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Form 51-102F1

Management Discussion and Analysis

For

Freegold Ventures Limited





MANAGEMENT DISCUSSION & ANALYSIS



The following discussion and analysis is managements assessment of the results and financial condition of Freegold Ventures Limited (the Company or Freegold) for the year ended December 31, 2006 and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2006 and related notes contained in the report.  The date of this managements discussion and analysis is March 6, 2007.  Additional information on the Company is available on SEDAR at www.sedar.com.



Business of Freegold



Freegold is an exploration stage company engaged in the acquisition exploration and evaluation of mineral properties of merit with the aim of developing them to a stage where they can be exploited at a profit or to arrange joint ventures whereby other companies provide funding for development and exploitation.



Forward looking statements



Certain information included in this discussion may constitute forward-looking statements.  Forward-looking statements are based on current expectations and entail various risks and uncertainties.  These risks and uncertainties could cause or contribute to actual results that are materially different than those expressed or implied.  The Company disclaims any obligation or intention to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.



Selected annual information



Unless otherwise noted, all currency amounts are stated in Canadian dollars.



The following table summarizes selected financial data for Freegold for each of the three most recently completed financial years.  The information set forth below should be read in conjunction with the consolidated audited financial statements, prepared in accordance with Canadian generally accepted accounting principles (GAAP), and related notes.



|                                                                                         |                                   |                    |                   
|---------------------------------------------------------------------------------------- | --------------------------------- | ------------------ | ------------------
|                                                                                         | Years Ended December 31,(audited)
|                                                                                         | 2006                              | 2005               | 2004              
|Total revenues                                                                           | $126,882                          | $40,434            | $168,823          
|General and administrative expenses                                                      | $1,510,665                        | $1,328,008         | $1,381,717        
|Mineral property costs                                                                   | 3,310,465                         | 1,114,827          | 1,387,730         
|Income (loss) before extraordinary items
-  In total
-  Basic and diluted loss per share | (1,510,665)
(0.04)                | (1,328,008)
(0.04) | (1,381,717)
(0.05)
|Net income (loss) before income taxes
-  In total
-  Basic and diluted loss per share    | (1,772,633)
(0.05)                | (1,368,370)
(0.04) | (2,018,689)
(0.08)
|Totals assets                                                                            | 12,347,101                        | 9,431,704          | 10,442,657        
|Total long term liabilities                                                              | Nil                               | Nil                | Nil               
|Cash dividends declared                                                                  | Nil                               | Nil                | Nil               







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Selected quarterly financial information



The following selected financial information is derived from the unaudited consolidated interim financial statements of the Company prepared in accordance with Canadian GAAP.



|                      |            |            |                                    |           |           |           |           |           
|--------------------- | ---------- | ---------- | ---------------------------------- | --------- | --------- | --------- | --------- | ----------
|                      |            |            | For the Quarters Ended (unaudited) |           |          
|                      | Dec. 31    | Sep 30     | Jun 30                             | Mar 31    | Dec. 31   | Sep 30    | Jun 30    | Mar 31    
|                      | 2006       | 2006       | 2006                               | 2006      | 2005      | 2005      | 2005      | 2005      
|Total revenues        | $44,728    | $10,987    | $67,509                            | $3,658    | $25,065   | $6,865    | $4,933    | $3,571    
|Net loss  before tax | 717,993    | 599,310    | 195,838                            | 259,492   | 373,741   | 398,061   | 290,184   | 306,384   
|Net loss per share    | 0.02       | 0.02       | 0.01                               | 0.01      | 0.01      | 0.01      | 0.01      | 0.01      
|Total assets          | 12,347,101 | 10,694,202 | 11,137,711                         | 9,406,647 | 9,431,704 | 9,652,159 | 9,792,836 | 10,072,692



Results of operations



The year ended December 31, 2006 resulted in a net loss of $1,772,633 which compares with a loss of $1,368,370 for the same period in 2005.  General and administrative expenses for the year ended December 31, 2006 were $1,510,665, an increase of $182,657 over the same period in 2005. Consulting fees of $207,651 were recorded as compared to $304,998 during the previous year.   The total fair value of stock options that vested using the Black-Scholes Option Pricing Model resulted in stock-based compensation expense of $83,835 for the period ended December 31, 2006 compared to $214,799 for the previous year.  The stock compensation expense has been allocated by expense category on the income statement. Wages of $466,743 were significantly higher than the previous year amount of $95,733 principally due to the inclusion of $222,060 relating to the accrual/allotment of performance shares.  All other general and administrative costs were relatively the same when compared to the previous year.  Capital gains of $85,884 were realized on the sale of investments in 2006 as compared to $Nil over the same period in 2005.   Interest income of $40,998 was also earned in 2006 as compared to $39,476 in the previous year as the Company had almost the same amount of funds on deposit.



During the year ended December 31, 2006, the Company incurred mineral property deferred exploration costs of $3,405,654.  Of the deferred exploration costs, $19,266 relates to the minimum holding costs, $702,054 was incurred to review and update previous engineering and resource work and $1,478,828 was incurred for drilling on the Almaden project in Idaho. $964,957 was incurred on the Golden Summit project in Alaska of which $531,909 was for bulk sampling. $33,049 was spent on the Rob project in Alaska. Mineral property acquisition costs of $203,997 were also incurred which included $19,922 for the Almaden Idaho project, $25,425 for the Rob Alaska project and $78,650 for the Golden Summit Alaska project. The Company also received $30,000  and 253,586 shares at a value of $100,000 from Pacific North West Capital Corp. as part of the Union Bay agreement. During the year, the Company terminated the Duke, B.C. property agreement and the associated costs of $332,806 were written off. The Company continued with the Grew Creek project in the Yukon by making a cash payment of $65,000 and issuing 50,000 shares with a deemed value of $15,000. $190,697 in exploration expenditures was spent on the Grew Creek project during the year with $169,186 being received as a mineral tax credit from the Yukon government relating to exploration expenditures incurred in the prior year.



Shareholder relations and promotional activities undertaken by the Company, which included attendance at various trade shows, cost $200,065 for the period ended December 31, 2006, an increase of $23,823 over the same period in 2005.



Three months ending December 31, 2006



The quarter ended December 31, 2006 resulted in a loss from operations of $717,993 which was higher than the loss of $373,741 incurred in the comparative quarter.  Most of the increase can be attributed to the accounting of $222,060 for the allotment/accrual of performance shares that were recorded in wages.  All other quarterly expenses are consistent with the discussion of the annual loss in the previous paragraph and elsewhere in this Annual MD & A.





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Cash flows from financing and borrowing activities during the quarter were $1,610,500.  The source of cash during the quarter was from the completion of a 1,111,111 unit private placement for gross proceeds of $500,000, the borrowing of a $1,000,000 short term loan and $110,500 from the exercise of stock options.



Liquidity and capital resources



At December 31, 2006, the Companys working capital, defined as current assets less current liabilities, was a deficit of  $805,360 compared with a surplus of $689,794 at December 31, 2005.  During 2006, 8,146,542 shares were issued for gross proceeds of $2,737,401. 453,750 options were also exercised for proceeds of $153,125.



The Company has a portfolio of investments with a book value of $232,219 and a market value of $368,160 as at December 31, 2006. The investments consist of 553,986 shares of Pacific North West Capital Corp. and 206,500 shares of CanAlaska Uranium Ltd.  These companies have certain directors in common. These amounts are included in the above working capital. The Company had 40,262,882  issued and outstanding shares at December 31, 2006.



Contractual commitments



The Company is committed under an operating lease, for its office premises with the following lease payments to the expiration of the lease on June 30, 2010.



|                           |         |         |         |         |      |           
|-------------------------- | ------- | ------- | ------- | ------- | ---- | ----------
|Fiscal year ended Dec. 31, | 2007    | 2008    | 2009    | 2010    | 2011 | Thereafter
|                           |         |         |         |         |      |           
|Office lease               | $39,679 | $39,679 | $39,679 | $19,840 | -    | -         
|                           |         |         |         |         |      |           





Off-balance sheet arrangements



The Company has no off-balance sheet arrangements.



Critical accounting estimates



A detailed summary of all the Companys significant accounting policies is included in Note 1 to the consolidated financial statements for the year ended December 31, 2006.



Significant estimates used in the preparation of these consolidated financial statements include, amongst other things, amortization, determination of net recoverable value of assets, determination of fair value on, taxes, contingencies and stock-based compensation.



Change in accounting policies



There are no changes in significant accounting policies.



Auditors



The Companys auditors for the year ended December 31, 2005, Staley, Okada & Partners, have combined their practice with PricewaterhouseCoopers LLP. The directors subsequently appointed PricewaterhouseCoopers LLP as the Companys auditors for the year ending December 31, 2006.



Financial instruments and other instruments



Freegolds financial instruments consist of cash and cash equivalents, term deposits, accounts and advances receivable, portfolio investments, accounts payable, accrued liabilities, secured loans and amounts due to related parties.  Unless otherwise noted, it is managements opinion that Freegold is not exposed to significant interest, currency or credit risks arising from the financial instruments.  The fair value of these financial instruments approximates their carrying value due to their short-term maturity or capacity of prompt liquidation.





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The Company is exposed to currency risk on its acquisition and exploration expenditures on its U.S. properties since it has to convert Canadian dollars raised through equity financing in Canada to US dollars.  The Companys expenditures are negatively impacted by increases in the U.S. versus the Canadian dollar.



Outstanding share data



The Company is authorized to issue unlimited common shares without par value.  As at December 31, 2006, there were 40,262,882 outstanding common shares compared to 31,562,590 outstanding shares at December 31, 2005.  The increase reflects the issuance of 50,000 performance shares, 8,600,292 shares for cash, and 50,000 shares for mineral properties.



