Donner Minerals Ltd.
 
 
 Quarterly Consolidated Financial Statements
 For The Three Months Ended May 31, 2003
 (Unaudited)





DONNER MINERALS LTD.(An exploration stage company)Consolidated Balance Sheets(Canadian Dollars)(Unaudited)May 31,

February 28,2003

2003ASSETSCurrentCash and cash equivalents
$ 938,879

$ 1,229,989Marketable securities and short term investments (note 4)
740,524

1,037,092Amounts receivable
11,691

13,770Advances for exploration
213,337

480,173Deposits and prepaid expenses
3,205

4,8621,907,636

2,765,886Property, plant and equipment
40,228

44,075Investment (note 5)
1,105,849

61,625Mineral properties (note 6)
2,628,641

2,603,641$ 5,682,354

$ 5,475,227LIABILITIESCurrentAccounts payable and accrued liabilities
$ 211,209

$ 203,943Non-controlling interest
420,465

420,559631,674

624,502SHAREHOLDERS' EQUITYShare capital (note 7)
36,220,092

35,971,592Contributed surplus
163,460

163,460Deficit
(31,332,872)

(31,284,327)5,050,680

4,850,725$ 5,682,354

$ 5,475,227Approved by the Directors:"Harvey Keats""David Patterson"







DONNER MINERALS LTD.(An exploration stage company)Consolidated Statements of Deficit(Canadian Dollars)(Unaudited)Three months

Three monthsended May 31,

ended May 31,2003

2002(restated - note 3)Deficit, beginning of period




$(31,284,327)

$(28,419,105)Loss for the period




(48,545)

(1,204,769)Deficit, end of period




$(31,332,872)

$(29,623,874)







DONNER MINERALS LTD.(An exploration stage company)Consolidated Statements of Operations(Canadian Dollars)(Unaudited)Three months

Three monthsended May 31,

ended May 31,2003

2002(restated - note 3)ExpensesAdministration and management fees




$ 148,667

$ 136,000Amortization




3,847

2,046Consulting fees




-

4,000Exploration expenditures (note 3) (schedule)




301,837

838,986Filing and transfer agent fees




1,869

8,232Office and miscellaneous




48,166

13,002Professional fees




6,847

7,047Promotion




54,184

106,085Rent




12,000

13,200Stock-based compensation




-

50,000Telephone and communications




6,115

6,480Travel




24,075

36,055Less: interest income




(14,383)

(18,643)Loss before other items




(593,224)

(1,202,490)Other itemsNon-controlling interest




94

91Writedown of marketable securities




-

(2,370)Gain on redemption of convertible debenture (note 5)




267,254

-Gain on deemed disposition of investment (note 5)




333,406

-Equity in loss of investment (note 5)




(56,075)

-Loss for the period




$ (48,545)

$ (1,204,769)Basic and diluted loss per share




$ -

$ (0.02)Weighted average number of common shares outstanding




69,509,508

49,225,803









DONNER MINERALS LTD.(An exploration stage company)Consolidated Statements of Cash Flows(Canadian Dollars)(Unaudited)Three months

Three monthsended May 31,

ended May 31,Cash provided by (used for):




2003

2002(restated - note 3)Operating activitiesLoss for the period




$ (48,545)

$ (1,204,769)Items not involving cash:Amortization




3,847

2,046Stock-based compensation




-

50,000Non-controlling interest




(94)

(91)Writedown of marketable securities




-

2,370Gain on deemed disposition of investment




(333,406)

-Equity in loss of investment




56,075

-Accrued interest income




-

(352)Changes in non-cash operatingworking capital items (note 10)




277,838

292,853(44,285)

(857,943)Financing activitiesPrivate placement proceeds




-

910,000Common shares issued for cash




248,500

150,805248,500

1,060,805Investing activities(Expenditures on) recovery of mineral properties acquisition




(25,000)

600Purchase of long term investment




(804,993)

