UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C. 20549

FORM10-KSB

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|   | ANNUAL REPORT UNDER SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For theFiscal Year Ended December  31,2005

OR

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|   | TRANSITION REPORTUNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the Transition Period From                     To                    

CommissionFile Number: 001-01761

CHIEF CONSOLIDATED MININGCOMPANY(Name of small business issuer in itscharter)

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| ARIZONA                                                                                                 |  |  | 87-0122295                          |
| (Stateor Other Jurisdiction ofIncorporation orOrganization                                              |  |  | (I.R.S. Employer IdentificationNo.) |
| 15988 SILVERPASS ROAD, P.O. BOX 51, EUREKA, UTAH 84628(Address of PrincipalExecutive Offices) (ZipCode) |
| (435)433-6606(Issuer’s telephone number, including areacode)                                      |
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Securities registered under section12(b) of the Exchange Act: Common Stock, $0.50 Par Value

Securities registered under section 12(g) of the ExchangeAct: N/A

Check whether the issuer is not required to filereports pursuant to Section 13 or 15(d) of the ExchangeAct.    

Check whether the issuer: (1) filed allreports required to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes           No  X  

Check if there is no disclosureof delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to thebest of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of thisForm 10-KSB or any amendments to this Form10-KSB.    

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

State issuer’s revenues for itsmost recent fiscal year: $0

State the aggregate marketvalue of the voting and non-voting common equity held by non-affiliatescomputed by reference to the price at which the common equity was sold,or the average bid and asked price of such common equity, as ofNovember 28, 2006: $1,787,925.

State the number of sharesoutstanding of each of the issuer’s classes of common equity, asof the latest practicable date. Common Stock $0.50 par value:10,635,507

Transitional Small Business DisclosureFormat:

YES                NO   X  

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PART I

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| Item1.  | Description of Business. |

ChiefConsolidated Mining Company was organized as a corporation under thelaws of Arizona in 1909. Our mining and executive office is located inEureka, Juab County, Utah. Our principal subsidiaries are Tintic UtahMetals, LLC, a Colorado limited liability company and Chief Gold Mines,Inc., a Delaware corporation. Through these subsidiary companies, Chiefowns interests in mining properties, including the Burgin Mine and theTrixie Mine. Neither mine is currently in production but are subject tothe development efforts as further described below. We own a 75%membership interest in Tintic Utah. Chief Gold Mines is a wholly ownedsubsidiary.

We also own or control approximately 6,000 acres ofland in an area known as the Main Tintic District in Utah. The majorityof this land is generally considered to be non-mining land and issubject to being sold as discussed below pursuant to a Consent Decreeapproved by the United States District Court for the District of Utahin January  2005 on behalf of the Environment ProtectionAgency.

In late 2005, we commissioned a study on the furtherdevelopment and exploitation of our mining claims in the Tintic andEast Tintic Mining Districts. The engineers who completed the studyconcluded that significant opportunities may exist and recommended aprogram of development to increase the value and enhance the prospectsof viably operating fourprojects:

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|  | •  | Advancing the Burgin extensiondeposit through to a feasibilitystudy; |

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|  | •  | Further development of theconcept to sell potable water from a desalination plant fed by pumpedwater from the BurginMine; |

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|  | •  | Investigation of the economicpossibilities of producing and selling halloysite (and other) claysfrom the Zuma and other areas;and |

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|  | •  | Continued investigation anddevelopment of other exploration targets in the claim block andadjacent areas. |

Background

TinticUtah.    Tintic Utah was organized in 1996 under the ColoradoLimited Liability Company Act as a joint venture for the development ofproperties that we contributed to Tintic Utah. At that time, we enteredinto an operating agreement with KZ Utah, Inc., a subsidiary of KoreaZinc Co. Ltd. and Akiko Gold Resources Ltd. to form Tintic Utah. Theoperating agreement governs the management and operations of theproperties owned by Tintic Utah and the rights and obligations of themembers of Tintic Utah to each other. Pursuant to the terms of theoperating agreement, we transferred the mining rights to approximately8,500 acres of our patented mining property in the East Tintic MiningDistrict of Utah, including the Burgin Mine, and approximately 200acres of unpatented mining claims in the same vicinity to Tintic Utahin exchange for a 50% membership interest. Korea Zinccontributed $3,000,000 to Tintic Utah for a 25% membershipinterest. The funds from Korea Zinc were used by Tintic Utah forrehabilitation work, reserve confirmation and to produce information inconnection with a potential feasibility study on the Burgin Mine. As aresult of its failure to contribute the required capital to TinticUtah, however, Akiko forfeited any rights of ownership in the jointventure and we succeeded to their 25% membership interest,increasing our ownership percentage of Tintic Utah to 75%.

Burgin Mine.    The Burgin Mine, which is located in theEast Tintic Mining District of Utah, is not currently in production. Wecannot proceed with production at the mine unless we can dewater themine and raise capital for use in connection with restarting miningoperations. We have applied for permission, as described further below,to appropriate water from the Burgin Mine and it is currently pendingbefore the Utah State Engineer. If they approve our application, we maythen begin negotiations with various potential partners with theintention of finding a method to finance the construction of a watertreatment facility. The water treatment facility would be used as themeans for disposing of the water pumped from the lower levels of theBurgin Mine, enabling us to proceed with development and productionprograms. Although there were objections to our application, we havebeen in negotiations regarding the terms of an agreement with the mainobjectors. The Utah State Engineer will issue a decision on theapplication 

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and we would have the right to appeal anyadverse decision to a court. We are unable to predict whether anagreement with the objectors will be signed or when the Utah StateEngineer will render his decision. Even if the Utah State Engineerapproves our application and we reach an agreement with the objectors,we may not have funds to proceed, and even if we do have funds, we maynot use such funds to proceed at the Burgin Mine. If we are notsuccessful in obtaining water rights, we believe there may bealternative methods to successfully dewater the mine.

TrixieMine.    The Trixie Mine is located on property owned by ourwholly owned subsidiary, Chief Gold Mines, and is 1.5 miles from TinticUtah’s concentrating mill. Our subsidiary, Tintic Utah lastprocessed gold and silver ores produced from the Trixie Mine at TinticUtah’s concentrating mill during early 2002. Due to past safetyconditions at the Trixie Mine, we are not operating the mine and do notpresently plan to resume mining operations at the Trixie Mine, althoughwe may be interested in various other options including, joint venturesor leasing or selling the Trixie.

Korea ZincOption.    We previously held options to purchase KoreaZinc’s membership interest in Tintic Utah, and that optionexpired. Pursuant to the last option amendment to the operatingagreement, we held an additional option to purchase Korea Zinc’s25% membership interest for $3,000,000. That option expired onDecember  31,  2002. Since that option expired, themanagement of Tintic Utah is controlled by us and Korea Zinc through amanagement committee. Each member has a voting representative on thecommittee.

Voting is in proportion to each member’srespective membership percentage interest. As such, we will be able todetermine the decisions of the management committee because we hold amajority of the percentage interests. A majority vote is required toapprove a program and budget that describes the exploration,development, mining and other operational activities of Tintic Utah.The approval of a production program and budget that describes thedevelopment, rehabilitation and construction to bring the Burgin Mineinto production would require the affirmative vote of us and KoreaZinc.

Application for Appropriation of Burgin MineWater.    In 2000, a public hearing was held before the UtahState Engineer on our application for the appropriation of the salinewaters located below the 1050 foot level of the Burgin Mine. At thehearing, several objectors to the application argued that theapplication should be denied on the grounds that the removal of thewater from the Burgin Mine would interfere with their water rights inthe Utah Lake. We presented expert testimony at the hearing todemonstrate that the Burgin geothermal system and the Utah Lakegeothermal system are not connected and that removal of water from theBurgin Mine would have no effect upon Utah Lake. We have beennegotiating with the objectors, but cannot predict when and how theUtah State Engineer will decide the application or whether we willreach an agreement with the objectors. Even if our application isapproved, we may not be able to proceed with production at the BurginMine.

If the water appropriation is not approved and we choose togo forward with production at the Burgin Mine, we believe there may bealternative methods to dewater the Burgin Mine. The Utah Division ofWater Quality is holding an application previously filed by us for theunderground injection of Burgin Mine water in abeyance until the waterappropriation application is decided by the Utah State Engineer.Alternately we may also be able to file for a temporary diversion todewater the Burgin Mine.

If we decide to proceed with our miningbusiness and we are able to resolve the dewatering process, we wouldthen start a final feasibility study. The feasibility study woulddefine the mining methods to be employed, including among other things,pre-engineering design for pumping, defining the structural steel andcement requirements, determining the locations where deep wells will bedrilled and the overall evaluation of the Burgin Mine’s main orebody. We estimate that such a feasibility study could cost between$2,500,000 and $4,000,000.

Chief Gold Mines.    ChiefGold Mines was formed to enter into a transaction with South StandardMining Company and hold our mining property in the East Tintic Districtof Utah. As a result of the merger in 1996 of South Standard MiningCompany into our wholly owned subsidiary, Chief Gold Mines, Chief GoldMines owns 2,554 acres of patented mining properties located in theEast Tintic District of Utah, including the Trixie Mine.

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EPA Settlement

During2001, the EPA placed Eureka Mills Superfund Site on the NationalPriorities List, as authorized under the Comprehensive EnvironmentalResponse, Compensation and Liability Act of 1980. According to the EPA,samples indicate that, approximately 150 acres of soil in the Town ofEureka were contaminated with lead and, to a lesser extent,arsenic.

In 2002, the EPA finalized its actions to be taken inresponse to the release of waste materials at and around the site. TheEPA is seeking reimbursement from Chief for its portion of theliability based on the ownership and the conduct of mining operationson portions of the site.

In February  2005, Chief confessedto a judgment with the EPA in the amount of $60  million. Thejudgment will remain in effect until we have complied with all therequirements of the Consent Decree. The following outlines ourobligations under the Consent Decree:

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|  | •  | Weagreed to use our best efforts to satisfy the judgment by seekingindemnification or recovery from insurance policies. After deductingrecovery costs, 70% of all proceeds from insurance policies willbe paid to the United States. Until all claims are exhausted, we mustprovide an annual report for five years listing insurance claims, theaction taken to recover the amounts, and any recoveryobtained. |

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|  | •  | We agreed to use our bestefforts to sell property, other than property upon which therepository, open cells, response action structures, water source, andborrow source are located. Upon the transfer of any property, we willpay the EPA 100% of net sales proceeds up to $350,000 and then50% thereafter. If the transfer is less than the tax assessedvalue of the property or exceeds a total of more than 1,000 acres, theEPA may require an independent appraisal and may object to the transferbased on the sale price. If any portion of the property is not sold bythe fifth anniversary of this decree, we agreed to auction the propertyto the highest bidder, engaging a professional auctioneer, but wecannot hold a mortgage or other security interest from anypurchaser. |

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|  | •  | We agreed for a five yearperiod from the date of the Consent Decree to reimburse the UnitedStates 15% of our net income in excess of $2  millionduring any calendar year. We also agreed to pay the U.S. 15% ofthe net proceeds of the sale of Chief Consolidated Mining Company orthe sale of substantially all of its assets in excess of $2million. We are required to present audited financial statements to theEPA. |

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|  | •  | We agreed to allow the EPA sole useof borrowed material (top soil, fill and base material) that is freefrom contaminants, and to give uninterrupted and continuous access tothe borrowed source 24 hours a day, 365 days ayear. |

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|  | •  | We agreed to allow the EPA anirrevocable right to access, construct, operate, and close therepository and the property. We also granted the EPA the right toaccess, construct, and operate the two open cells on the property forthe permanent disposal of waste material excavated from thesite. |

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|  | •  | We agreed to allow the EPA toenter onto the property to construct and maintain such response actionstructures as are necessary to implement the response actions. The landwill have an easement for the EPA to inspect, maintain, and operate thestructure. We also agreed to provide storage space and water asneeded. |

In the event that we complete all of our obligationsunder the Consent Decree, the EPA will file a Release of Notice ofFederal Lien in the Office of the Juab County Recorder and we will becompletely relieved of the $60  million liability, resulting in again in such future period. As of the current date, we have fullycomplied with all terms of the agreement. The judgment amount of$60  million represents the future value of clean up costs whenthe terms of the Consent Decree are satisfied on February9,  2010.

Employees

As a result ofthe suspension of our mining operation, we were forced to lay-off allof our employees in 2002. We currently have noemployees.

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| Item 2.  | Description ofProperty. |

We are the direct owner of, or have a membership orstock ownership interest in a total of approximately 19,300 acres ofpatented mining property in the Tintic and East Tintic MiningDistricts, located in Juab and Utah Counties of Utah, and approximately200 acres of unpatented mining claims in the same area. Title to the19,300 acres of patented mining ground is vested in the owner of theland; the 200 acres of unpatented mining claims are possessory rightsto land owned by the U.S. government and are subject to rental paymentsand other conditions as to validity.

Property Owned By TinticUtah.    Approximately 8,500 acres of patented ground and 200acres of unpatented mining claims located in the East Tintic MiningDistrict of Utah are owned by Tintic Utah. Pursuant to the terms ofTintic Utah’s operating agreement, we transferred ownership ofapproximately 11,000 acres of our patented ground and 200 acres of ourunpatented mining claims to Tintic Utah.

Under the terms of theoperating agreement, ownership of approximately 2,500 acres that werenot involved in Tintic Utah’s exploration and developmentprograms reverted back to us, leaving Tintic Utah with the 8,500acres.

Property Owned By Chief GoldMines.    Approximately 2,550 acres of patented miningproperties located in the East Tintic Mining District of Utah are ownedby Chief Gold Mines. Chief Gold Mines acquired the property as theresult of a merger of South Standard Mining Company into Chief GoldMines in 1996. The Trixie Mine is located on Chief Gold Mines’property.

Property Owned By Us In The Main TinticDistrict.    We own approximately 10,000 acres in Eureka Valleynear the City of Eureka, Utah in an area known as the Main TinticDistrict. We intend to sell portions of the property for purposes ofcomplying with the Consent Decree. There are no current plans to usethis acreage for mining purposes.

Central StandardConsolidated Mines.    We currently own approximately23% of the outstanding capital stock of Central StandardConsolidated Mines. Central Standard’s mining property consistsof 320 acres located in the north-central portion of the East TinticMining District. This property is surrounded by property owned byTintic Utah. The 320 acres owned by Central Standard is located about 2miles from the Burgin Mine and the geologic characteristics of theCentral Standard property are similar to those of the Trixie Mine. InSeptember  2006, Central Standard’s land holdings weresold at Sherriff’s sale for past due real estate taxes. We arecurrently reviewing our options to redeem the property.

