----

----

----

|   | - | uncertainties      in the estimates of proved reserves, and in the projection of future rates      of production and timing of development  expenditures; |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | our      ability to find and acquire additionalreserves; |
|--------|---|----------------------------------------------------------|

|   | - | risks      associated with acquisitions, exploration, development and      production; |
|--------|---|----------------------------------------------------------------------------------------|

|   | - | operating      hazards attendant to the oil and natural gas  business; |
|--------|---|------------------------------------------------------------------------|

|   | - | potential      constraints on our ability to market reserves due to limited      transportation space; |
|--------|---|--------------------------------------------------------------------------------------------------------|

|   | - | climatic      conditions; |
|--------|---|---------------------------|

|   | - | availability      and cost of labor, material, equipment and  capital; |
|--------|---|------------------------------------------------------------------------|

|   | - | ability      to employ and retain key managerial and technical    personnel; |
|--------|---|------------------------------------------------------------------------------|

|   | - | international,      national, regional or local political and economic uncertainties,      including changes in energy policies, foreign exchange restrictions and      currency fluctuations; |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | adverse      regulatory or legal decisions, including those under environmental laws      and regulations; |
|--------|---|------------------------------------------------------------------------------------------------------------|

|   | - | environmental      risks; |
|--------|---|---------------------------|

|   | - | the      strength and financial resources of our  competitors; |
|--------|---|----------------------------------------------------------------|

|   | - | general      economic conditions; and |
|--------|---|---------------------------------------|

|   | - | our      ability to continue as a “goingconcern”. |
|--------|---|---------------------------------------------------------------|

----

|                            | Average | High | Low  | Close |
|---------------------------------|---------|------|------|-------|
| Fiscal      Year Ended 12/31/08 | 1.07    | 1.31 | 0.98 | 1.22  |
| Fiscal      Year Ended 12/31/07 | 1.08    | 1.19 | 0.92 | 0.99  |
| Fiscal      Year Ended 12/31/06 | 1.13    | 1.17 | 1.10 | 1.17  |
| Fiscal      Year Ended 12/31/05 | 1.21    | 1.27 | 1.15 | 1.16  |
| Fiscal      Year Ended 12/31/04 | 1.30    | 1.40 | 1.18 | 1.20  |

|   | 12/08 | 01/09 | 02/09 | 03/09 | 04/09 | 05/09 |
|--------|-------|-------|-------|-------|-------|-------|
| High   | 1.30  | 1.28  | 1.29  | 1.31  | 1.27  | 1.19  |
| Low    | 1.21  | 1.19  | 1.23  | 1.23  | 1.20  | 1.09  |

----

|                                                | YearEnded12/31/08                            | YearEnded12/31/07RESTATED                    | YearEnded12/31/06RESTATED                    | YearEnded12/31/05RESTATED                    | YearEnded12/31/04                       |
|-----------------------------------------------------|----------------------------------------------|----------------------------------------------|----------------------------------------------|----------------------------------------------|----------------------------------------------|
| Revenue                                             | $       - | $       - | $       - | $       - | $       - |
| Gain      (loss) Before Non-controlling Interest    | $(4,237)                                     | $(3,666)                                     | $(3,375)                                     | $10,371                                      | $(7,228)                                     |
| Net      Income (loss)                              | $(4,237)                                     | $(3,666)                                     | $(3,375)                                     | $10,371                                      | $(7,219)                                     |
| Net      Income (loss) Per Share                    | $(0.01)                                      | $(0.02)                                      | $(0.02)                                      | $0.06                                        | $(0.05)                                      |
| Diluted  Net      Income (loss) Per Share | $(0.01)                                      | $(0.02)                                      | $(0.02)                                      | $0.05                                        | $(0.05)                                      |
| Dividends      Per Share                            | $0.00                                        | $0.00                                        | $0.00                                        | $0.00                                        | $0.00                                        |
| Weighted  Avg.      Shares O/S            | 404,144                                      | 239,623                                      | 195,610                                      | 175,620                                      | 149,900                                      |
| Working      Capital                                | $165                                         | $706                                         | $(3,153)                                     | $1,271                                       | $(998)                                       |
| Resource      Properties (1)                        | $     -             | $     -             | $     -             | $     -             | $6,217                                       |
| Long-Term      Debt                                 | $     -             | $     -             | $     -             | $2,710                                       | $7,921                                       |
| Shareholders’      Equity/ (deficiency)       | $6,562                                       | $7,579                                       | $8,671                                       | $10,142                                      | $(2,153)                                     |
| Capital      Stock Shares                           | 434,144                                      | 434,144                                      | 234,144                                      | 178,161                                      | 174,584                                      |
| Total      Assets                                   | $6,690                                       | $11,124                                      | $11,587                                      | $13,026                                      | $7,271                                       |

| (1)   | Resource      properties comprise all costs of acquisition of, exploration for, and      development of petroleum and natural gas reserves (net of government      incentives) less depletion and writedowns. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               | YearEnded12/31/08                | YearEnded12/31/07RESTATED        | YearEnded12/31/06RESTATED        | YearEnded12/31/05RESTATED                                |  Year      Ended 12/31/04  |
|----------------------------------------------------|----------------------------------|----------------------------------|----------------------------------|----------------------------------------------------------|--------------------------------------|
| Revenue                                            | $     - | $     - | $     - | $     -                         | $     -     |
| Income      (Loss) Before Non-controlling interest | $(4,974)                         | $(4,131)                         | $(4,030)                         | $10,287                                                  | $(6,973)                             |
| Net      Income (loss)                             | $(4,974)                         | $(4,131)                         | $(4,030)                         | $10,287                                                  | $(6,965)                             |
| Net      Income (loss) Per Share                   | $(0.01)                          | $(0.03)                          | $(0.02)                          | $0.06                                                    | $(0.05)                              |
| Fully      Diluted Net Income (loss) Per Share     | $(0.01)                          | $(0.03)                          | $(0.02)                          | $0.05                                                    | $(0.05)                              |
| Dividends      Per Share                           | $0.00                            | $0.00                            | $0.00                            | $0.00                                                    | $0.00                                |
| Wgt.      Avg. Shares O/S                          | 404,144                          | 209,623                          | 195,610                          | 175,620                                                  | 149,900                              |
| Working      Capital                               | $165                             | $706                             | $(3,153)                         | $1,271                                                   | $(998)                               |
| Resource      Properties                           | $     - | $     - | $     - | $         - | $6,217                               |
| Long-Term      Debt                                | $     - | $     - | $     - | $2,995                                                   | $8,105                               |
| Shareholders’      Equity/(deficiency)       | $5,432                           | $7,186                           | $8,216                           | $23,630                                                  | $(2,462)                             |
| Capital      Stock Shares                          | 434,144                          | 434,144                          | 234,144                          | 178,161                                                  | 174,584                              |
| Total      Assets                                  | $5,560                           | $10,730                          | $12,110                          | $27,030                                                  | $7,405                               |

|   | Funds      used in operations for the fiscal years ended December 31, 2008, 2007, and      2006 were $(1,480,714), $(417,405), and $(1,658,921),      respectively.  We have been dependent upon the proceeds of      equity and debt financing in addition to the disposition of assets to fund      operations.  No assurances can be given that our actual cash      requirements will not exceed our budget, that anticipated revenues will be      realized, that, when needed, lines of credit will be available if      necessary or that additional capital will be available to      us.  There is no assurance that we will be able to obtain such      additional funds on terms and conditions we may deem      acceptable.  Failure to obtain such additional funds may      materially and adversely affect our ability to acquire interests directly      or indirectly in producing oil and gas and mineral    properties. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | We      have paid no dividends on our common shares since inception, and do not      plan to pay dividends in the foreseeable future. See "Description of Common      Shares." |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      market price of our common shares has fluctuated over a wide range, and it      is likely that the price of our common shares will fluctuate in the      future.  Further, announcements regarding acquisitions, the      status of corporate collaborations, regulatory approvals or other      developments by us or our competitors could have a significant impact on      the market price of our commonshares. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Future      sales of substantial amounts of common shares in the public market, or the      perception that such sales could occur, could adversely affect the market      price of our common shares.  At June 15, 2009, we had      434,143,765 common shares outstanding.  On that date we also had      reserved 19,520,000 common shares for issuance under our stock plan at      per-share exercise prices ranging from US$0.055 to US$0.079, and also had      reserved 3,533,333 common shares for issuance under the warrants pursuant      to the acquisition of Forum Exploration Inc.  We intend to      include these common shares in a future Registration Statement to be filed      with the United States Securities and Exchange Commission (“SEC”) pursuant      to the Securities Act of 1933, registering the common shares for      sale. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The      production of oil and gas and the extraction of minerals by companies we      invest in or by ourselves is generally subject to extensive laws, rules,      orders and regulations governing a wide variety of matters, including the      drilling and spacing of wells, allowable rates of production, prevention      of waste and pollution and protection of the environment.  In      addition to the direct costs borne in complying with such regulations,      operations and revenues may be impacted to the extent that certain      regulations limit oil and gas and mineral production to below economic      levels.  Although the particular regulations applicable in each      jurisdiction in which operations are conducted vary, such regulations are      generally designed to ensure that oil and gas operations are carried out      in a safe and efficient manner, and to ensure that similarly-situated      operators are provided with reasonable opportunities to produce their      respective fair share of available crude oil, natural gas, and mineral      reserves.  However, since these regulations generally apply to      all oil and gas producers, we believe that these regulations should not      put us at a material disadvantage to other oil, gas and mineral      producers. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Exploration      and development of oil and gas and mineral resources involve a high degree      of risk, and few properties which are explored are ultimately developed      into producing properties.  There is no assurance that our      exploration and development activities or those of companies that we      invest in will result in any discoveries of commercial bodies of oil, gas      or minerals.  The long-term profitability of our operations will      be, in part, directly related to the cost and success of our exploration      programs or those of companies we invest in which may be affected by a      number of factors.  Substantial expenditures are required to      establish reserves through drilling, to develop processes to extract the      resources, and, in the case of new properties, to develop the extraction      and processing facilities and infrastructure at any site chosen for      extraction.  Although substantial benefits may be derived from      the discovery of a major deposit of oil, gas or minerals, no assurance can      be given that natural resources will be discovered in sufficient      quantities to justify commercial operations or that the funds required for      development can be obtained on a timelybasis. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We      expect that to be successful in our oil and gas and mineral exploration      activities, we must continually acquire or explore for and develop new oil      and gas reserves to replace those, if any, being depleted by production by      ourselves or by companies we invest in.  Without successful      drilling or acquisition ventures, our direct and indirect oil and gas      assets, mineral assets and, properties and the revenues derived there      from, if any, will decline over time.  To the extent we engage      in drilling activities directly or indirectly, such activities carry the      risk that no commercially viable oil or gas production or mineral      extraction will be obtained.  The cost of drilling, completing      and operating oil and gas wells is often uncertain.  Moreover,      drilling for oil and gas and minerals may be curtailed, delayed or      cancelled as a result of many factors, including shortage of available      working capital, title problems, weather conditions, environmental      concerns, government prohibitions, shortages of or delays in delivery of      equipment, as well as the financial instability of well operators, major      working interest owners, and drilling and well servicing      companies.  The availability of a ready market for oil and gas      and minerals will depend on numerous factors beyond our control, including      the demand for and supply of oil and gas and minerals, the proximity of      natural gas reserves to pipelines, the capacity of such pipelines, the      proximity of any smelting facilities in relation to any minerals found,      fluctuations in seasonal demand, the effects of inclement weather, and      government regulation.  New gas wells may be “shut-in” for lack      of a market until a gas pipeline or gathering system with available      capacity is extended into an area. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exploration      for natural resources involves many risks, which even a combination of      experience, knowledge and careful evaluation may not be able to      overcome.  Operations in which we expect to acquire an interest      will be subject to all the hazards and risks normally incidental to      exploration, development and production of resources, any of which could      result in work stoppages, damage to persons or property and possible      environmental damage.  These include the possibility of fires,      earthquake activity, coastal erosion, explosions, blowouts, oil spills or      seepage, gas leaks, discharge of toxic gas, over-pressurized formations,      unusual or unexpected geological conditions and the absence of      economically viable reserves.  These hazards may result in cost      overruns, substantial losses, and/or exposure to substantial environmental      and other liabilities. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | We      may, in the future, be unable to meet our share of costs incurred under      joint venture agreements or other option or joint venture agreements to      which we are, or may become a party, and we may have our interest in      properties, in which we may acquire interests subject to such agreements,      reduced as a result. Furthermore, if other parties to such agreements do      not meet their share of such costs, we may be unable to finance the cost      required to complete recommendedprograms. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Although      we will attempt to ascertain the status of the title for any projects in      which we have or will acquire a material interest, there is no guarantee      that title to such concessions will not be challenged or      impugned.  In some countries, the system for recording title to      the rights to explore, develop, and mine natural resources is such that a      title opinion provides only minimal comfort that the holder has      title.  Also, in many countries, claims have been made and new      claims are being made by aboriginal peoples that call into question the      property rights granted by the governments of those    countries. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Reserve      estimates are imprecise and may be expected to change as additional      information becomes available.  Furthermore, estimates of      reserves of natural resources, of necessity, are projections based on      engineering data and there are uncertainties inherent in the      interpretation of such data as well as the projection of future rates of      production and the timing of development expenditures.  Reserve      engineering is a subjective process of estimating underground      accumulations of oil, gas and minerals that cannot be measured in an exact      way and the accuracy of any reserve estimate is a function of the quality      of available data of engineering and geological interpretation and      judgment.  Accordingly, there can be no assurance that the      information regarding reserves of natural resources, if any, set forth      herein will ultimately be produced. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | The      production and marketing of resources are affected by a number of      competitive factors which are beyond our control and the effect of which      cannot be accurately predicted.  These factors include crude oil      and mineral imports, actions by foreign oil-producing nations and other      mineral producers, the availability of adequate pipeline and other      transportation facilities, the availability of equipment and personnel,      the marketing of competitive fuels and minerals, the effect of      governmental regulations, and other matters affecting the availability of      a ready market such as fluctuating supply and  demand. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Our      resource operations and those of companies we invest in, if any will be      subject to compliance with applicable federal, state, and local laws and      regulations controlling the discharge of materials into the environment,      or otherwise relating to the protection of the environment.  We      believe that there is a trend toward stricter standards of environmental      regulation which will in all probability continue.  Compliance      with such laws and standards may cause substantial delays and require      capital outlays in excess of those anticipated, thereby adversely      affecting our earnings and competitive position in the    future. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Since      our direct and indirect exploration and development activities will occur      primarily in countries other than Canada and the United States, we may be      affected by possible political or economic instability in those      countries.  The risks include, but are not limited to,      terrorism, military repression, extreme fluctuations in currency exchange      rates, and high rates of inflation.  Changes in resource      development or investment policies or shifts in political attitude in      these countries may adversely affect our business. Operations may be      effected in varying degrees by government regulations with respect to      restrictions on production, price controls, export controls, income taxes,      expropriation of property, maintenance of claims, environmental      legislation, land use, land claims of local people, water use and mine      safety. The effect of these factors cannot be accurately      predicted.  Exploration and production activities in areas      outside of the United States and Canada are also subject to the risks      inherent in foreign operations, including loss of revenue, property and      equipment as a result of hazards such as expropriation, nationalization,      war, insurrection and other politicalrisks. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      resource industry is highly competitive, and our business could be harmed      by competition from other companies.  Because resources are      fungible commodities, the principal form of competition is price      competition.  We will strive to maintain the lowest exploration      and production costs possible to maximize profits and insure that any      companies in which we invest do the same.  In addition, as an      independent resource company, we frequently compete for reserve      acquisitions, exploration leases, licenses, concessions and marketing      agreements against companies with financial and other resources      substantially larger than we possess.  Many of our competitors      have established strategic long term positions and maintain strong      governmental relationships in countries in which we  may seek      entry. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As      previously stated herein, exploration for and production of resources can      be hazardous, involving natural disasters and other unforeseen occurrences      such as “blowouts”, “cratering”, fires and loss of well control, which can      damage or destroy wells or production facilities, injure or kill people,      and damage property and the environment.  Although      we intend to maintain insurance against many potential losses or      liabilities arising from our operations in accordance with customary      industry practices and in amounts that we believe to be prudent, we do not      presently have such insurance coverage; and, even if we were to obtain      such insurance coverage, there is no assurance that it will be adequate to      protect against all operational risks, or subject to defenses or      exclusions against insurancecoverage. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | 100%      interest in GSEC 101 (Reed Bank), an offshore license which contains the      Sampaguita Gas Field as well as several oil and gas  leads; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 66.7%      interest in SC 40 (Cebu), a service contract which contains the onshore      Libertad Gas Field and Maya discovery and several other prospects      including onshore Jibitnil Island and offshore Central      Tañon; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An      effective interest of 66.7% in two (2) Coal Operating Contracts on      Cebu Island containing a number of coal seams;  and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 100%      interest in Forum Energy Philippines Corporation (Formerly Basic Petroleum      and Minerals Inc.), a company with varying interests in nine (9) offshore      fields west of the Philippines. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Drill      one (1) well and acquire a minimum of 250 kilometers of seismic in year      8; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Drill      two (2) wells in year 9; and |
|--------------------|-----------------------------------------|

| ·   | Drill      two (2) wells in year 10. |
|--------------------|--------------------------------------|

| ·   | US$1,000,000      upon production reaching 25,000bopd; |
|--------------------|--------------------------------------------------------|

| ·   | US$2,000,000      upon production reaching 50,000 bopd;and |
|--------------------|------------------------------------------------------------|

| ·   | US$3,000,000      upon production reaching 75,000bopd. |
|--------------------|--------------------------------------------------------|

----

----

| ·   | Philippine      Pesos 600,000 signature bonus; |
|--------------------|------------------------------------------------|

| ·   | Within      the first year, the group must secure a Certificate of Non-Coverage and an      Environmental Compliance Certificate from Department of the Environment      and Natural Resources (“DENR”) and a Precondition Certificate from the      NCIP; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Implement      the work program detailed in the COC, with a minimum spend of Philippine      Pesos 1,000,000 per block; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | In      any year, the group is be able to recover the following from the gross      income received under the COC: |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| o   | All      associated operating expenses provided that the amount does not exceed 90%      of the total gross income in any year.  Operating expenses exceeding      90% of gross income, including years when there was no income, can be      recovered in subsequent years; |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| o   | Receive      a combined fee plus a special allowance of up to 70% of the net operating      income; and |
|---------------|---------------------------------------------------------------------------------------------------------|

| o   | The      balance of the gross income generated within the COCs is due to the      DOE. |
|---------------|----------------------------------------------------------------------------------------|

----

----

----

----

----

|   | The      holder could choose one of the following in lieu of conversion into common      shares of the Company: |
|--------|-----------------------------------------------------------------------------------------------------------------|

|   | i) | On      maturity, a cash repayment of the outstanding principal and interest plus      25% of the outstanding principal as a bonus for not converting into      shares; or |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii)   | On      or before maturity, a cash repayment of the principal and interest, plus a      cash bonus for not converting into shares, calculated as one-half of the      difference between the FEP share price on the date of the debenture being      issued, and the FEP share price on the date of maturity i.e. the FEP share      price at the date of maturity minus the FEP share price on issuance of      debenture x 50%. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                     |   | Payments      Due By Period |
|------------------------------------------|--------|-----------------------------|
| Contractual      Obligations             | Total  | <      1 year            | 1-3      years | 3-5      years | >      5 years |
|                                     |   |                        |   |   |   |
| Long-Term      Debt Obligations          | -      | -                           | - | - | - |
| Capital      (Finance) Lease Obligations | -      | -                           | - | - | - |
| Operating      Lease Obligations         | -      | -                           | - | - | - |
| Purchase      Obligations                | -      | -                           | - | - | - |
| Other      Long-Term Liabilities         | -      | -                           | - | - | - |
|                                     |   |                        |   |   |   |
| Total                                    | -      | -                           | - | - | - |