-Redemption of long term investment




38,100

-Maturity of short term investments




296,568

1,027,548(495,325)

1,028,148Increase (decrease) in cash and cash equivalents




(291,110)

1,231,010Cash and cash equivalents, beginning of period




1,229,989

206,693Cash and cash equivalents, end of period




$ 938,879

$ 1,437,703







DONNER MINERALS LTD.
(An exploration stage company)
Notes to the Consolidated Financial Statements
May 31, 2003
(Canadian Dollars)  1.  Nature of Operations
 
 The Company is a public company incorporated under the Company Act, British Columbia. Its shares are listed on the TSX Venture Exchange and the Frankfurt Stock Exchange. The principal business of the Company is to explore for and develop mineral properties. As of the date of this report, the Company has not determined whether its mineral properties contain ore reserves that are economically recoverable. The recoverability of amounts shown for mineral properties and related deferred costs is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development and future profitable production from the property or proceeds from disposition.
 
 2.  Significant Accounting Policies
 
 These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principals and they follow the same accounting policies and methods that were used in the Companys annual financial statements of February 28, 2003 except for the following item:
 
 During the three months ended May 31, 2003, the Company started to account for its investment in Knight Resources Ltd. ("Knight") using the equity method (note 5). The Company completed an 8,000,000 common share private placement in Knight and as a result exercises significant influence over Knight. Under the equity method, the investment is initially recorded at cost and is adjusted to recognize the Companys share of earnings or losses and reduced by dividends and distributions received.
 
 3.  Change in Accounting Policy
 
 Effective February 28, 2003, the Company changed its method of accounting for mineral exploration expenditures, from deferring them until the viability of a project was determined, to charging them to operations as incurred. Under the new policy, only expenditures incurred on properties identified as having substantial evidence that a commercial body of ore has been located are capitalized and accounted for in accordance with the Companys accounting policy for mineral properties.
 
 As a result of this change, the May 31, 2002 comparative figures have been restated for comparative purposes. The net loss has been increased by $838,986 to $1,204,769 and loss per share has been increased by $0.01 to $0.02.
 
 4.  Marketable securities and short term investments
 
 Lower ofType of


Market
Cost andSecurity
Number
Cost
Value
MarketCBX Ventures Inc.
Common
46,250
$ -
$ -
$ -Curlew Lake Resources Inc.
Common
200,000
10,000
10,000
10,000Mesa Resources Inc.
Common
15,797
1,580
7,109
7,10911,580
17,109
17,109Money Market Instrument


728,945
728,945
728,945$ 740,525
$ 746,054
$ 746,054
 
 
 
  
 5.  Investment
 
 May 31, 2003Percentage
Carrying
Marketof Ownership
Value
ValueKnight Resources Ltd.Common shares (a)
27.6%
$ 828,518
$ 1,876,97311% convertible debenture (b)
0%
-
-$ 828,518
$ 1,876,973February 28, 2003Percentage
Carrying
Marketof Ownership
Value
ValueKnight Resources Ltd.Common shares
2.4%
$ 23,525
$ 51,75511% convertible debenture
100%
38,100
47,984$ 61,625
$ 99,739
 (a)  During the three months ended May 31, 2003, the Company advanced $780,000 to Knight in order to complete its private placement investment in Knight of 8,000,000 common shares at $0.10 per share. The Company holds approximately 28% of the outstanding common shares of Knight at 8,160,750 common shares.  This investment will be accounted for using the equity method. Knight has directors and officers in common with the Company.
 
 The cost of the Companys investment in Knight exceeded its share of the underlying fair value of Knights net assets at March 21, 2003, the deemed date of acquisition for accounting purposes, by approximately $571,000. This excess is attributable to mineral properties and will be amortized against the Companys share of Knights net income or loss if and when production is attained.
 