Directors, officers, employees and contractors are granted options to purchase common shares under the Company Stock Option Plan.  This plan and its terms and outstanding balance are disclosed in Notes 8e to the consolidated financial statements to December 31, 2006.



Related party transactions



A total of $107,602 was paid to a company controlled by Harry Barr, a Director and Chairman of the Company, for management services during the year ended December 31, 2006.   An amount of $36,681 was paid to a company controlled by Harry Barr, a Director and Chairman of the Company, for office rent during the year ended December 31, 2006.  A total of $28,231 was paid to a company controlled by Taryn Downing, the Corporate Secretary of the Company, for Corporate secretarial services during the year ended December 31, 2006.   A total of $28,831 was paid to a company controlled by Gord Steblin, the Chief Financial Officer (CFO) of the Company for accounting services during the year ended December 31, 2006.   A total of $73,042 was paid to a company controlled by Kristina Walcott. 50,000 performance shares with a value of $19,000 were issued and 82,500 performance shares with a value of $43,523 were allotted/accrued to Kristina Walcott, the Vice-President of Business Development.  A total 427,272 performance shares with a value of $177,227 were allotted/accrued to Steve Manz, the President & Chief Executive Officer (CEO). A total 106,666 performance shares with a value of $44,833 were allotted/accrued to Michael Gross, the Vice-President of Exploration.



Disclosure controls and internal controls over financial reporting



The Company has established disclosure controls and procedures to ensure that information disclosed in this MD & A and the related financial statements was properly recorded, processed, summarized and reported to the Companys Board and Audit Committee.  The companys CEO and CFO have evaluated and are satisfied with the effectiveness of these disclosure controls and procedures for the period ending December 31, 2006.



The CEO and CFO acknowledge responsibility for the design of internal control over financial reporting
(ICFR), and confirm that there were no changes in these controls that occurred during the most recent period ended December 31, 2006 which materially affected, or are reasonably likely to materially affect the Companys
ICFR.



Risks and uncertainties



The mineral industry is intensely competitive in all its phases.  The Company competes with many other companies who have greater financial resources and experience.  The market price of precious metals and other minerals is volatile and cannot be controlled.  Exploration for minerals is a speculative venture.  There is no certainty that the money spent on exploration and development will result in the discovery of an economic ore body.



The Companys activities outside of Canada make it subject to foreign currency fluctuations and this may materially affect its financial position and results.



The Company has limited financial resources, no source of operating cash flows and no assurances that sufficient funding, including adequate financing, will be available to conduct further exploration and development of its projects or to fulfill its obligations under the terms of any option or joint venture agreements.  If the Companys generative exploration programs are successful, additional funds will be



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required for development of one or more projects.  Failure to obtain additional financing could result in the delay or indefinite postponement of further exploration and development or the possible loss of the companys properties.



Outlook



The Company ended December 31, 2006 with a working capital deficit of $805,360.  Subsequent to year end, the Company raised $2,805,000 from private placements and realized $130,258 from the sale of portfolio investments. The Company has repaid the $1,000,000 loan and estimates that it will have adequate funds to meet its corporate, administrative and property obligations for the coming year.



Approval



The Board of Directors of Freegold has approved the disclosure contained in this annual MD&A. A copy of this annual MD&A will be provided to anyone who requests it.







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FREEGOLD VENTURES LIMITED



(An Exploration Stage Company)



CONSOLIDATED FINANCIAL STATEMENTS



31 DECEMBER 2006 and 2005













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| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | PricewaterhouseCoopers LLP
Chartered Accountants
PO Box 82
Royal Trust Tower, Suite 3000
Toronto Dominion Centre
Toronto, Ontario
Canada M5K 1G8
Telephone +1 416 863 1133
Facsimile +1 416 365 8215





Independent Auditors Report



To the Shareholders of

Freegold Ventures Limited



We have audited the consolidated balance sheet of Freegold Ventures Limited(the Company) as at December 31, 2006 and the consolidated statements of loss and deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.



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



In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.



The consolidated financial statements as at December 31, 2005 and 2004 were audited by predecessor auditors who expressed an opinion without reservation on those statements in each of their reports dated February 6, 2006 and January 28, 2005 respectively.



PricewaterhouseCoopers LLP



Chartered Accountants

Vancouver, British Columbia

March 8, 2007



Comments by Auditor for U.S. Readers on Canada-U.S Reporting Difference



In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Companys ability to continue as a going concern, such as those described in note 1(a) to the financial statements.  Our report to the shareholders dated March 8, 2007 is expressed in accordance with Canadian reporting standards which do not permit reference to such events and conditions in the auditors report when these are adequately disclosed in the financial statements.



PricewaterhouseCoopers LLP



Chartered Accountants

Vancouver, British Columbia

March 8, 2007





PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.







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Report of Independent Registered Public Accounting Firm





To the Shareholders of Freegold Ventures Limited:



We have audited the accompanying consolidated balance sheets of Freegold Ventures Limited (an Exploration Stage Company) (the Company) as at 31 December 2005 and 2004 and the related consolidated statements of shareholders' equity, loss and cash flows for each of the years ended 31 December 2005, 2004 and 2003.  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 the Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at 31 December 2005 and 2004, and the results of its operations and its cash flows for each of the years ended 31 December 2005, 2004 and 2003 in accordance with Canadian generally accepted accounting principles.



Staley, Okada & Partners





|                      |                         
|--------------------- | ------------------------
|Vancouver, BC, Canada | STALEY, OKADA & PARTNERS
|6 February 2006       | CHARTERED ACCOUNTANTS   





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Directors and Shareholders of Freegold Ventures Limited:



We have audited the accompanying consolidated balance sheets of Freegold Ventures Limited (formerly International Freegold Mineral Development Inc.) (An Exploration Stage Company) as at 31 December 2004 and 2003 and the related consolidated statements of changes in shareholders equity, loss and cash flows for the years ended 31 December 2004, 2003 and 2002.  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 with the Standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.



In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2004 and 2003 and the changes in shareholders equity, results of its operations and its cash flows for the years ended 31 December 2004, 2003 and 2002 in accordance with Canadian generally accepted accounting principles.





Staley, Okada & Partners





|                                                                          |                         
|------------------------------------------------------------------------- | ------------------------
|Vancouver, B.C.                                                           | STALEY, OKADA & PARTNERS
|28 January 2005, except as to Note 4(a)(v) which is as at 2 February 2005 | CHARTERED ACCOUNTANTS   





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|                                                         |            
|-------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company) | Statement 1
|Consolidated Balance Sheets                              |            
|As at 31 December                                        |            
|Canadian Funds                                           |            





ASSETS20062005CurrentCash and cash equivalents$326,966$544,275Term deposits50,460-Accounts and advances receivable16,18049,624Portfolio investments (Note 3)232,219197,153Prepaid expenses and deposits130,82122,380756,646813,432Mineral Property Costs Statement 5 (Note 4)11,561,8378,584,178Property and Equipment(Note 5)62,75034,094$12,381,233$9,431,704LIABILITIESCurrentAccounts payable$516,006$66,943Accrued liabilities38,00056,695Due to related parties (Note 6a)8,000-Loan (Note 7)1,000,000-1,562,006123,638Contingent Liabilities(Note 4b)Commitments(Note 10)Continued Operations and Going Concern(Note 1a)SHAREHOLDERS' EQUITYShare Capital- Statement 2(Note 8)Authorized:Unlimited common shares without par valueIssued, allotted and fully paid:40,262,882 (2005  31,562,590) shares33,364,78430,714,606Contributed Surplus1,746,1281,072,794Deficit Accumulated During Exploration Stage- Statement 2(24,291,685)(22,479,334)10,819,2279,308,066$12,381,233$9,431,704




ON BEHALF OF THE BOARD:





Harry Barr, Director     Hubert Marleau, Director



- See Accompanying Notes -



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|                                                           |             | 
|---------------------------------------------------------- | ----------- | 
|Freegold Ventures Limited
(An Exploration Stage Company)   | Statement 2
|Consolidated Statements of Changes in Shareholders Equity |            
|Canadian Funds                                             |            







Common
SharesAmountContributed SurplusAccumulated
DeficitTotalBalance - 31 December 200326,266,705$29,334,259$499,845$(19,396,866)$10,437,238Issuance and allotment of shares for:- Cash2,738,0001,140,100--1,140,100- Property900,000303,000--303,000- Finders fees87,500----Share issuance costs---(54,910)(54,910)Stock-based compensation--358,150-358,150Future income tax on flow-through (Note 9)-(365,968)--(365,968)Loss for the year---(1,652,721)(1,652,721)Balance - 31 December 200429,992,205$30,411,391$857,995$(21,104,497)$10,164,889Issuance and allotment of shares for:- Cash1,445,385245,715--245,715- Property75,00050,000--50,000- Performance shares50,0007,500--7,500Share issuance costs---(6,467)(6,467)Stock-based compensation--214,799-214,799Loss for the year---(1,368,370)(1,368,370)Balance  31 December 200531,562,590$30,714,606$1,072,794$(22,479,334)$9,308,066Issuance and allotment of shares for:- Private placements8,146,5422,737,401--2,737,401- Value assigned to warrants (Note7, 8d)-(328,813)378,381-49,568- Property50,00015,000--15,000- Exercise of options453,750207,590(54,465)-153,125- Performance shares50,00019,000--19,000- Performance shares reserved for issuance.--265,583-265,583Share issuance costs---(39,718)(39,718)Stock-based compensation--83,83583,835Loss for the year---(1,772,633)(1,772,633)Balance  31 December 200640,262,882$33,364,784$1,746,128$(24,291,685)$10,819,227






























- See Accompanying Notes -



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|                                                         |            
|-------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company) | Statement 3
|Consolidated Statements of Loss                          |            
|Canadian Funds                                           |            