----

| Not | Section      1400, General Standards on Financial Statement Presentation, was amended      to include requirements to assess and disclose an entity’s ability to      continue as a going concern. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | Recent Accounting      Pronouncements Not YetAdopted |
|--------|------------------------------------------------------|

----

| Name                                                                                                          | Age            | Position/Area      of Experience/Function                                                                                                                                                                |
|---------------------------------------------------------------------------------------------------------------|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Larry W. Youell      (1)(2)(3) Barry Stansfield      (1)(2)(3)Riaz      SumarJose      Ernesto Villaluna | 67 583969 | Director      since June 1998, Chairman April 2003, CEO effective May 2005Director      since April 2003, Chairman effective May 2005Director,      CFO since May, 2005Director      since February 2009 |

| (1)   | Member      of Audit Committee in 2008. |
|-----------------|-----------------------------------------|

| (2)   | Member      of Compensation Committee in 2008 |
|-----------------|-----------------------------------------------|

| (3)   | Member      of the Corporate Governance Committee in2008 |
|-----------------|----------------------------------------------------------|

----

----

|  Directors/Officers |  Salary | Option      Exercise Net Market Value(1) | TotalCompensation |
|--------------------------|--------------|------------------------------------------|-------------------|
| Barry      Stansfield    | $44,825      | $0.00                                    | $44,825           |
| Larry      W. Youell     | $151,200     | $0.00                                    | $151,200          |
| Riaz      Sumar          | $121,800     | $0.00                                    | $121,800          |
| Mark      Crandall       | $7,189       | $0.00                                    | $7,189            |
| Walter      Brown        | $11,573      | $0.00                                    | $11,573           |
| Michael      Whiting     | $7,189       | $0.00                                    | $7,189            |
| Total      CDN$          | $343,776     | $0.00                                    | $343,776          |

----

|  Directors/Officers |  Salary | Option      Exercise Net Market Value(1) | TotalCompensation |
|--------------------------|--------------|------------------------------------------|-------------------|
| Barry      Stansfield    | $45,112      | $0.00                                    | $45,112           |
| Larry      W. Youell     | $151,200     | $0.00                                    | $151,200          |
| Riaz      Sumar          | $135,526     | $0.00                                    | $135,526          |
| Mark      Crandall       | $12,889      | $0.00                                    | $12,889           |
| Walter      Brown        | $12,889      | $0.00                                    | $12,889           |
| Michael      Whiting     | $12,889      | $0.00                                    | $12,889           |
| Total      CDN$          | $375,852     | $0.00                                    | $370,505          |

| Name                                         | Expiry      Date | Exercise      Price US$                         | Number     |
|----------------------------------------------|------------------|-------------------------------------------------|------------|
| Larry      Youell                            | 31-Jan-10        | $    0.0723                 | 220,000    |
|                                         | 25-Oct-10        | $    0.0550                 | 2,000,000  |
| Riaz      Sumar                              | 02-Aug-10        | $     0.079            | 1,000,000  |
|                                         | 25-Oct-10        | $     0.055            | 2,000,000  |
| Timothy      Strong                          | 31-Jan-10        | $    0.0723                 | 80,000     |
| Barry      Stansfield                        | 31-Jan-10        | $    0.0723                 | 80,000     |
|                                         | 25-Oct-10        | $    0.0550                 | 2,000,000  |
| AMS      Limited                             | 31-Jan-10        | $    0.0723                 | 1,000,000  |
| Energy      Services Group                   | 09-Dec-09        | $       0.10 | 1,000,000  |
| Eastmark      Limited                        | 31-Jan-10        | $    0.0723                 | 3,975,000  |
| International      Asian Investment Holdings | 31-Jan-10        | $    0.0723                 | 1,855,000  |
| Saranova      Limited                        | 31-Jan-10        | $    0.0723                 | 1,855,000  |
| Laval      Capital Limited                   | 31-Jan-10        | $    0.0723                 | 1,455,000  |
| Walter      Brown Dr.                        | 02-Aug-10        | $     0.079            | 1,000,000  |
|                                         |             |                                            | 19,520,000 |

----

----

| Name      of Registered Shareholder owning 5% or more of the outstanding      shares: | Number      ofShares | Percentof      Class |
|---------------------------------------------------------------------------------------|----------------------|----------------------|
| Philex      Mining Corporation *                                                      | 220,000,000          | 50.67                |
| CDS&Co**                                                                          | 44,464,231           | 10.24                |
| CEDE      & Co**                                                                  | 37,686,455           | 8.68                 |
| Asian      Coast International                                                        | 67,740,000           | 15.60                |
| Indexa      Corp***                                                                   | 30,000,000           | 6.91                 |
|  Name      of Director and/or Officer and number of shares held:                 |                 |                 |
| Larry      Youell****                                                                 | 190,780              | -                    |
| Barry      Stansfield                                                                 | 216,539              | -                    |
| Jose      Ernesto Villaluna *                                                         | -                    | -                    |
| Riaz      Sumar                                                                       | 10,000               | -                    |
|  Number      of shares held by all Directors and Officers as a group:            | 417,319              | -                    |

| Name | Number      of Share Purchase Warrants | Exercise      Price | Expiration      Date |
|------|----------------------------------------|---------------------|----------------------|
| None | None                                   |                |                 |

----

| Name                             | Number      of Shares Owned | Percent      of Class |
|----------------------------------|-----------------------------|-----------------------|
| Philex      Mining Corporation * | 220,000,000                 | 50.67                 |
| CDS&Co**                     | 44,464,231                  | 10.24                 |
| CEDE      & Co**             | 37,686,455                  | 8.76                  |
| Asian      Coast International   | 67,740,000                  | 15.60                 |
| Indexa      Corp***              | 30,000,000                  | 6.91                  |

----

| *      Note Item 7.C not required for this Annual  Report. |
|------------------------------------------------------------|

|   | Our      commitments in this regard were to provide an initial US$250,000      (CDN$290,900) signature bonus to PGI (paid during the year ended December      31, 2005), pay a fee of US$100,000 (CDN$111,982) (paid) and then for us to      contribute to the joint venture company, a total of US$1,000,000      (CDN$1,119,823) from January 1, 2006 to October 31, 2006, such amount      being estimated as sufficient funding to complete the planned exploration      and prospect work program.  On October 2, 2006, we had met all      our funding obligations and fully earned our 40% interest in the joint      venture company.  Also, as a result of the independent valuation      and negotiations, we issued 20,000,000 of our common shares (valued at      CDN$891,360) to Indexa and a further 30,000,000 of our common shares into      escrow, to be awarded to Indexa upon the declaration of commerciality as      full and final consideration for the assignment of its rights to      us.  The 30,000,000 shares are considered contingent      consideration and will be recorded as additional cost of the investment at      fair value once it is likely that they will be  issued. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | As      at December 31, 2008, in order for us to maintain our 40% interest without      dilution, we would be required to pay cash calls totaling approximately      US$783,813.  From January to March 2009 an additional US$75,391      was also due.  We are in discussions on how to maintain our      interest without contributing to any of the cash calls so that we can      conserve our cash on hand. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year      Ended | High   | Low    |
|-----------------|--------|--------|
| 12/31/08        | $0.03  | $0.00  |
| 12/31/07        | $0.012 | $0.045 |
| 12/31/06        | $0.08  | $0.026 |
| 12/31/05        | $0.15  | $0.03  |
| 12/31/04        | $0.62  | $0.07  |

| Quarter      Ended | Volume     | High | Low  |
|--------------------|------------|------|------|
| 3/31/09            | 1,369,379  | 0.01 | 0.00 |
| 12/31/08           | 11,895,246 | 0.01 | 0.00 |
| 9/30/08            | 5,466,700  | 0.02 | 0.01 |
| 6/30/08            | 3,016,400  | 0.03 | 0.01 |
| 3/31/08            | 5,046,503  | 0.03 | 0.02 |
| 12/31/07           | 4,510,133  | 0.03 | 0.01 |
| 9/30/07            | 2,114,499  | 0.04 | 0.02 |
| 6/30/07            | 6,793,790  | 0.04 | 0.02 |
| 3/31/07            | 9,361,281  | 0.05 | 0.02 |

----

| Month      Ended | High | Low  | Volume    |
|------------------|------|------|-----------|
| 05/31/09         | 0.01 | 0.00 | 1,565,064 |
| 04/30/09         | 0.00 | 0.00 | 675,940   |
| 03/31/09         | 0.00 | 0.00 | 52,417    |
| 02/28/09         | 0.01 | 0.00 | 17,160    |
| 01/31/09         | 0.01 | 0.00 | 1,299,802 |
| 12/31/08         | 0.01 | 0.00 | 2,530,770 |

----

----

----

----

----

|   | 1. | Honest      and ethical conduct, including the ethical handling of actual or apparent      conflicts of interest between personal and professional      relationships; |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Full,      fair, accurate, timely, and understandable disclosure in reports and      documents that a registrant files with, or submits to, regulatory agencies      and in other public communications made by the  registrant; |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Compliance      with applicable governmental laws, rules and  regulations; |
|--------|----|----------------------------------------------------------------------------|

|   | 4. | The      prompt internal reporting of violations of the standards to an appropriate      person or persons identified in the standards;  and |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5. | Accountability      for adherence to the standards of the Code of  Ethics. |
|--------|----|----------------------------------------------------------------------------|

| The      Code of Ethics (in hard copy) is available for inspection in our      headquarters during regular businesshours. |
|---------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

|                                                         |                                                                                                                | 2007                            |
|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------|
| ASSETS                                                       |  2008                                                                                                          | Restated      – (Note 13) |
|                                                         |                                                                                                                |                            |
| Current                                                      |                                                                                                                |                            |
| Cash                                                         | $186,974                                                                                                            | $4,170,080                      |
| GST refundable                                               | 73,303                                                                                                              | 53,788                          |
| Prepaidexpenses                                              | 32,541                                                                                                              | 26,335                          |
|                                                         |                                                                                                                |                            |
|                                                         |          292,818                                                       | 4,250,203                       |
|                                                         |                                                                                                                |                            |
| Equipment      – Note 4                                | 5,442                                                                                                               | 4,382                           |
| Investments      – Note 5                              | 6,391,707                                                                                                           | 6,868,953                       |
|                                                         |                                                                                                                |                            |
|                                                         | $6,689,967                                                                                                          | $11,123,538                     |
|                                                         |                                                                                                                |                            |
| LIABILITIES                                                  |
|                                                         |                                                                                                                |                            |
| Current                                                      |                                                                                                                |                            |
| Accounts payable and accrued      liabilities – Note 8 | $        127,964                                                            | $1,045,363                      |
| Convertible debentures – Note      6                   |                    - | 2,499,000                       |
|                                                         |                                                                                                                |                            |
|                                                         | 127,964                                                                                                             | 3,544,363                       |
|                                                         |                                                                                                                |                            |
| SHAREHOLDERS’ EQUITY                                   |
|                                                         |                                                                                                                |                            |
| Share      capital – Note 7                            | 17,339,665                                                                                                          | 17,339,665                      |
| Warrants      – Note 7                                 | 267,501                                                                                                             | 267,501                         |
| Contributed      surplus – Note 7                      | 3,794,939                                                                                                           | 3,794,939                       |
| Accumulated      other comprehensive income (loss)           | 6,091                                                                                                               | (3,214,000)                     |
| Deficit                                                      | (14,846,193)                                                                                                        | (10,608,930)                    |
|                                                         |                                                                                                                |                            |
|                                                         | 6,562,003                                                                                                           | 7,579,175                       |
|                                                         |                                                                                                                |                            |
|                                                         | $6,689,967                                                                                                          | $11,123,538                     |

| APPROVED      ON BEHALF OF THE BOARD OF DIRECTORS: |
|----------------------------------------------------|
|                                               |   |   |
| “Riaz      Sumar”                      | Director |   | “Larry      Youell” | Director |
| Riaz      Sumar                                    |   |   | Larry      Youell |   |

----

|                                                                                |                                                          |  2007                                                    |  2006                                                    |
|-------------------------------------------------------------------------------------|---------------------------------------------------------------|---------------------------------------------------------------|---------------------------------------------------------------|
|                                                                                | 2008                                                          | Restated      – (Note 13)                               | Restated      – (Note 13)                               |
|                                                                                |                                                          |                                                          |                                                          |
| General      and administrative expenses                                            |                                                          |                                                          |                                                          |
| Amortization                                                                        | $       2,332              | $       1,878              | $       1,894              |
| Amortization of deferred      financing charge                                      | -                                                             | -                                                             | 86,730                                                        |
| Accretion on long-term debt –      Note 6                                     | -                                                             | 998,072                                                       | 452,993                                                       |
| General and administration –      Note 8                                      | 607,531                                                       | 666,293                                                       | 842,556                                                       |
| Interest                                                                            | -                                                             | 355,368                                                       | 649,727                                                       |
| Redemption premium on      convertible debenture –Note 6 (c)                  |  -                                                       |  630,678                                                 |  -                                                       |
| Withholding taxes – Note      12                                              | -                                                             | 75,015                                                        | -                                                             |
|                                                                                |                                                          |                                                          |                                                          |
|                                                                                | (609,863)                                                     | (2,727,304)                                                   | (2,033,900)                                                   |
| Other      items:                                                                   |                                                          |                                                          |                                                          |
| Equity loss in investments –      Note 5                                      | (1,493,411)                                                   | (1,302,174)                                                   | (1,368,436)                                                   |
| Foreign exchange gain      (loss)                                                   | 54,490                                                        | 479,604                                                       | (283,693)                                                     |
| Gain (loss) on disposition of      investments – Note 5                       | -                                                             | (9,778)                                                       | 118,232                                                       |
| (Loss) gain on dilution of      investment in FEP                                   | (239,488)                                                     | (79,255)                                                      | 226,295                                                       |
| Gain on change in fair value of      derivative liability – Note    6(c) |  -                                                       |  735,281                                                 |  -                                                       |
| Interest income                                                                     | 15,449                                                        | 2,556                                                         | 29,050                                                        |
| Write-down of trading      securities                                          | -                                                             | -                                                             | (62,675)                                                      |
| Write-down of investments –      Note 5                                       | (1,964,440)                                                   | (764,675)                                                     | -                                                             |
|                                                                                |                                                          |                                                          |                                                          |
| Net      loss for the year                                                          | (4,237,263)                                                   | (3,665,745)                                                   | (3,375,127)                                                   |
|                                                                                |                                                          |                                                          |                                                          |
| Deficit,      beginning of the year, as previously reported                         | (12,778,565)                                                  | (7,174,048)                                                   | (3,910,082)                                                   |
| Prior      period correction – Note 13                                        | 2,169,635                                                     | (111,161)                                                     | -                                                             |
| Deficit,      beginning of the year, as restated                                    | (10,608,930)                                                  | (7,285,209)                                                   | (3,910,082)                                                   |
|                                                                                |                                                          |                                                          |                                                          |
| Adoption      of new accounting policy – Note 2 (i)                           | -                                                             | 342,024                                                       | -                                                             |
|                                                                                |                                                          |                                                          |                                                          |
| Deficit,      beginning of the year (restated)                                      | (10,608,930)                                                  | (6,943,185)                                                   | (3,910,082)                                                   |
|                                                                                |                                                          |                                                          |                                                          |
| Deficit,      end of the year                                                       | $(14,846,193)                                                 | $(10,608,930)                                                 | $(7,285,209)                                                  |
|                                                                                |                                                          |                                                          |                                                          |
| Basic      and diluted loss per common share                                        | $         (0.01) | $         (0.02) | $         (0.02) |
|                                                                                |                                                          |                                                          |                                                          |
| Weighted      average number of shares outstanding                                  | 404,143,765                                                   | 209,623,217                                                   | 195,609,707                                                   |
|                                                                                |                                                          |                                                          |                                                          |

----

|                                                                  | 2008               | 2007Restated      – (Note 13) |
|-----------------------------------------------------------------------|--------------------|-------------------------------------|
|                                                                  |               |                                |
| Net      loss for the year                                            | $      (4,237,263) | $      (3,665,745)                  |
| Foreign      currency translation adjustments                         | 3,073,315          | (2,439,209)                         |
| Effect      of foreign currency translation on dilution of investment | 146,776            | 59,840                              |
|                                                                  |               |                                |
|  Comprehensive      loss for the year                            | $(1,017,172)       | $(6,045,114)                        |

----

|                                                                                          |                                      | 2007                                                                           | 2006                                                   |
|-----------------------------------------------------------------------------------------------|-------------------------------------------|--------------------------------------------------------------------------------|--------------------------------------------------------|
|                                                                                          | 2008                                      | Restated      – (Note 13)                                                | Restated      – (Note 13)                        |
|                                                                                          |                                      |                                                                           |                                                   |
| Operating      Activities                                                                     |                                      |                                                                           |                                                   |
| Net loss for the      year                                                                    | $(4,237,263)          | $(3,665,745)                                          | $(3,375,127)             |
| Non-cash items included in      loss:                                                         |                                      |                                                                           |                                                   |
| Amortization                                                                                  | 2,332                 | 1,878                                            | 1,894               |
| Amortization of deferred      financing charges                                               | -                                         | -                                                | 86,730              |
| Accretion on long-term      debt                                                              |                                      | 998,072                                          | 452,993             |
| Accrued interest on convertible      debentures                                               | -                | 249,900                                          | -              |
| Equity loss in      investments                                                               | 1,493,411        | 1,302,174                                        | 1,368,436           |
| Gain on change in fair value of      derivative liability                                     | -                | (735,281)                                        | -              |
| Loss (gain) on disposition of      investments                                                | -                | 9,778                                       | (118,232)           |
| Loss (gain) on dilution of      investment in FEP                                             | 239,488          |            79,255       | (226,295)           |
| Redemption premium on      convertible debentures                                             | -                | 630,678                                          | -              |
| Shares issued for      services                                                               | -                | -                                                | 88,165         |
| Write-down of trading      securities                                                         | -                | -                                                | 62,675         |
| Write-down of      investments                                                                | 1,964,440        | 764,675                                          | -              |
| Net changes in non-cash      operating working capital items related to      operations: |                                      |                                                                           |                                                   |
| GST refundable                                                                                | (19,515)         | (22,564)                                              | (10,124)            |
| Prepaidexpenses                                                                               | (6,206)          | 7,320                                            | (24,832)            |
| Accounts payable and accrued      liabilities                                                 | (917,401)        | (37,545)                                              | 34,796         |
|                                                                                          |                                      |                                                                           |                                                   |
|                                                                                          | (1,480,714)      | (417,405)                                             | (1,658,921)         |
|                                                                                          |                                      |                                                                           |                                                   |
| Investing      Activities                                                                     |                                      |                                                                           |                                                   |
| Acquisitions of      equipment                                                                | (3,392)          | (1,841)                                               | (3,870)             |
| Increase in      investments                                                                  | -           | (207,873)                                             | (1,380,294)         |
| Proceeds (advances) of loans      receivable                                                  | -           | 13,044                                                | (13,044)            |
| Proceeds from sale of      investments                                                        | -           | 622,823                                          | 1,358,598           |
| Proceeds from the sale of      trading securities                                             | -           | -                                                | 32,268              |
|                                                                                          |                                      |                                                                           |                                                   |
|                                                                                          | (3,392)          | 426,153                                               | (6,342)             |

