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ROUGE RESOURCES LTD.

FINANCIAL STATEMENTS

JANUARY 31, 2009





1

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AUDITORS REPORT

To the Shareholders of Rouge Resources Ltd.

We have audited the balance sheet of Rouge Resources Ltd. as at
January 31, 2009 and the statements of operations, comprehensive loss and
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in
all material respects, the financial position of the Company as at January 31,
2009 and the results of its operations and its cash flows for the year then
ended in accordance with Canadian generally accepted accounting principles.

The audited financial statements at January 31, 2008 and for
the years ended January 31, 2008 and 2007 were examined by other auditors who
expressed an opinion without reservation on those statements in their report
dated May 8, 2008.

DMCL

DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED ACCOUNTANTS

Vancouver, Canada May 8, 2009

|COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
|-----------------------------------------------
|                                               
|-UNITED STATES
      REPORTING DIFFERENCES     

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) when
the financial statements are affected by conditions and events that cast
substantial doubt on the Companys ability to continue as a going concern, such
as those described in Note 1 to the financial statements. Our report to the
shareholders dated May 8, 2009 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditors report when these are adequately disclosed in the
financial statements.

DALE MATHESON CARR-HILTON LABONTE LLP ACCOUNTANTS

Vancouver, Canada May 8, 2009



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ROUGE RESOURCES LTD.BALANCE
SHEETS

|                                                       |   | JANUARY
      31 |  
|------------------------------------------------------ | - | ---------------- | -
|                                                       |   | 2009             |  
|                                                       |   |                  |  
|ASSETS                                                 |  
|Current                                                |   |                  |  
|Cash                                                   | $ | 4,856            |  
|Receivable                                             |   | 2,536            |  
|                                                       |   | 7,392            |  
|                                                       |   |                  |  
|Restricted cash (Note 3)                               |   | 6,900            |  
|Mineral Property Interests (Note 4)                    |   | 85,345           |  
|Equipment (Note 5)                                     |   | 1,848            |  
|                                                       |   |                  |  
|                                                       | $ | 101,485          |  
|                                                       |   |                  |  
|LIABILITIES                                            |  
|Current                                                |   |                  |  
|Accounts
      payable and accrued liabilities         | $ | 124,648          |  
|Due to related parties (Note
      6)                  |   | 928,948          |  
|                                                       |   | 1,053,596        |  
|                                                       |   |                  |  
|SHAREHOLDERS DEFICIENCY                               |  
|                                                       |   |                  |  
|Share Capital (Note 7)                                 |   | 1,613,471        |  
|                                                       |   |                  |  
|Contributed Surplus (Note 7)                           |   | 53,357           |  
|                                                       |   |                  |  
|Deficit Accumulated During the Exploration
      Stage |   | (2,618,939       | )
|                                                       |   | (952,111         | )
|                                                       |   |                  |  
|                                                       | $ | 101,485          |  

Approved on behalf of the Board of Directors:

|Linda Smith |  | Darcy Krell
|------------- |  | -------------
|Director      |  | Director     

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

3

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ROUGE RESOURCES LTD.STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND
DEFICIT

|                                               |   | YEARS ENDED JANUARY 31 |  
|---------------------------------------------- | - | ---------------------- | -
|                                               |   | 2009                   |  
|                                               |   |                        |  
|General and Administration Expenses            |   |                        |  
|Amortization                                   | $ | 793                    |  
|Accounting
      and audit fees                |   | 53,775                 |  
|Accretion of convertible
      promissory note |   |                        |  
|(Note 6)                                       |   | 11,871                 |  
|Bad debt expense                               |   | -                      |  
|Management
      fees (Note 6)                 |   | 52,750                 |  
|Office and general (Note
      6)              |   | 29,579                 |  
|Professional
      fees                        |   | 16,280                 |  
|Transfer agent and filing
      fees           |   | 11,632                 |  
|Travel and
      promotion                     |   | 18,655                 |  
|                                               |   |                        |  
|Net and Comprehensive Loss for the Year        |   | 195,335                |  
|                                               |   |                        |  
|Deficit, Beginning of Year                     |   | (2,423,604             | )
|                                               |   |                        |  
|Deficit, End of Year                           | $ | (2,618,939             | )
|                                               |   |                        |  
|                                               |   |                        |  
|Net Loss Per Share - Basic and Diluted         | $ | (0.05                  | )
|                                               |   |                        |  
|Weighted Average Number of Shares Outstanding  |   |                        |  
|- Basic and Diluted                            |   | 3,597,958              |  