Year Ended 31 December200620052004General and Administrative ExpensesConsulting fees$207,651$304,998$173,124Consulting fees  Stock-based compensation (Note 8e)18,615125,553160,236Travel127,365142,099156,151Promotion104,59092,633143,237Management fees (Note 6b)107,602106,818124,640Director fees (Note 6a)22,00024,000-Director fees  Stock-based compensation (Note 8e)1,46132,74096,721Audit and accounting63,88481,52876,110Wages, salaries and benefits244,68395,73373,823Wages  Stock-based compensation (Note 8e)57,99819,73718,606Wages  Performance share compensation (Note 8f)222,060--Shareholder relations95,47583,60961,067Shareholder relations  Stock-based compensation
(Note 8e)5,76136,76982,587Transfer and filing fees64,77846,11552,456Rent and utilities40,38640,01540,015Office and miscellaneous41,17320,27730,175Insurance34,13139,13526,842Legal20,81017,05026,776Telephone17,23910,17218,330Equipment rental-1,02812,341Amortization13,0037,9998,480Loss Before the Undernoted(1,510,665)(1,328,008)(1,381,717)Other Income (Expenses)Gain on sale of portfolio investments (Note 3)85,884-30,570Interest income40,99839,47665,250Foreign exchange gain (loss), net(28,675)(2,492)9,688Miscellaneous income-95873,003Interest, bank charges and loan arrangement fee(27,369)(29,373)(27,107)Write-off of mineral property costs (Note 4)(332,806)(40,020)(788,376)Write-down of investments-(19,559)-Gain on sale of property and equipment-10,648-(261,968)(40,362)(636,972)Loss Before Income Taxes(1,772,633)(1,368,370)(2,018,689)Future income tax recovery (Note 9)--365,968Loss for the Year$(1,772,633)$(1,368,370)$(1,652,721)Loss per Share - Basic and diluted$(0.05)$(0.04)$(0.06)Weighted Average Number of Shares Outstanding37,459,60230,506,30826,847,155








- See Accompanying Notes -



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|                                                         |            
|-------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company) | Statement 4
|Consolidated Statements of Cash Flows                    |            
|Canadian Funds                                           |            



Year Ended 31 DecemberCash Resources Provided By (Used In)200620052004Operating ActivitiesLoss for the period$(1,772,633)$(1,368,370)$(1,652,721)Items not affecting cash:Amortization13,0037,9998,480Gain on sale of portfolio investments(85,884)-(30,570)Gain on sale of equipment-(10,648)-Write-down of investments-19,559-Write-off of mineral property costs332,80640,020788,376Stock-based compensation83,835214,799358,150Consulting fees  performance shares issued18,5007,000-Wages and consulting fees  performance shares reserved for issuance.265,583--Loan arrangement fee15,437--Future income tax recovery on flow-through shares (Note 9)--(365,968)Net changes in non-cash working capital components:Accounts and advances receivable33,444126,649(154,113)Term deposits(50,460)1,405,949100,996Prepaid expenses and deposits(74,309)12,183(33,463)Accounts payable(47,868)(21,966)(4,851)Accrued liabilities(18,695)13,71027,985Due to related parties8,000(20,960)20,960(1,279,241)425,924(936,739)Investing ActivitiesPurchase of portfolio investments(7,800)-(40,823)Proceeds on sale of portfolio investments158,618-48,260Mineral property acquisition costs(188,997)(173,514)(280,365)Mineral property deferred exploration costs(2,908,723)(1,186,119)(1,770,925)Mineral tax credit169,186152,873-Option payments received30,00030,000104,585Advances received from Meridian--986,228Purchase of property and equipment(41,660)(4,197)(12,549)Proceeds on sale of equipment-10,648-Option payment liability settlement-(12,982)(29,677)(2,789,376)(1,183,291)(995,266)Financing ActivitiesShare capital issued2,890,526245,7151,140,100Share issuance costs(39,718)(6,467)(54,910)Performance shares500500-Loan proceeds1,000,000--3,851,308239,7481,085,190Net Increase (Decrease) in Cash and Cash Equivalents(217,309)(517,619)(846,815)Cash and cash equivalents  - Beginning of year544,2751,061,8941,908,709Cash and Cash Equivalents - End of Year$326,966$544,275$1,061,894




- See Accompanying Notes -



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|                                                         |            
|-------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company) | Statement 4
|Consolidated Statements of Cash Flows Continued         |            
|Canadian Funds                                           |            







Year Ended 31 DecemberCash Resources Provided By (Used In)200620052004Cash Position Consists of:Cash and cash equivalents$326,966$544,275$167,573Restricted cash--894,321$326,966$544,275$1,061,894Supplemental Disclosure of Non-Cash Investing and Financing ActivitiesExploration expenditures included in accounts payable$496,931$66,943$178,875Shares issued or allotted for mineral property$(15,000)$(50,000)$(303,000)Option payments received in shares$100,000$-$17,100






- See Accompanying Notes -



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|                                                         |            
|-------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company) | Statement 5
|Consolidated Schedules of Mineral Property Costs        
|For the Years Ended 31 December                          |            
|Canadian Funds                                           |            







20062005Golden Summit Property, Alaska, USAAcquisition costsCash - option payments$78,650$82,58378,65082,583Deferred exploration expendituresGeological and field expenses71,8708,164Mineral property fees25,86628,378Drilling38,734-Assaying55,9149,635Engineering and consulting114,53525,967Bulk sampling531,909-Personnel126,129-Management fees-18,819964,95790,963Total1,043,607173,546Almaden Property, Idaho, USAAcquisition costsCash - option payments19,92224,75519,92224,755Deferred exploration expendituresGeological and field expenses220,6003,010Drilling1,478,828-Mineral property fees19,26620,379Assaying83,771-Metallurgical testing73,408-Resource engineering19,955-Engineering and consulting304,32049,9482,200,14873,337Total2,220,07098,092Balance Forward$3,263,677$271,638










- See Accompanying Notes -



---



|                                                            |            
|----------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company)    | Statement 5
|Consolidated Schedules of Mineral Property Costs- Continued
|For the Years Ended 31 December                             |            
|Canadian Funds                                              |            
|                                                            |            









20062005Balance Carried Forward$3,263,677$271,638Grew Creek Property, Yukon, CanadaAcquisition costsCash - option payments65,00045,000Shares - option payments15,00015,00080,00060,000Deferred exploration expendituresGeological and field expenses74,42655,467Mineral property fees10,850-Geophysics-196,384Drilling60,241280,647Assaying13,34340,495Engineering and consulting31,83796,231Mineral tax credit(169,186)(152,873)21,511516,351Total101,511576,351Rob Property, Alaska, USAAcquisition costsCash - option payments25,42521,17525,42521,175Deferred exploration expendituresMineral property fees15,57116,674Engineering and consulting10,5375,496Geological and field expenses1,4712,304Assaying2,739-Wages2,73115933,04924,633Total58,47445,808Union Bay Property, Alaska, USAShares - option payments received(100,000)-Cash - option payments received(30,000)(30,000)Total(130,000)(30,000)Balance Forward$3,293,662$863,797










- See Accompanying Notes -



---



|                                                            |            
|----------------------------------------------------------- | -----------
|Freegold Ventures Limited
(An Exploration Stage Company)    | Statement 5
|Consolidated Schedules of Mineral Property Costs- Continued
|For the Years Ended 31 December                             |            
|Canadian Funds                                              |            



20062005Balance Carried Forward$3,293,662$863,797Duke Property, British Columbia, CanadaAcquisition costsShares - option payments-35,000-35,000Deferred exploration expendituresGeological and field expenses204911Geophysics-45,027Assaying6881,117Engineering and consulting-31,799Drilling-131,628892210,482Total892245,482Liberty Bell Property, Alaska, USADeferred exploration expendituresEngineering and consulting-1,258Total-1,258General Exploration and Property ExaminationsEngineering and consulting14,9193,150Geological and field expenses3291,140Wages663-Total15,9114,290Costs for the Year3,310,4651,114,827Balance - Beginning of year8,584,1787,509,371Write-off of mineral property costs (Note 4)(332,806)(40,020)Balance - End of Year$11,561,837$8,584,178






















- See Accompanying Notes -





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 







1.

Continued Operations/Going Concern and Significant Accounting Policies



a)

Continued Operations and Going Concern



The Company is in the process of acquiring, exploring and developing precious metal mineral properties.  The Company will attempt to bring the properties to production, structure joint ventures with others, option or lease properties to third parties, or sell the properties outright.  The Company has not determined whether these properties contain ore reserves that are economically recoverable and the Company is considered to be in the exploration stage.



These consolidated financial statements have been prepared assuming the Company will continue on a going-concern basis. Several adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred losses since inception, has a working capital deficit of $805,360 at 31 December 2006 and has accumulated an operating deficit of $24,291,685 at 31 December 2006. Subsequent to the year end, the Company raised $2,935,258 ($2,805,000 from private placements (note8a) and $130,258 from sale of portfolio investments (note3)).If the Company is to advance or develop its mineral properties further, it will be necessary to obtain additional financing and while it has been successful in doing so in the past, there can be no assurance that it will be able to do so in the future.



These financial statements do not reflect the adjustments to carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used that would be necessary should the going concern assumption be inappropriate.



b)

Consolidation



These consolidated financial statements include the accounts of the Companys wholly owned subsidiaries, Free Gold Recovery, USA, Ican Minerals, Inc. and Canu Resources, Inc.  All subsidiaries are U.S. corporations which are involved in mineral property exploration.  Inter-company balances are eliminated upon consolidation.



c)

Cash and Cash Equivalents



The Company considers cash and cash equivalents to include amounts held in banks and highly liquid investments with remaining maturities at point of purchase of 90 days or less.  The Company places its cash and cash equivalents with institutions of high-credit worthiness.



d)

Portfolio Investments



Portfolio investments are recorded at the lower of cost or quoted market value.  Portfolio investments are written down to market value when the decline in market value is deemed to be other than temporary.