 The Companys share of Knights net loss from March 21, 2003 to May 31, 2003 was $56,075. As a result of share issuances by Knight after March 21, 2003 and before May 31, 2003, the Company recorded a gain on deemed disposition of $333,406.
 
 (b)  During the three months ended May 31, 2003, the Company received proceeds on the convertible debenture owing from Knight in the amount of $311,556 which included $31,556 in accrued interest. Because the convertible debenture was written down in previous periods to better reflect its market value, the Company reported a gain on redemption of $267,954.
 
 6.  Mineral Properties
 
 The Companys mineral properties are comprised of wholly owned mineral claims and interests in joint venture agreements in South Voisey Bay, Labrador and an option earn-in agreement in Stephens Lake, Manitoba, Canada. Although the Company holds some interests in mineral properties through joint venture agreements, none of the operations are carried on through joint venture entities.
 
 South Voisey Bay Properties
 
 As at May 31, 2003, Falconbridge Limited ("Falconbridge") has spent a total of $2,326,010 on the SVB Nickel property. For the three months ended May 31, 2003, Falconbridge has spent $226,368.
 
 
  6.  Mineral Properties (contd)
 
 As at May 31, 2003, Falconbridge has spent a total of $143,158 on the Northern Abitibi property. For the three months ended May 31, 2003, Falconbridge has spent $5,129.
 
 As at May 31, 2003, Falconbridge has spent a total of $113,346 on the Commander property. For the three months ended May 31, 2003, Falconbridge has spent $10,288.
 
 Stephens Lake Property
 
 During the three months ended May 31, 2003, the Company expended $254,469 on exploration (see schedule). As at May 31, 2003, the Company has advanced Falconbridge $1,500,000 of which $1,298,431 has been spent on exploration activities with $201,569 remaining in advances for exploration. Also, the Company expended $25,000 in option payments to acquire more ground adjacent to the property during the three months ended May 31, 2003.
 
 Labrador Regional Exploration
 
 During the three months ended May 31, 2003, the Company expended $47,368 on exploration (see schedule). As at May 31, 2003, the Company has advanced Falconbridge $300,653 of which $288,886 has been spent on exploration activities with $11,767 remaining in advances for exploration.
 
 NorthernSVB Nickel
Commander
Abitibi
StephensProperty Acquisition Costs
Claims
Claims
Claims
Lake
TotalBalance at February 28, 2003
$ 1,953,141
$ 438,500
$ 212,000
$ -
$ 2,603,641Option payment
-
-
-
25,000
25,000Balance at May 31, 2003
$ 1,953,141
$ 438,500
$ 212,000
$ 25,000
$ 2,628,641
 
 7.  Share Capital
 
 Issued and outstanding:
 Number ofShares

AmountBalance at February 28, 2003
68,255,541

$ 35,971,592Exercise of options
50,000

5,500Exercise of warrants
2,025,000

243,000Balance at May 31, 2003
70,330,541

$ 36,220,092
 8.  Stock-based Compensation
 
 The Company uses the intrinsic value based method of accounting for stock-based awards granted to employees and directors. Under this method, compensation cost is only recorded when the exercise price is below the market price of the stock on the date of grant. During the three months May 31, 2003, the Company incurred $nil stock compensation cost:
 
 
 
  
 8.  Stock-based Compensation (contd)
 
 Number
Market
Exercise
Intrinsic
CompensationDate of Grant
Granted
Price
Price
Value
CostApril 10, 2003
400,000
$0.155
$0.155
$ -
$ -
 There were no stock options granted to non-employees during the period.
 