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

4

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ROUGE RESOURCES LTD.STATEMENTS OF CASH FLOWS

|                                                   |   | YEARS
      ENDED JANUARY 31 |  
|-------------------------------------------------- | - | ---------------------------- | -
|                                                   |   | 2009                         |  
|                                                   |   |                              |  
|Cash Flows Provided by (Used In):                  |   |                              |  
|                                                   |   |                              |  
|Operating Activities                               |   |                              |  
|Net loss for the year                              | $ | (195,335                     | )
|Items not requiring
      use of cash:             |   |                              |  
|Amortization                                       |   | 793                          |  
|Accretion on convertible promissory note           |   | 11,871                       |  
|                                                   |   | (182,671                     | )
|Changes in operating
      assets and liabilities: |   |                              |  
|Receivable                                         |   | 1,528                        |  
|Accounts payable and accrued liabilities           |   | 18,570                       |  
|                                                   |   | (162,573                     | )
|                                                   |   |                              |  
|Investing Activities                               |   |                              |  
|Mineral property
      interests                   |   | (14,906                      | )
|Purchase of equipment                              |   | -                            |  
|                                                   |   | (14,906                      | )
|                                                   |   |                              |  
|Financing Activities                               |   |                              |  
|Due to related parties                             |   | (323,664                     | )
|Shares issued for
      cash                       |   | 500,000                      |  
|                                                   |   | 176,336                      |  
|                                                   |   |                              |  
|Decrease in Cash                                   |   | (1,143                       | )
|                                                   |   |                              |  
|Cash, Beginning of Year                            |   | 5,999                        |  
|                                                   |   |                              |  
|Cash, End of Year                                  | $ | 4,856                        |  
|                                                   |   |                              |  
|                                                   |   |                              |  
|Supplemental Cash Flow Information                 |   |                              |  
|Interest paid                                      | $ | -                            |  
|Income taxes paid                                  | $ | -                            |  

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

5

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ROUGE RESOURCES LTD.NOTES TO
FINANCIAL STATEMENTSJANUARY 31, 2009

|1. | NATURE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Rouge Resources Ltd. (the Company) was incorporated in
      British Columbia, on March 31, 1998. The Company is engaged in the
      acquisition, exploration and, if warranted, development of mineral
      resource properties. On October 23, 2007, the Company restructured its
      share capital and consolidated the issued and outstanding shares on a one
      for ten (1:10) basis. Share and per share information in these financial
      statements is presented on a retroactive basis as if the share
      consolidation took place at the beginning of all years
presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | These financial statements have been prepared on a going
      concern basis, which assumes the Company will realize its assets and
      discharge its liabilities in the normal course of operations. During the
      year, the Company incurred a loss of $195,335 and a working capital
      deficiency of $1,046,204. Should the Company be unable to continue as a
      going concern, significant adjustments to asset values may be necessary.
      The ability of the Company to continue as a going concern is dependent
      upon the Company raising sufficient financing to complete exploration and
      development activities, the discovery of economically recoverable
      reserves, and upon future profitable operations or proceeds from
      disposition of resource property interests. The Company presently, has not
      yet determined whether its mineral property contains economically
      recoverable resources. Management is also aware that significant material
      uncertainties exist, related to current economic conditions that could
      cast significant doubt upon the Companys ability to continue to finance
      its exploration activities. Management is not able to assess the
      likelihood or timing of improvements in the equity markets for raising
      capital for future acquisitions or expenditures. These uncertainties
      represent a liquidity risk and may impact the Companys ability to
      continue as a going concern in the future.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The financial statements of the Company are presented in
      accordance with Canadian generally accepted accounting principles and are
      presented in Canadian dollars.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Use of Estimates and Assumptions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The preparation of financial statements in conformity
      with Canadian generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported amounts of
      assets and liabilities, disclosure of contingent assets and liabilities at
      the date of the financial statements and the reported amounts of revenues
      and expenses during the reporting period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The significant areas requiring the use of management
      estimates relate to the determination of impairment of the carrying values
      for long-lived assets, future income tax assets and the related valuation
      allowance. Management reviews significant estimates on a periodic basis
      and, when changes in estimates are necessary, makes adjustments
      prospectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

6

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|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company follows the CICA Handbook Section 3855,
      Financial Instruments. This section prescribes when a financial
      instrument is to be recognized on the balance sheet and at what amount.
      Under Section 3855, financial instruments must be classified into one of
      five categories: held-for-trading, held-to-maturity, loans and
      receivables, available-for-sale financial assets, or other financial
      liabilities.                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Companys financial instruments consist of cash,
      receivable, restricted cash, accounts payable, and amounts due to related
      parties. Cash and restricted cash, which are measured at face value,
      representing fair value, are classified as held-for-trading. Receivable,
      which is measured at amortized cost, is classified as loans and
      receivables. Accounts payable and amounts due to related parties, which
      are measured at amortized costs, are classified as other financial
      liabilities. The fair value of these financial instruments approximates
      their carrying values. For the years ended January 31, 2009 and 2008, the
      Company has no derivatives or embedded derivatives.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company adopted the CICA Handbook Section 1530,
      Comprehensive Income on February 1, 2007. Section 1530 establishes
      standards for the reporting and presenting of comprehensive income which
      is defined as the change in equity from transaction and other events from
      non- owner sources. Other comprehensive income refers to items recognized
      in comprehensive income that are excluded from net loss. At January 31,
      2009 and 2008 the Company had no items that caused other comprehensive
      loss to be different than net loss.                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Mineral Property Interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company records its interests in mineral properties
      at the lower of cost or estimated recoverable value. Where specific
      exploration programs are planned and budgeted by management, mineral
      exploration costs are capitalized and carried at cost until the properties
      to which they relate are placed into commercial production, sold,
      abandoned or determined by management to be impaired in value.                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Costs incurred for acquisition, including where
      applicable, option payments under acquisition agreements, are capitalized
      until such time as the related interest is placed into production, sold,
      abandoned or management has determined impairment in value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Mineral property interests, where future cash flows are
      not reasonably determinable, are evaluated for impairment on a reporting
      period basis or as events and changes in circumstances warrant based on
      managements intentions and determination of the extent to which future
      exploration programs are warranted and likely to be funded.                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Capitalized costs for acquisition and deferred
      exploration as reported on the balance sheet represent costs incurred to
      date or estimated recoverable value if lower than cost. Recovery of
      carrying value is dependent upon future commercial success or proceeds
      from disposition of the mineral interests. Upon the establishment of
      commercial production, carrying values of deferred acquisition and
      exploration costs will be amortized over the estimated life of the
      resource on the unit of production method.                                                                                                                                                                                 

