SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 20  F



___

Registration Statement pursuant to Section 12(b) or 12)(g) of the Securities Exchange Act of 1934

Or

X

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended   June 30, 2005

Or

____

Transaction Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from  __________________ to ____________________

Or

_____

Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this shell company report _____________________



For the transition period from _________________ to _______________________



Commission file number  000-51236



RIPPLE LAKE DIAMONDS INC.

(Exact name of registrant as specified in its charter)



British Columbia, Canada

(Jurisdiction of incorporation or organization)



#305, 595 Howe Street

Vancouver, British Columbia, V6C 2T5

(Address of principal executive offices)



Securities to be registered pursuant to section 12 (b) of the Act:  None





Securities to be registered pursuant to section 12(g) of the Act:  Common Shares, no par value

(Title of Class)



Securities for which there is a reporting obligation pursuant to section 15(d) of the Act:   None



Indicate the number of outstanding shares of each of the Companys classes of capital or common stock as of the close of the period covered by the annual report.



Title of Each Class

Outstanding at June 30, 2005



Common Shares, no par value

23,289,550



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



Yes

X

No



If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.



X

Yes

No



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



Yes

X

No



Indicate by check mark which financial statement item the registrant has elected to follow.



X

Item 17

Item 18



If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No



Yes

X

No





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TABLE OF CONTENTS

Part

Item

Page



Forward-Looking Statements

4

I

1

Identity of Directors, Senior Management and Advisors

4



2

Offer Statistics and Expected Timetable

4



3

Key Information

4



Selected Financial Data

4



Exchange Rate Data

5



Capitalization and Indebtedness

6



Reason for the Offer and Use of Proceeds

6



Risk Factors

6



4

Information on the Company

9



History and Development of the Company

9



Business Overview

10



Property Plants and Equipment

22



5

Operating and Financial Review and Prospects

22



Financing Activities

23



Operating Results

24



Liquidity and Capital Resources

24



Research and Development

25



Patents and Licenses

25



Trend Information

25



Off-Balance Sheet Information

25



Contractual Obligations

26



Safe Harbor

26



6

Directors, Senior Management and Employees

26



Directors and Senior Management

26



Compensation

28



Board Practices

30



Employees

30



Share Ownership

30



Options to Purchase Securities

32



7

Major Shareholders and Related Party Transactions

35



Major Shareholders

35



Related Party Transactions

35



8

Financial Information

35



Statements and Other Financial Information

35



Significant Changes

36



9

The Offer and Listing

36



Offer and Listing

32



Plan of Distribution

36



Markets

36



Selling Shareholders

37



Dilution

37



Expenses of the Issue

37



10

Additional Information

37



Share Capital

37



Memorandum and Articles of Association

37



Material Contracts

39



Exchange Controls

40



Taxation

40



Dividends and Paying Agents

41



Statement By Experts

41



Documents on Display

41



Subsidiary Information

41



11

Quantitative and Qualitative Disclosure about Market Risk

42



12

Description of Securities Other than Equity Securities

42

II

13

Default, Dividend Arrearages and Delinquencies

42



14

Material Modifications to the Rights of Security Holders

42



15

Controls and Procedures

42



16A

Audit committee Financial Expert

43



16B

Code of Ethics

43



16C

Principal Accountant Fees and Services

43



16D

Exemptions from the Listing Standards for Audit Committees

43



16E

Purchasers of Equity Securities by the Issuer and Affiliated Purchasers

43

III

17

Financial Statements

43



18

Financial Statements

44



19

Exhibits

44



Signatures

45



Financial Statements





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INTRODUCTION



As used herein, except as the context otherwise requires, the term we refers to Ripple Lake Diamonds Inc., a corporation organized under the laws of the Province of British Columbia, Canada.



We publish our financial statements expressed in Canadian Dollars and prepare a compilation statement to comply with U.S. GAAP. In this document, references to "US dollars" or "US$" are to the currency of the United States of America. Otherwise our Financial Statements and disclosure are in Canadian Dollars.



Our fiscal year ends on June 30 of each year. References in this document to a particular year are to the fiscal year unless otherwise indicated.



FORWARD-LOOKING INFORMATION



This registration statement contains forward-looking statements and information relating to Ripple Lake Diamonds Inc.that are based on beliefs of our management as well as assumptions made by and information currently available to us.  When used in this document, the words anticipate, believe, estimate, expect, intend, plan, and project and similar expressions, as they relate to Ripple Lake Diamonds Inc. or our management, are intended to identify forward-looking statements.  Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions.  Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, changes in business strategy and various other factors, both referenced and not referenced in this registration statement.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein.





PART I



ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS



Not applicable.  Refer to Item 6 - Directors, Senior Management and Employees - Directors  and  Senior  Management" herein.



ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE



Not applicable.



ITEM 3.

KEY INFORMATION



Selected Financial Data



The summary  financial information set forth below should be read in conjunction with, and is qualified in its entirety by reference to, our  financial statements as of and for the years ended June 30, 2005 and June 30, 2004, together with the notes thereto, which appear elsewhere in this annual report.  Our financial statements as of and for the years ended June 30, 2005 and June 30, 2004 have been audited by Amisano Hanson Chartered Accountants.



Our financial statements are presented in Canadian dollars and have been prepared in accordance with generally accepted accounting principles in Canada.  Our financial statements presented in this registration statement have been reconciled to generally accepted accounting principals in the United States of America ("U.S. GAAP").



The selected financial data set forth in the following tables is expressed in Canadian dollars (Cdn$).



Condensed Statements of Operations for the year ended June 30, 2005:



|                             | Fiscal years ended
|---------------------------- | ------------------
|                             | June 30, 2005     
|Revenues                     | $    2,256        
|Net Loss                     | 921,040           
|Deficit, beginning of period | 18,301            
|Deficit, end of period       | 939,341           
|Loss per share               | 0.05              



Note:

Diluted loss per share has not been presented as the effect on basic loss per share would be anti-dilutive.



Condensed Balance Sheet Information for the year ended June 30, 2005



|                                      | Fiscal years ended
|------------------------------------- | ------------------
|                                      | June 30, 2005     
|Current Assets                        | $    388,407      
|Mineral Properties and Capital Assets | 3,186,673         
|Total Assets                          | 3,575,080         
|Current/Total Liabilities             | 482,778           
|Net Working Capital                   | (94,371)          
|Shareholders Equity                   | 3,092,302         



Exchange Rates



We maintain our books of account in Canadian dollars.  Our audited financial statements are prepared in accordance with generally accepted auditing standards in Canada.  All references to the dollar herein are to the lawful currency of Canada unless designated as US$.



The following table sets forth, for the periods indicated, certain exchange rates based on the noon buying rate with the Bank of Canada for cable transfers in Canadian dollars.  Such rates are the number of United States dollars per one (1) Canadian dollar and are the inverse of rates quoted by the Federal Reserve Bank of New York for Canadian dollars per US$1.00.  On December 28, 2005, the exchange rate was US$1.00 per Cdn$1.1639.  The high and low exchange rates for each month during the previous six months were as follows:



High

Low



November 2005

1.1961

1.1657

October 2005

1.1887

1.1659

September 2005

1.1882

1.1611

August 2005

1.2187

1.1889

July 2005

1.2432

1.2051

June 2005

1.2577

1.2256



The average exchange rate is based on the average of the exchange rates on the last day of each month during such periods.



|                                                          | Year Ended June 30        
|--------------------------------------------------------- | --------------------------
|                                                          | 2005                      
|Rate at end of Period
Average Rate during Period
Low
High | 1.2256
1.2497
1.774
1.3348



Capitalization and Indebtedness



Not applicable.



Reason for the Offer and Use of Proceeds



Not applicable.



Risk Factors



An investment in our securities involves significant risks, including the following:



Company risks



Capitalization and Commercial Viability.



If our exploration programs are successful, additional funds will be required for the development of an economic ore body and to place it in commercial production. The only sources of future funds presently available to us is the sale of equity capital, or the offering by us of an interest in our properties to be earned by another party or parties carrying out further exploration or development thereof. There are a number of risks that may cause us to be unable to obtain adequate financing in the future or that the terms of such financing would be favorable.  The most important of those risks is that we do not succeed in finding evidence that our exploration properties contain economic quantities of diamonds which is strong enough to satisfy potential investors.  The other important risk relating to obtaining financing is that financial markets may not be interested in investing in diamond exploration at the time we need the money to advance our exploration programs. Failure to obtain such additional financing will result in the delay or indefinite postponement of further exploration and development of our properties and will result in us losing some of our properties which would cause us to go out of business.



We have a limited operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease operations.



We were incorporated in February 2004 and we have limited operations, but have not realized any revenues since inception. We have no operating history upon which an evaluation of our future success or failure can be made. Our net loss from inception to June 30, 2005 is $939,341. Our ability to achieve and maintain profitability and positive cash flow is dependent upon



·

our ability to locate, explore and develop a profitable mineral property;

·

our ability to generate revenues; and

·

our ability to reduce exploration costs.



Based upon current plans, we expect to incur operating losses in future periods. We have not generated any revenues from our operations and we dont anticipate any in the foreseeable future. This will happen because there are expenses associated with the research and exploration of our mineral properties. We may not be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.



Our plan of operation is limited to finding an ore body. As such we have no plans for revenue generation. Accordingly, you should not expect any revenues from operations.



Our plan of operation and the funds we raised from our public offering were used for exploration of our properties to determine if there is an ore body beneath the surface. Exploration does not contemplate removal of the ore. We have no plans or funds for ore removal. Accordingly, we will not generate any revenues as a result of your investment.



Because the probability of an individual prospect ever having reserves is extremely remote any funds spent on exploration will probably be lost.



The probability of an individual prospect ever having reserves is extremely remote. In all probability the properties do not contain any reserves. As such, any funds spent on exploration will probably be lost which will result in a loss of your investment.



We have no known mineral reserves.



We have no known mineral reserves. Without mineral reserves, we have nothing to economically remove. If we have nothing to economically remove, we cannot generate income and if we cannot generate income we will have to cease operation which will result in the loss of your investment.



Because we do not carry insurance and exploration operations are subject to risks, if we are successfully sued and a judgment is rendered against us, we may have to cease operations.



Exploration operations generally involve a high degree of risk. Hazards such as unusual or unexpected formations and other conditions are involved. We may become subject to liability for pollution, cave-ins or hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position. We are not insured against any environmental risks. Insurance against environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production, has not been generally available to companies within the industry. We will evaluate the cost and coverage of the insurance against certain environmental risks that is available to determine if it would be appropriate to obtain such insurance. Without such insurance, and if we becomes subject to environmental liabilities, the payment of such liabilities would reduce or eliminate our available funds or could exceed the funds we have to pay such liabilities and result in bankruptcy. Should we be unable to fund fully the remedial cost of an environmental problem, we might be required to enter into interim compliance measures pending completion of the required remedy.



If we do not have title to our properties, we may not own anything which will result in the loss of your investment.



While we have performed our own due diligence with respect to title to our properties, this can not be construed as a guarantee of title. The properties may be subject to prior unregistered agreements or transfers or native land claims and title may be affected by undetected defects.



We are small and do not have much capital and must limit our exploration.



Because we are small and do not have much capital, we must limit our exploration. Because we may have to limit our exploration, we may not find any minerals, even though our properties may contain mineralized material. Without any minerals we cannot generate revenues and you will lose your investment.



Our key management have other outside business activities and will only be devoting part of their time to our operations.



Because Messrs. Lipsett, Cavey, Crowhurst and Chan, our officers and directors, have other outside business activities and will only be devoting part of their time to our operations, our operations may be sporadic and occur at times which are convenient to Messrs. Lipsett, Cavey, Crowhurst and Chan. As a result, exploration of our properties may be periodically interrupted or suspended.



We may not have access to all of the supplies and materials for our exploration activities which could cause us to delay or suspend operations.



Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as dynamite, and certain equipment such as bulldozers and excavators that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. Our exploration efforts will be continued on the receipt of further funding. Once further funding is obtained we will attempt to locate products, equipment and materials. If we cannot find the products and equipment we need we will have to suspend our exploration plans until we do find the products and equipment we need.



Our operations may be adversely affected by potential conflicts of interest.



Certain of our directors serve as directors of other junior mining companies, and therefore it is possible that a conflict may arise between their duties as a director our company and their duties as a director or officer of such the other junior mining companies.   Should such a conflict arise, our operations could be adversely affected as a result of the diversion of corporate opportunities to one or more of the junior mining companies.



Investment risks



Because our securities are subject to penny stock rules, you may have difficulty reselling your shares.



Our shares as penny stocks are covered by Section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell our securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. For sales of our securities, the broker/dealer must make a special suitability determination and receive from its customer a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect our shareholders ability to dispose of their stock.



Because all of our assets and our officers and directors are located outside the United States of America, it may be difficult for an investor to enforce within the United States any judgments obtained against us or any of our officers and directors.



All of our assets are located outside of the United States and we do not currently maintain a permanent place of business within the United States. In addition, our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for an investor to effect service of process or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts of Canada and other jurisdictions would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in Canada or other jurisdictions against us or our directors and officers predicated upon the securities laws of the United States or any state thereof.



We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S. investors.



Since PFIC status will be determined by us on an annual basis and will depend on the composition of our income and assets from time to time (as further discussed below), we cannot assure you that we will not be considered a PFIC for any taxable year. Such a characterization could result in adverse U.S. tax consequences to you if you are a U.S. investor. In particular, absent an election described below, a U.S. investor would be subject to U.S. federal income tax at ordinary income tax rates, plus a possible interest charge, in respect of gain derived from a disposition of our shares, as well as certain distributions by us. In addition, a step-up in the tax basis of our shares would not be available upon the death of an individual shareholder. For this reason, if we are treated as a PFIC for any taxable year and you are a U.S. investor, you may desire to make an election to treat us as a "qualified electing fund" with respect to your shares (a "QEF election"), in which case you will be required to take into account a pro-rata share of our earnings and net capital gain for each year, regardless of whether we make any distributions to you. As an alternative to the QEF election, a U.S. investor may be able to make an election to "mark-to-market" our shares each taxable year and recognize ordinary income pursuant to such election based upon increases in the value of our shares. We will be classified as a PFIC for U.S. federal income tax purposes if 50% or more of our assets, including goodwill (based on an annual quarterly average), are passive assets, or 75% or more of our annual gross income is derived from passive assets. The calculation of goodwill will be based, in part, on the then market value of our common shares, which is subject to change.



We may issue additional shares of common stock in public offerings or private placements so your ownership interest in us may be diluted.



Because we may issue shares of common stock in public offerings or private placements in order to raise capital for our operations, your ownership interest may be diluted which results in your percentage of ownership in us decreasing.



Because our directors are involved in other junior mining companies there may be occasions where directors have a conflict of interest.



Because our directors are involved in other junior mining companies there may be occasions where our directors have a conflict of interest regarding the selection of which mining company will be chosen to develop a new mineral property. There could also be a situation arise where we enter into a transaction with another company which has one or more directors in common with us which would create a conflict of interest.



ITEM 4.

INFORMATION ON THE COMPANY



History and Development of the Company



Our registered office in British Columbia is located at 595 Howe Street, 10th Floor, Vancouver, British Columbia, Canada V6C 2T5. Our head office and principal office is located at 595 Howe Street, Suite 305, Vancouver, British Columbia, Canada V6C 2T5.  Our telephone number is (604) 484-8264. We pay rent of $2,000 per month for office space. We lease a total of approximately 1,100 square feet from Trafalgar Financial (1985) Ltd., pursuant to a written lease agreement.



We were incorporated under the name, TCH Minerals Inc. on February 6, 2004, by registration of our Memorandum and Articles under the Company Act of British Columbia.  Our name was changed to Ripple Lake Minerals Inc. on May 13, 2004, and to Ripple Lake Diamonds Inc. on July 26, 2004.



We do not have any subsidiaries. Further, we have no plans to change our business activities or to combine with another business, and are not aware of any events or circumstances that might cause our plans to change.



On January 6, 2005, we completed our initial Canadian public offering of shares for gross proceeds of $1,600,000.  Our shares of common stock began trading on the TSX Venture Exchange on January 7, 2005 under the symbol RLD.  A total of 4,000,000 shares were issued in the offering at a price of $0.40 per share. Canaccord Capital Corporation, a Canadian registered broker/dealer, acted as our underwriter on a best efforts basis.



Canaccord Capital received (i) a commission in cash equal to 7.5% of the gross proceeds of the offering; (ii) warrants to acquire up to 400,000 shares of our common stock at a purchase price of $0.40 per share which warrants expire on January 6, 2006; and (iii) 200,000 shares of our common stock.



On June 15, 2005, we completed a private placement to an investment fund consisting of 2,222,223 common shares and 1,111,112 share purchase warrants, for gross proceeds of $1,000,000.30.  Each warrant entitles the holder to purchase one additional common share at a price of $0.50 per share, exercisable for a period of two years from June 15, 2005.  Canaccord Capital Corporation received a commission in cash equal to 7.5% of the private placement proceeds and warrants to acquire up to 222,222 of our common shares at a purchase price of $0.50, warrants which will expire on June 15, 2007.