 If the Company used the fair value based method of accounting for stock-based awards granted to employees and directors, the cost of the options granted during the three months ended May 31, 2003 would have been estimated on the date of grant using the Black-Scholes option pricing model, with the following assumptions for each grant:
 
 Expected
Risk-free



Pro FormaNumber
Life
Interest
Expected
Dividend
Fair
CompensationDate of Grant
Granted
(years)
Rate
Volatility
Yield
Value
CostApril 10, 2003
400,000
2
3.81%
94.55%
0.00%
$0.08
$ 32,000Less: intrinsic value compensation cost






-Additional compensation cost






$ 32,000
 
 If the Company had used the fair value based method, pro forma loss would have amounted to $80,545 (an increase of $32,000) and pro forma loss per share would have been unchanged at $nil for the three months ended May 31, 2003.
 
 9.  Related Party Transactions
 
 Related parties are directors, officers and other companies with common directors and/or officers of the Company. Amounts due to related parties are non-interest bearing and without specific terms of repayment.
 
 Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
 
 The following is a summary of the related party transactions that occurred throughout the three months ended May 31:
 
 May 31,

May 31,2003

2002Management fees
$ 120,667

$ 106,000Interest income
$ 6,202

$ 15,400Gain on redemption of convertible debenture
$ 267,254

$ -Gain on deemed disposition of investment
$ 333,406

$ -Equity in loss of investment
$ (56,075)

$ -Marketable securities
$ -

$ 3,525Investment
$ 1,105,849

$ 58,343
 
  
  10.  Supplementary Cash Flow Information
 
 May 31,

May 31,2003

2002(restated - note 3)Change in non-cash operating working capital itemsAmounts receivable
$ 2,079

$ 12,793Advances for exploration
266,836

338,986Deposits and prepaid expenses
1,657

1,260Accounts payable and accrued liabilities
7,266

(60,186)$ 277,838

$ 292,853
 11.  Subsequent Events
 
 Subsequent to May 31, the Company issued 630,000 shares for proceeds of $75,600 pursuant to the exercise of warrants and 100,000 shares for proceeds of $12,000 pursuant to the exercise of options.
 
 
 
 
  DONNER MINERALS LTD.(An exploration stage company)Schedule of Exploration Expenditures(Canadian Dollars)Three months

Three monthsended May 31,

ended May 31,2003

2002(restated - note 3)Stephens Lake ClaimsDrilling




$ 198,928

$ -Geochemistry




-

684Geology




25,223

6,979Geophysics




13,122

831,323Government grants




(15,028)

-Other




32,224

-254,469

838,986Labrador Regional ExplorationGeology




15,483

-Geophysics




27,779

-Other




4,106

-47,368

-$ 301,837

$ 838,986
 
  DONNER MINERALS LTD. Schedule B
Supplementary Information
For the Three Months Ended May 31, 2003  Analysis of expenses and deferred costs 
 Please see the financial statements for a breakdown of deferred mineral property acquisition costs and exploration expenditures.
 
 Administration and Management fees:
 
 Management fees
$ 120,667Accounting
14,000Secretarial
5,600General office administration
8,400$ 148,667
 Professional fees:
 
 Legal fees
$ 1,097Taxation services
5,750$ 6,847
 2.  Related party transactions
 
 Please see the financial statements for a breakdown of the related party transactions.
 
 3.  a)  Securities issued during the period
 
 Date of

Type of



Type of
CommissionIssue
Type of Security
Issue
Number
Price
Proceeds
Consideration
Paid06-Mar-03
Common shares
Warrants
25,000
$0.12
$3,000
Cash
$020-Mar-03
Common shares
Warrants
1,500,000
$0.12
$180,000
Cash
$013-May-03
Common shares
Warrants
20,000
$0.12
$2,400
Cash
$020-May-03
Common shares
Warrants
30,000
$0.12
$3,600
Cash
$021-May-03
Common shares
Warrants
100,000
$0.12
$12,000
Cash
$023-May-03
Common shares
Options
25,000
$0.10
$2,500
Cash
$023-May-03
Common shares
Options
25,000
$0.12
$3,000
Cash
$028-May-03
Common shares
Warrants
50,000
$0.12
$6,000
Cash
$028-May-03
Common shares
Warrants
250,000
$0.12
$30,000
Cash
$028-May-03
Common shares
Warrants
50,000
$0.12
$6,000
Cash
$0
 
 
 b)  Options granted during the period
 
 Date of


Exercise
ExpiryGrant
Number
Name
Price
Date10-Apr-03
400,000
Employees
$0.155
09-Apr-05
 
