UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TWELVE MONTH PERIOD ENDED JANUARY 31, 2006



Commission File No. 0-31100



RIMFIRE MINERALS CORPORATION

(Exact name of Registrant as specified in its charter)



British Columbia, Canada

(Jurisdiction of incorporation or organization)



Suite 700 - 700 West Pender Street, Vancouver, British Columbia, V6C 1G8

(Address of principal executive offices)



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



Securities registered or to be registered pursuant to Section 12(g) of the Act:



Common Shares, without par value

(Title of Class)



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



Indicate the number of outstanding shares of each of the Issuer's classes of capital or common stock as of January 31, 2006: 19,999,539



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ̈ Yes x No



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

 ̈ Yes

x No



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

xYes  ̈ No





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

 ̈Large accelerated filer

 ̈   Accelerated filer

x  Non-accelerated filer



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



x    Item 17    ̈ Item 18



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



Currency: All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated.











|Glossary of Terms  
|-------------------
|anastomosing       
|andesite           
|antimony           
|argillite          
|arsenic            
|arsenopyrite       
|As                 
|Au                 
|Ba                 
|barite             
|basalt             
|Bi                 
|bismuth            
|bismuthinite       
|breccia            
|carbonate-muscovite
|chalcedony         
|chalcopyrite       
|chert              
|clastic            
|Cretaceous         
|Cu                 
|dacite             
|enargite           
|Eocene             





|feldspar           | a major rock forming silicate mineral                                                                                                   
|------------------ | ----------------------------------------------------------------------------------------------------------------------------------------
|felsic             | applied to an igneous rock having abundant light-coloured minerals (quartz, feldspars, muscovite)                                       
|gossan             | an iron-bearing weathered product overlying a sulphide deposit                                                                          
|granite            | an igneous rock consisting of quartz and orthoclase with hornblende or biotite as mafic constituents                                    
|granodiorite       | a plutonic igneous rock consisting of quartz, calcic feldspar, and orthoclase with biotite, hornblende or pyroxene as mafic constituents
|hectare (ha)       | metric unit of area equal to 10,000 square metres (2.471 acres)                                                                         
|hornblende         | The commonest mineral of the amphibole group, usually black, dark green or brown                                                        
|hydrothermal       | a term applied to heated water or fluid                                                                                                 
|Jurassic           | second period of the Mesozoic era spanning 190 to 135 million years before the present                                                  
|mafic              | applied to an igneous rock having dark-colored minerals (ferromagnesian) containing iron and/or magnesium                               
|marcasite          | light yellow or grayish mineral (FeS2) resembling pyrite                                                                                
|mesothermal        | conditions of ore deposition of intermediate temperatures and depths                                                                    
|Mesozoic           | era of geologic time spanning 245 to 66 million years before the present                                                                
|minerals           | a homogeneous naturally occurring chemical substance                                                                                    
|net smelter return | the proceeds received from a smelter or refinery after the deduction of processing, shipping costs and related costs                    
|ore                | a mineral or aggregate of minerals which can be mined at a profit                                                                       
|monzonite          | plutonic rocks intermediate between syenite and diorite containing approximately equal amounts of alkali feldspar and plagioclase       
|orthogneiss        | a metamorphic rock derived from gneiss                                                                                                  
|Permian            | the last period of the Paleozoic era from 286 to 245 million years ago                                                                  
|PIMA               | Portable infrared mineral analyzer (spectrometer) that can be used for qualitative identification of minerals in the field              
|plagioclase        | one of a group of triclinic feldspars                                                                                                   
|plutonic rocks     | igneous rocks formed below the earths surface                                                                                          
|porphyry           | an igneous rock of any composition that contains conspicuous crystals in a fine-grained groundmass                                      
|ppm                | abbreviation for units of measure in parts per million                                                                                  
|Precambrian        | all geologic time and its corresponding rocks before the beginning of the Paleozoic era ( 570 million years before present)             
|Proterozoic        | the more recent of the two great divisions of the Precambrian                                                                           





|pyrite                | a mineral composed of iron and sulfur (FeS2)                                                                                                         
|--------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|pyroclastic           | formed by volcanic explosion or aerial expulsion from a volcanic vent                                                                                
|pyrrhotite            | a mineral composed of iron and sulfur (FeS)                                                                                                          
|rhyolite              | extrusive igneous rocks with high potassium and silica content                                                                                       
|sericitization        | a hydrothermal or metamorphic process involving the introduction of, replacement by, or alteration to sericitic muscovite                            
|silicification        | the introduction of or replacement by silica                                                                                                         
|tellurium             | a silvery-white to brownishblack mineral, the native semi-metallic element Te                                                                       
|mineral tenure number | number assigned by Provincial, Territorial or State authorities to mineral claims                                                                    
|tetrahedrite          | a steel-gray to iron-black isometric mineral which commonly occurs in characteristic tetrahedral crystals associated with copper ores                
|Triassic              | the first period of the Mesozoic era thought to have covered a span of time between 245 and 208 million years before the present                     
|tuff                  | a general term for all consolidated pyroclastic rocks                                                                                                
|tungsten              | a metallic element with the chemical symbol W                                                                                                        
|UTEM                  | University of Toronto Electromagnetic System used to measure variances in ground conductivity which may indicate the presence of mineralized material
|VHMS                  | volcanic-hosted massive sulphide  a style of mineral deposit thought to have been emplaced on ancient seafloor                                      
|VLF-EM                | very low frequency electromagnetic survey used to identify variances in ground conductivity which may indicate the presence of mineralized material  











FORWARD-LOOKING STATEMENTS



This Report contains forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Certain statements in this Report constitute forward looking statements. These forward looking statements are not guarantees of Rimfires future operational or financial performance and are subject to risks and uncertainties. When used in this Annual Report, the words estimate, intend, expect, anticipate and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these statements, which speak only as of the date of this Annual Report. These statements are subject to risks and uncertainties that could cause results to differ materially from those contemplated in such forward-looking statements.

Actual operational and financial results may differ materially from Rimfires expectations contained in the forward looking statements as a result of various factors, many of which are beyond the control of the Corporation. These factors include, but are not limited to, the need for additional financing to fully execute the Corporations business plan, the risk factors as set forth in more detail in Item 3 - Key Information - Risk Factors, adverse technical factors associated with exploration and development of Rimfires properties, changes in Canadian or U.S. tax or other laws or regulations, and material changes in capital expenditures.











|        | TABLE OF CONTENTS                                          |     
|------- | ---------------------------------------------------------- | ----
|        |                                                            |     
|        | PART I                                                     | Page
|        |                                                            |     
|ITEM 1  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS      | 9   
|ITEM 2  | OFFER STATISTICS AND EXPECTED TIMETABLE                    | 9   
|ITEM 3  | KEY INFORMATION                                            | 9   
|ITEM 4  | INFORMATION ON THE CORPORATION                             | 17  
|ITEM 5  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS               | 59  
|ITEM 6  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                 | 66  
|ITEM 7  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS          | 76  
|ITEM 8  | FINANCIAL INFORMATION                                      | 78  
|ITEM 9  | THE OFFERING AND LISTING                                   | 78  
|ITEM 10 | ADDITIONAL INFORMATION                                     | 79  
|ITEM 11 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 89  
|ITEM 12 | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES     | 89  
|        |                                                            |     











|         | PART II                                                                      | Page
|-------- | ---------------------------------------------------------------------------- | ----
|         |                                                                              |     
|ITEM 13  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 89  
|ITEM 14  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 89  
|ITEM 15  | CONTROLS AND PROCEDURES                                                      | 89  
|ITEM 16A | AUDIT COMMITTEE FINANCIAL EXPERT                                             | 90  
|ITEM 16B | CODE OF ETHICS                                                               | 90  
|ITEM 16C | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       | 90  
|ITEM 16D | EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                    | 91  
|ITEM 16E | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 91  



|                 | PART III                                   |       
|---------------- | ------------------------------------------ | ------
|                 |                                            |       
|ITEM 17

ITEM 18 | FINANCIAL STATEMENTS

FINANCIAL STATEMENTS | 92

92
|ITEM 19          | EXHIBITS                                   | 92    









PART I



ITEM 1   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.



ITEM 2   OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.



ITEM 3   KEY INFORMATION

CURRENCY AND EXCHANGE RATES



All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated. The following tables set forth:



(i)

the average rates of exchange for each of the Corporations fiscal years ending January 31, for the Canadian dollar, expressed in U.S. dollars, calculated by using the average of the exchange rates on the last day of each month during the period.

(ii)

the high and low exchange rate for each month during the previous six months,

in each case based on the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York.



|Fiscal Year ended 
January 31st | 2006    | 2005     | 2004     | 2003     | 2002    
|------------------------------- | ------- | -------- | -------- | -------- | --------
|Average Rate During Period      | $0.8339 | $ 0.7763 | $ 0.7305 | $ 0.6392 | $ 0.6414



|          | April
2006 | March 2006 | February 2006 | January 2006 | December 2005 | November 2005
|--------- | ---------- | ---------- | ------------- | ------------ | ------------- | -------------
|High Rate | $0.8926    | $0.8809    | $0.8788       | $ 0.8744     | $ 0.8690      | $ 0.8579     
|Low Rate  | $0.8534    | $0.8531    | $0.8638       | $ 0.8528     | $ 0.8521      | $ 0.8361     



On April 28, 2006, the noon buying rate in New York City for cable transfer in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York was $0.8926 US = $1.00 CDN.



SELECTED FINANCIAL DATA



The selected consolidated financial information set out below has been obtained from financial statements which reflect the Corporation's operations in the mineral exploration business.









The following table summarizes information pertaining to operations of the Corporation for the last five fiscal years.



|                                         | Year
Ended
2006 ($) | Year
Ended
2005 ($) | Year
Ended
2004 ($) | Year
Ended
2003 ($)
(restated) | Year
Ended
2002 ($)
(restated)
|---------------------------------------- | ------------------- | ------------------- | ------------------- | ------------------------------ | ------------------------------
|Revenues                                 | 112,849             | 128,697             | 56,235              | 27,670                         | 13,955                        
|Exploration & Development Expenses       | 1,265,615           | 1,090,613           | 356,812             | 315,620                        | 224,369                       
|Depletion, Depreciation and Amortization | 33,980              | 17,344              | 7,761               | 5,628                          | 5,457                         
|General and Administrative Expenses      | 933,596             | 910,869             | 839,701             | 329,205                        | 529,040                       
|Other Income (Option Proceeds)           | 163,500             | 358,630             | 191,792             | 139,580                        | 45,016                        
|Net Income (Loss)                        | (1,823,606)         | (1,495,680)         | (901,405)           | (507,303)                      | (716,895)                     
|Per Share                                | (0.10)              | (0.09)              | (0.07)              | (0.04)                         | (0.08)                        
|Working Capital                          | 2,905,645           | 2,844,579           | 1,071,452           | 1,041,619                      | 383,506                       
|Resource Properties                      | NIL                 | NIL                 | NIL                 | NIL                            | NIL                           
|Other Assets                             | 90,264              | 88,461              | 44,163              | 31,175                         | 17,298                        
|Long-Term Liabilities                    | 35,363              | 35,363              | NIL                 | NIL                            | NIL                           
|Shareholders Equity                     | 2,960,546           | 2,897,677           | 1,115,615           | 1,072,794                      | 400,804                       
|                                         |                     |                     |                     |                                |                               
|Total assets                             | 3,095,488           | 3,153,025           | 1,176,633           | 1,119,457                      | 454,059                       



The Corporations financial statements have been prepared in accordance with accounting principles generally accepted in Canada. The Corporation intends to adopt accounting recommendations of the Canadian Institute of Chartered Accountants for the recognition and measurement of financial instruments with related disclosure in a Statement of Comprehensive Income for the fiscal year ending January 31, 2007. At each balance sheet date, the Corporations financial instruments will be measured at their fair value. Gains and losses will be recognized in other comprehensive income for instruments considered to be available for sale and in net income for other instruments. Adoption of this provision requires that interim statements for the fiscal year must show the components of other comprehensive income and the adjustments to reclassify amounts of revenue, expense, gain and loss previously recognized in other comprehensive income to the income statement.



On January 31, 2004, the Corporation adopted the new accounting recommendations of the Canadian Institute of Chartered Accountants on accounting for share-based compensation of employees and non-employees during the year. These recommendations established the following standards for the measurement, recognition and disclosure of compensation and other costs arising from the issue of share purchase options and other share-based payments to employees and non-employees. When options to purchase shares are issued to employees or directors, the fair value of the options on the date of the grant are recognized as compensation expense, with a corresponding increase in contributed surplus, over the period during which the related options vest. When options to purchase shares are issued to non-employees in return for goods and services, the fair value of the options issued are recognized as an expense, with a corresponding increase in contributed surplus, in the period in which the goods or services are received or are expected to be received. The consideration received on the exercise of share options is credited to share capital. The Corporation accounted for these recommendations on a retroactive basis, and accordingly increased share-based compensation expense by $245,280 and $10,240 for the years ended January 31, 2002 and 2003 and deficit and contributed surplus by $245,280 at January 31, 2002 and $255,520 at January 31, 2003.



On January 31, 2002 the Corporation elected to adopt a different method of accounting for its mineral property interests. The Corporation accounts for its mineral property interests whereby all acquisition and exploration costs are charged to expense as incurred and all property sales and option proceeds received are credited to income. When the existence of a mineral reserve on a property has been established, future acquisition, exploration and development costs will be capitalized for that property. After commercial production on the property commences, the net capitalized costs will be charged to





future operations using the unit of production method based on estimated recoverable reserves on the property. The Corporation had previously accounted for its mineral property interests whereby costs relative to the acquisition, exploration and development of these interests were capitalized by property. All sales and option proceeds received were first credited against the costs of the related property, with any excess credited to earnings. No gains or losses were recognized on the partial sale or dispositions of properties except in circumstances which result in significant dispositions of reserves. Once commercial production had commenced, these net costs were to be charged to future operations using the unit-of-production method based on estimated recoverable reserves by property. The net costs related to abandoned properties were charged to earnings.



Except as disclosed in Note 10 of the financial statements, the financial statements conform in all material respects with U.S. GAAP.



The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes.  This statement requires the proceeds from shares issued pursuant to a flow-through offering to be allocated between the offering of shares and the sale of tax benefits, such as the renunciation of exploration expenditures to shareholders.  The sale of tax benefits is to be recorded as a deferred tax liability until the related asset is amortized or sold. Under Canadian GAAP, the estimated future income tax arising from the renunciation of expenses to subscribers is recorded as a cost of issuing the shares.  The Corporation has determined that there is no difference in the reported liabilities and shareholders equity arising from this difference in accounting policies.



The weighted average number of shares outstanding used in the calculation of earnings per share under Canadian GAAP includes shares held in escrow. These shares are excluded in the calculation under U.S. GAAP. This has the effect of increasing the loss per share in previous years when the number of shares held in escrow was more substantial. There was little or no effect in each of the last three years.





|                    | Year
Ended
2006 ($) | Year
Ended
2005 ($) | Year
Ended
2004 ($) | Year
Ended
2003 ($)
(restated) | Year
Ended
2002 ($)
(restated)
|------------------- | ------------------- | ------------------- | ------------------- | ------------------------------ | ------------------------------
|Shareholders Equity | 2,960,546           | 2,797,552           | 1,015,490           | 992,669                        | 338,379                       
|Loss Per Share      | (0.10)              | (0.09)              | (0.07)              | (0.05)                         | (0.09)                        





CAPITALIZATION AND INDEBTEDNESS



Not Applicable.



REASONS FOR THE OFFER AND USE OF PROCEEDS



Not Applicable.



RISK FACTORS



The Corporation is engaged in the business of preliminary or early stage mineral exploration and mine development. The Corporation holds no interests in any producing mines or commercial ore deposits. The Corporation is subject to many of the material risks customarily encountered by early stage exploration and mine development companies. Additional risks are included which are specific to the operations and business plan of the Corporation.







Specific Corporate Risks



Employment Contracts/Reliance Upon Officers



The Corporation is largely dependent upon the personal efforts and abilities of its corporate officers. The loss or unavailability to the Corporation of these individuals may have a materially adverse effect upon the Corporation's business. Investors will be relying on management's judgment with respect to the operation of the Corporation. The Corporation does not presently have "key person" life insurance on the lives of any of its officers. (See Item 6 "Directors, Senior Management and Employees").



The Corporation has not entered into an employment contract with any of its executive officers. The services of David A. Caulfield, President and Chief Executive Officer are provided to the Corporation pursuant to a January 1, 2006 management agreement with Equity Engineering Ltd. (See Item 6 "Directors, Senior Management and Employees").



Conflict of Interest



Certain of the directors of the Corporation are also directors and officers of other corporations engaged in the business of mineral exploration and mine development. It is possible that a conflict of interest may arise between their duties as a director of the Corporation and their duties as a director or officer of other corporations. All such conflicts of interest must be disclosed by a director under British Columbia corporate law and a director must act in the best interest of both corporations. A director in such a conflict of interest position must abstain from voting on all resolutions with respect to one of the two competing corporations. (See Item 6: Certain Affiliations)



Legal Proceedings Against Foreign Directors



The Corporation is incorporated under the laws of the Province of British Columbia, Canada, and all of the Corporations five directors and all of its officers are residents of Canada. Consequently, it may be difficult for United States investors to effect service of process within the United States upon the Corporation or upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended. Furthermore, it may be difficult for investors to enforce judgments of the U.S. courts based on civil liability provisions of the U.S. federal securities laws in a Canadian court against the Corporation or any of the Corporations non-U.S. resident executive officers or directors. There is substantial doubt whether an original lawsuit could be brought successfully in Canada against any of such persons or the Corporation predicated solely upon such civil liabilities.



Shareholder Dilution



The Corporation raises working capital funds primarily through the sale of its common shares from treasury. An investors proportional interest in the Corporation will decrease over time as additional common shares are issued.







Classification as a Passive Foreign Investment Company



The Corporation believes it is a Passive Foreign Investment Company (PFIC), as that term is defined in Section 1297 of the Internal Revenue Code of 1986, as amended, and believes it will continue to be a PFIC for the coming fiscal year. Consequently, this classification may result in adverse tax consequences for U.S. holders of the Corporations shares. For an explanation of these effects on taxation, see Item 10, Taxation. U.S. shareholders and prospective holders of the Corporations shares are also encouraged to consult their own tax advisers.



Classification of the Common Stock as Penny Stock



In October 1990, Congress enacted the "Penny Stock Reform Act of 1990. A "Penny Stock" is generally any equity security other than a security (a) that is registered or approved for registration and traded on a national securities exchange or an equity security for which quotation information is disseminated by The National Association of Securities Dealers Automated Quotation ("NASDAQ") System on a real-time basis pursuant to an effective transaction reporting plan, or which has been authorized or approved for authorization upon notice of issuance for quotation in the NASDAQ System, (b) that is issued by an investment company registered under the Investment Company Act of 1940, (c) that is a put or call option issued by Options Clearing Corporation, (d) that has a price of five dollars (US) or more, or (e) whose issuer has net tangible assets in excess of $2,000,000(US), if the issuer has been in continuous operation for at least three years, or $5,000,000(US) if the issuer has been in continuous operation for less than three years, or average revenue of at least $6,000,000(US) for the last three years.



The Corporations Common Shares are presently considered penny stock under these criteria. Therefore, the Common Shares are subject to Rules 15g-2 through 15g-9 (the "Penny Stock Rules") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Penny Stock Rules impose additional reporting, disclosure and sales practice requirements on brokers and dealers before they can recommend the Common Shares for purchase by their customers, and require that such brokers and dealers must make a special suitability determination of each purchaser and must have received the purchaser's written consent to the transaction prior to the sale. Consequently, the Penny Stock Rules may affect the ability of brokers and dealers to sell the Common Shares and may affect the ability of purchasers to sell any of the Shares acquired hereby in the secondary markets.



So long as the Common Shares are within the definition of "Penny Stock" as defined in Rule 3a51-1 of the Exchange Act, the Penny Stock Rules will continue to be applicable to the Common Shares. Unless and until the price per share of Common Shares is equal to or greater than $5.00(US), the Common Shares will be subject to substantial additional risk disclosures and document and information delivery requirements on the part of brokers and dealers effecting transactions in the Common Shares. Such additional risk disclosures and document and information delivery requirements on the part of such brokers and dealers may have an adverse effect on the market for and/or valuation of the Common Shares.



General Exploration and Mining Risks



Stage of Development



The Corporation has no production revenue. It does not have an operating history upon which investors may rely. Moreover, the Corporation has no commercially viable properties at this time.







Capital Expenditures; Need for Future Financing



The Corporation has limited financial resources. Sufficient funding for future exploration and development of its properties or to fulfill its obligations under current agreements may not be available when and as required. Failure to obtain such future financing will result in delay or indefinite postponement of further exploration and development of its projects. Failure to obtain such future financing will also result in default under certain of the current agreements and the Corporation will forfeit its interest in such properties. The Corporations accumulated deficit as at January 31, 2006 was $7,320,443.



Commercial development of any of the Corporations properties will only occur if sufficient quantities of minerals with a sufficient average grade are discovered. If a mineral discovery is made, substantial financial resources will be required to establish ore reserves, develop metallurgical processes to extract metal from the ore and develop mining and processing facilities at a given site. If the Corporation is unable to finance such development on its own, it will be required to sell all or a portion of its interest in such property to one or more parties capable of financing such development.



Operating Risks



The exploration and, if warranted, development of mining properties is a high-risk industry. Presently, none of the Corporations properties have a known body of commercial ore. Unusual or unexpected formations, formation pressures, fires, power outages, labor disruptions, flooding, explorations, cave-ins, landslides, and the inability to obtain adequate machinery, equipment or labor are all risks involved in the operation of mines and the conduct of exploration programs.



Volatility in Mineral Prices



The cost of developing gold and other mineral properties is affected by the cost of operations, variations in ore grade, fluctuations in metal markets and the cost of processing equipment. Government regulations regarding prices, taxes, royalties, allowable production, importing and exporting of minerals, land use, land tenure and environmental protection also affect economic viability.



The Corporation cannot control the marketability of the minerals it discovers. Metal prices have fluctuated widely in recent years, and are affected by numerous factors beyond the Corporations control. International economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and worldwide production levels all may affect metal prices.



The trading price of mineral exploration and mining companies is largely influenced by international metal prices. As the Corporation raises funds through the sale of its common shares, a significant decrease in the price of precious and base metals will adversely affect the Corporations ability to fund its operations.



Forfeiture of Mineral Claims



The Corporation holds an interest in a number of exploration properties with respect to which certain cash payments, exploration expenditures and share issuances are required to maintain the Corporations interests in such properties. For those of the Corporations properties acquired through the staking of





claims, a failure by the Corporation to incur exploration expenditures or make cash payments to the appropriate government agency in lieu of exploration expenditures will result in the forfeiture of the title to the mining claims back to the State of Alaska, State of Nevada, Yukon Territory or Province of British Columbia, as the case may be. Once forfeited, the areas previously covered by the claims will be available for staking by other parties.



For those of the Corporations properties held under option agreement, if the Corporation does not fulfill its obligations under the terms of any such option agreement, such agreement will terminate and title to the property will revert to the grantor of the original option.



Competition



The mineral industry is very competitive. The Corporation must compete with other companies possessing superior financial resources and technical facilities. This competition is not only for the acquisition of mining interests, but also for retention of the services of qualified employees.



No Assurance of Titles



The Corporations mineral property interests may be subject to prior unregistered agreements, transfers or native land claims and title may be affected by undetected defects. Substance and continuity of title may also be affected by political instability and the vagaries of law as they exist and are applied in foreign jurisdictions. Surveys have not been carried out on all of the Corporations mineral properties and therefore, in accordance with the laws of the jurisdiction in which such properties are situated, their existence and area could be in doubt.



General Operating Risks



Permits and Licenses



The operations of the Corporation require licenses and permits from various governmental authorities. The Corporation may not be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects. All properties are presently without any known body of commercial ore.



The Corporations RDN, Thorn, Williams, Jake, Adam, Kizmet, and Tide Properties are located in British Columbia, Canada. The RDN Property consists of 19 mineral claims comprising 10,140 hectares. The Thorn Property consists of 21 mineral claims comprising 15,583 hectares. The Williams Property consists of 21 mineral claims comprising 10,727 hectares. The Jake Property consists of 84 claims covering 37,237 hectares. The Adam Property consists of 2 mineral claims comprising 1,823 hectares. The Kizmet Property consists of 93 mineral claims comprising 34,078 hectares. The Tide Property consists of 4 mineral claims comprising 2,964 hectares. All of these mineral claims are governed by the Mineral Tenure Act and the Mines Act (British Columbia) and are subject to a required assessment work or cash in lieu of $4.00 per hectare in each of the first 3 years and $8.00 in the fourth and subsequent years after their location dates. As the Corporation has paid all required assessments and filing fees, valid title to the mineral claims is recorded in the name of the Corporation or the Joint Venture partner of each property with the Ministry of Energy and Mines in British Columbia.



The Corporations Fer, Simpson and Wernecke Breccia Properties are located in Yukon Territory, Canada. The Fer Property consists of 118 claims, the Simpson Property consists of 8 claims and the Wernecke Breccias Property is comprised of 700 claims. All of these mineral claims are





governed by the Quartz Mining Act and are subject to a required assessment work or cash in lieu of $100 each year. As the Corporation has paid all required assessments and filing fees, valid title to the mineral claims is recorded in the name of the Corporation or the Joint Venture partner.



The Corporations Poncho-Crow Property is located in the State of Nevada. The property consists of 136 mining claims totaling 1,700 acres. The mineral claims are subject to a Bureau of Land Management claim rental fee of $125 (US) per claim plus a Nye County renewal fee of $8.50 per claim plus filing fees. As the Corporation has paid all required claim rental and filing fees, valid title to the mining claims is recorded in the name of Rimfire Nevada Ltd.



The Corporations Goodpaster Properties (Bou, California-Surf, Eagle, ER-Ogo-Fire, Hawk and Swede) are located in the State of Alaska. The properties consist of 1,654 state mining claims totaling 182,800 acres. The mineral claims are subject to a required assessment or cash in lieu of $2.50 (US) per acre per year. The annual claim rental fees of $25-$100 (US) per claim, depending on size and location date, are due in November. As the Corporation has paid all required assessments and filing fees, valid title to the mining claims is recorded in the name of Rimfire Alaska with the Alaska Department of Natural Resources. There is currently no mining activity or commercial production from any of the Corporations British Columbia, Yukon or Alaska mineral properties.



Share Price Fluctuations, Price Volatility



Securities markets in Canada have experienced a high level of price and volume volatility in recent years, with many resource companies experiencing wide price fluctuations not necessarily related to operating performance or underlying asset values of such companies. The Corporations Common Shares traded between $0.51 and $1.25 in 2003, between $0.76 and $1.80 during 2004, between $0.93 and $1.90 during 2005, and between $1.45 and $2.64 during the first quarter of fiscal 2006. It is probable that the Corporations share price and volume will continue to fluctuate materially.



Environmental Regulations



All phases of the Corporations operations are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation is evolving in a manner which means stricter standards and enforcement, more stringent fines and penalties for non-compliance. Environmental assessments of proposed projects carry a heightened degree of responsibility for the Corporation and its directors, officers and employees. Future changes in environmental regulation, if any, may adversely affect the Corporations operations.





ITEM 4   INFORMATION ON THE CORPORATION



HISTORY AND DEVELOPMENT OF THE CORPORATION



The Corporation was incorporated under the laws of the Province of British Columbia on May 7, 1991 under the name of Bull Pine Explorations Ltd. The Corporation changed its name to Rimfire Minerals Corporation on November 4, 1997 to better reflect corporate strategies and focus. The Corporation completed the transition process under the Business Corporations Act (British Columbia) in August 2004. At the annual general meeting held in 2004, the shareholders approved the new Articles of Incorporation and increased share capital to authorize an unlimited number of common shares (Common Shares), without par value. There were 19,999,539 Common Shares issued and outstanding as fully paid and non-assessable as of January 31, 2006. The registered and records office of the Corporation is located at Suite 700, 700 West Pender Street, Vancouver, British Columbia, V6C 1G8.







BUSINESS OVERVIEW



The Corporation is a natural resource company engaged in the acquisition and exploration of precious and base metal mineral properties. The Corporation carried out minimal mineral property acquisition and exploration between its incorporation in 1991 and 1993. The Corporation then became inactive and remained so until 1997 when it acquired an interest in the RDN Property, located in British Columbia.



In addition to the RDN Property, the Corporation currently holds interests in the Thorn, Williams, Jake, Adam, Kizmet, and Tide Properties in British Columbia, the Fer, Simpson and Wernecke Properties in the Yukon Territory, the Poncho-Crow property in Nye County, Nevada and a number of properties in the Goodpaster Mining District of Alaska. A description of the Corporation's mineral exploration properties is set out below this Item 4 under the subheading Property, Plants and Equipment.



NONE OF THE MINERAL PROPERTIES IN WHICH THE CORPORATION HOLDS AN INTEREST CONTAIN ANY KNOWN ORE OR MINERAL RESERVES. ALL EXPLORATION PROGRAMS PROPOSED FOR ANY MINERAL PROPERTIES IN WHICH THE CORPORATION HAS AN INTEREST ARE EXPLORATORY IN NATURE.



The Common Shares of the Corporation were listed and posted for trading on the Vancouver Stock Exchange on June 28, 1999 under the trading symbol RFM. On November 29, 1999, the listing was transferred to the TSX Venture Exchange (formerly Canadian Venture Exchange) as part of the merger of the Alberta Stock Exchange and Vancouver Stock Exchange.



The Corporation does not prepare business plans for any of its properties. Business plans are not customarily prepared for mineral exploration programs or properties. As is industry standard, the Corporation will prepare a work program for each of the mineral properties upon which it will carry out exploration work. Although a program is completed within a specified budget, the specific nature and type of exploration work completed may vary from the original work program depending on results obtained during the program.



The Corporation intends to raise all but a very minor portion of its future working capital and exploration funds through the sale of its securities from treasury. The Corporation may periodically receive cash payments and securities as property option payments from third parties pursuant to the terms of existing or future option agreements.



To date, the Corporation has not, nor does it intend to, finance its operations or exploration programs through any means other than through the sale of its securities. Except for minor property option payments, at no time has the Corporation sought or received funds other than through the sale of its securities.



The Corporation's long-term goal is to identify high potential mineral properties that have received little if any recent exploration work then enhance their value through initial exploration and market them to joint venture partners. The Corporation plans to maintain significant interests in a number of projects and have joint venture partners raise and spend the money necessary to thoroughly evaluate the potential of such mineral properties.







Prior to commencing any exploration activities in any of the State of Alaska, State of Nevada, the Yukon Territory or the Province of British Columbia, the Corporation or the party intending to carry out a work program on a mineral property is required to apply to the appropriate Mining Division of the State, Territorial or Provincial government for a number of permits or licences related to mineral exploration activities. These permits or licences include water and surface use permits, occupation permits, fire permits, and timber permits. Prior to being issued the various permits or licences, the applicant must file a detailed work plan with the applicable government agency. Permits are issued on the basis of the work plan submitted and approved by the governing agency. Additional work on a given mineral property or a significant change in the nature of the work to be completed would require an amendment to the original permit or licence.



As part of the permit or licensing requirements, the applicant is required to post an environmental reclamation bond in respect to the work to be carried out on the mineral property. The amount of such bond is determined by the amount and nature of the work proposed by the applicant. The amount of a bond may also be increased with increased levels of development on the property.



The Corporation has or will make application to the appropriate agencies for permits and licences relating to those properties upon which the Corporation intends to carry out work during the 2006 exploration season. For those mineral properties in which the Corporation has an interest but is not the operator of the work programs, application for the required permits and licenses and the posting of the reclamation bonds will be made by the party entitled to carry out exploration work on the property. The Corporation believes that it is currently in compliance with all applicable environmental laws and regulations in the State of Alaska, the State of Nevada, the Yukon Territory and the Province of British Columbia.