Business Overview



Our properties are the TCH Project in Ontario and the KMD Property in Nunavut. We are an exploration stage corporation. An exploration stage corporation is one engaged in the search from mineral deposits or reserves which are not in either the development or production stage. We intend to conduct exploration activities on our properties.



We have spent the funds we received from our Canadian offering completed on January 6, 2005, in which we raised $1,600,000, to carry out exploration work on our natural resource properties.



We are an exploration stage company and there is no assurance that a commercially viable mineral deposit exists on any of the property, and further exploration will be required before a final evaluation as to the economic and legal feasibility is determined.



TCH Project, Ontario



We acquired by staking seven blocks of claims, named the Ripple Lake Claim Block, the Sandspit Claim Block, the Steel River Claim Block, the Pic Claim Block, the Foxtrap Claim Block, the Killala Claim Block, and the Islington Claim Block, located in north-central Ontario in the Thunder Bay Mining Division, known as the TCH Project. These properties comprise a total of 2,504 claim units in 182 claims with a total area of 40,064 hectares ("ha").



We also entered into five agreements dated March 2004, April 2005 and June 2005, whereby we acquired options (the Options) to earn a 100% interest in certain mineral claims, representing 167 units or 2,672 hectares, located in the Province of Ontario, Walsh, Foxtrap Lake and Killala Townships known as the TCH Project, for total cash consideration of $24,500 and total share consideration of 40,000 common shares. As of the year ended June 30, 2005, we have made additional cash payments totalling $18,500 and have issued an additional 55,000 common shares under these Options.



The future annual payments of cash and shares required under these Options are as follows:



Common

Cash

Shares

Year ended June 30,

2006

59,000

110,000

2007

61,000

125,000

2008

210,000

335,000

2009

30,000

20,000



360,000

590,000



We are also required to make all expenditures required to maintain the mineral claims in good standing and to pay the Optionors 2% of net smelter returns from the properties upon commercial production.



To maintain the above claims in good standing, we are required to spend a minimum of $25 per hectare on assessment work during the first two years after staking.



Summary Claim Status



|Summary            | CLAIM  # | UNITS | AREA (ha) | Assessment
|------------------ | -------- | ----- | --------- | ----------
|Ripple Lake Block  | 35       | 356   | 5,760     | $142,400  
|Sandspit Block     | 11       | 166   | 2,656     | $66,400   
|Steel River Block  | 9        | 136   | 2,176     | $54,400   
|Pic Block          | 7        | 108   | 1,728     | $43,200   
|Foxtrap Block      | 89       | 1,317 | 21,072    | $526,800  
|Islington Block    | 9        | 135   | 2,160     | $54,000   
|Killala Block      | 22       | 282   | 4,512     | $112,800  
|Killala West Block | 43       | 620   | 9,920     | $248,000  
|Glory              | 17       | 254   | 4,064     | $101,600  
|Prairie Lake South | 2        | 30    | 480       | $12,000   
|Prairie Lake West  | 2        | 30    | 240       | $12,000   
|Nuinsco            | 9        | 38    | 608       | $15,200   
|Ruffle             | 23       | 286   | 4,576     | $114,400  
|Totals             | 278      | 3,758 | 59,952    | $1,503,200



In addition to the above described properties, we entered into a property sharing agreement dated July 1, 2004 with Phoenix Matachewan Mines Inc., the holder of 18 mineral claims containing 189 units to the west of the TCH Project.  Pursuant to the Phoenix Agreement we have the right to explore for mineralized material on Phoenixs property and to acquire any part of the same by issuing 300,000 shares to Phoenix and granting to Phoenix a net returns royalty equal to 1% of the gross proceeds received by us if we prepare a feasibility study which incorporates reserves on such part of the Phoenix property. Phoenix was granted reciprocal rights for precious and base metals on the southern part of our property which is adjacent to Phoenixs properties.



We entered into two option agreements to acquire 51 additional claims within our TCH claim block in the Lake Superior area of Ontario.  We may extend the options by cash payments and share issuances on each of April 30, 2006 (total of $20,000 and 40,000 shares), April 30, 2007 (total of $20,000 and 40,000 shares), and April 30, 2008 (total of $40,000 and 40,000 shares) (those claims are included in the above Claims Summary table).



We have entered into an agreement with Nuinsco Resources Limited pursuant to which we have the right to explore for diamonds on Nuinscos nine claims in the Killala Township.  These claims are within the boundary of our TCH Project (those claims are included in the above Claims Summary table).  We will conduct and file the assessment work required on the Nuinsco claims prior to May 30, 2006 and may make annual payments of cash and stock to extend the option until May 30, 2008.  We will pay Nuinsco a royalty of 2% of the sales proceeds from any diamonds produced on the optioned claims.



In addition, we staked additional mineral claims in an area that is contingous to the optioned properties (those claims are included in the above Claims Summary table).  These additional claims are 100% owned by us.  The cost incurred to the year ended June 30, 2005 to stake these claims was $248,770.  Our interest in the TCH Project now totals 278 claims (3,758 units) or approximately 60,000 hectares (148,000 acres).



KMD Property, Nunavut



Pursuant to an agreement dated May 11, 2004 with KM Diamond Exploration Ltd. (KMD), we were granted an option, hereinafter called the "KMD Option," to purchase a 100% interest in a total of 15 claims (approximately 32,281 acres) located near Parker Lake and Brown Lake, Nunavut. We subsequently added to the property by staking an additional 47 contiguous claims (approximately 98,514 acres) during June 2004 for a total of 62 claims containing approximately 130,795 acres.



During January 2005 an additional 40 contiguous claims (approximately 53,354.50 acres) were added by staking. The total is 102 claims and approximately 184,150.02 acres or approximately 74,500 ha (collectively the KMD Property).  KMD is a company wholly owned by Felix Kaminsky, who subsequent to the date of the KMD Option became one of our officers.



The KMD Property is located approximately 960 km east-northeast of Yellowknife, NWT and approximately 770 km east of Canadas first producing diamond mine, the Ekati mine, operated by BHP Minerals.



The KMD Property consists of the 62 contiguous claims as set forth below, plus the 40 additional claims staked in January 2005.  All of the claims are unsurveyed and unpatented.



KMD Recorded Property Information



|Claim Name        | Tag Number | Area (ac.)       | Filing Date     | Expiration Date
|----------------- | ---------- | ---------------- | --------------- | ---------------
|                  |            |                  |                 |                
|KMD1              | F76234     | 2582.50          | June 26, 2003   | June 26, 2007  
|KMD2              | F76235     | 2582.50          | June 26, 2003   | June 26, 2008  
|KMD3              | F76236     | 2582.50          | June 26, 2003   | June 26, 2008  
|KMD4              | F76237     | 2582.50          | June 26, 2003   | June 26, 2008  
|KMD5              | F76238     | 2582.50          | June 26, 2003   | June 26, 2008  
|KMD6              | F76239     | 2582.50          | June 26, 2003   | June 26, 2008  
|KMD7              | F76240     | 2582.50          | June 26, 2003   | June 26, 2009  
|KMD8              | F76241     | 2582.50          | June 26, 2003   | June 26, 2009  
|KMD9              | F76242     | 2582.50          | June 26, 2003   | June 26, 2007  
|KMD10             | F76243     | 2582.50          | June 26, 2003   | June 26, 2007  
|KMD11             | F76266     | 1291.25          | June 26, 2003   | June 26, 2007  
|KMD12             | F76267     | 1291.25          | June 26, 2003   | June 26, 2009  
|KMD13             | F76268     | 1291.25          | June 26, 2003   | June 26, 2008  
|KMD14             | F76269     | 1291.25          | June 26, 2003   | June 26, 2009  
|KMD15             | F76270     | 1291.25          | June 26, 2003   | June 26, 2011  
|KMD 901           | F71931     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 902           | F71932     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 903           | F71934     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 904           | F88421     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 905           | F88422     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 906           | F88423     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 907           | F88424     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 908           | F88425     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 909           | F88426     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 910           | F88427     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 911           | F88428     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 912           | F88429     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 913           | F88430     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 914           | F88431     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 915           | F88432     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 916           | F88433     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 917           | F84981     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 918           | F84982     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 919           | F84983     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 920           | F84984     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 921           | F84985     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 922           | F84986     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 923           | F84987     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 924           | F84988     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 925           | F84989     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 926           | F84990     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 927           | F84991     | 405.90           | July 31, 2004 * | July 31, 2006* 
|KMD 928           | F84908     | 829.20           | July 31, 2004 * | July 31, 2006* 
|KMD 929           | F84909     | 1142.60          | July 31, 2004 * | July 31, 2006* 
|KMD 930           | F84910     | 495.50           | July 31, 2004 * | July 31, 2006* 
|KMD 931           | F84911     | 167.60           | July 31, 2004 * | July 31, 2006* 
|KMD 932           | F84912     | 1429.30          | July 31, 2004 * | July 31, 2006* 
|KMD 933           | F84913     | 1969.10          | July 31, 2004 * | July 31, 2006* 
|KMD 934           | F84914     | 1719.94          | July 31, 2004 * | July 31, 2006* 
|KMD 935           | F84915     | 1549.50          | July 31, 2004 * | July 31, 2006* 
|KMD 936           | F84916     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 937           | F84917     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 938           | F84918     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 939           | F84919     | 2582.50          | July 31, 2004 * | July 31, 2006* 
|KMD 940           | F84920     | 2324.25          | July 31, 2004 * | July 31, 2006* 
|KMD 941           | F84993     | 423.53           | July 31, 2004 * | July 31, 2006* 
|KMD 942           | F84994     | 1291.25          | July 31, 2004 * | July 31, 2006* 
|KMD 943           | F84995     | 1309.40          | July 31, 2004 * | July 31, 2006* 
|KMD 944           | F84996     | 1712.40          | July 31, 2004 * | July 31, 2006* 
|KMD 945           | F84997     | 1612.00          | July 31, 2004 * | July 31, 2006* 
|KMD 946           | F84998     | 2126.30          | July 31, 2004 * | July 31, 2006* 
|KMD 947           | F84999     | 531.50           | July 31, 2004 * | July 31, 2006* 
|Totals: 62 claims |            | 130,795.52 acres |                 |                



A minimum expenditure of $4.00 per acre is required during the first two years to maintain the claims in good standing.  However, the first filing of work need only be submitted on or before the second anniversary date of each claim.  If the claims are to be kept in good standing beyond the two-year period, a total of $2.00 per acre per year will have to be expended.  In addition, there is a $0.10 per acre fee for filing work on the claims.



We have the right to earn the initial 80% interest in the KMD Property from KMD subject to certain terms including:



(a)

payment of the sum of $20,000 on the execution of the KMD Option, which has been paid;



(b)

payment of the sum of $150,000 and the issuance of 200,000 of our common shares, which has paid;



(c)

the issuance of 150,000 common shares to KMD on or before February 14, 2005, which shares have been issued, and an additional 150,000 common shares to KMD on or before February 14, 2006; and



(d)

the issuance of 200,000 common shares at the time we exercise the option or at any time prior to December 31, 2007.



We also were required to carry out the following work programs to develop the property:



(a)

a work program consisting of sampling and sample analysis, involving a minimum expenditure of $375,000 during 2004, which was completed.  As of the year ended June 30, 2005, we have incurred $1,401,958 in exploration expenditures on the KMD Property in respect to the recommended Phase I program.  The results of the exploration programs carried out on the KMD Property were publicly announced on March 4, 2005;



(b)

a work program consisting of sampling, sample analysis, geophysical survey and additional agreed exploration, involving a minimum expenditure of $400,000 to be carried out during 2005, which work was carried out; and



(c)

a work program consisting primarily of drilling, involving a minimum of $450,000 to be carried out during 2006. We will use our best efforts to increase the expenditures for 2006 to $600,000.



Upon exercise of the Option, KMD will have an immediate vested royalty equal to 3% of all revenues from the sale of diamonds mined from the KMD Property (the 3% Royalty).  We may, at a time within three years after the exercise of the Option, purchase 1/3 of the 3% Royalty for a purchase price of $1,000,000, and may purchase an additional 1/3 of the 3% Royalty for an additional $1,000,000. In addition, we have the right to purchase the remaining 20% interest in the KMD Property at any time prior to the expiration of the three year period following the date of the exercise of the Option by issuing to KMD an additional 200,000 common shares.



OUR PROPERTIES



TCH Project, Ontario



Summary



We have staked ten properties in the Marathon area of north-central Ontario that have potential for diamond deposits. The 100% owned properties are named the Ripple Lake Claim Block, the Pic Claim Block, the Sandspit Claim Block, the Steel River Block, the Foxtrap Claim Block, the Killala Claim Block , the Islington Claim Block, the Glory Block and the Ruffle Block.. We also have optioned certain claims included within the contiguous claim block. These claims and optioned claim blocks totaling 278 claims are known collectively known as the TCH Project.



The TCH Project is located in north-central Ontario west of the town of Marathon. The seven properties lie in a 45km by 30km area centered at 87o 45 W longitude and 45o 45 N latitude that stretches north from the north shore of Lake Superior. The Trans Canada Highway, the CPR mainline and two Ontario Hydro high voltage power lines pass through the Ripple Lake Claim Block in the south part of the area. The town of Marathon lies 30 km to the east on the Trans Canada Highway and the major city of Thunder Bay is 270km to the west. Access into the northern part of the area is afforded by an extensive network of logging roads.



Property Description and Location



The TCH Project consisting of seven wholly owned claim groups and eight optioned claims are located in north-central Ontario in the Thunder Bay Mining Division on NTS maps 42D15 and 42E2 to the west and northwest of the town of Marathon. They lie in a 45km by 30km area centered at 87o 45 W longitude and 45o 45 N latitude that stretches north from the north shore of Lake Superior.



This project is made up of a total of 278 claims that involve 3,758 claim units with a total area of 59,952 ha.



Certain limited areas of the Ripple Lake Claim Block are crown grants or patented claims where the surface rights or both the surface rights and mineral rights are reserved. Where only the surface rights are held, access cannot be denied to the holder of the mineral rights without due cause.



To maintain the claims in good standing beyond the current expiration dates we are obligated to spend $1,503,200 on assessment work. The newly staked claims (all claims except the optioned claims) will expire between 18 and 24 months from the date of the LeBel Report. If both phases of the proposed exploration programs are completed within that time frame, we should have enough assessment credit to keep the claims in good standing for an additional year.  It is anticipated that we will be dropping certain claims after completing our work programs so that the actual assessment requirement will be less that the $1,503,200 amount. Sufficient work has already been completed to keep the claims with the 2005 and early 2006 expiration dates in good standing for at least one more year.



There are no known pre-existing liabilities, environmental or otherwise, in the area for which we can be held responsible. There are no unusual permit requirements for mineral exploration other than standard permitting for any issues related to water crossings where installation of a bridge is required.



Accessibility, Climate, Local Resources, Infrastructure and Physiography



The TCH Project lies approximately 30 km west of Marathon, Ontario. Marathon lies on Highway 17, the Trans Canada Highway, which provides all weather road access to the major centres of Thunder Bay to the west and Sault Ste. Marie to the east. Marathon has a small airport, serviced by regional airlines, which provide passenger and freight service from the larger centers of the Province of Ontario.



Access to the TCH Project is gained via the Trans Canada Highway, which passes the southern part of the Ripple Lake Claim Block. An extensive network of logging roads, which originate off the TCH Project provide reasonable vehicle access to the northern claim blocks. During exploration, access to the remoter parts of the properties might require a helicopter from Marathon. For drilling purposes the terrain and vegetation permits the construction of temporary drill roads.



The Canadian Pacific Railway mainline passes through the Ripple Lake Claim Block, as do two Ontario Hydro high voltage power lines. All essential services, such as food and lodging, are available in the town of Marathon. Marathon is the local logistical center of the three gold mines operating in the Hemlo area a further 30 km to the east. In addition to the comprehensive infrastructure, north-central Ontario features a resource-based economy attuned to mining exploration and development.



The topography in the area consists of low rolling to rugged hills with numerous lakes and swamp filled valleys typical of the Canadian Shield. The terrain is particularly rugged along the shore of Lake Superior on the Ripple Lake Claim Block, but becomes more subdued away for Lake Superior with distance to the north. Elevations range from 600 feet at Lake Superior to 1,500 feet at the hilltops. The average elevation is approximately 1,000 feet above sea level, with a maximum relief of not more than 500 feet. Glaciolacustrene deposits are generally restricted to low areas and may reach considerable depth in some of the larger drainage basins, but overburden is generally thin in most areas.



The vegetation in the area is boreal forest. On the higher ground the vegetation is predominantly spruce, birch and poplar with alder and maple undergrowth. Thick cedar swamps are characteristic of the low wet areas located throughout project area. All creeks and river systems drain southerly toward Lake Superior.