 4.  a)  Authorized share capital
 
 100,000,000 common shares without par value
 
 b)  Issued and outstanding share capital
 
 70,330,541 shares at a recorded value of $36,220,092
 
 c)  Options, warrants and convertible securities
 
 Exercise/Type of

ExerciseSecurity
Number
Price
Expiry DateOptions
100,000
$0.12
February 13, 2004Options
500,000
$0.12
April 3, 2004Options
150,000
$0.25
August 22, 2004Options
300,000
$0.12
November 14, 2004Options
400,000
$0.155
April 9, 2005Options
144,000
$0.10
February 3, 2008Options
363,000
$0.10
July 14, 2008Options
255,000
$0.10
November 22, 2008Options
1,255,443
$0.10
November 16, 2009Options
1,212,915
$0.10
February 1, 2011Options
832,500
$0.10
August 10, 2011Options
2,260,000
$0.12
January 16, 2012Options
500,000
$0.33
June 16, 2012Options
736,583
$0.43
June 16, 2012Options
1,700,000
$0.12
November 14, 2012Warrants
4,000,000
$0.44
June 4, 2004Warrants
7,975,000
$0.12
December 18, 2004Warrants
175,000
$0.21
January 9, 2005
 
 Number of shares subject to escrow or pooling agreements 
 None
 
 Directors and officers of the Company 
 David Patterson  Director and CEO
 Harvey Keats  Director and President
 Kerry Sparkes  Director
 Rex Gibbons  Director
 Andrew Stewart  Secretary
 
 
 
    Principal Activity of the Company
 
 Donner Minerals Ltd. (the "Company") is a mineral exploration company with a project in the South Voisey Bay area of Labrador, Newfoundland and a project in the Stephens Lake area of Manitoba. The Companys partners in the South Voisey Bay Project ("SVB Project") include Falconbridge Limited ("Falconbridge"), Teck Cominco and various junior resource exploration companies. The Companys partner in the Stephens Lake Project is Falconbridge. The Company is also carrying out regional exploration in Labrador with Falconbridge as part of the Labrador Regional Project.
 
 South Voisey Bay Project, Labrador
 
 The South Voisey Bay Project is the Companys most advanced exploration project and is located 90 km south of Incos Voiseys Bay deposits. The South Voisey Bay Project covers approximately 650 square kilometres in which the Company has varying interests ranging from 52% to 77%.
 
 Exploration work on the South Voisey Bay Project is currently being carried out by Falconbridge who has an option to earn a 50% interest in the entire South Voisey Bay Project by spending $23 million on exploration, over 5 years.
 
 In April 2003, a 2,200 line kilometre MegaTEM survey was begun on the eastern half of the South Voisey Bay Project. MegaTEM is a deep penetrating airborne electromagnetic and magnetic survey. The survey was designed to detect conductors to a depth of 300 to 400 metres on a virtually unexplored portion of the property, which has only been covered by a shallow penetrating (less than 100 metres) helicopter borne electromagnetic and magnetic survey. This portion of the property is prospective for nickel sulphides associated with blind olivine gabbro intrusive bodies and related feeder systems.
 
 In early June, the Company announced that the interpretation of the deep penetrating airborne MegaTEM survey over the South Voisey Bay Project had been completed.
 
 The survey identified nine conductive trends which are currently subject to geological and geophysical ground follow-up to select and accurately locate targets for diamond drilling.
 