The Corporation is unaware of any legal proceedings, either threatened or pending, to which the Corporation is or is likely to be a party, or of which any of its properties or assets is or is likely to be the subject, that are material to the business and affairs of the Corporation.



The Corporation currently holds interests in mineral properties located in British Columbia, Yukon Territory, Nevada and Alaska. None of the mineral properties in which the Corporation holds any interest is currently being operated as a producing mine.



Most of these mineral properties are located in areas that experience significant low temperatures and snowfall in winter, therefore the exploration season is generally limited to the June-October window of more clement weather. Planning for exploration and compilation of reports on completed programs and new project research continues on a year-round basis.



The table below illustrates the Corporations expenditures on exploration activities for the last three fiscal years. The figures below have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada. Except as explained in Note 10 of the Corporations financial statements, the figures below are consistent with U.S. GAAP.





|                             | Year
Ended
2006 ($) | Year
Ended
2005 ($) | Year
Ended
2004 ($)
|---------------------------- | ------------------- | ------------------- | -------------------
|Exploration Costs            | 1,116,172           | 1,105,733           | 320,743            
|Mineral Property Acquisition | 202,167             | 217,385             | 98,200             



Note:

All figures shown above are in Canadian Dollars.







The total exploration and acquisition expenses for the period February 1, 2005 to January 31, 2006 were $1,318,339. A private placement of flow-through shares was undertaken during June 2005 which raised $470,723, net of share issue costs, for exploration expenses. In addition, significant exercises of share purchase warrants and stock options raised $1,601,803 after payment of share issue costs.



The Corporations plan for fiscal 2006 is to obtain joint venture partners to continue exploration of the Fer and Simpson properties in southeast Yukon, the Adam and Williams properties in northern BC, and the wholly owned claims in the Goodpaster area of Alaska. The Corporation plans to conduct preliminary exploration on the Jake property. There will be a drill program on one property with a joint venture partner; however, there is no requirement for the Corporation to finance this exploration program. Under the Thorn Property agreement, Cangold has completed their initial earn-in and may propose a drill program for the 2006 field season. The Corporation can choose to participate by paying 49% of the costs or can choose dilution of ownership at a rate of 1% reduction for each $50,000 not contributed to the program. Other option agreements are also close to completing their initial earn-in. If and when the initial earn-in is complete, the Corporation will be required to share exploration expenditures with the joint venture partner on a 49/51, or 40/60 basis depending on the option agreements. The Corporation has signed an agreement with Newmont to commence exploration in the Walker Lane area of Nevada which will require expenditures of up to $170,000 (Canadian) this fiscal year. (see Item 4: Property Plants and Equipment below).



ORGANIZATIONAL STRUCTURE



The Corporation has two (2) wholly-owned United States subsidiaries, Rimfire Alaska, Ltd. ("Rimfire Alaska"), which was incorporated under the laws of the State of Alaska on August 19, 1998 for the purpose of holding the Corporation's Alaskan mineral property interests, and Rimfire Nevada Ltd. (Rimfire Nevada) which was incorporated under the laws of the State of Nevada on January 4, 2005 for the purpose of holding the Corporation's Nevada mineral property interests.



Rimfire Alaska is authorized to issue 100 no par value common shares. The only shareholder of Rimfire Alaska is the Corporation and it holds all issued and outstanding company shares. The registered office of Rimfire Alaska, Ltd. is located at Suite 700, 510 L Street, Anchorage, Alaska 99501.



Rimfire Nevada is authorized to issue 75,000 no par value common shares. The only shareholder of Rimfire Nevada is the Corporation and it holds all issued and outstanding company shares. The registered office of Rimfire Nevada Ltd. is located at Suite 260, 6121 Lakeside Drive, Reno Nevada 89511.



INTERCORPORATE RELATIONSHIPS



|RIMFIRE MINERALS CORPORATION
(British Columbia)
|-----------------------------------------------
|                                               
|100%                                           
|RIMFIRE ALASKA, LTD.(Alaska)                   







PROPERTY, PLANTS AND EQUIPMENT



The Corporation is in the exploration stage and its properties are presently without a known body of commercial ore. Its principal mineral properties are the following:



·

The RDN Property, located in the Liard Mining Division of British Columbia, approximately 120 kilometres northwest of Stewart, British Columbia and 50 kilometres north of the Eskay Creek Mine.



·

The Thorn Property, located in the Atlin Mining Division of British Columbia, approximately 120 kilometres northwest of Telegraph Creek.



·

The Williams Property, located in the Liard Mining Division of British Columbia, approximately 150 kilometres southeast of Dease Lake, British Columbia and 330 kilometres north of Smithers.



·

The Tide Property, located in the Skeena Mining Division of British Columbia, approximately 36 kilometres north of Stewart, British Columbia.



·

The Kizmet Property, located in the Atlin Mining Division of British Columbia, approximately 130 kilometres northwest of Telegraph Creek.



·

The Jake Property, located in the Kamloops Mining Division of British Columbia, approximately 13 km west of Clearwater.



·

The Adam Property, located in the Skeena Mining Division of British Columbia, approximately 70 kilometres northwest of Stewart.



·

The Alaska Properties, located in the Goodpaster Mining District, Alaska, 65 kilometres northeast of Delta Junction.



·

The Fer Property, located in the Watson Lake Mining District of Yukon Territory, approximately 20 kilometres west of Cantung in the Northwest Territories and approximately 200 kilometres north of Watson Lake, Yukon Territory.



·

The Simpson Property, located in the Watson Lake Mining District of Yukon Territory, approximately 105 km northwest of Watson Lake, Yukon Territory.



·

The Wernecke Breccia property, located in the Mayo Mining District of Yukon Territory, approximately 180 km northeast of Mayo, Yukon Territory.



At present, the Corporation does not intend to undertake any exploration at its own expense on the RDN, Tide, Kizmet, Adam, Simpson, Fer or Wernecke Breccia properties for the fiscal year ending January 31, 2007. Option agreements in place require other corporations to complete exploration programs on some of these properties. These are described in more detail in the description of each property in this Item 4 below.



In the event that joint venture partners are not obtained for the remaining properties, the Corporation may pay the required carrying costs from working capital or allow these claims to be returned to the vendor or be forfeited to the State, Province or Territory as the case may be.



The estimated cost to retain ownership of the state mineral claims for the Alaska properties (Bou, California-Surf, ER-Ogo-Fire, Eagle, Hawk and Swede) is $289,987 USD. Some of these claims, based on previous exploration programs, may not warrant any additional expenditure. The Corporation will examine all data thoroughly to make that determination prior to making a commitment to either work programs or additional cash expenditure.







The Corporations head office occupies 1,445 square feet of office space leased under agreement with Equity Engineering Ltd. (Exhibit 4.1). The Corporation has purchased furnishings, computers and office equipment. Photocopier and plotter are available for use from Equity and are billed on a cost-recovery basis. The rent, as of April 30, 2006, is $5,034 per month. Telephone and internet access charges are in addition to this amount.



RDN Property, Liard Mining Division



Location and Introduction



The RDN Property is located in the Liard Mining Division of British Columbia approximately 120 kilometres northwest of Stewart, British Columbia and 50 kilometres north of the Eskay Creek Mine. The property is comprised of a total of 19 claims and covers approximately 10,140 hectares.



Work can be carried out on the RDN Property from mid June to mid September.



Two British Columbia Provincial Government Orders-in-Council, 1589(1972) and 440 (1983) have stated that ground below 580 metres above sea level may be subject to flooding for hydro-electrical development, and although mineral exploration and development may be carried out below this level, compensation will not be payable in the event of flooding. In the event that a commercially exploitable mineral deposit is discovered in those areas subject to the Orders-in-Council, a subsequent decision by the Government of British Columbia to flood the area for water resource or hydro-electric generating purposes will not entitle the title holders to the mineral deposit to any form of compensation. The lands in question lie along More Creek and its tributaries, which affect portions of the RDN 10 and14-17A mineral claims. To date, no significant mineralised areas have been identified in areas subject to the Orders-in-Council.





Property History



Regional exploration in the area was conducted by several mining companies from the 1960's to the early 1980's, which resulted in the discovery of porphyry and vein style mineralization at the nearby Snip, Johnny Mountain and Sulphurets areas. The RDN 1-4 claims were staked by two private individuals (collectively, the Prospectors) and Equity Engineering Ltd. of Vancouver, British Columbia in November 1987. In 1988 a limited prospecting, silt sampling and rock sampling program was completed on the claims.



In October 1989, Noranda Exploration Company ("Noranda") optioned the RDN 1-4 claims, and staked the GOZ claims to the north. Noranda carried out a program of sampling and conducted airborne magnetic and aeromagnetic surveys over the property. In 1990, Noranda and High Frontier Resources, an exploration joint venture partner, carried out geochemical and geophysical surveys and a 15 hole diamond drilling program. This work resulted in the discovery of several gold-bearing quartz chalcopyrite-pyrite veins within felsic tuffs and the definition of a gold soil anomaly designated the Jungle Soil Anomaly.



The program was continued in 1991 with expanded geophysical surveys and the drilling of an additional 15 diamond drill holes. In 1991, Noranda terminated its option on the RDN Property and allowed the GOZ claims to lapse. The GOZ claims were subsequently restaked as the RDN 5-8 and 11-13 claims.







In 1990, Adrian Resources Limited ("Adrian"), Skeena Resources Limited and Noranda carried out a work program in the area of the current RDN 9 and 10 claims. The work consisted of geochemical and geophysical surveys. In 1991, Noranda completed additional geophysical surveying and sampling, and Adrian conducted a work program consisting of detailed geological mapping and sampling.



The RDN Property was optioned to Pathfinder Resources Limited in 1994, and in 1994, 1995 and 1996 Pathfinder carried out work programs which included soil sampling, geological mapping, prospecting, and geophysical surveying.



Property Acquisition



On July 31, 1997, the Corporation purchased a one-third interest in the RDN Property for $150,000 from Equity Engineering Ltd. On March 6, 2000, the Corporation increased its interest in the RDN Property from a one-third interest to 100% by acquiring a 66.66% interest from Neil Debock and Rocky Saliken pursuant to an option agreement dated as of July 31, 1997 and amended October 8, 1998. The consideration paid to Messrs Debock and Saliken under the option agreement was an aggregate 133,330 Corporation Common Shares. Messrs. Debock and Saliken have retained a 1.34% net smelter return royalty interest in the RDN Property. The royalty interest may be reduced to a 0.67% net smelter return royalty at any time prior to or after the commencement of commercial mining operations on the property through the payment to Messrs. Debock and Saliken of an aggregate $666,666 ($333,333 to each individual ).



The Corporation signed an option agreement and subsequent amendments, effective March 29, 2004, with Northgate Minerals Corporation (Northgate) which provides that Northgate can earn a 51% interest in the RDN Property on completion of the following:





Exploration expenditures of:

·

not less than $1,000,000 before December 31, 2004 (completed)

·

not less than an aggregate of $2,000,000 on or before December 31, 2005 (completed)

·

not less than an aggregate of $3,000,000 on or before December 31, 2006

·

not less than an aggregate of $5,000,000 on or before December 31, 2007

Cash payments of:

·

$25,000 upon closing of the agreement (received)

·

$40,000 on or before March 1, 2005 (received)

·

$60,000 on or before March 1, 2006 (received subsequent to year end)

·

$75,000 on or before March 1, 2007



Rimfire will be project operator until Northgate has earned its 51% interest. Northgate may earn an additional 9% by completing a feasibility study and funding all expenditures up to completion of the feasibility study.



On December 14, 2005, Rimfire purchased 100% of the LL property, which is contiguous with the RDN, for $30,000 cash with a net smelter return royalty of 2%. This royalty can be purchased at any time for $2,000,000. The purchase of the LL property was funded 60% by Northgate and 40% by Rimfire.



The following table details the claims that comprise the RDN property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim      | Mineral Tenure | Area (ha) | Expiry Date       | Location
|---------- | -------------- | --------- | ----------------- | --------
|MOR2       | 501927         | 299.329   | December 31, 2014 | 104G007 
|RDN 1&2    | 502738         | 670.153   | December 31, 2014 | 104B097 
|RDN 3&4&13 | 501227         | 1111.923  | December 31, 2014 | 104B097 
|RDN 5&7    | 501832         | 1162.807  | December 31, 2014 | 104G008 
|RDN 6&8    | 501862         | 846.243   | December 31, 2014 | 104B097 





|RDN 9     | 501812 | 774.248 | December 31, 2014 | 104G007
|--------- | ------ | ------- | ----------------- | -------
|RDN 10    | 502756 | 457.823 | December 31, 2014 | 104G007
|RDN 11&12 | 502758 | 704.855 | December 31, 2014 | 104G007
|RDN 14&15 | 502751 | 931.516 | December 31, 2014 | 104G017
|RDN 16    | 502752 | 404.486 | December 31, 2014 | 104G007
|RDN 17    | 501895 | 457.21  | December 31, 2014 | 104G007
|RDN 17A   | 518112 | 123.24  | December 31, 2014 | 104G007
|Bodgen    | 510806 | 263.362 | December 31, 2008 | 104G017
|KC 1      | 504798 | 316.37  | December 31, 2008 | 104G017
|KC 2      | 504799 | 316.213 | December 31, 2008 | 104G017
|LL 1      | 501122 | 421.636 | December 31, 2008 | 104G017
|LL 2      | 501153 | 351.253 | December 31, 2008 | 104G017
|Luc       | 504982 | 104.457 | December 31, 2008 | 104G017
|Narby 1   | 504758 | 421.543 | December 31, 2008 | 104G017





Regional Geology



The RDN Property and surrounding area are underlain by mid-Paleozoic and Mesozoic island arc successions which have been covered to the east by clastic sediments of the Bowser Basin.



Property Geology



The RDN Property is underlain by a fault mosaic of Jurassic age Hazelton Group volcanic and sedimentary rocks and co-eval felsic intrusions in the central area, and Triassic age mixed rocks of the Stuhini Group. Permian age sedimentary, volcanic and intrusive rocks are in fault contact with the Hazelton Group rocks on the western side of the RDN Property. Forrest Kerr Fault is this bounding structure. Strata appear moderately folded.



Mineralization



A variety of styles of mineralization are present on the RDN Property.



Possible VHMS style mineralization is found at the Marcasite Gossan showing. There, Hazelton Group dacite flows are cut by a sulphidic stockwork of marcasite, pyrite, chalcedony and/or pyrobitumen and/or barite. In addition, several cobbles of very fine grained pyrite with an apparent bedded texture indicative of VHMS style of sulphide deposition were found a few metres downslope from the Marcasite Gossan outcrop. Less than 75 metres upslope is somewhat similar stockwork mineralization, referred to as the Upper Marcasite Gossan. Base metals and silver are elevated at the Upper Marcasite showing, whereas the Lower Marcasite showing has low base and precious metals. This mineralization is thought to occur at the same stratigraphic position as that of gold rich VHMS deposits elsewhere in the Hazelton Group, at a felsic volcanic-argillite-basalt interface. The 1999 drilling confirmed that stratigraphy is conformable and upright in this area. The area underlying the Jungle Soil Anomaly may also host VHMS deposits, as float found in the area includes pyritic chert, rhyolite and silicified argillite. A third area known as the Blind Fault area may also host VHMS deposits, as native silver and tetrahedrite was discovered at a volcanic/ sediment contact with associated alteration in 2004.



The remaining mineralized zones on the RDN Property are mesothermal veins and vein systems. The veins are planar and thought to be related to fault structures and brittle failure. They are clearly cross-cutting, and thus younger than parts of the hosting Hazelton Group felsic volcanic rocks, although fragments of these veins are also found in clastic units of the Hazelton Group, indicating their emplacement to be broadly contemporaneous with deposition of the Hazelton Group.



The Baseline and Main showings are fault-hosted quartz-sulphide breccia veins, up to 8.3 metres wide with high lead-zinc and moderate gold-silver values. The Wedge Zone consists of dozens of quartz-sulphide veins spread over an area of 500 x 2,700 metres.







Individual veins tend to pinch and swell and are affected by considerable structural dislocation. The Wedge Zone area is marked by a strong lead-zinc-gold-silver-arsenic soil geochemical anomaly.



The Boundary Zone veins are copper-gold rich, between 10 and 30 centimetres in width, planar to anastomosing, and consist of semi-massive chalcopyrite and pyrite.



The Jungle Soil Anomaly, located within the Downpour Grid, is a gold-arsenic+silver+lead soil anomaly. It was well defined in 1997, and covers approximately 100 by 450 metres overlying an area of minimal rock outcrop. Within this anomaly are float cobbles of pyritic chert, rhyolite and clastic. Nine diamond drill holes by the Corporation or joint venture partners in 1999 and 2002 were abandoned before reaching target depth. One drill hole was completed in 2004 encountering low gold values in fine clastic sediments and intermediate volcanic rocks thought to lie stratigraphically above the felsic-sediment contact targeted for gold rich VHMS mineralization.



Geophysics and Drill Programs



The 2000 UTEM survey showed a series of electromagnetic conductors along the contract between the felsic volcanics and overlying sedimentary rocks, a stratigraphic position thought to be favourable for hosting VHMS mineralization. This was followed by a diamond drill program in 2001 to test the conductors. Thirteen holes, totaling 2256 m, were drilled in the Wedge Zone and near Sand Lake, Marcasite Gossan and Boundary Zones.



During 2002, Homestake completed drilling of a total of 1072 metres in 9 holes. Eight of these holes were collared in the Jungle Zone geochemical anomaly, which is situated on the NE Downpour Grid. A single hole was located 700 metres northwest of the Jungle Zone Anomaly. No geochemical results of economic significance were returned from this program; however, it is arguable that in all holes the target horizon was not reached. Due to severe technical difficulties encountered in the drilling, that included thick overburden and highly faulted ground, the drill program was halted and work focused on surface exploration. The surface program included mapping in areas where rhyolitic volcanic rocks had been identified in previous programs. In addition contour soil sampling was carried out in areas that had not previously been sampled.



During 2003, Barrick completed an exploration program consisting of surface mapping and sampling on areas of the property including the Arctic Grid and Boundary Zone examining Eskay Creek equivalent stratigraphy.



During 2004, Northgate completed 2499 metres of drilling in nine holes. Several precious-metal bearing intervals were intersected; however these are interpreted as veins and breccias that are unlikely to have economic significance. The most important result of the program was the discovery of native silver and tetrahedrite at a volcanic/sediment contact in an area (Blind Fault) that has not been previously explored. This discovery, along with discovery of a gold and silver mineralized boulder in a second area (Arctic grid) that has only been superficially explored is very encouraging.



During 2005, six drillholes were completed for a total of 1,470 metres in two target areas: Blind Fault and Arctic Grid. Three holes in the Blind Fault area targeted a 300 x 50 metre zone of vein and disseminated silver-lead-zinc mineralization in volcanic and sedimentary rocks where native silver was discovered in 2004. Continuous surface channel sampling in 2005 returned 24.7 metres averaging 24.9 g/t silver with similar grades encountered in the drillholes. Drilling at the Arctic Grid target intersected stratigraphy equivalent in age and geological setting to that hosting the Eskay Creek deposit. Based on the geological similarities to Eskay Creek observed on surface and in drillholes, Northgate has expressed its intent to continue exploring the property for gold-silver rich massive sulphide deposits in 2006. The work program was conducted by Equity Engineering Ltd. under the direction of Murray Jones, P.Geo., a Qualified Person as required by NI 43-101 (Standards of Disclosure for Mineral Projects.) ALS Chemex Labs Ltd. of North Vancouver analyzed drill core samples as well as the rock samples. A technical report was filed on SEDAR on May 12, 2006.





Future Exploration Programs



The 2006 program will consist of airborne geophysical surveys, groundwork and drilling at the Arctic Grid Northgate Minerals has committed a $1 million (CAD) budget to undertake this work. There





are presently no on-going costs associated with holding the RDN claims, as Northgate will fund the 2006 exploration program.



Thorn Property, Atlin Mining Division



Location and Introduction



The property consists of 21 mineral claims in three nearby claim blocks (15,583 hectares) and is located in the Atlin Mining Division, approximately 120 kilometres northwest of Telegraph Creek. Access is currently by float plane and helicopter, with the nearest road approximately 50 kilometres to the southeast at the Golden Bear mine. The Golden Bear Mine is connected to the Telegraph Creek-Dease Lake connector by 150 kilometres of gravel road. A road could be constructed from the Thorn property to the Golden Bear mine if warranted.



Property History



The earliest known work on the Thorn property was carried out by Kennco Explorations (Western) Limited in 1959 during a regional exploration program. This was followed by three years of seasonal exploration by Julian Mining Corporation (Julian) from 1963-65. Mapping and prospecting work resulted in the discovery of 17 mineral showings of three main types: (i) quartz-pyrite-tetrahedrite-enargite veins, (ii) structurally-controlled chalcopyrite-pyrite-quartz veins and (iii) areas of widespread, low-grade disseminated chalcopyrite. Diamond drilling was carried out (17 holes, 1204 m) on three showings.



In 1983, Inland Recovery Group Ltd. (Inland Recovery) acquired the Thorn property from J.R. Woodcock and carried out mapping, soil sampling and VLF-EM surveying near the junction of Camp and La Jaune creeks. The soil grid consisted of an 800-metre base-line trending 060° with perpendicular cross-lines spaced 50 metres apart and sampled at 25 metre intervals. Strong silver-gold-copper-zinc soil geochemical anomalies were revealed along Camp Creek and extending 600 metres westerly from Anacondas B Zone (Wallis, 1983; Woodcock, 1986).



In 1986, Inland Recovery and American Reserve Mining Corp. drilled eight holes (688 m) from three drill sites within the soil geochemical anomaly extending west from the B Zone. Core was altered and variably mineralized throughout, but only the highest-grade sections were split and analysed (Woodcock, 1987).



Kohima Pacific Gold Corp. (Kohima) staked the Stuart 1-3 claims in 1997 and acquired an option on the Checkmate claim. In 1998, Kohima conducted an alteration mineralogy study using a portable infrared spectrometer (PIMA) on select outcrops in Camp Creek, and drill core from three diamond drill holes from the 1986 campaign.





Property Acquisition



By agreement dated March 1, 2000 with Kohima, the Corporation was granted an option to acquire a 100% interest in the Thorn property (four claims). The Corporation exercised the option by making staged cash payments of $230,000 by March 2, 2005, issuing a total of 200,000 shares by March 1, 2003 and incurring exploration expenditures of $50,000 by March 1, 2001. The Corporation subsequently staked an additional seven claims surrounding the initial claim block, but lying within the Kohima area of interest covered by that agreement A further 19 claims have been staked over favourable geochemical





targets between April 2003 and May 2004. This total of 30 claims was converted to 21 larger claims in the Mineral Titles Online map-staking initiative. The following table details the claims that comprise the Thorn property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim               | Mineral Tenure | Area (ha) | Expiry Date       | Location
|------------------- | -------------- | --------- | ----------------- | --------
|Checkmate/
Stuart 1 | 502741         | 1013.271  | December 31, 2014 | 104K056 
|Stuart 2&3          | 502743         | 929.37    | December 31, 2014 | 104K056 
|SUTL 1&3            | 502778         | 1061.928  | December 31, 2010 | 104K066 
|SUTL 2&4            | 502775         | 1213.627  | December 31, 2010 | 104K066 
|SUTL 14             | 509580         | 67.421    | December 31, 2010 | 104K066 
|SUTL 16             | 509581         | 269.823   | December 31, 2010 | 104K066 
|Thorn 1             | 504172         | 455.771   | December 31, 2014 | 104K058 
|Thorn 2             | 504173         | 303.841   | December 31, 2014 | 104K058 
|Thorn 3&4           | 502745         | 928.838   | December 31, 2014 | 104K057 
|Thorn 5&6           | 501282         | 1351.952  | December 31, 2014 | 104K057 
|Thorn 7&13          | 502746         | 1282.246  | December 31, 2014 | 104K056 
|Thorn 8&9           | 502747         | 1299.004  | December 31, 2014 | 104K057 
|Thorn 10-11         | 502748         | 607.684   | December 31, 2014 | 104K057 
|Thorn 12            | 502749         | 404.688   | December 31, 2014 | 104K066 
|Thorn 14&15&16      | 502750         | 1148.12   | December 31, 2014 | 104K057 
|Thorn 17            | 525344         | 421.706   | January 13, 2007  | 104K056 
|Thorn 18            | 525348         | 135.227   | January 13, 2007  | 104K056 
|Thorn 19            | 525349         | 337.412   | January 13, 2007  | 104K056 
|TUN 1               | 502817         | 591.891   | December 31, 2010 | 104K056 
|TUN 2&4             | 501261         | 1336.35   | December 31, 2010 | 104K057 
|TUN 3               | 502821         | 423.076   | December 31, 2010 | 104K046 





The Corporation has earned 100% interest in the property, subject to net smelter royalty. Kohima has retained a 3.5% net smelter return royalty, of which the Corporation can purchase a 57% interest (being 2% of the 3.5% interest) for $3 million. In addition to the above, the Corporation will issue 200,000 common shares to Kohima upon the commencement of commercial mining operations on the Thorn property.



The Corporation signed an option agreement dated March 1, 2002 with Cangold Limited, formerly First Au Strategies Corporation (Cangold) under which Cangold earned a 51% interest in the property by making staged cash payments totaling $190,000, issuing a total of 250,000 shares to the Corporation and by incurring exploration expenditures of $1.2 million. Further development of the property will continue as a joint venture.



Regional Geology



The area around the Thorn property is underlain by mid-Paleozoic and Triassic island arc successions, Late Triassic and Jurassic sediments of the Whitehorse Trough and bimodal Late Cretaceous to Eocene volcanic and associated intrusive rocks.



Property Geology



The southern and western portions of the Thorn property are underlain by Upper Triassic Stuhini Group mafic volcanic and epiclastic rocks, which are locally overlain by Middle Jurassic coarse clastic rocks of the Takwahoni Formation.



These have been intruded by the Late Cretaceous Thorn Stock, which covers an area of approximately 1,500 x 4,000 metres, elongated northwesterly along La Jaune Creek. The Thorn Stock consists of two distinct phases of feldspar-quartz-biotite porphyry which have been pervasively altered. Chloritization is most extensive, but intense sericitization and/or argillization, accompanied by up to 20% disseminated pyrite, extends for several tens or hundreds of metres away from mineralized fracture systems.



Rhyolitic to andesitic subaerial volcanics are exposed on the north and northeast portions of the property; they are somewhat younger than the Thorn Stock. At the eastern end of the property, these have been intruded by poorly-mapped monzonite and granodiorite stocks and plugs of Late Cretaceous age.



Mineralization



Exploration on the Thorn property is directed at two deposit types: (1) high-sulphidation epithermal mineralization of the El Indio/Lepanto style; and (2) breccia  hosted silver-gold-lead-zinc mineralization discovered in the Oban Zone in 2002. A number of pyrite+enargite+tetrahedrite+quartz veins are hosted by sericitized and argillized feldspar-quartz-biotite porphyry of the Thorn Stock over an area of 1,400 x 2,000 metres. A strong structural control is evident for the veining, much of which trends 070° and dips steeply. Some of the more significant showings include:







·

Catto Vein: Discovered in 2000, the recessive Catto Vein consists of massive pyrite, enargite and tetrahedrite in a fault paralleling the nearby contact between the porphyry and Stuhini andesites. Drill hole 86-6 may have intersected the Catto Vein approximately 50 metres along strike.



·

Tamdhu Vein:Discovered in 2000, the Tamdhu Vein consists of chalcedonic quartz, pyrite, enargite and tetrahedrite. The vein has been traced for 30 metres on surface and has been intersected in drilling over a strike length of 70 metres in three holes.



·

MP Vein:The MP Vein, which may form part of a wider system covered by boulders, consists of massive pyrite and enargite exposed in Camp Creek.



·

Oban Zone:The Oban zone is an extensively altered heterolithic breccia pipe containing significant silver-lead-zinc and gold mineralization. Sulphide minerals in the breccia contrast with the massive sulphide vein mineralogies and include boulangerite (silver-bearing sulphosalt), sphalerite, pyrite and minor arsenopyrite, freibergite (silver-rich tetrahedrite), galena and possibly tellurides.



·

Cardhu Vein:The Cardhu Vein is a poorly exposed sulphide/sulphosalt vein near the southwestern contact of the Thorn Stock, south of Spike Creek.



·

B Zone:The B Zone is a 1-5 metre wide zone of vuggy silica, chalcedonic veining and quartz breccia with relatively minor pyrite, enargite and tetrahedrite, which has been traced for about 300 metres along strike. Five 1986 drill holes tested the B Zone.



·

F Zone:F Zone is a broad zone of intense alteration with quartz-sulphide veining that can be traced for 200 metres.



·

I Zone:The I Zone comprises numerous parallel 10-70 centimetre quartz-pyrite-tetrahedrite veins in sericitized porphyry, across a true width of 5-10 metres.



·

Glenlivet Zone:The Glenlivet Zone, discovered in 2002, extends southwesterly for 220 metres from the western end of the F Zone and is comprised of sheeted pyrite-enargite veins filling fractures in clay-sericite altered porphyry.



The Stuhini Group mafic volcanics host several gold-bearing quartz+carbonate+chalcopyrite+ arsenopyrite veins within a few hundred metres of the Thorn Stock. Most of these veins are less than 70 centimetres wide and of limited economic significance.



The Outlaw Zone is a poorly understood area of silicification and scattered quartz veining located five kilometres southeast of the main enargite-tetrahedrite showings. The alteration, accompanied by strongly anomalous gold, arsenic and antimony soil geochemistry, covers an area of approximately 400 x 2,000 metres. Four drill holes tested a portion of the Outlaw Zone in 1987, showing the presence of widespread but erratic gold mineralization.



Prospecting, conducted on behalf of First Au Strategies, in 2002 was highly successful in identifying new mineralization. A large hydrothermal breccia unit in excess of 200 metres wide was identified as the source of the high grade Oban Zone mineralization. The Oban Breccia is coincident with a very strong silver-gold-arsenic-lead-antimony-zinc soil geochemical anomaly and is open to the southeast. A new





silver-gold-copper vein zone, the Glenlivet, was sampled intermittently over a 220 metre strike length. The Glenlivet is a zone of quartz-pyrite-sericite veins approximately 3 metres wide, located west of the Oban Zone. A seven-hole, 498 metre drill program tested three showings over a 1.2 kilometre trend in 2002. Three shallow holes were collared at the Oban Breccia to test surface mineralization. All three holes intersected weakly mineralized breccia. A total of four holes were drilled to test the I Zone and Tamdhu Zone. All four holes intersected the target structures, confirming the continuity of vein mineralization.



In 2003, work conducted on behalf of Cangold (formerly First Au Strategies) focused on trenching within the Oban soil geochemical anomaly and drill-testing the Oban breccia pipe. 841 metres of trenching exposed approximately 10% outcrop consisting of weakly mineralized breccia pipe. Eight diamond drill holes totaling 876 metres of ATW core were completed.  Four holes (TH03-19 to TH0322) intersected significant zones of fine-grained pyrite-sphalerite-boulangerite mineralization occurring as matrix infill between breccia clasts.  The high grade intersections define a steeply northwest-dipping mineralized zone with an apparent width of 14-26 metres. Generally lower-grade zones (12-25 metre apparent width) flank this mineralized core.



In 2004, an Induced Polarization (IP) geophysical survey demonstrated a significant correlation between the IP geophysics and known silver-gold mineralization but also identified several new targets in areas of no outcrop. Later in the year, a drill program was completed consisting of 1810 m in 12 holes targeting the Oban Breccia Zone, massive sulphide veins in the Camp Creek Structural Corridor with 5 holes targeting IP geophysical anomalies. Drill hole THN04-29 tested part of a 500 m long IP anomaly and intersected 56.1 metres of 1.27 grams/tonne gold, 16.7 grams/tonne silver and 0.19% copper in a new zone dubbed the Talisker Zone. The target remains open in all directions. Prospecting prior to the commencement of the drill program resulted in the discovery of a quartz-barite boulder assaying 265 grams/tonne (7.7 ounces/ton) gold two kilometres north of the Camp Creek Structural Corridor in an area of the property that has not seen previous work.