----

|                                                           |                                                                                         |                                                                                         |                                                                                         |
|----------------------------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                                           |                                                                                         |                                                                                         |                                                                                         |
|                                                           | 2008                                                                                         | 2007                                                                                         | 2006                                                                                         |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
| Financing      Activities                                      |                                                                                         |                                                                                         |                                                                                         |
| Deferred financing      charges                                | -                                                                                            | -                                                                                            | (175,465)                                                                                    |
| Issuance of share capital, net      of costs                   | -                                                                                            | 4,981,759                                                                                    | -                                                                                            |
| Proceeds (repayment) of      convertible debentures       |  (2,499,000)                                                                            |  (290,137)                                                                              |  1,511,402                                                                              |
| Repayment of short-term      loans                             | -                                                                                            | (572,094)                                                                                    | (651,269)                                                                                    |
|      Unrealized      foreign exchange | -                                                                                            | (406,223)                                                                                    | 339,125                                                                                      |
|      Withholding      taxes payable   | -                                                                                            | 75,015                                                                                       | -                                                                                            |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
|                                                           | (2,499,000)                                                                                  | 3,788,320                                                                                    | 1,023,793                                                                                    |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
| Increase      (decrease) in cash during the year               | (3,983,106)                                                                                  | 3,797,068                                                                                    | (641,470)                                                                                    |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
| Cash,      beginning of the year                               | 4,170,080                                                                                    | 373,012                                                                                      | 1,014,482                                                                                    |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
| Cash,      end of the year                                     | $186,974                                                                                     | $4,170,080                                                                                   | $373,012                                                                                     |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
| Supplemental      disclosure of cash flow information:         |                                                                                         |                                                                                         |                                                                                         |
| Cash paid for:                                                 |                                                                                         |                                                                                         |                                                                                         |
| Interest                                                       | $249,900                                                                                     | $     66,728                                                        | $643,163                                                                                     |
|                                                           |                                                                                         |                                                                                         |                                                                                         |
| Income taxes                                                   | $               - | $               - | $               - |
|                                                           |                                                                                         |                                                                                         |                                                                                         |

----

|   | These      consolidated financial statements have been prepared by management in      accordance with Canadian generally accepted accounting principles      (“Canadian GAAP”) and except as described in Note 14, conform in all      material respects with accounting principles generally accepted in the      United States of America.  The preparation of financial      statements in conformity with Canadian GAAP requires management to make      certain estimates and assumptions that affect the reported amounts of      assets and liabilities and disclosure of contingent assets and liabilities      as at the date of the financial statements and the reported amounts of      revenues and expenses during the reporting period. Significant areas      requiring the use of management estimates include the potential impairment      of asset values, valuation of equity investments, determining the fair      value of non-cash share based payments, future income tax asset      recoverability and ability to continue as a going      concern.  While it is the opinion of management that these      consolidated financial statements have been properly prepared within      reasonable limits of materiality and within the framework of the      significant accounting policies summarized below, actual results could      differ from the estimates made. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a)   | Basis of      Presentation |
|----------------|----------------------------|

|   | These      financial statements include the accounts of the Company and its      wholly-owned subsidiaries, FEC Resources (BVI) Limited and Pacific      Geothermal Energy, Inc. (“PACGEO”).  All inter-company      transactions were eliminated uponconsolidation. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| c)   | Property, plant and      equipment |
|----------------|------------------------------------|

|   | Property,      plant and equipment is carried at cost less accumulated amortization. The      Company depreciates its computer equipment at the rate of 30% per annum      utilizing the declining balancemethod. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | Impairment of      Long-Lived Assets |
|----------------|--------------------------------------|

|   | During      the years ended December 31, 2008, 2007 and 2006, no write-downs of      long-lived assets were recognized. |
|--------|-------------------------------------------------------------------------------------------------------------------------|

----

| e)   | Foreign Currency      Translation |
|----------------|-----------------------------------|

| f)   | Stock-based      Compensation |
|----------------|-------------------------------|

----

| g)   | Income      Taxes |
|----------------|-------------------|

| h)   | Loss Per      Share |
|----------------|---------------------|

|   | Basic      loss per share is computed by dividing the loss for the year by the      weighted average number of common shares outstanding during the      year.  Diluted earnings (loss) per share reflects the potential      dilution that could occur if potentially dilutive securities were      exercised or converted to common stock.  The dilutive effect of      options and warrants and their equivalent is computed by application of      the treasury stock method and the effect of convertible securities by the      “if converted” method. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Common      equivalent shares (consisting of shares issuable on the exercise of      options, warrants and convertible debt) totalling 23,053,333 (2007 –      29,082,878; 2006 – 72,417,077) have been excluded from the calculation of      diluted loss per share because the effect is      anti-dilutive. Accordingly, there is no difference in the amounts      presented for basic and diluted loss pershare. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i)   | Financial      Instruments |
|----------------|----------------------------|

----

| i)   | Financial Instruments-      (cont’d) |
|----------------|--------------------------------------------|

|   | Note      3 | Changes in Accounting      Policies |
|--------|-------------|-------------------------------------|

----

|   | Note      3 | Changes in Accounting      Policies – (cont’d) |
|--------|-------------|------------------------------------------------------------|

----

|   | Note      3 | Changes in Accounting      Policies – (cont’d) |
|--------|-------------|------------------------------------------------------------|

|                    |                                             | Accumulated                                      | Net      book                                    |
|-------------------------|--------------------------------------------------|--------------------------------------------------|--------------------------------------------------|
|                    | Cost                                             | Amortization                                     | value                                            |
|                    |                                             |                                             |                                             |
| Computer      equipment |                                             |                                             |                                             |
| December 31, 2008       | $    12,593                  | $       7,151 | $       5,442 |
|                    |                                             |                                             |                                             |
| December 31, 2007       | $       9,201 | $       4,819 | $       4,382 |

|                                      | 2008       | 2007Restated      – (Note 13) |
|-------------------------------------------|------------|-------------------------------------|
|                                      |       |                                |
| Forum      Energy plc (“FEP”) | $3,888,425 | $4,233,699                          |
| Lascogon      Mining Corporation          | 2,503,282  | 2,635,254                           |
|                                      |       |                                |
|                                      | $6,391,707 | $6,868,953                          |

----

|   | On      May 18, 2005, the Company acquired 9,996,000 common shares of      FEP.   FEP is a United Kingdom-based oil, gas and coal      company with assets in thePhilippines. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      investment in FEP is summarized asfollows: |
|--------|-----------------------------------------------------|

|                                                                                               | Number  of shares held |  AmountRestated – (Note 13) |
|----------------------------------------------------------------------------------------------------|----------------------------------|----------------------------------------|
| Balance,      December 31, 2005                                                                    | 9,996,000                        | $      10,646,597                      |
| Disposition                                                                                        | (810,000)                        | (934,004)                              |
| Gain      on dilution of investment in FEP as a result of additional FEP share      issuances |  -                          |  337,456                          |
| Foreign      currency translation adjustment                                                       |                             | (66,091)                               |
| Equity      loss in investment of FEP                                                              | ­-                          | (1,357,142)                            |
|                                                                                               |                             |                                   |
| Balance,      December 31, 2006                                                                    | 9,186,000                        | 8,626,816                              |
| Disposition                                                                                        | (635,800)                        | (632,601)                              |
| Loss      on dilution of investment in FEP as a result of additional FEP share      issuances |  -                          |  (19,415)                         |
| Equity      loss in investment of FEP                                                              | -                                | (1,301,892)                            |
| Foreign      currency translation adjustment                                                       | -                                | (2,439,209)                            |
|                                                                                               |                             |                                   |
| Balance,      December 31, 2007                                                                    | 8,550,200                        | 4,233,699                              |
| Loss      on dilution of investment in FEP as a result of additional FEP share      issuances |  -                          |  (92,710)                         |
| Foreign      currency translation adjustment                                                       | -                                | 3,073,315                              |
| Equity      loss in investment of FEP                                                              | -                                | (1,361,439)                            |
| Write-down      of investment in FEP to fair value                                                 | -                                | (1,964,440)                            |
|                                                                                               |                             |                                   |
| Balance,      December 31, 2008                                                                    | 8,550,200                        | $3,888,425                             |
|                                                                                               |                             |                                   |

|   | During      the year ended December 31, 2007, the Company disposed of 635,800 common      shares of FEP for total proceeds of $622,823 which resulted in a loss of      $9,778. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | As      FEP offers its shares to outside investors, the resulting dilution of the      investor’s shareholdings constitutes an effective disposition      necessitating recognition of a dilution gain or loss. As at December 31,      2008, the Company’s interest in FEP had been diluted to 28.42% (2007:      29.78%, 2006: 32.08%) as a result of the sale of FEP common shares and      equity offerings by FEP in which the Company did not      participate. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      financial position and results of operations of FEP as at December 31,      2008 and 2007 are summarized asfollows: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|                                         | 2008         | 2007         |
|----------------------------------------------|--------------|--------------|
|                                         |         |         |
| Assets                                       | $62,949,744  | $52,945,747  |
|                                         |         |         |
| Liabilities                                  | $7,443,184   | $4,604,888   |
|                                         |         |         |
| Equity                                       | $55,506,560  | $48,340,859  |
|                                         |         |         |
| Net      loss for the year ended December 31 | $(4,719,955) | $(3,763,623) |

|   | By      a memorandum of an agreement dated January 2, 2006 and a settlement and      release agreement dated May 11, 2006, the Company agreed to acquire a 40%      interest in a mining project (Lascogon Mining Corporation) in the      Philippines in partnership with Philex Gold, Inc.  (“PGI”). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The      project is the Mining and Production Sharing Agreement (“MPSA”) between      PGI and the Government of Philippines, which comprises 2,306      hectares.  The Company agreed to acquire the interest in the      project by way of assignment from Indexa Corp. (“Indexa”) to the Company      of an Agreement between Indexa and PGI.  Indexa is a Philippine      Company who had entered into a sole Agreement with PGI for the rights to a      joint exploration program.  Indexa assigned its rights and      obligations in their entirety to the Company, pursuant to which a new      Philippine Joint Venture Company was formed, of which the Company would      ultimately own 40% and PGI would own 60% equity interests      respectively.  For this assignment, Indexa was entitled to      receive a fee which was to be determined by an independent      valuation. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      commitments of the Company in this regard were to provide an initial      US$250,000 ($290,900) signature bonus to PGI (paid), pay a fee of      US$100,000 ($110,551) (paid) and then for the Company to contribute to the      Joint Venture Company a total of US$1,000,000 ($1,105,514) from January 1,      2006 through to October 31, 2006 being estimated as sufficient funding to      complete the planned exploration and prospect work program.  On      October 2, 2006, the Company had met all its funding obligations and fully      earned its 40% interest in the Joint Venture Company.  Also, as      a result of the independent valuation and negotiations, the Company issued      20,000,000 common shares of the Company with a fair value of $891,360 to      Indexa and a further 30,000,000 common shares of the Company into escrow,      to be awarded to Indexa upon the declaration of commerciality as full and      final consideration for the assignment of its rights to the      Company.  The 30,000,000 shares are considered contingent      consideration and will be recorded as additional cost of the investment at      fair value once it is likely that they will be  issued. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company has the option to increase its equity interest in the Joint      Venture Company to 60% by arranging or contributing by way of repayable      loan up to US$10,000,000 as the initial contribution to mine development      and production by the Joint VentureCompany. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Signature      bonus paid to PGI                         | $290,900                                                        |
|----------------------------------------------------------|-----------------------------------------------------------------|
| Fee      paid to Indexa                                  | 110,551                                                         |
| Funding      for exploration work program                | 1,105,514                                                       |
| Costs      incurred in respect of investment in Lascogon | 15,740                                                          |
|                                                     |                                                            |
|                                                     | 1,522,705                                                       |
| Common      shares issued to Indexa                      | 891,360                                                         |
| Equity      income in investment in Lascogon             | 2,080                                                           |
|                                                     |                                                            |
| Balance      at December 31, 2006                        | 2,416,145                                                       |
| Funding      for exploration work program                | 207,873                                                         |
| Equity      income in investment in Lascogon             | 11,236                                                          |
|                                                     |                                                            |
| Balance      at December 31, 2007                        | 2,635,254                                                       |
| Equity      loss in investment in Lascogon               |          (131,972) |
| Balance      at December 31, 2008                        | $      2,503,282                  |
|                                                     |                                                            |

|   | The      financial position and results of operations of Lascogon as at December      31, 2008 and 2007 are summarized asfollows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|                                                  | 2008       | 2007                                        |
|-------------------------------------------------------|------------|---------------------------------------------|
|                                                  |       |                                        |
| Assets                                                | $4,151,642 | $2,248,437                                  |
|                                                  |       |                                        |
| Liabilities                                           | $4,252,033 | $1,855,050                                  |
|                                                  |       |                                        |
| Equity                                                | $(100,391) | $393,387                                    |
|                                                  |       |                                        |
| Net      income (loss) for the year ended December 31 | $(493,777) | $      31,122 |

|   | At      December 31, 2008, Lascogon is related to the Company by virtue of a      common director. |
|--------|----------------------------------------------------------------------------------------------------|

|   | As      at December 31, 2008, in order for the Company to maintain its 40%      interest without dilution, the Company would be required to pay cash calls      totaling approximately$783,813. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Acquisition      of investment in Metalore              | $582,800                                                                                                 |
|---------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| Conversion      of loan outstanding equity of Metalore  | 58,280                                                                                                   |
|                                                    |                                                                                                     |
|                                                    | 641,080                                                                                                  |
| Advances                                                | 17,005                                                                                                   |
| Purchase      of 35% interest in an overriding royalty  | 131,484                                                                                                  |
| Equity      loss in investment in Metalore              | (13,376)                                                                                                 |
|                                                    |                                                                                                     |
| Balance      at December 31, 2006                       | 776,193                                                                                                  |
| Equity      loss in investment in Metalore              | (11,518)                                                                                                 |
| Write-down      of investment in Metalore               | (764,675)                                                                                                |
|                                                    |                                                                                                     |
| Balance      at December 31, 2007 and December 31, 2008 | $                 - |

|   | During      the year ended December 31, 2006, pursuant to a Company investor      exercising a price protection clause in a stock purchase agreement, the      Company recorded a loss in the amount of $306,362 on the disposition of      the investor’s shares. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a)   | In      October 2004, the Company issued convertible debentures for which it had      allocated the proceeds of $644,419 on a relative fair value basis between      their respective debt and equity components. The amount allocated to the      equity portion on issuance was $192,394 with the difference between the      face value of the debentures and the recorded value of the debt components      being accreted to income over the term of the debentures. During the year      ended December 31, 2006, an amount of $145,899 was accreted in      income. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| b)   | In      May 2005, the Company issued convertible debentures totalling $1,223,364      (US$970,000).  Each debenture bore simple interest at the rate      of 10% per annum and was to mature at the earliest of full repayment or      April 30, 2010. The debentures were sold in units of US$ 10,000 with      US$5,000 warrants.  Each debenture was convertible into common      shares of the Company at US$0.05 per share or shares of FEP at US$1.923      per share.  Each warrant was exercisable into common shares of      FEP at US$1.923 per share.  During the year ended December 31,      2006, upon agreement with the various debenture holders, the debenture was      amended whereby the holder could choose to either receive a payment of      principal, interest and a 24% premium to the face value of the debenture      or the holder could convert the debenture, interest, and warrants into      shares at US$0.05 per share.  In the event the holder chose the      option to receive payment and the Company could not pay by October 31,      2006, 12.5% per annum interest would be added to the amounts outstanding      until paid.  The debenture holders chose to receive payment      rather than convert into shares of the Company, and on November 24, 2006,      the Company paid the outstanding interest and premium plus one half of the      outstanding principal of the debenture leaving US$485,000 (CDN$572,095)      outstanding at December 31, 2006, which was overdue, accruing interest at      12.5% per annum.  The debentures of US$485,000 and total accrued      interest of US$66,581 were paid off during the year ended December 31,      2007. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      difference between the recorded value of the debt component and the face      value of the debenture is amortized to income over the term of the      debenture.  During the year ended December 31, 2006, $139,125      was amortized. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | On      January 19, 2006, the Company closed an offering of debentures amounting      to ₤1,400,000. These debentures matured on December 20, 2007 and interest      was calculated at 10% per annum.  The first year’s interest was      payable in advance on the closing date and the second year’s interest was      payable on in arrears on the maturity date.  As at December 31,      2005, the Company had received $1,309,882 (₤650,000) and during the year      ended December 31, 2006, received $1,570,618  (₤750,000). |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| c)   | –      (cont’d) |
|----------------|-----------------------------|

|   | The      amount allocated to the ₤1,400,000 convertible debenture of $2,880,500 was      allocated into its debt and equity components based on the residual      valuation approach whereby the amount allocated to equity at inception was      $370,271. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      difference between the recorded value of the debt component and face value      of the debenture was accreted to income over the term of the      debenture.  During the year ended December 31, 2006, the amount      accreted was $167,969. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Pursuant      to the terms and conditions of the debenture agreements, at any time after      August 2, 2006 and before or on the maturity date, and provided that the      debt has not been fully repaid, the holder had the right to convert all or      any portion of the convertible indebtedness owing to it as at the date of      election into Company common shares, the number of such shares to be based      on the 10-day average closing bid price of the Company’s shares prior to      the date of the debenture being issued.  The holder was also      entitled to receive a cash bonus which was based on 50% of the      appreciation on FEP shares and the appreciation amount was calculated      using a pre-determined formula.  As of December 31, 2007 and      2006, no cash bonus was accrued as the FEP shares have been traded below      the share price at the issuance date of the  debentures. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under      the terms and conditions of the debenture agreements, the holder could      also choose one of the following in lieu of conversion into common shares      of the Company: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| c)   | –      (cont’d) |
|----------------|-----------------------------|

| Risk      free interest rate | 3.85%        |
|------------------------------|--------------|
| Expected      remaining life | 2      years |
| Dividend      rate           | Nil          |
| Expected      volatility     | 135%         |

|   | The      debt discount was accreted from the inception of the debt using the      effective interest rate method.  As a result of adopting the      provisions of the CICA Handbook Section 3855, the difference between the      carrying amount and the amortized balance at January 1, 2007 of $430,759      was credited to the opening deficit on that  date. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risk      free interest rate | 4.14%       |
|------------------------------|-------------|
| Expected      remaining life | 1      year |
| Dividend      rate           | Nil         |
| Expected      volatility     | 126%        |