7

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|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company records amortization on equipment using the
      declining balance method at 30% per year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Impairment of Long-lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The carrying values of long-lived assets with fixed or
      determinable lives are reviewed for impairment whenever events or changes
      in circumstances indicate the recoverable value may be less than the
      carrying amount. Impairment determinations are based on management's
      estimates of undiscounted and discounted future net cash flows expected to
      be recovered from specific assets or groups of assets through use or
      future disposition. Impairment charges are recorded in the period in which
      determination of impairment is made by management.                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Assets with indefinite or indeterminable lives are not
      amortized and are reviewed for impairment on a reporting period basis
      using managements fair value determinations of estimated recoverable
      value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Asset Retirement Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company has adopted the CICA Handbook Section 3110,
      Asset Retirement Obligations. Under this policy, the present value of
      future retirement obligations is recorded as a liability when that
      liability is incurred with a corresponding increase in the carrying value
      of the related assets. The liability for asset retirement obligations is
      accreted to the amount ultimately payable over the period to the date it
      is paid. The Company currently does not have any asset retirement
      obligations.                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company follows CICA Handbook Section 3870,
      Stock-Based Compensation and Other Stock Based Payments. Under this
      standard, all stock options granted are recorded at the fair value of
      compensation, services or goods received using the Black-Scholes option
      pricing model on the date of grant and then expensed over the period of
      vesting. Upon exercise of the stock options, the amount previously
      recognized in contributed surplus is recorded as an increase to share
      capital together with any additional consideration paid by the option
      holder. At January 31, 2009, no stock options have been granted and no
      stock options were outstanding.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company uses the treasury stock method for the
      computation of loss per share. The treasury stock method is used to
      determine the dilutive effect of stock options and other dilutive
      instruments which assume that proceeds received from in-the-money stock
      options are used to repurchase common shares at the prevailing market
      rate. Basic net loss per share has been calculated using the weighted
      average number of shares outstanding during the period. Diluted loss per
      share is equal to the basic loss per share as the effect of dilutive
      instruments will be anti dilutive.                                                                          

8

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|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Future Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Future income taxes are recorded using the asset and
      liability method whereby future tax assets and liabilities are recognized
      for the future tax consequences attributable to differences between the
      financial statement carrying amounts of assets and liabilities and their
      respective tax bases. Future tax assets and liabilities are measured using
      the enacted or substantively enacted tax rates expected to apply when the
      asset is realized or the liability settled. The effect on future tax
      assets and liabilities of a change in tax rates is recognized in income in
      the period that substantive enactment or enactment occurs. To the extent
      that the Company does not consider it more likely than not that a future
      tax asset will be recovered, it provides a valuation allowance against the
      excess.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Recently Adopted Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The CICA issued four new accounting standards: Capital
      Disclosures (Handbook Section 1535), Financial Instruments  Disclosures
      (Handbook Section 3862), Financial Instruments  Presentation (Handbook
      Section 3863), and General Standards of Financial Statement Presentation
      (Handbook Section 1400). These new standards became effective for the
      Company on February 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Capital Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Handbook Section 1535 specifies the disclosure of (i) an
      entitys objectives, policies and processes for managing capital; (ii)
      quantitative data about what the entity regards as capital; (iii) whether
      the entity has not complied with any capital requirements; and (iv) if it
      has not complied, the consequences of such noncompliance. The Company has
      included disclosures recommended by the new Handbook section in Note 9 to
      these financial statements.                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Handbook Sections 3862 and 3863 replace Handbook Section
      3861, Financial Instruments  Disclosure and Presentation, revising and
      enhancing its disclosure requirements, and carrying forward unchanged its
      presentation requirements. These new sections place increased emphasis on
      disclosures about the nature and extent of risks arising from financial
      instruments and how the entity manages those risks. The Company has
      included disclosures recommended by the new Handbook sections in Note 10
      to these financial statements.                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Handbook Section 1400, General Standards of Financial
      Statement Presentations, was amended to include requirements for
      management to assess and disclose an entitys ability to continue as a
      going concern. The Company has included disclosures recommended by the new
      Handbook section in Note 1 to these financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Mining Exploration Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In March 2009 the CICA approved EIC 174, Mining
      Exploration Costs. The guidance clarified that an enterprise that has
      initially capitalized exploration costs has an obligation in the current
      and subsequent accounting periods to test such costs for recoverability
      whenever events or changes in circumstances indicate that its carrying
      amount may not be recoverable. The guidance is applicable to financial
      statements issued after March 27, 2009. The Company has evaluated the new
      section and determined that there was no impact on its financial
      statements.                                                                                                                                                                                                                                                                