Highlights of the 2005 exploration program included 17.4 kilometres of IP geophysical surveying and 655.8 metres of drilling in five holes. The 2005 IP helped to further outline and define the Talisker Zone, and located two new anomalies further north: the Balvenie and Cutty Sark Zones. Geological mapping and rock sampling during 2005 focused on the margins of the Thorn Stock and the overlying Windy Table Formation volcanic units as recent age dating of these rocks revealed that they may be affected by mineralizing events at the Thorn.



Two holes were drilled at the Talisker Zone, which has now been extended over a strike length of at least 200 metres with intercepts in both 2005 step out holes including 4.2 metres of 4.44 g/t gold, 407.9 g/t silver and 2.95 % copper in THN05-37. Two holes, which tested the new IP target at the Cutty Sark anomaly, intersected the first occurrences of lithologically controlled alteration on the property. One hole tested the far eastern extent of the Balvenie Zone, another vein system parallel to the Talisker Zone. The drilling and sampling programs were conducted under the direction of Henry Awmack, P.Eng.. of Equity Engineering Limited, a Qualified Person as required by NI 43-101 (Standards of Disclosure for Mineral Projects.) ALS Chemex Labs Ltd. of North Vancouver analyzed drill core samples as well as the rock, soil and silt samples. A technical report was filed on SEDAR on May 12, 2006.



Future Exploration Programs



The next stage of exploration on the Thorn property will be a diamond drill program focused on resource definition at the Talisker Zone and exploration drilling at several other IP geophysical targets identified in 2004 and 2005.





Williams Property, Liard Mining Division



Location and Introduction



The Williams property consists of 21 claims covering 10,727 hectares of mountainous terrain in north-central British Columbia, 330 kilometres north of Smithers. Access to the property is currently by helicopter and float-plane, with the nearest road 75 kilometres to the southeast. The Corporation has acquired a 100% interest in the property subject to a net smelter royalty.



Property History



The two main prospects (T-Bill and GIC) on the Williams property were independently discovered





in the early 1980s by Cominco and Du Pont, following up highly anomalous stream geochemistry. These companies joined forces to drill a total of 3,023 metres on the T-Bill prospect in 1983 and 1984 before allowing the property to lie dormant. The Corporation optioned the core of the property in May 2001, and then later staked additional claims.



Property Acquisition



On May 17, 2001 the Corporation entered into an option agreement with Lorne Warren (Warren) and John Mirko (Mirko) to acquire a 100% interest in the BT claim, subject to a 2.5% net smelter royalty. On June 25, 2002, the Corporation subsequently acquired half of the interest and half of the net smelter royalty in the Williams Property from Mirko by issuing 75,000 common shares. The Corporation has earned the remaining 50% interest by paying the property vendors an aggregate $57,500 and issuing to the property vendors an aggregate 125,000 common shares. The Corporation will issue an additional 50,000 shares upon commencement of commercial production from the property. The Corporation can purchase 0.75% of the net smelter return for $1,000,000. Commencing in December 2005, an advance royalty payment of $5,000 per year is required to maintain the option agreement in good standing.



Stikine Gold Corporation, during their tenure as optionor, staked an additional 6 claims, surrounding the original claim block to be included in the agreement. The Corporation staked additional claims during and after the field work during 2005. The following table details the claims that comprise the Williams property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim Name | Mineral Tenure | Area (hectares) | Expiry Date       | Location
|---------- | -------------- | --------------- | ----------------- | --------
|BT & BT1   | 502764         | 1449.39         | December 31, 2009 | 094E072 
|BT2&3      | 502770         | 844.804         | December 31, 2009 | 094E082 
|BT 4       | 514151         | 241.631         | December 31, 2009 | 094E072 
|BT 5       | 514152         | 103.586         | December 31, 2009 | 094E072 
|BT 6       | 514153         | 431.419         | December 31, 2009 | 094E071 
|BT 7       | 514154         | 431.172         | December 31, 2009 | 094E071 
|BT 8       | 514156         | 431.07          | December 31, 2009 | 094E082 
|BT 9       | 514162         | 414.052         | December 31, 2009 | 094E071 
|BT 10      | 514163         | 310.281         | December 31, 2009 | 094E081 
|BT 11      | 522391         | 413.788         | November 18, 2006 | 094E081 
|BT 12      | 522392         | 413.667         | November 18, 2006 | 094E081 
|BT 13      | 522394         | 241.247         | November 18, 2006 | 094E081 
|BT 14      | 522395         | 431.051         | November 18, 2006 | 094E081 
|GOS        | 502766         | 829.114         | December 31, 2009 | 094E072 
|ROK1 &2    | 502768         | 673.359         | December 31, 2009 | 094E072 
|NORTH 1    | 514157         | 430.824         | December 31, 2009 | 094E082 
|NORTH 2    | 514158         | 413.384         | December 31, 2009 | 094E082 
|NORTH 3    | 514159         | 430.735         | December 31, 2009 | 094E082 
|NORTH 4    | 514160         | 430.685         | December 31, 2009 | 094E082 
|WILL 1&2   | 502774         | 396.407         | December 31, 2009 | 094E082 
|WILL 3&4   | 502773         | 965.782         | December 31, 2009 | 094E072 





Regional Geology



The Williams property lies near the eastern edge of the Intermontane Belt in a fault mosaic of:





Devonian to Permian Asitka Group carbonates and volcano-sedimentary rocks; the Carboniferous to Lower Triassic Cache Creek oceanic assemblage, including the Kutcho Formation; Triassic Stuhini and Takla volcano-sedimentary rocks; Lower Jurassic Toodoggone (subaerial) and undifferentiated Hazelton volcanic rocks and Laberge Group volcanic and epiclastic rocks.



The stratified rocks are intruded by a variety of Late Triassic and Early to Middle Jurassic stocks and batholiths of felsic to ultramafic composition. Most of the Early Jurassic quartz monzonites, granodiorites and quartz diorites are marked by a distinctive magnetic high; in particular, this applies to the intrusive immediately northeast of the Williams property. The quartz monzonite stock exposed on the southern part of the Williams property is the exception to this rule; it is characterized by a distinctive magnetic low almost ten kilometres across.



The Pitman Fault is a major E-W fault which passes 30 kilometres north of the Williams property. Alldrick, who traced the Pitman Fault for 300 kilometres, states that there is 3 kilometres of left-lateral movement along it with minimal vertical offset, and that movement occurred during Eocene to Oligocene time. Three of these major E-W faults have been mapped at the northern and southern extremities of the Williams property, one along the Stikine and Chukachida Rivers four kilometres south of the Gos claim and the other two passing through the BT 3 claim, north of the GIC occurrence. A fourth could reasonably be inferred along the valley between the T-Bill and the GIC prospects, downdropping undeformed Upper Triassic Takla Group volcanics to the north against deformed Paleozoic Asitka Group rocks to the south.



Property Geology



The T-Bill prospect is underlain by penetratively deformed Devono-Permian Asitka Group metavolcanics which have been altered to carbonate-muscovite-quartz schist over an area of 1,200 x 2,300 metres. This alteration is confined to the core of a northeasterly-trending structural dome and is controlled both by foliation and by steep cross-cutting structures. Gold-rich quartz-arsenopyrite veins, locally with visible gold, are broadly co-spatial with the carbonate-muscovite alteration, although they extend into unaltered chlorite schists with only centimetre-scale alteration envelopes. Individual veins generally cut across foliation and are rarely wider than 30 centimetres, although swarms of veinlets are common. Potential for a bulk-mineable target is indicated by broad low-grade intersections. The T-Bill prospect is marked by a strong 2 x 3 kilometre gold-arsenic soil geochemical anomaly whose limits reflect masking by till and talus cover as much as by changes in alteration and mineralization of the underlying bedrock.



The GIC prospect is centred less than two kilometres north of the T-Bill prospects northern edge, across a broad valley which may mark a major east-west fault. The GIC prospect is hosted by undeformed Takla Group volcanics, presumably down-dropped by the east-west fault, which have been hornfelsed, silicified and pyritized by a multiphase intrusion. A 500 x 900 metre, open-ended, gold-copper soil geochemical anomaly encloses two gossans. At the more prominent one, intensely silicified tuff is in contact with crowded feldspar porphyry. A more subtle gossan 500 metres to the southeast was formed from pyritic hornfels.



Exploration



An initial program of prospecting, silt and soil geochemistry and core re-examination and sampling was carried out in July 2001. Reconnaissance soil samples were collected along contour or compass lines in areas where previous soil geochemical anomalies had not been closed off, and where gold-bearing silt samples had never been followed up. Core from the 1983 and 1984 diamond drilling is stored at the 2001





campsite. The 1983 core and holes 84-6 to 84-9 were inaccessible, due to collapse of their core racks. The first five 1984 holes could be recovered, but were in poor condition from animal disturbance. They were examined and 14 previously unsampled sections were split for analysis. Rock samples were taken from mineralized and altered rocks during the course of prospecting.



Stikine carried out a 3-D Induced Polarization (IP) geophysical survey in September 2002. The survey was undertaken to define areas of higher chargeability reflecting increased sulphide content and higher resistivity reflecting silicification. The survey defined a large chargeability anomaly, measuring 400 by 300 metres, immediately north of the area tested by the previous drilling. This anomaly is also coincident with a broad 700 by 1,000m resistivity anomaly. Contour soil samples from the northwest portion of the chargeability/resistivity anomaly are highly anomalous in gold for over 800 metres.



In 2003, Stikine conducted an 11-hole (2855 metre) drill program targeting the 800 by 450 metre resistivity anomaly, returning only anomalous gold values. One hole, WG03-10, targeted the T-Bill prospect and intersected high grade vein mineralization (6.92 metres of 6.0 grams/tonne gold.) Additional gold mineralization was intersected further down the hole.



The 2005 exploration program focused on the GIC prospect. Mapping, prospecting, and soil sampling followed by geophysical surveys outlined a compelling new copper-gold porphyry target. Induced Polarization (IP) surveys at the GIC prospect identified a strong 600 by 1800 metre chargeability high anomaly coincident with and adjacent to known gold and copper mineralization. A 500 x 1,400 metre, east-west trending copper soil geochemical anomaly, enclosing two discrete 300 x 500-750 metre gold soil anomalies lies to the north, partially overlapping the northern edge of the GIC chargeability anomaly. The rest of the geophysical anomaly is masked by glacial till except for an isolated outcrop where a chip sample returned 0.22 % copper and 0.22 g/tonne gold over 3.73 metres. Several gossans lie within the soil anomaly. The sampling programs were conducted by Equity Engineering Ltd. under the direction of Henry Awmack, P.Eng., a Qualified Person as required by NI 43-101 (Standards of Disclosure for Mineral Projects.) ALS Chemex Labs Ltd. of North Vancouver analyzed the samples. A technical report was filed on SEDAR on May 12, 2006.





Mineralization



The Williams property hosts two main styles of alteration and gold-bearing mineralization; orogenic gold and arsenic-bearing veins and disseminations (T-Bill prospect); and porphyrystyle copper, gold and molybdenum (GIC prospect). Previous drilling attempted to evaluate the T-Bill mineralization, however, that work was unsuccessful in determining with any certainty the orientation of the veins and associated alteration. In 2003, WG03-10 targeted the T-Bill prospect and intersected 6.92 metres of mineralization plus three other quartz vein zones with visible gold. An oriented core system was employed during the drilling suggesting a northwest  southeast trend to these high grade veins.



Future Exploration Programs



Future exploration programs on the Williams property should concentrate on follow up drilling of encouraging results from WG03-10 within the T-Bill prospect and investigation of the porphyry potential of the GIC Prospect. The Corporation is seeking a new partner for the property.



Tide Property, Skeena Mining Division



Location and Introduction



The Tide Property, consists of four claims covering 2,964 hectares and is located approximately 36 kilometres north of Stewart, British Columbia The Tide property covers a group of precious metal-bearing polymetallic mineral occurrences in the Stewart area of northwestern British Columbia. They were discovered in the 1980s through follow-up of highly anomalous silt and soil geochemistry. The following table details the claims that comprise the Tide property with legal identification (Mineral Tenure) size, expiry date, and location.









|Claim Name  | Mineral Tenure | Area (hectares) | Expiry Date       | Location
|----------- | -------------- | --------------- | ----------------- | --------
|Bow-1       | 501145         | 269.314         | December 31, 2014 | 104B030 
|Bow-2&3     | 501185         | 1149.882        | December 31, 2014 | 104B030 
|Bow 4&Arrow | 501213         | 1060.109        | December 31, 2014 | 104B030 
|BOW 5       | 503002         | 484.808         | December 31, 2014 | 104B030 



Property History



The East Gold Mine, surrounded on three sides by the Tide property, was first worked in 1926 and produced 46 tonnes of hand-picked ore grading 1,126 grams/tonne gold and 3,106 grams/tonne silver from narrow quartz-sulphide veins.



The first recorded work on the Tide property was done by Northair Mines Ltd., who carried out extensive silt and soil sampling from 1980 to 1986, discovering and blast-trenching several gold-bearing showings, and drilling 455 metres in two holes. Austral Pacific Gold Corporation and Claimstaker Resources Ltd. optioned the Tide property from 1988 to 1990, carrying out extensive mapping and ground geophysical surveys. Claimstaker drilled four holes totaling 120 metres in 1990, but three were abandoned in overburden. The best intersection from the three completed drill holes in 1986 and 1990 assayed 4.11 grams/tonne gold over 0.76 metres.



The Northair claims were allowed to lapse in 1993 and were re-staked by Hemlo Gold Mines Inc. (now Newmont Canada Limited) as the Bow-1 to -4 and Arrow claims, which constitute most of the current Tide property. In 1994, Hemlo carried out property-wide mapping and took soil samples on reconnaissance contour and ridge/spur lines. Detailed soil/talus and chip sampling in 1995 and 1996 were confined to higher elevations at the Northpit, 36, Riptide and Southpit zones.



Property Acquisition



The Corporation purchased the Tide property in August 2001 from Newmont Canada Limited for a total cash expenditure of $10 with an underlying agreement to give Newmont Canada Limited a 1.5% net smelter royalty in the event the property becomes commercially feasible to mine.



On October 28, 2002, and amended on July 25, 2003, October 20, 2003 and November 20, 2003, the Corporation granted Plutonic Capital Corp. (Plutonic) an option to earn a 51% interest in the property on completion of a combination of cash and share payments and exploration expenditures. In an option amendment agreement dated November 20, 2003, Plutonic assigned the agreement to Serengeti Resources Inc. (Serengeti). As compensation for this amendment, Serengeti issued 100,000 shares to the Corporation within 10 days of regulatory approval. Serengeti will assume the following obligations from the original and amended agreements with Plutonic:



a)

making cash payments to the Corporation of:

* $2,000 upon signing of the agreement (received)

* $13,000 upon regulatory approval (received)

* $15,000 on or before July 24, 2003 (received)

* $25,000 on or before December 31, 2004  (as amended September 9, 2004-received)

* $35,000 on or before December 31, 2005  (as amended September 9, 2004-received)

* $40,000 on or before December 31, 2006  (as amended September 9, 2004)







b)

issuing to the Corporation or pay :

* 50,000 common shares or $20,000 on or before August 15, 2003 (received)

* 75,000 common shares or $35,000 on or before July 24, 2004 (received)

* 75,000 common shares or $60,000 on or before December 31, 2005
   (as amended September 9, 2004) (received)

* 75,000 common shares or $85,000 on or before December 31, 2006 
   (as amended September 9, 2004)



c)

fund expenditures of at least:

* $185,000 on or before June 30, 2004 (completed)

* not less than an additional $250,000 on or before December 31, 2004 (completed)

* not less than an additional $400,000 on or before December 31, 2005 (completed)

* not less than an additional $600,000 on or before December 31, 2006



In consideration of the second extension, dated October 20, 2003, Plutonic issued an additional 100,000 common shares to the Corporation. The Corporation will be operator for the exploration programs until Serengetis interest has vested.



In November 2004 additional claims were staked and later converted to two claims totaling 1,184 hectares. These Wave claims were jointly explored with the Tide property but do not form part of the property agreement. They were permitted to lapse in November 2005.



Regional Geology



The Stewart mining camp lies along the western margin of the Intermontane tectonic belt, adjacent to the Coast Plutonic Complex. The area is underlain by the Hazelton Group, a Lower to Middle Jurassic island-arc complex, and its coeval stocks, sills and dykes of the Texas Creek Plutonic Suite. The Hazelton Group has been folded into north-northwest trending, doubly plunging syncline/anticline pairs with subvertical axial planes. Faults are abundant at both local and regional scales.

Property Geology



The Tide property is largely underlain by andesitic ash tuffs and lapilli tuffs, with lesser argillite, wacke and augite-feldspar porphyritic andesite flows. These form part of the Norian to Pliensbachian Unuk River Formation at the base of the Hazelton Group and have been extensively hornfelsed by thick sills related to the roughly coeval Summit Lake Stock. This stock, centred south of the Tide property and dated at 192.8+2 Ma, is a 2 x 3 km body of fresh, medium- to coarse-grained, equigranular hornblende granodiorite. To the north, it tails off into a 200-1,000 metre wide sill complex, which extends northward through the Tide property. The sill complex is generally feldspar-hornblende+biotite porphyritic, is variably altered and appears related to precious metal-bearing mineralization on the Tide property.



Exploration



An initial program of mapping and prospecting was carried out in September 2001 from a camp on the road. Mapping and prospecting were carried out at a scale of 1:2,500, with rock samples taken from mineralized and altered outcrops and boulders.







In 2004, the Corporation conducted two phases of exploration: an early summer program of geological mapping, prospecting and soil geochemical sampling infilling areas with poor sample coverage followed by a fall program of diamond drilling consisting of four holes totaling 598 m and further prospecting.



The primary focus of the 2005 drilling was to follow up the 2004 drilling discovery of gold mineralization at the 36 Zone. Eight holes totaling 967 metres were drilled, four targeting the 36 Zone and four targeting the 52 Zone. The holes in the 36 Zone had mineralized intervals which extended the zone to the northeast, southwest and in depth. Infill soil geochemical sampling between the 36 Zone and the South Pit soil anomalies to the south showed that the two anomalies are continuous as defined by gold values in excess of 500 ppb (0.5 g/t) gold. This gold-arsenic+/-antimony anomaly is now approximately 500 metres by 2100 metres in size, with diamond drilling having tested an area of 170 by 350 metres. Favourable results from preliminary metallurgical studies show that this mineralization is amenable to leaching, with gold recoveries averaging 73-81%. Prospecting and trenching were completed at the 52 Zone. The diamond drilling, combined with the surface results, has shown mineralization in this zone to be highly variable in nature. The drilling and sampling programs were conducted by Equity Engineering Ltd. under the direction of Henry Awmack, P.Eng., a Qualified Person as required by NI 43-101 (Standards of Disclosure for Mineral Projects.) ALS Chemex Labs Ltd. of North Vancouver analyzed the samples. A technical report was filed on SEDAR on May 12, 2006.



Mineralization



Sulphide mineralization is widespread on the Tide property, with all significant occurrences discovered to date lying in a 1,700 x 3,200 metre area on the eastern flank of Tide Mountain, south of Eastgold Creek. Mineralization appears to be spatially, and possibly genetically, related to the feldspar-hornblende porphyry sills of the Summit Lake Stock. The zones (Arrow, High-Grade, Brown Bear, 52 and part of the Southpit) within the sill, or proximal to its contacts, appear to be relatively enriched in Ag, Pb, Zn and Sb; those more distal to it (Northpit, 36, Riptide, Camp and part of the Southpit) are relatively enriched in gold and arsenic.



The distal gold-arsenic zones are dominated by quartz-pyrite-arsenopyrite veining emplaced within westerly-trending, steeply north-dipping fracture zones in hornfelsed volcanic and volcaniclastic rocks; they lie within a 500 metre wide band which parallels the sill complex and lies 100-900 metres west of its contact. The proximal group of mineral occurrences consists of polymetallic quartz-sphalerite-galena-pyrite+tetrahedrite+arsenopyrite veins at several orientations. This group is mainly hosted by sericitized feldspar-hornblende porphyry, but the Southpit veins are located up to 300 metres west of the sill contact. Both the distal and proximal groups contain locally high precious metal contents, including 53.0 grams/tonne gold (distal - Southpit Zone), 105 grams/tonne gold and 598 grams/tonne silver (proximal - Arrow Zone), and 593 grams/tonne gold and 14,708 grams/tonne silver (proximal - 52 Zone). Quartz-sulphide vein float in Eastgold Creek and veining in the East Gold Mine area, 500 metres north of the Tide property, have metal signatures similar to those of the polymetallic proximal mineralization, although the porphyry sills have not been mapped this far north.



Four reconnaissance holes, totaling 589 m. were drilled by Serengeti Resources in late 2004 testing the Arrow, Southpit, HighGrade Pit and 36 zones. Significant gold mineralization was intersected at the 36 Zone, where hole TIDE04-03 averaged 1 gram/tonne gold over 129.4 metres including 39.6 m at 1.93 grams/tonne gold.. This intersection is significant in that it tested a soil geochemical anomaly measuring 450 x 350 metres of greater than 0.5-gram/tonne gold that remains open in all directions. The hole was collared in the middle of the soil anomaly which is reflected in the mineralization found throughout its entire length. Prospecting work undertaken in conjunction with the drilling resulted in the discovery of a high grade vein structure, coined the 52 Zone, in the northeast corner of the property and the Brown Bear Zone which may be a continuation of the Arrow Zone mineralization.



Future Exploration Programs



For 2006, the proposed exploration program for the Tide project consists of mapping, prospecting and sampling followed by diamond drilling.







Kizmet Property, Atlin Mining Division



Location and Introduction



The Kizmet property is located in northwest B.C., approximately 90 km south of Atlin B.C. The main target of exploration on this property is epithermal gold-copper-silver-lead-zinc vein and breccia mineralization analogous to that found on the Corporations Thorn property to the south. It is believed that the epithermal mineralization in the district is strongly linked to a newly recognized suite of Cretaceous aged volcanic and plutonic rocks informally referred to as the Windy Table Suite. The Kizmet property is a joint venture with Barrick Gold Corporation. The Corporation contributed claims totalling 27,939 hectares to the joint venture while Barrick contributed claims covering an area of 67,865 hectares. In January 2006, the number of claims was reduced to 93 totalling 34,078 hectares.

.

The following table details the Corporations claims that comprise the Kizmet property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim Name  | Mineral Tenure | Area (hectares) | Expiry Date       | Location
|----------- | -------------- | --------------- | ----------------- | --------
|LJ1         | 502841         | 504.439         | December 31, 2008 | 104K075 
|LJ2         | 502848         | 504.438         | December 31, 2008 | 104K075 
|LJ3         | 502834         | 706.709         | December 31, 2008 | 104K075 
|LJ4         | 502840         | 706.711         | December 31, 2008 | 104K065 
|LJ5         | 502968         | 504.123         | December 31, 2008 | 104K075 
|LJ6         | 502967         | 705.766         | December 31, 2008 | 104K075 
|LJ7         | 502966         | 504.475         | December 31, 2008 | 104K075 
|LJ8         | 502926         | 605.365         | December 31, 2008 | 104K075 
|LJ9         | 502964         | 605.01          | December 31, 2008 | 104K074 
|LJ10        | 502971         | 588.168         | December 31, 2008 | 104K075 
|LJ11        | 502972         | 504.502         | December 31, 2008 | 104K074 
|LJ12        | 502973         | 420.416         | December 31, 2008 | 104K074 
|LJ13&15     | 501336         | 973.27          | December 31, 2008 | 104K074 
|LJ14        | 502975         | 184.554         | December 31, 2008 | 104K074 
|LJ16&19     | 501791         | 923.46          | December 31, 2008 | 104K074 
|LJ17        | 502984         | 302.104         | December 31, 2008 | 104K074 
|LJ18        | 502988         | 704.945         | December 31, 2008 | 104K075 
|LJ20        | 502989         | 302.304         | December 31, 2008 | 104K075 
|LJ21        | 502991         | 587.459         | December 31, 2008 | 104K075 
|LJ22        | 502992         | 621.057         | December 31, 2008 | 104K075 
|LJ23&24     | 502997         | 554.236         | December 31, 2008 | 104K075 
|Prindle     | 501884         | 422.671         | January 12, 2008  | 104K057 
|Prindle Ext | 517391         | 33.808          | July 12, 2008     | 104K057 
|Sutl 5&6    | 502801         | 1010.129        | December 31, 2010 | 104K066 
|Sutl 7&8    | 502779         | 1010.602        | December 31, 2010 | 104K066 
|Sutl 9&10   | 502815         | 1261.375        | December 31, 2010 | 104K066 
|Sutl 11&12  | 502803         | 1009.638        | December 31, 2010 | 104K066 
|Sutl 13     | 504171         | 539.237         | December 31, 2008 | 104K066 
|Sutl 14     | 502812         | 269.625         | December 31, 2008 | 104K066 
|Sutl 15&16  | 502792         | 118.011         | December 31, 2008 | 104K066 
|K15-1a      | 502036         | 317.616         | January 12, 2008  | 104K096 
|K15-1a      | 502083         | 66.84           | January 12, 2008  | 104K095 
|K15-1b      | 502069         | 133.68          | January 12, 2008  | 104K096 
|K15-1c      | 502052         | 217.319         | January 12, 2008  | 104K095 
|K15-4c      | 502136         | 417.607         | January 12, 2008  | 104K097 
|K15-4d      | 502152         | 384.214         | January 12, 2008  | 104K097 





|K15-4ee | 502362 | 100.261 | January 12, 2008 | 104K097
|------- | ------ | ------- | ---------------- | -------
|K15-4f  | 502220 | 85.553  | January 12, 2008 | 104K097
|        | 501218 | 151.599 | January 12, 2008 | 104K065
|        | 501241 | 50.546  | January 12, 2008 | 104K065
|        | 501244 | 101.104 | January 12, 2008 | 104K065
|        | 501268 | 421.066 | January 12, 2008 | 104K065
|        | 501304 | 235.908 | January 12, 2008 | 104K065
|        | 501348 | 50.444  | January 12, 2008 | 104K074
|        | 501417 | 420.661 | January 12, 2008 | 104K065
|        | 501452 | 420.665 | January 12, 2008 | 104K065
|        | 501464 | 423.327 | January 12, 2008 | 104K046
|        | 501517 | 84.113  | January 12, 2008 | 104K064
|        | 501532 | 67.775  | January 12, 2008 | 104K047
|        | 501541 | 33.645  | January 12, 2008 | 104K064
|        | 501557 | 84.695  | January 12, 2008 | 104K047
|        | 501558 | 423.449 | January 12, 2008 | 104K047
|        | 501570 | 33.673  | January 12, 2008 | 104K065
|        | 501578 | 423.201 | January 12, 2008 | 104K047
|        | 501602 | 389.111 | January 12, 2008 | 104K047
|        | 501605 | 420.861 | January 12, 2008 | 104K065
|        | 501607 | 50.462  | January 12, 2008 | 104K064
|        | 501640 | 404.059 | January 12, 2008 | 104K065
|        | 501655 | 421.069 | January 12, 2008 | 104K065
|        | 501667 | 421.067 | January 12, 2008 | 104K065
|        | 501704 | 135.538 | January 12, 2008 | 104K047
|        | 501709 | 423.325 | January 12, 2008 | 104K047
|        | 501720 | 235.826 | January 12, 2008 | 104K065
|        | 501727 | 84.695  | January 12, 2008 | 104K047
|        | 501729 | 423.383 | January 12, 2008 | 104K047
|        | 501766 | 134.796 | January 12, 2008 | 104K065
|        | 501781 | 406.393 | January 12, 2008 | 104K047
|        | 501811 | 237.073 | January 12, 2008 | 104K047
|        | 501821 | 50.817  | January 12, 2008 | 104K047
|        | 501836 | 406.14  | January 12, 2008 | 104K047
|        | 501864 | 287.782 | January 12, 2008 | 104K047
|        | 501894 | 421.071 | January 12, 2008 | 104K065
|        | 501904 | 169.103 | January 12, 2008 | 104K057
|        | 501920 | 421.069 | January 12, 2008 | 104K065
|        | 501949 | 302.854 | January 12, 2008 | 104K066
|        | 501969 | 84.235  | January 12, 2008 | 104K066
|        | 501978 | 420.12  | January 12, 2008 | 104K075
|        | 501980 | 421.018 | January 12, 2008 | 104K066
|        | 501986 | 420.119 | January 12, 2008 | 104K075
|        | 501994 | 419.871 | January 12, 2008 | 104K075
|        | 502003 | 404.142 | January 12, 2008 | 104K066
|        | 502012 | 319.826 | January 12, 2008 | 104K065
|        | 502021 | 100.967 | January 12, 2008 | 104K066
|        | 502025 | 16.789  | January 12, 2008 | 104K075
|        | 502032 | 419.871 | January 12, 2008 | 104K075
|        | 502035 | 404.152 | January 12, 2008 | 104K066
|        | 502039 | 404.142 | January 12, 2008 | 104K066
|        | 502047 | 285.668 | January 12, 2008 | 104K075
|        | 502051 | 302.963 | January 12, 2008 | 104K066
|        | 502062 | 353.352 | January 12, 2008 | 104K066
|        | 502075 | 16.824  | January 12, 2008 | 104K066
|        | 502088 | 33.647  | January 12, 2008 | 104K065
|        | 502114 | 168.118 | January 12, 2008 | 104K076



Property History



Previous exploration programs were directed at precious metal epithermal veins, copper-molybdenum porphyry and skarn mineralization, primarily on the current LJ claim groups. The Joly and Jak occurrences, which consist of gold-bearing quartz-carbonate-arsenopyrite veins, experienced the most exploration. In addition to property work, the BC government conducted a regional geochemical silt survey in 1987, which show tributaries on the properties to be highly anomalous in base and precious metals. In many instances, the sources of these anomalous drainages have yet to be found.



Property Acquisition



In the fall of 2003 and spring of 2004, Rimfire Minerals Corporation conducted an extensive staking program, which coincided with the discovery of the Oban Breccia Zone on the Thorn property. This staking campaign resulted in SUTL 5-16 and LJ 1-24 being staked. These properties were staked on the basis of encouraging silt geochemistry and geological characteristics similar to those existing at the Thorn property. In January 2005, the Corporation staked additional claims and converted the existing claims to the new Mineral Tenure Online system.



The Corporation signed a 50:50 joint venture agreement with Barrick Gold Corporation (Barrick), effective February 26, 2005 to explore the Kizmet claims. Barrick contributed 170 claims totaling 68,136 hectares while Rimfire contributed 52 claims totaling 27,975 hectares. Upon signing, Barrick paid the Corporation $75,000 Canadian. In January 2006, the number of claims was reduced to 93 totaling 34,078 hectares resulting in the table of claims as shown above.







Barrick can increase their interest to an aggregate 80% upon completion of the following:



* to 65% upon completion of: aggregate exploration expenditures of $1,200,000 (USD)over
   a period of three years from the date of the formal agreement;

* to 75% upon funding exploration expenditures of not less than $500,000 (USD) per year
   through to a production decision; and

* at the Corporations election, to 80% upon assisting the Corporation with project financing.



Regional Geology



The property is located on the eastern flank of the Stikine terrane, which is locally comprised of the Triassic Stuhini Group (variable marine clastic sedimentary rocks, sub-marine mafic volcanic rocks, and lesser carbonate rocks), overlain by upper Triassic Sinwa Formation limestone and lesser argillite, all of which is overlain by middle Jurassic Laberge Group clastic sedimentary rocks. The aforementioned comprise the basement rocks on the Sutlahine property and are intruded by Cretaceous volcano-plutonic complexes that are associated with known gold-silver-copper-lead-zinc showings.