BurginMine.    The Burgin Mine, which is located on the property ofTintic Utah, was transferred by us to Tintic Utah in 1996. The BurginMine had previously been leased by us as part of a Unit Lease, togetherwith properties of other landowners, to Kennecott Corporation. Afterthe Burgin Mine was removed from the Unit Lease in 1978, we leased theBurgin Mine to the Sunshine Mining Company in 1980. When Sunshinebecame the lessee, it gained the use of the mining shafts and othercapital improvements previously made by Kennecott on the properties,including underground access by means of the Apex Number 2Shaft.

The Apex Shaft, together with the connecting drifts anddrill stations, had been rehabilitated by Sunshine at a cost ofapproximately $6  million. As a result of a successful lawsuitbrought by us and South Standard against Sunshine relating toSunshine’s leases with us and South Standard, the Burgin Minewas returned to us in 1992.

Trixie Mine.    The TrixieMine is located on the 2,550 acres of property that was acquired byChief Gold Mines in 1996 upon its merger with South Standard. SouthStandard was one of the landowners who joined in a Unit Lease to leasevarious properties to Kennecott. The Trixie Mine property was includedin the land contributed by South Standard to the Unit Lease. Kennecottmined from the Trixie Mine, producing gold and silver that wereby-products from a flux material that Kennecott used in connection withrefining its copper ore from Kennecott’s Bingham Canyon miningoperation in Utah. In 1983, Kennecott sold its interest in the UnitLease to Sunshine, who operated the Trixie Mine for about nine years,producing similar ores for use as flux material. The Trixie Mine wasreceived back by South Standard in 1992. South Standard continuedshipping dump materials as flux from the Trixie dump for several yearsafter 1992, but it did not mine the Trixie Mine.

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We began mining ore from the Trixie Mine in2001, and began processing ore in the Tintic Mill in January2002. In March  2002, we encountered unstable mining conditionsin the Trixie Mine and suspended mining and processing operations. As aresult of the suspended mining and processing operations, we are notgenerating any revenues and we do not have sufficient funding to makethe significant safety improvements required in the Trixie Mine or tocontinue exploration efforts related to the Trixie Mine.

Concentrating Mill.    The concentrating mill (sometimesreferred to as the concentrator), was built by Kennecott when it wasmining from the Burgin Mine under its lease. The concentrator,approximately 24,000 square feet in size, was built to process up to1,200 tons of lead and zinc ore per day. Tintic Utah rehabilitated theconcentrator over a several year period to include a precious metals(gold/silver) flow sheet. The total cost of the renovation wasapproximately $1,900,000. The concentrating mill processed gold andsilver ores from the Trixie Mine during January, February andMarch  2002. The concentrates produced by the concentrating millwere brokered through H&H Metals, New York, New York, to PenolesTorreon Smelter, Penoles, Mexico.

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| Item3.  | Legal Proceedings. |

See‘‘Item 1. Description of Business — EPASettlement.’’ In addition, we were named, along with twoother corporate entities, as a respondent in an administrativeproceeding before the Utah Labor Commission in August  2006. Inthe proceeding, the seventy-six year old petitioner alleges that he wasa Chief employee from 1950 to 1954 and has contracted lung cancer as aresult of his employment. We have filed an answer in the proceedingdenying all material allegations and are investigating the claim, andwill vigorously dispute his claims.

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| Item4.  | Submission of Matters to a Vote of SecurityHolders. |

None.

PART II

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| Item5.  | Market for Common Equity, Related StockholderMatters and Small Business Issuer Purchases of EquitySecurities. |

Our shares of common stock are traded in the overthe counter market known as the Pink Sheets under the symbol‘‘CFCM.PK.’’ High and low sales prices ofour common stock for each quarterly period during the past two yearsare asfollows:

|                                          |  |  |      |   |        |     |  |  |  |   |        |  |
|------------------------------------------|--|--|------|---|--------|-----|--|--|--|---|--------|--|
|                                     |  |  | High |   |        | Low |
| 2006Market Price                         |  |  |      |   |   |     |  |  |  |   |   |  |
| Fourth Quarter(Through November 28,2006) |  |  |      | $ | 0.50   |     |  |  |  | $ | 0.35   |  |
| Third Quarter                            |  |  |      | $ | 0.50   |     |  |  |  | $ | 0.39   |  |
| SecondQuarter                            |  |  |      | $ | 0.60   |     |  |  |  | $ | 0.35   |  |
| FirstQuarter                             |  |  |      | $ | 0.54   |     |  |  |  | $ | 0.30   |  |
| 2005Market Price                         |  |  |      |   |   |     |  |  |  |   |   |  |
| FourthQuarter                            |  |  |      | $ | 0.49   |     |  |  |  | $ | 0.26   |  |
| ThirdQuarter                             |  |  |      | $ | 0.55   |     |  |  |  | $ | 0.25   |  |
| SecondQuarter                            |  |  |      | $ | 0.55   |     |  |  |  | $ | 0.30   |  |
| FirstQuarter                             |  |  |      | $ | 0.65   |     |  |  |  | $ | 0.30   |  |
| 2004Market Price                         |  |  |      |   |   |     |  |  |  |   |   |  |
| FourthQuarter                            |  |  |      | $ | 0.67   |     |  |  |  | $ | 0.20   |  |
|                                          |

Theapproximate number of holders of record of our common stock as ofNovember  1,  2006 was 2,000. No cash dividends have beendeclared or paid over the previous five years nor are expected to bepaid for the foreseeable future.

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| Item6.  | Management’s Discussion and Analysis orPlan of Operation. |

The following discussion is intended toassist in understanding our financial condition and plan of operations.You should read the following discussion along with our financialstatements and related notes included in this Form 10-KSB.

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Forward-LookingStatements

The following discussion contains forward-lookingstatements that are subject to risks, uncertainties and assumptions.Our actual results, performance and achievements may differ materiallyfrom those expressed in, or implied by, these forward lookingstatements. When used in this Form 10-KSB and in future filings by uswith the Securities and Exchange Commission, in our press releases orother public or shareholder communications, and in oral statements madewith the approval of an authorized executive officer, the words‘‘believes,’’‘‘intends,’’‘‘expects,’’‘‘may,’’‘‘will,’’‘‘should,’’‘‘plan,’’‘‘projected,’’‘‘contemplates,’’‘‘anticipates,’’ or similar statements areintended to identify forward-looking statements. Our ability to predictresults or the actual effect of future plans or strategies isuncertain. Factors which could have a material adverse effect on ouroperations include, but are not limited to, environmental matters,general economic conditions, legislative/regulatory changes, andchanges in accounting principles and interpretations. These risks anduncertainties should be considered in evaluating forward-lookingstatements and you should not place undue reliance on theseforward-looking statements, which apply only as of the date of thisForm 10-KSB. We undertake no obligation to release publicly the resultof any revisions to these forward-looking statements that may be madeto reflect events or circumstances after the date of this Form 10-KSBor to reflect the occurrence of unanticipatedevents.

Overview

We were organized in 1909and own several interests in mining properties in Utah, including theBurgin Mine and the Trixie Mine. Our principal subsidiaries are TinticUtah Metals, LLC, a Colorado limited liability company and Chief GoldMines, Inc., a Delaware corporation. We also own or controlapproximately 6,000 acres of land in an area known as the Main TinticDistrict in Utah. The majority of this land is generally considered tobe non-mining land and is subject to being sold pursuant to a ConsentDecree discussed above.

The Burgin Mine is not in operation. Inlate 2001, we began mining ore from the Trixie Mine, and beganprocessing ore in our Tintic Mill in January  2002. InMarch  2002, we encountered unstable mining conditions in theTrixie Mine and suspended mining and processing operations. As a resultof the suspended mining and processing operations, we are notgenerating any revenues and we do not have sufficient funding to makethe significant safety improvements required in the Trixie Mine or tocontinue exploration efforts related to the Burgin Mine. As a result,we have had no significant operating activity since early2002.

Plan of Operation

The mining aspectof our activities will concentrate on seeking one or more joint venturepartners or other arrangements to fund the startup of miningoperations. To the extent we enter into such an arrangement, we couldcontribute mining properties and/or the Burgin concentrating mill toany joint venture arrangement in return for a percentage interest inthe venture, with our partner(s) to provide the main portion of cashfunding requirements.

We have an immediate cash need. Noassurance can be given that we will be able to raise the necessaryfunds, or if the funds are raised, that we will be able to restart ourmining operations.

Our financial statements have been preparedassuming that we will continue as a going concern. We have suffered netlosses of $2,789,648 and $2,625,001 for the years ended December31,  2005 and 2004, respectively. Additionally, as ofDecember  31,  2005, we had an accumulated deficit of$85,076,387. These matters raise substantial doubt about our ability tocontinue as a going concern.

As of December  31,2005, we had $950,000 of land and mining claims and $250,000 of miningrelated buildings, machinery and equipment. The realization of ourinvestment in land and mining claims and mining related buildings andequipment is dependent upon various factors, including: our success inexploration efforts to discover additional mineral resources and inproving the technical feasibility and commercial viability of theidentified mineral resources, and our ability to obtain necessaryfunding to continue exploration of the mining properties and to financeoperations.

In December  2005, Dimeling, Schreiber &Park agreed to purchase $2.5  million in convertible debenturescontingent upon creditors holding more than 50% ofChief’s outstanding indebtedness 

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agreeing to settle such outstanding amounts.The funds are held in escrow by Chief’s counsel and aredispersed by the escrow agent to pay creditors as they individuallyagree with Chief and to pay legal, accounting and other consultingfees. The debentures automatically convert into common stock at $0.25per share immediately upon shareholder approval of certain amendmentsto the Articles of Incorporation, including a decrease in the par valueand an increase in authorized capital. The minimum level of acceptanceswith creditors has been reached. In the event that the shareholders donot approve such amendments, the debentures will become immediately dueand payable.

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| Item 7.  | FinancialStatements. |

See Financial Statements beginning on pageF-1.

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| Item 8.  | Changes In and Disagreementswith Accountants on Accounting and FinancialDisclosure. |

None.

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| Item 8A.  | Controlsand Procedures. |

We have had neither operations nor employeessince early 2002 and, as such, have not had an opportunity to establishrequired disclosure controls or procedures. With the re-commencement ofour operations, we will implement the disclosure controls andprocedures to ensure that information required to be disclosed by us inthe reports we file or submit to the SEC relating to us and ourconsolidated subsidiaries would be accumulated and communicated tothem, as appropriate, to allow timely disclosures regarding requireddisclosures.

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| Item 8B.  | OtherInformation. |

None

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PART III

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| Item9.  | Directors, Executive Officers, Promoters andControl Persons; Compliance with Section 16(a) Of the ExchangeAct. |

The name and age of each of our directors and executiveofficers and the positions and offices held by himare:

|                                        |  |  |     |  |  |                                  |  |  |                                                     |
|----------------------------------------|--|--|-----|--|--|----------------------------------|--|--|-----------------------------------------------------|
| Nameof Directors andExecutive Officers |  |  | Age |  |  | Officeswith Chief                |  |  | Term During WhichServed inOffice                    |
| Richard R.Schreiber                    |  |  | 51  |  |  | Director and InterimPresident    |  |  | Director since 2001 and Interim President since2002 |
| Steven G. Park                         |  |  | 51  |  |  | Director,Secretary and Treasurer |  |  | Director since October2001.                         |
|                                        |

The following is a brief account of thebusiness experience during the past five years of each director andexecutive officer namedabove.

|                     |  |  |                                                                                                                                                                 |
|---------------------|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| StevenG. Park       |  |  | A principal of Dimeling, Schreiber & Park, aprivate investment partnership that makes private equity investments ina broad range of middle marketcompanies. |
| Richard R.Schreiber |  |  | A principal of Dimeling, Schreiber & Park, aprivate investment partnership that makes private equity investments ina broad range of middle marketcompanies. |
|                     |

Section 16(a) BeneficialOwnership Reporting Compliance

We are presently reviewingwith counsel any previous section 16(a) reports filed or required to befiled by our directors, executive officers or ten percent owners forcompliance with the specific filing requirements.

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| Item10.  | ExecutiveCompensation. |

Summary CompensationTable

The following table sets forth compensation paid forthe years ending December  31,  2005, 2004 and 2003 tothose persons who were either (a) the chief executive officer ofDecember  31,  2005 or (b) one of the four other mosthighly compensated executive officers as of December  31,2005 whose total annual salary and other compensation exceeded $100,000(collectively, the ‘‘Named ExecutiveOfficers’’).

|                            |  |  |        |  |      |                    |  |  |                       |  |  |                             |  |  |                           |  |  |                                 |  |  |                          |  |  |     |
|----------------------------|--|--|--------|--|------|--------------------|--|--|-----------------------|--|--|-----------------------------|--|--|---------------------------|--|--|---------------------------------|--|--|--------------------------|--|--|-----|
|                       |  |  |   |  |      | AnnualCompensation |  |  | Long TermCompensation |  |  |                        |
| Nameand Principal Position |  |  | Year   |  |      | Salary ($)         |  |  | Bonus($)              |  |  | Other annualcompensation($) |  |  | Restrictedstock awards($) |  |  | SecuritiesUnderlyingOptions (#) |  |  | Allothercompensation ($) |
| RichardR.                  |  |  |        |  | 2005 |                    |  |  | -0-                   |  |  | -0-                         |  |  | -0-                       |  |  | -0-                             |  |  | -0-                      |  |  | -0- |
| Schreiber                  |  |  |        |  | 2004 |                    |  |  | -0-                   |  |  | -0-                         |  |  | -0-                       |  |  | -0-                             |  |  | -0-                      |  |  | -0- |
| CEO                        |  |  |        |  | 2003 |                    |  |  | -0-                   |  |  | -0-                         |  |  | -0-                       |  |  | -0-                             |  |  | -0-                      |  |  | -0- |
|                            |

Options/SARGrants in Last Fiscal Year

There were nooption or SAR grants during the last fiscal year.

Aggregated Options/SAR Exercised in Last Fiscal Year andFY-End Option/SAR Values

The following table containsinformation regarding the aggregate value as of December31,  2005 of exercised and unexercised stock options held by theNamed Executive Officers.