 In the North Gabbro area, on ground held by SVB Nickel Company Ltd. (SVBN), Donner/Northern Abitibi, Donner/Commander and SVBN/Pallaum, there are six conductive trends that have been identified by the MegaTEM survey. The ground geophysical follow-up will consist of widely spaced AMT electromagnetic (EM) ground geophysics to be followed by large loop EM surveys. The ground follow-up will be in the general area of the highest grades and nickel tenors intersected on the SVB Project to date.
 Three conductive trends, on strike with known gabbros, have been identified by the MegaTEM survey in the South Gabbro area on ground held entirely by SVBN. Ground geophysical follow-up will consist of large loop EM surveys.
 
 In addition, three conductive trends on the eastern portion of the SVBN property and one on the northern portion of the SVBN property, have been selected for follow-up in the field prior to a decision to carry out ground geophysics.
 
 High priority anomalies will be selected for diamond drilling.
 
 The 2003 program is being carried out by Falconbridge Limited. Falconbridge can earn a 50% interest in the entire South Voisey Bay Project by spending $23 million on exploration over a five-year period. As at May 31, 2003, Falconbridge had spent approximately $2.6 million and is required to spend an additional $1.4 million in 2003 to maintain its option.
 
 Labrador Regional Project
 
 The Labrador Regional Project is a joint venture between the Company and Falconbridge to explore for nickel-copper-cobalt deposits in Labrador outside of the Voiseys Bay and South Voisey Bay areas. Under the Labrador Regional Agreement, the partners have agreed to each spend a minimum of $200,000 per year, over a two-year period. Any properties acquired will form part of a Joint Venture in which both the Company and Falconbridge will have a 50% interest.
 
 The Company and Falconbridge believe that areas of Labrador, other than Voiseys Bay and South Voisey Bay, have the potential to host Voiseys Bay like deposits. Many areas of Labrador were underexplored during the Voiseys Bay staking rush, when the details of the Voiseys Bay model were not available. The purpose of the Labrador Regional Agreement is to combine the ideas and expertise of the Company and Falconbridge to realize this potential.
 
 In the first year of the agreement, a field program consisting of geochemical, geological and geophysical surveys, and property evaluation was carried out in July and August 2002. The Company and Falconbridge are carrying out follow-up work on areas of interest identified by the 2002 program. As of the date of this report, the results of this work have not resulted in the acquisition of any ground.
 
 
 
 
 
 
 Stephens Lake Project, Manitoba
 
 The Stephens Lake Project covers approximately 3,700 square kilometers and 110 kilometers of strike length along the newly interpreted extension of the Thompson Nickel Belt, one of the most important nickel producing regions in the world. The interpreted extension is known as the Stephens Lake Belt. The Company has the option to earn a 50% participating joint  venture interest in the Stephens Lake Project by incurring a total of $5 million of expenditures on exploration and related work on or before the end of December 2006.
 
 The deposits in the Thompson Nickel Belt occur where ultramafic rocks interact with sulphide iron formation. The ultramafic rocks provide the nickel and the sulphide iron formation provides the sulphur required to form the nickel sulphide deposits in the Thompson model.
 
 In March 2003, three holes, totalling 992 metres were drilled in the initial phase of the 2003 Stephens Lake exploration program. Significantly, one of the holes intersected 72 metres of sulphide iron formation, a key ingredient in the Thompson Nickel Belt model. The other key ingredient, ultramafic rocks, was intersected in early 2002 by a previous owner exploring for diamonds on ground that is now part of the Stephens Lake Project.
 
 While nickel and copper assays were not significant, the discovery of sulphide iron formation and the occurrence of ultramafic rocks on the property reinforces the interpretation that the Stephens Lake Belt is the extension of the Thompson Nickel Belt, and confirms the potential for nickel sulphide deposits similar to Thompson.
 
 The EM conductors in the other two holes were explained by the intersection of graphitic sediments. The holes were widely spaced over a 50 kilometre strike length of the Stephens Lake Belt and were drilled on separate geophysical targets.
 