----

| a)   | Authorized: |
|----------------|-------------|

|   | Unlimited      number of Class A and Class B preferred convertible redeemable voting      shares without par value. |
|--------|---------------------------------------------------------------------------------------------------------------------|

| b)   | Issued: |
|----------------|---------|

| Common      Shares                                                                                              | Number      | Amount      |
|-----------------------------------------------------------------------------------------------------------------|-------------|-------------|
|                                                                                                            |        |        |
| Balance      December 31, 2005                                                                                  | 178,160,936 | 10,732,164  |
| Shares issued for conversion of      debentures                                                                 | 9,872,929   | 426,604     |
| Shares delivered from      escrow                                                                               | (5,900,000) | -           |
| Allocation of equity portion of      convertible debenture upon conversion       – Note 8(b)(i) | -           | 137,574     |
| Escrow shares returned to      treasury                                                                         | (900,000)   | -           |
| Shares issued for settlement of      debt – Note 8(b)(ii)                                                 | 2,909,900   | 170,204     |
| Shares issued as a finder’s fee      on an investment                                                     |        |        |
|  – Note      8(b)(iii)                                                                               | 20,000,000  | 891,360     |
| Shares issued and held in      escrow pursuant to an agreement – Note      8(b)(iii)                 | 30,000,000  |  -     |
|                                                                                                            |        |        |
| Balance,      December 31, 2006                                                                                 | 234,143,765 | 12,357,906  |
| Shares issued pursuant to      private placement – Note      8(b)(iv)                                | 200,000,000 | 4,981,759   |
|                                                                                                            |        |        |
| Balance,      December 31, 2007 and 2008                                                                        | 434,143,765 | $17,339,665 |

|   | i) | During      the year ended December 31, 2006, holders of convertible debentures      converted their holdings into common shares of the Company. A total of      US$358,000 plus interest was converted into 9,872,929 common shares,      including 5,900,000 out of a total of 6,800,000 common shares previously      issued and lodged with an escrow agent for purposes of facilitating the      conversion process.  The escrow agent subsequently returned the      remaining 900,000 escrow shares to treasury. Upon conversion, the      remaining balance of $137,574 separately disclosed in shareholders’ equity      as the equity portion of the debenture conversion feature was credited to      share capital. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                 ii) | During      the year ended December 31, 2006, the Company issued 509,900 common shares      at $0.05 per share pursuant to an agreement to settle accounts payable      outstanding totalling US$25,495 ($29,825). As well, the Company also      issued 2,400,000 common shares at $0.05 per share pursuant to an agreement      to issue shares for consulting services totalling US$120,000      ($140,379). |
|-----------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| b)   | Issued      –(cont’d): |
|----------------|------------------------------------|

|   | iii) | As      a result of the independent valuation and negotiations, the Company issued      20,000,000 common shares, with total fair value of $891,360, to      Indexa and a further 30,000,000 common shares of the Company into escrow,      to be awarded to Indexa upon the decision to proceed with commercial      production as full and final consideration for the assignment of its      rights to the Company to acquire 40% interest (Note  6). |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iv) | On      December 21, 2007, the Company completed a private placement      of | 200,000,000      shares at US$0.025 ($0.025) per share for gross proceeds of US$5,000,000      ($4,991,500).  The Company incurred cash issuance costs      of $9,741. |
|--------|-----|------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | Warrants: |
|----------------|-----------|

|                                                       | Number      | Amount    |
|------------------------------------------------------------|-------------|-----------|
|                                                       |        |      |
| Balance      December 31, 2005                             | 9,233,333   | $735,404  |
| Expired                                                    | (5,700,000) | (467,903) |
|                                                       |        |      |
| Balance,      December 31, 2006, 2007,  and 2008 | 3,533,333   | $267,501  |

|   | The      warrants are exercisable until January 31, 2010 and allow the holder to      purchase one common share of the Company for every warrant held at      US$0.0723 per share. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | Options: |
|----------------|----------|

|   | The      Company has established a stock option plan whereby options may be granted      to its directors, officers, consultants, and employees.  The      exercise price of each option equals the market price of the Company’s      stock on the date of the grant and an option’s maximum term is five      years.  The options vest immediately.  At December 31,      2008 there were 19,520,000 stock options outstanding to purchase common      shares at prices ranging from US$0.055 to US$0.10 per    share. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| d)   | Options      – (cont’d): |
|----------------|--------------------------------------|

|                                               |                          | Weighted                                    |
|----------------------------------------------------|-------------------------------|---------------------------------------------|
|                                               |                          | Average                                     |
|                                               | Number      of                | Exercise                                    |
|                                               | Options                       | Price/Share                                 |
|                                               |                          |                                        |
|                                               |                          |                                        |
| Outstanding      and exercisable December 31, 2005 | 26,649,545                    |            US$0.11 |
| Cancelled                                          | (1,000,000)                   | US$0.079                                    |
|                                               |                          |                                        |
| Outstanding      and exercisable December 31, 2006 | 25,649,545                    | US$0.092                                    |
| Cancelled                                          | (100,000)                     | US$0.079                                    |
|                                               |                          |                                        |
| Outstanding      and exercisable December 31, 2007 | 25,549,545                    | US$0.092                                    |
| Expired                                            |    (6,029,545) | US$0.164                                    |
|                                               |                          |                                        |
| Outstanding      and exercisable December 31, 2008 | 19,520,000                    | US$0.0691                                   |

|   | The      following table summarizes stock options outstanding and exercisable at      December 31, 2008: |
|--------|----------------------------------------------------------------------------------------------------------|

| Number      of | Exercise      Price |                  | Contractual         |
|----------------|---------------------|-----------------------|---------------------|
| Options        | Per      Option     | Expiry      Date      | Remaining      life |
|           |                |                  | (in      years)     |
| 1,000,000      | US$0.10             | December      9, 2009 | 0.94                |
| 10,520,000     | US$0.0723           | January      31, 2010 | 1.08                |
| 2,000,000      | US$0.079            | August      2, 2010   | 1.59                |
| 6,000,000      | US$0.055            | October      25, 2010 | 1.82                |
|           |                |                  |                |
| 19,520,000     |                |                  |                |

| e)   | Contributed      Surplus: |
|----------------|---------------------------|

| Balance,      December 31, 2005                                  |    | $3,168,464 |
|------------------------------------------------------------------|---------|------------|
| Transfer      of amount upon expiry of warrants                  |    | 467,902    |
| Reclassification      of equity portion of convertible debenture | 158,573 |
|                                                             |    |       |
| Balance,      December 31, 2006, 2007, and 2008                  |    | $3,794,939 |

----

|   | During      the year ended December 31, 2008 general and administrative expenses      included fees charged by directors, officers and companies controlled by      directors and officers of the Company totaling $343,776      (2007:  $370,505;      2006:  $375,871).  Included in accounts payable and      accrued liabilities at December 31, 2008 is $534      (2007:  $31,668) owed to directors, officers and companies      controlled by them. Related party transactions are measured at the      exchange amount, which amount is agreed to by the  parties. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company has incurred non-capital losses for Canadian income tax purposes      of $7,094,000, which, together with resource and equipment cost pools of      $794,000, may be carried forward to offset future taxable      income.  The Company also has capital losses carried forward for      Canadian income tax purposes of $14,000,000 which may be applied to offset      future capital gains indefinitely.  The benefit, if any, of      these non-capital losses, capital losses, and resource pool and equipment      cost pool balances have not been reflected in the consolidated financial      statements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As      at December 31, 2008, the Canadian non-capital losses carried forward      expire as follows: |
|--------|-------------------------------------------------------------------------------------------------------|

| 2009   | $849,000   |
|--------|------------|
| 2010   | 440,000    |
| 2014   | 543,000    |
| 2015   | 1,255,000  |
| 2026   | 1,703,000  |
| 2027   | 1,701,000  |
| 2028   | 603,000    |
|   |       |
|   | $7,094,000 |

----

|                                                               | 2008                                                                                         | 2007Restated                                                                                 |
|--------------------------------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                                               |                                                                                         |                                                                                         |
| Non      capital losses carried forward                            | $1,773,000                                                                                   | $1,624,000                                                                                   |
| Capital      losses carried forward                                | 3,617,000                                                                                    | 3,498,000                                                                                    |
| Investments                                                        | 53,000                                                                                       | (378,000)                                                                                    |
| Foreign      exchange                                              | -                                                                                            | (102,000)                                                                                    |
| Mineral,      oil and gas properties and deferred exploration cost | 168,000                                                                                      | 168,000                                                                                      |
| Financing      costs                                               | 19,000                                                                                       | 35,000                                                                                       |
| Equipment                                                          | 30,000                                                                                       | 30,000                                                                                       |
| Valuation      Allowance                                           | (5,660,000)                                                                                  | (4,875,000)                                                                                  |
|                                                               |                                                                                         |                                                                                         |
|                                                               | $               - | $               - |

|                                        | 2008                                                                                         | 2007Restated                                                                                 |
|---------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                        |                                                                                         |                                                                                         |
| Statutory      tax rate                     | 29.50%                                                                                       | 32.12%                                                                                       |
|                                        |                                                                                         |                                                                                         |
| Income      tax recovery at statutory rates | $(1,250,000)                                                                                 | $(1,177,000)                                                                                 |
| Effect      of reduction in statutory rates | 92,000                                                                                       | -                                                                                            |
| Permanent      differences                  | 826,000                                                                                      | 312,000                                                                                      |
| Change      in valuation allowance          | 332,000                                                                                      | 865,000                                                                                      |
|                                        |                                                                                         |                                                                                         |
|                                        | $               - | $               - |

----

|   | The      Company is exposed to foreign currency fluctuations in cash balances      denominated in U.S. dollars as a significant amount of the Company’s      expenditures are in U.S. dollars; however this risk is partially mitigated      as the majority of the Company’s cash is kept in U.S.      dollars.  As at December 31, 2008, the Company      held  $182,362 (2007 - $4,136,979) of cash denominated in U.S.      dollars subject to exchange rate fluctuations between the Canadian dollars      and the U.S. dollars. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | Concentration of      credit risk |
|--------|----|-----------------------------------|

|   | d) | Liquidity      risk |
|--------|----|---------------------|

----

| Note      10 | Financial Instruments      – (cont’d) |
|--------------|---------------------------------------------------|

| e)   | Interest Rate      Risk |
|----------------|-------------------------|

| Note      11 | Capital      Management |
|--------------|-------------------------|

----

|   |   |
|--------|--------|

|                                                                | 2007                                                                                                                 | 2006                                                                                                           |
|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|
| Investment in FEP                                                   |                                                                                                                 |                                                                                                           |
| As previously      reported                                         | $    5,278,065                                                                                   | $9,572,609                                                                                                     |
| Accumulated foreign exchange      losses                            | (3,385,002)                                                                                                          | (945,793)                                                                                                      |
| Write-down of investment in      FEP                                | 2,340,636                                                                                                            | -                                                                                                              |
| As restated                                                         | $    4,233,699                                                                                   | $8,626,816                                                                                                     |
|                                                                |                                                                                                                 |                                                                                                           |
| Accumulated other Comprehensive      Loss                           |                                                                                                                 |                                                                                                           |
| As previously      reported                                         | $                   - | $                  - |
| Accumulated foreign exchange      losses                            | (3,214,001)                                                                                                          | (834,632)                                                                                                      |
| As restated                                                         | $(3,214,001)                                                                                                         | $(834,632)                                                                                                     |
|                                                                |                                                                                                                 |                                                                                                           |
| Deficit                                                             |                                                                                                                 |                                                                                                           |
| As previously      reported                                         | $(12,778,565)                                                                                                        | $(7,174,048)                                                                                                   |
| Write-down of investment in      FEP                                | 2,340,636                                                                                                            | -                                                                                                              |
| Dilution losses on reduction of      investment in FEP              | (171,001)                                                                                                            | (111,161)                                                                                                      |
| As restated                                                         | $(10,608,930)                                                                                                        | $(7,285,209)                                                                                                   |
|                                                                |                                                                                                                 |                                                                                                           |
| Dilution gain (loss) on investment in      FEP                      |                                                                                                                 |                                                                                                           |
| As previously      reported                                         | $       (19,415)                                                                  | $      337,456                                                                   |
| Effect of foreign currency      translation on dilutionofinvestment | (59,840)                                                                                                             | (111,161)                                                                                                      |
| As restated                                                         | $       (79,255)                                                                  | $      226,295                                                                   |
|                                                                |                                                                                                                 |                                                                                                           |
| Write-down of investments                                           |                                                                                                                 |                                                                                                           |
| As previously      reported                                         | $(3,105,311)                                                                                                         | $                  - |
| Write-down of investment in      FEP                                | 2,340,636                                                                                                            | -                                                                                                              |
| As restated                                                         | $     (764,675)                                                                             | $                  - |

| Net loss and comprehensive loss for the      year                   |              |         |
|---------------------------------------------------------------------|-------------------|--------------|
| As previously      reported                                         | $(5,946,541)      | $(3,263,966) |
| Write-down of investment in      FEP                                | 2,340,636         | -            |
| Effect of foreign currency      translation on dilutionofinvestment | (59,840)          | (111,161)    |
| Net loss for the year as      restated                              |  (3,665,745) | (3,375,127)  |
| Effect of foreign currency      translation on dilutionofinvestment | 59,840            | 111,161      |
| Foreign currency translation      adjustment                        | (2,439,209)       | (66,091)     |
|                                                                |              |         |
| Comprehensive loss for the year      as restated                    | $(6,045,114)      | $(3,330,057) |

| Basic and diluted loss per      share |                                                                                              |                                                                            |
|---------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
| As previously      reported           | $              (0.02)       | $           (0.02)       |
| As restated                           | $               (0.02) | $            (0.02) |

|   | There      was no impact on the total operating, investing and financing activities      on the Statement of Cash Flows as a result of these      corrections. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting      Principles |
|--------------|---------------------------------------------------------------------------------------------------|

|   | These      consolidated financial statements are prepared in accordance with Canadian      generally accepted accounting principles (“Canadian GAAP”) which differ in      certain material respects from accounting principles generally accepted in      the United States (“US GAAP”).  Material differences between      Canadian and US GAAP and their effect on the Company’s financial      statements are summarized below: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e)   | Balance      Sheets |
|----------------|---------------------|

|                                                                |             | 2007              |
|---------------------------------------------------------------------|------------------|-------------------|
|                                                                |             | (Restated      -  |
|                                                                | 2008             | Note      13(f)   |
|                                                                |             |              |
| Total      assets under Canadian GAAP                               | $6,689,967       | $11,123,538       |
| Investment      in Lascogon (d)                                     | (1,130,185)      | (393,190)         |
|                                                                |             |              |
| Total      assets under US GAAP                                     | $5,559,782       | $10,730,348       |
|                                                                |             |              |
| Total      liabilities under Canadian GAAP & US GAAP            | $127,964         | $3,544,363        |
|                                                                |             |              |
| Total      shareholders’ equity under Canadian GAAP           | 6,562,003        | 7,579,175         |
| Share      capital                                                  | (703,466)        | (703,466)         |
| Deficit                                                             | (2,723,915)      | (1,986,920)       |
| Additional      paid-in capital                                     | 2,455,769        | 2,455,769         |
| Contributed      surplus (c)                                        | (158,573)        | (158,573)         |
|                                                                |             |              |
| Total      shareholders’ equity under US GAAP                 | 5,431,818        | 7,185,985         |
|                                                                |             |              |
| Total      liabilities and shareholders’ equity under US GAAP |  $5,559,782 |  $10,730,348 |

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------------|--------------------------------------------------------------------------------------------------------------------------|

|                                                                                              | 2008                                                                | 2007Restated      – Note 13(f)                                | 2006Restated      – Note 13(f)                                |
|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|---------------------------------------------------------------------|---------------------------------------------------------------------|
|                                                                                              |                                                                |                                                                |                                                                |
| Net      loss under Canadian GAAP                                                                 | $(4,237,263)                                                        | $(3,665,745)                                                        | $(3,375,127)                                                        |
| Accretion      of equity portion of convertible debt (c)                                          |  -                                                             |  -                                                             |  452,993                                                       |
| Accretion      on long-term debt (c)                                                              | -                                                                   | 998,072                                                             | -                                                                   |
| Gain      on change in fair value of derivative liability (b)                                     |  -                                                             |  (735,281)                                                     |  -                                                             |
| Change      in fair value of embedded derivative (e)                                              |  -                                                             |  -                                                             |  230,498                                                       |
| Equity      loss in write-off of resource property costs in Metalore Mining      Corporation (d)  |   -                                                       |   167,990                                                 |   (167,990)                                               |
| Equity      loss and write-off of resource property costs in Lascogon Mining      Corporation (d) |   (736,995)                                               |   (308,773)                                               |   (84,417)                                                |
| Accretion      of debt discount related to beneficial conversion feature    (c)                   |  -                                                             |  (587,269)                                                     |  (1,086,190)                                                   |
|                                                                                              |                                                                |                                                                |                                                                |
| Net      loss under US GAAP                                                                       | $(4,974,258)                                                        | $(4,131,006)                                                        | $(4,030,233)                                                        |
|                                                                                              |                                                                |                                                                |                                                                |
| Basic      and diluted loss per share under US GAAP                                               |  $         (0.01) |  $         (0.03) |  $         (0.02) |
|                                                                                              |                                                                |                                                                |                                                                |
| Weighted      average shares outstanding                                                          | 404,143,765                                                         | 209,623,217                                                         | 195,609,707                                                         |

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------------|--------------------------------------------------------------------------------------------------------------------------|

|   | Under      US GAAP, on the commitment date of the debenture, the Company is required      to assess whether there is an intrinsic beneficial conversion feature in      place.  When the Company issues convertible debt securities with      a non-detachable conversion feature that is below market value on the      commitment date, it is known as a beneficial conversion feature (“BCF”)      and pursuant to EITF Issue 98-5 “Accounting for Convertible Securities      with Beneficial Conversion Features on contingently Adjustable Conversion      Ratios” and EITF issue No. 00-27, “Application of Issue No. 98-5 to      Certain Convertible Instruments”, the conversion feature of the security      that has characteristics of an equity instrument is measured at its      intrinsic value at the commitment date and is recorded as additional      paid-in capital.  The resulting discount of the debt instrument      is amortized into income as interest expense at the conversion feature’s      earliest conversion date. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------------|--------------------------------------------------------------------------------------------------------------------------|

|   | During      the year ended December 31, 2006, the Company issued convertible      debentures totalling £1,400,000 (CDN$2,880,500) for which it determined      there was a beneficial conversion feature in the amount of      $1,005,932.  Under US GAAP, this conversion feature would have      been recorded as a debt discount and would be accreted as interest expense      to December 20, 2007, the date of the convertible debentures’ maturity,      using the effective interest method.  The net loss under US GAAP      for the year ended December 31, 2007 would have increased by $587,269      (2006: $418,663) as a result of the accretion of debt      discount. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      May 2005, the Company issued convertible debentures totalling $1,223,364      (US$970,000). In accordance with Canadian GAAP, at the inception of the      debt, the embedded conversion feature of this debt in the amount of      $158,574 was presented separately as a component of shareholders’ equity      and the amount allocated to the equity component was to be accreted back      to debentures payable as a charge to interest over the life of the      debentures. For the year ended December 31, 2006, the accretion expense      was $139,126.  Under US GAAP, the conversion feature is not      subject to bifurcation. As a result, under US GAAP, net loss for the year      ended December 31, 2006 would decrease by  $139,126. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under      US GAAP, for these convertible debentures there was a beneficial      conversion feature totalling $704,220 (US$582,000).  During the      year ended December 31, 2005, as a result of measuring this conversion      feature, debt discount and additional paid-in capital each would have      increased under US GAAP by $704,220.  During the year ended      December 31, 2006, the terms of the debentures were amended allowing the      holders to an early payout.  As a result, net loss under US GAAP      would have increased by $610,324 as a result of accreting the remaining      deferred debt discount. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As      a result of convertible debenture conversions during the year ended      December 31, 2007, net loss would increase by $Nil (2006: $57,203) which      is the amount of the deferred financing costs associated with those      convertible debentures converted to common shares during the year and      which is the amount of deferred financing costs charged to earnings in the      year in accordance with the Emerging Issues Task Force (“EITF”) Issue No.      98-5. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------------|--------------------------------------------------------------------------------------------------------------------------|

|   | Under      Canadian GAAP, the costs of acquiring mineral properties and related      exploration and development expenditures are deferred.  Under US      GAAP, resource property costs related to exploration can only be deferred      subsequent to the establishment of reserves.  The financial      statements of the Company’s investment in Lascogon Mining Corporation      (“Lascogon”) reflect deferred exploration costs at December 31, 2008 of      $3,880,419 (2007: $2,037,931).  For purposes of US GAAP, the      Company’s equity share of the income or loss in its investment in Lascogon      is adjusted for its share of the expensing of exploration costs prior to      the establishment of reserves under US GAAP.  For the year ended      December 31, 2008, this amounted to $736,995 (2007:    $308,773). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During      the year ended December 31, 2007, the company wrote down its investment in      Metalore to $Nil.  Under US GAAP, for the year ended December      31, 2007, this write-down would decrease by $167,990 representing the      exploration costs which have already been expensed under US GAAP for the      year ended December 31, 2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During      the year ended December 31, 2006, the financial statements of Metalore      reflected deferred exploration costs of $639,932 resulting in an increase      to the company’s equity share of its loss in Metalore of      $167,990. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------------|--------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|                                                                        | 2007              | 2006            |
|-----------------------------------------------------------------------------|-------------------|-----------------|
|                                                                        |              |            |
| Total assets under US GAAP                                                  |              |            |
| As previously      reported                                                 | $11,774,714       | $13,056,629     |
| Write-down of investment in      FEP                                        | 2,340,636         | -               |
| Effect of foreign currency      translation on dilutionof investment in FEP |  (3,385,002) |  (945,793) |
| As restated                                                                 | $10,730,348       | $12,110,836     |
|                                                                        |              |            |
| Total Shareholders’ Equity under US      GAAP                         |              |            |
| As previously      reported                                                 | $8,230,351        | $9,161,859      |
| Write-down of investment in      FEP                                        | 2,340,636         | -               |
| Effect of foreign currency      translation on dilutionof investment in FEP |  (3,385,002) |  (945,793) |
| As restated                                                                 | $(7,185,985)      | $(8,216,066)    |