8

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|                     |  |  |                              |  |     |                |  |  |                                                                   |  |     |                                                                             |  |  |  |  |            |  |  |  |  |  |         |  |
|---------------------|--|--|------------------------------|--|-----|----------------|--|--|-------------------------------------------------------------------|--|-----|-----------------------------------------------------------------------------|--|--|--|--|------------|--|--|--|--|--|---------|--|
| Name                |  |  | Sharesacquiredonexercise (#) |  |     | Value realized |  |  | Numberofunexercisedoptions at12/31/05(#)exercisable/unexercisable |  |     | Valueofunexercisedin-the-moneyoption at12/31/05($)exercisable/unexercisable |
| Richard R.Schreiber |  |  |                              |  | -0- |                |  |  |                                                                   |  | -0- |                                                                             |  |  |  |  | 60,000/-0- |  |  |  |  |  | -0-/-0- |  |
| StevenG.Parks       |  |  |                              |  | -0- |                |  |  |                                                                   |  | -0- |                                                                             |  |  |  |  | 60,000/-0- |  |  |  |  |  | -0-/-0- |  |
|                     |

CompensationOf Directors

Directors did not receive any compensationduring fiscal year 2005.

|                |                                                                                               |
|----------------|-----------------------------------------------------------------------------------------------|
| Item 11.  | SecurityOwnership of Certain Beneficial Owners and Management and RelatedStockholder Matters. |

The following table shows as ofNovember  1,  2006, stock ownership of all persons known tomanagement, to be beneficial owners of more than 5% of ourcommon stock and our directors and Named Executive Officers. Eachdirector and officer has sole voting and investment power with respectto sharesowned.

|                                                                                                                                                           |  |  |                                         |  |           |                      |  |  |  |  |        |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-----------------------------------------|--|-----------|----------------------|--|--|--|--|--------|---|
| Nameof Beneficial Owners                                                                                                                                  |  |  | Amount and Nature ofBeneficialOwnership |  |           | PercentageofClass(1) |
| Five PercentShareholders:                                                                                                                                 |  |  |                                         |  |      |                      |  |  |  |  |   |   |
| SC Fundamental Value Fund L.P. andSC Fundamental Value BVILtd(2)                                                                                          |  |  |                                         |  | 595,270   | (2)                  |  |  |  |  | 5.6    | % |
| Dimeling,Schreiber & Park, as General Partner of Dimeling, Schreiber &Park Reorganization Fund II, LP 1629 Locust Street Philadelphia, PA19103(3) |  |  |                                         |  | 5,407,150 | (4)                  |  |  |  |  | 44.7   | % |
| Directorsand Named Executive Officers:                                                                                                                    |  |  |                                         |  |      |                      |  |  |  |  |   |   |
| Stephen G.Park(3)                                                                                                                                         |  |  |                                         |  | 5,467,150 | (4)(5)               |  |  |  |  | 45.0   | % |
| RichardR. Schreiber(3)                                                                                                                                    |  |  |                                         |  | 5,467,150 | (4)(6)               |  |  |  |  | 45.0   | % |
| Ownedby all directors and officers as a group (2persons)                                                                                                  |  |  |                                         |  | 5,527,150 | (4)(5)(6)            |  |  |  |  | 45.2   | % |
|                                                                                                                                                           |

|  |
|--|
|  |  |
|  |

(1)    Basedupon 10,635,507 shares of common stock outstanding as ofNovember  1,  2006.

(2)    SC Fundamental ValueFund, L.P. and SC Fundamental Value BVI, Ltd. are affiliated companies,and provided the revised ownership information included in the table.Messrs. Peter M.  Collery,  Neil  H.  Kofflerand John T. Bird share voting and investment power over the sharesreported in the table.

(3)    Richard R. Schreiber and StevenG. Park are principals of Dimeling, Schreiber & Park, which servesas the general partner of the Fund, and they share voting andinvestment power over the shares reported in the table.

(4)    The number of shares beneficially owned includes1,407,150 shares of common stock issuable as cumulative dividends inarrears, but does not include up to 10,000,000 shares of common stockissuable upon the conversion of outstanding debentures purchased byDimeling, Schreiber & Park. The debentures automatically convert ifand when the shareholders approve certain changes in the Articles ofIncorporation, including a change in par value and increase inauthorized capital

(5)    Includes nonqualified stock optionspreviously approved by the shareholders to purchase 60,000 shares heldby Stephen G. Park.

(6)    Includes nonqualified stockoptions previously approved by the shareholders to purchase 60,000shares held by Richard R. Schreiber.

9

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|                |                                                |
|----------------|------------------------------------------------|
| Item 12.  | CertainRelationships and Related Transactions. |

In December  2005,Chief issued and sold convertible debentures in the amount of$2.5  million to Dimeling, Schreiber and Park. The debenturesaccrue interest at an annual rate of 8%, payable at the time ofconversion in additional shares of common stock. The fixed conversionprice is $0.25 per share. The debentures automatically convert intoshares of common stock at the rate of 4,000 shares for each $1,000principal amount upon the approval by the shareholders of certainamendments to the Articles of Incorporation, including a change in parvalue and increase in authorized capital.

Dimeling Schreiber andPark placed $2.5  million in escrow during December  2005.The funds remain in escrow until such time Chief has receipt ofcreditor acceptances (repayment on a negotiated basis, or compromiseoffer) representing 50% of the outstanding aggregate unsecuredamounts owed. As of the date of this report, the minimum level ofcreditor acceptances has been reached. In the event that theshareholders fail to approve the certain amendments to the Articles ofIncorporation, the convertible debentures will become immediately dueand payable.

Item 13. Exhibits.

|            |  |             |
|------------|--|-------------|
| EXHIBITNO. |  | DESCRIPTION |
|            |  |             |

|     |  |                                                                                                                                                                    |
|-----|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1 |  | Articles ofIncorporation [Incorporated by reference to Exhibit A toChief’s Schedule 14A Proxy Statement filed on December17,  1999 (SEC File No.001-01761)]. |
|     |  |                                                                                                                                                                    |

|     |  |                                                                                            |
|-----|--|--------------------------------------------------------------------------------------------|
| 3.2 |  | By-laws[Incorporated by reference from Form S-4 Registration Statement(File No. 333-00160] |
|     |  |                                                                                            |

|     |  |                                                                                                                                                                                         |
|-----|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.3 |  | Amendment to theBy-laws dated March  16,  2001 [Incorporated byreference to Exhibit 2, marked as Exhibit A, to Chief’s Form10-KSB filed on April  4, 2001(SEC File No.001-01761)] |
|     |  |                                                                                                                                                                                         |

|      |  |                                                                                                                                                                                                                                                                                                               |
|------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1 |  | The Operating Agreementof Tintic Utah LLC dated as of July  17,  1996 by and amongChief, Akiko Resources (Utah) Inc. and KZ Utah, Inc. [Incorporatedby reference to Exhibit 10B, marked as ‘‘ExhibitA’’, to Chief’s Form 10-KSB filed on April2,  1997 (SEC File No.001-01761]. |
|      |  |                                                                                                                                                                                                                                                                                                               |

|      |  |                                                                                                                                                                                                                                                                                                                  |
|------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2 |  | The First Amendment toOperating Agreement dated as of March  11,  1997 by andamong Chief, Akiko Resources (Utah) Inc. and KZ Utah, Inc.[Incorporated by reference to Exhibit 10B, marked as‘‘Exhibit A’’, to Chief’s Form10-KSB filed on April  2,  1997, (SEC File No.001-01761]. |
|      |  |                                                                                                                                                                                                                                                                                                                  |

|      |  |                                                                                                                                                                                                                                                                |
|------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3 |  | Second Amendment toOperating Agreement dated as of November  10,  1997 by andbetween Chief and KZ Utah, Inc [Incorporated by reference toExhibit 10D, filed as Exhibit A, to Chief’s Form 10-K reportfiled on March  30,  1998 (SEC File No.001-01761)]. |
|      |  |                                                                                                                                                                                                                                                                |

|      |  |                                                                                                                                                                                                                                                               |
|------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.4 |  | Third Amendment toOperating Agreement dated as of October  1,  1998 by andbetween Chief and KZ Utah, Inc [Incorporated by reference toExhibit 10D, filed as Exhibit A, to Chief’s Form 10-KSB reportfiled on April  15,  1999 (SEC File No.001-01761)]. |
|      |  |                                                                                                                                                                                                                                                               |

10

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|      |  |                                                                                                                                                                                                                                                                  |
|------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.5 |  | Fourth Amendment toOperating Agreement dated as of September  9,  1999 by andbetween Chief and KZ Utah, Inc [Incorporated by reference toExhibit 10E, filed as Exhibit A, to Chief’s Form 10-KSB reportfiled on March  30,  2000 (SEC File No.001-01761)]. |
|      |  |                                                                                                                                                                                                                                                                  |

|      |  |                                                                                                                                           |
|------|--|-------------------------------------------------------------------------------------------------------------------------------------------|
| 10.6 |  | Fifth Amendment to theOperating Agreement dated as of January  1,  2001[Incorporated by reference to Form 10-QSB filed on August14, 2001] |
|      |  |                                                                                                                                           |

|      |  |                                                                                                                                 |
|------|--|---------------------------------------------------------------------------------------------------------------------------------|
| 10.7 |  | The Articles ofOrganization of Tintic Utah LLC is incorporated by reference to anexhibit to Form 10-KSB filed on April  2,1997. |
|      |  |                                                                                                                                 |

|      |  |                                                                                                                                                                                                                           |
|------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7 |  | Stock Purchase Agreement dated as ofNovember  19,  1999 between Chief and Dimeling, Schreiber& Park [Incorporated by reference to Chief’s Form 8-Kreport filed on November  30,  1999 (SEC File No.001-01761)]. |
|      |  |                                                                                                                                                                                                                           |

|      |  |                                                                                                                                                                                                                                |
|------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.8 |  | Registration RightsAgreement dated as of November  19,  1999 between Chief andDimeling, Schreiber & Park [Incorporated by reference toChief’s Form 8-K report filed on November  30,  1999(SEC File No. 001-01761)]. |
|      |  |                                                                                                                                                                                                                                |

|      |  |                                                                                                                                                                                                                   |
|------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.9 |  | Form ofWarrant issued to Dimeling, Schreiber & Park by Chief dated as ofNovember  19,  1999 [Incorporated by reference toChief’s Form 8-K report filed on November  30,  1999(SEC File No. 001-01761)]. |
|      |  |                                                                                                                                                                                                                   |

|       |  |                                    |
|-------|--|------------------------------------|
| 10.10 |  | EPAConsent Decree (filed herewith) |
|       |  |                                    |

|       |  |                                             |
|-------|--|---------------------------------------------|
| 10.11 |  | DebenturePurchase Agreement (filedherewith) |
|       |  |                                             |

|       |  |                                  |
|-------|--|----------------------------------|
| 10.12 |  | Escrow Agreement (filedherewith) |
|       |  |                                  |

|      |  |                                                           |
|------|--|-----------------------------------------------------------|
| 21.1 |  | A list of subsidiaries of Chiefis filed with this report. |
|      |  |                                                           |

|    |  |                                                                                                                                      |
|----|--|--------------------------------------------------------------------------------------------------------------------------------------|
| 32 |  | CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002 (filedherewith) |
|    |  |                                                                                                                                      |

Item 14. Principal Accountant Feesand Services.

The audit fees, audit-related fees, tax fees andall other fees billed by our accountants in the last two fiscal yearstotal $30, 477 and is divided equally between 2004 and2005.

11

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIES

TABLE OFCONTENTS

|                                                                                                                  |  |  |      |  |     |  |
|------------------------------------------------------------------------------------------------------------------|--|--|------|--|-----|--|
|                                                                                                             |  |  | Page |
| Reportof Independent Registered Public AccountingFirm                                                            |  |  |      |  | F-1 |  |
| Consolidated Balance Sheets— December  31,  2005, 2004, 2003 and2002                                       |  |  |      |  | F-2 |  |
| Consolidated Statements ofOperations for the Years Ended December  31,  2005, 2004,2003 and 2002                 |  |  |      |  | F-3 |  |
| Consolidated Statements ofStockholders’ Deficit for the Years Ended December31,  2002, 2003, 2004 and 2005 |  |  |      |  | F-4 |  |
| Consolidated Statements of Cash Flowsfor the Years Ended December  31,  2005, 2004, 2003, and2002                |  |  |      |  | F-5 |  |
| Notes to the Consolidated FinancialStatements                                                                    |  |  |      |  | F-6 |  |
|                                                                                                                  |

12

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|                                                                                                                                                                                                 |  |  |                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|------------------------------------------------------------|
| HANSEN,BARNETT & MAXWELLAProfessional CorporationCERTIFIED PUBLIC ACCOUNTANTS5 TriadCenter, Suite 750 Salt Lake City, UT 84180-1128 Phone: (801)532-2200 Fax: (801) 532-7944www.hbmcpas.com |  |  | Registeredwith the Public CompanyAccounting OversightBoard |
|                                                                                                                                                                                                 |

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors Chief ConsolidatedMining Company

We have audited the accompanyingconsolidated balance sheets of Chief Consolidated Mining Company andsubsidiaries as of December 31, 2005, 2004, 2003 and 2002 and therelated consolidated statements of operations, stockholders'deficit, and cash flows for the years then ended. These financialstatements are the responsibility of the Company's management.Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits inaccordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we planand perform the audits to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis forour opinion.

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects,the financial position of Chief Consolidated Mining Company andsubsidiaries as of December 31, 2005, 2004, 2003 and 2002, and theresults of their operations and their cash flows for the years thenended, in conformity with accounting principles generally accepted inthe United States of America.

The accompanying financialstatements have been prepared assuming that the Company will continueas a going concern. As discussed in Note 2 to the financial statements,the Company has little unrestricted cash, has a working capitaldeficiency and a capital deficiency, has incurred significant lossesfrom operations, and has significant reclamation and EPA settlementobligations and environmental contingencies that raise substantialdoubt about its ability to continue as a going concern. The financialstatements do not include any adjustments that might result from theoutcome of this uncertainty.