Climate is moderately dry summers with temperatures as high as 340C and snowy winters with temperatures as low as 400C. Exploration is possible year round with short hiatuses during the spring thaw and winter freeze up and is sometimes more efficient in the winter months when the water courses and swamps are frozen.



History



There was no previous diamond exploration activity on our property prior to our acquisition of the TCH Project.



Geology



The TCH Project lies at the junction of the Wawa and Quetico subprovinces of the Superior Structural Province of the Canadian Shield. The rocks comprise east-west trending interbedded Archean meta-sedimentary and meta-volcanic rocks intruded by granitic and mafic intrusive rocks. Younger Proterozoic intrusions include the Marathon diabase dyke swarm and alkalic intrusions, of the Coldwell and Prairie Lake alkalic-carbonatite complexes and lamprophyre dykes. The large number of dykes mapped in the area is clearly evident in the airborne magnetic survey as long linear anomalies with a variety of strikes. Included are some distinct magnetic lows which appear to reflect a north-northeast set of lamprophyre dykes.



The Trans-Superior Tectonic Zone or TSTZ extends north-northeast through the area and appears to be the locus of the considerable intrusive activity present. The TSTZ is similar to other tectonic features in the Canadian Shield.



Mineral Resources and Mineral Reserves



The TCH Project is in the exploration stage and no mineral resources have been found.



Exploration Operations



The TCH Project is at the exploration stage. We have initiated a multi-phase exploration program.



Exploration and Development



We completed our phase I exploration of the TCH Project during the fall of 2004 at a cost of approximately $530,000. We did not find an ore body; however, based upon our exploration, we decided to move on to Phase II, which consisted of airborne geophysics and detailed sampling.



During the three months ended June 30, 2005, we expended $485,392 in deferred exploration and acquisition costs on the TCH Project, which expenses included $50,139 in property acquisition, assessment and maintenance and $435,253 in exploration costs.  During the year ended June 30, 2005 we expended an aggregate of $1,029,897 in deferred exploration and acquisition costs on the TCH Project.



In addition to mineral sampling by the Ontario Geological Survey, the TCH Project was covered by a high-resolution helicopter magnetic and electromagnetic geophysical survey. This survey outlined a number of circular anomalies which look similar to the signature of kimberlite pipes found the world over. The TCH Project covers a number of these anomalies and is strategically located to incorporate as many anomalies as possible.



In November 2003, material collected from the Ripple Lake diatreme yielded three micro-diamonds from a 19.83 kg sample. This was the first direct indication of primary diamond mineralization in the area, which led us to acquire a land position in the area.  We also carried out a number of ground geophysical surveys in 2004 to verify a selection of airborne geophysical targets on the Ripple Lake Claim Block.  Several other, not readily accessible, geophysical targets on the TCH Project were examined by prospecting to determine their causes.



We completed the analysis of the 401samples collected in 2004 during January 2005.  On April 11, 2005 we announced results of the analysis of the 2004 sampling program.  Kimberlite indicator minerals, or KIM (pyrope, picroilmenite, chrome spinel, olivine and chrome-diopside) were identified in 60% of the samples collected during the 2004 exploration program.  Picroilmenite is the predominant KIM and pyrope is the second most abundant. By the chemical composition, six pyrope grains of the 99 that were analyzed belong to the diamond association (G10) group, and about ten are close to the diamond association. Among the seven analyzed kimberlitic chrome spinel grains, one belongs to the diamond field. This suggests that some diamondiferous kimberlites may be among the clastic material suppliers for Quaternary sediments in the Ripple Lake property. Ripple Lake's Exploration Manager, based on the mineral composition and morphology, the identified KIM's are related to the direct washout of near-by kimberlitic rocks and most probably, Group 1 kimberlites.



Eight dispersion haloes of the kimberlitic, short-transit associations (KIM-1) were identified in 2004 in the TCH area.  Among them, there are three first-priority prospective areas, showing the highest promise for finding primary sources of the KIM haloes within their boundaries, and five other local areas that are also of exploration interest. The OGS pyropes are also located in the recently identified priority areas of interest.



Based on these encouraging results, we acquired through staking, new claim blocks to the west, north and east of the existing claim block area. In addition to the 2004 mineral sampling, we completed, during the second quarter of 2005, an Aeroquest high-resolution helicopter magnetic and electromagnetic geophysical survey over the northern half of the TCH Diamond Project. The results of that survey and a re-interpretation of the previously flow 2001 government airborne survey are currently underway. A preliminary review of the data has outlined a number of circular anomalies which look similar to the signature of kimberlite pipes found the world over.



An extensive follow-up sampling program was carried out for us by KM Diamond Exploration Ltd. A preliminary report of the summer 2005 field work was received by us on September 20, 2005. That report contains sample location information for the 546 samples collected in 2005 and some preliminary comments on a sample believed to be kimberlitic. Full analytic results will be available following completion of laboratory analysis of the samples which will be available to us several months following our payment to the laboratory for the cost of the analytical work. We will require further financing to fund such work.



As at the date hereof we have not located mineralized material and we do not have an ore body.  There is no assurance that we will ever find mineralized material or that the TCH Project contains an ore body.



KMD Property, Nunavut



We were granted an option to purchase a 100% interest in a total of 15 claims containing approximately 32,281 acres located at Brown Lake, Nunavut and we have acquired by staking an additional contiguous 87 claims.  Together the claims contain approximately 141,465 acres which we call the KMD Property. The KMD Property is located approximately 960 km east-northeast of Yellowknife, NWT and approximately 770 km east of Canadas first producing diamond mine, the Ekati mine, operated by BHP Minerals.



Summary



The property lies within the Western Churchill Craton, Hearne Province, and is underlain by metasediments and gneisses of the MacQuiod belt and the Cross Bay plutonic complex, both of which are early Proterozoic in age.



We have completed our Phase I exploration work and are proceeding with further exploration of the property.



Property Description and Location



The KMD Property is located in Nunavut, approximately 120 km NW of Rankin Inlet, and is defined by geographical co-ordinates: 63o 39 N in the south and 63o 45N in the north, and 94o05 W in the west and 93o 50W in the east, within topo-sheets 55M9 and 55N12. The KMD Property consists of 102 contiguous claims. All of the claims are unsurveyed and unpatented.



A minimum expenditure of $4.00 per acre is required during the first two years to maintain the claims in good standing. However, the first filing of work need only be submitted on or before the second anniversary date of each claim. If the claims are to be kept in good standing beyond the two-year period, a total of $2.00 per acre per year will have to be expended. In addition, there is a $0.10 per acre fee for filing work on the claims.



Accessibility, Climate, Local Resources, Infrastructure and Physiography



Access to the area is by ski or float equipped aircraft or helicopter only, with the closest base being the float plane base located at Rankin Inlet, approximately 150 kilometres to the southeast.  A charter helicopter is often based in Rankin Inlet and can be utilized on a casual basis.  Fly camp style fieldwork can be completed using the Rankin helicopter, but a charter helicopter will need to be positioned on the KMD Property for full time work. There are several eskers in the area and some can be used as natural airstrips for tundra tire equipped twin otter fixed wing aircraft to position camp equipment, mobilize crews and provide other support services.  As well, float equipped fixed wing aircraft can land in many of the lakes throughout the area.



Rankin Inlet is serviced by commercial airline passenger service from points to the south including Yellowknife NWT and Winnipeg Manitoba, as well as Iqaluit to the east. Food, accommodation and expediting support services are available in Rankin Inlet.



The KMD Property is located in the barren lands, approximately 15 kilometers south of tidewater in Chesterfield Inlet off Hudson Bay.  Small stunted trees and shrubs with moss and lichen comprise the dominant vegetation types.  The climate is sub-arctic and experiences long, cold winters with temperatures dropping to -50°C.  Summers are short and temperatures can reach +25°C.  Daylight hours are long in the summer as the project area is in the far northern portion of Canada.  Elevations for the property vary from 250 metres to 410 metres above sea level.  Abundant lakes, bogs and swamps with low relief characterize the region.



It is possible to conduct exploration activities year-round with the exception of spring break-up and winter freeze-up.  During the winter months diamond drilling would be the only type of exploration reasonably possible and it would be hampered by the cold weather.  Both airborne and ground geophysical surveys can be completed during the spring and fall on the snow as long as there is enough light to work.  Winter surface sampling and mapping is virtually impossible due to snow cover and frozen ground conditions.  Water is extremely abundant and is available in sufficient quantities to supply virtually any mining need.  Power will need to be obtained via diesel generator, as there is no power infrastructure whatsoever in this part of Canada. The KMD Property covers a large area with plenty of space for the building of infrastructure for any advanced exploration or development.



The Inuit of Nunavut has selected approximately 350,000 km2 of the area of Nunavut for ownership of surface rights hereinafter called the Surface IOL as part of the 1993 Nunavut Lands Claims Agreement (NLCA). Additionally, approximately 38,000 km2 of land or 2% of the area of Nunavut, also includes the rights to all subsurface minerals hereinafter called the Subsurface IOL. As a result, there are essentially three levels of land ownership within Nunavut, as defined by Article 19 of the NCLA:



1.

Inuit Owned Lands (IOL) Surface and Subsurface Rights - (mineral rights included Subsurface IOL);



2.

IOL Surface Rights Only (mineral rights that are administered by Federal Government through DIAND  Surface IOL; and



3.

Crown (Public) Lands (mineral rights that are administered by Federal Government - DIAND).



The KMD Property falls within the Inuit Owned Lands Surface Rights Only, only the north-east corner of the KMD Property, consisting of three full sized claims and five partial claims, lies on Crown Lands. The vendor of the property, KM Diamond Exploration Ltd., secured a Land Use Permit from the Kivalliq Inuit Association, hereinafter called the KIA dated May 13, 2004 for the period July 16, 2004 to July 16, 2005, which allowed us to conduct exploration consisting of prospecting and sampling.  Further exploration or changes to the type of exploration will require amendments to the Land Use permit and although the KIA can require that we comply with certain land use issues, such issues are not expected to restrict advanced exploration activities.



History



No previous diamond exploration activity has been conducted on the KMD Property.



Geological Setting



The KMD Property lies in a portion of the northern Hearne domain, western Churchill Province.  The Hearne province consists of Archean rocks of the Hearne Craton and overlying supracrustal rocks that were intensely reworked during the 1.81.9 Ga Trans-Hudson Orogen. South of the Snowbird Tectonic Zone, the northern Hearne domain is predominantly composed of Archean juvenile crust which is interpreted to be underlain by continental crust of the Rae domain.



There are two theories regarding the tectonic nature of Snowbird Tectonic Zone (STZ).  According to one theory, the STZ has been interpreted as an Early Proterozoic (Paleoproterozoic) suture between two Archean continents, the Rae and Hearne.  However, other geological and geophysical interpretations represent the STZ as an Early Proterozoic intraplate fault, while geochronological data indicate that it is an Archean structure.  The most recent data obtained suggests a more complicated picture for this tectonic zone. Baldwin et al. conclude that there is an important 1.9 Ga high PT metamorphic event in the Snowbird tectonic zone that overprints an earlier Archean metamorphism (c. 2.522.55 Ga).



The KMD Property area includes the eastern part of the Archean MacQuoid supracrustal belt and the Cross Bay plutonic complex.  The MacQuoid supracrustal belt is divided into a southern, predominantly metasedimentary homocline with panels of gneissic tonalite, flanked to the north by a predominantly volcanic belt intruded by tonalite-granodiorite plutons.  The oval Cross Bay plutonic complex is principally composed of tonalitic and dioritic gneiss units and granite mostly of Archean intrusions.  Along its southern margin, the plutonic complex is separated from the supracrustal belt by the approximately east-trending, strike-slip, mylonitic Big Lake shear zone.  Folding and boudinage of east-trending mafic dykes indicates that significant Paleoproterozoic deformation occurred in the Cross Bay complex.



Property Geology



The KMD property geology has not been mapped in detail other than specified above in regional geology.



Exploration,Sampling Method and Approach



We completed a Phase I exploration program on the KMD Property during the fall of 2004.which consisted of taking mineral samples from the surface of the KMD property and concentrating them by hand panning and sending them to a laboratory for analysis for kimberlite indicator minerals. We spent approximately $430,000 on Phase I.  The result of that process was that an ore body was not discovered; however, we determined that further exploration is warranted. As of the date hereof, we have not located mineralized material and we do not have an ore body. There is no assurance that we will ever find mineralized material or that our property contains an ore body.



Mineral Resources and Mineral Reserves



The KMD Property is at the exploration stage with no mineral resource or mineral reserve.



Exploration and Development



Our plan of exploration is divided into multiple Phases.



We completed initial exploration of the KMD Property . Based upon the results we have decided to move on to Phase II, consisting of airborne geophysics and additional detailed sampling of the targets developed in Phase I.



During the fiscal year ended June 30, 2005, we completed a study of the nickel thermometry of some of the collected G-9 pyrope grains, using a highly sophisticated exploration technique recently developed in South Africa and determined that the temperature and pressure conditions at the KMD Property were correct for the formation of diamondiferous kimberlites and that a significant portion of the G-9 grains analyzed fall inside the diamond stability field.



During the fourth fiscal quarter of 2005 we completed an airborne geophysical (magnetic and electromagnetic) survey of the KMD Property.  The survey was undertaken in order to further delineate possible sources (drill targets) of thousands of pyrope and other kimberlite indicator mineral grains, recovered from the samples collected in 2004.



An extensive follow-up sampling program was carried out for us by KM Diamond Exploration Ltd. and a preliminary report of the summer 2005 field work was received by us on September 20, 2005. That report contains sample location information and some preliminary geological discussions for the 752 samples collected in 2005.   Full analytic results will be available following completion of laboratory analysis of the samples, which will be available to us several months following payment of laboratory costs of the analytical work.  We will require further financing to fund such work.



Competitive factors



The mining industry is fragmented. We are a start up venture and compete with other exploration companies looking for mineralized material. We are one of the smaller exploration companies in existence. While we compete with other exploration companies, there is no competition for the exploration or removal of minerals from our properties. Readily available markets exist in Canada and around the world for the sale of diamonds. However the saleability of diamonds depends upon their size, clarity and other characteristics and we may not be able to economically sell any diamonds that we are able to recover.



Regulations



Our mineral tenure in Nunavut is subject to the Territorial Lands Acts of Canada and the related Territorial Land Use Regulations.  This Act and these Regulations forth rules for



(a)

locating claims;



(b)

posting claims;



(c)

working claims; and



(d)

reporting work performed.



In Ontario the rules governing those matters are contained in the Mining Act Ontario. We must comply with these laws to operate our business. Compliance with these rules and regulations will not adversely affect our operations.



Environmental law



We will become subject to the Canadian Environmental Assessment Act if economic quantities of mineralized material were to be found and a mine was to developed. This Act deals with environmental matters including matters relating to the exploration and development of mining properties. Its goals are to protect the environment through a series of regulations affecting:



1.

Health and Safety;



2.

Archaeological Sites; and



3.

Exploration Access.



However, we are an exploration company and will not be required to conduct an environmental assessment unless a mine is ultimately developed on our properties.



Exploration stage companies have no specific environmental requirements.  The only costs of compliance with environmental regulations in each of Ontario and Nunavut are the costs of returning the surface to its previous condition upon abandonment of the properties.  Normally those exploration reclaimation costs do not represent a significant expenditure. We cannot speculate on those costs in light of our ongoing plans for exploration.



Permits



In Ontario there is no regulatory requirement which is required to be undertaken before conducting exploration on a mineral claim by the claim holder.  The KMD property is located in a geographical area in Nunavut which is under the control of the Kivalliq Inuit Association pursuant to the Nunavut Land Claims Agreement with the Government of Canada.  In order to carry out mineral exploration in the Kivalliq administered area a land use license must be obtained. On June 26, 2002 Felix Kaminsky obtained Land Use License No. KVL 102B259 which authorizes prospecting to be carried out on the KMD property.



Labor



Initially, we intend to use the services of subcontractors for manual labor exploration work on our properties. Our only technical assistants will be our officers and directors.



Employees and employment agreements



At present, we have no employees, other than our officers and directors. We entered into a two year management contracts with Robert Lipsett dated July 1, 2004. Pursuant to this contract, Mr. Lipsett is to be paid $6,000 per month to act as our President and Chief Executive Officer.  We had entered into a management contract with Christopher Pollard whereby he would provide legal and administrative services at a monthly fee of $2,500; however, Mr. Pollard has since resigned as a director and officer.



We have entered into a consulting agreement with Felix Kaminsky, our exploration manager, dated June 1, 2004.  Pursuant to the contract, Dr. Kaminsky is to be paid $1,000 per day for each day he spends on our behalf, with a minimum of one day per month.  Dr. Kaminsky is not paid a salary or any other amount beyond his consulting fees for acting as our exploration manager.  In addition, Dr. Kaminsky will be reimbursed for all reasonable expenses.  . Kaminsky has also been granted a stock option to purchase 250,000 of our shares at $0.40 per share. Pursuant to his consulting contract, Dr. Kaminsky is responsible for proposing annual exploration budgets to our Board of Directors and to oversee all approved  exploration programs.   He is also responsible for reviewing and giving recommendations on any diamond properties for which development proposals are brought to us by third parties.  He is also responsible to assist in the presentation of our projects to potential sources of exploration financing.