9

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|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Recent Accounting Pronouncements Not Yet
      Adopted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The CICA issued Section 3064, Goodwill and Intangible
      Assets, which will replace Section 3062, Goodwill and Other Intangible
      Assets and Section 3450 Research and development costs. The standard
      provides guidance on the recognition of intangible assets in accordance
      with the definition of an asset and the criteria for asset recognition as
      well as clarifying the concept of matching revenues and expenses, whether
      these assets are separately acquired or internally developed. This
      standard applies to fiscal years beginning on or after October 1, 2008.
      For the Company, this Section is effective for the year commencing
      February 1, 2009. The Company has evaluated the new section and determined
      that there will be no impact of its adoption on its financial
      statements.                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In 2006, the Canadian Accounting Standards Board (AcSB)
      published a strategic plan that will significantly affect financial
      reporting requirements for Canadian companies. The AcSB strategic plan
      outlines the convergence of Canadian generally accepted accounting
      principles with International Financial Reporting Standards (IFRS) over
      an expected five year transitional period. In February 2008, the AcSB
      announced that 2011 is the changeover date for publicly-listed companies
      to use IFRS, replacing Canadas own generally accepted accounting
      principles. The date is for interim and annual financial statements
      relating to fiscal years beginning on or after January 1, 2011. The
      transition date of January 1, 2011 will require the restatement for
      comparative purposes of amounts reported by the Company for the year ended
      January 31, 2010. The Company continues to monitor and assess the impact
      of Canadian GAAP and IFRS.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In January 2009, the CICA issued Handbook Section 1582,
      Business Combinations, which will provide the Canadian equivalent to
      International Financial Reporting Standard (IFRS) IFRS 3, Business
      Combinations, and replace the existing Handbook Section 1581, Business
      Combinations. The new standard will apply prospectively to business
      combinations for which the acquisition date is on or after January 1,
      2011. Earlier adoption is permitted as of the beginning of a fiscal year,
      in which case an entity would also early adopt Handbook Section 1601,
      Consolidated Financial Statements and Handbook Section 1602,
      Non-controlling Interests. The Company has evaluated the new section and
      determined that there will be no impact of its adoption on its financial
      statements                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In January 2009, the CICA issued Handbook Section 1601,
      Consolidated Financial Statements, which establishes standards for the
      preparation of consolidated financial statements and will replace the
      existing Handbook Section 1600, Consolidated Financial Statements. The new
      standard is effective for interim and annual consolidated financial
      statements relating to fiscal years beginning on or after January 1, 2011.
      Earlier adoption is permitted as of the beginning of a fiscal year, in
      which case an entity would also early adopt Handbook Section 1582,
      Business Combinations, and Handbook Section 1602, Non-Controlling
      Interests. The Company has evaluated the new sections and determined that
      there will be no impact of its adoption on its financial
  statements.                                                                                                                                                                                    

10

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|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Recent Accounting Pronouncements, Not Yet Adopted(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In January 2009, the CICA issued Handbook Section 1602,
      Non-Controlling Interests, which establishes standards for accounting for
      a non-controlling interest in a subsidiary in consolidated financial
      statements subsequent to a business combination. It is equivalent to the
      corresponding provisions of IFRS 27, Consolidated and Separate Financial
      Statements. The new standard is effective for interim and annual
      consolidated financial statements relating to fiscal years beginning on or
      after January 1, 2011. Earlier adoption is permitted as of the beginning
      of a fiscal year, in which case an entity would also early adopt Section
      1582, Business Combinations, and Section 1601, Consolidated Financial
      Statements. The Company has evaluated the new section and determined that
      there will be no impact of its adoption on its financial
  statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | RESTRICTED CASH                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Restricted cash consists of a one-year guaranteed
      investment certificate bearing annual interest of 1.7%, and maturing on
      October 26, 2009. It is held as security for the Companys credit
      card.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4. | MINERAL PROPERTY INTERESTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company staked the Dotted Lake Property in the
      Thunder Mining District of the province of Ontario, Canada, in February
      2003, and holds a 100% interest in the property comprising approximately
      375 hectares. The mineral claim is in good standing until March 14, 2010
      after which additional exploration spending of approximately $1,000 would
      be required to maintain it for another year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As at January 31, 2009, the Company had incurred the
      following amounts in the Dotted Lake Property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                            |   | 2009   |  |   | 2008   | 
| | -------------------------- | - | ------ |  | - | ------ | 
| |                            |   |        |  |   |        | 
| | Mineral properties         |   |        |  |   |        | 
| | Staking                    | $ | 4,206  |  | $ | 4,206  | 
| |                            |   |        |  |   |        | 
| | Deferred exploration costs |   |        |  |   |        | 
| | Geological
      survey    |   | 40,000 |  |   | 40,000 | 
| | Geological consulting fees |   | 41,139 |  |   | 26,233 | 
| |                            |   | 81,139 |  |   | 66,233 | 
| |                            |   |        |  |   |        | 
| |                            | $ | 85,345 |  | $ | 70,439 | 