HANSEN, BARNETT& MAXWELL

Salt Lake City, Utah July 31,2006

F-1

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Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCESHEETS

|                                                                                                                         |  |  |      |   |             |      |  |  |      |   |             |      |  |  |  |   |             |   |  |  |  |   |             |   |
|-------------------------------------------------------------------------------------------------------------------------|--|--|------|---|-------------|------|--|--|------|---|-------------|------|--|--|--|---|-------------|---|--|--|--|---|-------------|---|
| December31,                                                                                                             |  |  | 2005 |   |             | 2004 |  |  | 2003 |   |             | 2002 |
| Currentassets                                                                                                           |  |  |      |   |        |      |  |  |      |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
| Cash                                                                                                                    |  |  |      | $ | 10          |      |  |  |      | $ | 1,554       |      |  |  |  | $ | 1,444       |   |  |  |  | $ | 12,522      |   |
| Othercurrentassets                                                                                                      |  |  |      |   | 7,320       |      |  |  |      |   | 22,320      |      |  |  |  |   | 7,320       |   |  |  |  |   | 7,320       |   |
| Restrictedcash held inescrow                                                                                            |  |  |      |   | 2,500,000   |      |  |  |      |   | —     |      |  |  |  |   | —     |   |  |  |  |   | —     |   |
| Totalcurrentassets                                                                                                      |  |  |      |   | 2,507,330   |      |  |  |      |   | 23,874      |      |  |  |  |   | 8,764       |   |  |  |  |   | 19,842      |   |
| Landand miningclaims                                                                                                    |  |  |      |   | 950,000     |      |  |  |      |   | 950,000     |      |  |  |  |   | 950,000     |   |  |  |  |   | 950,000     |   |
| Buildings,machinery and equipment,net                                                                                   |  |  |      |   | 250,000     |      |  |  |      |   | 418,787     |      |  |  |  |   | 587,575     |   |  |  |  |   | 756,363     |   |
| Reclamationfunds ondeposit                                                                                              |  |  |      |   | 486,086     |      |  |  |      |   | 447,986     |      |  |  |  |   | 447,986     |   |  |  |  |   | 447,986     |   |
| Totalassets                                                                                                             |  |  |      | $ | 4,193,416   |      |  |  |      | $ | 1,840,647   |      |  |  |  | $ | 1,994,325   |   |  |  |  | $ | 2,174,191   |   |
| LIABILITIESAND STOCKHOLDERS'DEFICIT                                                                                     |  |  |      |   |        |      |  |  |      |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
| Currentliabilities                                                                                                      |  |  |      |   |        |      |  |  |      |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
| Accountspayable                                                                                                         |  |  |      | $ | 1,310,408   |      |  |  |      | $ | 1,218,504   |      |  |  |  | $ | 1,131,093   |   |  |  |  | $ | 1,047,314   |   |
| Relatedpartypayable                                                                                                     |  |  |      |   | 364,477     |      |  |  |      |   | 199,285     |      |  |  |  |   | 165,263     |   |  |  |  |   | 152,150     |   |
| Interestpayable                                                                                                         |  |  |      |   | 109,354     |      |  |  |      |   | 67,739      |      |  |  |  |   | 29,452      |   |  |  |  |   | 28,795      |   |
| Directorindemnification                                                                                                 |  |  |      |   | 240,000     |      |  |  |      |   | 240,000     |      |  |  |  |   | 240,000     |   |  |  |  |   | —     |   |
| Accruedliabilities                                                                                                      |  |  |      |   | 304,527     |      |  |  |      |   | 304,528     |      |  |  |  |   | 258,846     |   |  |  |  |   | 254,612     |   |
| Accruedconvertible common stockdividends                                                                                |  |  |      |   | 515,098     |      |  |  |      |   | 401,705     |      |  |  |  |   | 289,212     |   |  |  |  |   | 216,300     |   |
| Notespayable                                                                                                            |  |  |      |   | 424,014     |      |  |  |      |   | 424,014     |      |  |  |  |   | 424,014     |   |  |  |  |   | 437,179     |   |
| Totalcurrentliabilities                                                                                                 |  |  |      |   | 3,267,878   |      |  |  |      |   | 2,855,775   |      |  |  |  |   | 2,537,880   |   |  |  |  |   | 2,136,350   |   |
| Long-termliabilities                                                                                                    |  |  |      |   |        |      |  |  |      |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
| Convertibledebentures                                                                                                   |  |  |      |   | 2,500,000   |      |  |  |      |   | —     |      |  |  |  |   | —     |   |  |  |  |   | —     |   |
| Reclamationobligation                                                                                                   |  |  |      |   | 488,300     |      |  |  |      |   | 486,216     |      |  |  |  |   | 450,200     |   |  |  |  |   | 450,200     |   |
| EPAsettlementobligation                                                                                                 |  |  |      |   | 49,080,612  |      |  |  |      |   | 46,738,989  |      |  |  |  |   | 44,509,084  |   |  |  |  |   | 42,385,567  |   |
| Totallong-termliabilities                                                                                               |  |  |      |   | 52,068,912  |      |  |  |      |   | 47,225,205  |      |  |  |  |   | 44,959,284  |   |  |  |  |   | 42,835,767  |   |
| Minorityinterest in consolidatedsubsidiaries                                                                            |  |  |      |   | 24,727      |      |  |  |      |   | 24,727      |      |  |  |  |   | 24,727      |   |  |  |  |   | 24,727      |   |
| Commitmentsand contingencies(Note 8 and13)                                                                              |  |  |      |   |        |      |  |  |      |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
| Shareholders'deficit                                                                                                    |  |  |      |   |        |      |  |  |      |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
| Preferredstock, $0.50 par value; 1,500,000 shares authorized; 10,899 sharesoutstanding; liquidation preference of$5,450 |  |  |      |   | 5,450       |      |  |  |      |   | 5,450       |      |  |  |  |   | 5,450       |   |  |  |  |   | 5,450       |   |
| Convertible common stock, $0.50 par value; 30,000,000 sharesauthorized; 4,060,000 sharesoutstanding                     |  |  |      |   | 2,030,000   |      |  |  |      |   | 2,030,000   |      |  |  |  |   | 2,030,000   |   |  |  |  |   | 2,030,000   |   |
| Commonstock, $0.50 par value; 50,000,000 shares authorized; 10,635,507 sharesoutstanding                                |  |  |      |   | 5,314,209   |      |  |  |      |   | 5,314,209   |      |  |  |  |   | 5,314,209   |   |  |  |  |   | 5,314,209   |   |
| Additionalpaid-incapital                                                                                                |  |  |      |   | 23,773,747  |      |  |  |      |   | 23,773,747  |      |  |  |  |   | 23,773,747  |   |  |  |  |   | 23,773,747  |   |
| Stockpurchaserights                                                                                                     |  |  |      |   | 3,321,747   |      |  |  |      |   | 3,321,747   |      |  |  |  |   | 3,321,747   |   |  |  |  |   | 3,321,747   |   |
| Accumulateddeficit                                                                                                      |  |  |      |   | (85,613,254 | )    |  |  |      |   | (82,710,213 | )    |  |  |  |   | (79,972,719 | ) |  |  |  |   | (77,267,806 | ) |
| Totalstockholders'deficit                                                                                               |  |  |      |   | (51,168,101 | )    |  |  |      |   | (48,265,060 | )    |  |  |  |   | (45,527,566 | ) |  |  |  |   | (42,822,653 | ) |
| Totalliabilities and stockholders'deficit                                                                               |  |  |      | $ | 4,193,416   |      |  |  |      | $ | 1,840,647   |      |  |  |  | $ | 1,994,325   |   |  |  |  | $ | 2,174,191   |   |
|                                                                                                                         |

Theaccompanying notes are an integral part of these financialstatements

F-2

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Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESCONSOLIDATEDSTATEMENTS OF OPERATIONS

|                                                                                     |  |  |      |   |            |      |  |  |      |   |            |      |  |  |  |   |            |   |  |  |  |   |             |   |
|-------------------------------------------------------------------------------------|--|--|------|---|------------|------|--|--|------|---|------------|------|--|--|--|---|------------|---|--|--|--|---|-------------|---|
| Forthe Years Ended December 31,                                                     |  |  | 2005 |   |            | 2004 |  |  | 2003 |   |            | 2002 |
| Revenue                                                                             |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Miningrevenue                                                                       |  |  |      | $ | —    |      |  |  |      | $ | —    |      |  |  |  | $ | —    |   |  |  |  | $ | 1,237,060   |   |
| Landsales andother                                                                  |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 188,577     |   |
| Totalrevenue                                                                        |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 1,425,637   |   |
| Operatingexpenses                                                                   |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Generalandadministrative                                                            |  |  |      |   | 235,540    |      |  |  |      |   | 152,005    |      |  |  |  |   | 299,743    |   |  |  |  |   | 1,254,085   |   |
| Depreciationanddepletion                                                            |  |  |      |   | 168,787    |      |  |  |      |   | 168,787    |      |  |  |  |   | 168,787    |   |  |  |  |   | 253,039     |   |
| Accretionof reclamation and EPA settlementobligations                               |  |  |      |   | 2,343,707  |      |  |  |      |   | 2,265,921  |      |  |  |  |   | 2,156,865  |   |  |  |  |   | 426,192     |   |
| Miningproperties operating and explorationcosts                                     |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 1,337,677   |   |
| Impairmentloss on land and miningclaims                                             |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 1,635,587   |   |
| Impairmentloss on buildings, machinery andequipment                                 |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 2,115,214   |   |
| Impairmentloss on equityinvestment                                                  |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 129,294     |   |
| Totalexpenses                                                                       |  |  |      |   | 2,748,034  |      |  |  |      |   | 2,586,713  |      |  |  |  |   | 2,625,395  |   |  |  |  |   | 7,151,088   |   |
| Otherincome(expense)                                                                |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Interestexpense                                                                     |  |  |      |   | (41,614    | )    |  |  |      |   | (38,288    | )    |  |  |  |   | (39,953    | ) |  |  |  |   | (28,795     | ) |
| Lossbefore cumulative effect of change in accounting principle andextraordinaryitem |  |  |      |   | (2,789,648 | )    |  |  |      |   | (2,625,001 | )    |  |  |  |   | (2,665,348 | ) |  |  |  |   | (5,754,246  | ) |
| Cumulativeeffect of change in accountingprinciple                                   |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | 33,348     |   |  |  |  |   | —     |   |
| Lossbefore extraordinaryitem                                                        |  |  |      |   | (2,789,648 | )    |  |  |      |   | (2,625,001 | )    |  |  |  |   | (2,632,000 | ) |  |  |  |   | (5,754,246  | ) |
| Lossfrom extraordinary item – EPAsettlement                                   |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (41,959,375 | ) |
| Netloss                                                                             |  |  |      |   | (2,789,648 | )    |  |  |      |   | (2,625,001 | )    |  |  |  |   | (2,632,000 | ) |  |  |  |   | (47,713,621 | ) |
| Redeemableand convertible common stockdividends:                                    |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Eightpercent stockdividend                                                          |  |  |      |   | (113,393   | )    |  |  |      |   | (112,493   | )    |  |  |  |   | (72,912    | ) |  |  |  |   | (216,300    | ) |
| Accretionof redemptionvalue                                                         |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (324,624    | ) |
| Lossattributable to commonstockholders                                              |  |  |      | $ | (2,903,041 | )    |  |  |      | $ | (2,737,494 | )    |  |  |  | $ | (2,704,912 | ) |  |  |  | $ | (48,254,545 | ) |
| Basicand diluted loss per commonshare:                                              |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Lossbefore cumulative effect of change in accounting principle andextraordinaryitem |  |  |      | $ | (0.26      | )    |  |  |      | $ | (0.25      | )    |  |  |  | $ | (0.25      | ) |  |  |  | $ | (0.54       | ) |
| Cumulativeeffect of change in accountingprinciple                                   |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | —     |   |
| Extraordinaryitem                                                                   |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (3.95       | ) |
| Netloss attributable to commonstockholders                                          |  |  |      | $ | (0.27      | )    |  |  |      | $ | (0.26      | )    |  |  |  | $ | (0.25      | ) |  |  |  | $ | (4.54       | ) |
| Basicand Diluted Weighted-Average Common SharesOutstanding                          |  |  |      |   | 10,635,507 |      |  |  |      |   | 10,635,507 |      |  |  |  |   | 10,635,507 |   |  |  |  |   | 10,630,370  |   |
|                                                                                     |

Theaccompanying notes are an integral part of these financialstatements

F-3

----

Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESCONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ DEFECITFOR THE YEARS ENDEDDECEMBER 31, 2002, 2003, 2004 AND2005