----

|   | Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------|

|                                                                        | 2007                                                                                        | 2006                                                                            |
|-----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
| Net income (loss) under US    GAAP                                          |                                                                                        |                                                                            |
| As previously      reported                                                 | $(6,411,802)                                                                                | $(3,919,072)                                                                    |
| Write-down of investment in      FEP                                        | 2,340,636                                                                                   | -                                                                               |
| Effect of foreign currency      translation on dilutionof investment in FEP |  (59,840)                                                                              |  (111,161)                                                                 |
| As restated                                                                 | $(4,131,006)                                                                                | $(4,030,233)                                                                    |
|                                                                        |                                                                                        |                                                                            |
| Basic and diluted loss per share under US      GAAP                         |                                                                                        |                                                                            |
| As previously      reported                                                 | $              (0.03) | $           (0.02)       |
|                                                                        |                                                                                        |                                                                            |
| As restated                                                                 | $              (0.03) | $            (0.02) |
|                                                                        |                                                                                        |                                                                            |

|   | Recently      adopted accounting pronouncements |
|--------|-------------------------------------------------|

----

| Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Princes –      (cont’d) |
|--------------|-----------------------------------------------------------------------------------------------------------------------|

|   | Recently      adopted accounting pronouncements-(cont’d) |
|--------|----------------------------------------------------------------|

----

|   | Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------|

|   | g) | Recent Accounting      Pronouncements – (cont’d) |
|--------|----|--------------------------------------------------------------|

|   | In      April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life      of Intangible Assets.” This FSP amends the factors that should be      considered in developing renewal or extension assumptions used to      determine the useful life of a recognized intangible asset under FASB      Statement No. 142, “Goodwill and Other Intangible Assets.” The intent      of this FSP is to improve the consistency between the useful life of a      recognized intangible asset under Statement 142 and the period of expected      cash flows used to measure the fair value of the asset under FASB      Statement No. 141 (Revised 2007), “Business Combinations,” and other      U.S. generally accepted accounting principles (GAAP). This FSP is      effective for financial statements issued for fiscal years beginning after      December 15, 2008, and interim periods within those fiscal years.      Early adoption is prohibited.  The Company does not expect the      adoption of FAS 142-3 to have a material effect on its results of      operations and financial condition. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Note      14 | Differences Between      Canadian and United States Generally Accepted Accounting Principles      – (cont’d) |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------|

|   | g) | Recent Accounting      Pronouncements – (cont’d) |
|--------|----|--------------------------------------------------------------|

----

| ·   | Agreed      Work Programme with the Philippine Department of Energy (DOE) for GSEC101,      Forum’s principal asset, and continued to finalise conversion of this      licence to a full Service Contract; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Finalised      farm-out of a 30% interest in GSEC101 to a local partner Monte Oro      Resources & Energy, Inc. (Monte Oro) in which Forum benefited      from an immediate cash payment of US$1.7million, securing Monte Oro’s      involvement and thereby qualifying the Joint Venture for the Filipino      Participation Incentive Allowance (FPIA) which entitles the Company to      7.5% of gross revenues, prior to sharing revenues with the      government; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Galoc      production commencement; |
|--------------------|-------------------------------------|

| ·   | Closing      of the sale of Central Cebu Coal Operating Contract 132 (COC132) for      $3.5million; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | Initiated      Work Programme on Coal Operating Contract 131 (COC131) to further define      reserves and enable conversion to full production  licence; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Signed      Gas Sale and Purchase Agreement (GSPA) on the development of the Libertad      Gas Field in Cebu; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | Initiated      programme to review multiple international opportunities in view of      Company’s enhanced status through Philex Mining Corporation’s      investment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Working      capital of US$3.9 million as of 31 December 2008 (US$6.4 million –      2007). |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | Shareholders’      equity of US$45 million as of 31 December 2008 (US$49 million      -2007). |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | Revenues      of US$0.7 million in 2008 (US$0.9 million –  2007). |
|--------------------|-------------------------------------------------------------------------|

| ·   | Board      re-structured and enhanced with appointment of Walter Brown as CEO;      and |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | Fixed      overhead costs substantially reduced going  forward. |
|--------------------|-----------------------------------------------------------------|

----

----

----

----

----

| Shareholder                          | Number      of Shares Held | %     |
|--------------------------------------|----------------------------|-------|
| Philex      Petroleum Corporation*   | 9,933,311                  | 33.02 |
| FEC      Resources Inc*              | 8,550,200                  | 28.42 |
| Wellington      Asset Management Ltd | 7,804,778                  | 25.94 |
| Basic      Petroleum Corporation     | 933,759                    | 3.10  |
| TOTAL                                | 27,222,048                 | 90.48 |

----

----

----

----

----

----

----

|                                                                                 | Note   | Year      ended 31      December 2008  US$’000 | Year      ended 31      December 2007 US$’000 |
|--------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------------------------------------------------------------------|
| Continuing      operationsRevenue                                                    |   |  706                                                                |  876                                                          |
|                                                                                 |   |                                                                     |                                                               |
| Cost      of sales                                                                   |   | (1,017)                                                                  | (1,013)                                                            |
|                                                                                 |   |                                                                     |                                                               |
| Gross      loss                                                                      |   | (311)                                                                    | (137)                                                              |
|                                                                                 |   |                                                                     |                                                               |
| Other      administrative expenses                                                   |   | (4,030)                                                                  | (2,135)                                                            |
| Impairment      of deferred and abortive project costs                               |   | _                                                                        | (84)                                                               |
| Share-based      payments expense                                                    |   | (334)                                                                    | (843)                                                              |
|                                                                                 |   |                                                                     |                                                               |
| Total      administrative expenses                                                   | 3      | (4,364)                                                                  | (3,062)                                                            |
|                                                                                 |   |                                                                     |                                                               |
| Loss      from operations                                                            |   | (4,675)                                                                  | (3,199)                                                            |
|                                                                                 |   |                                                                     |                                                               |
| Financial      income                                                                | 5      | 306                                                                      | 137                                                                |
| Financial      expense                                                               | 6      | _                                                                        | (609)                                                              |
|                                                                                 |   |                                                                     |                                                               |
| Loss      on ordinary activities before taxation                                     |   | (4,369)                                                                  | (3,671)                                                            |
|                                                                                 |   |                                                                     |                                                               |
| Tax      expense                                                                     | 7      | (68)                                                                     | (39)                                                               |
|                                                                                 |   |                                                                     |                                                               |
| Loss      from continued operations                                                  |   | (4,437)                                                                  | (3,710)                                                            |
|                                                                                 |   |                                                                     |                                                               |
|                                                                                 |   |                                                                     |                                                               |
| Discontinued      operations                                                         |   |                                                                     |                                                               |
| Profit/(loss)      on discontinued operations (net of tax)                           | 8      | 90                                                                       | (180)                                                              |
|                                                                                 |   |                                                                     |                                                               |
| Loss      for the year                                                               |   | (4,347)                                                                  | (3,890)                                                            |
|                                                                                 |   |                                                                     |                                                               |
| Attributable      to:                                                                |   |                                                                     |                                                               |
| Equity      holders of the parent                                                    | 22     | (4,425)                                                                  | (3,503)                                                            |
| Minority      interest                                                               | 22     | 78                                                                       | (387)                                                              |
|                                                                                 |   |                                                                     |                                                               |
| Loss      per ordinary share (US$) attributable to equity holders of the      parent |   |  (4,347)                                                            |  (3,890)                                                      |
| Basic      and diluted                                                               | 9      | (0.152)                                                                  | (0.122)                                                            |
|                                                                                 |   |                                                                     |                                                               |
| Loss      per ordinary share (US$) on continued operations                           |   |                                                                     |                                                               |
| Basic      and diluted                                                               | 9      | (0.155)                                                                  | (0.116)                                                            |
|                                                                                 |   |                                                                     |                                                               |
|                                                                                 |   |                                                                     |                                                               |
|                                                                                 |   |                                                                     |                                                               |

|   | The      notes on pages XX to XX form part of these financial      statements. |
|--------|--------------------------------------------------------------------------------|

----

|   Group                                                                       | Share      capital US$’000 | Share      premium US$’000 | Share      option reserve US$’000 | Retained earnings      US$’000 | Total      attributable to equity holders of parent US$’000 | Minority      interest US$’000 | Total      US$’000 |
|-----------------------------------------------------------------------------------------|----------------------------------|----------------------------------|-----------------------------------------|-------------------------------------------|-------------------------------------------------------------------|--------------------------------------|--------------------------|
| Balance      as at 1 January 2007                                                       | 5,182                            | 48,597                           | 824                                     | (4,624)                                   | 49,979                                                            | 1,872                                | 51,851                   |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| LOSS      FOR THE YEAR                                                                  | –                          | –                          | –                                 | (3,503)                                   | (3,503)                                                           | (387)                                | (3,890)                  |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Total      recognised incomeand      expense for the year                               |  –                    |  –                    |  –                           |  (3,503)                             |  (3,503)                                                     |  (387)                          |  (3,890)            |
| Share-based      payment                                                                | –                          | –                          | 843                                     | –                                   | 843                                                               | –                              | 843                      |
| Issue      of Shares                                                                    | 15                               | 99                               | –                                 | –                                   | 114                                                               | –                              | 114                      |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Balance      as at 1 January 2008                                                       | 5,197                            | 48,696                           | 1,667                                   | (8,127)                                   | 47,433                                                            | 1,485                                | 48,918                   |
| Loss      for the year                                                                  | –                          | –                          | –                                 | (4,425)                                   | (4,425)                                                           | 78                                   | (4,347)                  |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Total      recognised income and      expense for the year                         |  –                    |  –                    |  –                           |  (4,425)                             |  (4,425)                                                     |  78                             |  (4,347)            |
| Share-based      payment                                                                | –                          | –                          | 334                                     | –                                   | 334                                                               | –                              | 334                      |
| Transfer      to retained reserves                                                      | –                          | –                          | (1,844)                                 | 1,844                                     | –                                                           | –                              | –                  |
| Issue      of shares                                                                    | 246                              | 242                              | –                                 | –                                   | 488                                                               | –                              | 488                      |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Balance      as at 31 December 2008                                                     | 5,443                            | 48,938                           | 157                                     | (10,708)                                  | 43,830                                                            | 1,563                                | 45,393                   |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
|   Company                                                                     | Share      capital US$’000 | Share      premium US$’000 | Share      option reserve US$’000 | Retained      earnings US$’000      | TotalUS$’000                                                |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Balance      as at 1 January 2007                                                       | 5,182                            | 48,597                           | 795                                     | (2,568)                                   | 52,006                                                            |                                 |                     |
| Loss      for the year                                                                  | –                          | –                          | –                                 | (2,278)                                   | (2,278)                                                           |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Total      recognised income     and      expense for the year |  –                    |  –                    |  –                           |  (2,278)                             |  (2,278)                                                     |                                 |                     |
| Share-based      payment                                                                | –                          | –                          | 872                                     | –                                   | 872                                                               |                                 |                     |
| Issue      of shares                                                                    | 15                               | 99                               | –                                 | –                                   | 114                                                               |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Balance      as at 1 January 2008                                                       | 5,197                            | 48,696                           | 1,667                                   | (4,846)                                   | 50,714                                                            |                                 |                     |
| Loss      for the year                                                                  | –                          | –                          | –                                 | (4,070)                                   | (4,070)                                                           |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Total      recognised income    and expense for the      year       |  –                    |  –                    |  –                           |  (4,070)                             |  (4,070)                                                     |                                 |                     |
| Share-based      payment                                                                | –                          | –                          | 334                                     | –                                   | 334                                                               |                                 |                     |
| Transfer      to retained reserves                                                      | –                          | –                          | (1,844)                                 | 1,844                                     | –                                                           |                                 |                     |
| Issue      of shares                                                                    | 246                              | 242                              | –                                 | –                                   | 488                                                               |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |
| Balance      as at 31 December 2008                                                     | 5,443                            | 48,938                           | 157                                     | (7,072)                                   | 47,466                                                            |                                 |                     |
|                                                                                    |                             |                             |                                    |                                      |                                                              |                                 |                     |

----

|   | At      31 December      2008 |
|--------|------------------------------------|

|                                                                    |   Note |  2008 US$’000 |  2007 US$’000 |
|-------------------------------------------------------------------------|------------------|-------------------------------|-------------------------------|
|                                                                    |             |                          |                          |
| Non-current      assets                                                 |             |                          |                          |
| Intangible      assets                                                  | 11               | 40,606                        | 41,900                        |
| Property,      plant and equipment                                      | 12               | 3,784                         | 4,101                         |
| Other      financial assets                                             | 13               | 8                             | 25                            |
|                                                                    |             |                          |                          |
| Total      non-current assets                                           |             | 44,398                        | 46,026                        |
|                                                                    |             |                          |                          |
| Current      assets                                                     |             |                          |                          |
| Inventories                                                             | 16               | 77                            | 117                           |
| Trade      and other receivables                                        | 17               | 275                           | 364                           |
| Advances      to associate companies                                    | 17               | 3,165                         | 3,848                         |
| Cash      and cash equivalents                                          |             | 2,574                         | 2,319                         |
|                                                                    |             |                          |                          |
| Total      current assets                                               |             | 6,091                         | 6,648                         |
|                                                                    |             |                          |                          |
| Non-current      assets held for sale                                   | 19               | 991                           | 901                           |
|                                                                    |             |                          |                          |
| Total      assets                                                       |             | 51,480                        | 53,575                        |
|                                                                    |             |                          |                          |
| Liabilities:                                                            |             |                          |                          |
| Current      liabilities                                                |             |                          |                          |
| Trade and      other payables                                      | 20               | 235                           | 283                           |
| Advances      from associate companies                                  | 20               | 2,011                         | -                             |
|                                                                    |             |                          |                          |
| Total      current liabilities                                          |             | 2,246                         | 283                           |
|                                                                    |             |                          |                          |
| Non-current      liabilities                                            |             |                          |                          |
| Other      payables                                                     | 20               | 3,841                         | 4,374                         |
|                                                                    |             |                          |                          |
| Total      liabilities                                                  |             | (6,087)                       | (4,657)                       |
|                                                                    |             |                          |                          |
| Total      net assets                                                   |             | 45,393                        | 48,918                        |
|                                                                    |             |                          |                          |
| Capital      and reserves attributable to equity holders of the Company |             |                          |                          |
| Called      up share capital                                            | 21               | 5,443                         | 5,197                         |
| Share      premium account                                              | 21               | 48,938                        | 48,696                        |
| Share      option  reserve                                    |             | 157                           | 1,667                         |
|                                                                    |             |                          |                          |
| Retained      losses                                                    |             | (10,708)                      | (8,127)                       |
|                                                                    |             | 43,830                        | 47,433                        |
|                                                                    |             |                          |                          |
| Minority      interest                                                  | 22               | 1,563                         | 1,485                         |
|                                                                    |             |                          |                          |
| Total      equity                                                       |             | 45,393                        | 48,918                        |
|                                                                    |             |                          |                          |
|                                                                    |             |                          |                          |
|                                                                    |             |                          |                          |
|                                                                    |             |                          |                          |
|                                                                    |             |                          |                          |
|                                                                    |             |                          |                          |

|   | ................................................ |
|--------|------------------------------------------------------------------------------------------------------------------|

|   | Andrew      Mullins |
|--------|---------------------|

|   | Director |
|--------|----------|

|   | The      notes on pages XX to XX form part of these financial      statements. |
|--------|--------------------------------------------------------------------------------|

----

|                                                                    |  Note | 2008US$’000 | 2007US$’000 |
|-------------------------------------------------------------------------|------------|-------------------|-------------------|
|                                                                    |       |              |              |
| Non-current      assets                                                 |       |              |              |
| Property,      plant and equipment                                      | 12         | 11                | 13                |
| Other      financial assets                                             | 13         | 32,891            | 32,891            |
|                                                                    |       |              |              |
| Total      non-current assets                                           |       | 32,902            | 32,904            |
|                                                                    |       |              |              |
| Current      assets                                                     |       |              |              |
| Trade      and other receivables                                        | 17         | 32                | 63                |
| Other      financial assets                                             | 18         | 12,067            | 15,692            |
| Cash      and cash equivalents                                          |       | 2,533             | 2,237             |
|                                                                    |       |              |              |
| Total      current assets                                               |       | 14,632            | 17,992            |
|                                                                    |       |              |              |
| Total      assets                                                       |       | 47,534            | 50,896            |
|                                                                    |       |              |              |
| Liabilities:                                                            |       |              |              |
| Current      liabilities                                                |       |              |              |
| Trade      and other payables                                           | 20         | 68                | 182               |
|                                                                    |       |              |              |
| Total      current liabilities                                          |       | (68)              | (182)             |
|                                                                    |       |              |              |
| Total      net assets                                                   |       | 47,466            | 50,714            |
|                                                                    |       |              |              |
| Capital      and reserves attributable to equity holders of the Company |       |              |              |
| Called      up share capital                                            | 21         | 5,443             | 5,197             |
| Share      premium account                                              | 21         | 48,938            | 48,696            |
| Share      option reserve                                               |       | 157               | 1,667             |
|                                                                    |       |              |              |
| Retained      losses                                                    |       | (7,072)           | (4,846)           |
|                                                                    |       |              |              |
| Total      equity                                                       | 22         | 47,466            | 50,714            |
|                                                                    |       |              |              |
|                                                                    |       |              |              |
|                                                                    |       |              |              |
|                                                                    |       |              |              |
|                                                                    |       |              |              |

|   | The      financial statements were approved and authorised for issue by the Board      on   2009. |
|--------|------------------------------------------------------------------------------------------------------------------|

|   |  Andrew      Mullins |
|--------|---------------------------|

|   | Director |
|--------|----------|

|   | The      notes on pages xx to xx form part of these financial      statements. |
|--------|--------------------------------------------------------------------------------|