We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt plans in the future.



Organizational Structure



Not applicable.



Property, Plants and Equipment



We are a natural resource company engaged in the acquisition and exploration of natural resource properties.



We have seven wholly owned claim blocks and eight optioned claims in the Marathon area of north-central Ontario that are called the TCH Project.   We also staked additional mineral claims in an area that is contiguous to the optioned properties.  Our interest in the TCH Project now totals 3,758 units or approximately 59,952 hectares.



We were granted an option to purchase a 100% interest in a total of 15 claims (approximately 32,281 acres) located at Brown Lake, Nunavut.  We acquired by staking an additional contiguous 87 claims containing approximately 141,465 acres which we call the KMD Property. The KMD Property is located approximately 960 km east-northeast of Yellowknife, NWT and approximately 770 km east of Canadas first producing diamond mine, the Ekati mine, operated by BHP Minerals.



ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS



Managements Discussion and Analysis of Financial Condition and Results of Operations



We are a start-up, exploration stage company and have not yet generated or realized any revenues from our business operations.



We are in the business of acquiring, exploring and evaluating interests in mineral properties.  Our current property interests are held for the purposes of exploration for precious metals and diamonds.



For the year ended June 30, 2005, we reported interest income of $2,256 as compared to $Nil for the period ended June 30, 2004.  The interest was earned on our cash and cash equivalents held during the year.  For the year ended June 30, 2005, we had net losses of $921,040 as compared to net losses of $18,301 for the period ended June 30, 2004.   The net losses for the period ended June 30, 2004 were for the period from our incorporation on February 6, 2004 to year end, so the net loss was not significant.  Our first full year of operations was fiscal 2005, during which we completed our public offering and carried out significant work on our properties, which is reflected in our net loss for the fiscal 2005.



During the fiscal year ended June 30, 2005 a total of 1,700,000 stock options were granted to directors, officers and consultants, exercisable at a price of $0.40 per share, with expiry dates ranging between one and five years from the date of granting.  No options were exercised as of the year ended June 30, 2005.



During the fiscal year ended June 30, 2005, 400,000 share purchase warrants were issued to our agent with respect to our public offering, with an exercise price of $0.40, expiring on January 6, 2006.  An additional 1,333,334 share purchase warrants were issued as part of a private placement, with an exercise price of $0.50 per share, expiring on June 15, 2007.   None of the share purchase warrants were exercised as of the year ended June 30, 2005.



During the period ended June 30, 2004 no share purchase warrants or stock options were granted or exercised.



Expenses for the fiscal year ended June 30, 2005 consisted of management fees, office, public and shareholder relations, filing fees, transfer agent fees and rent and other expenses that support our daily operations.  Expenses for the year ended June 30, 2005 were $986,296, being an increase of $967,995 compared to General and Administrative expenses of $18,301 during the period ended June 30, 2004, being our first five months of operation.  The significant increase in expenses for fiscal 2005 relate to our first full year of operations, which included completion of our public offering and carrying out exploration work on our properties.  The expenses incurred included management fees of $102,000 (2004 - $Nil), public and shareholder relations of $107,218 (2004 - $Nil), professional fees of $69,615 (2004 - $17,978), filing fees of $45,284 (2004 - $Nil), rent of $18,000 (2004 - $Nil), transfer agent fees of $10,487 (2004 - $Nil), office expenses of $7,580 (2004 - $106), printing costs of $2,264 and travel expenses of $7,846 (2004 - $Nil).



Financing Activities



During the year ended June 30, 2005, we completed our seed capital raising by the sale of 1,678,333 common shares at a price of $0.15 for proceeds of $251,750.



On January 7, 2005, we completed our initial Canadian public offering of 4,000,000 common shares at a price of $0.40 per share, for gross proceeds of $1,600,000. In addition to the agents compensation set forth below, we paid $105,457 of share issue costs to effect our initial public offering.



Canaccord Capital Corporation, which acted as our agent, received (i) a commission of $120,000, equal to 7.5% of the gross proceeds of the offering; (ii) 400,000 Canaccord Capitals Warrant, each such warrant entitled the holder to acquire one common share at a price of $0.40 per share up to January 6, 2006; and (iii) 200,000 corporate finance shares.



Our common shares commenced trading on January 7, 2005 on the TSX Venture Exchange under the symbol RLD.



On June 15, 2005, we completed a brokered private placement to a US based investment fund consisting of 2,222,223 units at a price of $0.45 per unit.  Each unit consisted of one common share and one-half share purchase warrant, with each whole warrant being exercisable into one common share at an exercise price of $0.50 per share, exercisable for a period of two years from June 15, 2005.  The private placement was completed pursuant to an exemption from prospectus requirements contained in Section 72(2)(4) of the Securities Act (British Columbia) and section 4(2) of the Securities Act of 1933.  Our agent, Canaccord Capital Corporation, received a cash commission of $75,000 and warrants to acquire up to 222,222 common shares at an exercise price of $0.50 per share, which warrants will expire on June 15, 2007.  In addition, we paid $3,800 in share issuance costs to effect the brokered private placement.



During the year ended June 30, 2005, 950,000 shares originally classified as escrow shares were repriced by regulatory authorities due to the fact that the holders were not principals.  As a result, the shares were reissued at $0.05 per share from $0.001 per share, for additional proceeds to us of $46,550.



During September 2005 we raised $280,110 from a non-brokered private placement of 622,466 units at a price of $0.45 per unit.  Each unit consists of one flow-through common share and one-half share purchase warrant, with each whole warrant entitling the holder thereof to purchase one common share at a price of $0.50 per share, exercisable for a period of one year.  No commission was paid with respect to this private placement.



Operating Results



We incurred a net loss of $921,040 for the year ended June 30, 2005 compared with a net loss of $18,501 during the period ended June 30, 2004.  These losses resulted in a net loss of $0.05 for the fiscal year ended June 30, 2005, compared to a loss of $0.02 for the period ending June 30, 2004.



During the fiscal 2005 year we received the results of the analysis of the samples collected at both of our projects during the 2004 Phase One exploration programs.  Based on the encouraging Phase One results, we completed the acquisition of additional claims at both projects and commissioned airborne magnetic surveys at both KMD and TCH to assist in the conduct of Phase 2 exploration programs on both properties and selection of drill targets.



The KMD Property, Nunavut



During the year ended June 30, 2005, we expended $1,887,330 in deferred exploration and acquisition costs related to the KMD Property, compared with $20,000 during the period ended June 30, 2004.  These major exploration expenses included $485,372 (2004 - $20,000) for additional staking and acquisition, $243,280 (2004 - $Nil) for campsite, $44,219 (2004 - $Nil) for data analysis, $95,827 (2004 - $Nil) for geological fee, $185,885 (2004 - $Nil) for geophysics, $161,232 for helicopter cost (2004 - $Nil), and $581,160 (2004 - $Nil) for sampling and processing.



The TCH Project, Ontario



During the year ended June 30, 2005, we expended $1,029,897 in deferred exploration and acquisition costs related to the TCH Project, compared with $248,173 during the previous period ended June 30, 2004.  These expenses included $163,177 (2004 - $147,405) in property acquisition and staking costs, $164,235 (2004 - $14,800) for data analysis, $89,190 (2004 - $16,638) for geological cost, $64,579 2004 - $Nil) for helicopter cost, $Nil for geophysics (2004 - $26,225), and $438,500 (2004 - $Nil) for sampling and processing.



Liquidity and Capital Resources



We have no known mineral resources and are not in commercial production on any of our properties and accordingly, we do not generate cash from operations.  We finance development and exploration activities by raising capital from equity markets from time to time.



During the year ended June 30, 2005 we completed a public offering of 4,000,000 common shares at a price of $0.40 per share for gross proceeds of $1,600,000.  We also completed a brokered private placement of 2,222,223 units at $0.45 per unit, for gross proceeds of $1,000,000.35.



Our cash position increased from $239,653 at June 30, 2004 to $262,734 at June 30, 2005 as a result of major funding for the sample and processing costs less administrative expenses and costs of our exploration programs.  Total assets increased from $838,113 at June 30, 2004 to $3,575,080 as of the year ended June 30, 2005.



We have no long-term debt. However as of June 30, 2005, we had a working capital deficiency of $94,371 and, accordingly, will require an early equity financing to fund additional exploration of our properties.



Related Party Transactions



During the year ended June 30, 2005, we incurred $102,000 (2004 - $Nil) in management and consulting services rendered by the President and a director.  For the fiscal year ended June 30, 2005 we also incurred $33,632 (2004 - $26,598) in deferred mineral property exploration services rendered by a company controlled by a director and officer.



These transactions are in the normal course of operations and are measured at the exchange amounts established and agreed to by the related parties.



Subsequent Events



In September 2005 we completed a non-brokered private placement of 622,466 units at a price of $0.45 per unit, with each unit consisting of one flow-through share and one-half warrant to purchase one non-flow through common.  Each whole warrant is exercisable for a period of one year at $0.50 per non-flow-through share.



In September 2005 we granted a total of 300,000 incentive stock options to an officer and to a consultant.



Outstanding Share Data



As at December 28, 2005 we had 24,017,016 common shares outstanding.  We had 2,000,000 incentive stock options outstanding, which are exercisable into an equivalent number of common shares.  In addition, there are 400,000 brokers warrants outstanding, which are exercisable into 400,000 common shares, 222,222 agents warrants exercisable into 222,222 common shares, in addition to 1,422,345 private placement warrants exercisable into 1,422,345 common shares.



Research and Development, Patents and Licences, etc.



Not applicable.



Trend Information



Not applicable.



Off-Balance Sheet Arrangements



Not applicable.



Contractual Obligations



Not applicable.



Safe Harbor



Not applicable.



ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



Directors and Senior Management



Our officers and directors are as follows:



|Name                       | Age | Position                                       
|-------------------------- | --- | -----------------------------------------------
|Robert Lipsett             | 58  | President, Chief Executive Officer and Director
|George Cavey, P.Geo.       | 50  | Vice President of Exploration and Director     
|Timothy Crowhurst          | 39  | Director                                       
|Foo Chan                   | 49  | Chief Financial Officer                        
|Dr. Felix Kaminsky, P.Geo. | 67  | Exploration Manager                            



Each director holds office until our next annual general meeting of shareholders or until his successor is duly elected or appointed, unless his office is earlier vacated in accordance with our articles or he becomes disqualified to act as a director. Officers serve at the discretion of the board and as a practice are appointed each year at a board meeting held following the annual general meeting.



Officers and Directors



Our officers and directors are:



Robert Lipsett, President, Chief Executive Officer and Director. Mr. Lipsett is a graduate of Weston High School (Toronto). Mr. Lipsett has been the CEO of Trafalgar Financial Group since 1985 and has 30 years of experience in developing and financing successful businesses and over 20 years experience in the mining business. He will spend approximately 65% of his time on our affairs.



George Cavey, P.Geo., Director, Vice-President Exploration. Mr. Cavey graduated from the University of British Columbia with a Bachelor of Science in 1976. He is the President of OreQuest Consultants Ltd., a Vancouver geological consulting company established in 1982. Mr. Cavey currently serves on the Canadian Securities Administrators Mining Advisory Committee and has been a councilor of the Association of Professional Engineers and Geoscientists of British Columbia. He is the former President of the Canadian Council of Professional Geologists. He will spend approximately 20% of his time on our affairs.



Timothy Crowhurst, Director.Mr. Crowhurst graduated from the Université de Nice, France, with a Certificat pratique de langue francaise in 1986. Mr. Crowhurst is President of Sea Level Communications Ltd., a strategic planning and issue management consultancy. Mr. Crowhurst is a senior business and public policy communicator in the areas of environmental issues management, product branding, and the development and implementation of strategic communications initiatives. Prior to establishing Sea Level Communications Ltd. in 1993, he served as a senior policy and communications advisor to several Canadian Cabinet Ministers. He will spend approximately 10% of his time on our affairs.



Foo Chan, Chief Financial Officer. Mr. Chan obtained a Bachelor of Commerce (Honours) from Dalhousie University in 1981. Mr. Chan is a chartered accountant and is associated with the Burnaby firm of Hedden Chong. Mr. Chan was a former partner of an international accounting firm. Mr. Chan has considerable experience in providing expertise to early stage public companies. He will spend approximately 10% - 15% of his time on our affairs.



Key Employee



Dr. Felix Kaminsky, Exploration Manager. Dr. Kaminsky graduated from Moscow State University with a Master of Science (Geology) in 1959, from the Moscow Oil Institute with a Master of Science (Geophysics) in 1966, and from the Institute of Ore Deposits, Moscow, Russia, with a Ph.D. in 1969. Dr. Kaminsky has been a Vancouver based diamond exploration geologist since 1994.  Prior to his relocation to Vancouver, Dr. Kaminsky was Chief Research Scientist for the Diamond Department, Central Research Institute of Geology, Moscow.  As such, Dr. Kaminsky created new techniques for forecasting and prospecting for primary diamond deposits and has published over 75 papers in industry publications and academic journals relating to diamond exploration.  Dr. Kaminsky led the geological team which made two important diamond discoveries in the former Soviet Union and participated in the first primary diamond discovery in Venezuela.  Dr. Kaminsky has been the recipient of many distinctions and awards recognizing his leading role in international diamond exploration.  He will spend approximately 100% of his time on our affairs during such time as exploration activities are being conducted on our properties.  At other times, he will be available when requested by us.



Pursuant to the provisions of the Business Corporations Act (British Columbia), we are required to have an audit committee. The general functions of the audit committee are to review the overall audit plan and our system of internal controls, to review the results of the external audit and to resolve any potential dispute with our auditors. Our audit committee currently consists of Robert Lipsett and Timothy Crowhurst.  With the recent resignation of Christopher Pollard, we no longer have a three member audit committee.  We are actively seeking a replacement for Mr. Pollard for our audit committee.  The Board of Directors has not appointed a compensation committee.



Conflicts Of Interest



Certain of our directors of serve as directors of other junior mining companies, and therefore it is possible that a conflict may arise between their duties as a director of our management and their duties as a director or officer of such other companies.



Our directors are involved in other junior mining companies as follows:



|Name              | Company                      | % of Stock Held
|----------------- | ---------------------------- | ---------------
|Robert Lipsett    | Staccato Gold Resources Ltd. | 1.8%           
|George Cavey      | Staccato Gold Resources Ltd. | 0%             
|                  | Icon Industries Limited      | 0%             
|                  | Orex Ventures Inc.           | 0%             
|                  | Orko Gold Corporation        | 0%             
|                  | Tri-Gold Resources Corp.     | 0%             
|Timothy Crowhurst | Santa Cruz Ventures Inc.     | 0%             



All of the above companies are in the business of exploring for gold, silver or base metals and to the best of our knowledge none of them intend to explore for diamonds.  To the best of our knowledge no conflicts over selection or acquisition of properties have occurred to date.  No transactions between us and any of the above companies have occurred.



Our directors and officers are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and we will rely upon such laws in respect of any directors and officers conflicts of interest or in respect of any breaches of duty by any of our directors or officers. Any such conflicts will be disclosed in accordance with the provisions of applicable corporate legislation and directors or officers will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.  We have not created any additional requirements for managing potential conflicts of interest beyond the requirements of the Business Corporations Act (British Columbia)and theSecurities Act(British Columbia).



Compensation



The following table sets forth the compensation paid by us during the year ended June 30, 2005 to each of our officers, directors and one key employee.  This information includes the dollar value of base salaries, bonus awards and number of stock options granted.  Except as set out below, during the year ended June 30, 2005, no payments have been made, directly or indirectly, by us to our directors and officers or any parties related to them.



Summary Compensation Table



|                                         | Annual Compensation     | Long Term Compensation
|---------------------------------------- | ----------------------- | ----------------------
|                                         |                         |                       
|Name and Principal
And Position          | Year Ended              | Salary
(CDN$)         
|Robert Lipsett
President and Director    | 6/30/05
6/30/04
6/30/03 | $72,000
-0-
N/A       
|George Cavey
Vice-President and Director | 6/30/05
6/30/04
6/30/03 | -0-
-0-
N/A           
|Timothy Crowhurst
Director               | 6/30/05
6/30/04
6/30/03 | -0-
-0-
N/A           
|Foo Chan
Chief Financial Officer         | 6/30/05
6/30/04
6/30/03 | -0-
-0-
N/A           
|Dr. Felix Kaminsky
Exploration Manager   | 6/30/05
6/30/04
6/30/03 | -0-
-0-
N/A           
|Christopher Pollard
Former Director (1)  | 6/30/05
6/30/04
6/30/03 | $30,000
-0-
N/A       

(1)

Christopher Pollard resigned as a director, effective November 24, 2005.