|                                                                                                                               |        |  |                |        |         |                         |        |  |              |        |         |                           |        |  |                       |        |           |                       |  |  |                                 |   |           |                     |  |  |                                    |  |            |  |  |  |  |   |           |  |  |  |  |   |            |   |  |  |  |   |           |  |  |  |  |   |         |   |  |  |  |   |         |   |  |  |  |   |             |   |  |  |  |   |             |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--|----------------|--------|---------|-------------------------|--------|--|--------------|--------|---------|---------------------------|--------|--|-----------------------|--------|-----------|-----------------------|--|--|---------------------------------|---|-----------|---------------------|--|--|------------------------------------|--|------------|--|--|--|--|---|-----------|--|--|--|--|---|------------|---|--|--|--|---|-----------|--|--|--|--|---|---------|---|--|--|--|---|---------|---|--|--|--|---|-------------|---|--|--|--|---|-------------|---|
|                                                                                                                          |        |  | PreferredStock |        |         | ConvertibleCommon Stock |        |  | Common Stock |        |         | Additional Paid-inCapital |        |  | Stock Purchase Rights |        |           | Deferred Compensation |  |  | NoteReceivable from Shareholder |   |           | Accumulated Deficit |  |  | TotalStockholders' Equity(Deficit) |
|                                                                                                                               | Shares |  |                | Amount |         |                         | Shares |  |              | Amount |         |                           | Shares |  |                       | Amount |
| Balance-December 31,2001                                                                                                      |        |  |                |        | 10,899  |                         |        |  |              | $      | 5,450   |                           |        |  |                       |        | 560,000   |                       |  |  |                                 | $ | 280,000   |                     |  |  |                                    |  | 10,553,418 |  |  |  |  | $ | 5,273,164 |  |  |  |  | $ | 20,015,289 |   |  |  |  | $ | 3,321,747 |  |  |  |  | $ | (11,220 | ) |  |  |  | $ | (25,370 | ) |  |  |  | $ | (28,688,637 | ) |  |  |  | $ | 170,423     |   |
| Issuanceof common stock and warrants in private placement offering at $2.00 pershare                                          |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | 50,000     |  |  |  |  |   | 25,000    |  |  |  |  |   | 75,000     |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | —     |   |  |  |  |   | 100,000     |   |
| Issuanceof common stock for services at $2.00 pershare                                                                        |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | 25,000     |  |  |  |  |   | 12,500    |  |  |  |  |   | 37,500     |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | —     |   |  |  |  |   | 50,000      |   |
| Issuanceof common stock toshareholders                                                                                        |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | 7,089      |  |  |  |  |   | 3,545     |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | —     |   |  |  |  |   | 3,545       |   |
| Accretionof redeemable convertible commonstock                                                                                |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (324,624    | ) |  |  |  |   | (324,624    | ) |
| Conversionof redeemable convertible common stock to convertible common stockthrough voluntary forfeiture of redeemablefeature |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | 3,500,000 |                       |  |  |                                 |   | 1,750,000 |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | 3,626,428  |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | —     |   |  |  |  |   | 5,376,428   |   |
| Paymentreceived on note receivablefromshareholder                                                                             |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | 3,600   |   |  |  |  |   | —     |   |  |  |  |   | 3,600       |   |
| Write-offnote receivable from shareholder as baddebt                                                                          |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | 21,770  |   |  |  |  |   | —     |   |  |  |  |   | 21,770      |   |
| Forfeitureof stockoptions                                                                                                     |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | (11,220    | ) |  |  |  |   | —   |  |  |  |  |   | 11,220  |   |  |  |  |   | — |   |  |  |  |   | —     |   |  |  |  |   | —     |   |
| Issuanceof warrants with notepayable                                                                                          |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | 30,750     |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | —     |   |  |  |  |   | 30,750      |   |
| Netloss                                                                                                                       |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (48,254,545 | ) |  |  |  |   | (48,254,545 | ) |
| Balance– December 31,2002                                                                                               |        |  |                |        | 10,899  |                         |        |  |              |        | 5,450   |                           |        |  |                       |        | 4,060,000 |                       |  |  |                                 |   | 2,030,000 |                     |  |  |                                    |  | 10,635,507 |  |  |  |  |   | 5,314,209 |  |  |  |  |   | 23,773,747 |   |  |  |  |   | 3,321,747 |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (77,267,806 | ) |  |  |  |   | (42,822,653 | ) |
| Netloss                                                                                                                       |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (2,704,912  | ) |  |  |  |   | (2,704,912  | ) |
| Balance– December  31,2003                                                                                              |        |  |                |        | 10,899  |                         |        |  |              |        | 5,450   |                           |        |  |                       |        | 4,060,000 |                       |  |  |                                 |   | 2,030,000 |                     |  |  |                                    |  | 10,635,507 |  |  |  |  |   | 5,314,209 |  |  |  |  |   | 23,773,747 |   |  |  |  |   | 3,321,747 |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (79,972,719 | ) |  |  |  |   | (45,527,566 | ) |
| Netloss                                                                                                                       |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (2,737,494  | ) |  |  |  |   | (2,737,494  | ) |
| Balance– December  31,2004                                                                                              |        |  |                |        | 10,899  |                         |        |  |              |        | 5,450   |                           |        |  |                       |        | 4,060,000 |                       |  |  |                                 |   | 2,030,000 |                     |  |  |                                    |  | 10,635,507 |  |  |  |  |   | 5,314,209 |  |  |  |  |   | 23,773,747 |   |  |  |  |   | 3,321,747 |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (82,710,213 | ) |  |  |  |   | (48,265,060 | ) |
| Netloss                                                                                                                       |        |  |                |        | — |                         |        |  |              |        | — |                           |        |  |                       |        | —   |                       |  |  |                                 |   | —   |                     |  |  |                                    |  | —    |  |  |  |  |   | —   |  |  |  |  |   | —    |   |  |  |  |   | —   |  |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (2,903,041  | ) |  |  |  |   | (2,903,041  | ) |
| Balance– December  31,2005                                                                                              |        |  |                |        | 10,899  |                         |        |  |              | $      | 5,450   |                           |        |  |                       |        | 4,060,000 |                       |  |  |                                 | $ | 2,030,000 |                     |  |  |                                    |  | 10,635,507 |  |  |  |  | $ | 5,314,209 |  |  |  |  | $ | 23,773,747 |   |  |  |  | $ | 3,321,747 |  |  |  |  | $ | — |   |  |  |  | $ | — |   |  |  |  | $ | (85,613,254 | ) |  |  |  | $ | (51,168,101 | ) |
|                                                                                                                               |

Theaccompanying notes are an integral part of these financialstatements

F-4

----

Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESCONSOLIDATEDSTATEMENTS OF CASH FLOWS

|                                                                   |  |  |      |   |            |      |  |  |      |   |            |      |  |  |  |   |            |   |  |  |  |   |             |   |
|-------------------------------------------------------------------|--|--|------|---|------------|------|--|--|------|---|------------|------|--|--|--|---|------------|---|--|--|--|---|-------------|---|
| Forthe Years Ended December31,                                    |  |  | 2005 |   |            | 2004 |  |  | 2003 |   |            | 2002 |
| CashFlows from OperatingActivities:                               |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Netloss                                                           |  |  |      | $ | (2,903,041 | )    |  |  |      | $ | (2,737,494 | )    |  |  |  | $ | (2,704,912 | ) |  |  |  | $ | (48,254,545 | ) |
| Adjustmentsto reconcile net loss to net cash usedin               |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| operatingactivities:                                              |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Lossfrom extraordinaryitem                                        |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 41,959,375  |   |
| Accretionof reclamation and EPA settlementobligations             |  |  |      |   | 2,343,707  |      |  |  |      |   | 2,265,921  |      |  |  |  |   | 2,156,865  |   |  |  |  |   | 426,192     |   |
| Depreciationanddepletion                                          |  |  |      |   | 168,787    |      |  |  |      |   | 168,787    |      |  |  |  |   | 168,787    |   |  |  |  |   | 253,039     |   |
| Cumulativeeffect of change of accountingprinciple                 |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | (33,348    | ) |  |  |  |   | —     |   |
| Losson impairment of building, machinery andequipment             |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 2,115,214   |   |
| Losson impairment of land and miningclaims                        |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 1,635,587   |   |
| Losson impairment of equityinvestment                             |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 129,294     |   |
| Stockissued for servicesrendered                                  |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 50,000      |   |
| Amortizationof discount on notepayable                            |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 30,750      |   |
| Baddebtexpense                                                    |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 21,770      |   |
| Equityin loss ofaffiliate                                         |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 4,942       |   |
| Gainon sale of property andequipment                              |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (29,427     | ) |
| Exchangeof supplies for settlement of accountspayable             |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (39,452     | ) |
| Changesin operating assets andliabilities:                        |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Otherassets                                                       |  |  |      |   | (38,100    | )    |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (460        | ) |
| Relatedpartypayable                                               |  |  |      |   | 165,192    |      |  |  |      |   | 34,022     |      |  |  |  |   | 13,113     |   |  |  |  |   | 52,154      |   |
| Accountspayable                                                   |  |  |      |   | 91,904     |      |  |  |      |   | 87,412     |      |  |  |  |   | 83,778     |   |  |  |  |   | 324,380     |   |
| Interestpayable                                                   |  |  |      |   | 41,614     |      |  |  |      |   | 38,287     |      |  |  |  |   | 658        |   |  |  |  |   | 28,795      |   |
| Prepaidexpenses                                                   |  |  |      |   | 15,000     |      |  |  |      |   | (15,000    | )    |  |  |  |   | —    |   |  |  |  |   | 153,139     |   |
| Accruedliabilities                                                |  |  |      |   | —    |      |  |  |      |   | 45,682     |      |  |  |  |   | 4,234      |   |  |  |  |   | 133,934     |   |
| Accruedconvertible common stockdividends                          |  |  |      |   | 113,393    |      |  |  |      |   | 112,493    |      |  |  |  |   | 72,912     |   |  |  |  |   | 216,300     |   |
| Directorindemnification                                           |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | 240,000    |   |  |  |  |   | —     |   |
| Accruedreclamationcosts                                           |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 60,400      |   |
| NetCash Used in OperatingActivities                               |  |  |      |   | (1,544     | )    |  |  |      |   | 110        |      |  |  |  |   | 2,087      |   |  |  |  |   | (728,619    | ) |
| CashFlows from InvestingActivities:                               |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Proceedsfrom the sale ofequipment                                 |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 167,853     |   |
| Proceedsfrom payment of shareholder notereceivable                |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 3,600       |   |
| Advancestoaffiliate                                               |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (3,708      | ) |
| Purchasesof property andequipment                                 |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | (17,423     | ) |
| NetCash Used in InvestingActivities                               |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 150,322     |   |
| CashFlows from FinancingActivities:                               |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Proceedsfrom notespayable                                         |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 269,250     |   |
| Netproceeds from issuance of common stock andwarrants             |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 100,000     |   |
| Netproceeds from issuance of convertible debtoption               |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 30,750      |   |
| Principalpayments on notespayable                                 |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | (13,165    | ) |  |  |  |   | (30,448     | ) |
| NetCash Provided By FinancingActivities                           |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | (13,165    | ) |  |  |  |   | 369,552     |   |
| NetChange in Cash                                                 |  |  |      |   | (1,544     | )    |  |  |      |   | 110        |      |  |  |  |   | (11,078    | ) |  |  |  |   | (208,745    | ) |
| Cashat Beginning ofYear                                           |  |  |      |   | 1,554      |      |  |  |      |   | 1,444      |      |  |  |  |   | 12,522     |   |  |  |  |   | 221,267     |   |
| Cashat End ofYear                                                 |  |  |      | $ | 10         |      |  |  |      | $ | 1,554      |      |  |  |  | $ | 1,444      |   |  |  |  | $ | 12,522      |   |
| SupplementalSchedule of Noncash Investing and FinancingActivities |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| Disposalof fully depreciatedassets                                |  |  |      | $ | 19,743     |      |  |  |      | $ | 45,528     |      |  |  |  | $ | 105,314    |   |  |  |  | $ | 237,840     |   |
| Conversionof accounts payable andaccrued                          |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| liabilitiesto notespayable                                        |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 167,627     |   |
| Conversionof redeemable convertible commonstock                   |  |  |      |   |       |      |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |        |   |
| toconvertible commonstock                                         |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 5,376,428   |   |
| Convertibledebentures issued for restrictedcash                   |  |  |      |   | 2,500,000  |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | —     |   |
| Writeoff deferred compensation on forfeitedoptions                |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | 11,220      |   |
| Cashpaid forinterest                                              |  |  |      |   | —    |      |  |  |      |   | —    |      |  |  |  |   | —    |   |  |  |  |   | —     |   |
|                                                                   |

Theaccompanying notes are an integral part of these financialstatements

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

NOTE 1 —NATURE OF OPERATIONS AND INVESTMENTS

Chief Consolidated MiningCompany (‘‘Chief’’) was incorporated in thestate of Arizona in 1909. Chief currently is the owner of or has vestedinterests in approximately 19,300 acres of patented mining property inthe Tintic Mining Districts in Utah County and Juab County, Utah. Chiefand its subsidiaries (collectively, the‘‘Company’’) operate as a mineral resourcecompany seeking to engage in the exploration and development of theirmining claims and properties.

Tintic Utah Metals JointVenture – The Company owns a 75% interest in TinticUtah Metals LLC (‘‘Tintic’’). TheCompany’s Burgin Mine and the Tintic Mill are located onproperty owned by Tintic. The Company had an option to purchase the25% minority interest for $3  million; however, thatoption expired unexercised on December  31,  2002. Duringthe portion of the option period from October  1,  1998 toDecember  31,  2002, the Company advanced $7,544,776 toTintic. The advances were eliminated on consolidation and theinvestment in the land and mining claims was included in the impairmentloss recognized during 2002.

Central Standard ConsolidatedMines – The Company owns approximately 23% percent ofthe outstanding capital stock of Central Standard Consolidated Mines(‘‘Central Standard’’). CentralStandard's mining property consists of 320 acres located in thenorth-central portion of the East Tintic Mining District and issurrounded by property owned by Tintic. On October  4,2000, the Boards of Directors of Chief and Central Standard approved anAgreement and Plan of Merger (the‘‘Merger’’) between Central Standard andChief Gold Mines, Inc., a wholly-owned subsidiary of Chief. The Mergerwas subject to the approval of the shareholders of Central Standard bySeptember  30,  2002, but was never submitted to theshareholders for their approval. Since the Merger was not completed bySeptember  30,  2002, the proposed merger transaction wasterminated and had no effect on the accompanying consolidated financialstatements. Central Standard’s land holdings were sold atSheriff’s sale in May  2005 for past due real estatetaxes.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

Use of Estimates – The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from theseestimates. The estimated amount of the reclamation and EPA settlementobligations are particularly subject to change in the nearterm.

Principles of Consolidation – Theaccompanying consolidated financial statements include the accounts ofthe Company and all majority owned subsidiaries. The Company's23% investment in Central Standard was accounted for using theequity method and was impaired to zero during the year endedDecember  31,  2002. Intercompany accounts and transactionshave been eliminated in consolidation.

Restricted Cash Heldin Escrow – Dimeling Schreiber and Park placed $2.5million in escrow during December  2005 upon the Company issuingto them $2,500,000 of convertible debentures, as further described inNote 9. The funds will remain in escrow until such time the Company hasreceipt of creditor acceptances (repayment on a negotiated basis, orcompromise offer) representing 50% of the outstanding aggregateunsecured amounts owed. The Company satisfied this requirement inJuly  2006 and, accordingly, the restricted cash was classifiedas a current asset at December  31,  2005.

Landand Mining Claims – Land and mining claims are recorded atthe lower of cost, less accumulated depletion, or fair value. Costs ofdeveloping mining properties (after completion of exploration) arecapitalized. Exploration costs are expensed as incurred until theestablishment of a commercially minable deposit or reserve which can beeconomically and legally produced. When a 

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

mining property reaches the production stage,the related capitalized costs are amortized using the units ofproduction method on the basis of proven and probable ore reserves. TheCompany's mining properties are periodically assessed forimpairment of value and any losses are charged to operations at thetime of impairment.

Buildings, Machinery and Equipment– Buildings, machinery and equipment are recorded at the lower ofcost or fair value. Major additions and improvements are capitalizedwhile minor replacements, maintenance and repairs that do not increasethe useful lives of the assets are expensed as incurred. Depreciationof buildings, machinery and equipment has been computed using thestraight-line method over estimated useful lives of 3years.