----

|                                                              |   Note | Year      ended31      December 2008 US$’000 | Year      ended 31      December 2007US$’000 |
|-------------------------------------------------------------------|------------------|---------------------------------------------------------|--------------------------------------------------------------|
|                                                              |             |                                                    |                                                         |
| Cash      flows from operating activities                         |             |                                                    |                                                         |
| Loss      before taxation                                         |             | (4,279)                                                 | (3,851)                                                      |
| Adjustments      for:                                             |             |                                                    |                                                         |
| Depreciation                                                      |             | 458                                                     | 645                                                          |
| Impairment                                                        |             | -                                                       | 84                                                           |
| Loss      on sale of property plant and equipment                 |             | -                                                       | 2                                                            |
| Share-based      payment expense                                  |             | 334                                                     | 843                                                          |
| Exchange      (gain)/loss                                         |             | (285)                                                   | 609                                                          |
| Loss      on financial assets                                     |             | 17                                                      | 15                                                           |
| Interest      income                                              |             | (21)                                                    | (137)                                                        |
| Share      of operating (profit)/loss of associate                |             |     (90)                            | 180                                                          |
|                                                              |             |                                                    |                                                         |
|                                                              |             | 413                                                     | 2,241                                                        |
|                                                              |             |                                                    |                                                         |
| Cash      flows from operating activities                         |             |                                                    |                                                         |
|   before      changes in working capital and provisions |             | (3,866)                                                 | (1,610)                                                      |
|                                                              |             |                                                    |                                                         |
| Decrease/(increase)      in trade and other receivables           |             | 22                                                      | (88)                                                         |
| Decrease      in inventories                                      |             | 40                                                      | 37                                                           |
| Decrease      in trade and other payables                         |             | (33)                                                    | (617)                                                        |
|                                                              |             |                                                    |                                                         |
|                                                              |             | 29                                                      | (668)                                                        |
|                                                              |             |                                                    |                                                         |
| Cash      generated from operations                               |             | (3,837)                                                 | (2,278)                                                      |
| Income      taxes paid                                            |             | (2)                                                     | (37)                                                         |
|                                                              |             |                                                    |                                                         |
| Net      cash flows from operating activities                |             | (3,839)                                                 | (2,315)                                                      |
|                                                              |             |                                                    |                                                         |
| Investing      activities                                         |             |                                                    |                                                         |
| Interest      received                                       |             | 21                                                      | 137                                                          |
| Purchase      of property, plant and equipment                    |             | (141)                                                   | (109)                                                        |
| Sale      of property, plant and equipment                        |             | -                                                       | 45                                                           |
| Purchase      of intangible assets                                |             | (406)                                                   | (489)                                                        |
| Disposal      of intangible assets                                |             | 1,700                                                   | -                                                            |
| Repaid/(advanced)      from/to associated companies               |             | 2,694                                                   | (689)                                                        |
|                                                              |             |                                                    |                                                         |
| Net      cash from/(used in) investing activities                 |             |    3,868                                 | (1,105)                                                      |
|                                                              |             |                                                    |                                                         |
| Financing      activities                                         |             |                                                    |                                                         |
| Issue      of ordinary share capital                              |             | 488                                                     | –                                                      |
|                                                              |             |                                                    |                                                         |
| Net      cash from financing activities                           |             |    488                                   | –                                                      |
|                                                              |             |                                                    |                                                         |
| Net      increase/(decrease) in cash and cash equivalents         |             |       517                 | (3,420)                                                      |
|                                                              |             |                                                    |                                                         |
| Cash      and cash equivalents at beginning of the year           |             |    2,319                                 | 5,739                                                        |
|                                                              |             |                                                    |                                                         |
| Foreign      exchange movements on cash and cash equivalents      |             | (262)                                                   | –                                                      |
|                                                              |             |                                                    |                                                         |
| Cash      and cash equivalents at end of the year                 | 25               | 2,574                                                   | 2,319                                                        |
|                                                              |             |                                                    |                                                         |
|                                                              |             |                                                    |                                                         |
|                                                              |             |                                                    |                                                         |

|   |   |
|--------|--------|

----

|                                                         |   Note | Year      ended31      December  2008 US$’000 | Year      ended31      December 2007 US$’000 |
|--------------------------------------------------------------|------------------|---------------------------------------------------------------|---------------------------------------------------------|
|                                                         |             |                                                          |                                                    |
| Cash      flows from operating activities                    |             |                                                          |                                                    |
| Loss      before taxation                                    |             | (4,070)                                                       | (2,278)                                                 |
| Adjustments      for:                                        |             |                                                          |                                                    |
| Depreciation                                                 |             | 11                                                            | 8                                                       |
| Share-based      payment expense                             |             | 334                                                           | 872                                                     |
| Exchange      loss/(gain)                                    |             | 158                                                           | (24)                                                    |
| Interest      income                                         |             | (21)                                                          | (83)                                                    |
|                                                         |             |                                                          |                                                    |
|                                                         |             | 482                                                           | 773                                                     |
|                                                         |             |                                                          |                                                    |
| Cash      flows from operating activities                    |             |                                                          |                                                    |
| before      changes in working capital and provisions        |             | (3,588)                                                       | (1,505)                                                 |
|                                                         |             |                                                          |                                                    |
| Decrease/(increase)      in trade and other receivables      |             | 31                                                            | (2)                                                     |
| Decrease      in trade and other payables                    |             | (114)                                                         | (628)                                                   |
|                                                         |             |                                                          |                                                    |
|                                                         |             | (83)                                                          | (630)                                                   |
|                                                         |             |                                                          |                                                    |
| Cash      generated from operations                          |             | (3,671)                                                       | (2,135)                                                 |
|                                                         |             |                                                          |                                                    |
| Investing      activities                                    |             |                                                          |                                                    |
| Interest      received                                       |             | 21                                                            | 83                                                      |
| Purchase      of property, plant and equipment               |             | (9)                                                           | (13)                                                    |
| Repayment of      subsidiary undertaking loans          |             | 3,625                                                         | 1,893                                                   |
|                                                         |             |                                                          |                                                    |
| Net      cash from/(used in) investing activities            |             |    3,637                                       | 1,963                                                   |
|                                                         |             |                                                          |                                                    |
| Financing      activities                                    |             |                                                          |                                                    |
| Issue      of ordinary share capital                         |             | 488                                                           | –                                                 |
|                                                         |             |                                                          |                                                    |
| Net      cash from/(used in) financing activities            |             | 488                                                           | –                                                 |
|                                                         |             |                                                          |                                                    |
| Net      increase/(decrease) in cash and cash equivalents    |             | 454                                                           | (172)                                                   |
|                                                         |             |                                                          |                                                    |
| Cash      and cash equivalents at beginning of the year      |             | 2,237                                                         | 2,385                                                   |
|                                                         |             |                                                          |                                                    |
| Foreign      exchange movements on cash and cash equivalents |             | (158)                                                         | 24                                                      |
|                                                         |             |                                                          |                                                    |
| Cash      and cash equivalents at end of the year            | 25               |     2,533                                 | 2,237                                                   |
|                                                         |             |                                                          |                                                    |
|                                                         |             |                                                          |                                                    |
|                                                         |             |                                                          |                                                    |

|   | The      notes on pages xx to xx form part of these financial      statements. |
|--------|--------------------------------------------------------------------------------|

----

|   | 1 ACCOUNTING      POLICIES |
|--------|---------------------------------|

|                                                                                                       | Change      to                               |                  |                                                                                         |
|------------------------------------------------------------------------------------------------------------|----------------------------------------------|-----------------------|----------------------------------------------------------------------------------------------|
| Standard                                                                                                   | accounting      policy                       | Date      of adoption | Impact      on initial application                                                           |
|                                                                                                       |                                         |                  |                                                                                         |
| IFRS7      ‘Financial Instruments:                                                                   | No      changes to current                   | 1      January 2007   | This      standard requires additional                                                       |
| Disclosures’      and amendments toIAS32      ‘Financial Instruments:                          | accounting      policy                       |                  | disclosure      regarding financial instruments.                                             |
| Disclosure      and preparation’                                                                     |                                         |                  |                                                                                         |
|                                                                                                       |                                         |                  |                                                                                         |
| Amendment      to IAS1 ‘Presentation of Financial Statements – Capital      Disclosures’ | No      changes to current accounting policy | 1      January 2007   | This      standard requires additional disclosure concerning an entity’s      capital. |
|                                                                                                       |                                         |                  |                                                                                         |

| IFRIC      11, IFRS2, ‘Group and Treasury Share Transactions’ (effective 1 March      2007). This amendment provides guidance as to whether certain share-based      payment transactions should be classified as “equity settled” or “cash      settled”.                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| IFRIC      12, ‘Service Concession Arrangements’. (effective 1 January 2008) This      amendment interprets 14 IFRSs that refer to a public sector entity that      awards the concession as the grantor and the private sector entity that      provides the services as the operator.                         |
| IFRIC      14, IAS19, ‘The Limit on Defined Benefit Asset Minimum Funding      Requirements and their Interaction’ (effective 1 January 2008). This      amendment clarifies how any asset in a defined benefit pension scheme      should be determined, in particular where a minimum funding requirement      exists.  |
| IFRIC      13, ‘Customer Loyalty Programmes’ (effective 1 July 2008). This interprets      accounting by entities that grant loyality awards credits.                                                                                                                                                                     |
| IAS      39 AND IFRS 7, ‘Reclassification of Financial Instruments’ (effective      1 July 2008). This amendment provides guidance on reclassification of non-      derivative financial assets.                                                                                                                     |
| IFRIC      16, ‘Hedges of a Net Investment in a foreign operation’ (effective 1      October 2008). This clarifies accounting treatment of changes in foreign      exchange rates in respect of hedged items.                                                                                                             |

----

|   | 1 ACCOUNTING      POLICIES - CONTINUED |
|--------|---------------------------------------------|

|   | Financial      Assets |
|--------|-----------------------|

|   | Trade      and other receivables –These assets are      non-derivative financial assets with fixed or determinable payments that      are not quoted in an active market. They arise principally through the      provision of goods and services to customers, but also incorporate other      types of contractual monetary asset such as advances made to affiliated      entities. They are initially recognised at fair value plus      transaction costs and subsequently carried at amortised cost, using the      effective interest method, less any provision for      impairment.  If the need for impairment of a receivable arises,      the value of the provision, representing the expected loss from not being      able to recover such receivables, is  recognised as a cost of      sale. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 1 ACCOUNTING      POLICIES - CONTINUED |
|--------|---------------------------------------------|

|   | Financial      Liabilities |
|--------|----------------------------|

----

|   | 1 ACCOUNTING      POLICIES - CONTINUED |
|--------|---------------------------------------------|

----

----

|   | 3 EXPENSES      BY NATURE |
|--------|--------------------------------|

|                                                                                                                                                            | Year      ended31      December 2008 US$’000 | Year      ended31      December 2007 US$’000 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|---------------------------------------------------------|
|                                                                                                                                                            |                                                    |                                                    |
| Fees      payable to the Company’s Auditor for the audit of the Company’s annual      accounts                                                      | 44                                                      | 70                                                      |
| Fees      payable to the Company’s Auditor and its associates for other      services:                                                                    |                                                    |                                                    |
| Fees      payable to the Company’s Auditor’s overseas associate for the audit of the      Company’s subsidiaries,pursuant      to legislation |  15                                                |  15                                                |
| Fees      payable to the Company’s Auditor for tax and consultancy      services                                                                          | 197                                                     | 128                                                     |
| Directors’      remuneration                                                                                                                              | 1,334                                                   | 559                                                     |
| Permanent      impairment of deferred charges and abortive costs                                                                                                | -                                                       | 84                                                      |
| Employee      salaries and other benefits                                                                                                                       | 657                                                     | 426                                                     |
| Share-based      payments, cash settled                                                                                                                         | 119                                                     | -                                                       |
| Share-based      payments, equity settled                                                                                                                       | 215                                                     | 843                                                     |
| Depreciation      and amortisation                                                                                                                              | 50                                                      | 58                                                      |
| Operating      lease rentals                                                                                                                                    | 84                                                      | 94                                                      |
| Other      individually immaterial items                                                                                                                        | 1,649                                                   | 785                                                     |
|                                                                                                                                                            |                                                    |                                                    |
|                                                                                                                                                            | 4,364                                                   | 3,062                                                   |
|                                                                                                                                                            |                                                    |                                                    |

|   |    |
|--------|--------------|

|   | 4 SALARIES |
|--------|-----------------|

|                                                                   | Group                                                   | Company                                                 |
|------------------------------------------------------------------------|---------------------------------------------------------|---------------------------------------------------------|
|                                                                   | Year      ended31      December 2008               | Year      ended31      December 2007               | Year      ended31      December 2008 | Year      ended31      December 2007 |
|                                                                   |                                                    |                                                    |   |   |
| Average      number of employees (including Directors) are as follows: |                                                    |                                                    |   |   |
|                                                                   |                                                    |                                                    |   |   |
| Administration      and finance                                        | 17                                                      | 21                                                      | 5 | 6 |
|                                                                   |                                                    |                                                    |   |   |
| Technical                                                              | 4                                                       | 7                                                       | – | – |
|                                                                   |                                                    |                                                    |   |   |
|                                                                   | 21                                                      | 28                                                      | 5 | 6 |
|                                                                   |                                                    |                                                    |   |   |
|                                                                   |                                                    |                                                    |   |   |
|                                                                   |                                                    |                                                    |   |   |
|                                                                   | Group                                                   | Company                                                 |
|                                                                   | Year      ended31      December 2008 US$’000 | Year      ended31      December 2007 US$’000 | Year      ended31      December 2008 US$’000 | Year      ended31      December 2007 US$’000 |
|                                                                   |                                                    |                                                    |   |   |
| Gross      salaries (including Directors)                              | 1,603                                                   | 694                                                     | 1,398 | 439 |
| Fees      (including Directors)                                        | 143                                                     | 234                                                     | 143 | 234 |
| Employee      benefits and social security costs                       | 245                                                     | 57                                                      | 242 | 53 |
| Share-based      payments                                              | 334                                                     | 843                                                     | 334 | 788 |
|                                                                   |                                                    |                                                    |   |   |
|                                                                   | 2,325                                                   | 1,828                                                   | 2,117 | 1,514 |
|                                                                   |                                                    |                                                    |   |   |

----

|                                           |    SalaryUS$’000 |    Bonuses US$’000 |    FeesUS$’000 | Year      ended31      December 2008 TotalUS$’000 | Year      ended31      December2007 TotalUS$’000 |
|------------------------------------------------|---------------------------------------|----------------------------------------------|-------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------------|
|                                           |                                  |                                         |                                |                                                              |                                                        |
| Alan      Henderson                            | 144                                   | -                                            | 27                                  | 171                                                               | 102                                                         |
| Henry      Wilson (resigned 20 August 2008)    | 24                                    | -                                            | 11                                  | 35                                                                | 41                                                          |
| Graeme      Thomson (resigned 20 August 2008)  | 40                                    | -                                            | –                             | 40                                                                | 47                                                          |
| Barry      Stansfield                          | 60                                    | -                                            | 53                                  | 113                                                               | 44                                                          |
| Russell      Harvey (resigned 23 June 2008)    | 435                                   | 170                                          | –                             | 605                                                               | 325                                                         |
| Andrew      Mullins (appointed 20 August 2008) | 58                                    | 260                                          | –                             | 318                                                               | –                                                     |
| Walter      Brown (appointed 14 November 2008) | -                                     | -                                            | 52                                  | 52                                                                | –                                                     |
|                                           |                                  |                                         |                                |                                                              |                                                        |
|                                           | 761                                   | 430                                          | 143                                 | 1,334                                                             | 559                                                         |
|                                           |                                  |                                         |                                |                                                              |                                                        |

|   | 5 FINANCIAL      INCOME |
|--------|------------------------------|

|                            | Group                                                   |
|---------------------------------|---------------------------------------------------------|
|                            | Year      ended31      December 2008 US$’000 | Year      ended31      December 2007 US$’000 |
|                            |                                                    |   |
| Interest      from bank deposit | 21                                                      | 137 |
| Foreign      exchange gains     | 285                                                     | – |
|                            |                                                    |   |
|                            | 306                                                     | 137 |
|                            |                                                    |   |

|   | 6 FINANCIAL      EXPENSES |
|--------|--------------------------------|

|                         | Group                                                   |
|------------------------------|---------------------------------------------------------|
|                         | Year      ended31      December 2008 US$’000 | Year      ended31      December 2007 US$’000 |
|                         |                                                    |   |
| Foreign      exchange losses | –                                                 | 609 |
|                         |                                                    |   |

----

|   | 7 TAXATION      ON LOSS FROM ORDINARY ACTIVITIES |
|--------|-------------------------------------------------------|

|                                                                                           | Group                                                   |
|------------------------------------------------------------------------------------------------|---------------------------------------------------------|
|                                                                                           | Year      ended31      December 2008 US$’000 | Year      ended31      December 2007 US$’000 |
|                                                                                           |                                                    |   |
| Overseas      tax                                                                              | 68                                                      | 39 |
|                                                                                           |                                                    |   |
| Loss      on ordinary activities                                                               | (4,369)                                                 | (3,671) |
|                                                                                           |                                                    |   |
| Loss      on ordinary activities at the standard rate of corporation tax in the UK      of 28% | (1,124)                                                 | (1,101) |
| Expenses      disallowed for tax                                                               | 8                                                       | 217 |
| Tax      losses carried forward                                                                |    1,151                                 | 326 |
| Different      tax rates applied to overseas jurisdictions                                     |         -       | 18 |
| Movements      in deferred taxation                                                            | 33                                                      | 579 |
|                                                                                           |                                                    |   |
| Tax      charge for the period                                                                 | 68                                                      | 39 |
|                                                                                           |                                                    |   |

|   | 8 PROFIT/(LOSS)      FROM DISCONTINUED OPERATIONS |
|--------|--------------------------------------------------------|

|   | 9 LOSS      PER SHARE |
|--------|----------------------------|

|   | 10 LOSS      FOR THE FINANCIAL YEAR |
|--------|------------------------------------------|

----

|     Group             | UnevaluatedOil,      Gas and Mining CostsUS$’0002008 | UnevaluatedOil,      Gas and Mining CostsUS$’000 2007 |
|-------------------------------------------|------------------------------------------------------------|------------------------------------------------------------------|
|                                      |                                                       |                                                             |
| Cost                                      |                                                       |                                                             |
| At      1 January                         | 41,900                                                     | 43,264                                                           |
| Additions                                 | 406                                                        | 603                                                              |
| Disposals                                 | (1,700)                                                    | –                                                          |
| Permanent      impairment                 | –                                                    | (84)                                                             |
| Tax      charge for the period            | 68                                                         | 39                                                               |
|                                      |                                                       |                                                             |
| Transferred      to tangible fixed assets | –                                                    | (1,883)                                                          |
|                                      |                                                       |                                                             |
| At      31 December                       | 40,606                                                     | 41,900                                                           |
|                                      |                                                       |                                                             |
| Amortisation                              |                                                       |                                                             |
| At      1 January                         | –                                                    | –                                                          |
| Provided      for the year                | –                                                    | –                                                          |
|                                      |                                                       |                                                             |
| At      31 December                       | –                                                    | –                                                          |
|                                      |                                                       |                                                             |
| Net      book value                       |                                                       |                                                             |
| At      31 December                       | 40,606                                                     | 41,900                                                           |
|                                      |                                                       |                                                             |
|                                      |                                                       |                                                             |

|   | The      unevaluated oil, gas and mining costs relate to the acquisition of the      Group’s assets in the Philippines |
|--------|------------------------------------------------------------------------------------------------------------------------------|

----

|   | 12 PROPERTY,      PLANT AND EQUIPMENT |
|--------|--------------------------------------------|

|                                 |                                                                      | Group                                                 |                                                    |                                                          |                                 |
|--------------------------------------|---------------------------------------------------------------------------|-------------------------------------------------------|---------------------------------------------------------|---------------------------------------------------------------|--------------------------------------|
|                                 | DrillingEquipment      &Pre      Development Costs US$’000 |  Transport&      MotorEquipmentUS$’000 |  FurnitureFixtures&      FittingsUS$’000 |   Tools&      OtherEquipment US$’000 |    TotalUS$’000 | Company      FurnitureFixtures &      Fittings US$’000 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| Cost                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      1 January 2008               | 4,776                                                                     | 21                                                    | 163                                                     | 116                                                           | 5,076                                | 25 |
| Additions                            | 76                                                                        | 53                                                    | 12                                                      | –                                                       | 141                                  | 9 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      31 December 2008             | 4,852                                                                     | 74                                                    | 175                                                     | 116                                                           | 5,217                                | 34 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| Depreciation                         |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      1 January 2008               | 792                                                                       | 6                                                     | 118                                                     | 59                                                            | 975                                  | 12 |
| Charge      for the year             | 376                                                                       | 5                                                     | 54                                                      | 23                                                            | 458                                  | 11 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      31 December 2008             | 1,168                                                                     | 11                                                    | 172                                                     | 82                                                            | 1,433                                | 23 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| Cost                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      1 January 2007               | 2,702                                                                     | 50                                                    | 151                                                     | 116                                                           | 3,019                                | 12 |
| Additions                            | 65                                                                        | 32                                                    | 12                                                      | –                                                       | 109                                  | 13 |
| Transfer      from Intangible Assets | 1,883                                                                     | -                                                     | -                                                       | -                                                             | 1,883                                | - |
| Decommissioning      provisions      | 126                                                                       | -                                                     | -                                                       | -                                                             | 126                                  | - |
| Disposals                            | –                                                                   | (61)                                                  | –                                                 | –                                                       | (61)                                 | - |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      31 December 2007             | 4,776                                                                     | 21                                                    | 163                                                     | 116                                                           | 5,076                                | 25 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| Depreciation                         |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      1 January 2007               | 231                                                                       | 11                                                    | 66                                                      | 36                                                            | 344                                  | 4 |
| Charge      for the year             | 561                                                                       | 9                                                     | 52                                                      | 23                                                            | 645                                  | 8 |
| Disposals                            | –                                                                   | (14)                                                  | –                                                 | –                                                       | (14)                                 | – |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      31 December 2007             | 792                                                                       | 6                                                     | 118                                                     | 59                                                            | 975                                  | 12 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| Net      book value                  |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      31 December 2008             | 3,684                                                                     | 63                                                    | 3                                                       | 34                                                            | 3,784                                | 11 |
|                                 |                                                                      |                                                  |                                                    |                                                          |                                 |   |
| At      31 December 2007             | 3,984                                                                     | 15                                                    | 45                                                      | 57                                                            | 4,101                                | 13 |