On July 1, 2004, we entered into a two year management contracts with Robert Lipsett dated July 1, 2004, whereby Mr. Lipsett is paid $6,000 per month to act as our President and Chief Executive Officer.  We had entered into a management contract with Christopher Pollard whereby he would provide legal and administrative services at a monthly fee of $2,500; however, Mr. Pollard has since resigned as a director and officer.



George Cavey is the principal of Orequest Consultants Ltd., Orequest Consultants Ltd. was paid a total of $33,632 during the year ended June 30, 2005.



We entered into a consulting agreement with Felix Kaminsky, our exploration manager, dated June 1, 2004, pursuant to which Dr. Kaminsky is paid $1,000 per day for each day he spends on our behalf, with a minimum of one day per month.  In addition, Dr. Kaminsky will be reimbursed for all reasonable expenses.  Dr. Kaminsky has been granted a stock option to purchase 250,000 of our shares at a price of $0.40 per share.  Dr. Kaminsky was paid a total of $84,829 for consulting fees for the year ended June 30, 2005.



Long-term Incentive Plans



Other than through the grant of incentive stock options and management contracts, we do not have a long-term incentive plan for compensating our directors or officers.



No pension plans or retirement benefit plans have been instituted by us and none are proposed at this time.



Options and Stock Appreciation Rights (SARs)



The following options were granted to the named executive officers and directors during the most recently completed financial year or subsequent thereto to the date of this report:



|Name                    | Securities Under Option/SARs Granted (#) | % of Total Options SARs Granted to Directors and Officers in Financial Year | Exercise or Base Price ($/Security) | Market Value of Securities Underlyng Options/SARs on the Date of Grant ($/Security) | Expiration Date                   
|----------------------- | ---------------------------------------- | --------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------
|Robert Lipsett          | 300,000                                  | 21.43%                                                                      | $0.40                               | $120,000                                                                            | January 6, 2010                   
|Timothy Crowhurst       | 300,000                                  | 21.43%                                                                      | $0.40                               | $120,000                                                                            | January 6, 2010                   
|Christopher Pollard (1) | 200,000                                  | 14.28%                                                                      | $0.40                               | $20,000                                                                             | January 6, 2010                   
|George Cavey            | 100,000                                  | 7.14%                                                                       | $0.40                               | $40,000                                                                             | January 6, 2010                   
|Foo Chan                | 100,000
150,000                          | 7.14%
10.72%                                                                | $0.40
$0.40                         | $40,000
$60,000                                                                     | January 6, 2010
September 21, 2010
|Dr. Felix Kaminsky      | 250,000                                  | 17.86%                                                                      | $0.40                               | $100,000                                                                            | January 6, 2010                   

(1)

Christopher Pollard resigned as a director, effective November 24, 2005.



Aggregate Option/SAR Exercises During the Most Recently Completed Financial Year and Financial Year Option/SAR Values



During the most recently completed year ended June 30, 2005, no stock options were exercised by the executive officers.



Termination of Employment or Change of Control



We did not have a plan or arrangement for compensation received or that may be received by Mr. Lipsett in the financial year ended June 30, 2005 or in the current financial year to compensate him in the event of the termination of employment (resignation, retirement, change of control) or in the event of a change in responsibilities following a change in control.



Compensation of Directors



Since our inception, our directors have not received fees for attendance of board meetings or other cash compensation in their capacity as directors.  The directors may be reimbursed for actual expenses reasonably incurred in connection with the performance of their duties as directors.  Directors are also eligible to receive incentive stock options to purchase common shares.



Board Practices



Our Board of Directors is elected at the annual general meetings of our shareholders.  Each director elected will hold office until the next annual meeting, or until his successor is duly elected or appointed, unless his office is earlier vacated in accordance with the Business Corporations Act (British Columbia).



We have no director's service contracts.



Our audit committee is comprised of Robert Lipsett and Timothy Crowhurst. Members of the audit committee oversee our accounting and financial reporting process and the audits of our financial statements. The audit committee also receives and addresses complaints regarding accounting, internal controls, and auditing issues.  No complaints have been received by the audit committee as of the date hereof.  Further, the audit committee provides protection for whistle blowers.  Again, no whistle blowing issues have presented themselves as of the date hereof. The audit committee functions in a collective manner with respect to all issues that come before it.



At their first meeting following each annual general meeting, the directors must elect an audit committee consisting of no fewer than three directors, of whom a majority must not be officers or employees, to hold office until the next annual general meeting.



Before a financial statement that is to be submitted to an annual general meeting is considered by the directors, it must be submitted to the audit committee for review with the auditor, and the report of the audit committee on the financial statements must be submitted to the directors thereafter.



Employees



We have no employees other than our officers and directors.



Share Ownership



The following table sets forth the common share ownership of each of our officers and directors. Each person has sole voting and investment power with respect to the shares of common stock shown, and all ownership is of record and beneficial.



|Name                                                     | Number of Common Shares Owned | Positions                                       | Percentage of Outstanding Common Shares[1]
|-------------------------------------------------------- | ----------------------------- | ----------------------------------------------- | ------------------------------------------
|Robert Lipsett                                           | 5,860,001                     | President, Chief Executive Officer and Director | 24.40%                                    
|Timothy Crowhurst                                        | 1,000,000                     | Director                                        | 4.16%                                     
|George Cavey                                             | 970,000                       | Vice-President and Director                     | 4.04%                                     
|Felix Kaminsky[2]                                        | 350,000                       | Exploration Manager                             | 1.46%                                     
|Foo Chan                                                 | 230,000                       | Chief Financial Officer                         | 0.96%                                     
|ALL DIRECTORS AND SENIOR OFFICERS AS A GROUP (5 persons) | 8,410,001                     |                                                 | 35.02%                                    



[1]

Based on issued and outstanding share capital of 24,017,016 as of December 28, 2005.

[2]

Dr. Kaminsky is the sole shareholder of KM Diamond Exploration Ltd. and may receive up to an additional 550,000 of our common shares when we exercise our option to acquire a 100% interest in the KMD property.



Options to Purchase Shares



As of June 30, 2005, we have issued 1,700,000 incentive stock options to purchase shares of our common stock as follows:



|Option Holders                                   | Designation of Securities Under Option | No. of Securities to be Acquired Upon Exercise | Exercise Price Per Share | Expiry Date                                  
|------------------------------------------------ | -------------------------------------- | ---------------------------------------------- | ------------------------ | ---------------------------------------------
|Executive Officers (three persons)               | Common Shares                          | 500,000                                        | $0.40                    | January 6, 2010                              
|Directors who are not Executive Officers         | Common Shares                          | 500,000                                        | $0.40                    | January 6, 2010                              
|All other employees or past employees as a group | Common Shares                          | Nil                                            | N/A                      | N/A                                          
|All consultants as a group                       | Common Shares                          | 250,000
150,000
300,000                        | $0.40
$0.40
$0.40        | January 6, 2010
March 15, 2010
March 15, 2006



Escrowed Securities



Pacific Corporate Trust Company (the "Escrow Agent") holds 9,000,001 of our common shares in escrow pursuant to the terms and conditions of an escrow agreement dated June 16, 2004 (the "Escrow Agreement"). The escrow restrictions provide that the Escrowed Securities may not be traded in, dealt with in any manner whatsoever or released, nor may we, our transfer agent or the escrow holders make any transfer or record any trading of the Escrowed Securities without the consent of the TSX Venture Exchange.



|Designation of Class | Number of Securities Held in Escrow | Percentage of Class (1)
|-------------------- | ----------------------------------- | -----------------------
|Common Shares        | 9,000,001                           | 37.47%                 



[1]

Based on an issued and outstanding share capital of 24,017,016 as of the date of December 28, 2005.



[2]

The Escrowed Securities are held as follows:



|Name                | No. of Shares Held in Escrow | Percentage of Escrow
|------------------- | ---------------------------- | --------------------
|Robert Lipsett      | 5,310,001                    | 59.0%               
|Christopher Pollard | 900,000                      | 10.0%               
|George Cavey        | 900,000                      | 10.0%               
|Timothy Crowhurst   | 900,000                      | 10.0%               
|Foo Chan            | 135,000                      | 1.5%                
|Bud Kanke           | 135,000                      | 1.5%                
|Steve Stares        | 270,000                      | 3.0%                
|Greg Hryhorchuk     | 270,000                      | 3.0%                
|Gordon Smith        | 180,000                      | 2.0%                



Under National Policy 46  201 Escrow for Initial Public Offerings, securities held by Principals (as defined below) are required to be held in escrow in accordance with the national escrow regime applicable to initial public distributions. Equity securities owned or controlled by Principals are subject to the escrow requirements.



A Principal is defined as:



(a)

our directors and senior officers or of any of our material operating subsidiary of us, as listed in our prospectus;



(b)

our promoters during the two years preceding our offering;



(c)

those who own and/or control more than 10% of our voting securities immediately before and immediately after completion of our offering if they also have elected or appointed or have the right to elect or appoint a director or senior officer of us or of a material operating subsidiary of ours;



(d)

those who own and/or control more than 20% of our voting securities immediately before and immediately after completion of our offering; and



(e)

associates and affiliates of any of the above.



Our principals are all of our directors and senior officers, with the exception of Christopher Pollard, who resigned as a director, effective November 24, 2005.



Pursuant to the Escrow Agreement, the Principals agreed to deposit in escrow their Escrowed Securities with the Escrow Agent.  The Escrow Agreement provides that the Escrowed Securities will be released from escrow in equal tranches at six month intervals over the 36 months following the issue of the final receipt for our prospectus (that is 15% of each Principals holdings being released in each tranche with an initial 10% tranche being released on the date our securities are listed on the TSX Venture Exchange, being January 7, 2005).



We are an emerging issuer as defined in Canadian National Policy 46 - 201 and if we achieve established issuer status during the term of the Escrow Agreement, we will graduate resulting in a catch-up release and an accelerated release of any securities remaining in escrow under the 18 month schedule applicable to established issuers as if we had originally been classified as an established issuer.



Pursuant to the terms of the Escrow Agreement, the securities held in escrow may not be transferred or otherwise dealt with during the term of the Escrow Agreement unless the transfers or dealings with escrow are:



(a)

transfers to continuing or, upon their appointment, incoming directors and senior officers of us or of a material operating subsidiary, with approval of our board of directors;



(b)

transfers to an RRSP or similar trustee plan provided that the only beneficiaries are the transferor or the transferors spouse or children;



(c)

transfers upon bankruptcy to the trustee in bankruptcy; and



(d)

pledges to a financial institution as collateral for a bona fide loan, provided that upon a realization the securities remain subject to escrow. Tenders of Escrowed Securities to a take-over bid are permitted provided that, if the tenderer is a Principal of our successor upon completion of the take-over bid, securities received in exchange for tendered Escrowed Securities are substituted in escrow on the basis of our successor escrow classification.



The TSX Venture Exchange may approve an accelerated release schedule if we, after listing, meet Tier 1 issuer listing requirements. Escrow agreements, in the form prescribed by the TSX Venture Exchange, restrict the sale, assignment, hypothecation and transfer of all escrowed shares without the prior written consent of the TSX Venture Exchange. TSX Venture Exchange policy provides that it will generally only permit a transfer of our escrowed shares to incoming principals. In the event of the bankruptcy or death of a holder of Escrowed Securities, the Escrow Agent, with written notification to the TSX Venture Exchange, may transmit such holders Escrowed Securities to the trustee in bankruptcy, executor, administrator or such other person as is legally entitled to become the registered owner of the Escrowed Securities. Escrowed Securities that are transferred to a trustee in bankruptcy will remain in escrow subject to the applicable Escrow Agreement. Escrowed Securities transferred upon death will be released from escrow to the applicable legal representative unless the TSX Venture Exchange objects.



Resale Restrictions on the Seed Capital Shares



All of our shares other than the Escrowed Securities issued for cash prior to January 6, 2005 are subject to the TSX Venture Exchange's resale restrictions. 20% or 1,292,465 common shares were released at the date common shares commenced trading through the facilities of the TSX Venture Exchange, being January 7, 2005 and 20% or 1,292,465 common shares will be released each three months thereafter.



ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



Major Shareholders



As of the date of this report, there are no persons known to us that have direct or indirect beneficial ownership of, control or direction over, or a combination of direct or indirect beneficial ownership of and control or direction over, voting securities that will constitute more than 10% of any class of such securities except for Robert Lipsett who holds 5,860,001 shares, being 24.40% of the shares outstanding.



The following table sets forth the common share ownership of each person known by us to be the beneficial owner of five percent or more of our common shares. Each person has sole voting and investment power with respect to the shares of common stock shown, and all ownership is of record and beneficial.



|Name of Shareholder | Number of Shares | Position                    | % of Class
|------------------- | ---------------- | --------------------------- | ----------
|Robert Lipsett      | 5,860,001        | President, CEO and Director | 24.40%    



Related Party Transactions



Other than as disclosed herein, our officers, directors and principal shareholders, or any of our associates or affiliates, have not participated in and have no other interest, direct or indirect, in any material transactions in which we have participated, or in any proposed transaction which has materially affected or will materially affect our company during the year ended June 30, 2005:



Pursuant to an agreement dated as of the 11th of May, 2004, with KMD, we were granted the KMD Option to purchase a 100% interest in the Diamond Exploration Property. KMD is a company wholly-owned by Felix Kaminsky who subsequent was appointed as our exploration manager.



We were organized to acquire and exploit the diamond property interests. Incidental to such acquisition two of our directors advanced loans totaling $71,620, which loans were repaid without interest during January 2005.



There are no additional interests of management in transactions involving our company except for those stated in the Notes to the Financial Statements.



Interests of Experts and Counsel



Not applicable



ITEM 8.

FINANCIAL INFORMATION



Statements and Other Financial Information



See Item 17.



Legal Proceedings



No material legal proceedings to which we are a party are pending nor are any known to be contemplated and we know of no legal proceedings pending or threatened, or judgments entered against, any of our officers or directors in their capacities as such.



Dividends



No dividend has been paid on our common shares since inception, and none is contemplated in the foreseeable future.



Significant Changes



There have been no significant changes since the date of our annual financial statements or since the date of our most recent interim financial statements.



ITEM 9.

THE OFFER AND LISTING



Offer and Listing Details



No market has ever been established for our shares since incorporated.



We are required to file an annual report on Form 20-F with the Securities and Exchange Commission and Form 6-K.  A Form 6-K is required to be filed when the laws of British Columbia and Alberta require us to disclose information.  The Form 6-K must be filed promptly after information is made public by us.  As a foreign private issuer, we will not be subject to the reporting obligations of Section 13, except as set forth above; the proxy rules of the Section 14 of the Securities Exchange Act of 1934; or, the insider reporting or short-swing profit rules of Section 16 of the Securities Exchange Act of 1934.



Plan of Distribution



Not applicable



Markets



The following table discloses the monthly high and low sales prices in Canadian dollars for our common shares for the most recent six months as traded on the TSX Venture Exchange:



|Month          | High | Low 
|-------------- | ---- | ----
|November 2005  | 0.25 | 0.17
|October 2005   | 0.38 | 0.25
|September 2005 | 0.45 | 0.30
|August 2005    | 0.45 | 0.37
|July 2005      | 0.42 | 0.37
|June 2005      | 0.55 | 0.40



Our shares began trading on the TSX Venture Exchange under the symbol RLD on January 7, 2005. Since trading began and up to the date of this registration statement the high bid has been $0.75 and the low bid is $0.17.



The source for the above information is Canada Stockwatch. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.



Holders



As of December 23, 2005, we had 70 holders of record of our common shares.  Currently, we have 5 shareholders of our common securities resident in the United States.



Selling Shareholders



Not applicable.



Dilution



Not applicable



Expenses of the Issue



Not applicable



ITEM 10.

ADDITIONAL INFORMATION



Share Capital



Not applicable.



Memorandum and Articles of Incorporation



We have no bylaws. Under British Columbia law they are called Articles of Incorporation.



1.

Our Memorandum and Articles of Incorporation do not limit in any manner our business purpose. As such, no provision relating to the same is contained in the Memorandum or Articles of Incorporation.



2.

Directors



(a)

A director shall disclose the nature and extent of his interest in a contract or transaction. A director shall not vote on any contract or transaction in which he is interested. The foregoing shall not apply to: (1) a loan to us which the director is guaranteeing repayment; (2) any contract or transaction for the benefit of a holding company or a subsidiary corporation of which the a director is a director; (3) any contract by a director to subscribe for or underwrite securities in which a director is interested if all the other directors are interested; (4) determining the remuneration of the directors: (5) purchasing and maintaining insurance to cover directors against liability incurred by them as directors; or, (6) indemnification of any director.



(b)

Directors are empowered to vote compensation to themselves even in the absence of an independent quorum.



(c)

Our board of directors may from time to time on our behalf borrow money. We have no prohibition against loaning money to a director.



(d)

There are no provisions for retirement or non-retirement of directors under an age limit requirement.



(e)

There is no number of shares which must be owned for director's qualification.



(f)

Our Articles authorize the shareholders to set the number of directors which is currently set at four.  Our directors are elected annually at our annual general meeting.  If there are more than four persons nominated as directors at the annual general meeting then the four directors receiving the most votes are elected for the ensuing year.