11

---

|5. | EQUIPMENT
|-- | ---------

| |                                |   | 2009   |   |   | 2008   |  
| | ------------------------------ | - | ------ | - | - | ------ | -
| |                                |   |        |   |   |        |  
| | Computer equipment, at cost    | $ | 5,970  |   | $ | 5,970  |  
| | Accumulated
      amortization |   | (4,122 | ) |   | (3,329 | )
| |                                |   |        |   |   |        |  
| |                                | $ | 1,848  |   | $ | 2,641  |  

|6. | RELATED PARTY TRANSACTIONS
|-- | --------------------------
|   |                           
|   | a)                        
|   |                           
|   | b)                        
|   |                           
|   | c)                        

| |                 |   | 2009   |  |   | 2008   |  |   | 2007   | 
| | --------------- | - | ------ |  | - | ------ |  | - | ------ | 
| |                 |   |        |  |   |        |  |   |        | 
| | Management fees | $ | 52,750 |  | $ | 30,000 |  | $ | 30,000 | 
| | Office rent     |   | 18,000 |  |   | 18,000 |  |   | 18,000 | 
| |                 |   |        |  |   |        |  |   |        | 
| |                 | $ | 70,750 |  | $ | 48,000 |  | $ | 48,000 | 

The foregoing transactions were
conducted in the normal course of business and recorded at the exchange amount,
which is the consideration agreed to between the related parties.

12

---

|7. | SHARE CAPITAL
|-- | -------------

| | a) | Common Shares Authorized                 
| | -- | -----------------------------------------
| |    |                                          
| |    | Unlimited common shares without par value
| |    |                                          
| |    | Issued                                   

Number of Shares
    
    
    - $ -Balance at January 31, 2008 and 2007
    
    565,171
    
    
    1,113,471Private placement at $0.05 per share
    
    10,000,000
    
    
    500,000Balance at January 31, 2009
    
    10,565,171
    
    
    1,613,471


| |    | During the year ended January 31, 2009, the Company
      completed a non-brokered private placement of 10 million units at $0.05
      for total proceeds of $500,000. Each unit consists of one common share and
      one non-transferable share purchase warrant, each warrant entitling the
      holder to acquire one additional common share of the Company at a price of
      $0.10 per share for two years. No value was attributed to the
    warrant.                                                                                                                                                                                                                          
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | During the year ended January 31, 2008, the Company
      affected a one for ten (1:10) share consolidation of its authorized,
      issued and outstanding share capital resulting in all share and per share
      information in these financial statements being presented on a retroactive
      basis as if the share consolidation took place at the beginning of all
      years presented. Accordingly, the issued and outstanding share capital was
      reduced from 5,651,714 to 565,171 common shares. After the share
      consolidation, the Company increased its authorized share capital from
      10,000,000 common shares to an unlimited number without par
  value.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | b) | Share Purchase
Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Balance
    
    BalanceJanuary 31,
    
    January 31,
    Exercise2008
    Issued
    2009
    Price
    Expiry-
    10,000,000
    10,000,000
    $        0.10
    June 30, 2010


| |    | As at January 31, 2009, the weighted average remaining
      contractual life of the share purchase warrants is 1.14 years and the
      weighted average exercise price is $0.10.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                   
| | c) | Stock Option Plan                                                                                                                                                                 
| |    |                                                                                                                                                                                   
| |    | The Companys Stock Option Plan (the Plan) was adopted
      in December 2006 and is administered under the following basic terms and
      conditions:                         
| |    |                                                                                                                                                                                   
| |    | (i)                                                                                                                                                                               

13

---

|7. | SHARE CAPITAL(CONTINUED)
|-- | ------------------------

| | (ii)  | Company employees, directors, officers and consultants
      are eligible to receive a grant of stock options provided that bona fide
      services have been rendered and that such services are not in connection
      with the offer or sale of securities in a capital-raising transaction.
      There is a 10% limitation of options granted in any one year to one
      specific employee, director or officer and a 2% annual limitation to one
      specific consultant;
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) | the grant price shall not be less than the market value
      of the shares at the time of grant less any discount permitted by the
      relevant regulatory authorities;                                                                                                                                                                                                                                                                                                           
| | (iv)  | the exercise price shall be determined by a plan
      committee at the time of grant; and                                                                                                                                                                                                                                                                                                                                                                                           
| | (v)   | the option period shall not exceed five years from the
      date of grant.                                                                                                                                                                                                                                                                                                                                                                                                          

| |    | No stock options have been granted and no stock options
      are outstanding at January 31, 2009.
| | -- | --------------------------------------------------------------------------------------------------
| |    |                                                                                                   
| | d) | Contributed Surplus                                                                               