Impairment of Long-Lived Assets – TheCompany accounts for long-lived assets pursuant to SFAS No. 144,‘‘Accounting for the Impairment of Long-Lived Assets andfor Long-Lived Assets to be Disposed Of.’’ The Companyevaluates its land and mineral properties, buildings, machinery andequipment and other long-lived assets for impairment and assesses theirrecoverability based upon anticipated future cash flows. If changes incircumstances lead Company management to believe that any of itslong-lived assets may be impaired, the carrying value of long-livedassets are reduced by the estimated excess of the carrying value overthe fair value of the assets.

Reclamation Costs –The Company provides for reclamation costs and penalties for theretirement obligations associated with tangible long-lived assets.Reclamation liabilities are accrued based on estimates of knownenvironmental exposure in conjunction with feasibility studies and areaccreted over the estimated life of the assets.

IncomeTaxes – The Company follows the provisions of Statement ofFinancial Accounting Standards (‘‘SFAS’’)No. 109, ‘‘Accounting for Income Taxes,’’which requires that income tax accounts be computed using the liabilitymethod. Deferred taxes are determined based upon the estimated futuretax effects of differences between the financial statement and taxbases of assets and liabilities and operating loss and tax creditcarryforwards given the provisions of currently enacted taxlaws.

Fair Value of Financial Instruments – Thecarrying amount of the convertible debentures, the reclamationobligation and the EPA settlement obligation approximates fair value.The estimated fair values have been determined using market informationregarding interest and discount rates.

Basic and Diluted LossPer Common Share – Basic loss per common share excludesdilution and is computed by dividing net loss applicable to commonstockholders by the weighted-average number of common sharesoutstanding during the year. Diluted loss per common share reflects thepotential dilution that could occur if stock options were exercised orconvertible common stock was converted into common stock. Thecomputation of diluted loss per common share does not assume exerciseor conversion of securities that would have an antidilutive effect onnet loss per common share.

At December  31,  2005,2004, 2003 and 2002, there were outstanding options to purchase245,000, 695,000, 785,000 and 855,000 shares of common stock,respectively, which were excluded from the computation of diluted lossper common share. In addition, for the years ended December31,  2005, 2004, 2003 and 2002, there were 4,060,000 shares ofconvertible common stock outstanding that were excluded from thecomputation of diluted loss per common share calculation. Thesepotential common shares were excluded because they were antidilutiveand would have decreased diluted loss per commonshare.

Recent Accounting Pronouncements – InJuly  2001, the Financial Accounting Standards Board(‘‘FASB’’) issued SFAS No. 141,‘‘Business Combinations’’ and SFAS No. 142,‘‘Goodwill and Other Intangible Assets.’’SFAS No.141 requires all business combinations initiated afterJune  30,  2001 to be accounted for using the purchasemethod of accounting. SFAS No. 142 eliminates amortization of goodwilland intangible assets with indefinite lives and requires such assets tobe tested for impairment and written down to appropriate fair values.SFAS No. 142 was effective for financial 

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

statements issued for fiscal years beginningafter December  15,  2001. The adoption of these statementsdid not have a material impact on the Company’s financialposition or the results of operations.

In June  2001, theFASB released SFAS No. 143, ‘‘Accounting for AssetRetirement Obligations.’’ This statement addresses theaccounting treatment for obligations associated with the retirement oftangible long-lived assets and the associated asset retirement costs.The provisions of the statement apply to legal obligations associatedwith the retirement of long-lived assets that result from theacquisition, construction, development, or normal operation of along-lived asset. The statement is effective for financial statementsissued for fiscal years beginning after June  15,  2002. Asdescribed further in Note 8, the adoption of this statement had a$33,348 effect on the Company’s financial position and on theresults of operations during 2003.

During August  2001, theFASB issued SFAS No. 144, ‘‘Accounting for Impairment orDisposal of Long-Lived Assets,’’ which supersedes SFASNo. 121, ‘‘Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to be Disposed of,’’ andvarious provisions of APB Opinion No. 30. This statement establishesnew guidelines, in connection with SFAS No. 142, for recognizing losseson certain long-lived assets when the carrying amount of the asset isnot recoverable. SFAS No. 144 is effective for financial statementsissued for fiscal years beginning after December  15,2001. The Company realized a significant impairment of its long-livedassets for the year ended December  31,  2002, as discussedmore fully in Note 11.

In February  2006, theFASB issued SFAS No. 155, Accounting forCertain Hybrid Financial Instruments – an amendment of FASBStatements No. 133 and 140 (SFAS 155).SFAS 155 amends SFAS No. 133, Accounting forDerivative Instruments and Hedging Activities andSFAS No. 140, Accounting for Transfers and Servicingof Financial Assets and Extinguishments of Liabilities, and relatedinterpretations. SFAS 155 permits fair value remeasurement forany hybrid financial instrument that contains an embedded derivativethat otherwise would require bifurcation and clarifies whichinterest-only strips and principal-only strips are not subject torecognition as liabilities. SFAS 155 eliminates the prohibition on aqualifying special-purpose entity from holding a derivative financialinstrument that pertains to a beneficial interest other than anotherderivative financial instrument. SFAS 155 is effective for theCompany for all financial instruments acquired or issued beginningJuly  1,  2007. The impact of adoption of this statement onthe Company’s consolidated financial statements, if any, has notyet been determined.

In March  2006, the FASB issued SFASNo. 156, Accounting for Servicing of Financial Assets – anamendment of FASB Statement No. 140 (SFAS 140). SFAS 156 amendsSFAS 140 requires an entity to recognize a servicing asset or servicingliability each time it undertakes an obligation to service a financialasset. It also requires all separately recognized servicing assets andservicing liabilities to be initially measured at fair value, ifpracticable. SFAS 156 permits an entity to use either the amortizationmethod or the fair value measurement method for each class ofseparately recognized servicing assets and servicing liabilities. SFAS156 is effective for the Company as of July  1,  2007. Theimpact of adoption of this statement on the Company’sconsolidated financial statements, if any, has not yet beendetermined.

In June  2006, the FASB issued FIN No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASBStatement No 109 (FIN 48). FIN 48 prescribes a recognitionthreshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to betaken in a tax return. FIN 48 also provides guidance on derecognitionclassification, interest and penalties, accounting in interim periods,disclosure, and transition. The interpretation is effective for thefiscal years beginning after December  15,  2006. Theimpact of adoption of this interpretation on the Company’sconsolidated financial statements, if any, has not yet beendetermined.

In September  2006, the FASB issued SFAS No.157, Fair Value Measurements (‘‘SFAS157’’). SFAS 157 defines fair value, establishes aframework for measuring fair value, and 

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

expands disclosures about fair valuemeasurements. SFAS 157 will be applied prospectively and iseffective for fiscal years beginning after November  15,2007, and interim periods within those fiscal years. SFAS 157 isnot expected to have a material impact on the Company’sconsolidated financial statements.

Business Conditions– The Company’s financial statements are prepared usingaccounting principles generally accepted in the United States ofAmerica applicable to a going concern that contemplates the realizationof assets and liquidation of liabilities in the normal course ofbusiness.

As of December  31,  2005, the Company had$950,000 of land and mining claims and $250,000 of mining relatedbuildings, machinery and equipment, which in aggregate, representapproximately 29%  of total assets. The Company'sbuildings, machinery and equipment consist principally of the TinticMill located at the Trixie mine. The realization of the Company'sinvestment in land and mining claims and mining related buildings,machinery and equipment is dependent upon various factors, includingthe outcome of: (i) the Company's success in exploration effortsto discover additional mineral resources and in proving the technicalfeasibility and commercial viability of the identified mineralresources, (ii) the Company's ability to obtain necessary fundingto continue exploration of the mining properties and to financeoperations while the Company pursues real estate developmentalternatives for portions of the Company's land, (iii) theCompany's success in finding a joint venture partner to providecapital funding for the Company's continued exploration of itsmining properties, (iv) the Company's ability to profitably leasethe Tintic Mill or its mining claims to outside entities, and (v) theCompany's success in selling or developing certain of its landsurface rights to fund its continued mining and explorationactivities.

During the year ended December  31,2001, the Company began mining ore from the Trixie Mine and beganprocessing ore in the Company's Tintic Mill in January2002. On March  28,  2002, the Company encountered unstablemining conditions and suspended mining and processing operations. As aresult of the suspended mining and processing operations, the Companyis not generating ongoing revenues and did not have sufficient fundingto make the significant safety improvements required in the Trixie Mineor to continue exploration efforts related to the Burgin Mine.

During 2002, the Environmental Protection Agency (EPA) completed afeasibility study and finalized its actions to be taken in response tothe release of waste materials at and around the Eureka Mills SuperfundSite located in Juab County, Utah. The EPA is seeking reimbursementfrom the Company in the amount of $60  million for its portion ofthe liability based on the ownership and the conduct of miningoperations on portions of the site. During 2005, the Company reached asettlement agreement with the EPA regarding the judgment, as discussedmore fully in Note 8.

These matters raise substantial doubt aboutthe Company's ability to continue as a going concern. Theconsolidated financial statements do not include any adjustmentsrelating to the recoverability or classification of assets orliabilities that might be necessary should the Company not be able tocontinue as a going concern.

The Board of Directors is currentlypursuing efforts to obtain additional sources of financing to allow theCompany to proceed with its operations. The Company is alsoinvestigating selling portions of its land surface rights in order tocomply with the EPA Consent Decree.

NOTE 3 —CAPITALIZATION

Redeemable Convertible Common Stock– At December  31,  2001, the Company had outstanding3,500,000 shares of redeemable convertible common stock that carried adividend rate of 8 percent, which dividends were payable innon-redeemable convertible common stock of the Company (based on thenumber of issued redeemable convertible common shares). The dividendshares were issuable on an annual basis. The Company accrued an 8percent in-kind convertible common stock dividend, or 92,821 shares ofconvertible common stock through May  1,  2002. Thedividend shares are valued based on the average market price of thecommon stock during the period, and amount to $89,108, or $0.96 pershare.

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

The discount on the 3,500,000 redeemableconvertible common shares was being amortized on a straight-line basisutilizing the difference between the carrying value at the date ofissuance and the redemption price of $7,000,000 that was dueDecember  1,  2003. The straight-line basis was assumed toreasonably approximate the effective interest method. The Companyrecognized $324,624 of accretion during 2002.

Dimeling,Schreiber & Park (‘‘DS&P’’), actingas the general partner of Dimeling, Schreiber & Park ReorganizationFund II, LP, was the sole stockholder of the Company’sredeemable convertible common stock. On May  1,  2002,DS&P relinquished its right to require the Company to redeem all orpart of its redeemable convertible common stock. After the redemptionrequirement was relinquished, the shares were reclassified intostockholders’ equity as convertible common stock, convertibleinto common stock on a 1-for-1 basis; however, they continue toaccumulate dividends of 8 percent per annum as disclosedabove.

Convertible Common Stock – ThroughDecember  31,  2001, the Company had issued 560,000 sharesof convertible common stock in payment of dividends on the redeemableconvertible common stock. The convertible common stock carries adividend rate of 8 percent, payable in-kind with shares of convertiblecommon stock. The terms of the convertible common stock require thatthe Company shall not declare dividends on the common stock as long asthe convertible common stock is outstanding. DS&P shall have apreemptive right to purchase new issuances of securities of the Companybefore any other investors, not to include certain issuances includingsecurities issued in any public offering or a merger.

Dividendsaccrue on the convertible common stock at the rate of 8% perannum and are payable in-kind with convertible common shares, andamounted to 404,974 shares, 374,976 shares, 347,200 shares and 280,000shares during the years ended December  31,  2005, 2004,2003 and 2002, respectively. The in-kind dividends were valued based onthe average market price of the common stock during the period andresulted in recognizing $113,393, $112,493, $72,912 and $127,192 ofconvertible common stock dividends during the years endedDecember  31,  2005, 2004, 2003 and 2002, respectively. Nofurther dividends will be paid if DS&P's ownership of allclasses of common stock increases to 68%. As of December31,  2005 DS&P’s actual ownership totaled27.76% and ownership including dividends in arrears totaled37.18%.

Preferred Stock – The Board ofDirectors of the Company authorized the issuance of common stock inexchange for preferred stock on a share-for-share basis if elected bythe preferred stockholders. Preferred shares obtained by the Company inthe exchange are retired. During 2005, 2004, 2003 and 2002 no preferredshares were exchanged for common shares.

The shares of preferredstock and common stock of the Company have equal right to receivedividends, to vote, and in all other respects except that uponliquidation of the Company the preferred shares are entitled to apreferential payment of $0.50 per share.

Common Stock– During the year ended December  31,  2002, theCompany issued 75,000 shares of $0.50 par value common stock for cashand services valued at $2.00 per share.

NOTE 4 — STOCKOPTIONS

The Company applies APB Opinion 25 (‘‘APB25’’) and related interpretations in accounting for itsstock-based compensation plans as they relate to employees anddirectors. No employee or director options were granted or vestedduring the years ended December  31,  2005, 2004, 2003 and2002, and no compensation was recognized either under the intrinsicvalue method of APB 25 or under the fair value method of SFAS123.

Incentive Stock Options – During the yearended December  31,  1995, the Company loaned an employee$37,500 to facilitate his exercise of stock options issued under apreviously existing incentive stock option plan. The loan to theemployee is evidenced by a non-interest bearing note secured by

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

certain shares of the Company’s commonstock with a balance of $21,770. The employee is no longer an employeeof the Company and the receivable was recognized as a bad debt expenseduring the year ended December  31,  2002.

AtDecember  31,  2005 no stock options remain outstandingunder the incentive stock option plan.

Nonqualified StockOptions – From time to time, the shareholders have approvedthe issuance of nonqualified stock options to officers and directors.The Board of Directors also issued nonqualified stock options to keyemployees, to non-employees for services rendered and to a creditor aspart of a settlement of a claim in prior years. The nonqualified stockoptions have various vesting options and must be exercised within tenyears or less from the date of grant unless sooner terminated by theirterms.