Property Geology & Mineralization



Past work indicates that there are three styles of mineralization represented on the properties: gold-silver-copper-lead-zinc epithermal veins; low grade copper-molybdenum (gold) porphyry; and zinc-lead-silver skarns. The Joly and Jak occurrences are a series of quartz-carbonate-arsenopyrite veins that are hosted in an East-West trending lineament extending from Mt. Lester Jones to King Salmon Lake. Results from these programs showed the presence of narrow mineralized veins. Drilling to the west of the Joly and Jak showed continuity of the veins along a controlling fault that has only been explored for approximately 10% of its length. Other float occurrences of this style of mineralization exist in the area, but were never traced back to their source.



A regional sampling, prospecting and mapping program was conducted during the late summer of 2004 to fulfil the assessment work requirement to keep the original claims in good standing until December 2006. Geological mapping and age-dating identified a Cretaceous-aged belt of volcanic and associated intrusive rocks distinct in age with coincident strong gold-silver-arsenic geochemical signature. Geological highlights include discovery of several precious metal rich base metal veins, a zone of precious metal rich silicified sedimentary rock, iron-zinc skarn and sedimentary-hosted gold-bearing disseminated sulphides.



During the summer of 2005, Barrick conducted a prospecting, mapping and stream sediment sampling program that identified several anomalous areas that will require more detailed work. A technical report has not been filed on the Kizmet Project.



Future Exploration Programs



For 2006, Barrick has proposed a continuation of the sampling and prospecting program to follow up anomalous areas identified in 2005.



Jake Property, Kamloops Mining Division



Location and Introduction



The Jake Property, covering 37,237 hectares, is located in Kamloops Mining Division of British Columbia, approximately 13 km west of Clearwater, BC. This project was initiated based on the discovery of significant gold-copper-bismuth mineralization in boulders and sub-crop located along recent logging roads. Gold mineralization was discovered in roadbed exposure and boulders concentrated over a 35 metre section of road cut. The Corporation signed an option agreement to earn a 100% interest in the Jake claims (1,204 hectares.) The surrounding claims were staked to cover geology with potential for Intrusion-Related Gold (IRG) mineralization. Access to the property is exceptional due to an extensive array of logging roads permitting access to the entire property.



Property History



The Jake showing was discovered in July of 2005 by prospector Mo Kaufman. Composite samples of gossanous boulders collected by Mr. Kaufman returned high grade results of 27.5 and 15.7 grams/tonne gold. 48% of float samples collected within 2.5 km of the showing also demonstrated anomalous gold values. To our knowledge there has been no previously documented exploration in the local vicinity of the Jake showing, as boulders and sub-crop in this area have only been recently exposed by two to four year-old logging roads. The Clearwater Peak showings are the only recorded mineral occurrences in the local region of the showing. They were discovered by follow-up prospecting of copper-zinc-gold anomalies in a soil survey conducted by Kerr, Dawson and Associates for Pan Ocean Oil Limited in 1972.





Property Acquisition



The Corporation signed an option agreement effective October 29, 2005 to earn a 100% interest in the Jake claims (1,204 hectares), subject to a 4% NSR, half of which can be purchased for US$2 million. The Corporation will make cash payments totaling USD$300,000 and complete an aggregate of $300,000 (Canadian) in exploration expenditures before October 29, 2009. The Corporation will make cash payments of:

?

US$10,000 upon signing (paid)

·

US $20,000 on or before October 29, 2006

·

US $25,000 on or before October 29, 2007

·

US $30,000 on or before each of the third through ninth anniversary dates (US $210,000)

·

US $35,000 on or before October 29, 2015



The Corporation will complete exploration expenditures of:

·

$100,000 (Canadian) on or before October 29, 2007

·

an aggregate of $300,000 (Canadian) on or before October 29, 2009



The following table details the claims that comprise the Jake property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim Name | Mineral Tenure | Area (hectares) | Expiry Date        | Location
|---------- | -------------- | --------------- | ------------------ | --------
|CLO 1      | 518670         | 240.691         | August 3, 2008     | 092P069 
|CLO 2      | 519684         | 200.651         | September 4, 2008  | 092P069 
|JAKE 1     | 521792         | 481.356         | November 2, 2006   | 092P069 
|JAKE 2     | 521793         | 441.426         | November 2, 2006   | 092P069 
|JAKE 3     | 521794         | 481.712         | November 2, 2006   | 092P069 
|JAKE 4     | 521795         | 501.76          | November 2, 2006   | 092P070 
|JAKE 5     | 521796         | 481.448         | November 2, 2006   | 092P070 
|JAKE 6     | 521797         | 481.187         | November 2, 2006   | 092P070 
|JAKE 7     | 521798         | 481.144         | November 2, 2006   | 092P069 
|JAKE 8     | 521799         | 481.147         | November 2, 2006   | 092P069 
|JAKE 9     | 521800         | 481.149         | November 2, 2006   | 092P069 
|JAKE 10    | 521801         | 481.491         | November 2, 2006   | 092P070 
|JAKE 11    | 521802         | 481.315         | November 2, 2006   | 092P070 
|JAKE 12    | 521803         | 481.142         | November 2, 2006   | 092P070 
|JAKE 13    | 521804         | 481.358         | November 2, 2006   | 092P070 
|JAKE 14    | 521805         | 481.709         | November 2, 2006   | 092P070 
|JAKE 15    | 521806         | 480.97          | November 2, 2006   | 092P070 
|JAKE 16    | 521807         | 480.971         | November 2, 2006   | 092P069 
|JAKE 17    | 521808         | 480.971         | November 2, 2006   | 092P069 
|JAKE 18    | 521810         | 480.795         | November 2, 2006   | 092P069 
|JAKE 19    | 521811         | 480.796         | November 2, 2006   | 092P069 
|JAKE 20    | 521812         | 500.622         | November 2, 2006   | 092P079 
|JAKE 21    | 521813         | 480.974         | November 2, 2006   | 092P069 
|JAKE 22    | 521814         | 480.797         | November 2, 2006   | 092P069 
|JAKE 23    | 521815         | 500.624         | November 2, 2006   | 092P079 
|JAKE 24    | 521816         | 480.577         | November 2, 2006   | 092P079 
|JAKE 25    | 521817         | 480.975         | November 2, 2006   | 092P069 
|JAKE 26    | 521818         | 480.987         | November 2, 2006   | 092P069 
|JAKE 27    | 521819         | 480.799         | November 2, 2006   | 092P069 
|JAKE 28    | 521820         | 480.81          | November 2, 2006   | 092P069 
|JAKE 29    | 521821         | 480.623         | November 2, 2006   | 092P079 
|JAKE 30    | 521822         | 480.634         | November 2, 2006   | 092P079 
|JAKE 31    | 521823         | 480.457         | November 2, 2006   | 092P079 
|JAKE 32    | 521824         | 480.284         | November 2, 2006   | 092P079 
|JAKE 33    | 521825         | 480.155         | November 2, 2006   | 092P079 
|JAKE 34    | 521826         | 280.145         | November 2, 2006   | 092P079 
|JAKE 35    | 521827         | 480.328         | November 2, 2006   | 092P079 
|JAKE 36    | 521828         | 320.279         | November 2, 2006   | 092P078 
|JAKE 37    | 521830         | 480.591         | November 2, 2006   | 092P079 
|JAKE 38    | 521831         | 421.484         | November 2, 2006   | 092P069 
|JAKE 39    | 521832         | 401.541         | November 2, 2006   | 092P069 
|JAKE 40    | 521834         | 482.073         | November 2, 2006   | 092P059 
|JAKE 41    | 521835         | 482.341         | November 2, 2006   | 092P059 
|JAKE 42    | 521836         | 481.866         | November 2, 2006   | 092P059 
|JAKE 43    | 521837         | 482.024         | November 2, 2006   | 092P059 
|JAKE 44    | 521838         | 482.205         | November 2, 2006   | 092P059 
|JAKE 45    | 521840         | 482.382         | November 2, 2006   | 092P059 
|JAKE 46    | 521841         | 482.559         | November 2, 2006   | 092P059 
|JAKE 47    | 521842         | 281.531         | November 2, 2006   | 092P059 
|JAKE 48    | 521843         | 482.713         | November 2, 2006   | 092P059 
|JAKE 49    | 521845         | 482.47          | November 2, 2006   | 092P060 
|JAKE 50    | 521846         | 482.71          | November 2, 2006   | 092P060 
|JAKE 51    | 521847         | 482.555         | November 2, 2006   | 092P060 
|JAKE 52    | 521848         | 422.348         | November 2, 2006   | 092P060 
|JAKE 53    | 521849         | 482.557         | November 2, 2006   | 092P060 
|JAKE 54    | 521850         | 482.558         | November 2, 2006   | 092P060 
|JAKE 55    | 521851         | 482.383         | November 2, 2006   | 092P060 
|JAKE 56    | 521853         | 482.207         | November 2, 2006   | 092P060 
|JAKE 57    | 521854         | 482.026         | November 2, 2006   | 092P060 
|JAKE 58    | 521855         | 481.845         | November 2, 2006   | 092P070 
|JAKE 59    | 521856         | 481.67          | November 2, 2006   | 092P070 
|JAKE 60    | 521857         | 482.029         | November 2, 2006   | 082M051 
|JAKE 61    | 521858         | 481.849         | November 2, 2006   | 082M061 
|JAKE 62    | 521859         | 481.673         | November 2, 2006   | 082M061 
|JAKE 63    | 521860         | 401.284         | November 2, 2006   | 082M061 
|JAKE 64    | 521861         | 482.38          | November 2, 2006   | 092P060 
|JAKE 65    | 521862         | 482.337         | November 2, 2006   | 092P060 
|JAKE 66    | 521863         | 482.07          | November 2, 2006   | 092P060 
|JAKE 67    | 521864         | 501.865         | November 2, 2006   | 092P060 
|JAKE 68    | 521865         | 502.19          | November 2, 2006   | 092P070 
|JAKE 69    | 521866         | 482.115         | November 2, 2006   | 092P060 
|JAKE 70    | 521867         | 481.887         | November 2, 2006   | 092P060 
|JAKE 71    | 521868         | 441.872         | November 2, 2006   | 092P060 
|JAKE 72    | 521869         | 461.085         | November 2, 2006   | 092P069 
|JAKE 73    | 521870         | 481.332         | November 2, 2006   | 092P069 
|JAKE 74    | 521871         | 200.633         | November 2, 2006   | 092P069 
|JAKE 75    | 521873         | 220.207         | November 2, 2006   | 092P079 
|JAKE 76    | 521874         | 400.756         | November 2, 2006   | 092P069 
|JAKE 77    | 521876         | 502.11          | November 2, 2006   | 082M051 
|JAKE 78    | 521878         | 401.031         | November 2, 2006   | 092P070 
|JON        | 520106         | 300.879         | September 17, 2008 | 092P069 
|MELI       | 521756         | 120.325         | November 1, 2006   | 092P069 
|SID        | 520105         | 100.279         | September 17, 2008 | 092P069 
|TOM        | 519188         | 240.702         | August 19, 2008    | 092P069 



Regional Geology



The Jake property straddles the boundary between the eastern Intermontane Belt to the west and the Omineca Belt to the east. The geology of this area has been the focus of significant mapping and geochronology by the British Columbia Geological Survey. The north-south long axis of the project area follows the Lemieux Creek Fault, which separates the Lemieux Creek Formation of the Quesnel Terrane from the Upper Paleozoic Fennel Formation of the Slide Mountain Terrane to the west. The Lemieux Creek Succession is a sedimentary sequence comprised of phyllites, slates, siltstones, quartzite and calcareous quartzite. The Jake showing occurs within mafic rocks of the Fennel Formation, which is largely composed of pillowed to massive basalt with minor bedded chert and gabbro. The claims continue east within the Slide Mountain Terrane across a thrust faulted boundary into metamorphic rocks of the Kootenay Terrane. In this region the Quesnel, Slide Mountain and Kootenay Terrane boundaries are all cross-cut by batholithic granite intrusions.



Property Geology



The Jake showing occurs within basaltic to gabbroic boulders and sub-crop of the Fennel Formation near an inflection in the northwest-trending portion of the Lemieux Creek Fault. The showing consists of four similar boulders distributed obliquely over a recently built logging road bed and extending for 35 metres. A single 15 cm wide quartz cobble with visible gold and bismuthinite was located 250 m further south of the heavily mineralized boulders.



Exploration



The Corporation conducted a limited property examination prior to acquiring the claims. This included channel sampling, mapping and prospecting. The results were sufficiently encouraging to prompt the option agreement and subsequent staking of related claims. In March 2006, the Corporation completed a ground magnetic and VLF-EM survey.



Mineralization

Mineralization within the boulders is characterized by bull quartz veins with banded and net-textured pyrrhotite ± chalcopyrite ± pyrite ± bismuthinite. Vein sulphide mineralogy is dominated by pyrrhotite, chalcopyrite, pyrite, traces of bismuthinite and spotty tungsten. Disseminated pyrrhotite (up to 3%) also occurs as blebs in pillow basalts that display hornfelsic textures and secondary epidote and quartz. One quartz cobble with disaggregated vein structure contains visible gold and bismuthinite. This style of vein mineralization and a gold-copper-bismuthinite metal association is similar to other Cretaceous-aged gold-quartz vein systems in the area (e.g. the Windpass deposit and the Cam-Gloria discovery) and highlights the potential of this region to host Intrusion-Related Gold deposits analogous to those in the Tintina Gold Belt of the Yukon and Alaska.



Future Exploration Programs

Proposed work programs for the 2006 field will commence with ground magnetic and VLF-EM surveys. This will be followed later in the season with trenching, till and stream geochemistry and prospecting. Pending these results, future regional exploration may consist of regional drainage geochemistry, detailed till geochemistry, airborne geophysics and diamond drilling. A technical report has not been filed on the Jake Property.



Adam Property, Skeena Mining Division



Location and Introduction



The Adam property covers a copper-gold porphyry prospect in the Unuk River area of northwestern British Columbia. The property lies in the Coast Mountains, approximately 70 kilometres northwest of Stewart and 20 kilometres southwest of the Eskay Creek Mine. A well-maintained gravel road connects





the Eskay Creek Mine to their concentrate-shipping port facilities at Stewart, British Columbia. Eventual road access to the Adam property from the Eskay Creek Mine Road would be relatively easy to construct, without any major river crossings and mainly across the Prout Plateau. Alternatively, the Adam property is 50 kilometres upstream along the Unuk River from tidewater at Burroughs Bay, Alaska. The following table details the claims that comprise the Adam property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim Name | Mineral Tenure | Area (hectares) | Expiry Date   | Location
|---------- | -------------- | --------------- | ------------- | --------
|Adam 1&2   | 501297         | 1286.292        | April 5, 2007 | 104B057 
|Adam 3     | 501315         | 536.447         | April 5, 2007 | 104B047 



The Corporation staked the Adam property in April 2002 and owns the property outright, with no underlying royalties.



Regional Geology



The Unuk River area lies along the western margin of the Intermontane tectonic belt, adjacent to the Coast Plutonic Complex. The area is underlain by more than 5,000 metres of Upper Triassic Stuhini Group and Lower Jurassic Hazelton Group volcano-sedimentary arc-complex lithologies. The Upper Triassic and Lower to Middle Jurassic volcanic rocks are accompanied by coeval intrusions throughout the map area. Economically most important is the Texas Creek Plutonic Suite, which comprises a group of Early Jurassic granodioritic stocks, dykes and sills in the Stewart-Unuk-Iskut area.



Property Geology



The Adam property is underlain by a sequence of northerly-trending, steeply-dipping, Hazelton Group andesitic volcanic rocks and mixed sedimentary rocks. These were intruded by a series of monzonite dykes and plugs along the major northerly-trending Adam fault zone. The Adam Fault trends 016° for at least 6.5 kilometres across the property, with evidence that faulting, monzonite intrusion and alteration/mineralization of the monzonite were all roughly synchronous.



The Evan Dyke is by far the largest of the monzonite bodies, measuring 50-300 metres wide and at least 3,500 metres long, between Fewright and King Creeks. Cliff exposures of the Evan Dykes contact show it to be irregular, subvertical and intrusive in nature. It is formed of three segments, with the wider north and south segments emplaced along the Adam Fault and the narrower middle segment intruding along a 335°-trending cross-fault.



Exploration



In August and September 2002, the Corporation carried out 1:2,500 scale mapping, prospecting and soil geochemistry over the Adam property from two fly camps. No additional work has been completed since then.



Mineralization



The Evan prospect is a copper-gold porphyry system hosted within the northerly-trending Evan Dyke over a strike length of at least 3,000 metres. Significant alteration and mineralization is confined to equigranular monzonite of the Evan Dyke, which is variably sericitized, chloritized and silicified. Sulphide-poor, centimetre-scale, sheeted or stockwork quartz veins and stringers are present locally in each style of





alteration. The bulk of copper and gold mineralization in the Evan prospect is hosted within three coherent zones of moderate to strong sericitization, occurring as finely disseminated chalcopyrite. The sericitized zones, the largest of which covers 1,400 metres of the dykes strike length, are relatively recessive and generally marked by scattered outcrops in a field of talus.



As well as the Evan prospect, several other gold and gold-copper occurrences are associated with the Adam Fault. The King prospect, located 800 metres north of the Evan prospect, consists of several massive pyrite+arsenopyrite lenses in black argillaceous siltstone. The Cole prospect is a small, weak copper-gold porphyry system centred on the Adam Fault a further 2,000 metres north.



Future Exploration Programs



The Corporation intends to seek a third party to undertake further mapping, prospecting and an induced polarization survey over the Evan prospect, which could lead to diamond drilling.



Fer Property, Watson Lake Mining District



Location and Introduction



The Fer Property is comprised of a total of 118 contiguous mining claims and covers approximately 2,450 hectares. The Fer Property is located 20 kilometres west of the town of Tungsten in the Northwest Territories, and is approximately 200 kilometres north of Watson Lake, Yukon Territory. The Cantung Highway passes five kilometres northeast of the Fer Property; however the Fer Property is best accessed by helicopter. If warranted, no problems are foreseen in constructing road access to the property from the Cantung Highway.





Property History



The FER Property was originally staked by Westmin Resources Limited in 1996 and was located to cover the strongest cluster of anomalous gold and arsenic results from a regional fine sediment sampling program conducted by Westmin in 1994. The survey was designed to test for Telfer-style, sediment-hosted gold deposits in the Hyland Group sedimentary rocks, and covered approximately 7000 square kilometres, stretching from the B.C.-Yukon border to the headwaters of the Hyland River. There is no record of exploration work on the property prior to this program.



Westmin did contour soil sampling, geological mapping and rock sampling in 1996 and 1997. The results of this work indicated extensive areas of moderately to strongly anomalous results for gold and arsenic in soils. These anomalous results were concentrated on the south slope of the property and in the east-central area, primarily associated with thick quartz-rich clastic sedimentary units.



Work by the Corporation in 1998 consisted of soil sampling, detailed mapping of the anomalous soil zones and prospecting.



Property Acquisition



Pursuant to an Option and Joint Venture Agreement dated as of July 1, 1998, with Boliden Westmin (Canada) Limited, ("Boliden") as amended October 11, 2000, the Corporation acquired a 51% interest in the Fer Property. The Corporation did not complete the required exploration expenditures to acquire an additional 34% interest. Bolidens interest in the property has been sold to Breakwater Resources Ltd.





(Breakwater). The Corporation and Breakwater will enter into a joint venture for the further development of the Fer Property. If either partys interest decreases to below 7.5% that partys interest will be automatically extinguished and converted to a net smelter royalty return interest of 2%. The Corporation and Breakwater are at arm's length to one another.



The following table details the claims that comprise the Fer property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim      | Mineral Tenure  | Expiry Date   | Location
|---------- | --------------- | ------------- | --------
|Fer 1      | YB84329         | June 10, 2006 | 105H/15 
|Fer 2      | YB84330         | June 10, 2007 | 105H/15 
|Fer 3      | YB84331         | June 10, 2006 | 105H/15 
|Fer 4      | YB84332         | June 10, 2007 | 105H/15 
|Fer 5      | YB84333         | June 10, 2006 | 105H/15 
|Fer 6      | YB84334         | June 10, 2007 | 105H/15 
|Fer 7      | YB84335         | June 10, 2006 | 105H/15 
|Fer 8      | YB84336         | June 10, 2007 | 105H/15 
|Fer 9      | YB84337         | June 10, 2006 | 105H/15 
|Fer 10     | YB84338         | June 10, 2007 | 105H/15 
|Fer 11     | YB84339         | June 10, 2006 | 105H/15 
|Fer 12     | YB84340         | June 10, 2007 | 105H/15 
|Fer 13-64  | YB84341-YB84392 | June 10, 2006 | 105H/15 
|Fer 65-76  | YB84393-YB84404 | June 10, 2007 | 105H/15 
|Fer 77-118 | YB85825-YB85866 | July 22, 2006 | 105H/15 





Regional Geology



The Fer Property is underlain by a broadly folded sequence of coarse siliciclastic, calcareous and phyllitic, continental margin sediments of the late Proterozoic to early Cambrian Hyland Group. The nearest intrusion is an elongate, Cretaceous-aged granite body which lies four kilometres southwest of the Fer Property. Hyland Group rocks host gold mineralization in numerous occurrences from the southeastern Yukon to the Dawson City area, covering approximately 750 kilometres within the Tintina Gold Belt.



Property Geology



Soil geochemistry has outlined an area of approximately 2,000 by 500 metres in the southern part of the Fer Property with anomalous gold and arsenic values (> .025 ppm gold, > 125 ppm arsenic). An additional 500 by 200 metre gold/arsenic anomaly is also present in the northeast portion of the Fer Property.



The FER property is underlain by quartzose clastic rocks interbedded with phyllite and much lesser limestone. Whereas the northeast corner of the property is relatively homoclinal, the structural geology of the rest of the property is more complex. The southwest area is dominated by an apparent broad synform which traverses the area in a northwest-southeast direction, plunging to the shallowly to the southeast. Minor folds and cross-cutting faults also complicate the geology in this area. North-northeast, northwest, and east-west trending faults are quite common and these structures are commonly associated with intensified alteration and mineralization.







Mineralization



Mineralization on the Fer Property is largely controlled by structure and host rock lithology. It is spatially associated with intense zones of silicification and quartz vein stockworks. Gold correlates best in rock samples with arsenic, silver, lead and antimony. Decalcification is suggested by lack of interstitial calcite in the main altered and mineralized area, whereas calcite is widespread elsewhere.



Future Exploration Programs



The Corporation does not consider the Fer Property to be a principal property. The Corporation intends to seek a third party to option the Corporations interest in the property.



Simpson Property, Watson Lake Mining District



Location and Introduction



The Simpson Property lies in the Simpson Range of the Pelly Mountains of south-eastern Yukon, approximately 105 km northwest of Watson Lake. The Robert Campbell Highway passes the Simpson at its nearest point 35 km to the east.



The property consists of 8 mining claims (873 hectares) located in the Watson Lake Mining District. The property was initially staked in 2003. The Corporation owns the property outright, with no underlying royalties. The following table details the claims that comprise the Simpson property with legal identification (Mineral Tenure) size, expiry date, and location.







|Claim       | Mineral Tenure    | Expiry Date       | Location
|----------- | ----------------- | ----------------- | --------
|SIM 19 - 22 | YC24032 - YC24035 | December 31, 2008 | 105A/13 
|SIM 37 - 40 | YC24036  YC24039 | December 31, 2008 | 105A/13 



Exploration



The Simpson exploration target was defined on the basis of several anomalous government silt samples in an area underlain by prospective lithologies belonging to the Yukon Tanana Terrane. Preliminary prospecting and sampling was carried out in the general area during 2002 under the auspices of the Yukon Mining Incentives Program. Work on the Simpson confirmed that the geology is permissive for VMS mineralization and there is evidence of the existence of felsic volcanic units. Silt and soil results are highly anomalous in a suite of elements consistent with VMS-style mineralization and they are at levels considered anomalous in the nearby districts. Unfortunately, the limited program did not identify the source of the geochemical anomalies.



During 2003, a program of mapping, prospecting and geochemical sampling attempted to locate the source of the anomalous geochemistry defined by earlier programs. The program was successful in





further defining existing soil geochemical anomalies, outlining new soil geochemical anomalies, and identifying in-situ felsic stratigraphy.



Future Exploration Programs



The Corporation does not intend to undertake any exploration on the Simpson property during the current field season. The Corporation intends to seek a third party as a joint venture partner to explore the property.



Wernecke Breccias, Yukon



Location and Introduction



The Wernecke Breccias properties are situated in the Wernecke Mountains, approximately 180 kilometres northeast of Mayo in east-central Yukon. Access to the property is via fixed wing aircraft to Copper Point airstrip and then by helicopter to the property. The property is situated in typical alpine, glaciated terrain, with elevations ranging from 1065 to 2165 metres above sea level.



Property History



The Wernecke Breccias have been explored for copper, uranium and gold in the 1960s, 1970s, and 1980s. However, as iron oxide copper-gold (IOCG) deposits are relatively recently described, early exploration was not able to take advantage of this model. In the mid 1990s, Newmont Exploration Limited made a strong effort to advance the exploration of the Wernecke Breccias for their gold and copper potential, spending a total of (US)$5.5 million on more than 20 properties. Newmont flew a regional airborne magnetic and radiometric survey and conducted extensive geochemical sampling and geological mapping prior to drilling twelve prospects for a total of 14,600 metres.





Property Acquisition



In January 2006, the Corporation signed an agreement with Fronteer Development Group Inc (Fronteer) to acquire 700 mineral claims and a proprietary geoscience dataset covering the Wernecke Breccias from Newmont Exploration Canada Limited (Newmont) and NVI Mining Ltd., a subsidiary of Breakwater Resources Ltd. (NVI).



To complete the acquisition, $2 million in exploration expenditures must be spent within four years. Newmont and NVI retain a total 2% NSR and a right of first refusal, which terminates after completion of the exploration expenditures. There is a 7.5% to 15% Net Profits Interest payable to the underlying vendors. Fronteer will be operator of the project and will fund 100% of the exploration costs to earn an 80% interest, with the Corporation earning the remaining 20% interest. Once the $2 million has been expended, a Joint Venture will be formed between Fronteer and the Corporation, and ongoing exploration expenses will be shared pro-rata subject to dilution for non participation. Should either partys interest fall below 5%, their interest will be converted to a 3% Net Profits Interest after payback of capital. The following table details the claims that comprise the Wernecke property with legal identification (Mineral Tenure) size, expiry date, and location.



|Claim            | Mineral Tenure | Expiry Date | Location
|---------------- | -------------- | ----------- | --------
|Anthea 1-6       | YB42738-743    | 31-Dec-06   | 106E/02 
|Anthea 7-24      | YB43114-131    | 31-Dec-06   | 106E/02 
|Anthea 25-30     | YB43166-171    | 31-Dec-06   | 106E/02 
|Auks 1 - 36      | YB64035-070    | 31-Dec-06   | 106C/13 
|Hail 3 - 5       | YB28566-568    | 31-Dec-06   | 106D/16 
|Hail 7, 9        | YB28570, 572   | 31-Dec-06   | 106D/16 
|Hoover 1  8     | YB28692-699    | 31-Dec-10   | 106E/01 
|Hoover 9 - 36    | YB28970-997    | 31-Dec-06   | 106E/01 
|Hoover 37 - 46   | YB29288-297    | 31-Dec-06   | 106E/01 
|Hoover 47 - 62   | YB29298-313    | 31-Dec-06   | 106E/01 
|Hoover 63 - 66   | YB29314-317    | 31-Dec-06   | 106E/01 
|Hoover 67 - 76   | YB29318-327    | 31-Dec-06   | 106E/01 
|Hoover 77 - 80   | YB29328-331    | 31-Dec-06   | 106E/01 
|Hoover 81 - 84   | YB29332-335    | 31-Dec-06   | 106E/01 
|Hoover 85  90   | YB29336-341    | 31-Dec-06   | 106E/01 
|Hoover 91  96   | YB29342-347    | 31-Dec-06   | 106E/01 
|Hoover 97 - 104  | YB29348-355    | 31-Dec-06   | 106E/01 
|Hoover 105 - 114 | YB29356-365    | 31-Dec-06   | 106E/01 
|Jazz 1  14      | YB28586-599    | 31-Dec-10   | 106D/09 
|Jazz 15  38     | YB28827-850    | 31-Dec-10   | 106D/09 
|Jazz 39 - 46     | YB43106-113    | 31-Dec-08   | 106D/09 
|TVA 1 - 4        | YB29130-133    | 31-Dec-06   | 106D/16 
|Ursus 1  7      | YB28528-534    | 31-Dec-07   | 106D/16 
|Ursus 8  12     | YB28535-539    | 31-Dec-06   | 106D/16 
|Ursus 13 - 14    | YB28968-969    | 31-Dec-07   | 106D/16 
|Slab 1 - 7       | YB28600-606    | 31-Dec-10   | 106D/16 
|Slab 8  9       | YB28607-608    | 31-Dec-09   | 106D/16 
|Slab 10          | YB28609        | 31-Dec-08   | 106D/16 
|Slab 11  13     | YB28610-612    | 31-Dec-10   | 106D/16 
|Slab 14          | YB28613        | 31-Dec-09   | 106D/16 
|Slab 15          | YB28614        | 31-Dec-10   | 106C/13 
|Slab 16          | YB28615        | 31-Dec-09   | 106C/13 
|Slab 17          | YB28616        | 31-Dec-10   | 106C/13 
|Slab 18  21     | YB28617-620    | 31-Dec-09   | 106C/13 
|Slab 22          | YB28621        | 31-Dec-08   | 106C/13 
|Slab 23  24     | YB28622-623    | 31-Dec-10   | 106E/01 
|Slab 25  34     | YB28624-633    | 31-Dec-09   | 106C/13 
|Slab 35  39     | YB28729-733    | 31-Dec-09   | 106C/13 
|Slab 40  42     | YB28734-736    | 31-Dec-08   | 106C/13 
|Slab 43          | YB28737        | 31-Dec-09   | 106C/13 
|Slab 44          | YB28738        | 31-Dec-08   | 106C/13 
|Slab 45          | YB28739        | 31-Dec-09   | 106C/13 
|Slab 46          | YB28740        | 31-Dec-08   | 106C/13 
|Slab 47  50     | YB28741-744    | 31-Dec-07   | 106C/13 
|Slab 51  53     | YB28745-747    | 31-Dec-10   | 106E/01 
|Slab 54          | YB28748        | 31-Dec-06   | 106E/01 
|Slab 55  65     | YB28749-759    | 31-Dec-10   | 106E/01 
|Slab 66  71     | YB28760-765    | 31-Dec-09   | 106F/04 
|Slab 72          | YB28766        | 31-Dec-08   | 106F/04 
|Slab 73          | YB28767        | 31-Dec-09   | 106F/04 
|Slab 74          | YB28768        | 31-Dec-08   | 106F/04 
|Slab 75          | YB28769        | 31-Dec-09   | 106F/04 
|Slab 76          | YB28770        | 31-Dec-08   | 106F/04 
|Slab 77          | YB28771        | 31-Dec-09   | 106F/04 
|Slab 78          | YB28772        | 31-Dec-08   | 106C/13 
|Slab 79          | YB28773        | 31-Dec-09   | 106C/13 
|Slab 80 - 83     | YB28774-777    | 31-Dec-08   | 106C/13 
|Slab 84          | YB28778        | 31-Dec-09   | 106C/13 
|Slab 85 - 100    | YB29006-021    | 31-Dec-06   | 106C/13 



Regional Geology



The Wernecke Breccias property is located within a regional-scale belt of iron oxide dominated breccias which host significant copper-gold-cobalt mineralization. These breccias share many of the characteristics of iron oxide copper-gold (IOCG) deposits on a world wide scale. IOCG deposits have the potential to produce high unit value ore due to their multi-element nature and can form very large tonnage deposits, as best exemplified by the Olympic Dam deposit in South Australia. At Olympic Dam, ore is mined for copper, uranium, gold and silver. Several lines of evidence suggest that at the time of formation of the Wernecke Breccias, the Stuart Shelf of South Australia, the geological host terrane of the Olympic Dam deposit, was attached to the Yukon, as part of the Proterozoic super-continent of Rhodinia. The Olympic Dam deposit and the breccias in the Wernecke Mountains have identical ages of approximately 1.59 Ga. Other geological features, such as the intra-cratonic setting and orogenic history, are similar in style and timing between the two regions.