----

|   | 13 FINANCIAL      ASSETS  |
|--------|-------------------------------------|

|                     | Group                   | Company                 |
|--------------------------|-------------------------|-------------------------|
|                     | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                     |                    |                    |   |   |
| Cost                     |                    |                    |   |   |
| At      1 January 2008   | 25                      | 40                      | 32,891 | 32,891 |
| Revaluation              | (17)                    | (15)                    | – | – |
|                     |                    |                    |   |   |
| At      31 December 2008 | 8                       | 25                      | 32,891 | 32,891 |
|                     |                    |                    |   |   |

|   Name                          |  Country      of Incorporation |   | Proportion      of ownership interest and ordinaryshare      capital held |
|-------------------------------------------|-------------------------------------|--------|---------------------------------------------------------------------------|
|                                      |                                | 2008   | 2007                                                                      |
| Forum      Philippine Holdings Limited    | Jersey                              | 100%   | 100%                                                                      |
| Forum      (FEI) Limited                  | Jersey                              | 100%   | 100%                                                                      |
| Forum      (GSEC101) Limited (1)          | Jersey                              | 100%   | 100%                                                                      |
| Forum      (Nido Matinloc) Limited        | Jersey                              | 100%   | 100%                                                                      |
| Forum      Exploration Inc                | Philippines                         | 66.67% | 66.67%                                                                    |
| Forum      Energy Philippines Corporation | Philippines                         | 100%   | 100%                                                                      |

|   |  (1)Forum      (GSEC101) Limited has established a registered branch office in the      Philippines. |
|--------|-----------------------------------------------------------------------------------------------------------|

|   | 14 INVESTMENTS      IN ASSOCIATED COMPANIES |
|--------|--------------------------------------------------|

|                                      | Group                   | Company                 |
|-------------------------------------------|-------------------------|-------------------------|
|                                      | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                      |                    |                    |   |   |
| At      1 January 2008                    | –                 | 1,081                   | – | – |
| Share      of operating loss of associate | –                 | (180)                   |   |   |
| Reclassification                          | –                 | (901)                   | – | – |
|                                      |                    |                    |   |   |
| At      31 December 2008                  | –                 | –                 | – | – |
|                                      |                    |                    |   |   |

----

|   | 14      INVESTMENTS IN ASSOCIATED COMPANIES -CONTINUED |
|--------|--------------------------------------------------------|

|                                                |                         | Proportion      of ownership interest      and ordinary share      capital held |
|-----------------------------------------------------|------------------------------|--------------------------------------------------------------------------------------|
|                                                | Country      ofIncorporation | 2008                                                                                 | 2007 |
|                                                |                         |                                                                                 |   |   |
| Forum      Cebu Coal Corporation                    | Philippines                  | 40%                                                                                  | 40% |
| Forum      Coal Cebu Holdings Inc                   | Philippines                  | 40%                                                                                  | 40% |
|                                                |                         |                                                                                 |   |   |
| Summary      of financial information on associates |                         |                                                                                 |   |   |
|                                                |                         |                                                                                 |   |   |
|  2008                                          | AssetsUS$’000          | LiabilitiesUS$’000                                                             | EquityUS$’000 | Profit/(Loss) US$’000 |
|                                                |                         |                                                                                 |   |   |
| Forum      Cebu Coal Corporation                    | 5,630                        | 6,030                                                                                | (400) | 682 |
| Forum      Coal Cebu Holdings Inc                   | 3,458                        | 3,194                                                                                | 264 | (468) |
|                                                |                         |                                                                                 |   |   |
| 2007                                                |                         |                                                                                 |   |   |
| Forum      Cebu Coal Corporation                    | 3,426                        | 4,519                                                                                | (1,083) | (840) |
| Forum      Coal Cebu Holdings Inc                   | 3,924                        | 3,331                                                                                | 593 | 390 |
|                                                |                         |                                                                                 |   |   |
|                                                |                         |                                                                                 |   |   |

|   | 15 ADVANCES      TO ASSOCIATED COMPANIES – NON-CURRENTASSETS |
|--------|-------------------------------------------------------------------------|

|                     | Group                   | Company                 |
|--------------------------|-------------------------|-------------------------|
|                     | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                     |                    |                    |   |   |
| At      1 January 2008   | –                 | 3,159                   | – | – |
| Additions                | –                 | 689                     |   |   |
| Reclassified             | –                 | (3,848)                 | – | – |
|                     |                    |                    |   |   |
| At      31 December 2008 | –                 | –                 | – | – |
|                     |                    |                    |   |   |

|   | 16 INVENTORIES |
|--------|---------------------|

|                        | Group                   | Company                 |
|-----------------------------|-------------------------|-------------------------|
|                        | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                        |                    |                    |   |   |
| Materials      and supplies | 77                      | 117                     | – | – |
|                        |                    |                    |   |   |

----

|   | 17 RECEIVABLES |
|--------|---------------------|

|                                  | Group                   | Company                 |
|---------------------------------------|-------------------------|-------------------------|
|                                  | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                  |                    |                    |   |   |
| Prepayments                           | 13                      | 34                      | 17 | 19 |
| Other      receivables                | 262                     | 330                     | 15 | 44 |
|                                  |                    |                    |   |   |
|                                  | 275                     | 364                     | 32 | 63 |
|                                  |                    |                    |   |   |
| Advances                              |                    |                    |   |   |
| Advances      to associated companies | 3,165                   | 3,848                   | – | – |
|                                  |                    |                    |   |   |
| Total      receivables                | 3,440                   | 4,212                   | 32 | 63 |
|                                  |                    |                    |   |   |

|   | 18 FINANCIAL      ASSETS |
|--------|-------------------------------|

|                                           | Group                   | Company                 |
|------------------------------------------------|-------------------------|-------------------------|
|                                           | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                           |                    |                    |   |   |
| Amounts      due from subsidiary undertakings: |                    |                    |   |   |
| Cost                                           |                    |                    |   |   |
| At      1 January 2008                         | –                 | –                 | 15,692 | 17,471 |
| Additions                                      | –                 | –                 | 356 | 1,007 |
| Repayment                                      | –                 | –                 | (3,981) | (2,786) |
|                                           |                    |                    |   |   |
| At      31 December 2008                       | –                 | –                 | 12,067 | 15,692 |
|                                           |                    |                    |   |   |

|   | 19 NON-CURRENT      ASSETS HELD FOR SALE |
|--------|-----------------------------------------------|

|                                                          | Group                   | Company                 |
|---------------------------------------------------------------|-------------------------|-------------------------|
|                                                          | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                                          |                    |                    |   |   |
| At      1 January 2008                                        |   901         | –                 | – | – |
| Share      of operating profit of associate                   | 90                      | –                 | – | – |
| Reclassification      from investments in associate companies | –                 | 901                     | – | – |
|                                                          |                    |                    |   |   |
| At      31 December 2008                                      | 991                     | 901                     | – | – |
|                                                          |                    |                    |   |   |

----

|   | 20 LIABILITIES |
|--------|---------------------|

|                                                                | Group                   | Company                 |
|---------------------------------------------------------------------|-------------------------|-------------------------|
|  Current                                                       | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                                                |                    |                    |   |   |
| Trade      payables                                                 | 19                      | 34                      | 19 | 34 |
| Other      payables                                                 | 120                     | 186                     | 49 | 119 |
| Employee      benefits                                              | 71                      | 24                      | – | – |
| Tax      payable                                                    | 25                      | 39                      | – | 29 |
|                                                                | 235                     | 283                     | 68 | 182 |
|                                                                |                    |                    |   |   |
| Advances                                                            |                    |                    |   |   |
| Advances      from associate companies                              | 2,011                   | 0                       | – | – |
|                                                                | 2,246                   | 283                     | 68 | 182 |
|                                                                |                    |                    |   |   |
| The      Group advances from associate companies are interest free. |                    |                    |   |   |
|                                                                |                    |                    |   |   |
| All      amounts fall due for payment within one year.              |                    |                    |   |   |
|                                                                |                    |                    |   |   |
| Non-current      liabilities                                        |                    |                    |   |   |
|                                                                |                    |                    |   |   |
| Other      payables                                                 | 3,613                   | 4,158                   | – | – |
| Deferred      tax liabilities                                       | 102                     | 90                      | – | – |
| Decommissioning      liabilities                                    | 126                     | 126                     | – | – |
|                                                                | 3,841                   | 4,374                   | – | – |

|   | 21 SHARE      CAPITAL |
|--------|----------------------------|

|  Current                      |  2008                  |  2008                         |  2007                                                       |  2007  |
|------------------------------------|----------------------------------|------------------------------------|------------------------------------------------------------------|------------------|
| Group      and Company             | Number                           | US$’000                      | Number                                                           | US$’000    |
| At      1 January 2008             | 28,711,709                       | 5,197                              | 28,636,709                                                       | 5,182            |
|                               |                             |                               |                                                             |             |
| Additions                          |   1,372,412            | 246                                | 75,000                                                           | 15               |
| At      31 December 2008           | 30,084,121                       | 5,443                              | 28,711,709                                                       | 5,197            |
|                               |                             |                               |                                                             |             |
|                               |                             |                               |                                                             |             |
|                               |                             |                               |                                                             |             |
|   Group      and Company | AuthorisedNumberof      10p each |   Number                 | Allotted,      Share called      up and fully      paid US$ |  PremiumUS$ |
|                               |                             |                               |                                                             |             |
| At      1 January 2008 (1)    | 100,000,000                      | 28,711,709                         | 5,196,884                                                        | 48,695,846       |
| 28      August 2008 (2)       |     –  |     303,663(1) | 56,703                                                           | –          |
| 1      September 2008 (3)     |     –  | 418,749(2)                    | 74,403                                                           | –          |
| 4      September 2008 (4)     |     –  | 590,000(3)                         | 104,831                                                          | 220,146          |
| 8      September 2008 (5)     |     –  | 60,000(4)                          | 10,661                                                           | 22,388           |
| At      31 December 2007           | 100,000,000                      | 30,084,121                         | 5,443,482                                                        | 48,938,380       |
|                               |                             |                               |                                                             |             |

|   |   |
|--------|--------|

| (1)   | On      28 August 2008 the company issued 303,663 Ordinary Shares of 10p each      under the Long Term Incentive plan at parvalue |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| (2)   | on      1 September 2008 the company issued 418,749 Ordinary Shares of 10p each      under the Long Term Incentive plan at parvalue |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | On      4 September 2008 the company issued 590,000 Ordinary Shares of 10p each      under the share option plan for 31p pershare |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| (4)   | On      8 September 2008 the company issued 60,000 Ordinary Shares of 10p each      under the share option plan for 31p pershare. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

----

|                        |                |            | Number      of Options |            |            |        |
|-----------------------------|---------------------|-----------------|------------------------|-----------------|-----------------|-------------|
| Exercise                    | Outstanding         | Granted         | Surrendered            | Cancelled       | Exercised       | Outstanding | Final |
| price                       | as      at          | during      the | during      the        | during      the | during      the | As      at  | expiry      dates |
|                        | 1      January 2008 | year            | year                   | Year            | year            | 31/12/2008  |   |
|                        |                |            |                   |            |            |        |   |
|                        |                |            |                   |            |            |        |   |
| £0.31      (US$0.45)*  | 650,000             | 2,567,000       | –                | –         | 650,000         | 2,567,000   | December      2018 |
| £0.735      (US$1.06)* | 681,000             | –         | 410,000                | –         | –         | 271,000     | February      2009 |
| £0.935      (US$1.35)* | 500,000             | –         | –                | 500,000         | –         | –     | December      2008 |
| £1.12      (US$1.62)*  | 524,207             | –         | 308,207                | –         | –         | 216,000     | February      2009 |
| £1.21      (US$1.75)*  | 24,793              | –         | 24,793                 | –         | –         | –     | February      2009 |
|                        |                |            |                   |            |            |        |   |
|                        |                |            |                   |            |            |        |   |
|                        | 2,380,000           | 2,567,000       | 743,000                | 500,000         | 650,000         | 3,054,000   |   |

|   | Inputs      to the valuation model |
|--------|------------------------------------|

| Grant      date                         | 1      Aug 2005           | 15      Aug 2005          | 25      May 2006          | 6      Dec 2006      | 27      Nov 2007                | 19      Dec 2008          |
|-----------------------------------------|---------------------------|---------------------------|---------------------------|---------------------------|---------------------------------|---------------------------|
| Share price at date of      grant  | £1.12      (US$2.19) | £1.21      (US$2.30) | £0.93      (US$1.77) | £0.73      (US$1.39) | £0.28      (US$0.56)       | £0.25      (US$0.38) |
| Exercise      price                     | £1.12      (US$2.19) | £1.21      (US$2.30) | £0.93      (US$1.77) | £0.73      (US$1.39) | £0.31      (US$0.61)  | £0.31      (US$0.46) |
| Volatility                              | 25%                       | 25%                       | 40%                       | 40%                       | 40%                             | 40%                       |
| Option      life                        | 10      years             | 10      years             | 5      years              | 5      years              | 10      years                   | 10      tears             |
| Dividend      yield                     | –                   | –                   | –                   | –                   | –                         | –                   |
| Risk-free      investment rate          | 4.5%                      | 4.5%                      | 5%                        | 5%                        | 5%                              | 4%                        |
| Employee      turnover                  | –                   | –                   | –                   | –                   | –                         | –                   |

|   |   |
|--------|--------|

|   | (i)The      annualised volatility of the Company’s shares since its floatation on the      AIM market. |
|--------|--------------------------------------------------------------------------------------------------------------|

|   | (ii)The      volatility of comparable listed companies in the mining, oil and gas      sector, based on historical share price information from the      London Business School for a ten-year period dating back to      1995. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Grant      date | 1      Aug 2005           | 15      Aug 2005          | 25      May 2006          | 6      Dec 2006      | 27      Nov 2007          | 19      Dec 2008          |
|-----------------|---------------------------|---------------------------|---------------------------|---------------------------|---------------------------|---------------------------|
|            |                      |                      |                      |                      |                      |                      |
| Fair      value | £0.35      (US$0.51) | £0.37      (US$0.54) | £0.32      (US$0.46) | £0.31      (US$0.45) | £0.11      (US$0.16) | £0.13      (US$0.20) |
|            |                      |                      |                      |                      |                      |                      |

| Tranche | Event      and performance hurdle                                                                                          | Shares      under option |
|---------|----------------------------------------------------------------------------------------------------------------------------|--------------------------|
|    |                                                                                                                       |                     |
|    | (i)Forum      share price or market capitalisation target surpassed prior to 15 May      2011:                             |                     |
| 1       | £0.47                                                                                                                 | 275,000                  |
| 2       | £1.25                                                                                                                 | 220,000                  |
| 3       | £1.75      or £60m market capitalisation                                                                         | 240,000                  |
| 4       | £2.25                                                                                                                 | 240,000                  |
| 5       | £2.75      or £90m market capitalisation                                                                         | 240,000                  |
| 6       | £3.25                                                                                                                 | 240,000                  |
| 7       | £3.75                                                                                                                 | 240,000                  |
| 8       | (ii)Coal      revenues for 2006 and 2007 achieve or exceed coal budget, as approved by      the Board on 27 June 2006 | 150,000                  |
| 9       | (iii)Coal      revenues for 2008 achieve or exceed coal budget, as approved by the Board      on 27 June 2006              | 150,000                  |
|    |                                                                                                                       |                     |

| Tranche | Event      and performance hurdle                                                                                          | Shares      under option |
|---------|----------------------------------------------------------------------------------------------------------------------------|--------------------------|
|    |                                                                                                                       |                     |
|    | (i)Forum      share price or market capitalisation target surpassed prior to 15 May      2011:                             |                     |
| 1       | £0.47                                                                                                                 | 0                        |
| 2       | £1.25                                                                                                                 | 0                        |
| 3       | £1.75      or £60m market capitalisation                                                                         | 0                        |
| 4       | £2.25                                                                                                                 | 0                        |
| 5       | £2.75      or £90m market capitalisation                                                                         | 0                        |
| 6       | £3.25                                                                                                                 | 0                        |
| 7       | £3.75                                                                                                                 | 0                        |
| 8       | (ii)Coal      revenues for 2006 and 2007 achieve or exceed coal budget, as approved by      the Board on 27 June 2006 | 0                        |
| 9       | (iii)Coal      revenues for 2008 achieve or exceed coal budget, as approved by the Board      on 27 June 2006              | 0                        |
|    |                                                                                                                       |                     |

----

|   | Inputs      to the valuation model |
|--------|------------------------------------|

|  Grant      date             | 20      December2007 |
|-----------------------------------|----------------------|
|                              |                 |
| Share      price at date of grant | £0.285          |
| Exercise      price               | As      above        |
| Volatility                        | 40%                  |
| Option      life                  | 10      years        |
| Dividend      yield               | –              |
| Risk-free      investment rate    | 5%                   |
| Employee      turnover            | –              |

| Tranche | Event      and performance hurdle                                                                                         | £ | US$          |
|---------|---------------------------------------------------------------------------------------------------------------------------|--------|--------------|
|    |                                                                                                                      |   |         |
|    | (iv)Forum      share price or market capitalisation target surpassed prior to 15 May      2011:                           |   |         |
| 1       | £0.47                                                                                                                | 0.1998 | 0.3956       |
| 2       | £1.25                                                                                                                | 0.5042 | 0.9580       |
| 3       | £1.75      or £60m market capitalisation                                                                        | 0.3668 | 0.6969       |
| 4       | £2.25                                                                                                                | 0.2691 | 0.      5113 |
| 5       | £2.75      or £90m market capitalisation                                                                        | 0.1997 | 0.3794       |
| 6       | £3.25                                                                                                                | 0.1513 | 0.2875       |
| 7       | £3.75                                                                                                                | 0.1162 | 0.2208       |
| 8       | (v)Coal      revenues for 2006 and 2007 achieve or exceed coal budget, as approved by      the Board on 27 June 2006 | 0.6950 | 1.321        |
| 9       | (vi)Coal      revenues for 2008 achieve or exceed coal budget, as approved by the Board      on 27 June 2006              | 0.6590 | 1.321        |

|   | 22 MOVEMENT      IN RESERVES |
|--------|-----------------------------------|

|                                                        | 2008 US$’000                      | 2007 US$’000           |
|-------------------------------------------------------------|----------------------------------------------|-----------------------------------|
|                                                        |                                         |                              |
| Group      attributable to the equity holders of the parent |                                         |                              |
| At      1 January 2008                                      | 47,433                                       | 49,979                            |
| Loss      for the year                                      | (4,425)                                      | (3,503)                           |
| Share      option charge                                    | 334                                          |      843 |
| Issue      of shares                                        |     488                  |      114 |
|                                                        |                                         |                              |
| At      31 December 2008                                    | 43,830                                       | 47,433                            |
|                                                        |                                         |                              |
| Minority      interest                                      |                                         |                              |
| At      1 January 2008                                      | 1,485                                        | 1,872                             |
| Minority      share of net loss for the period              |        78 |    (387)           |
|                                                        |                                         |                              |
| At      31 December 2008                                    | 1,563                                        | 1,485                             |
|                                                        |                                         |                              |
| Company                                                     |                                         |                              |
| At      1 January 2008                                      | 50,714                                       | 52,006                            |
| Loss      for the period                                    |   (4,070)                          | (2,278)                           |
| Share      option expense                                   |       334      |      872 |
| Issue      of shares                                        | 488                                          | 114                               |
|                                                        |                                         |                              |
| At      31 December 2008                                    | 47,466                                       | 50,714                            |
|                                                        |                                         |                              |
|                                                        |                                         |                              |