 In May 2003, Falconbridge arranged for a Thompson Nickel Belt expert from the Manitoba Geological Survey to examine all of the drill core from the 2003 drill program and all of the core from the 2002 drill program where the ultramafic rocks were intersected. The stratigraphy intersected at Stephens Lake is being compared with the stratigraphy which hosts the Thompson deposits.
 
 A follow-up 2003 program is currently being designed. A large portion of the current land position, now totaling approximately 4,000 square kilometres, was not covered in the 2002 GEOTEM survey. Additional airborne and ground geophysics will be required to generate targets for future drilling.
 
 
 
 As of May 31, 2003, the Company has advanced Falconbridge $1,500,000 for Stephens Lake exploration and must advance a further $500,000 during the 2003 calendar year in order to keep the option in good standing.
 
 West Raglan/Knight Resources Ltd. Investment
 
 On January 24, 2003, the Company announced that it had subscribed for, through a private placement, 8,000,000 units of Knight Resources Ltd. ("Knight") at a total cost to the Company of $800,000. Each unit is comprised of one common share of Knight and one non-transferable share purchase warrant entitling the holder to purchase one additional common share of Knight at a price of $0.15 until March 25, 2005.
 
 The Company has taken this interest in Knight in order to have a significant exposure to, and indirect interest in, Anglo American (Canada) Exploration Limiteds ("Anglo American") West Raglan Project. In January 2003, Knight had entered into an Option Agreement with Anglo American to earn a 49% interest in the West Raglan Project (see Knight news release dated January 24, 2003 for terms of the option earn-in).
 
 The West Raglan Project, located in Northern Quebec, is comprised of 1,754 contiguous map-staked claims covering approximately 72,000 hectares of the western part of the Cape Smith Belt.
 
 The northern portion of the Cape Smith Belt, known as the Raglan Horizon, hosts Falconbridges Raglan deposits, which are estimated to contain a total of 25 million tonnes averaging 2.8% nickel, 0.8% copper and significant platinum group elements and cobalt.
 
 The southern portion of the Cape Smith Belt, referred to here as the Expo-Ungava Horizon, hosts the Expo-Ungava deposit and the Mesamax occurrence.
 
 The eastern edge of the West Raglan Project is located approximately 80 kilometers west of Falconbridges Katinniq mine. The West Raglan Project covers over 70 kilometers of the prospective Raglan horizon and 65 km of the prospective Expo-Ungava horizon, as confirmed by Anglo Americans 2002 field program.
 
 The West Raglan Project has never been surveyed with a deep penetrating airborne electromagnetic survey, and there is no evidence of any prior diamond drilling on the Project.
 
 The 2003 program began with a 4,500 line kilometre, deep penetrating SPECTREM airborne electromagnetic (EM) and magnetic survey. Preliminary interpretation of the airborne survey has identified numerous high priority EM targets throughout the property, coincident with known ultramafic rocks and with magnetic anomalies interpreted as ultramafic rocks. Target depths are interpreted to be shallower than originally anticipated, which will increase the number of holes to be drilled in the planned 2,000 metre 2003 drill program.
 
 Geological, geophysical and geochemical work is currently underway in preparation for diamond drilling which is expected to begin by the end of July.
 
 As a result of the Companys private placement in Knight, and a second placement that Knight carried out, the Company holds approximately 28% of Knights issued and outstanding common shares.
 
 Operating Results
 
 The Company incurred a loss of $48,545 (2002 - $1,204,769). The Companys loss per share was $nil for 2003 compared to a loss per share of $0.02 for 2002.
 
 Effective February 28, 2003, the Company changed its method of accounting for mineral exploration expenditures, from deferring them until the viability of a project was determined, to charging them to operations as incurred. Under the new policy, only expenditures incurred on properties identified as having a commercial body of ore will be capitalized and accounted for in accordance with the Companys accounting policy for mineral properties.
 