Future Exploration Programs



Fronteer expects to carry out a program of field mapping and sampling of target areas arising from analysis of the available exploration datasets. This may be followed by a regional airborne gravity survey and further claim staking depending on the results of the initial reconnaissance work.



Alaska Properties, Goodpaster Mining District



Location and Introduction



The Corporation holds an interest in seven mineral exploration properties in the Goodpaster Mining District of Alaska, through its wholly-owned subsidiary, Rimfire Alaska, Ltd. The Corporation currently owns 100% of the, Bou, California-Surf, Eagle, Er-Ogo-Fire, Hawk and Swede Properties.



The Corporations Alaska properties lie within east-central Alaska, 65 kilometres northeast of Delta Junction. Access to the properties is by helicopter based out of Delta Junction. Teck Cominco/Sumitomo operate a restricted access road from Delta Junction. Teck Cominco/Sumitomo also maintain an airstrip in the area. This infrastructure has been used to assist with access to the Corporations Alaska properties. A seasonal airstrip is located on the eastern edge of the California/Surf property discussed below.



Property History



There is no documented exploration history for any of the properties previous to the Corporations acquisition through staking. The region was geologically mapped and silt sampled by government entities and by reconnaissance programs conducted by mining company syndicates in the 1970s and 1980s. Only government data was available in the public domain.



Property Acquisition



In 1998, the Corporation completed a comprehensive compilation of all publicly available data for a large area in east central Alaska, creating an exploration model to identify plutonic-related gold targets. This model provided a basis for the systematic definition and priority ranking of specific geological and geophysical targets in the area.



The Corporation, through Rimfire Alaska, then staked or acquired from arms-length third parties interests in over 1,600 mining claims in the Goodpaster Mining District (the "Alaska Properties. The Corporation staked additional claims in August 2003 and March 2004. Property agreements have been amended to include 37 claims staked by AngloGold. Late in 2005, data from previous programs and newly published government surveys was re-interpreted and new targets defined. Subsequently, the company staked 842 claims covering 53,695 ha (132,680 acres). The Corporation now has an interest in 1,654 claims totalling 182,800 acres.



The specific mining claims in the Goodpaster Mining District in which the Corporation holds an interest are set out in the following table:







|Project     | Claim          | Mineral Tenure (ADL) | Location                                      
|----------- | -------------- | -------------------- | ----------------------------------------------
|Bou         | Bou 21-22      | 594583-594584        | Fairbanks Meridian, Township 7S, Range 18E    
|            | Bou 31-32      | 594593-594594        | Fairbanks Meridian, Township 7S, Range 18E    
|            | Bou 41-42      | 594603-594604        | Fairbanks Meridian, Township 7S, Range 18E    
|            | Bou 51-52      | 594613-594614        | Fairbanks Meridian, Township 7S, Range 18E    
|            | Bou 61-62      | 594623-594624        | Fairbanks Meridian, Township 7S, Range 18E    
|            | Bou 71-72      | 594633-594634        | Fairbanks Meridian, Township 7S, Range 18E    
|            | Bou 1-7        | 651861-651867        | Fairbanks Meridian, Township 7S, Range 18E    
|Cal-Surf    | BEV 1-64       | 606861-606923        | Fairbanks Meridian, Township 6S, Range 15E/16E
|            | BND 1-95       | 606924-607017        | Fairbanks Meridian, Township 6S, Range 16E/17E
|            | BNDN 1-70      | 651868-651937        | Fairbanks Meridian, Township 5S, Range 16E/17E
|            | CEN 17-80      | 594779 - 594842      | Fairbanks Meridian, Township 6S, Range 16E    
|            | HAB 22-30      | 595093  595101      | Fairbanks Meridian, Township 6S, Range 17E    
|            | HAB 34-43      | 595105  595114      | Fairbanks Meridian, Township 6S, Range 17E    
|            | HAB 47-56      | 595118 - 595127      | Fairbanks Meridian, Township 6S, Range 17E    
|            | LCC 14 - 20    | 595141 - 595147      | Fairbanks Meridian, Township 6S, Range 17E    
|            | LCC 24 - 30    | 595151 - 595157      | Fairbanks Meridian, Township 6S, Range 17E    
|            | LCC 4- 10      | 595131 - 595137      | Fairbanks Meridian, Township 6S, Range 17E    
|            | LH-1-16        | 644745-644760        | Fairbanks Meridian, Township 6S, Range 17E    
|            | PAR 1  11     | 595382  595392      | Fairbanks Meridian, Township 6S, Range 15E/16E
|            | PAR 14  24    | 595395  595405      | Fairbanks Meridian, Township 6S, Range 15E/16E
|            | PAR 27  37    | 595408  595418      | Fairbanks Meridian, Township 6S, Range 15E/16E
|            | PAR 40  50    | 595421  595431      | Fairbanks Meridian, Township 6S, Range 15E/16E
|            | PAR 53  121   | 595434 - 595502      | Fairbanks Meridian, Township 6S, Range 15E/16E
|            | PC-1 - 25      | 644761-644785        | Fairbanks Meridian, Township 6S, Range 16E    
|            | Scot 1-27      | 605472 - 605498      | Fairbanks Meridian, Township 5S, Range 15E/16E
|            | SHARP 29 - 33  | 595531  595535      | Fairbanks Meridian, Township 6S, Range 17E    
|            | SHARP 43 - 47  | 595545  595549      | Fairbanks Meridian, Township 6S, Range 17E    
|            | SHARP 57 - 61  | 595559  595563      | Fairbanks Meridian, Township 6S, Range 17E    
|            | SHARP 71 - 75  | 595573 - 595577      | Fairbanks Meridian, Township 6S, Range 17E    
|            | SHARP 85 - 89  | 595587 - 595591      | Fairbanks Meridian, Township 6S, Range 17E    
|            | SHARP 99  103 | 595601  595605      | Fairbanks Meridian, Township 5S, Range 17E    
|            | SS-1 - 42      | 644786 - 644827      | Fairbanks Meridian, Township 5S/6S, Range 17E 
|            | STER 35  40   | 595663 - 595668      | Fairbanks Meridian, Township 6S, Range 17E    
|            | STER 45  50   | 595673 - 595678      | Fairbanks Meridian, Township 6S, Range 17E    
|            | STER 55  60   | 595683 - 595688      | Fairbanks Meridian, Township 6S, Range 17E    
|            | STER 65  70   | 595693 - 595698      | Fairbanks Meridian, Township 6S, Range 17E    
|            | STER 75  80   | 595703 - 595708      | Fairbanks Meridian, Township 6S, Range 17E    
|            | STER 85  90   | 595713 - 595718      | Fairbanks Meridian, Township 5S, Range 17E    
|Eagle       | Eagle 1-106    | 579385-579490        | Fairbanks Meridian, Township 7S, Range 11E/12E
|            | EX 1-20        | 605507-605526        | Fairbanks Meridian, Township 7S, Range 11E/12E
|            | EX21-33        | 641468-641480        | Fairbanks Meridian, Township 7S, Range 11E/12E
|            | SAND 1-39      | 605420 - 605458      | Fairbanks Meridian, Township 7S, Range 11E/12E
|ER-Ogo-Fire | ER 3-12        | 579158-579167        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 15-24       | 579170-579179        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 27-36       | 579182-579191        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 39-48       | 579194-579203        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 51-60       | 579206-579215        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 63-72       | 579218-579227        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 75-84       | 579230-579239        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 87-96       | 579242-579251        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 99-108      | 579254-579263        | Fairbanks Meridian, Township 5S, Range 13E    
|            | ER 111-120     | 579266-579275        | Fairbanks Meridian, Township 5S, Range 13E    
|            | Fire 4-12      | 579034-579042        | Fairbanks Meridian, Township 5S, Range 13E    
|            | Fire 16-56     | 579046-579086        | Fairbanks Meridian, Township 5S, Range 13E    
|            | JAZZ 1-13      | 605459-605471        | Fairbanks Meridian, Township 5S, Range 13E    
|            | Ogo 35-39      | 595262-595266        | Fairbanks Meridian, Township 5S, Range 14E    
|            | Ogo 42-76      | 595269-595303        | Fairbanks Meridian, Township 5S, Range 14E/13E





|      | Ogo 143-154 | 595370-595381   | Fairbanks Meridian, Township 5S, Range 13E    
|----- | ----------- | --------------- | ----------------------------------------------
|      | ZAPPA 1-4   | 605091 - 605094 | Fairbanks Meridian, Township 5S, Range 13E    
|Hawk  | EGLE 1-362  | 652208-652569   | Fairbanks Meridian, Township 7S, Range 11E/12E
|Swede | SWD 1-38    | 651938-651975   | Fairbanks Meridian, Township 6S, Range 14E/15E
|      | SWD 39-182  | 651976-652119   | Fairbanks Meridian, Township 7S, Range 14E/15E
|      | SWD 183-246 | 652120-652183   | Fairbanks Meridian, Township 8S, Range 15E    



Regional Geology



The Alaska properties lie within rocks of the Yukon-Tanana Terrane (YTT), bounded to the north by the Tintina Fault and to the south by the Denali Fault systems. The YTT in east-central Alaska consists of a Precambrian to middle Paleozoic metamorphic sequence of sedimentary and magmatic rocks. Mineralization at plutonic gold deposits in Alaska and the Yukon are directly associated and often hosted within Cretaceous aged plutons. In this region recent evidence indicates that mineralization is associated with Cretaceous-related aged plutons which are characterized by a lower magnetic susceptibility forming linear arrays of magnetic lows. One of these linear arrays, which is associated with gold occurrences in the area, has been termed the Pogo Trend. Another magnetic-plutonic trend further to the south has been termed the Big Swede Trend. The northeast structures are thought to have been important in controlling the distribution of Cretaceous intrusions through significant horizontal and vertical displacements. The vertical movements on these northeast structures are important since the style and grade of mineralization in plutonic-gold systems are strongly influenced by depth of formation.



Individual Properties



Mark Baknes, P.Geo, Vice President, Exploration for the Corporation, is the Qualified Person for these projects as required by NI 43-101 (Standards of Disclosure for Mineral Projects.) A technical report was filed on SEDAR on May 12, 2006. :



California-Surf



The Corporation, through Rimfire Alaska Inc., held a 30% joint venture interest in these properties. The joint venture partner, Western Keltic Mines Alaska Inc. (Western Keltic), held the remaining 70% interest in the properties.



In August 2003, Western Keltic sold its 70% interest in these claims to the Corporation, subject to a 1.75% NSR (of which 1% may be bought for $1,000,000), for the following payments (all payments in Canadian currency):







·

$25,000, or 50,000 common shares at the election of the Corporation, upon completion of $1,500,000 exploration expenditures subsequent to the agreement,

·

$50,000, or 50,000 common shares at the election of the Corporation, upon completion of an aggregate $3,000,000 exploration expenditures subsequent to the agreement, 100,000 shares upon obtaining a positive feasibility study for placing any part of the property into commercial production.



The Beverly area lies in the southwest corner of the California-Surf property and consists of the PAR, Cen and PC claims. An exploration, development and mine operating agreement, dated June 22, 2004 was signed with AngloGold which was terminated in November 2004. During this period, AngloGold completed a program of soil sampling along the anomalous portions of lines sampled in 1999 and 2000 to verify previously defined anomalies. Very little sampling was done beyond the areas of previous work.



The Scot area is comprised of the Scot 1-27 state mining claims and is located along the Pogo trend. It is underlain by undifferentiated paragneiss and orthogneiss which are cut by mid-Cretaceous aged northwest trending dykes. The Shawnee Peak mineral occurrence lies adjacent to the south and is host to gold-bearing quartz veins associated with similar granitic dykes and hosted in orthogneiss.



The SE Surf area lies in the southeast corner of the California-Surf property and consists of the HAB, LCC and LH claims. Three distinct gold soil anomalies are coincident with strong bismuth, arsenic, antimony and weaker silver, molybdenum and tungsten. The three soil anomalies have dimensions of 2.4 kilometres by 0.5 km, 1.2 kilometres by 1.1 kilometres and 2.2 kilometres by 0.5 kilometres and are oriented in an east-west direction with a weak north-south component. Mineralization has been found in boulders over an area measuring 250 by 200 metres and consists of intensely quartz- and sericite-altered porphyritic granite. Although the anomalous gold in soils has associated high bismuth, no elevated bismuth has been found in rock samples collected to date. This indicates that there may be other styles of gold-bismuth-bearing mineralization that have yet to be found.



The Boundary area is situated toward the northern edge of the California-Surf claim group on the south side of a granitic body. This property is comprised of the SHARP, STER and SS state mining claims. The main gold soil anomaly, measuring 800 by 350 metres, wraps around a prominent ridge. A broader anomaly, defined by bismuth and arsenic with spotty gold, measures 2.5 by 1.5 kilometres and is centred on the main gold anomaly. Four distinct mineralized surface showings of quartz boulders have been discovered within a 1.0 by 1.5 kilometres area that is central to a moderately intense zone of pervasive quartz-sericite alteration. Two mineralization types have been distinguished: 1) shallow-dipping shear-hosted quartz veins; 2) narrow tensional quartz stockwork veins. The shear-hosted veins are variably textured and contain milky white quartz (Type 1), strongly brecciated-sheared quartz (Type 3) and granular quartz with interstitial sericite, feldspar and tourmaline (Type 2).



Drilling during September 2000 (4 holes, 827.1 m) at the Boundary Property revealed three styles of gold mineralization, and indicated that gold mineralization is more widespread than indicated by surface sampling. The highest gold values are hosted in 1-5 centimetre quartz-pyrite-pyrrhotite veinlets that





locally contain visible gold intergrown with bismuthinite. Broader zones of elevated gold values are found in quartz-sericite altered or sheared gneiss locally cut by hairline quartz-pyrite-calcite stringers. Less commonly, quartz-pyrite-bismithunite possibly with arsenopyrite and/or gold veinlets occurs in pegmatitic marginal phases of granitic dykes. The strong gold-bismuth correlation, associated alteration and gold-bearing pegmatitic granite indicate a geological setting not unlike other plutonic gold-type deposits in the region.



In 2001, work consisted of an airborne radiometric and magnetic survey over the California-Surf property, limited auger soil sampling and a 619 m drill hole in the Boundary area, which was followed by a regional soil sampling program evaluating six geochemical-geophysical target areas.



Late in 2005, data from previous programs and newly published government surveys was re-interpreted and new targets defined. Subsequently, the Corporation staked 842 claims covering 53,695 ha (132,680 acres). The Corporation expects to conduct regional exploration on these claims in 2006 on its own behalf or under an option or joint venture agreement if a partner is secured.



Future Exploration Programs



The Corporation expects to conduct regional exploration on these claims in 2006 on its own behalf or under an option or joint venture agreement if a partner is secured.



Eagle Property



On January 30, 2002 the Corporation signed an exploration, development and mine operating agreement with AngloGold Ashanti (U.S.A) Exploration (AngloGold) whereby AngloGold can earn a 50% interest in the Eagle property. A December 17, 2003 amendment included the Sand claims (staked by the Corporation) and the EX claims (staked by AngloGold) in the agreement. Effective December 31, 2005, a termination agreement was signed whereby AngloGold relinquished 100% ownership of the claims subject to an NSR of 2%, one-half of which can be purchased for $1,000.000 (US). In January 2006, the Corporation staked 362 claims near the Eagle property.







Property Geology



The Eagle property is comprised of the Eagle 1  106, Sand 1-39 and EX 1-33 state mining claims and is located along the Big Swede magnetic trend. The Eagle property is underlain by mid-Cretaceous aged granitic rocks and older intrusive rocks known as orthogneiss. A magnetic low feature corresponds closely with the granitic body.



During September 2000, Hyder Gold Inc. completed a five hole, 274.3 metre diamond drilling program on the Eagle property. The aim of the program was to test portions of the gold soil geochemical anomaly. Drill hole EA00-03 encountered weakly porphyritic granite which was consistently cut by quartz, quartz-calcite and, less commonly, quartz-pyrite-arsenopyrite veinlets.



In 2002 and 2003, AngloGold conducted auger soil surveys as well as tree bark sampling for biogeochemical studies. Both techniques defined areas of anomalous gold-arsenic and bismuth geochemistry. These geochemical results define a 1500 metre by 3000 metre gold-arsenic-bismuth-tungsten soil anomaly. Recovery of rock chips from soil sample pits revealed extensive alteration and in some instances quartz-carbonate stringer-style mineralization.



Two phases of work were completed on the Eagle property in 2004; soil sampling to expand the previous focused soil grid to its current length of 6 km with lines ranging from 0.7 to 1.8 km in length, and a drill program of 9 holes totaling 2778 m. Mineralization intersected during drilling consists of quarts-sulphide vein stockworks containing gold hosted in a granitic stock. A total of 24 narrow intercepts containing greater than 1 gram/tonne gold were intersected. A deep penetrating EM survey was carried out late in the season which defined a strong northeast fault zone coincident with anomalous geochemistry.



Future Exploration Programs



The Corporation expects to conduct regional exploration on these claims in 2006 on its own behalf or under an option or joint venture agreement if a partner is secured.



ER-Ogo-Fire Property



On January 30, 2002 the Corporation signed an exploration, development and mine operating agreement with AngloGold Ashanti (U.S.A) Exploration Inc. (AngloGold) whereby AngloGold could earn a 50% interest in the ER-Ogo-Fire property. A December 17, 2003 amendment included the Jazz claims (staked by the Corporation) and the Zappa claims (staked by AngloGold) in the agreement. Effective December 31, 2005, a termination agreement was signed whereby AngloGold relinquished 100% ownership of the claims subject to an NSR of 2%, one-half of which can be purchased for $2,000.000 (US Dollars).







Property Geology



The ER-Ogo-Fire property is comprised of 219 claims covering approximately 4,270 hectares. The ER-Ogo-Fire Property is underlain by gneisses of the Paleozoic Yukon-Tanana Terrane representing strongly metamorphosed sedimentary and igneous rocks. The gneisses are intruded by late Cretaceous aged granitic intrusions which outcrop extensively on the property. Gold-bearing quartz vein material has been sampled on a ridge lying between the two areas of intrusive outcrop.



Auger soil sampling surveys in 2003 expanded the geochemically anomalous area beyond that outlined by reconnaissance style surveys conducted in 2002. Results of the geochemical survey defined a 1500 by 300 metre gold-arsenic-bismuth-antimony soil anomaly. Six diamond drill holes totaling 2161 metres tested four widely spaced areas within the soil anomaly. Drilling intersected widespread quartz-sericite-pyrite alteration enveloping multiple quartz sulphide veins and vein breccias. A total of 32 intercepts of greater than 1 gram/tonne gold were intersected. A ground geophysical survey conducted late in the season appears to outline early granitic phases that are believed to form a prospective host rock for veining.



During 2004, AngloGold completed a NSAMT (Natural Source Audio Frequency Magneto-Telluric) geophysical survey, soil geochemical sampling and three drill holes totaling 997 m on the ER project. Drilling further defined a northwest trending vein structure that is open to the northwest and downdip. Hole ER04-7, following up on a 0.5 m intercept that assayed 63 grams/tonne gold in 2003, intersected 4.1 grams/tonne gold over 1.3 metres.



Future Exploration Programs



The Corporation expects to conduct regional exploration on these claims in 2006 on its own behalf or under an option or joint venture agreement if a partner is secured.



Bou Property



The Bou property, consisting of 19 claims, is located along the Pogo Trend. Rimfire Alaska holds a 100% interest in the property with no underlying royalties. Rocks underlying the property are almost exclusively granite. Mineralization consisting of quartz veins and mineralized and altered granite has been found in two general areas. At the Thunder showing, quartz vein boulders with gold, arsenic and antimony have been found over a 300 by 300 metre area, along the trace of a northeast trending fault structure. The Cairn showing lies 2 kilometres south of the Thunder and is defined by a gold-bearing quartz vein boulder train measuring 50 by 300 metres that extends along the trace of an east-west structure. Strongly anomalous gold, bismuth, arsenic and antimony soil anomalies extend beyond the current limits of sample coverage.



Future Exploration Programs



The Corporation intends to seek a third party to undertake further mapping, prospecting and sampling, which could lead to diamond drilling.



Project Alliances



Yukon Targeted Exploration Initiative



In December 2003, the Corporation signed an agreement with Newmont Canada Limited (Newmont) to focus on grass-roots exploration within a defined area in the Yukon. Phase I costs were shared equally between the Corporation and Newmont. Phase II fieldwork was undertaken in July 2004 with expenditures shared equally between the parties. .A total of 193 man days were spent conducting reconnaissance investigations of targets selected during an in-house research effort completed in the winter of 2003/2004. The program consisted of reconnaissance style soil and silt sampling, prospecting and mapping of eight individual target areas. A total of 786 soil, 264 silt, and 329 rock samples were collected during the course of the program. There are no plans for additional exploration under this program.



Walker Lane Alliance (Nevada)



In January 2005, the Corporation signed an agreement with Newmont Capital Limited (Newmont) targeting a defined project area in Nevadas Walker Lane Mineral Belt. The Corporation has committed to making $300,000 USD in expenditures within the project area during the term of the two year agreement. Rimfire may, at its discretion, acquire one or more properties within the project area boundaries in which to conduct further exploration work. On Rimfires acquisition of any property interest, Newmont will be granted a Net Smelter Return Royalty of 2.0% to 3.0% on a sliding scale based on the price of gold. Newmont will have a one-time right to enter a 50:50 Joint Venture upon Rimfire expenditures of $300,000 USD on an acquired property. When this right is exercised, Newmont will relinquish the Net





Smelter Return Royalty, manage the Joint Venture, and solely fund the next $1,000,000 USD in exploration to earn its 50% interest.



The company has access to Newmont's geological, geochemical and geophysical databases for the project area, as well as dedicated technical assistance and the use of Newmont's "neural network" (pattern recognition) target map.



During the first half of 2005, the company identified potential targets for exploration and conducted limited field examinations. During the third quarter, 65 claims (526 ha, 1300 acres) were staked in the Poncho-Crow project area. Subsequent to year end an additional 71 (568 ha, 1404 acres) claims were staked adjoining the original group. The Corporation is negotiating with a third party for additional claims in the area. This acquisition is expected to be completed after the date of this report. No detailed property work on the Walker Lane projects has been completed; however, the company expects to conduct surface programs and a drill program on the claims in 2006. A technical report has not been filed. The Qualified Person for this property is Mark Baknes, P.Geo. Vice President, Exploration for the Corporation.



|Claim         | Mineral Tenure (ADL) | Location                             
|------------- | -------------------- | -------------------------------------
|Crow 1-18     | 640622-640639        | Nye County, Township 8N, Range 39E   
|Poncho 1-47   | 640574-640620        | Nye County, Township7N/ 8N, Range 38E
|Poncho 50-51  | 650460-650461        | Nye County, Township7N/ 8N, Range 38E
|Poncho 52-120 | 650462-650530        | Nye County, Township7N/ 8N, Range 39E



Estimated Administrative Expenditures



The Corporation expects that total administrative costs to carry out the Corporations proposed exploration and development programs for the period February 1, 2006 to January 31, 2007 will be approximately $973,042. The estimated administrative expenses will be financed from existing working capital. The estimated average monthly breakdown is as follows:



|ITEM                        | Average Month | 12 Month Period
|--------------------------- | ------------- | ---------------
|Accounting & legal          | $      3,258  | $      39,100  
|Investor services           | 1,450         | 17,395         
|Management services         | 11,300        | 135,600        
|Office                      | 4,755         | 57,060         
|Marketing and promotion     | 14,377        | 172,520        
|Rent                        | 6,264         | 75,168         
|Salaries & support services | 38,127        | 457,524        
|Travel & entertainment      | 1,556         | 18,675         
|TOTAL                       | $   81,087    | $    973,042   



ITEM 5   OPERATING AND FINANCIAL REVIEW AND PROSPECTS



Overview



The Corporation has no producing properties and, consequently, has no current operating income or cash flow from its mineral property exploration and development operations.



The Corporation did not engage, does not currently engage, nor does it expect to engage, in any hedging transactions to protect against fluctuations between Canadian currency and the U.S currency. The Corporations expenses are denominated in Canadian dollars.



The following discussion of the operating results and financial position of the Corporation should be read in conjunction with the Corporations consolidated financial statements (and related notes).



OPERATING RESULTS



The Corporation adopted the new accounting recommendations of the Canadian Institute of Chartered Accountants on accounting for share-based compensation of employees and non-employees during the year ended January 31, 2004. When options to purchase shares are issued to employees or directors, the fair value of the options on the date of the grant are recognized as compensation expense, with a corresponding increase in contributed surplus, over the period during which the related options vest. When options to purchase shares are issued to non-employees in return for goods and services, the fair





value of the options issued are recognized as an expense, with a corresponding increase in contributed surplus, in the period in which the goods or services are received or are expected to be received. The consideration received on the exercise of share options is credited to share capital. The Corporation accounted for these recommendations on the retroactive basis, and accordingly increased share-based compensation expense by $10,240 for the year ended January 31, 2003 and deficit and contributed surplus by $255,520 at January 31, 2003.



Year Ended January 31, 2006



For the year ended January 31, 2006, the Corporation incurred a net loss of $1,823,606 ($0.10 per share) compared to a net loss of $1,495,680 ($0.09 per share) in the previous year. Revenue declined by $15,848 as interest revenue remained steady but joint venture management fees decreased due to reduction in number of projects under management. Completion of earn-in on the Thorn property contributed to a decline in option proceeds from $358,630 for the year ended January 2005 to $163,500 for the current year.



The major increases in general and administrative expenses are for rent and salaries and support services. Rent during the year increased from $39,172 in 2004 to $63,832 in 2005 as office renovations were completed at the end of the first quarter allowing more office space for the use of Corporation staff. Salaries and support services increased from $163,503 in 2004 to $255,550 in 2005. This reflects the addition of two fulltime staff members and additional support services provided by Equity Engineering Ltd.



Investor services expense has been split into two components to reflect the re-alignment of marketing strategies. Investor services expense includes only the costs required to maintain a public listing and to provide services to current shareholders. This includes listing fees and transfer agent costs. Marketing expense includes the costs to provide information to new and existing shareholders as well as trade show participation intended to raise the companys profile in the marketplace. Prior results have been reclassified to conform to the new presentation. Total expenditures on both components are reduced in the current year. The change to a strategic marketing focus rather than trade show participation is primarily responsible for the changes in expenditures.



Accounting and legal costs are sharply increased for the current year. Part of this is based on increased audit procedures required to comply with changes in accounting and auditing standards. It is anticipated that there will be an increase of approximately 20% in the amount of time involved in the audit. The second factor is the number and complexity of property option and exploration agreements undertaken by the company during the year. Most of these costs are included in acquisition costs for the individual properties but some are corporate expenses related directly to setting up a new subsidiary to hold claims in Nevada.



Exploration expenditures, excluding those by joint-venture partners, totaled $1,116,172 ($1,105,733), and property acquisition costs totaled $202,167 ($217,385). These costs were offset by joint venture reimbursements totaling $33,988 ($145,641.) The British Columbia Mineral Exploration Tax Credit Program will reimburse the Corporation for 20% of eligible expenditures in that jurisdiction. For the fiscal year ended January 31, 2006, exploration tax credits are only $18,736 since the remainder of exploration expenditures were renounced to flow-through investors from the private placement completed during the second quarter.



Several factors come into play when comparing current fiscal year exploration expenditures to previous years. The first is the Corporations decision to undertake geophysical and geochemical surveys on the Williams property. This program accounted for one-fifth of the Corporations exploration expenditures. Another factor was the acquisition of new claims in the Goodpaster region of Alaska. Exploration work in Nevada for the Walker Lane Alliance project also increased total exploration expenditures for the current fiscal year. The final factor was completion of earn-in for the Thorn property requiring the Corporation to pay 49% of exploration expenditures. British Columbia expenditures were financed with a flow-through share placement which reduced mineral exploration tax credits which otherwise would have offset 20% of the expenditures.



Year Ended January 31, 2005



For the year ended January 31, 2005, the Corporation incurred a net loss of $1,495,680 ($0.09 per share) compared to a net loss of $901,405 ($0.07 per share) in the previous year. Revenue improved by $80,777 as interest revenue increased from $24,078 to $69,715 due to increased cash balances and rising market interest rates. Both option proceeds (2004-$358,630, 2003-$191,792) and joint venture management revenue (2004-$55,708, 2003-$31,834) have contributed to improved revenue.



The major changes in general and administrative expenses are for management services, salaries and support. The changes in the contract for David Caulfields services as Chief Executive Officer account for most of the increase in management services while the addition of two full-time staff members and increased utilization of administrative support accounts for the increased salary and support costs.



Office expenses, which include computer services, membership dues, insurance, postage and printing, were significantly higher in 2004. Membership dues included issuing $10,000 in common shares to Mineral Deposit Research Unit in exchange for a five-year membership. Shareholder requests for annual report material tripled. This substantially increased the costs of producing and mailing the annual report and information packages. The cost of insurance increased from $6,400 to $14,450.



Investor services expenses increased for the second year in a row. Part of this increase is related to the need for a strong presence in certain sectors of the US markets. To meet this need, each year the company attended major trade shows in New Orleans, San Francisco, New York and Las Vegas. A strategic marketing program was introduced during the third quarter to increase market awareness of the Corporation. This has shifted the emphasis from trade show participation with accompanying travel and entertainment costs, as well as exhibitor fees, to a targeted marketing strategy which ensures that qualified investors are able to access information about the company. The company expects that the primary emphasis in future years will be the strategic marketing program. The overall costs of investor services will not decrease significantly but it is expected that the strategic marketing will be more effective.



Exploration expenditures, excluding those by joint-venture partners, totaled $1,105,733 ($320,743), and property acquisition costs totaled $217,385 ($98,200). These costs were offset by joint venture reimbursements totaling $145,641. The British Columbia Mineral Exploration Tax Credit Program will reimburse the Corporation for 20% of eligible expenditures. For the fiscal year ended January 31, 2005 this should amount to $122,227 ($1,889 plus $60,242 Yukon credits.) Option proceeds, consisting of both cash and share payments totaled $358,630 ($191,792).



Exploration expenditures included costs of aircraft and helicopter ($261,871), camp and support activities ($58,846), chemical analysis ($52,832), drafting ($13,148), drilling ($87,046), equipment rentals ($16,228), freight ($12,341), materials and supplies ($30,249), maps and reproductions ($17,341) professional geological fees ($354,662), program management ($97,443), recording and filing fees ($67,720) and travel ($36,006). Acquisition costs include the costs incurred to stake the Alaska and





Kizmet properties, option payments made for the Thorn and Williams properties, and the preparation of legal agreements concerning the Alaska, Fer and Tide Properties. Option proceeds relate to cash and share payments made by partners on the RDN, Thorn, Tide and Alaska properties.



The Corporation may have an obligation to complete reclamation work on mineral property interests where exploration activities have occurred in the past under the Corporations guidance. Reclamation work is normally completed at the end of each seasons exploration program; however, for on-going projects where it is anticipated that future programs will require the same infrastructure, some remedial work is not undertaken until the completion of all exploration programs. An estimate has been made of the cost for a third party to undertake this reclamation obligation for all active projects and the present value of this cost has been included in mineral property expenses. When the work is completed, the expense will be charged against this liability account rather than to the project expenses.