During 2000, the Board of Directors approved the grantingof nonqualified stock options for the purchase of 20,000 shares ofcommon stock to a key employee of Tintic. These options have anexercise price of $2.19 per share. However, the exercise price waslower than the market price of the stock on the day the Company grantedoptions. As a result, the Company recognized $21,250 of deferredcompensation for the difference between the option price and the marketprice. This deferred compensation was being amortized over the threeyear vesting period. On April  1,  2002 the employee leftthe Company, thus no additional shares would vest. The unamortizedcompensation cost of $11,220 was removed through additional paid-incapital. No options were granted for the years ended December31,  2005, 2004, 2003 and 2002. A summary of the status of thenonqualified stock options at December  31,  2005, 2004,2003 and 2002 and related changes during the years then ended is asfollows:

|                           |  |  |         |  |           |                      |  |  |                                |   |      |                        |  |  |  |  |        |  |  |  |  |   |                                          |  |
|---------------------------|--|--|---------|--|-----------|----------------------|--|--|--------------------------------|---|------|------------------------|--|--|--|--|--------|--|--|--|--|---|------------------------------------------|--|
|                      |  |  | Options |  |           | AverageExercisePrice |  |  | Average Remaining Life (Years) |   |      | RangeofExercise Prices |
| Balance, December31,2001  |  |  |         |  | 1,005,000 |                      |  |  |                                | $ | 2.57 |                        |  |  |  |  | 8.03   |  |  |  |  | $ | 2.00  –  $3.50 |  |
| Expired                   |  |  |         |  | 49,862    |                      |  |  |                                |   | 2.83 |                        |  |  |  |  |   |  |  |  |  |   |                                     |  |
| Cancelled                 |  |  |         |  | 115,138   |                      |  |  |                                |   | 2.40 |                        |  |  |  |  |   |  |  |  |  |   |                                     |  |
| Balance,December  31,2002 |  |  |         |  | 840,000   |                      |  |  |                                |   | 2.57 |                        |  |  |  |  | 7.00   |  |  |  |  |   | 2.19  –  3.50  |  |
| Expired                   |  |  |         |  | 70,000    |                      |  |  |                                |   | 2.62 |                        |  |  |  |  |   |  |  |  |  |   |                                     |  |
| Balance,December  31,2003 |  |  |         |  | 770,000   |                      |  |  |                                |   | 2.56 |                        |  |  |  |  | 6.16   |  |  |  |  |   | 2.19  –  3.50  |  |
| Expired                   |  |  |         |  | 90,000    |                      |  |  |                                |   | 3.50 |                        |  |  |  |  |   |  |  |  |  |   |                                     |  |
| Balance,December  31,2004 |  |  |         |  | 680,000   |                      |  |  |                                |   | 2.43 |                        |  |  |  |  | 5.87   |  |  |  |  |   | 2.19  –  3.50  |  |
| Expired                   |  |  |         |  | 450,000   |                      |  |  |                                |   | 2.30 |                        |  |  |  |  |   |  |  |  |  |   |                                     |  |
| Balance,December  31,2005 |  |  |         |  | 230,000   |                      |  |  |                                | $ | 2.68 |                        |  |  |  |  | 5.43   |  |  |  |  | $ | 2.19  –  $3.00 |  |
|                           |

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

NOTE 5 — INCOME TAXES

TheCompany believes it is unlikely that the deferred tax assets will berealized and that the deferred tax assets have been fully allowedagainst. The net deferred tax asset consisted of the following atDecember31:

|                                    |  |  |      |   |             |      |  |  |      |   |             |      |  |  |  |   |             |   |  |  |  |   |             |   |
|------------------------------------|--|--|------|---|-------------|------|--|--|------|---|-------------|------|--|--|--|---|-------------|---|--|--|--|---|-------------|---|
|                               |  |  | 2005 |   |             | 2004 |  |  | 2003 |   |             | 2002 |
| EPA settlementobligation           |  |  |      | $ | 18,307,068  |      |  |  |      | $ | 17,433,643  |      |  |  |  | $ | 16,601,888  |   |  |  |  | $ | 15,809,816  |   |
| Reclamationobligation              |  |  |      |   | 182,136     |      |  |  |      |   | 181,359     |      |  |  |  |   | 167,925     |   |  |  |  |   | 167,925     |   |
| Mineexplorationcosts               |  |  |      |   | 2,457,000   |      |  |  |      |   | 2,866,500   |      |  |  |  |   | 3,276,000   |   |  |  |  |   | 3,685,500   |   |
| Landand miningclaims               |  |  |      |   | 610,074     |      |  |  |      |   | 610,074     |      |  |  |  |   | 610,074     |   |  |  |  |   | 610,074     |   |
| Buildingsandequipment              |  |  |      |   | 352,275     |      |  |  |      |   | 469,700     |      |  |  |  |   | 587,125     |   |  |  |  |   | 704,550     |   |
| Impairmentloss on equityinvestment |  |  |      |   | 48,994      |      |  |  |      |   | 48,994      |      |  |  |  |   | 48,994      |   |  |  |  |   | 48,994      |   |
| Accrueddirectorindemnification     |  |  |      |   | 89,520      |      |  |  |      |   | 89,520      |      |  |  |  |   | 89,520      |   |  |  |  |   | —     |   |
| Stock-basedcompensation            |  |  |      |   | 78,040      |      |  |  |      |   | 230,726     |      |  |  |  |   | 261,264     |   |  |  |  |   | 285,015     |   |
| Operatinglosscarryforwards         |  |  |      |   | 7,995,739   |      |  |  |      |   | 7,340,021   |      |  |  |  |   | 6,725,087   |   |  |  |  |   | 6,123,876   |   |
| Totaldeferred taxassets            |  |  |      |   | 30,120,846  |      |  |  |      |   | 29,270,537  |      |  |  |  |   | 28,367,877  |   |  |  |  |   | 27,435,750  |   |
| Valuationallowance                 |  |  |      |   | (30,120,846 | )    |  |  |      |   | (29,270,537 | )    |  |  |  |   | (28,367,877 | ) |  |  |  |   | (27,435,750 | ) |
| Netdeferred taxasset               |  |  |      | $ | —     |      |  |  |      | $ | —     |      |  |  |  | $ | —     |   |  |  |  | $ | —     |   |
|                                    |

Areconciliation of the expected U.S. federal income tax computed at thestatutory rate to the provision for income taxes is as follows for theyears ended December31:

|                                         |  |  |      |   |          |      |  |  |      |   |          |      |  |  |  |   |          |   |  |  |  |   |             |   |
|-----------------------------------------|--|--|------|---|----------|------|--|--|------|---|----------|------|--|--|--|---|----------|---|--|--|--|---|-------------|---|
|                                    |  |  | 2005 |   |          | 2004 |  |  | 2003 |   |          | 2002 |
| Tax at federalstatutory rate –34% |  |  |      | $ | (948,480 | )    |  |  |      | $ | (892,500 | )    |  |  |  | $ | (894,880 | ) |  |  |  | $ | (16,222,631 | ) |
| Statebenefit, net of federaltax         |  |  |      |   | (92,058  | )    |  |  |      |   | (86,625  | )    |  |  |  |   | (86,856  | ) |  |  |  |   | (1,574,549  | ) |
| Changein valuationallowance             |  |  |      |   | 850,309  |      |  |  |      |   | 902,660  |      |  |  |  |   | 932,127  |   |  |  |  |   | 17,591,750  |   |
| Expirationof operating losscarryforward |  |  |      |   | 190,229  |      |  |  |      |   | 76,465   |      |  |  |  |   | 49,609   |   |  |  |  |   | 73,854      |   |
| Effectof change in effective taxrate    |  |  |      |   | —  |      |  |  |      |   | —  |      |  |  |  |   | —  |   |  |  |  |   | 131,576     |   |
| Nettaxexpense                           |  |  |      | $ | —  |      |  |  |      | $ | —  |      |  |  |  | $ | —  |   |  |  |  | $ | —     |   |
|                                         |

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Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

Since operations ceased in 2002, theCompany has failed to file its federal income tax returns. The netoperating losses expire asfollows:

|                   |  |  |        |   |            |  |
|-------------------|--|--|--------|---|------------|--|
| Yearof Expiration |  |  | Amount |
| 2006              |  |  |        | $ | 256,000    |  |
| 2007              |  |  |        |   | 181,000    |  |
| 2008              |  |  |        |   | 773,000    |  |
| 2009              |  |  |        |   | 930,000    |  |
| 2010              |  |  |        |   | 1,284,000  |  |
| 2011              |  |  |        |   | 1,038,000  |  |
| 2012              |  |  |        |   | 648,000    |  |
| 2018              |  |  |        |   | 992,000    |  |
| 2019              |  |  |        |   | 1,085,000  |  |
| 2020              |  |  |        |   | 2,161,000  |  |
| 2021              |  |  |        |   | 3,457,000  |  |
| 2022              |  |  |        |   | 2,765,000  |  |
| 2023              |  |  |        |   | 1,745,000  |  |
| 2024              |  |  |        |   | 1,854,000  |  |
| 2025              |  |  |        |   | 2,267,000  |  |
|              |  |  |        | $ | 21,436,000 |  |
|                   |

TheInternal Revenue Code contains provisions that reduce or limit theavailability and utilization of net operating loss carryforwards ifcertain changes in ownership have taken place or will take place.Changes in the ownership of the Company may have resulted inlimitations on all pre-existing net operating loss carryforwards of theCompany. As a result, management estimates that all of theCompany's net operating loss carryforwards may be limited toutilization of an annual amount not to exceed the value of the Companyon the date the Company exceeded the specified levels of allowablechanges in ownership multiplied by the Federal long-term tax-exemptrate at that date. If the annual limited amount is unutilized in anyparticular year, it remains available on a cumulative basis through theexpiration date of the applicable net operating losscarryforwards.

NOTE 6 — RELATED PARTY TRANSACTIONS

As discussed in Note 4, the Company loaned $37,500 to an employeewho is also a shareholder of the Company. The loan is non-interestbearing. At December  31, 2002, the remaining principal balancewas $21,770, which was written off in 2002 as a bad debt.

TheCompany has amounts payable to Dimeling, Schreiber & Park in theamount of $264,481, $99,298, $65,267, and $52,154 at December31, 2005, 2004, 2003 and 2002, respectively and owes Dimeling,Schreiber & Park $2,500,000 at December  31, 2005 under theterms of convertible debentures payable. A representative of Dimeling,Schreiber & Park is management of the Company. In addition, theCompany has accrued payroll liabilities in the amount of $99,996 toformer employees for the years ended December  31,  2005,2004, 2003 and 2002.

NOTE 7 — NOTES PAYABLE

OnFebruary  9, 2002, the Company entered into a $300,000 promissorynote, bearing interest at 8% per annum payable quarterly, dueone year from the date of the note. In conjunction with the promissorynote, the Company issued warrants to purchase 15,000 shares of theCompany’s stock at an exercise price of $2.75. The exerciseprice was equal to the market value of the Company’s commonstock on the date of issuance. In accordance with the Emerging IssuesTask Force (‘‘EITF’’) Issue No.98-5, ‘‘Accounting for Convertible Securities withBeneficial Conversion Features or Contingently 

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Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

Adjustable Conversion Ratios,’’and EITF Issue No. 00-27, ‘‘Application of Issue No. 98-5to Certain Convertible Instruments,’’ the $300,000 ofproceeds were allocated $269,250 to the note payable and $30,750 to thewarrants based on their relative fair values and the resulting discounton the note is being amortized over the one year term of the note. Theeffective interest rate was 19.5%. As of December  31,2002, the Company had not made the required interest payments and wasin default on the terms of the note. The Company remains in defaultunder the terms of the note through December  31, 2005.

OnApril  15, 2002, the Company converted an account payable of$63,000 into a note payable at 12% interest rate that compoundsmonthly, requiring monthly payments of $10,000 beginning on May15, 2002 until October  15, 2002, when the entire unpaid balanceof principal and accrued interest became due and payable. As ofDecember  31, 2002, the Company had not made any of the requiredpayments and was in default on the terms of the note. The Companyremains in default under the terms of the note through December31, 2005.

On June  30, 2002, the Company converted anaccount payable of $104,627 into a note payable at an interest rate of8% per annum, with payments of principal and interest requiredthe first day of each month beginning July  1, 2002 throughDecember  1, 2002 when the entire balance of principal andinterest was due. The note is secured by various equipment of theCompany. As of December  31, 2002, the Company was not current onthe required interest and principal payments and was therefore indefault on the terms of the note. During 2002, one piece of equipmentsecuring the indebtedness was sold with the net proceeds of $9,500applied to the balance of the note. The Company remains in defaultunder the terms of the note through December  31,2005.

Notes payable are summarized as follows at December31, 2005, 2004, 2003 and2002:

|                                                                                                          |  |  |      |   |         |      |  |  |      |   |         |      |  |  |  |   |         |  |  |  |  |   |         |  |
|----------------------------------------------------------------------------------------------------------|--|--|------|---|---------|------|--|--|------|---|---------|------|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                                                                                                     |  |  | 2005 |   |         | 2004 |  |  | 2003 |   |         | 2002 |
| $300,000unsecured note payable to an individual, 8% interest,matured February  9,  2003, indefault       |  |  |      | $ | 286,835 |      |  |  |      | $ | 286,835 |      |  |  |  | $ | 286,835 |  |  |  |  | $ | 300,000 |  |
| $63,000unsecured note payable to a company, 12% interest, maturedOctober  15,  2002, indefault           |  |  |      |   | 63,000  |      |  |  |      |   | 63,000  |      |  |  |  |   | 63,000  |  |  |  |  |   | 63,000  |  |
| $104,627note payable to a company, 8% interest secured byequipment, matured December  1, 2002, indefault |  |  |      |   | 74,179  |      |  |  |      |   | 74,179  |      |  |  |  |   | 74,179  |  |  |  |  |   | 74,179  |  |
| Totalnotespayable                                                                                        |  |  |      | $ | 424,014 |      |  |  |      | $ | 424,014 |      |  |  |  | $ | 424,014 |  |  |  |  | $ | 437,179 |  |
|                                                                                                          |

NOTE8 — ASSET RETIREMENT OBLIGATIONS

Reclamation ofMines   –   On January  1,  2003, theCompany adopted SFAS No. 143, ‘‘Accounting for AssetRetirement Obligations’’ which provides accountingrequirements for retirement obligations associated with tangiblelong-lived assets, including: the timing of liability recognition,initial measurement of the liability, allocation of asset retirementcost to expense, subsequent measurement of the liability and financialstatement disclosures. The implementation of SFAS No. 143 resulted in acumulative effect on prior years of the change in accounting principleof $33,348. The effect was recorded during the first quarter of 2003 asa decrease in net loss.