| |                                            |  | $      | 
| | ------------------------------------------ |  | ------ | 
| | Balance, January 31, 2007                  |  | 11,576 | 
| | Equity component
      of convertible debt |  | 41,781 | 
| |                                            |  |        | 
| | Balance, January
      31, 2009 and 2008   |  | 53,357 | 

|8. | INCOME TAXES                                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                       
|   | A reconciliation of income taxes at statutory rates to
      the Companys effective income tax expense is as
follows:

| |                                                 |   | 2009    |   |   | 2008    |  
| | ----------------------------------------------- | - | ------- | - | - | ------- | -
| |                                                 |   |         |   |   |         |  
| | Loss before income taxes                        | $ | 195,335 |   | $ | 156,658 |  
| | Statutory tax rate                              |   | 31%     |   |   | 31.5%   |  
| |                                                 |   |         |   |   |         |  
| | Expected income tax recovery                    |   | (60,554 | ) |   | (49,000 | )
| | Increase (decrease) resulting from:             |   |         |   |   |         |  
| | Non-deductible differences                      |   | 384     |   |   | 1,000   |  
| | Impact of change in tax rates                   |   | 50,797  |   |   | (61,000 | )
| | Unrecognized tax losses and change in valuation |   |         |   |   |         |  
| | allowance                                       |   | 9,373   |   |   | 109,000 |  
| |                                                 |   |         |   |   |         |  
| | Income tax recovery                             | $ | -       |   | $ | -       |  

14

---

|8. | INCOME TAXES(CONTINUED)                                                
|-- | -----------------------------------------------------------------------
|   |                                                                        
|   | Future tax assets of the Company were comprised of the
      following:

| |                                             |   | 2009     |   |   | 2008     |  
| | ------------------------------------------- | - | -------- | - | - | -------- | -
| |                                             |   |          |   |   |          |  
| | Non-capital losses carried-forward          | $ | 271,985  |   | $ | 251,000  |  
| | Capital assets                              |   | 198      |   |   | 1,000    |  
| | Mineral properties and deferred exploration |   | 74,190   |   |   | 85,000   |  
| |                                             |   | 346,373  |   |   | 337,000  |  
| | Less: Valuation allowance                   |   | (346,373 | ) |   | (337,000 | )
| |                                             |   |          |   |   |          |  
| | Future tax asset recognized                 | $ | -        |   | $ | -        |  

As at January 31, 2009, the Company has
incurred non-capital losses available for carry forward totalling $1,046,095,
which expire from 2010 to 2029 as follows:

2010
    $
    62,0002014
    $
    68,0002015
    $
    84,0002026
    $
    132,0002027
    $
    354,0002028
    $
    152,0002029
    $
    194,095$
    1,046,095


|   | A valuation allowance has been used to offset the net
      benefit related to the future tax assets as a result of the uncertainty
      associated with the ultimate realization of these tax assets before
      expiry.                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|9. | CAPITAL MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company manages its capital structure and makes
      adjustments to it depending on the funds available to the Company for
      acquisition, exploration and development of mineral properties. The Board
      of Directors does not establish quantitative return on capital criteria
      for management, but rather relies on the expertise of the Companys
      management to sustain future development of the business.                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The property in which the Company currently has interests
      is in the exploration stage. As such, the Company is dependent on external
      financing to fund its activities. In order to carry out its planned
      exploration and pay for on-going general and administrative expenses, the
      Company will use existing working capital and raise additional amounts as
      needed. The Company will continue to assess new properties and seek to
      acquire an interest in additional properties if it feels there is
      sufficient geologic or economic potential and if it has adequate financial
      resources to do so.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Management reviews its capital management approach on an
      on-going basis and believes that this approach, given the small size of
      the Company, is reasonable. The Company is not subject to externally
      imposed capital requirements and there were no changes in its approach to
      capital management during the year ended January 31,
  2009.                                                                                                                                                                                                                                                                                

15

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|10. | RISK MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company is engaged primarily in the mineral
      exploration business and manages related industry risk directly. The
      Company is potentially at risk for environmental reclamation and
      fluctuations and commodity-based market prices associated with resource
      property interests. Management is of the opinion that the Company
      addresses environmental risk and compliance in accordance with industry
      standards and specific project environmental requirements. There is no
      certainty that all environmental risks and contingencies have been
      addressed.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company is exposed in varying degrees to a variety of
      financial instrument related risks as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | a) | Credit risk is the risk that one party to a financial
      instrument will fail to discharge an obligation and cause the other party
      to incur a financial loss. The Companys primary exposure to credit risk
      is in its cash accounts. This risk is managed through the use of a major
      financial institution which has high credit quality as determined by the
      rating agencies.                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | b) | Foreign exchange risk is the risk that the Company will
      be subject to foreign currency fluctuations in satisfying obligations
      related to its foreign activities. The Company operates primary in Canada
      and therefore is not exposed to foreign exchange risk arising from
      transactions denominated in a foreign currency.                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | c) | Interest rate risk is the risk that the fair value of
      future cash flow of a financial instrument will fluctuate because of
      changes in market interest rate. The Companys exposure to interest rate
      risk relates to its ability to earn interest income on cash balances at
      variable rates. The fair value of the Companys cash account is relatively
      small and unaffected by changes in short term interest rates. The
      Companys long term debt bears interest at a fixed rate and the Company
      therefore is not affected by changes in long term interest
rates.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | d) | Liquidity risk arises through the excess of financial
      obligations over available financial assets due at any point in time. The
      Companys objective in managing liquidity risk is to maintain sufficient
      readily available capital in order to meet its liquidity
    requirements.                                                                                                                                                                                                                                                                                                       