Year Ended January 31, 2004



For the year ended January 31, 2004, the Corporation incurred a net loss of $901,405 ($0.07 per share) compared to a net loss of $507,303 ($0.04 per share) in the previous year. Revenue improved by $80,777 as interest revenue increased from $8,576 to $24,078 due to increased cash balances offset by lower market interest rates. Both option proceeds (2003-$191,792, 2002-$139,580) and joint venture management revenue (2003-$31,834, 2002-$18,644) have contributed to improved revenue. The Corporation received Yukon Mining Incentives Program grants totaling $60,242 for regional exploration work. The Mineral Exploration Tax Credit (METC) for BC is only $1,889 for exploration conducted in 2003 because flow-through shares receive a similar tax credit such that expenditures renounced to the individual are not eligible for METC.



Accounting and legal expenses were lower but investor services expenses more than doubled to $106,188 (2002-$52,991) with related increases in travel costs (2003-$32,142, 2002-$22,482.) The company has a strong presence in certain sectors of the US markets. Maintaining this presence requires the company to attend major trade shows in New Orleans, San Francisco, New York and Las Vegas. Salaries and share-based compensation have increased compared to the previous year primarily due to including the fair value of stock options in compensation expense and partly due to hiring one additional full-time staff member. The increase in share-based compensation was $398,408. Total salaries only show an increase from $67,984 to $85,152 since most of the compensation costs were charged to individual projects. Another major increase was foreign exchange losses. When the Corporations US Dollar accounts are re-valued at the balance sheet date, there is a loss due to foreign exchange translation. For the year ended January 31, 2004 this difference was a loss of $32,028 compared to a loss of only $5,596 the previous year.



Exploration expenditures, excluding those by joint-venture partners, totaled $320,743, and property acquisition costs totaled $98,200. These expenditures included costs of camp and support activities ($23,958), chemical analysis ($25,033), drafting ($8,981), equipment rentals ($4,975), helicopter and aircraft ($39,204), professional geological fees and program management ($169,850), recording and filing fees ($36,389) and travel ($12,353). Acquisition costs include the costs incurred to stake the Alaska, Simpson, and Sutlahine properties and the preparation of legal agreements concerning the Alaska, Fer and Tide Properties. Option proceeds relate to cash and share payments made by partners on the Eagle, ER-Ogo-Fire, Thorn, Tide and Williams properties.







LIQUIDITY AND CAPITAL RESOURCES



The Corporations working capital as of January 31, 2006 was $2,905,645, comprised primarily of term deposits and other forms of cash, compared to $2,844,579 at the previous fiscal year end. The Corporation expects that current working capital will be sufficient for the 2006 and 2007 fiscal years.



The Corporations issued and outstanding shares stood at 19,999,539 at January 31, 2006. The placements completed during the second quarter and exercise of share purchase warrants represents most of the increase from the 17,855,220 common shares that were issued and outstanding at the previous fiscal year-end. During the year, 150,000 employee stock options were granted and 600,000 options were exercised. 980,000 previously granted director and employee options exercisable before December 2009 remain outstanding.



On March 28, 2006, the Corporation announced that a private placement has been negotiated to raise $2.55 million. The private placement consisted of 1,500,000 units at a price of $1.70 per unit with each unit consisting of one common share and one non-transferable share purchase warrant ("Warrant"). Each Warrant entitles the holder to purchase, for a period of two years from the closing of the private placement, one additional common share at a price of $2.00 per share in year one and $2.25 per share in year two. The Warrants will contain a provision whereby if, during the term of any unexercised Warrant commencing four months after the Closing, the common shares of the Corporation trade on any exchange for a period of 20 consecutive trading days at a price of $2.50 per share or greater in year one or $2.75 per share or greater in year two the Corporation may, at its option and by notice in writing to each holder, require the holder of the Warrant to exercise such Warrant within 30 days, failing which the Warrant will be deemed to have expired. The proceeds from the private placement financing will be used for continued exploration of the Corporation's properties, development of other projects and for general corporate purposes. This financing closed on April 13, 2006 with gross proceeds of $2,550,000. Share issue costs were $54,645. Common shares issued and outstanding has been increased to 21,721,539. There were 1,572,000 share purchase warrants issued. 140,000 Brokers warrants at an exercise price of $1.70 were issued in conjunction with the placement. The expiry date for all warrants is April 13, 2008. If all remaining options and warrants are exercised, a maximum of $4,420,875 will be added to the Corporations treasury, and shares outstanding will total 24,451,039.



As at January 31, 2005, the Corporation had working capital, defined as current assets less current liabilities, of $2,844,579 compared to working capital of $1,071,452 as at January 31, 2004. Completion of a private placement in March 2004 significantly increased the Corporations treasury. Exercises of share purchase warrants and options also increased the Corporations working capital. Increases in exploration activity have resulted in similar increases in administrative costs. Administrative expenses were approximately fifty percent higher in 2004 compared to 2003 while overall exploration activity increased three-fold. The Corporation expects that current working capital will be sufficient for the next two fiscal years.



The Corporations issued and outstanding shares stood at 17,855,220 at year-end. The placements completed during the first quarter and exercise of share purchase warrants represents most of the increase from the 13,615,621 common shares that were issued and outstanding at the previous fiscal year-end. During the year, 465,000 employee stock options were granted and 100,000 options were exercised. 1,712,121 share purchase warrants exercisable before September 2005 were issued as part of the placements.1,180,000 previously granted director and employee options exercisable before December 2008 remain outstanding. If all remaining warrants and options are exercised, a maximum of $2,914,772 will be added to Rimfires treasury, and shares outstanding will total 21,072,341.





At the annual general meeting held June 18, 2004, the shareholders approved an increase in authorized capital to allow an unlimited number of common shares to be issued.



As at January 31, 2004, the Corporation had working capital of $1,071,452 compared to working capital of $1,041,619 at January 31, 2003. Significant exercises of share purchase warrants increased working capital. Exploration expenditures were one-third higher than in the previous fiscal year but these were offset by lower acquisition costs and higher option proceeds. Overall general and administrative expenses were thirty-five percent higher in 2003 compared to the previous fiscal year.



A total of 1,211,000 share purchase warrants were exercised in 2003 at prices of $0.40, $0.45 and $0.75. The Corporation issued the same number of shares for gross proceeds of $509,500. Employee stock options were exercised resulting in the issuance of 20,000 shares for proceeds of $7,000.



The Corporations issued and outstanding shares stood at 13,615,621 at year-end. 1,100,000 share purchase warrants and 1,340,000 director and employee options remain outstanding. If all remaining warrants and options are exercised, a maximum of $1,205,750 will be added to the Corporations treasury, and shares outstanding will total 16,025,621.



The Corporation does not plan to issue debt instruments or undertake other forms of debt financing to secure mineral properties for exploration or to cover general and administrative expenses. The sale of shares from treasury is the only method of financing that the Corporation will undertake at this time. If an opportunity arises to acquire additional exploration properties, the Corporation may issue shares from treasury to cover exploration expenses and/or acquisition costs. The Corporation has no long term debt.



The Corporation does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Corporations liquidity either materially increasing or decreasing at present or in the foreseeable future. Material increases or decreases in the Corporations





liquidity will be substantially determined by the success or failure of the Corporations exploration programs or the future acquisition of projects.



The Corporation holds an interest in a number of exploration properties with respect to which certain cash payments, exploration expenditures and share issuances are required to maintain the Corporations interests in such properties. The nature of the Corporations interest in its properties and the financial obligations associated with maintaining such interests are set out for the specific properties under Item 4, in the section entitled Property, Plants and Equipment.



For those of the Corporations properties acquired through the staking of claims, a failure by the Corporation to incur exploration expenditures or make cash payments to the appropriate government agency in lieu of exploration expenditures will result in the forfeiture of the title to the mining claims back to the State of Alaska, the State of Nevada, the Province of British Columbia or the Yukon Territorial Government, as the case may be. Once forfeited, the areas previously covered by the claims will be available for staking by other parties.



In the event that the Corporation does not fulfill its obligations under the terms of any of its option agreements, such agreement or agreements will terminate and title to the property will revert to the grantor of the original option.



Year Ended January 31, 2006



During the year ended January 31, 2006, the Corporation used $1,714,595 of its cash resources for operating activities, which included a net loss for the year of $1,823,606. Expenditures included net mineral property acquisition and exploration costs of $1,094,292, an increase of $432,390 from the previous year. The Corporation increased cash resources by $15,736 from the sale of marketable securities received as mineral property option proceeds. During the year, the Corporation issued 415,500 flow-through shares for net proceeds of $288,223 in a private placement. There were share issue costs of $29,277 and a provision for future income taxes of $182,500. An additional 1,728,819 shares were issued for net proceeds of $1,601,803 pursuant to share purchase warrants and options at prices of $0.25 to $1.15 per share. Share issue costs totaled $3,466. As of January 31, 2006, consolidated cash amounted to $2,836,027, an increase of $111,944 from the beginning of the year.





Year Ended January 31, 2005



During the year ended January 31, 2005, the Corporation used $1,190,190 of its cash resources for operating activities, which included a net loss for the year of $1,495,680. Expenditures included net mineral property acquisition and exploration costs of $661,902, an increase of $396,996 from the previous year. The Corporation increased cash resources by $66,958 from the sale of marketable securities received as mineral property option proceeds. During the year, the Corporation issued 2,996,907 shares for net proceeds of $2,424,098 in concurrent brokered and non-brokered private placements. An additional 1,210,000 shares were issued for net proceeds of $543,013 pursuant to share purchase warrants and options at prices of $ 0.25 to $1.15 per share. Share issue costs totaled $241,357. As of January 31, 2005, consolidated cash amounted to $2,724,083, an increase of $1,806,169 from the beginning of the year.



Year Ended January 31, 2004



During the year ended January 31, 2004, the Corporation used $555,139 of its cash resources for operating activities, which included a net loss for the year of $901,405. Expenditures included net mineral property acquisition and exploration costs of $264,906, an increase of $129,262 from the previous year. The Corporation increased cash resources by $62,242 from the sale of marketable securities received as mineral property option proceeds. During the year, the Corporation issued 1,231,000 shares for proceeds of $516,500, pursuant to share purchase warrants and options at prices of $ 0.35 to $0.75 per share. Share issue costs totaled $982. As of January 31, 2004, consolidated cash amounted to $917,914, an increase of $1,872 from the beginning of the year.



RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.



Not Applicable.



TREND INFORMATION



Not Applicable.



OFF-BALANCE SHEET ARRANGEMENTS



The Corporation does not utilize off-balance sheet arrangements.





CONTRACTUAL OBLIGATIONS



|Contractual Obligations                          | Payments due by period
|------------------------------------------------ | ----------------------
|Total                                            | Less than 1 year      
|Long-Term Debt Obligations                       | Nil                   
|Lease Obligations [1]                            | $ 114,600             
|Mineral Property Interests  Option Payments [2] | 5,000                 
|Mineral Property Interests  Filing Fees[2]      | 3,140,653             
|Other Long-Term Liabilities                      | Nil                   
|Total                                            | $ 3,260,253           



[1]

Management agreement requires 6-month written notice or fees in lieu of notice. There are no other binding contractual obligations.







[2]

Mineral property interest costs are contingent on retaining an interest in the property. All agreements are subject to cancellation without penalty. Filing fees, which include claim rental fees, do not have to be paid if the property is forfeited to the appropriate government authority.



ITEM 6   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



DIRECTORS AND SENIOR MANAGEMENT



David A. Caulfield, P. Geo,, President and Chief Executive Officer

Coquitlam, BC  age 47



David A. Caulfield holds a B.Sc. in geology and is a registered professional geoscientist. Mr. Caulfield has been a principal of Equity Engineering Ltd., a Vancouver, British Columbia based private mineral resource consulting firm, since 1987. Mr. Caulfield is also the President of Attunga Holdings Inc., a private British Columbia corporation.



Henry J. Awmack, P.Eng., Chairman

Vancouver, BC  age 46



Henry J. Awmack holds a B.A. Sc. (Honours) in geological engineering and is a registered professional engineer. Mr. Awmack has been a principal of Equity Engineering Ltd., a Vancouver, British Columbia based private mineral resource consulting firm, since 1987. Mr. Awmack is also the President of Running Dog Resources Inc., a private British Columbia corporation.





Mark E. Baknes, P.Geo, Vice President, Exploration

Duncan, BC  age 45



Mark E. Baknes holds a B.Sc. and M.Sc. in geology and is a registered professional geoscientist. Mr. Baknes was a geologist with Equity Engineering Ltd., a Vancouver, British Columbia based private mineral resource consulting firm, from 1993 until 2003, when he commenced working full-time for the Corporation as Vice-President, Exploration. Prior to joining Equity, Mr. Baknes worked as a project geologist with Atna Resources Ltd. and Kennecott Canada Exploration Inc.



Bipin Ghelani, C.A., Director

Richmond, BC  age 56



Bipin Ghelani has been a Chartered Accountant since 1972, having completed his education in London England. Mr. Ghelani has managed his own accounting firm since 1988. Prior to that, he held senior positions with several international accounting firms including Deloitte & Touche and PricewaterhouseCoopers. Mr. Ghelani is the chair of the Audit Committee for the Corporation.



Dorothy G. Miller, Chief Financial Officer

North Vancouver, BC  age 50



Dorothy Miller holds a Bachelor of Home Economics and is currently pursuing completion of CGA accounting designation. Ms. Miller has held an administrative position with Equity Engineering Ltd. since 1999. Previous administrative experience includes positions with Weldwood of Canada Ltd from 1995-1997, Gibraltar Mines Ltd (1994) and Clark County School district in Nevada (1991-1994.) Ms. Miller is the spouse of a director, Jack H.L. Miller and the sister of the Chairman, Henry J. Awmack.







Jack H.L. Miller, P.Eng, Director

North Vancouver, BC  age 51



Jack H.L. Miller holds a B.A.Sc., M.A.Sc. in geological engineering and is a registered professional engineer. Mr. Miller is currently Chief Operating Officer for Quadra Mining Ltd., however, Mr. Miller's experience in the resource industry dates back to 1979. His previous positions include assistant general manager and senior mine engineer, Viceroy Gold Corp. (1987-1994), Vice President, Projects and Mine Superintendent, Gibraltar Mines Ltd. (1994-1996), Vice President, Projects, Westmin Resources (1996-1997), Vice President, Operations, Princeton Mining Corp. (1997-1998) and Vice President, Operations for Imperial Metals Corporation (1998-2002.) Mr. Miller is a member of the Audit Committee for the Corporation.



P. Gary Paulson, Director

Prince George, BC  age 55



P. Gary Paulson has been the President of Falcon Drilling Ltd. and Jempland Construction Ltd. since 1986. Mr. Paulson is a member of the Audit Committee for the Corporation.





Ian J. Talbot, Corporate Secretary

North Vancouver, BC  age 47



Ian J. Talbot holds a B.Sc. in geology and an LL.B. (bachelors of laws degree). Mr. Talbot is a member of the British Columbia Law Society and was called to the British Columbia Bar in 1990. He is currently practicing law in Vancouver.



CERTAIN AFFILIATIONS



Some of the directors of the Corporation are also directors and officers of other corporations. It is possible, therefore, that a conflict may arise between their duties as a director or officer of the Corporation and their duties as a director or officer of such companies. All such conflicts must be disclosed by them in accordance with the Business Corporations Act (British Columbia), and they are required to govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.



The following directors and officers of the Corporation are also directors, officers or promoters of the following corporations:



|Name of Director/Officer | Company                                    | Position                | Period                           
|------------------------ | ------------------------------------------ | ----------------------- | ---------------------------------
|Henry J. Awmack          | Equity Engineering Ltd.                    | President
Director      | 02/02 to present
01/87 to present
|David A. Caulfield       | Equity Engineering Ltd.                    | Director                | 01/87 to present                 
|Gary Paulson             | Falcon Drilling Ltd.
Jempland Construction | President
President     | 1986 to present
1986 to present  
|Jack H.L. Miller         | Quadra Mining Ltd.                         | Chief Operating Officer | 04/04 to present                 









David A. Caulfield and Mark E. Baknes each devote 100% of their time to the affairs of the Corporation. Dorothy G. Miller devoted 90% of her time to administrative and financial functions within the Corporation until April 1, 2006. After that date, 100% of her time has been allocated to the Corporation. Henry J. Awmack spends approximately 5-10% of his time on the affairs of the Corporation, while Bipin Ghelani, Jack H.L. Miller, and P. Gary Paulson each allot less than 5% of their time to the Corporations business. Ian J. Talbot allots less than 5% of his time to the affairs of the Corporation in his capacity as Corporate Secretary.



COMPENSATION



The following tables set forth all annual and long term compensation for services in all capacities to the Corporation and its subsidiaries for each of the past three completed fiscal years in respect of each of the individuals who were, as of January 31, 2005, directors and members of its administrative, supervisory or management bodies (collectively the Named Executive Officers) including any individual who would have qualified as a Named Executive Officer but for the fact that individual was not serving as such at the end of the most recently completed financial year.





Summary Compensation Table



|                                      | Annual Compensation | Long Term Compensation
|------------------------------------- | ------------------- | ----------------------
|                                      |                     |                       
|Name and Principal Position           | Fiscal
Year End     | Salary
($)            
|David A. Caulfield, President, CEO[1] | Jan. 2006           | NIL                   
|Henry J. Awmack,
Chairman             | Jan. 2006           | NIL                   
|Mark E. Baknes, Vice President        | Jan. 2006           | $80,872               
|Bipin Ghelani,
Director               | Jan. 2006           | NIL                   
|Dorothy Miller,
CFO[2]                | Jan. 2006           | NIL                   
|Jack H.L. Miller,
Director            | Jan. 2006           | NIL                   





|P. Gary Paulson,
Director          | Jan. 2006 | NIL | NIL | NIL | 10,000 | NIL | NIL | NIL
|---------------------------------- | --------- | --- | --- | --- | ------ | --- | --- | ---
|Ian J. Talbot,
Corporate Secretary | Jan. 2006 | NIL | NIL | NIL | 10,000 | NIL | NIL | NIL



[1]

Pursuant to the terms of a Management Agreement dated December 1, 2005, Equity Engineering Ltd. is paid the sum of $10,800 per month for the services of Mr. Caulfield. Mr. Caulfield is a director and officer of Equity Engineering Ltd. Refer to "Management and Consulting Contracts".

[2]

Pursuant to the terms of a Management Agreement dated December 1, 2005, Equity Engineering Ltd. is reimbursed for salary and benefits paid for the services of Dorothy Miller. Refer to "Management and Consulting Contracts".



As at January 31, 2006, the Corporation has granted rights to purchase or acquire an aggregate of 1,195,000 Common Shares pursuant to share purchase options, including the options listed below. The closing market price of the Common Shares on April 28, 2006 as traded on the TSX Venture Exchange was $2.14.



Outstanding Director and Officer Stock Options as at January 31, 2006



|Name of Optionees | No. of Common 
Shares Subject to Option (#) | Date of Grant                                          | Exercise
Price
$     | Expiry Date                                                 | Market Value on Date of Grant
|----------------- | ------------------------------------------- | ------------------------------------------------------ | -------------------- | ----------------------------------------------------------- | -----------------------------
|Henry Awmack      | 25,000
20,000
15,000                        | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005               | $0.95
1.21
1.23      | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010                    | $0.95
1.21
1.23              
|Mark Baknes       | 100,000
15,000
10,000                       | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005               | $0.95
1.21
1.23      | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010                    | $0.95
1.21
1.23              
|David Caulfield   | 120,000
45,000
15,000                       | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005               | $0.95
1.21
1.23      | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010                    | $0.95
1.21
1.23              
|Bipin Ghelani     | 75,000
10,000
10,000
10,000                 | Jan. 15, 2003
Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005 | $0.60
0.95
1.21
1.23 | January 15, 2008 
Dec. 18, 2008 
Dec. 9, 2009
Dec. 22, 2010 | $0.60
0.95
1.21
1.23         





|Dorothy Miller | 75,000
15,000
10,000 | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005 | $0.95
1.21
1.23 | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010 | $0.95
1.21
1.23
|-------------- | -------------------- | ---------------------------------------- | --------------- | ---------------------------------------- | ---------------
|Jack Miller    | 25,000
10,000
10,000 | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005 | $0.95
1.21
1.23 | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010 | $0.95
1.21
1.23
|Gary Paulson   | 25,000
10,000
10,000 | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005 | $0.95
1.21
1.23 | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010 | $0.95
1.21
1.23
|Ian Talbot     | 25,000
25,000
10,000 | Dec. 18, 2003
Dec. 9, 2004
Dec. 22, 2005 | $0.95
1.21
1.23 | Dec. 18, 2008
Dec. 9, 2009
Dec. 22, 2010 | $0.95
1.21
1.23
|Total          | 720,000              |                                          |                 |                                          |                



In addition to the options granted to Directors and Senior Officers of the Corporation, the Corporation issues share purchase options to employees of the Corporation and persons who provide ongoing services to the Corporation under an incentive stock option plan. Under the plan, the Corporation has reserved a total of 1,827,522 shares for the issue of share purchase options. The exercise price of share purchase options is no less than the closing price of the shares on the business day immediately preceding the date on which the option is granted less the discount permitted by the TSX Venture Exchange. Options expire no later than five years from the grant date, except that they will expire within thirty days when the holder is no longer qualified to hold the option (other than for cause, when the option will expire immediately). Of the reserved shares, 32,522 remain available for stock option grants. Shareholders must approve the stock option plan at each annual general meeting, at which time the number of shares available for issue increases to a total of 10% of the Corporations issued and outstanding shares as of the record date for the meeting.



As of January 31, 2006, there are four employees and one consultant who have been granted stock options in the aggregate amount of 475,000 options at exercise prices ranging from $0.95 to $1.23 with expiry dates between March 2006 and December 2010. Individual grants of more than 30,000 options vest over a period of two years.



Defined Benefit or Actuarial Plan Disclosure



The Corporation has no defined benefit or actuarial plans.



Termination of Employment, Changes in Responsibility and Employment Contracts



There are no employment contracts between the Corporation and any Named Executive Officer. The Corporation has no plan or arrangement in respect of compensation received or that may be received by executive officers, including Named Executive Officers, in the financial year ending January 31, 2006, or current fiscal year with the view to compensating such officers in the event of the termination of employment (resignation, retirement, change of control) or in the event of a change in responsibilities following a change of control.







Management and Consulting Contracts



The Corporation entered into a management agreement effective January 1, 2006 with Equity Engineering Ltd. (Equity) to provide the services of David A. Caulfield as President and Chief Executive Officer of the Corporation for the sum of $10,800 per month. The agreement also provides that Rimfire will pay a proportional share of rent, internet and administrative services provided by Equity employees. The agreement is for a term of one year with provision for a one year extension at the Corporations option, and may be terminated by the Corporation on six months notice. Equity is not at arms length to the Corporation as two of the principals of Equity are David A. Caulfield and Henry J. Awmack, who are directors and officers of the Corporation.



Equity Engineering Ltd. provides geological consulting services to Rimfire Minerals on an individual project basis. On an on-going basis, Equity provides property evaluation services to the Corporation at standard commercial rates. These rates are the same as those charged to unrelated third parties. As exploration projects for a particular property are defined, a specific contract for consulting services related to that project is entered into.



During the fiscal year ended January 31, 2006, there were four such projects: RDN, Thorn, Tide, and Williams properties in British Columbia.



The RDN project represented one type of contract. Equity Engineering was contracted to provide geological consulting services for the project, then costs were passed on to the joint venture partner, Northgate Minerals for reimbursement. A Joint Venture management fee of 7.5 % was charged only on costs paid directly by the Corporation. The Corporations share of expenditures was $5,760 of which Equity was paid $76 for geological consulting fees and project management fees and $155 for support services. The Corporation provided technical assistance at a cost of $5,023 and other support activities totalling $506.



For the Thorn project, Equity Engineering invoiced Cangold Limited. Cangold, in turn, invoiced the Corporation for 49% of the net costs plus a management fee of 5%. The Corporations share of expenditures was $417,703 of which Equity was paid $375,609. This total included $107,921 for aircraft and helicopter, $145,314 for geological consulting fees and project management fees, $49,763 for drilling, $42,098 for camp and support services, $15,457 for maps and materials, $11,594 for chemical analysis, and $3,462 for recording fees. The Corporation provided technical assistance and support costs of $15,649 and paid joint venture management fees of $20,729.



The Corporations share of expenditures for the Tide project was $8,913 of which Equity was paid $3,919 for geological consulting fees and project management fees, and $733 for support services. The Corporation provided technical assistance costs of $4,261.



The Corporation paid Equity $181,699 of the total costs of $208,843 for the Williams project. This total included $46,761 for aircraft and helicopter, $97,240 for geological consulting fees and project management fees, $24,213 for camp and support services, $9,368 for maps and materials, and $4,117 for chemical analysis,. The Corporation provided technical assistance costs of $10,850 and recording fees of $16,294.



During the fiscal year ended January 31, 2005, there were five such projects: Kizmet, RDN, Thorn, and Tide properties in British Columbia and the Yukon Targeted Exploration Initiative in the Yukon.



Equity was paid $146,528 of the total costs of $176,517 for the Kizmet project. The bulk of this amount was geological consulting fees and project management fees ($68,522), aircraft & helicopter ($32,655), camp and support ($21,274), chemical analysis ($13,715), materials and supplies ($3,182), maps and reproductions ($2,840), recording fees ($2,190), and drafting ($2,150). The Corporation paid for the remaining supporting activities including $18,184 for recording and filing fees, $5,543 for aircraft, and $2,465 for technical assistance.



Equity Engineering was contracted to provide geological consulting services for the RDN project, with the costs passed on to the joint venture partner, Northgate Minerals for reimbursement. The Corporations share of expenditures was $5,425 of which Equity was paid $2,150 for geological consulting fees and project management fees and $203 for support services. The Corporation provided technical assistance at a cost of $2,462 and other support activities totalling $610.



The Thorn project was undertaken in two phases. In both phases, Equity Engineering was contracted to provide geological consulting services for the project. In the first phase, the Corporation paid the costs then charged them to the joint venture partner, Cangold Limited for reimbursement. A Joint Venture management fee of 7.5 % was charged on all costs paid by the Corporation. In the second phase, Equity Engineering invoiced Cangold Limited. Cangold, in turn, invoiced the Corporation for 49% of the net costs plus a management fee of 5%. he Corporations share of expenditures was $450,464 of which Equity was paid $417,338his total included $131,709 for aircraft and helicopter, $125,046 for geological consulting fees and project management fees, $87,046 for drilling, $43,579 for camp and support services, $15,072 for chemical analysis, $7,429 for communications and $7,458 for recording fees. The Corporation provided technical assistance and support costs of $12,526 and paid joint venture management fees of $20,600.







The Corporations share of expenditures for the Tide project was $17,678 of which Equity was paid $8,085 for geological consulting fees and project management fees, $400 for recording fees, and $678 for support services. The Corporation provided technical assistance and support costs of $8,515.



Equity was paid $273,473 of the total costs of $320,713 for the Yukon Targeted Exploration Initiative. This amount was comprised of geological consulting fees and project management fees ($104,605), aircraft & helicopter ($90,353), camp and support ($30,088), chemical analysis ($22,909), materials and supplies ($19,012), maps and reproductions ($3,731), and drafting ($2,775). The Corporation paid for the remaining supporting activities, including $32,684 for technical assistance, $7,029 for camp and support, and $7,527 for drafting and maps. Newmont paid a total of $144,213 for reimbursement of joint venture expenditures.



Compensation of Directors



The Corporation has no standard arrangement pursuant to which directors are compensated by the Corporation for their services in their capacity as directors other than the unissued treasury shares reserved for the grant of directors and employees stock options. There has been no other arrangement pursuant to which directors were compensated by the Corporation in their capacity as directors during the Corporations financial year ending January 31, 2006.



Proposed Compensation



The Corporation has determined the amount of compensation to be granted to directors and Named Executive Officers for the 12 months beginning February 1, 2006 as follows:







|                   | Monthly     | Yearly  
|------------------ | ----------- | --------
|David A. Caulfield | $10,800 [1] | $129,600
|Henry J. Awmack    | Nil         | Nil     
|Mark E. Baknes     | $9,334      | $112,000
|Dorothy Miller     | $6,250      | $75,000 



[1]

Paid to Equity Engineering Ltd. pursuant to the terms of January 1, 2006 management agreement.



Except as disclosed above, the Corporation has no standard arrangement pursuant to which Named Executive Officers or directors of the Corporation are compensated by the Corporation for their services, except for the granting from time to time of incentive stock options in accordance with policies of the TSX Venture Exchange.



BOARD PRACTICES



The directors of the Corporation are elected by the Corporation shareholders at the Corporations Annual General Meetings. A director of the Corporation holds his respective position until the earlier of his resignation or his replacement at a subsequent Annual General Meeting of the Corporation.



All corporate matters outside of the ordinary course of business must be approved by the Corporations board of directors. The Corporations audit committee consists of three directors who review the Corporations financial statements prior to such statements being submitted to the entire board of directors for approval. The members of the audit committee are Bipin Ghelani, Jack H.L. Miller and P. Gary Paulson. The Corporation does not have a formal compensation committee; however, independent directors meet on an annual basis to review management compensation. Recommendations from this group are referred to the entire board at the budget review meeting for approval.





The Audit Committee performs an oversight role for the board by:

·

Reviewing the appointment of the Chief Financial Officer and any other key financial personnel.

·

Reviewing, with management and the external auditor, the adequacy and effectiveness of the companys systems of internal control and the adequacy and timeliness of its financial reporting processes.

·

Reviewing the annual audited financial statements, unaudited quarterly financial statements, management discussion and analysis reports and other financial reporting documents prior to filing or distribution, including financial matters required to be reported under applicable legal or regulatory requirements.

·

Where appropriate and prior to release, reviewing and approving any other news releases that contain significant financial information that has not previously been released to the public.

·

Reviewing the companys financial reporting and accounting standards and principles and significant changes in such standards or principles or in their application.

·

Recommending to the Board and shareholders the external auditor selected to examine the companys accounts and financial statements.

·

Approving all audit engagement terms and fees and pre-approving all non-audit and assurance services to be performed by the auditor.







EMPLOYEES



The Corporation has six full-time employees. All other personnel are retained under contract with Equity Engineering Ltd. See Management and Consulting Contracts above. There are no contracts or collective agreements between the Corporation and any labour union or similar organization.



SHARE OWNERSHIP



The following table sets forth security ownership of each of the directors and officers of the Corporation as at April 30, 2006.



|Name,
Municipality of Residence
and Position with Corporation                                         | Number of Common Shares of the Corporation beneficially owned or directly/indirectly controlled (1) | Percentage of Issued Share Capital
|----------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------
|David A. Caulfield, P. Geo.
Coquitlam, B.C.
President, Chief Executive Officer, Director and Promoter | Common Shares: 738,001[1]
Options: 180,000[2]
Warrants: Nil                                         | 3.40%                             
|Henry J. Awmack, P.Eng.
Vancouver, B.C.
Chairman of the Board, 
Director and Promoter                 | Common Shares: 1,352,001[1]
Options: 60,000[2]
Warrants: Nil                                        | 6.22%                             
|Mark E. Baknes, P.Geo.
Vancouver, B.C.
Vice-President, Exploration                                    | Common Shares: 574,100[1]
Options: 125,000[2]
Warrants: Nil                                         | 2.64%                             
|Bipin Ghelani, C.A.
Richmond, BC.
Director                                                            | Common Shares: 63,000[1]
Options: 105,000[2]
Warrants: Nil                                          | 0.29%                             
|Dorothy Miller
North Vancouver, B.C.
Chief Financial Officer                                          | Common Shares: Nil
Options: 100,000[2]
Warrants: Nil                                                | 0.0%                              
|Jack H.L. Miller, P.Eng.
North Vancouver, B.C.
Director                                               | Common Shares: 114,500[1]
Options: 45,000[2]
Warrants: Nil                                          | 0.53%                             
|P. Gary Paulson
Prince George, B.C.
Director                                                          | Common Shares: 168,680[1]
Options: 45,000[2]
Warrants: Nil                                          | 0.78%                             
|Ian J. Talbot
North Vancouver, B.C.
Corporate Secretary                                               | Common Shares: 34,500[1]
Options: 60,000[2]
Warrants: Nil                                           | 0.16%                             



[1]

Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised, as at April 30, 2006, based upon information furnished by the respective shareholders.