---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 



1.

Significant Accounting Policies - Continued



e)

Mineral Properties and Deferred Exploration Expenditures



The company records its interests in mineral properties at cost. The costs of acquiring mineral properties and related exploration and development expenditures, holding costs to maintain a property and related foreign exchange amounts are deferred and would be amortized against future production following commencement of commercial production or are written-off if the properties are sold, allowed to lapse or abandoned.



Option payments received are treated as a reduction of the carrying value of the related mineral property and deferred costs until the receipts are in excess of costs incurred, at which time they are credited to income. Option payments are at the discretion of the optionee, and accordingly, are recorded on a cash basis.



Management of the company regularly reviews the net carrying value of each mineral property. Where events or changes in circumstances suggest impairment, estimated future cash flows are calculated using estimated future prices, proven and probable reserves, value beyond proven and probable reserves, probability weighted outcomes and operating capital and reclamation costs on an undiscounted basis. If it is determined that the future cash flows are less than the carrying value, a write-down to the estimated fair value is expensed for the period. The company presently has no proven or probable reserves. Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses if carrying values can be recovered. If the carrying values exceed estimated recoverable values, then the project is written-down to estimated fair values with the write-down expensed in the period.



Managements estimates of future mineral prices, recoverable resources, initial and operating capital and reclamation costs are subject to certain risks and uncertainties that may affect the recoverability of mineral property costs. Although management has made its best estimate of these factors, it is possible that changes could occur that could adversely affect managements estimate of the net cash flows to be generated from its properties.



f)

Asset Retirement Obligation



On May 1, 2004 the company retroactively adopted the new CICA accounting standard, Section 3110 for Asset Retirement Obligations. Operating under this Section, future obligations to retire an asset or property are recognized and recorded as a liability at fair value as at the time the asset is acquired or the event occurs giving rise to such an obligation. At each reporting period, asset retirement obligations are increased to reflect the interest element (accretion expense) considered in the initial fair value of the measurement of the liabilities. In addition, an asset retirement cost is added to the carrying amount of the related asset and depreciated over the life of the asset. The capitalized asset retirement cost is amortized on the same basis as the related asset and along with the accretion expense, before arriving at the net income.





g)

Amortization



The Company provides for amortization on its property, plant and equipment at 20% - 45% on a declining balance method.  One half of the rate is applied in the year of acquisition.



h)

Share Capital





Share capital issued for non-monetary consideration is recorded at an amount based on

fair market value.



---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





1.

Significant Accounting Policies - Continued



i)

Stock-Based Compensation



All stock-based awards made to employees and non-employees are measured and recognized using the Black-Scholes valuation model.  For employees, the fair value of the options is measured at the date of the grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For employees and non-employees, the fair value of the options is accrued and charged to operations, with the offsetting credit to contributed surplus, on a straight-line basis over the vesting period.  If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital. The Company estimates forfeiture of stock-based awards based on historical data and adjusts the forfeiture rate periodically.



j)

Loss per Share



Basic loss per share is based on the weighted average number of common shares issued and outstanding during the year.  The effect of potential issuances of shares under options and warrants would be anti-dilutive, and therefore basic and diluted loss per share are the same.



k)

Income Taxes



The asset and liability method is used for determining future income taxes.  Under the asset and liability method, the change in the net future income tax asset or liability is included in income.  The income tax effects of differences in the periods when revenue and expenses are recognized, in accordance with Company accounting practices, and the periods they are recognized for income tax purposes are reflected as future income tax assets or liabilities.  Future income tax assets and liabilities are measured using the statutory income tax rates which are expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. A valuation allowance is provided to the extent that it is more likely than not that future income tax assets will not be realized.



l)

Foreign Currency Translation



The Companys subsidiaries are integrated foreign operations and their results and financial position are translated into the Companys functional currency, the Canadian dollar, using the temporal method as follows:



-

Monetary assets and liabilities at year-end rates;

-

All other assets and liabilities at historical rates; and

-

Revenue and expense items at the average rate of exchange prevailing during the year.



Translation gains and losses arising from these transactions are reflected in income or expense in the year that they occur.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





1.

Significant Accounting Policies - Continued



m)

Management's Estimates



The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Significant areas where managements judgement is applied are the determination of asset impairment, stock-based compensation and future income tax valuation allowances.  Actual results could differ from those estimates.



n)

Flow-Through Shares



During a prior year, the Company adopted the recommendations of the Emerging Issues Committee relating to flow-through shares effective for all flow-through agreements dated after 
19 March 2004.  Canadian Income Tax Legislation permits an enterprise to issue securities referred to as flow-through shares, whereby the investor can claim the tax deductions arising from the renunciation of the related resource expenditures.  When resource expenditures are renounced to the investors and the Company has reasonable assurance that the expenditures will be completed, future income tax liabilities are recognized (renounced expenditures multiplied by the effective tax rate) thereby reducing share capital.



o)

Performance shares



The Company grants performance shares to attract consultants and/or employees to the Company. Performance shares are valued at market price on the date of issuance and charged to operations with the offsetting credit to share capital.





p)

Mineral Exploration Tax Credits (METC)



The Company recognizes METC amounts and applies those amounts against deferred exploration costs when the Companys application for tax credits is approved by Canada Revenue Agency.  Assessments, if any, for taxes, penalties and interest under Part XII.6 under section 2.11.91 of the Income Tax Act are deducted from the tax credits when necessary.





2.

Fair Value of Financial Instruments



The Companys financial instruments consist of cash and cash equivalents, term deposits, accounts and advances receivable, portfolio investments, accounts payable, accrued liabilities, loan and amounts due to related parties.  Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments.  The fair value of these financial instruments approximates their carrying value due to their short-term maturity or capacity of prompt liquidation.



The Company is exposed to currency risk on its acquisition and exploration expenditures on its US properties since it has to convert Canadian dollars raised through equity financing in Canada to US dollars.  The Companys expenditures will be negatively impacted if the US dollar increases versus the Canadian dollar.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 





3.

Portfolio Investments



Details are as follows:

20062005Number of
Shares% OwnedBook ValueMarket ValueBook ValuePacific North West Capital Corp. (PFN)553,9861.32%$189,582$213,285$120,120CanAlaska Uranium Ltd. (CVV)206,5000.22%42,637154,87577,033$232,219$368,160$197,153




The above investments have been accounted for using the cost method.  PFN, CVV and the Company are companies with certain directors in common.  During the year, the Company had a net gain on sale of investments of $85,884 (2005 - $Nil) of which a gain of $74,510 (2005 - $Nil) was due to the sale of CVV shares and a gain of $11,374 (2005 - $Nil) was due to the sale of PFN shares.  During the year, the Company had a write down in investments of $Nil (2005 - $19,559) related to PFN shares. Subsequent to year end, 166,500 shares of CVV were sold for net proceeds of $122,083 and 20,000 shares of PFN were sold for net proceeds of $8,175.





4.

Mineral Property Costs



Details are as follows:



|                       |   |             |   |                      |   |                  |   |            |   |             |   |            
|---------------------- | - | ----------- | - | -------------------- | - | ---------------- | - | ---------- | - | ----------- | - | -----------
|                       |   | Acquisition |   | Deferred Exploration |   | Payments/ grants |   | Write-offs |   | Totals 2006 |   | Totals 2005
|Golden Summit Property | $ | 463,517     | $ | 5,689,768            | $ | -                | $ | -          | $ | 6,153,285   | $ | 5,109,678  
|Almaden Property       |   | 690,827     |   | 2,345,116            |   | -                |   | -          |   | 3,035,943   |   | 815,873    
|Grew Creek Property    |   | 215,470     |   | 1,470,492            |   | (322,059)        |   | -          |   | 1,363,903   |   | 1,262,392  
|Rob Property           |   | 521,675     |   | 185,958              |   | -                |   | -          |   | 707,633     |   | 649,159    
|Union Bay Property     |   | 110,658     |   | 161,505              |   | (234,200)        |   | -          |   | 37,963      |   | 167,963    
|PGM Properties         |   | 98,650      |   | 148,549              |   | -                |   | -          |   | 247,199     |   | 247,199    
|Property Examinations  |   | -           |   | 15,911               |   | -                |   | -          |   | 15,911      |   | -          
|Duke Property          |   | 45,000      |   | 287,806              |   | -                |   | (332,806)  |   | -           |   | 331,914    
|                       | $ | 2,145,797   | $ | 10,305,105           | $ | (556,259)        |   | (332,806)  | $ | 11,561,837  | $ | 8,584,178  





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





4.

Mineral Property Costs - Continued



a)

Golden Summit Property, Alaska, USA



By various agreements dated from 1 December 1992 to 9 May 1997, the Company acquired from Fairbanks Exploration Inc. (FEI) certain mineral claims in the Fairbanks Mining District of Alaska known as the Golden Summit Property subject to a 7% working interest held in trust for FEI by the Company.  The property is controlled by the Company through long-term lease agreements or outright claim ownership.  As consideration for the property, the Company agreed to:



-

Issue 25,000 shares of the Company (issued in 1997);

-

Issue 25,000 shares of the Company for each US$1,000,000 in expenditures spent on the property including all underlying lease obligations since 9 May 1997 to an aggregate of 125,000 shares.  As at 31 December 2006, the Company had issued 100,000 shares (25,000 shares each in 1998,1999, 2001 and 2005).  Subsequent to year end, the Company issued the final 25,000 shares.