3.

Shares



(a)

The board of directors, may from time-to-time declare and authorize payment of dividends. No dividend will be paid otherwise than out of funds and/or assets properly available therefore. There is no time limit after which dividend entitlement lapses.



(b)

Each shareholder shall have one vote for each share of common stock owned by him. At each annual meeting the entire board of directors retire and shareholders shall elect an new board of directors. There are no staggered intervals and cumulative voting is not provided for.



(c)

Shareholders do not have the right to share in our profits.



(d)

Shareholders are entitled to share in any surplus upon liquidation, after the payment of all creditors and superior equity securities.



(e)

We may redeem any of our shares at the price and on the terms as determined by our board of directors.



(f)

There are no sinking fund provisions.



(g)

Shareholders are not liable for further capital calls.



(h)

There are no provisions discriminating against any existing or prospective holder of common stock as a result of a shareholder owning a substantial number of shares of common stock.



4.

No alteration shall be valid as to any outstanding shares unless the holders of the shares consent thereto or by a resolution passed by 3/4 of the outstanding shares.



5.

The annual general meeting of shareholders is called by written notice mailed by the board of directors to each shareholder of record. A quorum shall be a least two persons represented at the meeting either in person or by proxy.  Resolutions must be passed by a majority (ie. more than 50%) of the votes cast by shareholders at general meeting.  Extraordinary (special) general meetings are called by written notice mailed by the board of directors to each shareholder of record. The quorum remains the same for Extraordinary Meetings. There are no conditions of admission to the meetings.  Special resolutions are required to amend our Memorandum or Articles, Special Resolutions must be passed by 75% of the votes cast by shareholders.



6.

There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities, imposed by the laws of British Columbia, or our articles or other constituent document.



7.

There are no provisions in our articles that would have an effect of delaying, deferring or preventing a change in our control and that would operate only with respect to any merger, acquisition or corporate restructuring involving us.



8.

There are no provisions in our articles which require the disclosure of shareholder ownership.



9.

The law applicable to us is not significantly different from that in the host country.



10.

The conditions imposed by the articles governing changes in the capital are not more stringent than is required by law.



Material Contracts



There are no material contracts except as discussed in this registration statement. The following material contracts and all engineering or geological reports referred to in this registration statement may be inspected at our office Suite 305 - 595 Howe Street, Vancouver, British Columbia, Canada V6C 2T5, during normal business hours.



|Exhibit No. | Description                                                                                                                                                                                                                                          
|----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1         | Articles of Organization;                                                                                                                                                                                                                            
|4.1         | Option agreement with Russell Renner, James Bond and Rudolph Wahl dated as of the 18th of March, 2004;                                                                                                                                               
|4.2         | Option agreement with John E. Ternowesky, Eugene Belisle and Noel Belisle dated as of the 19th of March, 2004;                                                                                                                                       
|4.3         | Option Agreement with James Bond and Russell Renner dated as of the 18th of March, 2004;                                                                                                                                                             
|4.4         | Option Agreement with William Maurice Michano, John Grant Michano dated as of the 17th of March, 2004;                                                                                                                                               
|4.5         | Option Agreement with KM Diamond Exploration Ltd. dated as of the 11th of May, 2004;                                                                                                                                                                 
|4.6         | Joint Exploration Agreement with Phoenix Matachewan Mines Inc. dated as of July 1, 2004;                                                                                                                                                             
|4.7         | Consulting contract with Felix Kaminsky dated June 1, 2004;                                                                                                                                                                                          
|4.8         | Management contract with Robert Lipsett dated July 1, 2004;                                                                                                                                                                                          
|4.9         | Management contract with Christopher Pollard dated July 1, 2004;                                                                                                                                                                                     
|4.10        | Escrow Agreement among Pacific Corporate Trust Company, Ripple Lake Minerals Inc., Robert Lipsett, Christopher Pollard, George Cavey, Timothy Crowhurst, Bud Kanke, Stephen Stares, Gregory Hryhorchuk and Gordon Smith dated the 16th of June, 2004.
|4.11        | Private Placement Agreement with Canaccord Capital Corporation dated June 13, 2005.                                                                                                                                                                  
|4.12        | Option Agreement with Nuinsco Resources Limited dated June 22nd, 2005                                                                                                                                                                                
|4.13        | Option Agreement with Rudolf Wahl and Deric Ewen dated April 25th, 2005                                                                                                                                                                              
|4.14        | Option Agreement with Rudolf Wahl, Russel Renner and James Bond dated April 25th, 2005                                                                                                                                                               



Exchange Controls



There are no exchange controls or other limitations which affect the sale of shares in the United States which were issued to Robert Lipsett, George Cavey, Christopher Pollard, Timothy Crowhurst, Foo Chan and Felix Kaminsky, which are "restricted securities" as that term is defined in Reg. 144 of the Securities Act of 1933.  The restricted shares may only be resold in compliance with Reg. 144 of the Securities Act of 1933t.



Taxation



Canadian Income Tax Consequences



The following summary discusses only the Canadian federal income tax considerations generally applicable to a holder (a "Holder") of one or more of our common shares who, for the purposes of the Income Tax Act(Canada) (the "Tax Act") is a non-resident of Canada who holds common shares as capital property.  The summary deals with the provisions of the Tax Actin force on February 28, 2005.  It discusses all material matters; but might not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules. Holders and prospective holders are urged to consult with their own tax advisers with respect to their particular circumstances.



Dividends



A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%.  If the Holder is a company that owns at least 10% of the voting stock of the company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.



Disposition of Common Shares



A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act.  Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the company. The TSX Venture Exchange is a prescribed stock exchange under the Tax Act.  A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.



A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.



United States Federal Income Taxation Considerations



For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the company's common shares are a capital asset in U.S. Taxpayer's hands.



For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the company's common shares.  A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability.  A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the company's common shares.



Under a number of circumstances, United States Investor acquiring shares of the company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255.  In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the company will be required to file such a return.  Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.



The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company.  A foreign corporation, such as the company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. We believe that we were not a passive foreign investment company for the taxable year ended December 31, 2004 and, furthermore, expect to conduct our affairs in such a manner so that we will not meet the criteria to be considered passive foreign investment company in the foreseeable future.



The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holders particular circumstances. This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arms length with us, hold their common stock as capital property and who will not use or hold the common stock in carrying on business in Canada. Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.



This summary is based upon the provisions of the Income Tax Act of Canada and the regulations issued thereunder (collectively, the Tax Act or ITA) and the Canada-United States Tax Convention (the Tax Convention) as at the date of the registration statement and the current administrative practices of Canada Customs and Revenue Agency. This summary does not take into account provincial income tax consequences.



We urge each holder to consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.



Dividends and Paying Agents



Not applicable



Statement by Experts



Not applicable.



Documents on Display



All material documents referred to herein have been filed as exhibits to this Form 20-F or at our office at Suite 305 - 595 Howe Street, Vancouver, British Columbia, Canada V6C 2T5 and our telephone number is (604) 682-8789



Subsidiary Information



Not applicable



ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not applicable.



ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not applicable.



PART II



ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



Not applicable.



ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



Not applicable.



ITEM 15.

CONTROLS AND PROCEDURES



We carried out an evaluation, under the supervision and with the participation of our management, including the our president, of the effectiveness of the design and operation of our disclosure controls and procedures [as defined in the Exchange Act Rule 13a-15(e)] as of the end of the period covered by this report.  Based upon that evaluation, our president concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to our company required to be included in our periodic SEC filings, and that information is recorded, processed, summarized and reported as and when required.



There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.



There was no significant change in our internal control over financial reporting that occurred during our most recently completed fiscal year ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Nor were there any significant deficiencies or material weaknesses in our internal controls requiring corrective actions.



ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT



We do not at this time have a financial expert on our Audit Committee (as defined in Item 16A of Form 20-F).  We are currently actively seeking a financial expert to join our audit committee.  Robert Lipsett and Timothy Crowhurst have the industry experience necessary to understand and analyze financial statements, as well as the understanding of internal controls and procedures necessary for financial reporting.



ITEM 16B.

CODE OF ETHICS



We have not adopted a Code of Ethics at this time.  We do not consider a Code of Ethics necessary due to the small size of our exploration activities and the small number of persons comprising our Board of Directors and management.



ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following table lists the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.



|                   | Year ended
June 30, 2005
Cdn $ | Year Ended
June 30, 2004
Cdn $
|------------------ | ------------------------------ | ------------------------------
|Audit fees         | 21,000                         | 16,800                        
|Audit related fees | Nil                            | Nil                           
|Tax fees           | Nil                            | Nil                           
|All other fees     | 2,500                          | Nil                           
|Total:             | 23,500                         | 16,800                        



ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not applicable.



Item 16E.

PURCHASERS OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS



Not applicable.



PART III



ITEM 17.

FINANCIAL STATEMENTS



Our audited financial statements for the year ended June 30, 2005 immediately follow:



|Report of Independent Registered Public Accounting Firm dated September 19, 2005        | F-2       
|--------------------------------------------------------------------------------------- | ----------
|FINANCIAL STATEMENTS                                                                    |           
|Balance Sheet for the years ended June 30, 2005 and June 30, 2004                       | F-3       
|Statement of Operations and Deficit for the years ended June 30, 2005 and June 30, 2004 | F-4       
|Statement of Cash Flows for the years ended June 30, 2005 and June 30, 2004             | F-5       
|Statement of Stockholders Equity for the years ended June 30, 2005 and June 30, 2004   | F-6       
|Notes to the Financial Statements for the years ended June 30, 2005 and June 30, 2004   | F-7  F-22



ITEM 18.

FINANCIAL STATEMENTS



Not applicable.



ITEM 19.

EXHIBITS



|Exhibit # | Document Description                                                                                                                                                                                                                                 
|--------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1*      | Articles of Organization;                                                                                                                                                                                                                            
|4.1*      | Option agreement with Russell Renner, James Bond and Rudolph Wahl dated as of the 18th of March, 2004;                                                                                                                                               
|4.2*      | Option agreement with John E. Ternowesky, Eugene Belisle and Noel Belisle dated as of the 19th of March, 2004;                                                                                                                                       
|4.3*      | Option Agreement with James Bond and Russell Renner dated as of the 18th of March, 2004;                                                                                                                                                             
|4.4*      | Option Agreement with William Maurice Michano, John Grant Michano dated as of the 17th of March, 2004;                                                                                                                                               
|4.5*      | Option Agreement with KM Diamond Exploration Ltd. dated as of the 11th of May, 2004;                                                                                                                                                                 
|4.6*      | Joint Exploration Agreement with Phoenix Matachewan Mines Inc. dated as of July 1, 2004;                                                                                                                                                             
|4.7*      | Consulting contract with Felix Kaminsky dated June 1, 2004;                                                                                                                                                                                          
|4.8*      | Management contract with Robert Lipsett dated July 1, 2004;                                                                                                                                                                                          
|4.9*      | Management contract with Christopher Pollard dated July 1, 2004;                                                                                                                                                                                     
|4.10*     | Escrow Agreement among Pacific Corporate Trust Company, Ripple Lake Minerals Inc., Robert Lipsett, Christopher Pollard, George Cavey, Timothy Crowhurst, Bud Kanke, Stephen Stares, Gregory Hryhorchuk and Gordon Smith dated the 16th of June, 2004.
|4.11**    | Private Placement Agreement with Canaccord Capital Corporation dated June 13, 2005.                                                                                                                                                                  
|4.12      | Option Agreement with Nuinsco Resources Limited dated June 22nd, 2005                                                                                                                                                                                
|4.13      | Option Agreement with Rudolf Wahl and Deric Ewen dated April 25th, 2005                                                                                                                                                                              
|4.14      | Option Agreement with Rudolf Wahl, Russel Renner and James Bond dated April 25th, 2005                                                                                                                                                               
|31.1      | Certification of the Chief Executive Officer Pursuant To Rule 13a-14 Or 15d-14 of the Securities Exchange Act of 1934,as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                           
|31.2      | Certification of the Chief Financial Officer Pursuant To Rule 13a-14 Or 15d-14 of the Securities Exchange Act of 1934,as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                           
|32.1      | Certification of the Chief Executive Officer pursuant to 18 U.S.C.  Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                
|32.2      | Certification of the Chief Financial Officer pursuant to 18 U.S.C.  Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                



*

Incorporated by reference from our Registration Statement on Form 20-F filed on April 3, 2005.



**

Incorporated by reference from our Amendment No. 1 to our Registration Statement on Form 20-F filed on July 14, 2005.





--





---

SIGNATURES



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on the Form 20-F and has duly caused to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.



Dated this 28th day of December, 2005.



RIPPLE LAKE DIAMONDS INC.







BY: /s/ Robert Lipsett



Robert Lipsett, President and Director





--





---





RIPPLE LAKE DIAMONDS INC.

(AN EXPLORATION STAGE COMPANY)

FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2005

(Stated in Canadian dollars)



PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F-2

BALANCE SHEET

F-3

STATEMENTS OF OPERATIONS AND DEFICIT

F-4

STATEMENT OF CASH FLOWS

F-5

STATEMENT OF STOCKHOLDERS' EQUITY

F-6

NOTES TO THE FINANCIAL STATEMENTS

F-7  F-22





F-1



---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To

The shareholders of

Ripple Lake Diamonds Inc.







We have audited the balance sheets of Ripple Lake Diamonds Inc.  as at June 30, 2005 and 2004 and the statements of operations, cash flows and stockholders' equity for the year ended June 30, 2005 and for the period from February 6, 2004 (date of incorporation) to June 30, 2004.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2005 and 2004 and the results of its operations and its cash flows for the year ended June 30, 2005 and for the period from February 6, 2004 (date of incorporation) to June 30, 2004 in accordance with Canadian generally accepted accounting principles.



Vancouver, Canada

September 19, 2005

"Amisano Hanson"

CHARTERED ACCOUNTANTS







COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA - U.S. REPORTING CONFLICT



In the United States of America, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is substantial doubt about a company's ability to continue as a going concern. The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes the realization of assets and discharge of liabilities in the normal course of business. As discussed in Note 1 of the accompanying financial statements, the Company is in the process of exploring its principal mineral property and has not yet determined whether the property contains ore reserves that are economically recoverable which raises substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from outcome of this uncertainty.



Our report to the shareholders dated September 19, 2005 is expressed in accordance with Canadian reporting standards which do not permit a reference to such uncertainty in the auditors' report when the uncertainty is adequately disclosed in the financial statements.