[2]

Stock Options entitle the holder to purchase Common Shares in the capital of the Corporation at a fixed price for a specific period of time. Stock options do not carry any voting rights. Details of stock options held by the directors and officer of the Corporation are set out under "Options and Other Rights to Purchase Shares - Outstanding Stock Options."







Of the shares beneficially held by David Caulfield, 155,001 are registered in the name of Attunga Holdings Inc., a private British Columbia corporation controlled by David Caulfield. Of the shares beneficially held by Henry Awmack, 65,001 shares are beneficially held by Running Dog Resources Inc, a private British Columbia corporation controlled by Henry Awmack.



Aggregate Option Exercises in Last Financial Year and Option Values



Details of stock options held by the Named Executive Officers and the value of such options as at the end of the most recently completed financial year are set forth in the following table:



|Name               | Securities Acquired
on Exercise
(#) | Aggregate
Value
Realized
($) | Unexercised Options
at the end of the Financial Year
(#) Exercisable | Value of Unexercised
In-the-Money Options
as of 
January 31, 2006
|------------------ | ----------------------------------- | ---------------------------- | -------------------------------------------------------------------- | -----------------------------------------------------------------
|Henry J. Awmack    | 150,000                             | $132,000                     | 60,000                                                               | $      32,600                                                    
|Mark E. Baknes     | 150,000                             | 132,000                      | 125,000                                                              | 80,800                                                           
|David A. Caulfield | 150,000                             | 132,000                      | 168,750                                                              | 105,150                                                          
|Bipin Ghelani      | Nil                                 | Nil                          | 105,000                                                              | 94,350                                                           
|Dorothy Miller     | Nil                                 | Nil                          | 100,000                                                              | 63,300                                                           
|Jack H.L. Miller   | 75,000                              | 80,250                       | 45,000                                                               | 26,100                                                           
|P. Gary Paulson    | 75,000                              | 88,500                       | 45,000                                                               | 26,100                                                           
|Ian J. Talbot      | Nil                                 | Nil                          | 60,000                                                               | 32,700                                                           



ITEM 7    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



MAJOR SHAREHOLDERS



The following table sets forth security ownership of those parties owning five percent (5%) or more of the outstanding common shares of the Corporation as at January 31, 2006.



|Name,
Municipality of Residence
and Position with Corporation  | Number of Common Shares of the Corporation beneficially owned or directly/indirectly controlled | Percentage of Issued Share Capital
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------
|The Canadian Depository
for Securities Limited 
Toronto, ON[2] | Common Shares: 16,980,817 [1]                                                                   | 84.9%                             
|Depository Trust Company 
New York, NY[3]                      | Common Shares: 2,289,800 [1]                                                                    | 11.5%                             





|Henry J. Awmack, P.Eng.
Vancouver, B.C.
Chairman of the Board, 
Director and Promoter | Common Shares: 1,357,301[1]
Options: 60,000[4] | 6.8%
|------------------------------------------------------------------------------------- | ---------------------------------------------- | ----



[1]

Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised, as at January 31, 2006, based upon information furnished by the respective shareholders.



[2]

Canadian Depository for Securities Limited (CDS & Co.) is the registered holder, as nominee, of a total of 16,980,817 Common Shares of the Corporation, representing 84.9% of the issued and outstanding shares. The Corporation is unaware of the beneficial owners of the shares held by CDS & Co.



[3]

Depository Trust Company (CEDE & Co.) is the registered holder, as nominee, of a total of 2,289,800 Common Shares of the Corporation, representing 11.5% of the issued and outstanding shares. The Corporation is unaware of the beneficial owners of the shares held by CEDE & Co.



[4]

Stock Options entitle the holder to purchase Common Shares in the capital of the Corporation at a fixed price for a specific period of time. Stock options do not carry any voting rights. Details of stock options held by the directors and officers are set forth under "Options and Other Rights to Purchase Shares - Outstanding Stock Options."



The voting rights attached to all shares of the Corporation are equal. No shareholder or group of shareholders holds or is entitled to exercise any preferential voting rights with respect to shares of the Corporation.



The Corporation has not paid any dividends since its incorporation and does not anticipate the payment of dividends in the foreseeable future. At present, the Corporations policy is to retain earnings, if any, to finance exploration on its properties. The payment of dividends in the future will depend upon, among other factors, the Corporations earnings, capital requirements and operating conditions.



RELATED PARTY TRANSACTIONS



As at April 30, 2006, Equity Engineering Ltd. (Equity) was indebted to the Corporationin the amount of $47,453 for advances for project expenses and consulting services provided by Equity. Equity is not at arm's length to the Corporation, as two of the principals of Equity are David A. Caulfield and Henry J. Awmack who are directors and officers of the Corporation. The services provided by Equity to the Corporation are provided at rates no less favorable to the Corporation than would be available from unaffiliated third parties providing similar services. It is anticipated that Equity will continue to provide geological consulting and administrative support services to the Corporation from time to time, and Equity will be remunerated for such services at Equitys standard commercial rates.



During the first quarter ending April 30, 2006, the Corporation paid Equity $17,238 for geological consulting services and $69,617 for providing general corporate and administrative services composed of $926 for investor services, $32,400 for management services, $3,549 for office services, $17,780 for rent and $14,962 for support services. In addition, exploration advances totaling $92,000 were made in anticipation of field work commencing in early May.



As at January 31, 2006, the Corporation was indebted toEquity Engineering Ltd. (Equity) in the amount of $36,846 for consulting services provided by Equity.



During the year ended January 31, 2006, the Corporation paid Equity $206,763 for geological consulting services and $244,871 for providing general corporate and administrative services composed of $1,117 for insurance, $4,279 for investor services, $99,305 for management services, $5,810 for office services, $62,696 for rent and $71,663 for support services.



Equity is one of the underlying vendors who own a 7.5 to 15% Net Profits Interest (NPI) in the Wernecke Breccia property. Equitys share of the NPI is 40%. In addition, two of the directors and officers of the Corporation each own 20% of a different company which is entitled to 10% of the NPI.



During the fiscal year ended January 31, 2005, the company paid Equity $431,996 for geological consulting services, excluding costs paid by joint venture partners, and $203,098 for providing general corporate and administrative services. General corporate and administrative services provided by Equity during the period consisted of the following: $14,457  insurance $3,711 - investor services; $96,462- management services; $12,026  office; $39,172  rent; and $37,270 - support services. The increases in these amounts reflect additional office space and services utilized by the increase in Rimfire staff.



Except as disclosed above, during the previous three fiscal years, no insider of the Corporation, director or officer, or associate or affiliate of such persons, has or has had any material beneficial interest in any transaction or in any proposed transaction, which has or will materially affect the Corporation. The Corporation has not made any loans (including guarantees of any kind) to or for the benefit of any of the directors, officers, employees or related parties.



INTERESTS OF EXPERTS AND COUNSEL



Not Applicable.





ITEM 8   FINANCIAL INFORMATION



CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION



The following financial statements are attached and incorporated herein:



|Description of Statement

Consolidated Balance Sheets for the fiscal years ended January 31, 2006 and 2005
Statements of Loss and Deficit, Statements of Cash Flows,
Statement of Changes in Shareholders Equity, and Statements of Mineral Property Expenditures
all for the fiscal years ended January 31, 2006, 2005, and 2004
Notes to Consolidated Financial Statements | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 



SIGNIFICANT CHANGES



There have been no significant changes since year-end that have not been disclosed elsewhere in this document. Please see Item 5, in the section entitled Liquidity and Capital Resources for discussion of the private placement completed April 13, 2006.



ITEM 9   THE OFFERING AND LISTING



OFFER AND LISTING DETAILS



The common shares of the Corporation have been listed and posted for trading on the TSX Venture Exchange. The following table sets forth the high and low closing bid prices, in Canadian dollars, and trading volume of the common shares on the TSX Venture Exchange for the period January 1, 2004 to April 28, 2006.



|Most recent 6 months | High      | Low       | Volume   
|-------------------- | --------- | --------- | ---------
|November 1-30, 2005  | $    1.13 | $    0.99 | 511,830  
|December 1-31, 22005 | 1.24      | 1.05      | 634,599  
|January 1-31, 2006   | 1.90      | 1.19      | 1,126,169
|February 1-28, 2006  | 1.89      | 1.45      | 449,745  
|March 1-31, 2006     | 2.14      | 1.55      | 1,528,082
|April 1-30, 2006     | 2.64      | 1.80      | 1,166,498



|Fiscal 2004    | High  | Low   | Volume   
|-------------- | ----- | ----- | ---------
|First Quarter  | $1.50 | $0.84 | 1,298,462
|Second Quarter | 1.15  | 0.80  | 1,191,155
|Third Quarter  | 1.29  | 0.76  | 1,638,143
|Fourth Quarter | 1.80  | 0.99  | 1,818,306



|Fiscal 2005    | High  | Low  | Volume   
|-------------- | ----- | ---- | ---------
|First Quarter  | $1.37 | 1.00 | 806,828  
|Second Quarter | 1.48  | 1.05 | 1,148,678
|Third Quarter  | 1.50  | 0.93 | 3,301,016
|Fourth Quarter | 1.90  | 0.99 | 2,272,598



|Fiscal 2006   | High  | Low   | Volume   
|------------- | ----- | ----- | ---------
|First Quarter | $2.64 | $1.45 | 3,144,325



The following table sets forth the high and low closing bid prices, in Canadian dollars, and trading volume of the common shares on the TSX Venture Exchange for the last five fiscal years.



|Fiscal Year ending | High  | Low    | Volume   
|------------------ | ----- | ------ | ---------
|January 31, 2006   | $1.90 | $ 0.93 | 7,529,120
|January 31, 2005   | 1.80  | 0.76   | 5,946,066
|January 31, 2004   | 1.25  | 0.51   | 4,744,159
|January 31, 2003   | 0.84  | 0.35   | 3,033,956
|January 31, 2002   | 0.66  | 0.23   | 1,775,916



At January 31, 2006, 2,797,600 Common Shares were held by 22 registered holders in the United States, representing an aggregate of 14% of the Corporations total issued and outstanding Common Shares. The Corporation is not listed for trading on any securities exchange in the United States, and there has been no market in the United States for the Common Shares. As of April 30, 2006, 4,028,904 Common Shares were held by 75 registered holders in the United States.



At January 31, 2006, there were 19,999,539 of the Corporations Common Shares outstanding. As of April 30, 2006, there were 21,721,539 Common Shares issued and outstanding.



ITEM 10   ADDITIONAL INFORMATION



MEMORANDUM AND ARTICLES OF ASSOCIATION



The Corporation was incorporated under the British Columbia Company Act on May 7, 1991 under the name of Bull Pine Explorations Ltd. The Corporation changed its name to Rimfire Minerals Corporation on November 4, 1997.



The Corporation's authorized capital consists of an unlimited number of common shares without par value, of which 19,999,539 are issued and outstanding as at January 31, 2006. The shareholders approved the increase in authorized capital from 100,000,000 at the annual general meeting held in June 2004.



The Corporation's head office and its registered and records office is located at Suite 700 - 700 West Pender Street, Vancouver, British Columbia, Canada V6C 1G8.



Pursuant to the requirements of Business Corporations Act (British Columbia), a director of the Corporation must declare any interest in and abstain from voting on any board of directors resolution relating to any matter in which such director has a material interest. In addition, the policies of the TSX Venture Exchange require that all employment, consulting or other compensation agreements between a company and its officers or directors be considered and approved by the disinterested member of the board of directors or a committee of independent directors.



Pursuant to the Business Corporations Act (British Columbia), and the Corporations Articles of Incorporation, the board of directors of the Corporation may exercise the general power to borrow on behalf of the Corporation in any manner deemed to be in the best interest of the Corporation and its shareholders. Whether exercising this general borrowing power or otherwise, the directors of the Corporation are under a fiduciary duty at all times to act honestly and in the best interest of the Corporation shareholders.



Pursuant to the requirements of the Business Corporations Act (British Columbia), a person must be not less than 18 years of age to act as a director of a British Columbia company. There are no requirements under the Business Corporations Act (British Columbia), or the Corporations Articles of Incorporation that a director be a shareholder of the Corporation.



The Common Shares are not subject to any future call or assessment and all have equal voting rights. There are no special rights or restrictions of any nature attached to any of the Common Shares. All of the Common Shares rank equally with respect to all benefits which might accrue to the holders including any redemption of shares or the division of corporate assets in the event of liquidation. There are no sinking fund provisions or any provisions discriminatory or advantageous to shareholders controlling a specific number of Common Shares.



On March 30, 2004, the British Columbia Company Act was replaced by the Business Corporations Act (British Columbia). There is a two-year transition period during which corporations must make amendments to their articles of incorporation to bring them into compliance with the new statutes. The Corporation has completed the transition process by obtaining shareholder approval of special resolutions adopting new articles of incorporation. The amended articles have been filed with Corporate Registry, effective August 5, 2004 and are filed as an exhibit with this report.



MATERIAL CONTRACTS



The Corporation entered into a management agreement effective January 1, 2006 with Equity Engineering Ltd. (Equity) to provide the services of David A. Caulfield as President and Chief Executive Officer of the Corporation for the sum of $10,800 per month. The agreement also provides that Rimfire will pay a proportional share of rent, internet and administrative services provided by Equity employees. The agreement is for a term of one year with provision for a one year extension at the Corporations option, and may be terminated by the Corporation on six months notice. Equity is not at arms length to the Corporation as two of the principals of Equity are David A. Caulfield and Henry J. Awmack who are directors and officers of the Corporation.



The Corporations ordinary course of business involves contracts to acquire or dispose of mineral property interests. Each of these contracts is detailed in the description of the mineral property interests presented in Item 4 under the subheading Property, Plants and Equipment.



EXCHANGE CONTROLS



There are no government laws, decrees or regulations in Canada relating to restrictions on the import/export of capital, or affecting the remittance of interest, dividends or other payments to non-residential holders of the Corporations shares. Any such remittances to United States residents, however, may be subject to a 15% tax pursuant to Article X of the reciprocal tax treaty between Canada and the United States. The applicable rate is dependent on the type of entity receiving the dividends. See this Item 10, Taxation subheading, below.



The Investment Canada Act (the Act), which became effective on June 30, 1985, requires a non-Canadian making an investment to acquire control, directly or indirectly, of a Canadian business, to file a notification or an application for review with Investment Canada. An application for review must be filed if the investor is not a citizen or resident of a World Trade Organization member country and the investment is over $50,000,000.00 or, if the investor is a citizen or resident of a World Trade Organization member country and the investment is over $179,000,000.00. For all acquisitions of a Canadian business which does not meet the threshold criteria for filing an application for review, the Act requires the investor to file a notification.



The provisions of the Act are complex, and the above is a limited summary of the main provision of the Act. Any non-Canadian citizen contemplating an investment to acquire control of the Corporation is encouraged to consult professional advisors as to whether and how the Act might apply.



For the purposes of the Act, direct acquisition of control means a purchase of the voting interests of a corporation, partnership, joint venture or trust carrying on a Canadian business, or any purchase of all or substantially all of the assets used in carrying on a Canadian business. An indirect acquisition of control means a purchase of the voting interest of a corporation, partnership, joint venture or trust, whether a Canadian or foreign entity, which controls a corporation, partnership, joint venture or trust company carrying on a Canadian business in Canada.



Except as provided in the Investment Canada Act (the Act), there are no limitations under the laws of Canada, the Province of British Columbia or in the charter or any other constituent documents of the Corporation on the right of foreigners to hold and/or vote the shares of the Corporation.



As a result of the Canada - U.S. Free Trade Agreement, the Act was amended in January, 1989 to provide distinct threshold levels for Americans who acquire control of a Canadian business.



A Canadian business is defined in the Act as a business carried on in Canada that has a place of business in Canada, an individual or individuals in Canada who are employed or self-employed in connection with the business, and assets in Canada used in carrying on the business.



An American, as defined in the Act, includes: an individual who is an American national or a lawful permanent resident of the United States; a government or government agency of the United States; an American-controlled entity, corporation or limited partnership; and a corporation, limited partnership or trust which is not controlled in fact through ownership of its voting interests in which two-thirds of its board of directors, general partners or trustees, as the case may be, are any combination of Canadians and Americans.



The following investments by a non-Canadian are subject to review by Investment Canada:



·

all direct acquisitions of control of Canadian businesses with assets of $5 million or more;



·

all indirect acquisitions of control of Canadian businesses with assets of $50 million or more, if such assets represent less than 50% of the value of the assets of the entities, the control of which is being acquired; and



·

all indirect acquisitions of control of Canadian businesses with assets of $5 million or more, if such assets represent more than 50% of the value of the assets of the entities, the control of which is being acquired.



Review by Investment Canada is required when investments by Americans exceed $150 million for direct acquisitions of control.



The acquisition of certain Canadian businesses is excluded from the higher threshold set out for Americans. These excluded businesses include oil, gas, uranium, financial services (except insurance); transportation services and cultural services (i.e.: the publication, distribution or sale of books, magazines, periodicals [other than printing or typesetting businesses], music in print or machine readable form, radio, television, cable and satellite services; the publications, distributions, sale and exhibitions of film or video recordings or audio or video music recordings). Direct or indirect acquisitions of control of these excluded businesses are reviewable at the $5 million and $50 million thresholds.



A non-Canadian will not implement an investment reviewable under the Act unless the investment has been reviewed and the Minister responsible for Investment Canada is satisfied or is deemed to be satisfied that the investment is likely to be of net benefit to Canada. The factors to be taken into account include:



1.

the effect of the investment on the legal and economic activities in Canada, including the effect on employment and resource processing, on the utilization of particular components and services produced in Canada, and on exports from Canada;



2.

the degree and significance of participation by Canadians in the Canadian business;



3.

the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada;



4.

the effect of the investment on competition within an industry or industries in Canada and will such industry or industries be significantly affected by the investment; and



5.

the compatibility of the investment with national industrial economic or cultural policies enunciated by the federal government or legislation of the legislature or government of any Province.



If the Minister is not satisfied that the investment is likely to be a net benefit to Canada, the non-Canadian will not implement the investment or, if the investment has been implemented, will divest itself of control of the business that is the subject of the investment.



A non-Canadian or American making the following investments: (i) an investment to establish a new Canadian business; or, (ii) an investment to acquire control of a Canadian business which investment is not subject to review under the Act; must notify Investment Canada, within prescribed time limits, of such investments.



TAXATION



Canadian Federal Income Tax Consequences



The discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of common shares of the Registrant for a shareholder of the Registrant who is not resident in Canada and who is resident in the United States. It is based on the current provisions of the Income Tax Act (Canada) (the Tax Act) and the regulations thereunder. The provisions of the Tax act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980) (the Convention). This discussion is general only and is not a substitute for independent advice from a shareholders own tax advisor. Management of the Corporation considers that the following discussion fairly describes the principal and material Canadian federal income tax consequences applicable to shareholders of the Corporation who are residents of the United States and are not residents of Canada and do not hold, and are deemed not to hold, shares of the Corporation in connection with carrying on a business in Canada (a non-resident).



Generally, dividends paid by Canadian corporations to non-resident shareholders are subject to a withholding tax of 25% of the gross amount of such dividends. However, Article X of the reciprocal tax treaty between Canada and the United States reduced to 15% the withholding tax on the gross amount of dividends paid to residents of the United States. When a U.S. corporation owns at least 10% of the voting stock of the Canadian corporation paying the dividends, the withholding tax rate on the gross amount of dividends is reduced to 5%.



A non-resident who holds shares of the Corporation as capital property will not be subject to tax on capital gains realized on the disposition of such shares unless such shares are taxable Canadian Property within the meaning of the Income Tax Act (Canada), and no relief is afforded under any applicable tax treaty.



The shares of the Corporation would be taxable Canadian property of a non-resident if at any time during the five year period immediately preceding a disposition by the non-resident of such shares (a) not less than 25% of the issued shares of any class of the Corporation belonged to the non-resident, (b) the person with whom the non-resident dealt did not deal at arms length, or (c) to the non-resident and any person with whom the non-resident did not deal at arms length own or are considered to own not less than 25% of the issued shares of any class of the Corporation.



Material United States Federal Income Tax Consequences



The following is a general discussion of the material United States Federal income tax law for U.S. holders that hold such common shares as a capital asset, as defined under United States Federal income tax law and is limited to discussion of U.S. Holders that own less than 10% of the common stock. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. See "Item 10 Additional Information - Canadian Federal Income Taxation" and "Certain United States Federal Income Tax Consequences".



The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), Treasury Regulations, published Internal Revenue Service ("IRS") rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any future legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The following discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Corporation and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Corporation are encouraged to consult their own tax advisors about the Federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Corporation.



U.S. Holders



As used herein, a "U.S. Holder" is a holder of common shares of the Corporation who or which is a citizen or individual resident (or is treated as a citizen or individual resident) of the United States for federal income tax purposes, a corporation or partnership created or organized (or treated as created or organized for federal income tax purposes) in the United States, including only the States and District of Columbia, or under the law of the United States or any State or Territory or any political subdivision thereof, or a trust or estate the income of which is includable in its gross income for federal income tax purposes without regard to its source, if, (i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States trustees have the authority to control all substantial decisions of the trust. For purposes of this discussion, a U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers and Holders who acquired their stock through the exercise of employee stock options or otherwise as compensation.



Distributions on common shares of the Corporation



U.S. Holders, who do not fall under any of the provisions contained within the "Other Consideration for U.S. Holders" section, and receiving dividend distributions (including constructive dividends) with respect to common shares of the Corporation are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Corporation has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder's United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's United States Federal taxable income by those who itemize deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the extent that distributions exceed current or accumulated earnings and profits of the Corporation, they will be treated first as a return of capital up to the U.S. Holder's adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.



Dividends paid on the common shares of the Corporation will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Corporation (unless the Corporation qualifies as a "foreign personal holding company" or a "passive foreign investment company", as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Corporation. The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.



Foreign Tax Credit



A U.S. Holder, who does not fall under any of the provisions contained within the "Other Consideration for U.S. Holders" section, and who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Corporation may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate shares of the U.S. Holder's United States income tax liability that the U.S. Holder's foreign source income bears to his or its world-wide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as "passive income", "high withholding tax interest", "financial services income", "shipping income", and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of common shares of the Corporation are encouraged to consult their own tax advisors regarding their individual circumstances.



Disposition of common shares of the Corporation



A U.S. Holder, who does not fall under any of the provisions contained within the "Other Consideration for U.S. Holders" section, and will recognize gain or loss upon the sale of common shares of the Corporation equal to the difference, if any, between the amount of cash plus the fair market value of any property received, and the Holder's tax basis in the common shares of the Corporation. This gain or loss will be a capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder unless the Corporation were to become a controlled foreign corporation. For the effect on the Corporation of becoming a controlled corporation, see "Controlled Foreign Corporation Status" below. Any capital gain will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders which are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.



Other Considerations for U.S. Holders



In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Corporation:



Passive Foreign Investment Company



A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a passive foreign investment company ("PFIC") is subject to U.S. federal income taxation of that foreign corporation under one of two alternative tax methods at the election of each such U.S. Holder.



Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is "passive income," which includes but is not limited to interest, dividends and certain rents and royalties or (ii) the average percentage, by value (or, if the company is a controlled foreign corporation or makes an election, adjusted tax basis), of its assets that produce or are held for the production of "passive income" is 50% or more. The Corporation believes that it is presently a PFIC.



As a PFIC, each U. S. Holder must determine under which of the alternative tax methods it wishes to be taxed. Under one method, a U.S. Holder who elects in a timely manner to treat the Corporation as a Qualified Electing Fund ("QEF"), as defined in the Code, (an "Electing U.S. Holder") will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Corporation's qualifies as a PFIC on his pro-rata share of the Corporation's (i) "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) "ordinary earnings" (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the U.S. Holder's taxable year in which (or with which) the Corporation taxable year ends, regardless of whether such amounts are actually distributed.



A QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of his common shares (or deemed to be realized on the pledge of his common shares) as capital gain; (ii) treat his share of the Corporation's net capital gain, if any, as long-term capital gain instead of ordinary income, and (iii) either avoid interest charges resulting from PFIC status altogether (see discussion of interest charge below), or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Corporation's annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as non-deductible "personal interest".



The procedure a U.S. Holder must comply with in making a timely QEF election will depend on whether the year of the election is the first year in the U.S. Holder's holding period in which the Corporation is a PFIC. If the U.S. Holder makes a QEF election in such first year, (sometimes referred to as a "Pedigreed QEF Election"), then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files its tax return for such first year. If, however, the Corporation qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. Holder may also elect to recognize as an "excess distribution" (i) under the rules of Section 1291 (discussed below), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the application date or (ii) if the Corporation is a controlled foreign corporation ("CFC"), the Holder's pro rata share of the corporation's earnings and profits. (But see "Elimination of Overlap Between Subpart F Rules and PFIC Provisions"). Either the deemed sale election or the deemed dividend election will result in the U.S. Holder being deemed to have made a timely QEF election.



With respect to a situation in which a Pedigreed QEF election is made, if the Corporation no longer qualifies as a PFIC in a subsequent year, normal Code rules and not the PFIC rules will apply.



If a U.S. Holder has not made a QEF Election at any time (a "Non-electing U.S. Holder"), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reason of a pledge) of his common shares and (ii) certain "excess distributions", as specially defined, by the Corporation.



A Non-electing U.S. Holder generally would be required to pro-rate all gains realized on the disposition of his common shares and all excess distributions over the entire holding period for the common shares. All gains or excess distributions allocated to prior years of the U.S. Holder (other than years prior to the first taxable year of the Corporation during such U.S. Holder's holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. Holder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing U.S. Holder that is not a corporation must treat this interest charge as "personal interest" which, as discussed above, is wholly non-deductible. The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance.



If the Corporation is a PFIC for any taxable year during which a Non-electing U.S. Holder holds common shares, then the Corporation will continue to be treated as a PFIC with respect to such common shares, even if it is no longer by definition a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules discussed above for Non-Electing U.S. Holders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC.



Under Section 1291(f) of the Code, the Department of the Treasury has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by Non-electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.



If a U.S. Holder makes a QEF Election that is not a Pedigreed Election (i.e., it is made after the first year during which the Corporation is a PFIC and the U.S. Holder holds shares of the Corporation) (a "Non-Pedigreed Election"), the QEF rules apply prospectively but do not apply to years prior to the year in which the QEF first becomes effective. U.S. Holders are encouraged to consult their tax advisors regarding the specific consequences of making a Non-Pedigreed QEF Election.



Certain special, generally adverse, rules will apply with respect to the common shares while the Corporation is a PFIC whether or not it is treated as a QEF. For example under Section 1298(b)(6) of the Code, a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such stock.



The foregoing discussion is based on currently effective provisions of the Code, existing and proposed regulations thereunder, and current administrative rulings and court decisions, all of which are subject to change. Any such change could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect. There can be no assurance that any of these proposals will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. Holders of the Corporation are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in the Corporation.



Mark-to-Market Election for PFIC Stock



A U.S. Holder of a PFIC may make a mark-to-market election with respect to the stock of the PFIC if such stock is marketable as defined below. This provision is designed to provide a current inclusion provision for persons that are Non-Electing Holders. Under the election, any excess of the fair market value of the PFIC stock at the close of the tax year over the Holder's adjusted basis in the stock is included in the Holder's income. The Holder may deduct any excess of the adjusted basis of the PFIC stock over its fair market value at the close of the tax year. However, deductions are limited to the net mark-to-market gains on the stock that the Holder included in income in prior tax years, or so called "unreversed inclusions."



For purposes of the election, PFIC stock is marketable if it is regularly traded on (1) a national securities exchange that is registered with the SEC, (2) the national market system established under Section 11A of the Securities Exchange Act of 1934, or (3) an exchange or market that the IRS determines has rules sufficient to ensure that the market price represents legitimate and sound fair market value.



A Holder's adjusted basis of PFIC stock is increased by the income recognized under the mark-to-market election and decreased by the deductions allowed under the election. If a U.S. Holder owns PFIC stock indirectly through a foreign entity, the basis adjustments apply to the basis of the PFIC stock in the hands of the foreign entity for the purpose of applying the PFIC rules to the tax treatment of the U.S. owner. Similar basis adjustments are made to the basis of the property through which the U.S. persons hold the PFIC stock.



Income recognized under the mark-to-market election and gain on the sale of PFIC stock with respect to which an election is made is treated as ordinary income. Deductions allowed under the election and loss on the sale of PFIC with respect to which an election is made, to the extent that the amount of loss does not exceed the net mark-to-market gains previously included, are treated as ordinary losses. The U.S. or foreign source of any income or losses is determined as if the amount were a gain or loss from the sale of stock in the PFIC.



If PFIC stock is owned by a controlled foreign corporation (CFC), the CFC is treated as a U.S. person that may make the mark-to-market election. Amounts includable in the CFC's income under the election are treated as foreign personal holding company income, and deductions are allocable to foreign personal holding company income. A CFC is a foreign corporation in which more than 50% of the voting power of all classes of stock or the total value of the stock is owned, directly or indirectly, by U.S. Holders, each of whom own 10% or more of the total combined voting power.



The above provisions apply to tax years of U.S. persons beginning after December 31, 1997, and to tax years of foreign corporations ending with or within such tax years of U.S. persons.



The rules of Code Section 1291 applicable to nonqualified funds generally do not apply to a U.S. Holder for tax years for which a mark-to-market election is in effect. If Code Section 1291 is applied and a mark-to-market election was in effect for any prior tax year, the U.S. Holder's holding period for the PFIC stock is treated as beginning immediately after the last tax year of the election. However, if a taxpayer makes a mark-to-market election for PFIC stock that is a nonqualified fund after the beginning of a taxpayer's holding period for such stock, a coordination rule applies to ensure that the taxpayer does not avoid the interest charge with respect to amounts attributable to periods before the election.



DOCUMENTS ON DISPLAY



All material contracts may be inspected at the Corporations offices, 700  700 West Pender Street, Vancouver, British Columbia, during normal business hours.



SUBSIDIARY INFORMATION



The Corporation has two (2) wholly-owned United States subsidiaries, Rimfire Alaska, Ltd. ("Rimfire Alaska"), which was incorporated under the laws of the State of Alaska on August 19, 1998 for the purpose of holding the Corporation's Alaskan mineral property interests, and Rimfire Nevada Ltd. (Rimfire Nevada) which was incorporated under the laws of the State of Nevada on January 4, 2005 for the purpose of holding the Corporation's Nevada mineral property interests.



Rimfire Alaska is authorized to issue 100 no par value common shares. The only shareholder of Rimfire Alaska is the Corporation and it holds all issued and outstanding company shares.



Rimfire Nevada is authorized to issue 75,000 no par value common shares. The only shareholder of Rimfire Nevada is the Corporation and it holds all issued and outstanding company shares.





ITEM 11   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



The Corporation does not hold nor issue any derivative financial instruments. Furthermore, the Corporation does not hold any long-term debt, and therefore is not subject to interest rate fluctuation. The Corporation does not have any other interest-rate sensitive instruments. The sole financial instruments that the Corporation holds which are subject to interest rate fluctuation are term deposits held for near-term use. The Corporation is not relying on the investment income to fund operations, and therefore does not deem this to be a market risk to the Corporation.



The Corporations financial instruments include marketable securities which are publicly traded and therefore are subject to the market risks that affect all publicly traded securities. Some of these shares are thinly traded which could result in lower quoted market values.



The Corporation does have limited exposure to foreign exchange risk, but this is restricted to payment of current trade accounts payable in US Dollars where most of the Corporations cash assets are denominated in Canadian Dollars. The Corporation maintains bank accounts in US Dollars from payments received in US Dollars to pay these trade accounts; therefore, there is no market risk, within the meaning of Item 11, to the Corporation from this limited exposure to foreign exchange translation effects.



ITEM 12   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not Applicable.



PART II



ITEM 13   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



None



ITEM 14   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



Not Applicable.