 As a result of this change, the May 31, 2002 comparative figures have been restated for comparative purposes. The net loss has been increased by $838,986 to $1,204,769 and loss per share has been increased by $0.01 to $0.02.
 
 The Company expended $254,469 (net of $15,028 received in the form of government grants) on its Stephens Lake Project (2002 - $838,986) and $47,368 on its Labrador Regional Project (2002 - $nil). The Company has not expended any funds (2002 - $nil) on its South Voisey Bay properties because Falconbridge is incurring the bulk of the exploration costs in order to earn a 50% interest in the South Voisey Bay Project.
 
 The Company recorded stock-based compensation of $nil (2002 - $50,000) for 2003. The Company follows the intrinsic value based method of accounting for stock based awards. The expense is the result of granting stock options to certain employees with exercise prices less than the market price of the stock on the day of grant. This is a non-cash transaction.
 
 If the Company had used the fair value based method, pro forma loss would have amounted to $80,545 (an increase of $32,000) and pro forma loss per share would have been unchanged for the three months ended May 31, 2003.
 
 Promotion and travel have both decreased in 2003 compared to 2002 because Management did not spend as much time traveling throughout Canada and Europe. During 2002, the Company revised and updated its internet web site and printed significantly more promotional material.
 
 The Companys administration and management fees were $148,667 during 2003 compared to $136,000 for 2002. The Company paid $34,667 (2002 - $40,000) to the President, $60,000 (2002 - $36,000) to the CEO and $26,000 (2002 - $30,000) to the exploration manager for management services.
 
 The Company paid an arms-length private company $28,000 (2002 - $30,000) for accounting, secretarial and general administrative services and paid the same company $12,000 (2002 - $12,000) for rent.
 
 During the three months ended May 31, 2003, the Company received proceeds totaling $311,556 for the redemption of the convertible debenture with Knight. This included 100% of the principle, being $280,000, and accrued interest of $31,556. Because the convertible debenture was written down in prior periods to better reflect its market value at those times, the Company reported a gain on redemption of $267,954.
 
 The Companys investment in Knight (discussed above) is being accounted for using the equity method, whereby the investment is initially recorded at cost and is adjusted to recognize the Companys share of earnings or losses and reduced by dividends and distributions received. The Companys share of Knights loss from March 21, 2003, the deemed date of acquisition for accounting purposes, to May 31, 2003 amounted to $56,075. Subsequent to March 21, 2003 and before May 31, 2003, Knight issued common shares out of its treasury which had the effect of diluting the Companys investment in Knight. As a result, the Company has recorded a gain on deemed disposition of $333,406.
 
 Liquidity and Capital Resources
 
 The Companys working capital position at May 31, 2003 was $1,696,427 compared to $2,561,943 at February 28, 2003. The decrease in working capital is mainly due to the Company advancing Knight $780,000 to complete its investment in Knight and a reduction in advances for exploration of $266,836.
 
 During the three months ended May 31, 2003, the Company issued 2,075,000 common shares for net proceeds of $248,500 pursuant the exercise of stock options and warrants.
 It is anticipated that the Company will have the necessary funds available to meet its fiscal 2004 operating costs and its calendar 2003 exploration commitments.
 
 It is also anticipated that the 2004 operating expenditures for the next nine months will be comparable or less than 2003.
 
 Investor Relations
 
 The Company responded to shareholder inquiries throughout the three months ended May 31, 2003. In March 2003, the Company participated in, and had a booth at, the Prospector and Developers Association Conference in Toronto and at investment conferences in Montreal and Vancouver. In April 2003, the Company entered into an agreement with Rock Marketing Inc. ("Rock"), whereby Rock will provide Investor Relations services for an initial term of 6 months. Rock will focus on servicing the Companys European shareholders, bringing greater attention to the Companys Frankfurt Stock Exchange listing, and introducing and presenting the Company to interested investors. The Company has agreed to pay Rock $5,000 per month.