-

Expend a minimum of US$1,767,000 of exploration expenditures on the property before 2000 (completed); and

-

Make all required lease payments to underlying lessors (Note 4a(i-iii)).



The Company will fund 100% of the project until commercial production is achieved at which point FEI will be required to contribute 7% of any approved budget.  The property is subject to a 2% Net Smelter Royalty (NSR).  The Company has a 30 day right of first refusal in the event that the 7% working interest of FEI or the NSR is to be sold.  The Company can also purchase the NSR at any time following commercial production, based on its net present value as determined by mineable reserves.



Underlying Leases



(i)

Keystone Claims



By agreement dated 17 May 1992 and amended 15 May 2000 and 30 November 2001, the Company agreed to make advance royalty payments as follows:



US Funds1992  1998 (US$15,000 per year)$105,000(paid)2000$50,000($25,000 paid in cash and $25,000 with 58,898 treasury shares issued)2001- 2006 (US$50,000 per year)$*300,000(paid)2007  2019 (US$150,000 per year)$1,950,000




*  The 2001 US$50,000 advance royalty payment was settled by issuing 250,000 shares.  These shares were issued during the year ended 31 December 2002.



An amendment signing bonus of US$50,000 was paid 1 October 2000.





The leased property is subject to a 3% NSR.



---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 







4.

Mineral Property Costs - Continued



a)

Golden Summit Property, Alaska, USA - Continued



Underlying Leases - Continued



(ii)

Newsboy Claims



By lease agreement dated 28 February 1986 and amended 26 March 1996, the Company assumed the obligation to make advance royalty payments of US$2,500 per year until 1996 (paid) and US$5,000 per year until 2006 (paid to date).  During 2006, the Company renewed the existing lease term for an additional 5 years on the same terms and conditions.   The claims are subject to a 4% NSR which the Company has an option to purchase for the greater of the current value or US$1,000,000 less all advance royalty payments made.





(iii)

Tolovana Claims



In May 2004, the Company entered into an agreement with a third party (the Seller) whereby the Seller transferred 100% of the rights via Quit Claim Deed to a 20-year lease on the Tolovana Gold Property in Alaska.



Under the terms of the agreement, the Company assumed all of the Sellers obligations under the lease, which include making annual payments of $1,000 per month for the first 23 months increasing to $1,250 per month for the 24th to the 48th months and increasing to $1,500 after the 49th month and for the duration of the lease. These payments are current.



The property is subject to a sliding scale NSR as follows: 1.5% NSR if gold is below US$300, in the event the price of gold is between US$300 to US$400, 2.0% NSR, and in the event that the price of gold is above US$400,the property is subject to a 3.0% NSR.  In addition, the Company has made a cash payment of US$7,500 on signing and issued 400,000 shares on regulatory approval. An additional 200,000 shares are to be issued within 30 days of a minimum 200,000 ounce mineral resource being calculated on the property if the resource is established in five years or less from the date of the agreement.



(iv)

Meridian Gold Option and Joint Venture



During 2004, the Company entered into an option and joint venture agreement with Meridian Gold Company (Meridian) with regard to the Golden Summit Project.



During 2005, Meridian terminated the agreement.  The 200,000 shares and $75,000 to be subscribed/received on or before 31 December 2004 was never subscribed/received.









---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





4.

Mineral Property Costs- Continued



b)

Almaden Property, Washington County, Idaho, USA



By agreement dated 13 December 1995 and various amendments, the Company purchased a 60% interest in certain mineral claims located in Washington County, Idaho, known as the Almaden Property.  As consideration, the Company paid US$250,000 to underlying optionors, issued 4,621,714 common shares and completed a feasibility study.



Pursuant to the Company submitting a feasibility report, the Company entered into a joint venture agreement whereby 60% of all further costs spent on the property were the responsibility of the Company.  The joint venture assumed the requirements to pay US$250,000 to underlying optionors (paid), US$4 per month for each acre acquired (approximately US$10,000 per year [paid to date]) and US$24,000 per year (US$6,000 annually [paid to date] with the remaining US$18,000 deferred for payment upon commencement of commercial production).  The US$18,000 annual contingent liability has not been recorded in these financial statements due to the uncertainty of going into commercial production.  This accumulated contingent liability for lease payments due on commencement of commercial production is US$450,000.



By agreement dated 17 April 2001, the Company acquired the remaining 40% portion of the joint venture interest and 100% of the shares of Ican Minerals, Inc. and Canu Resources, Inc. for 500,000 shares of the Company (issued). The Company now owns a 100% interest in the Almaden Property, subject to underlying lease agreements.



The property is subject to a production royalty of 4% of net returns and a 1% NSR if the average price of gold is less than US$425 per ounce and 2% if the average price of gold is equal to or greater than US$425 per ounce.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





4.

Mineral Property Costs- Continued



c)

Grew Creek Property, Yukon Territory, Canada



By Letter Agreement dated 27 May 2004 the Company can acquire, from a third party (Optionor), up to a 100% interest in certain mineral claims known as the Grew Creek Property located in Whitehorse Mining District, Yukon Territory.  To acquire a 100% interest in the property, the Company must, at its option, complete the following:



|                                                   |              |               |                                |   |          
|-------------------------------------------------- | ------------ | ------------- | ------------------------------ | - | ---------
|                                                   | Issue Shares | Cash Payments | Incur Exploration Expenditures
|Upon signing the letter agreement (paid)           | -            | $             | 5,000                          | $ | -        
|Within 5 days of regulatory approval (issued/paid) | 50,000       |               | 35,000                         |   | -        
|On or before 27 May 2005 (issued/paid/incurred)    | 50,000       |               | 45,000                         |   | 75,000   
|On or before 27 May 2006 (issued/paid/incurred)    | 50,000       |               | 65,000                         |   | 150,000  
|On or before 27 May 2007                           | 50,000       |               | 75,000                         |   | 325,000  
|On or before 27 May 2008                           | -            |               | 80,000                         |   | 450,000  
|On or before 27 May 2009                           | -            |               | -                              |   | 500,000  
|                                                   | 200,000      | $             | 305,000                        | $ | 1,500,000



The project is subject to a 3% NSR.  In the event that commercial production has not commenced on the property by the 6th anniversary of the Letter Agreement, the Company shall make an advance royalty payment in the amount of $50,000.  On the 7th Anniversary, the advance royalty payments shall increase to $100,000 and remain at that level until such time that commercial production commences, or until the Company notifies the Optionor that it does not intend to proceed to commercial production.  These advance royalty payments made shall be deducted from the NSR payments due.  Once commercial production has commenced the minimum annual royalty payable shall be $50,000.



d)

Rob Property, Alaska, USA



By agreement dated 9 July 2002 the Company has the option to earn a 100% interest in a 20-year lease on certain mineral claims located in the Good Paster Mining District, Alaska, known as the Rob Property.



As consideration, the Company shall, at its option, make the following payments and issue shares as follows:



US FundsShares- Upon execution of the agreement (paid)$7,000-- Earlier of 1 September 2002 and approval date (paid/issued)7,000500,000- On or before 1 July 2003 (paid/issued)2,500500,000- On or before 1 July 2004 (paid)2,500-- On or before 1 July 2005 (paid)2,500-- On or before 1 July 2006 (paid)2,500-- On or before 1 July 20072,500-- On or before 1 July 20082,500-$29,0001,000,000




---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





4.

Mineral Property Costs- Continued



d)

Rob Property, Alaska, USA- Continued



The Company is also responsible to make payments for an underlying agreement with the vendor as follows:



US Funds- On or before 1 July 2003 (paid)$10,000- On or before 1 July 2004 (paid)10,000- On or before 1 December 2005 (paid)15,000- On or before 1 December 2006 (paid)20,000- On or before 1 December 200725,000$80,000




In addition, the Company is also required to expend a total of US$1,000,000 in exploration expenditures on the property prior to 31 December 2008 (US$111,205 spent to date).  Minimum work in any given year shall not be less than US$10,600 per year.  If the Company fulfills this US$1,000,000 exploration expenditure requirement, an additional 500,000 shares of the Company must be issued.



Commencing 1 December 2008 annual advance royalty payments must be made depending on the average gold price for the proceeding year as follows:



Gold Price Per OunceAnnual Royalty PaymentLess than US$350US$30,000US$350 to US$400US$40,000More than US$400US$50,000




The vendor shall retain a NSR, which shall vary according to the London gold price for the preceding six-month period as follows:  1% for gold prices less than US$300, 1.5% for gold prices between US$301 and US$350, and 2% for gold prices greater than US$350.  The NSR may be purchased for US$500,000 for each percentage point.  An undivided 100% interest in the property may be purchased for US$1,500,000.



In addition, an intermediary vendor retains a 1% NSR which the Company may purchase for US$1,000,000.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





4.

Mineral Property Costs- Continued



e)

Union Bay Property, Alaska, USA



The Company acquired certain mineral claims known as the Union Bay Property, in Alaska, USA, by way of staking.



(i)

By agreement dated 1 October 2002 and amended 2 April 2003, the Company granted to PFN, a company with certain directors and officers in common, an option to earn a 70% interest in the property.



To earn its 50% interest, PFN, purchased a private placement of $165,000 (2002) and made cash payments, issued shares and incurred exploration expenditures as follows:



PaymentsSharesExploration Expenditures- Within 5 days from approval date (received)$-30,000$-- On or before 1 July 2003 (received / completed)20,000-30,000- On or before 30 January 2004 (received)-30,000-- On or before 1 July 2004 (received / completed)20,000-30,000- On or before 1 July 2005 (received / completed)30,000-340,000- On or before 1 July 2006 (received / completed)30,000-600,000$100,00060,000$1,000,000




Following vesting with a 50% interest, PFN had the right to elect within 45 days to increase its interest to 60% by completing a feasibility study within 12 months of having vested. This election was not made.