----

|   | 22 MOVEMENT      IN RESERVES – CONTINUED |
|--------|-----------------------------------------------------|

|   | 23 COMMITMENTS |
|--------|---------------------|

|   | 24 FINANCIAL      COMMITMENTS |
|--------|------------------------------------|

|                                                            |   | Land      andBuildings 2008 US$’000 |   | Land      andBuildings2007 US$’000 |
|-----------------------------------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------|
|                                                            |   |                                                |   |                                          |
| Operating      leases with an option to terminate within 1 year |   | 32                                                  |   | 28                                            |
|                                                            |   |                                                |   |                                          |
|                                                            | 21     | 28                                                  | 5      | 6                                             |
|                                                            |   |                                                |   |                                          |

|   | 25 CASH FLOW      NOTES |
|--------|-----------------------------------|

|                                                              | Group                   | Company                 |
|-------------------------------------------------------------------|-------------------------|-------------------------|
|                                                              | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                                              |                    |                    |   |   |
| Cash      and cash equivalents comprise:                          |                    |                    |   |   |
| Cash      available on demand                                     | 42                      | 278                     | 42 | 196 |
| Short-term      deposits                                          | 2,532                   | 2,041                   | 2,491 | 2,041 |
|                                                              |                    |                    |   |   |
|                                                              | 2,574                   | 2,319                   | 2,533 | 2,237 |
|                                                              |                    |                    |   |   |
| Significant      non-cash transactions                            |                    |                    |   |   |
| Investing      activities                                         |                    |                    |   |   |
| Equity      consideration for termination of service agreement    | -                       | 113                     | - | - |
|                                                              |                    |                    |   |   |
|                                                              |                    |                    |   |   |
| DISCONTINUED      CASH FLOW MOVEMENTS                        |                    |                    |   |   |
|                                                              | Group                   | Company                 |
|                                                              | 2008 US$’000 | 2007 US$’000 | 2008 US$’000 | 2007 US$’000 |
|                                                              |                    |                    |   |   |
| Cash      flows from discontinued operations:                     |                    |                    |   |   |
| Profit/(loss)      before taxation                                | 90                      | (180)                   | - | - |
| Adjustments      for:                                             |                    |                    |   |   |
| Share      of operating (profit)/loss of associate                | (90)                    | 180                     | - | - |
|                                                              |                    |                    |   |   |
| Net      cash from operating activities                           | -                       | -                       | - | - |
|                                                              |                    |                    |   |   |
| Investing      activities                                         |                    |                    |   |   |
| Repaid/(advanced)      from/to associated companies               | 2,694                   | (689)                   | - | - |
|                                                              |                    |                    |   |   |
| Net      increase/(decrease) in cash from discontinued operations | 2,694                   | (689)                   | - | - |

----

|   | 26 FINANCIAL      INSTRUMENTS |
|--------|------------------------------------|

|   | •Cash      flow interest rate risk |
|--------|------------------------------------------|

|   | •Foreign      currency risk |
|--------|-----------------------------------|

|   | •Liquidity      risk |
|--------|----------------------------|

|   | •Credit      risk |
|--------|-------------------------|

|   | •Trade      and other receivables |
|--------|-----------------------------------------|

|   | •Cash      and cash equivalents |
|--------|---------------------------------------|

|   | •  Trade      and other payables |
|--------|--------------------------------------------------|

|   | •Advances      to associate companies |
|--------|---------------------------------------------|

|                         | 2008 US$’000 | 2007 US$’000 |
|------------------------------|-------------------------|-------------------------|
|                         |                    |                    |
| British      pounds sterling | 666                     | 195                     |
| US      dollars              | 1,905                   |   2,091       |
| Philippine      peso         | 3                       | 33                      |
|                         |                    |                    |

|                             | 2008 US$’000 | 2007 US$’000 |
|----------------------------------|-------------------------|-------------------------|
|                             |                    |                    |
| Interest      from bank deposits | 21                      | 137                     |
|                             |                    |                    |

|                             | 2008 US$’000 | 2007 US$’000 |
|----------------------------------|-------------------------|-------------------------|
|                             |                    |                    |
| Interest      from bank deposits | 21                      | 83                      |
|                             |                    |                    |

----

|   | 26 FINANCIAL      INSTRUMENTS - CONTINUED |
|--------|------------------------------------------------|

|  Current                          | US      DollarUS$’000 | UK      SterlingUS$’000 | Philippine      PesoUS$’000 | 2008 US$’000 |
|----------------------------------------|-----------------------------|-------------------------------|-----------------------------------|-------------------------|
|                                   |                        |                          |                              |                    |
| At      31 December 2008               |                        |                          |                              |                    |
| Cash      and cash equivalents         | 1,905                       | 666                           | 3                                 | 2,574                   |
| Trade      and other receivables       | 178                         | 32                            | 65                                | 275                     |
| Advances      to associate companies   | 3,165                       | -                             | -                                 | 3,165                   |
| Trade      and other payables          | -                           | (69)                          | (166)                             | (235)                   |
| Advances      from associate companies | (2,011)                     | -                             | -                                 | (2,011)                 |
| Net      asset/(liabilities)           | 3,237                       | 629                           | (98)                              | 3,768                   |
|                                   |                        |                          |                              |                    |
| At      31 December 2007               |                        |                          |                              |                    |
|                                   |                        |                          |                              |                    |
| Cash      and cash equivalents         | 2,091                       | 195                           | 33                                | 2,319                   |
| Trade      and other receivables       | 276                         | 64                            | 24                                | 364                     |
| Advances      to associate companies   | 3,848                       | -                             | -                                 | 3,848                   |
| Trade      and other payables          | (34)                        | (183)                         | (66)                              | (283)                   |
|                                   |                        |                          |                              |                    |
| Net      asset/(liabilities)           | 6,181                       | 76                            | (9)                               | 6,248                   |
|                                   |                        |                          |                              |                    |

----

----

|   | 26 FINANCIAL      INSTRUMENTS - CONTINUED |
|--------|------------------------------------------------|

|   | Cash      and cash      equivalents                             666                          1,867                     2,533 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Trade      and other      receivables                                             32                                         -                          32 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Trade      and other      payables                                              (69)                                         -                        (69) |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash      and cash equivalents                                   196                             2,041                2,237 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Trade      and other      receivables                                               63                -                                  63 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Trade      and other      payables                                                   (182)                -                              (182) |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1      month                                            77        132                        25        83  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2/3      months                                                               43                  99        43        99 |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4/6      months                                                  115     52          -            - |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6/12      months                                                2,011       -           -            - |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                        | 2008                       | 2007                               |
|-----------------------------------------------------------------------------------------------------------------------------|----------------------------|------------------------------------|
|                                                                                                                        | CarryingvalueUS$’000 |  MaximumexposureUS$’000 | Carrying valueUS$’000 |  MaximumexposureUS$’000 |
|                                                                                                                        |                       |                               |   |   |
| Cash      and cash equivalents comprise:                                                                                    | 2,574                      | 2,574                              | 2,319 | 2,319 |
| Trade      and other receivables                                                                                            | 275                        | 275                                | 364 | 364 |
| Advances      to associate companies                                                                                        | 3,165                      | 3,165                              | 3,848 | 3,848 |
|                                                                                                                        | 6,014                      | 6,014                              | 6,531 | 6,531 |
|                                                                                                                        |                       |                               |   |   |
| The      company's maximum exposure to credit risk by class of financial instrument      is shown in the table below:  |                       |                               |
|                                                                                                                        | 2008                       | 2007                               |
|                                                                                                                        | CarryingvalueUS$’000 | MaximumexposureUS$’000       | Carrying valueUS$’000 | MaximumexposureUS$’000 |
|                                                                                                                        |                       |                               |   |   |
| Cash      and cash equivalents                                                                                              | 2,533                      | 2,533                              | 2,237 | 2,237 |
| Trade      and other receivables                                                                                            | 32                         | 32                                 | 63 | 63 |
|                                                                                                                        | 2,565                      | 2,565                              | 2,300 | 2,300 |
|                                                                                                                        |                       |                               |   |   |

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|   | 27 RELATED      PARTY TRANSACTIONS |
|--------|-----------------------------------------|

|   | 28 CONTINGENT      LIABILITIES |
|--------|-------------------------------------|

|   | 29 POST      BALANCE SHEET EVENTS |
|--------|----------------------------------------|

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| This      notice of meeting is important and requires your immediate      attention.If      you are in any doubt as to the contents of this document and/or the action      you should take, you are recommended to seek personal financial advice      from your bank manager, stockbroker, solicitor, accountant or other      independent financial adviser authorised under the Financial Services and      Markets Act 2000.If      you have sold or transferred all of your shares in the Company, please      send this document and all accompanying documents to the purchaser or      transferee, or to the stockbroker, bank or other agent through or to whom      the transfer was effected so that they can be passed on to the person who      now owns the shares.  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Forum      Energy plc(Registered in England and      Wales withcompany number      5411224)Notice      of Annual General Meeting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|  To be valid the Form of Proxy      for use in connection with the Meeting should be completed, signed and      returned to reach the Company's registrars, Share Registrars Ltd, Craven      House, West Street, Farnham, Surrey GU9 7EN by not later than      ●[a.m.][p.m.] on ● April 2009.  The completion and return      of the Form of Proxy will not preclude you from attending and voting in      person at the Meeting should you wish.  For full details on      proxy appointments, see the notes to the Notice of Annual General Meeting      and the Form of Proxy.                                                                                                                                                                 |

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| 1.   | To      receive the audited financial statements of the Company for the year ended      31 December 2008, together with the directors' report and the auditor's      report on those financialstatements. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | To      re-elect Alan Henderson, who retires by rotation in accordance with the      Company's articles of association. |
|----------------|-------------------------------------------------------------------------------------------------------------------------|

| 3.   | To      elect Dr Walter W. Brown as a director who, having been appointed since      the last Annual General Meeting, offers himself for re-election in      accordance with the Company's articles of  association. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | To      elect Andrew Mullins as a director who, having been appointed since the      last Annual General Meeting, offers himself for re-election in accordance      with the Company's articles ofassociation. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | To      re-appoint BDO Stoy Hayward LLP as auditors of the Company to hold office      from the conclusion of this Annual General Meeting until the conclusion of      the next general meeting at which accounts are laid before the      Company. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | To      authorise the directors to determine the remuneration of the      auditors. |
|----------------|-------------------------------------------------------------------------------------|

| 7.   | That,      the directors be and they are hereby generally and unconditionally      authorised pursuant to Section 80, Companies Act 1985 (the "Act") to exercise all      powers of the Company to allot relevant securities (as defined in section      80(2) of the Act) provided that this authority shall be limited to      relevant securities up to an aggregate nominal amount of [£1,001,801]      provided that such authority shall be in addition to any existing      authority and unless previously revoked, varied or extended, this      authority shall expire at the conclusion of the next Annual General      Meeting of the Company, except that the Company may at any time before      such expiry make an offer or agreement which would or might require      relevant securities to be allotted after such expiry and the Directors may      allot relevant securities in pursuance of such an offer or agreement as if      this authority had not expired. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 8.   | That      the directors be and they are hereby empowered pursuant to section 95(1)      of the Act to allot equity securities (as defined in section 94(2) of the      Act) of the Company wholly for cash where such allotment is either      pursuant to the authority of the Directors under section 80 of the Act      conferred by Resolution 7 above, or by virtue of section 94(3A) of the      Act, in either case as if Section 89(1) of the Act did not apply to such      allotment provided that the power conferred by this resolution shall be      limited to: |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | the      allotment of equity securities in connection with an offer of equity      securities to the holders of ordinary shares in the capital of the Company      in proportion as nearly as practicable to their respective holdings of      such shares, but subject to such exclusions or other arrangements as the      directors may deem necessary or expedient in relation to fractional      entitlements or legal or practical problems under the laws or requirements      of any regulatory body or any stock exchange;  and |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | the      allotment, otherwise than pursuant to sub-paragraph (a) above, of equity      securities up to an aggregate nominal value equal to      [£300,841], |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Dated:      ● April 2009                                         | By      order of the Board                      |
|------------------------------------------------------------------------|-------------------------------------------------|
| Registered      Office:120      Bridge Road, Chertsey, Surrey KT16 8LA | Andrew      MullinsCompany      Secretary  |

| 1.   | A      member who is entitled to attend, speak and vote may appoint a proxy to      attend, speak and vote instead of him.  A proxy need not also be      a member of the Company but must attend the AGM in order to represent you.      A member may appoint more than one proxy provided each proxy is appointed      to exercise rights attached to different shares (so a member must have      more than one share to be able to appoint more than one      proxy).  A form of proxy is enclosed.  The notes to      the form of proxy include instructions on how to appoint the Chairman of      the AGM or another person as proxy.  To be effective the form      must reach the Company's registrars, Share Registrars Ltd of Craven House,      West Street, Farnham, Surrey GU9 7EN, by no later than ●[a.m.][p.m.] UK      time on ● April 2009. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Copies      of the executive directors' service contracts with the Company and any of      its subsidiary undertakings and letters of appointment of the      non-executive directors are available for inspection at the registered      office of the Company during the usual business hours on any weekday      (Saturday, Sunday or public holidays excluded) from the date of this      notice until the conclusion of theAGM. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Please      note that communications regarding the matters set out in this notice of      Annual General Meeting will not be accepted in electronic      form. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The      Company pursuant to regulation 41 of the Uncertificated Securities      Regulations 2001, specifies that only those shareholders registered in the      register of members of the Company at ● [a.m.][p.m.] on ● April 2009 (or      if the AGM is adjourned, 2 working days before the time fixed for the      adjourned AGM) shall be entitled to attend and vote at the AGM in respect      of the number of shares registered in their name at that time. Any changes      to the register of members after such time shall be disregarded in      determining the rights of any person to attend or vote at the      AGM. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ORDINARY      BUSINESS | FOR                                                                                                                                   | AGAINST | VOTE      WITHHELD(Note 2) |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------|
| 1.                     | To      receive the directors' report and audited financial statements for the      year ended 31 December 2008 (ordinary resolution) |    |                       |   |
| 2.                     | To      re-elect Alan Henderson as a director (ordinaryresolution)                                                                    |    |                       |   |
| 3.                     | To      elect Dr Walter W. Brown as a director (ordinary    resolution)                                                               |    |                       |   |
| 4.                     | To      elect Andrew Mullins as a director (ordinary resolution)                                                                      |    |                       |   |
| 5.                     | To      re-appoint BDO Stoy Hayward LLP as auditors (ordinary      resolution)                                                        |    |                       |   |
| 6.                     | To      authorise the directors to fix the remuneration of the auditors (ordinary      resolution)                                    |    |                       |   |
| SPECIAL      BUSINESS  |                                                                                                                                  |    |                       |
| 7.                     | To      authorise the directors to allot relevant securities (ordinary      resolution)                                               |    |                       |   |
| 8.                     | To      enable the directors to allot shares for cash without first offering them      to existing shareholders (special resolution)  |    |                       |   |

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| (1)   | A      member who is entitled to attend, speak and vote may appoint a proxy to      attend, speak and vote instead of him.  A proxy need not also be      a member of the Company but must attend the AGM in order to represent      you.  A member wishing to appoint someone other than the      Chairman of the Meeting as his or her proxy should insert that person's      name in the space provided in substitution for the reference to "the Chairman of the      Meeting" (and delete that reference) and initial the      alteration. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Please      indicate by inserting an "X" in the appropriate      box how you wish your vote to be cast on the Resolutions.  If      you mark the box "vote withheld" it will mean that your proxy will abstain      from voting and, accordingly, your vote will not be counted either for or      against the relevant resolution.  If you  fail to      select any of the given options, the proxy can vote as he or she chooses      or can decide not to vote at all. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | If      the proxy is being appointed for less than your full entitlement, please      indicate above your signature the number and class of shares in relation      to which that person is authorised to act as your proxy.  If      left blank, your proxy will be deemed to be authorised in respect of your      full voting entitlement or, if this proxy form has been issued in respect      of a designated account for a shareholder, the full voting entitlement for      that designated account. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | A      member may appoint more than one proxy provided each proxy is appointed to      exercise rights attached to different shares (so a member must have more      than one share to be able to appoint more than one proxy).  A      separate form of proxy must be deposited for each proxy      appointed.  Further copies of this form may be obtained from the      Company Secretary or you may photocopy this form.  If you      appoint multiple proxies, please indicate above your signature, the number      and class of shares in relation to which the person named on this form is      authorised to act as your proxy.  Please also indicate by      ticking the box provided if the proxy instruction is one of multiple      instructions being given.  All forms must be signed and returned      to the Company Secretary in the same envelope.  Where multiple      proxies are appointed, failure to specify the number of shares to which      this proxy appointment relates or specifying a number which exceeds the      number held by the member when totalled with the number specified on other      proxy appointments by the same member, will render all the appointments      invalid. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | To      be valid, this form of proxy together with any power of attorney or other      authority under which it is signed or a notarially certified copy of such      power or authority must be received by post or (during normal business      hours only) by hand at the offices of the Company's registrars, Share      Registrars Ltd of Craven House, West Street, Farnham, Surrey GU9 7EN, by      no later than ●[a.m.][p.m.] UK time on ● April  2009. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | The      appointment of a proxy will not preclude a member from attending the      Meeting and voting in person but if he or she does so this proxy      appointment will terminateautomatically. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | An      individual member or his attorney must sign this form.  If the      member is a company, this form of proxy must be executed under the common      seal or signed on its behalf by an officer or attorney of the      company. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8)   | In      the case of joint holders, the proxy appointment of the most senior holder      will be accepted to the exclusion of any appointments by the other joint      holders.  For this purpose, seniority is determined by the order      in which the names are stated in the register of members of the Company in      respect of the joint holding. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | A      member wishing to change his or her proxy instructions should submit a new      proxy appointment using the methods set out, and by the time limit      specified, in note 5.  Any changes to proxy instructions      received after that time will be disregarded.  A member who      requires another form should contact the Company Secretary. Subject to      note 4, if a member submits more than one valid proxy appointment, the      appointment received last before the time limit in note 5 will take      precedence. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10)   | A      member wishing to revoke his or her proxy appointment should do so by      sending a notice to that effect to the Company's registrars as set out in      note 5.  The revocation notice must be received by the Company's      registrars by the time limit set out in note 5.  Any revocation      notice received after this time will not have effect. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 1.1   | Certificate      of Continuance of the Registrant (incorporated by reference to Exhibit 3.1      to the Registrant’s Registration Statement on Form F-1, File No. 33-81290      (the “Registration”); * |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.2   | By-Laws      of the Registrant (incorporated by reference to Exhibit 3.2 to the      Registration Statement); * |
|-----------------|-----------------------------------------------------------------------------------------------------------------|

| 4.1 | Consulting      Agreement dated March 1, 2004 between the Company and David Robinson      *; |
|-----|----------------------------------------------------------------------------------------------|

| 4.2 | Consulting      Agreement dated March 1,      2004 between the Company and Barry Stansfield  *; |
|-----|-------------------------------------------------------------------------------------------------|

| 4.3 | Consulting      Agreement dated November 23,      2003 between the Company and Larry Youell*; |
|-----|-----------------------------------------------------------------------------------------------|

| 4.4 | Consulting      Agreement dated March 1, 2004 between the Company and David Wilson      * |
|-----|-------------------------------------------------------------------------------------------|

| 4.5 | Consulting      Agreement dated March 1, 2004 between the Company and David    *; |
|-----|-----------------------------------------------------------------------------------|

| 4.6   | Exchange      and Release Agreement between Tracer Petroleum Corporation and      Transmeridian Exploration, Inc., dated March 16, 2001;  * |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| 4.7   | Share      Purchase Agreement dated March 11, 2003, as amended by agreements dated      March 21, and April 2, 2003; * |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

| 4.8   | Amendment      dated March 21, 2003 to Share Purchase Agreement dated March 11, 2003 as      amended by an agreement dated April 2, 2003;* |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| 4.9   | Amendment      dated April 2, 2003 to Share Purchase Agreement dated March 11, 2003 as      amended by agreement dated March 21, 2003;* |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | List      of Subsidiaries *; |
|----------------|------------------------------|

| 11.   | Code      of Ethics *; |
|-----------------|------------------------|

| 12.1 | Certification      by the Chief Executive Officer and Chief Financial Officer pursuant to      section 302 of the Sarbanes-Oxley Act of 2002 (filed      herewith); |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1 | Certification      by the Chief Executive Officer and Chief Financial Officer pursuant to      section 906 of the Sarbanes-Oxley Act of 2002 (filed      herewith); |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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