Vancouver, Canada

September 19, 2005

"Amisano Hanson"

CHARTERED ACCOUNTANTS









F-2



---

|RIPPLE LAKE DIAMONDS INC.                                            |           |         
|-------------------------------------------------------------------- | --------- | --------
|(AN EXPLORATION STAGE COMPANY)                                       |           |         
|                                                                    
|BALANCE SHEET                                                        |           |         
|June 30, 2005                                                        |           |         
|(Stated in Canadian dollars)                                         |           |         
|                                                                     |           |         
|                                                                    
|                                                                    
|                                                                     | 2005      | 2004    
|                                                                     | $         | $       
|ASSETS                                                              
|CURRENT ASSETS                                                       |           |         
|Cash                                                                 | 262,734   | 239,653 
|GST receivable                                                       | 105,673   | 32,787  
|Prepaid finance cost                                                 | 20,000    | -       
|                                                                    
|                                                                     | 388,407   | 272,440 
|ADVANCES FOR FUTURE EXPLORATION COSTS                                | -         | 297,500 
|MINERAL EXPLORATION PROPERTIES - acquisition                         |           |         
|and staking costs(Note 3)                                            | 815,954   | 167,405 
|MINERAL EXPLORATION PROPERTIES - exploration                         |           |         
|expenditures(Note 3 & 8)                                             | 2,369,446 | 100,768 
|CAPITAL ASSETS(Note 4)                                               | 1,273     | -       
|                                                                    
|                                                                     | 3,575,080 | 838,113 
|                                                                    
|                                                                    
|LIABILITIES                                                          |           |         
|CURRENT LIABILITIES                                                  |           |         
|Accounts payables and accrued liabilities                            | 482,778   | 57,194  
|Loans payable (Note 8)                                               | -         | 71,620  
|                                                                    
|                                                                     | 482,778   | 128,814 
|                                                                    
|                                                                    
|SHAREHOLDERS' EQUITY                                                 |           |         
|SHARE CAPITAL(Note 5)                                                |           |         
|Authorized: 100,000,000 common shares without par value              |           |         
|Issued and outstanding: 23,289,550 common shares (2004 - 14,783,994) | 3,420,643 | 727,600 
|CONTRIBUTED SURPLUS                                                  | 611,000   | -       
|DEFICIT accumulated during the exploration stage                     | (939,341) | (18,301)
|                                                                    
|                                                                     | 3,092,302 | 709,299 
|                                                                    
|                                                                     | 3,575,080 | 838,113 

|Nature and Continuance of Operations (Note 1)Commitments (Notes 3, 5 & 7)Subsequent Events (Notes 3, 5 & 10)APPROVED BY THE DIRECTORS:
|--------------------------------------------------------------------------------------------------------------------------------------

|DIRECTOR: | "Robert Lipsett"     
|--------- | ---------------------
|          | Robert Lipsett       
|DIRECTOR: | "Christopher Pollard"
|          | Christopher Pollard  

F-3

---



|RIPPLE LAKE DIAMONDS INC.                                  |                              |           
|---------------------------------------------------------- | ---------------------------- | ----------
|(AN EXPLORATION STAGE COMPANY)                             |                              |           
|                                                          
|STATEMENTS OF OPERATIONS AND DEFICIT                       |                              |           
|FOR THE YEAR ENDED JUNE 30, 2005                           |                              |           
|(With Comparative Figures for the Period from              |                              |           
|February 6, 2004 (Date of Incorporation) to June 30, 2004) |                             
|                                                           | (Stated in Canadian dollars) |           
|                                                           |                              |           
|                                                          
|                                                          
|                                                           | Cumulative                   |           
|                                                           | from inception,              |           
|                                                           | February 6, 2004, to,        |           
|                                                           | June 30, 2005                | 2005      
|                                                           | $                            | $         
|                                                          
|REVENUE                                                    | 2,256                        | 2,256     
|                                                          
|EXPENSES                                                   |                              |           
|Amortization                                               | 225                          | 225       
|Bank charges                                               | 1,133                        | 916       
|Entertainment                                              | 3,422                        | 3,422     
|Filing fees                                                | 45,284                       | 45,284    
|Interest                                                   | 439                          | 439       
|Management fees                                            | 102,000                      | 102,000   
|Office                                                     | 7,686                        | 7,580     
|Printing                                                   | 2,264                        | 2,264     
|Professional fees                                          | 87,593                       | 69,615    
|Public and shareholder relations                           | 107,218                      | 107,218   
|Rent                                                       | 18,000                       | 18,000    
|Stock-based compensation                                   | 611,000                      | 611,000   
|Transfer agent                                             | 10,487                       | 10,487    
|Travel                                                     | 7,846                        | 7,846     
|                                                          
|                                                           | 1,004,597                    | 986,296   
|                                                          
|LOSS BEFORE INCOME TAXES                                   | (1,002,341)                  | (984,040) 
|                                                          
|FUTURE INCOME TAX RECOVERY                                 | (63,000)                     | (63,000)  
|                                                          
|NET LOSS FOR THE PERIOD                                    | (939,341)                    | (921,040) 
|DEFICIT, beginning of period                               | -                            | (18,301)  
|                                                          
|DEFICIT,end of period                                      | (939,341)                    | (939,341) 
|                                                          
|                                                          
|NET LOSS PER SHARE:basic and diluted                       | (0.05)                       | (0.02)    
|                                                          
|                                                          
|WEIGHTED AVERAGE NUMBER                                    |                              |           
|OF SHARES OUTSTANDING                                      | -                            | 18,539,297

F-4

---



|RIPPLE LAKE DIAMONDS INC.                                                 |                      |            
|------------------------------------------------------------------------- | -------------------- | -----------
|(AN EXPLORATION STAGE COMPANY)                                            |                      |            
|                                                                         
|STATEMENT OF CASH FLOWS                                                   |                      |            
|FOR THE YEAR ENDED JUNE 30, 2005                                          |                      |            
|(With Comparative Figures for the Period from                             |                      |            
|February 6, 2004 (Date of Incorporation) to June 30, 2004)                |                      |            
|(Stated in Canadian dollars)                                              |                      |            
|                                                                          |                      |            
|                                                                         
|                                                                          | Cumulative           |            
|                                                                          | from inception,      |            
|                                                                          | February 6, 2004, to |            
|                                                                          | June 30, 2005        | 2005       
|                                                                          | $                    | $          
|                                                                         
|CASH FLOWS FROM OPERATING ACTIVITIES                                      |                      |            
|Net loss for the period                                                   | (939,341)            | (921,040)  
|Amortization                                                              | 225                  | 225        
|Stock-based compensation                                                  | 611,000              | 611,000    
|Future income taxes                                                       | (63,000)             | (63,000)   
|                                                                         
|CHANGES IN NON-CASH WORKING CAPITAL                                       |                      |            
|GST receivable                                                            | (105,673)            | (72,886)   
|Accounts payables and accrued liabilities                                 | 44,715               | 28,228     
|                                                                         
|                                                                          | (452,074)            | (417,473)  
|                                                                         
|                                                                         
|CASH FLOWS FROM FINANCING ACTIVITIES                                      |                      |            
|Prepaid finance cost                                                      | (20,000)             | (20,000)   
|Increase (decrease) in advances from related parties                      | -                    | (71,620)   
|Issuance of shares, net of issue costs                                    | 2,295,744            | 2,295,743  
|Issuance of seed shares                                                   | 969,349              | 251,750    
|Issuance of escrow shares                                                 | 56,550               | 46,550     
|                                                                         
|                                                                          | 3,301,643            | 2,502,423  
|                                                                         
|                                                                         
|CASH FLOWS FROM INVESTING ACTIVITIES                                      |                      |            
|Purchase of equipment                                                     | (1,498)              | (1,498)    
|Advances for future exploration costs                                     | -                    | 297,500    
|Mineral exploration properties - acquisition and staking costs            | (653,954)            | (486,549)  
|Mineral exploration properties - exploration expenditures                 | (1,931,383)          | (1,871,322)
|                                                                         
|                                                                          | (655,452)            | (2,061,869)
|                                                                         
|INCREASE IN CASH                                                          | 262,734              | 23,081     
|                                                                         
|CASH,beginning of period                                                  | -                    | 239,653    
|                                                                         
|                                                                         
|CASH,end of period                                                        | 262,734              | 262,734    
|                                                                         
|Non-cash investing and financing transactions not included in cash flows: |                      |            
|Issuance of common shares for mineral property rights                     | 162,000              | 162,000    
|Issuance of common shares for agent relating to initial                   |                      |            
|public offering                                                           | 80,000               | 80,000     
|Supplementary disclosure of cash flow information                         |                      |            
|Cash paid for:                                                            |                      |            
|Interest                                                                  | -                    | -          
|Income taxes                                                              | -                    | -          

F-5

---



|RIPPLE LAKE DIAMONDS INC.                       
|------------------------------------------------
|(AN EXPLORATION STAGE COMPANY)                  
|                                                
|STATEMENT OF STOCKHOLDERS' EQUITY               
|FOR THE PERIOD FEBRUARY 6, 2004 TO JUNE 30, 2005
|(Stated in Canadian dollars)                    
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|Balance, February 6, 2004                       
|Issued for cash pursuant to:                    
|Founder's share                                 
|Private Placement (seed shares) (at $0.15)      
|Escrow shares (at $0.001)                       
|Net loss                                        
|                                                
|Balance, June 30, 2004                          
|                                                
|Issued for cash pursuant to:                    
|Private Placement (seed shares) (at $0.15)      
|Price adjustment to 950,000 escrow shares       
|(from $0.001 to $0.05)                          
|Initial public offering (at $0.40, net of share 
|issue costs of $305,457)                        
|Private placement (at $0.45, net of share issue 
|costs of $78,800)                               
|Future income tax relating to renounced         
|exploration expenditures applicable to          
|flow-through shares                             
|Issued for agent's commission (at $0.40 per     
|share)                                          
|Issued for mineral property rights at $0.40 per 
|share - Note 3                                  
|Stock based compensation                        
|Net loss                                        
|                                                
|Balance, June 30, 2005                          

F-6

---



RIPPLE LAKE DIAMONDS INC. (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS  June 30, 2005 (Stated in Canadian dollars)

1. NATURE AND CONTINUANCE OF OPERATIONS AND GOING CONCERN

Ripple Lake Diamonds Inc. (the "Company") was incorporated on February 6, 2004 under the Business Corporations Act of British Columbia as TCH Minerals Inc. and changed its name to Ripple Lake Minerals Ltd. on May 13, 2004
and to Ripple Lake Diamonds Inc. on July 26, 2004. The Company is an exploration stage junior mining company engaged in the identification, acquisition, evaluation and exploration of diamond properties in Ontario and Nunavut, Canada. The Company
completed its initial public offering ("IPO") on January 6, 2005 and is listed for trading on the TSX Venture Exchange.

The Company's mineral properties are without a known body of commercial ore. The business of exploring for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into
producing mines.  Major expenses may be required to establish ore reserves, to develop metallurgical processes, to acquire construction and operating permits and to construct mining and processing facilities. The amounts shown as mineral property
costs represent acquisition, holding, and deferred exploration costs and do not necessarily represent present or future recoverable values. The recoverability of the amount shown for mineral property costs is dependent upon the ability of the
Company to obtain the necessary financing to complete the exploration and development of the properties, discovery of economically recoverable reserves, and future profitable production. There is no assurance that the Company will be successful in
recovering the amount shown for mineral properties.

Although the Company has taken steps to verify title to resource properties in which it has an interest in accordance with industry standards for the current state of exploration of such properties, these procedures do not
guarantee the Company's title.  Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.

The Company is dependent upon share issuances and other financings to provide the funding necessary for exploration and to meet its general operating expenses.  The Company has issued shares to fund current acquisition and
exploration activities and general operating expenses and intends to issue additional share capital to fund further exploration activities and to pay general operating expenses. The Company will require additional financing to continue to explore
and develop its mineral properties. There can be no assurance that such additional financing will be available on terms acceptable to the Company. These financial statements have been prepared on going concern basis.  The Company's ability to
continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business
operations when they come due. These financial statements do not include any adjustments to the recoverability or classification of recorded asset amounts or classification of liabilities that might be necessary should the Company be unable to
continue as a going concern and therefore be required to realize on its assets and discharge its liabilities and commitments at amounts different from those reported in the financial statements. At June 30, 2005 the Company has working capital
deficiency of $94,371 and an accumulated deficit of $939,341 since incorporation.



F-7

---



2. SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with generally accepted accounting principles in Canada and, except as described in Note 9, conform in all material respects with accounting principles generally
accepted in the United States of America. The financial statements have in management's opinion been properly prepared within the framework of significant accounting policies summarized below:

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  These estimates are reviewed periodically and as adjustments become necessary, they are
reported in earnings in the period in which they became known. Actual results may differ from those estimates.

| | Mineral Exploration Properties
| | ------------------------------

The Company defers the cost of acquiring, maintaining its interest, exploring and developing mineral properties until such time as the properties are placed into production, abandoned, sold or considered to be impaired in
value. Costs of producing properties will be amortized on a unit of production basis and costs of abandoned properties are written-off. Proceeds received on the sale of interests in mineral properties are credited to the carrying value of the
mineral properties, with any excess included in operations. Write-downs due to impairment in value are charged to operations.

The Company is in the process of exploring and developing its mineral properties and has not yet determined the amount of reserves available. Management reviews the carrying value of mineral properties on a periodic basis
and will recognize impairment in value based upon current exploration results, the prospect of further work being carried out by the Company, the assessment of future profitability of profitable revenues from the property or from the sale of
property. Amounts shown for properties represent costs incurred net of write-downs and recoveries and are not intended to represent present or future values.

Reclamation Costs

Reclamation activities are carried out to the extent practicable concurrently with property exploration activities and such costs are included in exploration costs during the period in which they are incurred. When
properties are abandoned, any remaining reclamation costs are estimated and included as exploration costs in the period the property is abandoned.



F-8

---



2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | Capital Assets
| | --------------

Capital assets are recorded at cost.  Amortization is provided using the declining balance basis over the estimated useful life of the asset at the following rate:

| | Computer 30 %
| | -------------

One-half of the rate is used in the year of addition and no amortization is claimed in the year of disposal.

Future Income Taxes

The Company accounts for income taxes using the asset and liability method.  Under this method, future income taxes are recorded for the temporary differences between the financial reporting basis and tax basis of the
Company's assets and liabilities. These future taxes are measured by the provisions of currently enacted tax laws.  Management believes that it is not sufficiently likely that the Company will generate sufficient taxable income to allow the
realization of future assets and therefore the Company has fully provided against these assets.

Financial Instruments

The financial instruments of the Company consist of cash, prepaid expenses, accounts payables and accrued liabilities. The carrying value of the financial instruments approximate fair value due to their short term to
maturity. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risk arising from these financial instruments.

Stock-Based Compensation

Effective July 1, 2004, the Company has adopted the recommendations of the CICA Handbook Section 3870 "Stock-Based Compensation and Other Stock-Based Payments". The standard requires that all stock-based awards to employees and directors be measured and recognized using the fair-value based method and amortized over period until vested. The Company uses the Black-Scholes option pricing model
to estimate the fair value of each stock option at the date of grant. Any consideration received from the exercise of stock options is credited to share capital.

F-9

---



2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Exploration Stage Company

The Company is an exploration stage company as defined in Statement of Financial Accounting Standards No. 7 and Securities and Exchange Commission Act Guide 7. The Company is devoting its present efforts to exploring and
developing its mineral properties and none of its planned principal operations have commenced. All losses accumulated since inception have been considered as part of the Company's exploration stage activities.

Flow-Through Shares

In March 2004, the CICA issued Emerging Issue Committee Abstract No. 146, Flow-through Shares, which clarified the recognition of previously unrecorded future income tax assets caused by renouncement of expenditures for
flow-through shares issued after March 19, 2004 and records the tax effect related to the renounced deductions as a reduction of income tax expense in the statement of operations and deficit on the date that the Company renounces deductions to
investors.

Basic and Diluted Loss Per Share

Basic loss per share is computed dividing the loss for the year by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect 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. Fully diluted amounts are not presented when effects of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.

F-10

---



|3. | MINERAL EXPLORATION PROPERTIES - ACQUISITION AND STAKING COSTS |                           
|-- | -------------------------------------------------------------- | --------------------------
|  
|   |                                                                | Cumulative from inception,
|   |                                                                | February 6, 2004 to       
|   |                                                                | June 30, 2005             
|   | TCH Diamond Project                                            | $                         
|   | Balance, beginning of period                                   | -                         
|  
|   | Property acquisition and staking costs                         | 310,582                   
|  
|   | Exploration expenses                                           |                           
|   | Communication                                                  | 16,000                    
|   | Data analysis                                                  | 179,035                   
|   | Equipment rental                                               | 14,000                    
|   | Food and accommodation                                         | 22,500                    
|   | Geological                                                     | 105,828                   
|   | Geophysics                                                     | 26,225                    
|   | Ground magnetic                                                | 21,635                    
|   | Helicopter fees                                                | 64,579                    
|   | Lab fee                                                        | 1,388                     
|   | Line cutting                                                   | 21,470                    
|   | Management fee                                                 | 32,000                    
|   | Mobilization and demobilization                                | 8,000                     
|   | Sampling and processing                                        | 438,500                   
|   | Supplies                                                       | 16,328                    
|  
|   |                                                                | 967,488                   
|  
|   | Balance, end of period                                         | 1,278,070                 
|  
|  
|   | KMD Project                                                    | $                         
|   | Balance, beginning of period                                   | -                         
|  
|   | Property acquisition and staking costs                         | 505,372                   
|  
|   | Exploration expenses                                           |                           
|   | Assessment fee                                                 | 3,768                     
|   | Camp                                                           | 243,280                   
|   | Communication                                                  | 3,981                     
|   | Data analysis                                                  | 44,219                    
|   | Food and accommodation                                         | 26,872                    
|   | Geological                                                     | 95,827                    
|   | Geophysics                                                     | 185,885                   
|   | Helicopter fees                                                | 161,232                   
|   | Management fee                                                 | 35,829                    
|   | Mobilization and demobilization                                | 12,938                    
|   | Sampling and processing                                        | 581,160                   
|   | Supplies                                                       | 6,967                     
|  
|   |                                                                | 1,401,958                 
|  
|   | Balance, end of period                                         | 1,907,330                 
|  
|   | TOTAL                                                          | 3,185,400                 

F-11

---



3. MINERAL EXPLORATION PROPERTIES (Continued)

Environmental Protection Practices

The Company is subject to laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous material and other
matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties and properties in which it has previously had an interest. The Company is not aware of any
existing environmental problems related to any of its current or former properties that may result in material liability to the Company.

TCH Diamond Project

The Company has entered into five agreements dated March 2004, April 2005 and June 2005, for options to earn a 100%  interest in certain mineral claims, representing 167 units or 2,672 hectares, located in the Province of
Ontario, Walsh, Foxtrap Lake and Killala Townships known as the TCH Diamond Project (the "Options") for total cash consideration of $24,500 and total share consideration of 40,000 common shares. As at June 30, 2005, the Company has made
additional cash payments totalling $18,500 and has issued an additional 55,000 common shares under these Options.

The future annual payments of cash and shares required under these Options are as follows:

| | Cash | Common Shares
| | ---- | -------------

|                         | $       |        
|------------------------ | ------- | -------
|                        
|Year ended June 30, 2006 | 59,000  | 110,000
|2007                     | 61,000  | 125,000
|2008                     | 210,000 | 335,000
|2009                     | 30,000  | 20,000 
|                         | 360,000 | 590,000

The Company is also required to make all expenditures required to maintain the mineral claims in good standing and to pay the Optioners 2% of net smelter returns from the properties upon commercial production.