Upon vesting, PFN issued 253,586 shares at market value for $100,000 to the Company.







(ii)

Joint Venture Agreement



By agreement dated 21 May 2003 with Lonmin PLC (Lonmin) the Company and PFN granted Lonmin an option to earn up to a 70% interest in the Union Bay project.  Under the agreement, Lonmin was required to incur, at its option, exploration expenditures of US$815,000 (completed) in 2003 and a minimum of US$1,000,000 per year in 2004 (completed), 2005(completed), and 2006, and US$750,000 for subsequent years. PFN is the operator of the project during the exploration phase.



On 26 August 2005, Lonmin advised that it was terminating its option on the project. PFN has notified the Company that it intends to retain the project by reducing the property size to encompass the remaining prospective target areas identified to date.



---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





4.

Mineral Property Costs- Continued



f)

PGM A Property, Sudbury Region, Ontario, Canada



By various agreements dated between 6 March and 19 December 2000, the Company acquired a property in the Sudbury region, Ontario known as the PGM A Property.  During a prior year, the Company earned a 100% interest in the property by making cash payments of $100,000, issuing 300,000 shares and incurring exploration expenditures of $50,000.  The Company is also required to issue a further 100,000 shares to the optionor upon the completion of a bankable feasibility study.



The property is subject to a 3% NSR.   The Company has the right to purchase up to 2% of the NSR for $3,000,000.  (The first 1% for $1,000,000 and the second 1% for $2,000,000.)



By Letter Agreement dated 16 November 2001, the Company granted to PFN, a company with certain directors in common, an option to earn a 70% interest in PGM A for cash payments of $55,000 (received), issuance of 20,000 PFN shares (received) and exploration expenditures on the property of $55,000 (completed).



PFN has the right to purchase an additional 30% interest in the property by paying to the Company $750,000.  The Company and PFN will share the NSR buyout privileges in proportion to their respective interests.



g)

Duke Property, British Columbia, Canada



By agreement dated 21 October 2004 and amended 24 December 2004 the Company had the right to acquire, from a third party, up to a 70% interest in certain mineral claims known as the Duke Property located in Merritt, British Columbia.



During 2006, the Company terminated this agreement.  Accordingly, all costs associated with the property have been written off.



h)

Liberty Bell Property, Alaska, USA



The Company acquired by staking 48 one hundred sixty-acre state mining claims plus 46 forty-acre state mining claims in the Bonnifield Mining District, Nenana Recording District, Alaska.



During 2005, management decided not to pursue further exploration on the property.  Accordingly, the associated acquisition and deferred exploration expenditures have been written-off.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





5.

Property and Equipment



Details are as follows:



|                 |      |                          |                     |          |   |       
|---------------- | ---- | ------------------------ | ------------------- | -------- | - | ------
|2006             | Cost | Accumulated Amortization | 2006
Net Book Value
|Mining equipment | $    | 13,505                   | $                   | (2,026)  | $ | 11,479
|Office equipment |      | 85,483                   |                     | (34,212) |   | 51,271
|                 | $    | 98,988                   | $                   | (36,238) | $ | 62,750



|                     |      |                          |                     |           |   |       
|-------------------- | ---- | ------------------------ | ------------------- | --------- | - | ------
|2005                 | Cost | Accumulated Amortization | 2005
Net Book Value
|Automotive equipment | $    | 32,744                   | $                   | (32,744)  | $ | -     
|Office equipment     |      | 185,933                  |                     | (151,839) |   | 34,094
|                     | $    | 218,677                  | $                   | (184,583) | $ | 34,094





6.

Related Party Balances and Transactions



Except as noted elsewhere in these consolidated financial statements, related party transactions are as follows:



a)

Effective 1 January 2005, each outside director is entitled to receive $500 per month, $500 per directors meeting and $500 per committee meeting.  During the year, $22,000 (2005 - $24,000) was paid/accrued to directors.  As at 31 December 2006, amounts due to related parties consists of $8,000 (2005 - $Nil) owing to directors.  These amounts were incurred in the ordinary course of business, are non-interest bearing, unsecured and due on demand.



b)

During the year, management fees of $107,602 (2005 - $106,818; 2004 - $124,640) were paid to a company controlled by the Chairman.



c)

During the year, consulting fees of $28,231 (2005 - $33,428; 2004 - $40,900) were paid to a company controlled by the Corporate Secretary.



d)

During the year, accounting fees of $28,831(2005 - $28,556; 2004 - $41,713) were paid to a company controlled by the Chief Financial Officer.



e)

During the year, rent of $36,681 (2005 - $40,015; 2004 - $40,015) was paid to a company controlled by the Chairman.



f)

During the year, consulting fees of $73,042 (2005 - $61,658) were paid, 50,000 performance shares (vested as described in Note 8f) were issued to the Vice-President of Business Development.  Subsequent to year end, 50,000 of the 400,000 performance shares reserved for issuance were issued.



g)

During the year, consulting fees of $Nil (2005 - $30,000; 2004 - $Nil) were paid to a director and former President of the Company.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





6.

Related Party Balances and Transactions- Continued



h)

During the prior year, 1,000,000 performance shares (vested as described in Note 8f) were reserved for issuance to the President and CEO.  Subsequent to year end, 427,272 of the 1,000,000 performance shares reserved for issuance were issued.



i)

During the year, 400,000 performance shares (vested as described in Note 8f) were reserved for issuance to the Vice-President of Exploration.  Subsequent to year end, 99,999 of the 400,000 performance shares reserved for issuance were issued.



The above transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.



7.

Loan



During the year, a $1 million short-term debt financing was obtained having a term of 1 year, an interest rate of 8%, and collateralized by a floating charge over the assets of the Company.  The lenders have the option to accelerate the repayment of the loan upon the Company obtaining subsequent equity financing in excess of $2 million, and the Company has agreed to apply net proceeds from the processing and sale of gold contained within the stockpiles at the Golden Summit project in the spring of 2007 against any unpaid loan balances.  As consideration for the loan, the lenders received 250,000 non-transferable warrants that entitle the holders to purchase common shares of the Company at a price of $0.55 per share during the twelve month period following the date of issuance of the warrants, and at a price of $0.65 per share during the subsequent twelve month period.  These warrants have a calculated value of $49,569 of which $15,437 has been expensed as a loan arrangement fee. This loan and the accrued interest were repaid subsequent to year end.







---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital



a)

Private Placements



During the year, the Company issued 8,146,542, units through private placements for gross proceeds of $2,737,401 as follows:



i)

1,500,000 common shares at $0.20 common share for gross proceeds of $300,000.



ii)

5,535,431 units at $0.35 per unit consisting of one common share and one-half non-transferable share purchase warrant for gross proceeds of $1,937,401.  Each whole warrant entitles the holder to purchase one additional common share of the Company at a purchase price of $0.45 expiring 3 April 2007.





iii)

1,111,111 units at $0.45 per unit consisting of one common share and one-half non-transferable share purchase warrant for gross proceeds of $500,000.  Each whole warrant entitles the holder to purchase one additional common share of the Company at a purchase price of $0.55 during the 12 month period expiring 10 November 2007 and at a price of $0.65 during the subsequent 12 month period.



Subsequent to year-end, the Company closed a non-brokered private placement of 5,100,000 units for gross proceeds of $2,805,000.   Each unit was priced at $0.55 and consisted of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase one additional common share at a price of $0.75 per share exercisable for 24 months from date of closing.  The Company will have the right to accelerate the warrant expiration on 30 days written notice in the event that after 6 months the closing bid price of the shares is equal to or above $1.10 per share for any consecutive 20-day period.



During 2005, the Company issued 1,445,385, shares at $0.17 per share (325,294 shares issued to related parties) through private placements for gross proceeds of $245,715.







---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital- Continued



b)

Flow-Through Shares



Flow-through shares are shares issued by a Company that incurs certain resource expenditures and then renounces them for Canadian tax purposes.  This allows the expenditures to flow through to the subscriber for tax purposes.  The subscribers may in turn claim the expenditure as a deduction on their personal or corporate tax returns.



The total amount of funds raised through the issuance of flow-through shares must be spent on qualifying mineral exploration.  The use of proceeds from flow-through shares is restricted to certain Canadian Exploration Expenditures under Canadian Income Tax Legislation.



c)

Exercise of Warrant and Options



i)

During the year, no warrants were exercised.



ii)

During the year, 453,750 (2005 - Nil) options were exercised for gross proceeds of $153,125 (2005 -$Nil).



d)

Share Purchase Warrants



As at 31 December 2006, the following share purchase warrants are outstanding:



|          |                 |                       | 
|--------- | --------------- | --------------------- | 
|Number    | Price per Share | Expiry Date           | 
|          |                 |                       | 
|2,767,714 | $0.45           | 3 April 2007          | 
|555,555   | $0.55/$0.65     | 10 November 2007/2008 | 
|250,000   | $0.55/$0.65     | 4 December 2007/2008  | 
|3,573,269 |                 |                       | 



During the year, 3,323,269 common share purchase warrants having a fair value of $328,813 were issued relating to two private placements and 250,000 common share purchase warrants having a fair value of $49,569  were issued as a loan arrangement fee for the $1,000,000 loan.





e)

Share Purchase Options



The Company has established share purchase option plans whereby the Board of Directors (Board), may from time to time, grant options to directors, officers, employees or consultants to a maximum of 8,250,061 options.  Options granted must be exercised no later than five years from date of grant or such lesser period as determined by the Board.  The exercise price of an option is not less than the closing price on the Toronto Stock Exchange on the last trading day preceding the grant date.  Options vest upon the discretion of the Board.