|11. | MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED
      STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | These financial statements have been prepared in
      accordance with Canadian GAAP which differ in certain respects from those
      principles that the Company would have followed had its financial
      statements been prepared in accordance with United States GAAP. The
      material differences between Canadian and US GAAP affecting the Companys
      financial statements are described and quantified below.                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Mineral Properties and Deferred Exploration
      Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Mineral interests acquisition costs are accounted for in
      accordance with Canadian GAAP as disclosed in Note 2. For US GAAP, mineral
      interest acquisition costs are capitalized in accordance with EITF 04-2.
      Mineral property acquisition costs are reviewed for impairment on a
      reporting period basis. For US GAAP, mineral property exploration costs
      are expensed as incurred. When it has been determined that a mineral
      interest can be economically developed as a result of establishing proven
      and probable reserves and pre feasibility, the costs incurred to develop
      such property are capitalized.

16

---

|11. | MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED
      STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)(CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Equity component of convertible note                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Under Canadian GAAP, companies allocate the proceeds of
      issuance between the convertible debt component and the embedded
      conversion feature based on their fair values. Under US GAAP, the Company
      has considered the guidance per FAS 133 and EITF 00-27 and has determined
      the entire proceeds of the convertible note should be treated as a
      liability since the embedded conversion feature has no intrinsic value and
      accordingly does not meet the requirements of an equity
  component.

| | a) | Effect on Balance
Sheets
| | -- | ------------------------

| |                                                         |   | 2009       |   |   | 2008       |  
| | ------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                         |   |            |   |   |            |  
| | Mineral properties and deferred exploration
      costs |   |            |   |   |            |  
| | Per Canadian GAAP                                       | $ | 85,345     |   | $ | 70,439     |  
| | Deferred exploration costs written off                  |   | (81,139    | ) |   | (66,233    | )
| | Per
      US GAAP                                       | $ | 4,206      |   | $ | 4,206      |  
| |                                                         |   |            |   |   |            |  
| | Liabilities                                             |   |            |   |   |            |  
| | Per Canadian GAAP                                       | $ | 1,053,596  |   |   | 1,346,819  |  
| | Reversal of equity portion of convertible note          |   | 41,781     |   |   | 41,781     |  
| | Per US GAAP                                             |   | 1,095,377  |   |   | 1,388,600  |  
| |                                                         |   |            |   |   |            |  
| | Shareholders deficiency                                |   |            |   |   |            |  
| | Per Canadian GAAP                                       | $ | (952,111   | ) | $ | (1,256,776 | )
| | Deferred
      exploration costs written off            |   | (81,139    | ) |   | (66,233    | )
| | Reversal of equity portion of convertible note          |   | (41,781    | ) |   | (41,781    | )
| | Per US GAAP                                             | $ | (1,075,031 | ) | $ | (1,364,790 | )

| | b) | Effect on Statements of Operations and
    Deficit
| | -- | --------------------------------------------------

| |                                              |   | 2009     |   |   | 2008     |   |   | 2007     |  
| | -------------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
| |                                              |   |          |   |   |          |   |   |          |  
| | Net loss for the year                        |   |          |   |   |          |   |   |          |  
| | Per Canadian GAAP                            | $ | (195,335 | ) | $ | (156,658 | ) | $ | (182,422 | )
| | Accretion on convertible promissory          |   |          |   |   |          |   |   |          |  
| | Note                                         |   | 11,871   |   |   | 2,331    |   |   | 1,356    |  
| | Deferred
      exploration costs written off |   | (14,906  | ) |   | -        |   |   | -        |  
| | Per
      US GAAP                            | $ | (198,370 | ) | $ | (154,327 | ) | $ | (181,066 | )
| |                                              |   |          |   |   |          |   |   |          |  
| | Net loss per common share, basic and         |   |          |   |   |          |   |   |          |  
| | diluted                                      |   |          |   |   |          |   |   |          |  
| | Per Canadian GAAP                            | $ | (0.05    | ) | $ | (0.28    | ) | $ | (0.32    | )
| | Deferred exploration
      costs written off |   | -        |   |   | -        |   |   | -        |  
| | Per
      US GAAP                            | $ | (0.05    | ) | $ | (0.28    | ) | $ | (0.32    | )