In addition, the Company has staked additional mineral claims in an area that is contingious to the optioned properties. These additional claims are 100% owned by the Company. The cost incurred to June 30, 2005 to stake
these claims was $248,770. The Company's interest in the TCH Diamond Project now totals 3,433 units or approximately 55,000 hectares.

To maintain the above claims in good standing, the Company is required to spend a minimum of $25 per hectare on assessment work during the first two years after staking.

F-12

---



3. MINERAL EXPLORATION PROPERTIES (Continued)

KMD Project

By an option agreement dated May 11, 2004, the Company was granted an option to purchase an 80% interest in certain mineral claims, representing approximately 32,281 acres, located in the territories of Nunavut known as the
KMD Project ("the Option") for total cash consideration of $20,000. As at June 30, 2005, the Company has made additional cash payments of $150,000 and has issued 350,000 common shares under the Option. The future payments of cash and shares
required under the Option are follows:

|                         | Cash | Shares 
|------------------------ | ---- | -------
|                         | $    |        
|Year ended June 30, 2006 | -    | 150,000

In addition, the Company must carry out the following minimum expenditures:

|Calendar | 2004 | $375,000 | (incurred)
|-------- | ---- | -------- | ----------
|Calendar | 2005 | $400,000 |           
|Calendar | 2006 | $450,000 |           

Upon making the foregoing payments and issuing the shares listed above and contingent upon the completion of the above minimum expenditures, the Company may exercise the Option by giving a notice of exercise to the Optionor
and by concurrently issuing 200,000 common shares to the Optionor at any time prior to December 31, 2007.

The Optionor is entitled to a royalty equal to 3% of Gross Revenue from the sale of diamonds mined from the property.  The Company may, at any time within three years after the exercise of the Option, purchase one-third
(1/3) of the 3% royalty for a purchase price of $1,000,000 and may purchase an additional one-third (1/3) of the royalty for an additional $1,000,000.

The Company shall have the right to purchase the 20% remaining interest of the Optionor in the property at any time prior to the expiry of the three year period following the date of the exercise of the Option by issuing to
the Optionor a further 200,000 common shares.

In addition, the Optioner has staked additional mineral claims on behalf of the Company in an area that is contingious to the optioned properties. These additional claims are 100% owned by the Company. The cost incurred to
June 30, 2005 to stake these claims was $195,371 and was reimbursed in full to the Optioner by the Company. The Company's interest in the KMD Project now totals approximately 151,000 acres.

To maintain the above claims in good standing, the Company is required to spend a minimum of $4 per acre on assessment work during the first two years after staking.

F-13

---

4.       CAPITAL ASSETS

|         |       | ACCUMULATED  | NET   | BOOK VALUE
|-------- | ----- | ------------ | ----- | ----------
|         | COST  | AMORTIZATION | 2005  | 2004      
|         | $     | $            | $     | $         
|Computer | 1,498 | 225          | 1,273 | -         

During August, 2004, the Company sold 1,678,333 seed shares at $0.15 per share pursuant to a private placement for total proceeds of $251,750.

On January 7, 2005, the Company completed its initial Public Offering of 4,000,000 shares at $0.40 per share. Pursuant to this financing, the Company paid an agent's commission of 7.5% in cash totaling $120,000 and
issued 200,000 corporate finance shares and 400,000 share purchase warrants. Each warrant entitles the agent to acquire one common share of the Company at $0.40 per share until January 6, 2006. No warrants were exercised during the year. In
addition, the Company paid $105,457 of share issue costs to effect the initial public offering.

On June 4, 2005, the Company completed a brokered private placement of 2,222,223 units at $0.45 per unit. Pursuant to this financing, the Company paid the broker a commission of 7.5% in cash totaling $75,000 and
issued 222,222 share purchase warrants.  Each share purchase warrant entitles the broker to acquire one common share of the Company at $0.50 per share until June 15, 2007. In addition, the Company paid $3,800 of share issue costs to effect
the brokered private placement. Each unit of the brokered private placement is comprised of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to acquire an additional common share of the Company until June
15, 2007 at a price of $0.50 per share. No warrants were exercised during the year.

During the year ended June 30, 2005, 950,000 shares originally classified as escrow shares were repriced by regulatory authorities due to the fact that the holders were not principals of the Company. As a result, the shares
were reissued at $0.05 per share from $0.001 per share, for additional proceeds to the Company of $46,550.

F-14

---



|5. | SHARE CAPITAL - Notes 3 and 10 (Continued)
|-- | ------------------------------------------
|  
|   | a)                                        
|  
|   |                                           
|  
|   | b)                                        
|  
|   |                                           
|  
|   |                                           
|  
|   |                                           
|  
|   |                                           
|  
|   | c)                                        
|  
|   |                                           
|  

|                                              | 2005      | 2004
|--------------------------------------------- | --------- | ----
|Balance, beginning of year                    | -         | -   
|Granted - directors, officers and consultants | 1,700,000 | -   
|Expired/cancelled                             | -         | -   
|Exercised                                     | -         | -   
|                                             
|Balance, end of year                          | 1,700,000 | -   

The Company has recorded $611,000 of compensation expense for stock-based compensation awarded to directors and consultants during the year-ended June 30, 2005. The Company used the Black-Scholes Option Pricing Model to
estimate the fair value of the options at each grant date using the following weighted average assumptions for the year ended June 30, 2005:

|                        |  | 2005      
|----------------------- |  | ----------
|Dividend yield          |  | -         
|Annualized volatility   |  | 134%      
|Risk-free interest rate |  | 3.85%     
|Expected life           |  | 4.34 years

F-15

---



|5. | SHARE CAPITAL - Notes 3 and 10 (Continued)
|-- | ------------------------------------------
|  
|   | c)                                        
|  
|   |                                           
|  
|   |                                           
|  

|Number      | Average remaining | Weighted Average        
|----------- | ----------------- | ------------------------
|outstanding | contractual life  | exercise price per share
|(in years)  |                   |                         
|300,000     | 0.95              | $0.40                   
|1,250,000   | 4.52              | $0.40                   
|150,000     | 4.71              | $0.40                   

d) Warrants

Summary of share warrant activities during the years ended June 30, 2005 and 2004 are as follows:

|                           | 2005      | 2004
|-------------------------- | --------- | ----
|Balance, beginning of year | -         | -   
|Issued                     | 1,733,334 | -   
|Exercised                  | -         | -   
|Expired                    | -         | -   
|                          
|Balance, end of year       | 1,733,334 | -   

As at June 30, 2005, the following share purchase warrants were outstanding:

|Number of | Exercise |                
|--------- | -------- | ---------------
|Warrants  | Price    | Expiry Date    
|         
|400,000   | $0.40    | January 6, 2006
|1,333,334 | $0.50    | June 15, 2007  
|         
|1,733,334 |          |                

These warrants entitle the holders thereof the right to acquire one common share for each warrant held.

F-16

---



|6. | INCOME TAX                                     |             |          
|-- | ---------------------------------------------- | ----------- | ---------
|  
|   | Basic statutory and provincial income tax rate | 35.62%      | 35.62%   
|  
|   |                                                | 2005        | 2004     
|   |                                                | $           | $        
|   | a) Tax provision                               |             |          
|  
|   | Loss before income taxes                       | (984,040)   | (18,301) 
|  
|  
|   | Income taxes at statutory rates                | (350,515)   | (6,519)  
|   | Tax deductible share issue costs               | (21,675)    | -        
|   | Stock-based compensation                       | 217,638     | -        
|   | Increase in valuation allowance                | 90,943      | 6,519    
|   | Other                                          | 609         | -        
|  
|   | Total income taxes (recovery)                  | (63,000)    | -        
|  
|  
|  
|   |                                                | 2005        | 2004     
|   |                                                | $           | $        
|   | b) Future tax balance                          |             |          
|  
|   | Future income tax assets relate to:            |             |          
|   | Mineral properties                             | 1,072,000   | 95,500   
|   | Capital asset                                  | 500         | -        
|   | Non-capital loss carryforwards                 | 161,000     | 6,000    
|   | Share issue costs                              | 86,700      | -        
|  
|   |                                                | 1,320,200   | 101,500  
|   | Valuation allowance                            | (1,320,200) | (101,500)
|  
|   | Net future income tax asset                    | -           | -        

c) Tax loss carryforwards

The Company has an available loss carry-forward of $448,981 and cumulative development and exploration expenses of $3,010,000 which may be carried forward to reduce taxable income in future years. The potential
future income tax benefits are not reflected in these financial statements. The non-capital losses expire as follows:

|Year | $      
|---- | -------
|    
|2014 | 16,801 
|2015 | 432,180
|     |        
|     | 448,981
|     |        

F-17

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|7. | COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|8. | RELATED PARTY TRANSACTIONS - Note 10                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | During the year ended June 30, 2005, the Company incurred management and consulting fees rendered by directors in the amount of $102,000 (2004: $NIL). The Company also incurred $33,632 (2004: $26,598) in
deferred mineral property expenditures to a company controlled by an officer and director of the Company. These transactions were entered into in the normal course of business and are measured at the exchange amount.
|  
|   | Amount of $nil (2004: $71,620) are due to directors, officers and a company controlled by them. These amounts are unsecured, due on demand and non-interesting bearing.                                                                                                                                                                                                                                                             
|  
|9. | UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | These financial statements prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") conform to those generally accepted in the United States ("U.S. GAAP"), in all material respects,
except as noted below:                                                                                                                                                                                 
|  

|Reconciliation of losses reported to U.S. GAAP:         |             |          
|------------------------------------------------------- | ----------- | ---------
|                                                        | 2005        | 2004     
|                                                        | $           | $        
|Net loss as reported in accordance with Canadian GAAP   | (921,040)   | (18,301) 
|Adjustments:                                            |             |          
|Advances for future exploration costs expensed          | -           | (297,500)
|Mineral exploration property - acquisition costs        | -           | (28,500) 
|Mineral exploration property - staking costs            | (304,049)   | (138,905)
|Mineral exploration property - exploration expenditures | (2,268,678) | (100,768)
|                                                       
|Net loss under U.S. GAAP                                | (3,493,767) | (583,974)
|                                                       
|                                                       
|Basic and diluted net loss per share under U.S. GAAP    | (0.19)      | (0.60)   

F-18

---



9. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

Advances for future exploration costs- Under Canadian GAAP, advances for future exploration costs are capitalized. Under U.S. GAAP, advances related to exploration are expensed as
incurred unless commercial feasibility is established.

Mineral exploration properties- acquisition and staking costs- Under Canadian GAAP, acquisition costs
including staking costs are capitalized. In accordance with EITF 04-2 under U.S. GAAP, acquisition costs only are considered tangible assets and are capitalized. Effective July 1, 2004, the Company has adopted EITF 04-2 prospectively.

Under U.S. GAAP, capitalized acquisition costs are reviewed by management for impairment whenever circumstances change which could indicate that the carrying amount of these assets may not be recoverable based on proven and
probable reserves. Management believes that there is no impairment to the acquisition costs incurred after July 1, 2004.

Mineral exploration properties - exploration expenditures- Under Canadian GAAP, exploration expenditures include all direct and indirect exploration activities and are capitalized.
Under U.S. GAAP, exploration expenditures include only direct exploration activities and are expensed as incurred unless commercial feasibility is established.

Stock-based compensation- The Company records compensation expense for U.S. GAAP purposes following the fair value method of accounting for stock options issued to employees. The
Company uses the Black-Scholes option pricing model to value its stock options as described in Note 2.

Flow-through shares- Under U.S. GAAP, proceeds from the issuance of flow-through shares are allocated amongst the fair value of the stock issued and the price the investor pays. The
difference between the fair value and the price paid is recognized as a liability for accounting purposes. The liability is relieved and the corresponding future tax liability is recorded when the Company renounces its exploration expenditures to
the flow-through share investors.

During the year ended June 30, 2004, the Company issued 871,110 flow-through shares.  The Company renounced $130,667 subsequent to June 30, 2004 relating to these issue of these shares. For the year ended June 30, 2005,
the Company issued an additional 300,000 flow-through shares at $0.15 per share for $45,000. As of June 30, 2005, all amounts renounced had been expended and tax benefit of $63,000 was recorded. As the fair value of the flow-through
shares was the same as non-flow-through shares issued at the same time, no liability is recognized under U.S. GAAP.

Additionally, under U.S. GAAP proceeds from the sale of flow-through shares would be classified as restricted cash until the expenditure actually occurs. As at June 30, 2004, for U.S. GAAP purposes, cash of $130,667
would have been restricted.

Net earnings per share and escrow shares- Under U.S. GAAP, performance-based escrow shares are considered to be contingently issuable until the performance criteria has been
satisfied and are excluded from the computation of the weighted average of shares outstanding.  The Company's escrow shares are not performance-based and therefore no adjustments have been made to the calculation of earnings per share.

F-19

---



|9. | UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)               
|-- | ---------------------------------------------------------------------------------
|  
|   | Reconciliation of total assets, liabilities, and shareholder equity to U.S. GAAP:
|  
|  
|   |                                                                                  
|   |                                                                                  
|   | Total assets under Canadian GAAP                                                 
|   | Adjustments to U.S. GAAP                                                         
|   | Expense of advances for future exploration costs                                 
|   | Expense of mineral exploration properties - acquisition costs                    
|   | Expense of mineral exploration properties - staking costs                        
|   | Expense of mineral exploration properties - exploration expenditures             
|  
|   | Total assets under U.S. GAAP                                                     
|  
|  
|   | Total liabilities under Canadian GAAP                                            
|   | Adjustments to U.S. GAAP                                                         
|  
|   | Total liabilities under U.S. GAAP                                                
|  
|   | Total stockholders' equity under Canadian GAAP                                   
|   | Adjustments to U.S. GAAP                                                         
|   | Expense of advances for future exploration costs                                 
|   | Expense of mineral exploration properties - acquisition costs                    
|   | Expense of mineral exploration properties - staking costs                        
|   | Expense of mineral exploration properties - exploration expenditures             
|  
|   | Total equity under U.S. GAAP                                                     
|  
|  
|   | Total liabilities and equity under U.S. GAAP                                     

F-20

---



|9. | UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)   
|-- | ---------------------------------------------------------------------
|  
|   | Reconciliation of statements of cash flow to U.S. GAAP:              
|   |                                                                      
|   |                                                                      
|  
|   | Cash provided by (used in) operation under Canadian GAAP:            
|   | Net loss as reported in accordance with Canadian GAAP                
|   | Adjustments:                                                         
|   | Advances for future exploration costs expensed                       
|   | Mineral exploration properties - acquisition costs                   
|   | Mineral exploration properties - staking costs                       
|   | Mineral exploration properties - exploration expenditures            
|  
|   | Net loss under U.S. GAAP                                             
|  
|   | Add (deduct) items not involving cash:                               
|   | Amortization                                                         
|   | Stock-based compensation                                             
|   | Future income tax benefit related to flow-through shares             
|   | Changes in non-cash working capital balances                         
|  
|   | Cash used in operations under U.S. GAAP                              
|  
|  
|   | Cash provided by (used in) financing activities under Canadian GAAP: 
|   | Prepaid finance costs                                                
|   | Loans payable                                                        
|   | Shares issued                                                        
|  
|   | Cash provided by financing activities under U.S. GAAP                
|  
|  
|   | Cash provided by (used in) investing activities under Canadian GAAP: 
|   | Purchase of equipment                                                
|   | Advances for future exploration costs                                
|   | Increase in mineral exploration properties - acquisition costs       
|   | Increase in mineral exploration properties - staking costs           
|   | Increase in mineral exploration properties - exploration expenditures
|   | Adjustments to U.S. GAAP                                             
|  
|   | Cash provided by financing activities under U.S. GAAP                

F-21

---



9. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

Under U.S. GAAP the Company must provided a reconciliation of the numerators and the denominators of basic and diluted earnings per share:

|                                                     | 2005        | 2004     
|---------------------------------------------------- | ----------- | ---------
|                                                     | $           | $        
|Numerator                                            |             |          
|Net loss under U.S. GAAP                             | (3,443,767) | (583,973)
|                                                    
|Denominator                                          |             |          
|Weighted average number of common shares outstanding | 18,539,297  | 965,518  
|                                                    
|Basic and diluted net earnings (loss) per share      | (0.19)      | (0.60)   

|    | Diluted net loss per share reflects the potential dilution of securities that could result from the exercise of dilutive options and warrants. As of June 30, 2005, the Company had 1,700,000 (2004: NIL) stock options and
1,733,334 (2004: NIL) warrants outstanding which have not been included in the calculation of diluted net loss per share because their effect would have been antidilutive.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Recent pronouncements:                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted could have a material effect on the accompanying financial statements.                                                                                                                                                                                                          
|   
|10. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                     
|   

F-22