Prior to 1993, the Company and orcompanies that were subsequently acquired by the Company leased certainof its mining properties to other companies for operation, explorationand development. Under the terms of the leases, these other companieswere obligated to comply with all federal, state and localenvironmental laws and regulations affecting the mining industry.Tintic has assumed a reclamation obligation from the previous operatorof the Burgin Mine. In addition, the Company also holds a small miningpermit and reclamation obligation in connection with its Chief Goldproperties.

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

The Company has cash held in escrow inthe form of reclamation bonds with the State of Utah to settle theobligations when all mining efforts have been abandoned. All interestincome on the bonds is currently being garnished by the InternalRevenue Service to cover certain taxes, penalties, and interestincluded in accrued liabilities on the Company’s balance sheet.Prior to adoption of SFAS No.  143, the Company had accruedreclamation costs of $450,200 and had placed funds in bonds held withthe State of Utah totaling $450,200 at December  31,2002.

Environmental Protection Agency Settlement –During 2001, the U.S. Environmental Protection Agency(‘‘EPA’’) proposed to place what the agencyhas titled the ‘‘Eureka Mills SuperfundSite’’ (the ‘‘Site’’) on theNational Priorities List, as authorized under the ComprehensiveEnvironmental Response, Compensation and Liability Act of 1980, asamended (‘‘CERCLA’’). According to the EPA,samples indicate that the soil in the Town of Eureka, Utah iscontaminated with lead and, to a lesser extent, arsenic. The Siteconsists of approximately 150 acres in the town of Eureka, Utah.

On October  18,  2002 the EPA finalized its actions tobe taken in response to the release of waste materials at and aroundthe Site. The EPA is seeking reimbursement from the Company for itsportion of the liability based on the ownership and the conduct ofmining operations on portions of the Site. On February  9,2005, the Company confessed to a judgment with the EPA in the amount of$60  million. The judgment will remain in effect until theCompany has complied with all the requirements of the related consentdecree. The following details the Company’s obligations underthe judgment:

|  |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 1.  | The Company agrees to use itsbest efforts to satisfy the judgment by seeking indemnification orrecovery from insurance policies. After deducting recovery costs,70% of all proceeds from insurance policies shall be paid to theUnited States. Until all claims are exhausted, the Company must providea report to the United States each year for five years listinginsurance claims, the action the Company is taking to recover theamounts, and any recovery obtained. |

|  |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 2.  | TheCompany agrees to use its best efforts to sell its property, other thanthe property upon which the repository, open cells, response actionstructures, water source, and borrow source are located. Upon thetransfer of any property, the Company shall pay the EPA 100% ofnet sales proceeds up to $350,000, and then 50% thereafter. Ifthe transfer is less than the tax assessed value of the property orexceeds a total of more than 1,000 acres, the EPA may require anindependent appraisal and may object to the transfer based on the saleprice. If any portion of the property is not sold by the fifthanniversary of this decree, the Company agrees to auction the propertyto the highest bidder, engaging a professional auctioneer. The Companycannot hold a mortgage or other security interest from anypurchaser. |

|  |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 3.  | The Company agrees, for a five yearperiod from the date of the consent decree, to reimburse the UnitedStates 15% of its net income in excess of $2  millionduring any calendar year. The Company also agrees to pay the US15% of the net proceeds of the sale of Chief Consolidated MiningCompany or the sale of substantially all of its assets in excess of$2  million. The Company will be required to present auditedfinancial statements to the EPA. |

|  |          |                                                                                                                                                                                                                                                                                                                                                                       |
|--|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 4.  | The Companyagrees to allow the EPA sole use of borrowed material (top soil, filland base material) that is free from contaminants. The Company agreesto give uninterrupted and continuous access to the borrowed source 24hours a day, 365 days a year. The Company shall allow the EPA to useand improve the borrowed source as is necessary to fulfill itspurposes. |

|  |          |                                                                                                                                                                                                                                                                                                                       |
|--|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 5.  | The Company agrees to allow the EPAan irrevocable right to access, construct, operate, and close therepository and the property. The Company further grants the EPA theright to access, construct, and operate the two open cells on theproperty for the permanent disposal of waste material excavated fromthe site. |

|  |          |                                                                                                                                                                                                                                                                      |
|--|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 6.  | The Company agrees to allow the EPAto enter onto the property to construct and maintain such responseaction structures as are necessary to implement the response actions.The land will have an easement for the EPA to inspect, maintain, andoperate the structure. |

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CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

|  |          |                                                                 |
|--|----------|-----------------------------------------------------------------|
|  | 7.  | The Company agrees toprovide storage space and water as needed. |

|  |          |                                                                                        |
|--|----------|----------------------------------------------------------------------------------------|
|  | 8.  | The Company agrees to allow additional access asneeded for various purposes as needed. |

In the event the Companycompletes all of its obligations under the consent decree, the EPA willfile a Release of Notice of Federal Lien in the office of the JuabCounty Recorder and the Company will be completely relieved of the$60  million liability, resulting in a gain in such futureperiod. To date, the Company has fully complied with all terms of theagreement.

The judgment amount of $60  million representsthe future value of clean up costs when the terms of the consent decreeare satisfied on February  9,  2010. The Company elected toadopt SFAS 143 during the year ended December  31,  2002with respect to the EPA settlement obligation. The Company recognizedthe net present value of the liability and is accreting it over theexpected life of the obligation.

A reconciliation of the assetretirement obligations is asfollows:

|                                          |  |  |              |   |            |       |  |  |       |   |         |   |  |  |  |   |            |   |
|------------------------------------------|--|--|--------------|---|------------|-------|--|--|-------|---|---------|---|--|--|--|---|------------|---|
|                                     |  |  | EPALiability |   |            | Other |  |  | Total |
| Balance,December  31,2001                |  |  |              | $ | —    |       |  |  |       | $ | 389,800 |   |  |  |  | $ | 389,800    |   |
| Liabilityincurred                        |  |  |              |   | 41,959,375 |       |  |  |       |   | 60,400  |   |  |  |  |   | 42,019,775 |   |
| Accretionexpense                         |  |  |              |   | 426,192    |       |  |  |       |   | — |   |  |  |  |   | 426,192    |   |
| Balance,December  31,2002                |  |  |              |   | 42,385,567 |       |  |  |       |   | 450,200 |   |  |  |  |   | 42,835,767 |   |
| Adoptionof change of accountingprinciple |  |  |              |   | —    |       |  |  |       |   | (33,348 | ) |  |  |  |   | (33,348    | ) |
| Accretionexpense                         |  |  |              |   | 2,123,517  |       |  |  |       |   | 33,348  |   |  |  |  |   | 2,156,865  |   |
| Balance,December  31,2003                |  |  |              |   | 44,509,084 |       |  |  |       |   | 450,200 |   |  |  |  |   | 44,959,284 |   |
| Accretionexpense                         |  |  |              |   | 2,229,905  |       |  |  |       |   | 36,016  |   |  |  |  |   | 2,265,921  |   |
| Balance,December  31,2004                |  |  |              |   | 46,738,989 |       |  |  |       |   | 486,216 |   |  |  |  |   | 47,225,205 |   |
| Accretionexpense                         |  |  |              |   | 2,341,623  |       |  |  |       |   | 2,084   |   |  |  |  |   | 2,343,707  |   |
| Balance,December  31,2005                |  |  |              | $ | 49,080,612 |       |  |  |       | $ | 488,300 |   |  |  |  | $ | 49,568,912 |   |
|                                          |

NOTE9 — CONVERTIBLE DEBENTURES

On October  21,2002, the Board of Directors approved a subscription agreement to raisea minimum of $2  million but no more than $3  million fromthe issuance of convertible debentures. As of April  22,2003, the Company had failed to reach the $2  million minimum andreturned the $950,000 previously received from five separate investorswithout interest or deduction. Interest income earned on the fundswhile held by the escrow agent of $11,657 was retained by the escrowagent to cover outstanding fees due.

During December  2005,the Board resolved to issue convertible debentures in the amount of$2.5  million to Dimeling, Schreiber and Park. The debenturesaccrue interest at an annual rate of 8%, payable at the time ofconversion in additional shares of common stock. The conversion priceis $0.25 per share. The debentures automatically convert into shares ofcommon stock at the rate of 4,000 shares for each $1,000 principalamount upon the approval of the shareholders of certain amendments tothe Articles of Incorporation. Under APB 14, none of the proceeds wereattributable to the conversion feature.

Dimeling Schreiber andPark placed $2.5  million in escrow during December  2005.The funds will remain in escrow until such time the Company has receiptof creditor acceptances (repayment on a negotiated basis, or compromiseoffer) representing 50% of the outstanding aggregate unsecuredamounts owed. The Company satisfied this requirement in July2006.

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Table of Contents

CHIEFCONSOLIDATED MINING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

NOTE 10 — LAND, MINING CLAIMS, ANDPROPERTY AND EQUIPMENT

Land and mining claims and buildings,machinery and equipment consisted of the following as ofDecember  31,  2005, 2004, 2003 and2002:

|                                        |  |  |      |   |          |      |  |  |      |   |          |      |  |  |  |   |         |   |  |  |  |   |         |  |
|----------------------------------------|--|--|------|---|----------|------|--|--|------|---|----------|------|--|--|--|---|---------|---|--|--|--|---|---------|--|
|                                   |  |  | 2005 |   |          | 2004 |  |  | 2003 |   |          | 2002 |
| Land andminingclaims                   |  |  |      | $ | 950,000  |      |  |  |      | $ | 950,000  |      |  |  |  | $ | 950,000 |   |  |  |  | $ | 950,000 |  |
| Mill                                   |  |  |      | $ | 250,000  |      |  |  |      | $ | 250,000  |      |  |  |  | $ | 250,000 |   |  |  |  | $ | 250,000 |  |
| Machineryandequipment                  |  |  |      |   | 335,778  |      |  |  |      |   | 355,521  |      |  |  |  |   | 401,048 |   |  |  |  |   | 506,362 |  |
| Totalbuildings, machinery andequipment |  |  |      |   | 585,778  |      |  |  |      |   | 605,521  |      |  |  |  |   | 651,048 |   |  |  |  |   | 756,362 |  |
| Less:Accumulateddepreciation           |  |  |      |   | (335,778 | )    |  |  |      |   | (186,734 | )    |  |  |  |   | (63,473 | ) |  |  |  |   | — |  |
| Netbuildings, machinery andequipment   |  |  |      | $ | 250,000  |      |  |  |      | $ | 418,787  |      |  |  |  | $ | 587,575 |   |  |  |  | $ | 756,362 |  |
|                                        |

Depreciationexpense was $168,787, $168,787 and $168,787 for the years endedDecember  31, 2005, 2004 and 2003. Depreciation and depletionexpense for of the year ended December  31, 2002 was $253,039.After the impairment analysis, the remaining machinery and equipmentwas determined to have a remaining useful life of 3 years and was fullydepreciated as of December  31, 2005. During 2002, the mill wasimpaired to its salvage value and has not been in operation sinceoperations discontinued during 2002. The Company disposed of and wroteoff fully depreciated assets of $19,743, $45,528, $105,314 and $237,840during the years ended December  31, 2005, 2004, 2003 and 2002,respectively.

NOTE 11 — IMPAIRMENT OF LONG LIVEDASSETS

As of September  30, 2002, management determinedthat buildings, machinery and equipment, and land and mineralproperties were impaired due to sustained operating losses, theCompany’s inability to continue mining operations and adown-turn in the economy. Management determined the fair value of landand mineral properties based on market values of comparable realestate. The fair value of buildings, machinery and equipment weredetermined based on prices of similar assets. A loss of $2,115,214 wasrecorded for impairment of buildings, machinery and equipment,including the mill, mill-related assets and costs related to thedewatering of the Burgin mine. A loss of $1,635,587 was recorded forimpairment of land and mineral properties.

During 2002, theCompany also determined its equity investment in Central StandardConsolidated Mines was impaired due to Central Standard ceasingoperations during 2002. The Company recognized an impairment loss onits equity investment in Central Standard of $129,294 during the yearended December  31, 2002.

NOTE 12 — OTHERCOMMITMENTS AND CONTINGENCIES

On May  24, 2002, a suit wasfiled against the Company by a limited liability company(‘‘the LLC’’) for $1,787,400 in damages, aswell as punitive damages, that derive from claims by the LLC that theCompany had committed to purchase certain water rights that the LLCowned or was in process of obtaining with the intent to sell to theCompany. The Company settled the liability for $25,000 during the yearended December  31, 2004. The liability has not been paid and isincluded in accrued liabilities in the accompanying balancesheet.

During 2002, a former employee filed a suit for $43,425for severance pay. During 2003, two former directors filed a suitseeking indemnification for approximately $240,000 in legal feesresulting from a lawsuit brought by a former director. Other suits havebeen filed for an additional $106,488. The Company has accrued theseamounts in full as of December  31, 2005, 2004, 2003 and2002.

The Company has other matters of litigation related toundisputed accounts payable. Outstanding settlement judgments have beenreached totaling $194,039 $194,039 $92,984 and $63,425 as ofDecember  31, 2005, 2004, 2003 and 2002,respectively.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, theRegistrant caused this report to be signed on its behalf by theundersigned, thereunto dulyauthorized.

|        |  |  |                                                                   |
|--------|--|--|-------------------------------------------------------------------|
|   |  |  | CHIEFCONSOLIDATED MINING COMPANY                                  |
| By:    |  |  | /s/Richard R.Schreiber                                            |
|   |  |  | RichardR. Schreiber, Interim President and Chief ExecutiveOfficer |
|        |

Date:    November 30, 2006

In accordance with the Exchange Act, this report has been signedbelow by the following persons on behalf of the registrant and in thecapacities and on the datesindicated.

|                                                                                                                                                                           |  |  |                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|------------------|
| Signatures                                                                                                                                                                |  |  | Date             |
| /s/Richard R. Schreiber                                                                                                                                                   |  |  | November 30,2006 |
| Richard R. Schreiber, Chairman,President and Chief Executive Officer (Principal Executive Officer andInterim Principal Financial Officer and Principal AccountingOfficer) |  |  |             |
| /s/Stephen G. Park, Director                                                                                                                                              |  |  | November 30,2006 |
| Stephen G. Park,Director                                                                                                                                                  |  |  |             |
|                                                                                                                                                                           |

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