17

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|11. | MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED
      STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)(CONTINUED)
|--- | --------------------------------------------------------------------------------------------------------------------------

| | c) | Effect on Statements of Cash
  Flows
| | -- | ------------------------------------

| |                                           |   | 2009     |   |   | 2008     |   |   | 2007     |  
| | ----------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
| |                                           |   |          |   |   |          |   |   |          |  
| | Cash flows used in:                       |   |          |   |   |          |   |   |          |  
| | Operating activities                      |   |          |   |   |          |   |   |          |  
| | Per Canadian GAAP                         | $ | (162,573 | ) | $ | (180,512 | ) | $ | (165,415 | )
| | Accretion on convertible
      promissory |   |          |   |   |          |   |   |          |  
| | note                                      |   | 11,871   |   |   | 2,331    |   |   | 1,356    |  
| | Deferred exploration costs written off    |   | (14,906  | ) |   | -        |   |   | -        |  
| | Per US GAAP                               | $ | (165,608 | ) | $ | (178,181 | ) | $ | (164,059 | )
| |                                           |   |          |   |   |          |   |   |          |  
| | Cash flows used in:                       |   |          |   |   |          |   |   |          |  
| | Investing activities                      |   |          |   |   |          |   |   |          |  
| | Per Canadian GAAP                         | $ | (14,906  | ) | $ | (2,662   | ) | $ | -        |  
| | Deferred exploration costs written off    |   | 14,906   |   |   | -        |   |   | -        |  
| | Per US GAAP                               | $ | -        |   | $ | (2,662   | ) | $ | -        |  

| | d) | Recent Accounting Pronouncements by the Financial
      Accounting Standards Board (FASB)
| | -- | -------------------------------------------------------------------------------------------

In November 2008, the FASB voted on
the effective date and other amendments of proposed FASB Staff Position FAS
140-e and FIN 46(R)-e, Disclosures about Transfers of Financial Assets and
Interests in Variable Interest Entities (FSP FAS 140-e and FIN 46R-e). FSP
FAS 140-e and FIN 46R-e would amend SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities  as amended
(SFAS 140) and FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN 46R) to require enhanced
disclosures by public entities about transfers of financial assets and interests
in variable interest entities, and provide users of the financial statements
with greater transparency about a transferors continuing involvement with
transferred financial assets and an enterprises involvement with variable
interest entities. The disclosures required by FSP FAS 140-e and FIN 46R-e will
be effective for reporting periods (interim and annual) ending after December
15, 2008. The Company has concluded this amended standard will have no effect on
its financial statements.

In September 2008, the FASB issued two
separate but related exposure drafts: (1) Proposed Statement of Financial
Accounting Standards, Accounting for Transfers of Financial Assets  an
amendment of FASB Statement No. 140, and (2) Proposed Statement of Financial
Accounting Standards, Amendments to FASB Interpretation No. 46(R) (together,
the proposed Statements). The proposed Statements would remove the concept of
a qualifying special-purpose entity (QSPE) from SFAS 140 and the exceptions
from applying FIN 46R to QSPEs. The proposed Statements would be effective as of
the beginning of a reporting entitys fiscal year that begins after November 15,
2009. The Company has concluded these proposed standards will have no effect on
its financial statements.

18

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|11. | MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED
      STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)(CONTINUED)
|--- | --------------------------------------------------------------------------------------------------------------------------

| | d) | Recent Accounting Pronouncements by the FASB
      (continued)
| | -- | --------------------------------------------------------------

In June 2008, the FASB issued FASB
Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities (FSP EITF
03-6-1) FSP EITF 03-6-1 establishes that unvested share-based payment awards
that contain non-forfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities as defined in Emerging
Issues Task Force (EITF) Issue No. 03-6, Participating Securities and the
Two-Class Method under FASB Statement No. 128, and should be included in the
computation of earnings per share pursuant to the two-class method as described
in Statement of Financial Accounting Standards No. 128, Earnings per Share.
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. All
prior-period earnings per share data presented shall be adjusted retrospectively
to conform to the provisions of FSP EITF 03-6-1. Early application is not
permitted. The Company has concluded this standard will have no effect on its
financial statements.

In May 2008, the FASB issued Statement
of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted
Accounting Principles(SFAS 162). SFAS 162 identifies a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
generally accepted accounting principles for nongovernmental entities. SFAS 162
is effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles. The Company
has concluded this standard will have no effect on its financial statements.

In May 2008, the FASB issued SFAS No.
163, Accounting for Financial Guarantee Insurance Contracts  An interpretation
of FASB Statement No. 60. SFAS 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial obligation. It
also clarifies how SFAS 60 applies to financial guarantee insurance contracts,
including the recognition and measurement to be used to account for premium
revenue and claim liabilities, and requires expanded disclosures about financial
guarantee insurance contracts. It is effective for financial statements issued
for fiscal years beginning after December 15, 2008, except for some disclosures
about the insurance enterprises risk-management activities. SFAS 163 requires
that disclosures about the risk-management activities of the insurance
enterprise be effective for the first period beginning after issuance. Except
for those disclosures, earlier application is not permitted. The adoption of
this statement will have no effect on the Companys financial statements.

In March 2008, the FASB issued
Statement of Financial Accounting Standards No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an Amendment of FASB Statement
No. 133 (SFAS 161). SFAS 161 amends and expands the disclosure requirements
of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities  as amended (SFAS 133), to provide enhanced disclosures about how
and why an entity uses derivative instruments; how derivative instruments and
related hedged items are accounted for under SFAS 133; and how derivative
instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has concluded this
standard will have no effect on its financial statements.

19

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