---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital- Continued



e)

Share Purchase Options- Continued



A summary of the Companys options at 31 December 2006 and the changes for the year are as follows:



Number
Outstanding
31 December
2005GrantedExercisedCancelledExpiredNumber
Outstanding
31 December
2006Exercise
Price
Per ShareExpiry Date860,000-(25,000)(150,000)-685,000$0.5031 December 20071,150,000--(130,000)-1,020,000$0.4810 September 2008100,000-(100,000)---$0.251 July 200780,000--(30,000)-50,000$0.5510 February 200750,000-(50,000)---$0.311 July 20071,380,000-(165,000)(135,000)-1,080,000$0.40/$0.505 November 2009100,000-(100,000)---$0.3013 July 2010500,000----500,000$0.2030 September 2010-110,000(13,750)--96,250$0.3025 January 2011-350,000---350,000$0.3513 March 2011-100,000---100,000$0.5017 July 2011-100,000---100,000$0.5021 September 20114,220,000660,000(453,750)(445,000)-3,981,250




Effective 1 January 2003, the Company adopted the recommendations of CICA Handbook Section 3870, Stock-based compensation (Note 1i).  The standard requires that stock-based awards made to employees and non-employees are to be measured and recognized using a fair value based method. During the year, the Company transferred $54,465 from contributed surplus to share capital as required when options were exercised.



During the year, the Company granted the following options and recognized the following costs with respect to options granted in 2006:





Grant dateGrantedExercise priceFair
Value2006 Vested
Amount25 January 2006110,000$0.30$10,986$4,12013 March 2006350,000$0.3586,86432,57417 July 2006100,000$0.5022,1058,84221 September 2006100,000$0.5028,662-Total660,000$148,617$45,536








The total estimated fair value of the 660,000 options is $148,617.  Since the options were granted under a graded vesting schedule, $45,536 of the total fair value has been recorded in the Company accounts as stock-based compensation expenses during the year.  The offsetting entry is to contributed surplus.







---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital- Continued



e)

Share Purchase Options- Continued









During prior years, the Company granted the following options and recognized the 2006 vested amount as follows:





Grant dateGrantedExercise priceFair
Value2006 Vested
Amount10 November 20042,000,000$0.40/$0.50$337,017$8,99113 July 2005100,000$0.309,9305,26330 September 2005500,000$0.2046,16724,045Total2,600,000$393,114$38,299








The total estimated fair value of the 2,600,000 options is $393,114.  Since the options were granted under a graded vesting schedule, $38,299 of the total fair value has been recorded in the Company accounts as stock-based compensation expenses during 2006.  The offsetting entry is to contributed surplus.









The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



200620052004Expected dividend yield0.00%0.00%0.00%Expected stock price volatility74.70%62.76%73.52%Risk-free interest rate4.08%3.52%3.75%Expected life of options5.0 years5.0 years4.8 years




Option pricing models require the input of highly subjective assumptions including the expected price volatility.  Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Companys stock options.



---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital- Continued



f)

Performance Shares



A total of 2,187,482 performance shares are reserved for issue.  At the discretion of the Board, these shares may be issued to such arms length parties as the Board considers desirable to attract consultants and/or employees to the Company.



During a prior year, the Board authorized the issuance of up to 400,000 performance shares at an exercise price of $0.01 per share to attract a Vice-President of Business Development to the Company.  These shares are to be granted as follows:



SharesDate50,0005 September 2005(issued)50,0005 March 2006(issued*)50,0005 September 2006(issued subsequent to year end**)50,0005 March 200750,0005 September 200750,0005 March 200850,0005 September 200850,0005 March 2009400,000




* 50,000 performance shares were issued at $0.01 per share for total proceeds of $500.  The fair market value of the performance shares at the date of the issuance was $19,000.  The difference between the issue price and the fair market value ($18,500) was recorded in the accounts as consulting fees.  The offsetting entry is to share capital.



** 82,500 performance shares were reserved for issuance at $0.01 per share.  The fair market value of the performance shares at the date of the allotment/accrual was $43,523 and was recorded in the accounts as consulting fees.  The offsetting entry is to contributed surplus.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital- Continued



f)

Performance Shares- Continued





During the prior year, the Board authorized the issuance of up to 1,000,000 performance shares at an exercise price of $0.01 per share to attract a new President & CEO to the Company.  These shares are available for issuance as follows:



SharesDate100,0001 January 2006(issued subsequent to year end*)81,8181 April 2006(issued subsequent to year end*)81,8181 July 2006(issued subsequent to year end*)81,8181 October 2006(issued subsequent to year end*)81,8181 January 2007(issued subsequent to year end*)81,8181 April 200781,8181 July 200781,8181 October 200781,8181 January 200881,8181 April 200881,8181 July 200881,8201 August 20081,000,000




* 427,272 performance shares were reserved for issuance at $0.01 per share.  The fair market value of the performance shares at the date of the allotment/accrual was $177,227 and was recorded in the accounts as wages and benefits.  The offsetting entry is to contributed surplus.







---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





8.

Share Capital- Continued



f)

Performance Shares- Continued



During the year, the Board authorized the issuance of up to 400,000 performance shares at an exercise price of $0.01 per share to attract a new Vice-President of Exploration to the Company.  These shares are available for issuance as follows:





SharesDate33,33313 June 2006(issued subsequent to year end*)33,33313 September 2006(issued subsequent to year end*)33,33313 December 2006(issued subsequent to year end*)33,33313 March 200733,33313 June 200733,33313 September 200733,33313 December 200733,33313 March 200833,33313 June 200833,33313 September 200833,33313 December 200833,33713 March 2009400,000




* 106,666 performance shares were reserved for issuance at $0.01 per share.  The fair market value of the performance shares at the date of the allotment/accrual was $44,833 and was recorded in the accounts as wages and benefits.  The offsetting entry is to contributed surplus.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





9.

Income Taxes





A reconciliation of income taxes at statutory rates with the reported taxes is as follows:



|                                             |   |             |   |            
|-------------------------------------------- | - | ----------- | - | -----------
|                                             |   | 2006        |   | 2005       
|                                             |   |             |   |            
|Loss before income taxes                     | $ | (1,772,633) | $ | (1,368,370)
|                                             |   |             |   |            
|Expected income tax (recovery)               | $ | (604,468)   | $ | (466,836)  
|Items not deductible for income tax purposes |   | 204,828     |   | 133,683    
|Unrecognized benefit of non-capital losses   |   | 399,640     |   | 333,153    
|                                             |   |             |   |            
|Total income taxes                           | $ | -           | $ | -          
|                                             |   |             |   |            
|Represented by:                              |   |             |   |            
|Current income tax                           | $ | -           | $ | -          
|Future income tax                            | $ | -           | $ | -          



The significant components of the Company's future income tax assets and liabilities are as follows:



|                                                                  |   |             |   |            
|----------------------------------------------------------------- | - | ----------- | - | -----------
|                                                                  |   | 2006        |   | 2005       
|                                                                  |   |             |   |            
|Future income tax assets                                          |   |             |   |            
|Financing costs                                                   | $ | 30,101      | $ | 53,424     
|Loss carry-forwards                                               |   | 8,163,302   |   | 8,125,423  
|Undepreciated capital cost in excess of accounting net book value |   | 115,613     |   | 111,176    
|Mineral properties                                                |   | 387,366     |   | 50,264     
|                                                                  |   |             |   |            
|                                                                  |   | 8,696,382   |   | 8,340,287  
|Valuation allowance                                               |   | (8,696,382) |   | (8,340,287)
|                                                                  |   |             |   |            
|Net future income tax assets                                      | $ | -           | $ | -          



The Company has non-capital losses for Canadian tax purposes of approximately $4,843,000 available to offset against taxable income in future years, which, if unutilized, will expire through to 2016.  In addition, the Company has net operating loss carryovers for US tax purposes of approximately US$16,508,082 available to offset against taxable income in future years, which, if unutilized, will expire through to 2026. Subject to certain restrictions, the Company also has resource exploration expenditures of approximately $12,697,000 available to reduce taxable income of future years. Future tax benefits which may arise as a result of these losses, resource deductions and other tax assets have not been recognized in these financial statements, and have been offset by a valuation allowance.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





9.

Income Taxes - Continued



Future Income Tax Recovery



During a prior year, flow-through shares were issued for $1,028,000, which funds were required to be spent on certain Canadian Exploration Expenditures.  Because the Company no longer has the ability to use the expenditures for tax purposes, the Company is required to record a future tax liability ($365,968) which is equal to the renunciation, times the corporation tax rate when expenditures are renounced.  However, because the Company has unused tax losses and resource pools in excess of the renunciation, the future tax liability becomes a future income tax recovery.





10.

Commitments





By an agreement dated 1 July 2005, the Company is committed under an operating lease, for its office premises with the following lease payments to the expiration of the lease on June 30, 2010.



|                           |         |         |         |         |      |           
|-------------------------- | ------- | ------- | ------- | ------- | ---- | ----------
|Fiscal year ended Dec. 31, | 2007    | 2008    | 2009    | 2010    | 2011 | Thereafter
|                           |         |         |         |         |      |           
|Office lease               | $39,679 | $39,679 | $39,679 | $19,840 | -    | -         
|                           |         |         |         |         |      |           

















---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





11.

Segmented Information



Details on a geographic basis as at 31 December 2006 are as follows:



USACanadaTotalAssets$9,950,735$2,430,498$12,381,233Mineral property costs$9,950,735$1,611,102$11,561,837Loss for the year$(2,006)$(1,770,627)$(1,772,633)




Details on a geographic basis as at 31 December 2005 are as follows:



USACanadaTotalAssets$6,753,761$2,677,943$9,431,704Mineral property costs$6,742,673$1,841,505$8,584,178Loss for the year$(43,019)$(1,325,351)$(1,368,370)




Details on a geographic basis as at 31 December 2004 are as follows:



USACanadaTotalAssets$6,601,475$3,841,182$10,442,657Mineral property costs$6,489,699$1,019,672$7,509,371Loss for the year$(447,510)$(1,205,211)$(1,652,721)






12.

Differences Between United States and Canadian Generally Accepted Accounting Principles ("GAAP")



These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada.  Except as set out below, these financial statements also comply, in all material aspects, with accounting principles generally accepted in the United States and the rules and regulations of the Securities and Exchange Commission.



a)

SEC staff have interpreted U.S. GAAP to require that mineral property exploration and land use costs must be expensed as incurred, until commercially mineable deposits are determined to exist within a particular property. Accordingly, for U.S. GAAP purposes, for all periods presented, the Company has expensed all land use costs for mineral properties and deferred exploration costs, which have been incurred by the Company, for which commercially mineable revenues do not exist. Under Canadian GAAP, such costs have been deferred. For Canadian GAAP, cash flows relating to mineral property exploration and land use costs are reported as investing activities. For U.S. GAAP, these costs would be characterized as operating activities.





b)

Under U.S. GAAP, investments classified as available for sale are recorded at market value.  The difference between the market value and the cost of the investment is recorded in comprehensive income.  Once the investment is sold, the comprehensive income for that investment is transferred to income.  Under Canadian GAAP, investments held as available for sale are recorded at the lower of cost and market.  There is no comprehensive income category in Canada.





---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





12.

Differences Between United States and Canadian Generally Accepted Accounting Principles ("GAAP") - Continued



c)

Flow-through Shares



In 2004, the Company received a premium to market on the issuance of flow-through shares of $77,100 which was recorded in share capital under Canadian GAAP. For U.S. GAAP purposes, SFAS 109, Accounting for Income Taxes, the proceeds should be allocated between the offering of the shares and the sale of tax benefits when the shares are offered.  The allocation is made based on the difference between the quoted price of the shares and the amount the investor pays for the flow-through shares.  A future tax liability is recognized for the premium paid by the investors.



In 2004, for Canadian GAAP purposes, the Company recorded a future income tax recovery of $365,968 and a corresponding reduction of share capital in respect of flow-through share financing.



d)

514,501 performance shares were released upon regulatory approval prior to 1991 from an escrow arrangement based on the maintenance of the current level of cash flow.  The excess of the fair value of these shares when the required level of cash flow was attained over the nominal original consideration paid of $0.01 per share ($5,145) would be charged to operations as compensation expense under U.S. GAAP.



e)

Under U.S. GAAP, share issue costs are charged to share capital in the year and not to deficit.



f)

Prior year restatement



Certain of the comparative numbers in this Canadian to U.S. GAAP reconciliation have been restated to reflect errors in the previous years presentation. As a result of this restatement, loss for the year 2004 under U.S. GAAP increased by $275,348. Basic and diluted loss per share under U.S. GAAP increased from$0.08 to $0.09 as a result of the restatement. Loss for the year 2005 under U.S. GAAP decreased by $2,072 as a result of the restatement. Basic and diluted loss for 2005 did not change.







g)

The impact of the above differences between Canadian and United States GAAP on loss for the period is as follows:



Year Ended
31 December
2006As Restated
Year Ended
31 December
2005As Restated
Year Ended
31 December
2004Loss for the period as reported$(1,772,633)$(1,368,370)$(1,652,721)Write-off of mineral property costs (Note a)(2,977,659)(1,074,807)(599,354)Future income tax recovery (Note c)--(288,868)Loss for the period in accordance with   United States GAAP$(4,750,292)$(2,443,177)$(2,540,943)Basic loss per share for the year in accordance with United States GAAP$(0.13)$(0.08)$(0.09)






---



|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 
|                                                         | 





12.

Differences Between United States and Canadian Generally Accepted Accounting Principles ("GAAP") -Continued



h)

The impact of the above differences between Canadian and United States GAAP on the deficit, as reported, is as follows:



Year Ended
31 December
2006Year Ended
31 December
2005Deficit - As reported$(24,291,685)$(22,479,334)Stock compensation expense (Note d)(244,404)(244,404)Write-off of mineral property costs (Note a)(11,561,837)(8,584,178)Share issuance costs (Note e)1,011,744972,026Future Income tax recovery (Note c)(288,868)(288,868)Deficit in accordance with United States GAAP$(35,375,050)$(30,624,758)




i)

The impact of the above differences between Canadian and United States GAAP on the statement of changes in shareholders equity, as reported, is as follows:



|                                                                               | Common
      Shares |   |             |   |              |   |                         |   |                               
|------------------------------------------------------------------------------ | ------------------- | - | ----------- | - | ------------ | - | ----------------------- | - | ------------------------------
|                                                                               | Number              |   | Amount      |   | Deficit      |   | Contributed
    surplus |   | Other
    Comprehensive Income
|Shareholders equity balance as reported at 31 December 2005                   | 31,562,590          | $ | 30,714,606  | $ | (22,479,334) | $ | 1,072,794               | $ | -                             
|Stock compensation expense(Note d)                                             | -                   |   | 244,404     |   | (244,404)    |   | -                       |   | -                             
|Write-off of mineral property costs (Note a)                                   | -                   |   | -           |   | (8,584,178)  |   | -                       |   | -                             
|Share issuance costs                                                           | -                   |   | (972,026)   |   | 972,026      |   | -                       |   | -                             
|Future Income tax recovery(Note c)                                             | -                   |   | 288,868     |   | (288,868)    |   | -                       |   | -                             
|Shareholders equity in accordance with United States GAAP at 31 December 2005 | 31,562,590          | $ | 30,275,852  | $ | (30,624,758) | $ | 1,072,794               | $ | -                             
|Shareholders equity balance as reported at 31 December 2006                   | 40,262,882          | $ | 33,364,784  | $ | (24,291,685) | $ | 1,746,128               | $ | -                             
|Stock compensation expense                                                     | -                   |   | 244,404     |   | (244,404)    |   | -                       |   | -                             
|Write-off of mineral property costs (Note a)                                   | -                   |   | -           |   | (11,561,837) |   | -                       |   | -                             
|Share issuance costs                                                           | -                   |   | (1,011,744) |   | 1,011,744    |   | -                       |   | -                             
|Investments available for sale                                                 | -                   |   | -           |   | -            |   | -                       |   | 135,941                       
|Future Income Tax recovery(Note c)                                             | -                   |   | 288,868     |   | (288,868)    |   | -                       |   | -                             
|Shareholders equity in accordance with United States GAAP at 31 December 2006 | 40,262,882          | $ | 32,886,312  | $ | (35,375,050) | $ | 1,746,128               | $ | 135,941                       





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|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 







12.

Differences Between United States and Canadian Generally Accepted Accounting Principles ("GAAP")- Continued



j)

Cash flows



Year Ended 31 DecemberStatements of Cash Flows200620052004Cash used in operating activities under Canadian GAAP$(1,279,241)$425,924$(936,739)Mineral property exploration and development expenditures(2,898,534)(1,176,760)(960,477)Cash used in operating activities under U.S. GAAP(4,177,775)(750,836)(1,897,216)Cash generated by financing activities, under
Canadian and U.S. GAAP3,851,308239,7481,085,190Cash used in investing activities under Canadian GAAP(2,789,376)(1,183,291)(995,266)Mineral property exploration and development expenditures2,898,5341,176,760960,477Cash used in (from) investing activities under  U.S. GAAP109,158(6,531)(34,789)Cash and cash equivalents end of year under Canadian and U.S. GAAP$326,966$544,275$1,061,894






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|                                                         | 
|-------------------------------------------------------- | 
|Freegold Ventures Limited
(An Exploration Stage Company) | 
|Notes to Consolidated Financial Statements               | 
|31 December 2006 and 2005                                | 
|Canadian Funds                                           | 







12.

Differences Between United States and Canadian Generally Accepted Accounting Principles ("GAAP")- Continued



k)

Recent Accounting Pronouncements



In June 2006, FASB issued Accounting for Uncertain Tax Positions - an Interpretation of FASB Statement No. 109, FIN 48 which prescribes a recognition and measurement model for uncertain tax positions taken or expected to be taken in the Companys tax returns.  FIN 48 provides guidance on recognition, classification, presentation and disclosure of unrecognized tax benefits. Management is required to adopt this statement effective January 1, 2007 and is currently assessing the impact on the Companys financial statements.



In September 2006, FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands fair value disclosures.  The standard does not require any new fair value measurements.  This standard is effective for fiscal years beginning after November 15, 2007.  Management is currently assessing the impact on the Companys financial statements.



In April 2005, the Canadian Accounting Standards Board issued new accounting standards dealing with the recognition, measurement and disclosure of financial instruments, hedges and comprehensive income, together with many consequential changes throughout the CICA Handbook.  These new standards will affect the companys Canadian GAAP interim and annual financial statements beginning in the first quarter of 2007.  The most significant new standards are as follows:



i)

Financial Instruments  Recognition and Measurement, Section 3855

This standard prescribes when a financial asset, financial liability, or non-financial derivative is to be recognized on the balance sheet and whether fair value or cost-based methods are used to measure the amounts.  It also specifies how financial instrument gains and losses are to be presented.  Management is currently finalizing its evaluation of the impact of this standard on the Companys Canadian GAAP financial statements.



ii)

Hedges, Section 3865

This standard is applicable when a company chooses to designate a hedging relationship for accounting purposes.  The adoption of this standard is not expected to impact the company.



iii)

Comprehensive Income, Section 1530

This standard requires the presentation of a statement of comprehensive income and its components.  Comprehensive income includes both net earnings and other comprehensive income.  Other comprehensive income for the company will include holding gains and losses on investments designated as available for sale.











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