ITEM 15   CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer have instituted a system of disclosure controls for the Corporation to ensure proper and complete disclosure of material information. The limited number of employees within the Corporation facilitates access to real time information about developments in the business for the person responsible for drafting disclosure documents. All documents are circulated to responsible members of management and the board of directors according to the disclosure time-lines contained within the Corporations disclosure policy. The disclosure controls conform to the Corporations Corporate Governance guidelines which were adopted by the board of directors on November 20, 2002.



The Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Corporations disclosure controls and procedures (as defined in U.S. Exchange Act Rule 13a-14(c)) as of the end of the period covered by this Form 20-F, have concluded that, as of such date, the Corporations disclosure controls and procedures were effective to ensure that material information relating to the Corporation was made known to them by others within the Corporation during the period in which this Form 20-F was being prepared.



There were no significant changes in the Corporation's internal controls or in other factors that could significantly affect these controls subsequent to the date our Chief Executive Officer and our Chief Financial Officer completed their evaluation, nor were there any significant deficiencies or material weaknesses in the Corporation's internal controls requiring corrective actions.



ITEM 16A   AUDIT COMMITTEE FINANCIAL EXPERT

The Corporations Board of Directors has determined that Bipin Ghelani fulfills the role of Financial Expert on the Corporations audit committee. Mr. Ghelani is "independent" of the Corporation, as that term is defined by Section 803 of the American Stock Exchange (AMEX) Company Guide, in accordance with Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Mr. Ghelani is a Chartered Accountant with over 30 years of experience in financial, accounting and taxation matters. Mr. Ghelani manages his own accounting firm and has held senior positions with several international accounting firms including Deloitte & Touche and PricewaterhouseCoopers. The other members of the audit committee have significant financial experience within the mining industry and are considered financially literate although they do not meet the definition of financial expert.



ITEM 16B   CODE OF ETHICS

The Corporation has adopted separate codes of ethics that apply to the Chief Executive Officer, Chief Financial Officer and members of the Board of Directors. All employees are expected to abide by the principle that standards of personal behavior should at all times reflect credit on the Corporation and the mining/exploration industry in general. No amendments or waivers to these policies have been made since their adoption.



The codes of ethics and corporate governance policy were filed as exhibits in connection with the Registrants Form 20-F dated July 7, 2003. The Corporation will provide copies of these codes of ethics to any person, upon written request to the secretary of the Corporation at its address at 700 - 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8.



ITEM 16C   PRINCIPAL ACCOUNTANT FEES AND SERVICES

|                        | Fiscal Year ending 
January 31, 2006 | Fiscal Year ending 
January 31, 2005
|----------------------- | ------------------------------------ | ------------------------------------
|Audit Fees              | $ 16,000                             | $ 14,500                            
|Audit-related fee       | 520                                  | 1,550                               
|Tax services - Canadian | 1,500                                | 1,500                               
|Tax services - US       | 1,600                                | -                                   
|All other fees          | 554                                  | 489                                 
|Total fees billed       | 20,174                               | 18,039                              



The Corporations auditors are Hay & Watson, Chartered Accountants. Full-time, permanent employees of the auditor perform all services. The nature of the services provided by Hay & Watson under each of the categories indicated in the table is described below.



Audit Fees



Audit fees were for professional services rendered by Hay & Watson for the audit of the Registrants annual financial statements and services provided in connection with statutory and regulatory filings or engagements.



Audit-Related Fees



Audit-related fees were for assurance and related services reasonably related to the performance of the audit or review of the annual statements that are not reported under Audit Fees above. This included amendment of filings and responses to comments made by the Securities and Exchange Commission in connection with the Corporations 20-F Registration Statement. Registration fees for Canadian Public Accountability Board and Public Company Accounting Oversight Board are included in this category.



Tax Fees



Tax fees were for tax compliance, tax advice and tax planning professional services. These services consisted of: tax compliance including the review of tax returns, and tax planning and advisory services relating to common forms of domestic and international taxation (i.e. income tax, capital tax, goods and services tax, payroll tax and value added tax).



All Other Fees



Fees disclosed in the table above under the item all other fees were incurred for services other than the audit fees, audit-related fees and tax fees described above. These services would have consisted of assistance in the documentation of processes and controls and disbursements made by the auditor on behalf of the company.



Pre-Approval Policies and Procedures



It is within the mandate of the Corporations Audit Committee to approve all audit and non-audit related fees. The Audit Committee has pre-approved specifically identified non-audit related services, including tax compliance and review of tax returns as submitted to the Audit Committee from time to time. The auditors also present the estimate for the annual audit related services to the Audit Committee for approval prior to undertaking the annual audit of the financial statements.



ITEM 16D   EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable



ITEM 16E   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable





PART III



ITEM 17   FINANCIAL STATEMENTS



The following financial statements are attached and incorporated herein:



|Description of Statement

Consolidated Balance Sheets for the fiscal years ended January 31, 2006 and 2005
Statements of Loss and Deficit, Statements of Cash Flows,
Statement of Changes in Shareholders Equity, and Statements of Mineral Property Expenditures
all for the fiscal years ended January 31, 2006, 2005, and 2004
Notes to Consolidated Financial Statements | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 



ITEM 18   FINANCIAL STATEMENTS



See Item 17



ITEM 19   EXHIBITS



|Exhibit Number | Description                                                                                                                                     | Page
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ----
|1.8            | Articles of Incorporation effective August 5, 2004                                                                                              | 8   
|4.30           | Management Contract between Equity Engineering Ltd. and Rimfire Minerals Corporation effective January 1, 2006                                  | t   
|4.33           | Option Agreement between Northgate Minerals Corporation and Rimfire Minerals Corporation dated March 29, 2004                                   | 8   
|4.35           | Registrar and Transfer Agent Agreement between Pacific Corporate Trust Company and Rimfire Minerals Corporation dated September 1, 2004         | 8   
|4.36           | Amendment to Option Agreement between Rimfire Minerals Corporation, Plutonic Capital and Serengeti Resources Inc. dated September 9, 2004       | 8   
|4.37           | Amendment to RDN Property Option Agreement between Northgate Minerals Corporation and Rimfire Minerals Corporation dated November 19, 2004      | 8   
|4.38           | Agreement between Newmont Capital Limited and Rimfire Minerals Corporation dated January 5, 2005 regarding Walker Lane                          | 8   
|4.39           | Termination Agreement between AngloGold Ashanti (U.S.A.) Exploration Inc. and Rimfire Alaska, Ltd. effective December 31, 2005 (Eagle Property) | t   
|4.40           | Termination Agreement between AngloGold Ashanti (U.S.A.) Exploration Inc. and Rimfire Alaska, Ltd. effective December 31, 2005 (ER Property)    | t   
|8.1            | List of Subsidiary Companies of Rimfire Minerals Corporation                                                                                    | 8   
|11.1           | Corporate Governance Policy adopted November 20, 2002                                                                                           | a   
|11.2           | Code of Ethics – Board of Directors dated January 31, 2003                                                                                      | a   
|11.3           | Code of Ethics – Chief Executive Officer dated January 31, 2003                                                                                 | a   
|11.4           | Code of Ethics – Chief Financial Officer dated February 28, 2003                                                                                | a   
|11.5           | Incentive Stock Option Plan                                                                                                                     | *   
|31.1           | Certification by Chief Executive Officer                                                                                                        | t   
|31.2           | Certification by Chief Financial Officer                                                                                                        | t   
|32.1           | Certification by Chief Executive Officer                                                                                                        | t   
|32.2           | Certification by Chief Financial Officer                                                                                                        | t   



t

Filed as exhibits in connection with this document



8

Incorporated herein by reference to the exhibits as filed in connection with the Registrant’s Form 20-F dated May 25, 2005.



v

Incorporated herein by reference to the exhibits as filed in connection with the Registrant’s Form 20-F dated July 26, 2004.

a

Incorporated herein by reference to the exhibits as filed in connection with the Registrants Form 20-F dated July 7, 2003.







SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.





RIMFIRE MINERALS CORPORATION



|By: | David A. Caulfield | 
|--- | -------------------- | 
|    | David A. Caulfield   | 
|    | President & Director | 



Date: May 25, 2006









RIMFIRE MINERALS CORPORATION



Consolidated Financial Statements

Years Ended January 31, 2006, 2005 and 2004

and Auditors Report











MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING



The accompanying consolidated financial statements of Rimfire Minerals Corporation and all information in this annual report are the responsibility of management. The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles and where appropriate include managements best estimates and judgments. Management has reviewed the financial information presented throughout this report and has ensured it is consistent with the consolidated financial statements.



Management maintains a system of internal control designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, and that financial information is timely and reliable.



The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility principally through its Audit Committee.



The Board of Directors appoints the Audit Committee, and the majority of its members are independent directors. The Audit Committee meets periodically with management and the shareholders auditors to review financial statements and reports prepared by management, internal controls, audit results, accounting principles and related matters. The Board of Directors approves the consolidated financial statements on recommendation from the Audit Committee.



Hay and Watson, an independent firm of Registered Chartered Accountants, was appointed by the shareholders at the last annual meeting to examine the consolidated financial statements and provide an independent professional opinion.









David A. Caulfield

Dorothy Miller





David A. Caulfield, P.Geo

Dorothy G. Miller

President & Chief Executive Officer

Chief Financial Officer











REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS



To the Shareholders of

Rimfire Minerals Corporation



We have audited the consolidated balance sheets of Rimfire Minerals Corporation as at January 31, 2006 and 2005 and the consolidated statements of operations, of changes in shareholders equity, of mineral property expenditures and of cash flows for each of the years in the three year period ended January 31, 2006 (all expressed in Canadian dollars). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). 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 January 31, 2006 and 2005 and the results of its operations and its cash flows for each of the years in the three year period ended January 31, 2006 in accordance with Canadian generally accepted accounting principles.



Canadian generally accepted accounting principles vary in certain significant respects from accounting principles generally accepted in the United States of America. The effect of the application of United States generally accepted accounting principles on the net loss for each year and total assets and shareholders equity at the end of each year in these consolidated financial statements is summarized in Note 10 to the consolidated financial statements.



Hay & Watson

Independent Registered Chartered Accountants

Vancouver, Canada

March 31, 2006



Comment by Independent Registered Chartered Accountants on Canada  United States of America Reporting Difference



The standards of the Public Company Oversight Board (United States) for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there are changes in accounting principles that have a material effect on the comparability of the Companys financial statements, such as the change described in Note 2 to the consolidated financial statements. Our report to the shareholders dated March 31, 2006 is expressed in accordance with Canadian reporting standards which do not require a reference to such a change in accounting principles in the report of the independent registered chartered accountants when the change is properly accounted for and adequately disclosed in the financial statements.



Hay & Watson

Independent Registered Chartered Accountants

Vancouver, Canada

March 31, 2006





|RIMFIRE MINERALS CORPORATION                   |                               |           |           
|---------------------------------------------- | ----------------------------- | --------- | ----------
|                                               |                               |           |           
|Consolidated Statements of Operations          |                               |           |           
|Years Ended January 31                         |                               |           |           
|(Expressed in Canadian Dollars)                |                               |           |           
|                                               |                               |           |           
|                                               |                               |           |           
|                                               |                               |           |           
|                                               |                               |           | 2006      
|                                               |                               |           |           
|Mineral Property Operations                    |                               |           |           
|Revenue                                        |                               |           |           
|                                               | Option proceeds               | $         | 163,500   
|                                               | Project management fees       |           | 36,277    
|                                               |                               | 199,777   |           
|Expenses                                       |                               |           |           
|                                               | Acquisition costs             |           | 202,167   
|                                               | Exploration expenditures      |           | 1,116,172 
|                                               | Reclamation obligations       |           | -         
|                                               | Joint venture reimbursements  |           | (33,988)  
|                                               | Exploration tax credits       |           | (18,736)  
|                                               |                               |           | 1,265,615 
|Loss from mineral property operations          |                               | 1,065,838 |           
|                                               |                               |           |           
|Other Operations                               |                               |           |           
|Revenue                                        |                               |           |           
|                                               | Interest                      |           | 68,672    
|                                               | Other                         |           | 7,900     
|                                               |                               |           | 76,572    
|Expenses                                       |                               |           |           
|                                               | Accounting and legal          |           | 40,934    
|                                               | Depreciation                  |           | 33,980    
|                                               | Foreign exchange losses       |           | 8,196     
|                                               | Investor services             |           | 36,478    
|                                               | Management services           |           | 116,804   
|                                               | Marketing and promotion       |           | 77,234    
|                                               | Office                        |           | 78,959    
|                                               | Rent                          |           | 63,832    
|                                               | Salaries and support services |           | 255,550   
|                                               | Share-based compensation      |           | 206,689   
|                                               | Travel and entertainment      |           | 48,920    
|                                               |                               |           | 967,576   
|Loss from other operations                     |                               | 891,004   |           
|                                               |                               |           |           
|Loss Before Marketable Securities Transactions | 1,956,842                     |           | 1,531,499 
|                                               |                               |           |           
|(Loss) Gain on Sale of Marketable Securities   |                               | (49,264)  |           
|                                               |                               |           |           
|Loss before Income Taxes                       |                               | 2,006,106 |           
|                                               |                               |           |           
|Future Income Tax Recovery (Note 8)            |                               | 182,500   |           
|                                               |                               |           |           
|Net Loss                                       | $                             | 1,823,606 | $         
|                                               |                               |           |           
|Basic and Diluted Loss Per Share               | $                             | 0.10      | $         
|                                               |                               |           |           
|Weighted average number of shares outstanding  | 18,656,974                    |           | 17,231,840



|RIMFIRE MINERALS CORPORATION                     |                                   |            
|------------------------------------------------ | --------------------------------- | -----------
|                                                 |                                   |            
|Consolidated Balance Sheets                      |                                   |            
|January 31                                       |                                   |            
|(Expressed in Canadian Dollars)                  |                                   |            
|                                                 |                                   |            
|                                                 |                                   |            
|                                                 |                                   |            
|                                                 |                                   |            
|ASSETS                                           |                                   |            
|Current                                          |                                   |            
|                                                 | Cash                              | $          
|                                                 | Marketable securities (Note 3)    |            
|                                                 | Accounts receivable               |            
|                                                 | Prepaid expenses                  |            
|                                                 |                                   |            
|                                                 |                                   |            
|Office and Computer Equipment, less accumulated  |                                   |            
|depreciation of $70,282 (2005- $47,076)          | 61,564                            |            
|Project Deposits (Note 4)                        |                                   | 28,700     
|Mineral Property Interests (Note 5)              |                                   | -          
|                                                 |                                   |            
|                                                 |                                   | $          
|                                                 |                                   |            
|LIABILITIES                                      |                                   |            
|Current                                          |                                   |            
|                                                 | Accounts payable and accruals     | $          
|                                                 | Payable to related party (Note 7) |            
|                                                 | Joint venture project deposits    |            
|                                                 |                                   |            
|                                                 |                                   |            
|Mineral Property Reclamation Obligation(Note 11) | 35,363                            |            
|                                                 |                                   | 134,942    
|                                                 |                                   |            
|SHAREHOLDERS EQUITY                             |                                   |            
|Share Capital (Note 6)                           |                                   | 9,358,013  
|Contributed Surplus (Notes 2 and 6 )             |                                   | 922,976    
|Deficit                                          |                                   | (7,320,443)
|                                                 |                                   |            
|                                                 |                                   |            
|                                                 | $                                 | 3,095,488  
|                                                 |                                   |            
|                                                 |                                   |            
|APPROVED BY THE BOARD                            |                                   |            
|                                                 |                                   |            
|David A. Caulfield                             | Director                          |            
|                                                 |                                   |            
|Henry J. Awmack                                | Director                          |            
|                                                 |                                   |            





|RIMFIRE MINERALS CORPORATION                      |                                           |           |            
|------------------------------------------------- | ----------------------------------------- | --------- | -----------
|                                                  |                                           |           |            
|Consolidated Statements of Cash Flows             |                                           |           |            
|Years Ended January 31                            |                                           |           |            
|(Expressed in Canadian Dollars)                   |                                           |           |            
|                                                  |                                           |           |            
|                                                  |                                           |           |            
|                                                  |                                           |           |            
|                                                  |                                           |           | 2006       
|Cash Flows Used for Operating Activities          |                                           |           |            
|Mineral property interests                        |                                           |           |            
|                                                  | Acquisition costs                         | $         | (175,818)  
|                                                  | Exploration costs (net of reimbursements) |           | (1,144,890)
|                                                  | Exploration tax credits and grants        |           | 122,229    
|                                                  | Joint venture project deposits            |           | (97,806)   
|                                                  | Project management revenue                |           | 36,293     
|                                                  | Reclamation deposits                      |           | 15,700     
|Mineral property interest option proceeds         |                                           | 150,000   |            
|Other operations                                  |                                           |           |            
|                                                  | Cash paid for supplies and services       |           | (688,520)  
|                                                  | Advances from related party               | 3,478     |            
|                                                  | Interest and other revenue received       |           | 64,739     
|                                                  |                                           |           |            
|                                                  |                                           |           | (1,714,595)
|                                                  |                                           |           |            
|Cash Flows Used for Investing Activities          |                                           |           |            
|Proceeds from sale of marketable securities       | 15,736                                    |           | 66,958     
|Purchase of office and computer equipment         | (51,483)                                  |           | (37,442)   
|                                                  |                                           |           |            
|                                                  |                                           | (35,747)  |            
|                                                  |                                           |           |            
|Cash Flows From Financing Activities              |                                           |           |            
|Common shares issued for cash                     |                                           | 1,895,029 |            
|Share issue costs                                 |                                           | (32,743)  |            
|                                                  |                                           |           |            
|                                                  |                                           |           | 1,862,286  
|                                                  |                                           |           |            
|Increase in Cash                                  |                                           | 111,944   |            
|Cash, Beginning of Year                           |                                           | 2,724,083 |            
|                                                  |                                           |           |            
|Cash, End of Year                                 | $                                         | 2,836,027 | $          
|                                                  |                                           |           |            
|Supplemental Information on Non-Cash Transactions |                                           |           |            
|Mineral property interest acquisition costs       | $                                         | -         | $          
|Shares issued for acquisition of                  |                                           |           |            
|mineral property interests                        |                                           | -         |            
|Marketable securities received                    |                                           | (13,500)  |            
|Mineral property interest option proceeds         |                                           | 13,500    |            
|Share-based compensation expense                  |                                           | 206,689   |            
|Contributed surplus                               |                                           | (3,551)   |            





|RIMFIRE MINERALS CORPORATION                               |                                                                                    |           |          
|---------------------------------------------------------- | ---------------------------------------------------------------------------------- | --------- | ---------
|                                                           |                                                                                    |           |          
|Consolidated Statements of Changes in Shareholders Equity |                                                                                    |           |          
|Years Ended January 31                                     |                                                                                    |           |          
|(Expressed in Canadian Dollars)                            |                                                                                    |           |          
|                                                           |                                                                                    |           |          
|                                                           |                                                                                    |           |          
|                                                           |                                                                                    |           |          
|                                                           |                                                                                    |           | 2006     
|Common Shares (Note 6)                                     |                                                                                    |           |          
|Balance, beginning of year                                 | $                                                                                  | 7,467,987 | $        
|                                                           | Issued for                                                                         |           |          
|                                                           | Cash - private placement                                                           |           |          
|                                                           | Cash - private placement (flow-through shares)                                     |           | 500,000  
|                                                           | Cash  Exercise of share purchase warrants                                         |           | 1,245,029
|                                                           | Cash  exercise of share purchase options                                          |           | 150,000  
|                                                           | Mineral properties                                                                 |           | -        
|                                                           | Membership fee                                                                     |           | -        
|                                                           | Transfer from contributed surplus on the exercise of vested share purchase options |           | 210,240  
|                                                           | Future income taxes related to flow-through share issue                            |           | (182,500)
|                                                           | Share issue costs                                                                  |           | (32,743) 
|                                                           |                                                                                    |           |          
|Balance, end of year                                       |                                                                                    | 9,358,013 |          
|                                                           |                                                                                    |           |          
|Contributed Surplus                                        |                                                                                    |           |          
|Balance, beginning of year                                 |                                                                                    | 926,527   |          
|                                                           | Share-based compensation                                                           |           | 206,689  
|                                                           | Transfer to common shares on exercise of share purchase vested options             |           | (210,240)
|                                                           |                                                                                    |           |          
|Balance, end of year                                       |                                                                                    | 922,976   |          
|                                                           |                                                                                    |           |          
|Deficit                                                    |                                                                                    |           |          
|Balance, beginning of year                                 |                                                                                    | 5,496,837 |          
|                                                           | Net Loss for the year                                                              |           | 1,823,606
|                                                           |                                                                                    |           |          
|Balance, end of year                                       |                                                                                    | 7,320,443 |          
|                                                           |                                                                                    |           |          
|                                                           |                                                                                    |           |          
|Shareholders Equity                                       | $                                                                                  | 2,960,546 | $        
|                                                           |                                                                                    |           |          







|RIMFIRE MINERALS CORPORATION                                                                      |                              |                |             |             |            |            |            |           
|------------------------------------------------------------------------------------------------- | ---------------------------- | -------------- | ----------- | ----------- | ---------- | ---------- | ---------- | ----------
|                                                                                                  |                              |                |             |             |            |            |            |           
|Consolidated Statements of Mineral Property Expenditures                                          |                              |                |             |             |           
|Years Ended January 31                                                                            |                              |                |             |             |            |            |            |           
|(Expressed in Canadian Dollars)                                                                   |                              |                |             |             |            |            |            |           
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  |                              |                | Canada      |             | Alaska     | Nevada     |            |           
|                                                                                                  |                              |                | Jake        | Kizmet      | RDN        | Thorn      | Tide       | Williams  
|Cumulative net expenditures, January 31, 2003                                                     | $         -                  | $            - | $798,180    | $321,741    | $35,831    | $177,406   | $318,361   | $18,506   
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  | Acquisition Costs            | -              | 22,830      | -           | 30,957     | 2,369      | 21,250     | 3,531     
|                                                                                                  | Exploration Expenditures     | -              | 10,975      | 7,410       | 11,853     | 802        | 3,644      | 237,374   
|                                                                                                  | Exploration Tax Credits      | -              | -           | (1,889)     | -          | -          | -          | (60,242)  
|                                                                                                  | Option Proceeds              | -              | -           | -           | (41,000)   | (61,000)   | (50,000)   | -         
|                                                                                                  |                              |                |             |             |            |            |            |           
|Net expenditures, year ended January 31, 2004                                                     | -                            | 33,805         | 5,521       | 1,810       | (57,829)   | (25,106)   | 180,663    | 26,156    
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  | Acquisition Costs            | -              | 5,242       | -           | 150,000    | 1,842      | 28,750     | 4,496     
|                                                                                                  | Exploration Expenditures     | -              | 176,517     | 5,425       | 450,461    | 17,677     | 6,255      | 367,430   
|                                                                                                  | Exploration Tax Credits      | -              | (30,243)    | (552)       | (87,818)   | (2,751)    | (350)      | (513)     
|                                                                                                  | Joint Venture Reimbursements | -              | -           | -           | -          | (1,427)    | -          | (144,214) 
|                                                                                                  | Reclamation Obligations      | -              | -           | 17,102      | 11,082     | 3,179      | 4,000      | -         
|                                                                                                  | Option Proceeds              | -              | -           | (25,000)    | (182,000)  | (56,500)   | -          | -         
|                                                                                                  |                              |                |             |             |            |            |            |           
|Net expenditures, year ended January 31, 2005                                                     | -                            | 151,516        | (3,025)     | 341,725     | (37,980)   | 38,655     | 227,199    | (14,751)  
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  | Acquisition Costs            | 14,256         | 7,806       | 31,342      | 15,665     | -          | 5,000      | 10,083    
|                                                                                                  | Exploration Expenditures     | 21,802         | 11,612      | 5,760       | 417,703    | 8,913      | 208,843    | 64,806    
|                                                                                                  | Exploration Tax Credits      | (263)          | (717)       | (106)       | (2,889)    | (997)      | (13,762)   | (2)       
|                                                                                                  | Joint Venture Reimbursements | -              | (560)       | (18,042)    | (5,465)    | (364)      | -          | (9,557)   
|                                                                                                  | Option Proceeds              | -              | (75,000)    | (40,000)    | -          | (48,500)   | -          | -         
|                                                                                                  |                              |                |             |             |            |            |            |           
|Net expenditures, year ended January 31, 2006                                                     | 35,795                       | (56,859)       | (21,046)    | 425,014     | (40,948)   | 200,081    | 65,330     | 299,478   
|                                                                                                  |                              |                |             |             |            |            |            |           
|                                                                                                  |                              |                |             |             |            |            |            |           
|Cumulative net expenditures, January 31, 2006                                                     | 35,795                       | 128,462        | 779,630     | 1,090,290   | (100,926)  | 391,036    | 791,553    | 329,389   
|Less write-downs and abandonments                                                                 | -                            | -              | -           | -           | (1,719)    | -          | (563,922)  | (6,290)   
|                                                                                                  |                              |                |             |             |            |            |            |           
|Net cumulative expenditures on active 
mineral properties charged to operations,
January 31, 2006 | $  35,795                    | $    128,462   | $   779,630 | $ 1,090,290 | $(102,645) | $  391,036 | $  227,631 | $  323,099





RIMFIRE MINERALS CORPORATION



Notes to the Consolidated Financial Statements

January 31, 2006, 2005 and 2004

(Expressed in Canadian Dollars)









1.

SIGNIFICANT ACCOUNTING POLICIES



These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada, which conform in all material respects with accounting principles generally accepted in the United States of America, except as described in Note 10 to the consolidated financial statements. These consolidated financial statements include the following significant policies:



Operations and Basis of Consolidation



The Company was incorporated on May 7, 1991 as Bull Pine Explorations Ltd. and commenced mineral exploration operations in Canada in 1991. The Company changed its name to Rimfire Minerals Corporation on November 4, 1997. One of the Companys wholly-owned subsidiary companies, Rimfire Alaska, Ltd., which was incorporated on August 19, 1998, conducts exploration of mineral properties located in the State of Alaska. A second wholly-owned subsidiary company, Rimfire Nevada Ltd., which was incorporated on January 4, 2005, conducts exploration of mineral properties located in the State of Nevada.



These consolidated financial statements include the accounts of the Company and its wholly-owned United States subsidiaries, Rimfire Alaska, Ltd. and Rimfire Nevada Ltd. (individually and collectively the Company).



Marketable Securities



Marketable securities are recorded at acquisition cost and are written down to market value when declines in value are significant and other than temporary.



Office and Computer Equipment



Office and computer equipment are recorded at cost. Depreciation is provided at annual rates considered sufficient to amortize the cost of the assets over their estimated useful lives as follows:



| | Computer software                            | 100%
| | -------------------------------------------- | ----
| | Computer equipment (prior to March 23, 2004) | 30% 
| | Computer equipment (after March 23, 2004)    | 45% 
| | Office equipment and furniture               | 20% 



Mineral Property Interests



The Companys mineral property interests are composed of mineral properties owned by the Company and rights to ownership of mineral properties which the Company can earn through cash or share payments, incurring exploration expenditures and combinations thereof. The Companys property ownership and rights to property ownership are described in Note 5.



The Company accounts for its mineral property interests whereby all acquisition and exploration costs are charged to expense as incurred and all property sales and option proceeds received are credited to operations. When the existence of a mineral reserve on a property has been established, future acquisition, exploration and development costs will be capitalized for that property. After commercial production on a property commences, the net capitalized costs will be charged to future operations using the unit of production method based on estimated recoverable reserves on the property.



Mineral Property Reclamation Obligations



The company recognizes the fair value of a liability for a reclamation obligation on mineral property interests when the obligation is incurred and the fair value can be reasonably estimated.  The fair value of the obligations is based on the estimated cash flow required to settle the obligations, discounted using the Government of Canada Bond Rate for the applicable term adjusted for the Companys credit rating.  The fair value of the obligation is recorded as a liability with the same amount charged to mineral property expenses.  The liability is adjusted for accretion expense representing the increase in the fair value of the obligations due to the passage of time.  Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash-flows are recognized as an increase or a decrease to the carrying amount of the liability and charged to mineral property expenses.  When the existence of a mineral reserve on a property has been established, future reclamation obligation costs will be capitalized for that property.



Share-Based Compensation



The Company issues options to purchase shares under the terms described in Note 6. When options to purchase shares are issued to employees or directors, the fair value of the options on the date of the grant is recognized as compensation expense, with a corresponding increase in contributed surplus, over the period during which the related options vest. When options to purchase shares are issued to non-employees in return for goods and services, the fair value of the options issued is recognized as an expense, with a corresponding increase in contributed surplus, in the period in which the goods or services are received or are expected to be received.



The consideration received on the exercise of share options is credited to share capital. When options are exercised, previously recorded compensation is reclassified from contributed surplus to share capital to fully reflect the consideration for the shares issued.



Income Taxes



The Company follows the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recorded based on temporary differences between the carrying amount of balance sheet items and their corresponding tax bases. In addition, the future tax benefits of unused tax losses and other deductions carried forward, are recognized, subject to a valuation allowance, to the extent that it is more likely than not that such future benefits will ultimately be realized.  Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates and laws expected to apply when the tax liabilities or assets are to be either settled or realized.



Flow-Through Shares



The Company has issued flow-through shares to finance some of its exploration activities. These shares were issued for cash in exchange for the Company giving up the tax benefits arising from the exploration expenditures, in accordance with tax legislation.  The Company records these share issues by crediting share capital for the full value of cash consideration received and the related future income tax liabilities are reflected as a share issue cost.



Foreign Currency Translation



Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using historical rates. Revenue and expense items are translated at exchange rates prevailing at the time of the transaction. Foreign exchange gains and losses are included in operations.



Loss per Share



The basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. The diluted loss per share reflects the potential dilution of common share equivalents, such as the outstanding share purchase options and warrants, in the weighted average number of common shares outstanding during the year, if dilutive. For this purpose, the treasury stock method is used for the assumed proceeds upon the exercise of share purchase options and warrants that are used to purchase common shares at the average market price during the year. Common share equivalents (Note 6) have been excluded from the computation of the diluted loss per share for the periods presented as including them would have been anti-dilutive.



Exploration Tax Credits



The Company may receive refundable exploration tax credits and grants from provincial jurisdictions in Canada equal to a specified rate of qualifying exploration expenditures incurred on properties located within that jurisdiction. The Company records these exploration tax credits or grants as it incurs the related exploration expenditures.



Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.



2.

ACCOUNTING CHANGES



The Company adopted the new accounting recommendations of the Canadian Institute of Chartered Accountants for the accounting for share-based compensation of employees and non-employees during the 2004 fiscal year. These recommendations established the standards described in Notes 1 and 6 for the measurement, recognition and disclosure of compensation and other costs arising from the issue of share purchase options and other share-based payments to employees and non-employees. The Company accounted for these recommendations on a retroactive basis, and accordingly increased the deficit and contributed surplus by $255,520 at January 31, 2003. This change also resulted in an increase in the net loss for the years ended January 31, 2006, 2005 and 2004 by $206,689 ($.01 per share), $292,149 ($.02 per share) and $411,208 ($.03 per share), respectively.



3.

MARKETABLE SECURITIES



The fair market value of the marketable securities on January 31, 2006 was approximately $182,468 (2005 - $271,405).





4.

PROJECT DEPOSITS



Project deposits represent term deposits in favour of regulatory authorities held as site restoration deposits. The amount of the deposit is determined at the time the exploration program is planned and a notice of work is submitted to the regulatory authority. If work is more extensive than previously planned, the amount of the deposit will be increased.



5.

MINERAL PROPERTY INTERESTS



Expenditures on mineral property interests during the years ended January 31 were:



| |                                                                                               | 2006        | 2005       | 2004      
| | --------------------------------------------------------------------------------------------- | ----------- | ---------- | ----------
| | Acquisition Costs                                                                             | $ 202,167   | $217,385   | $98,200   
| | Exploration Costs                                                                             |             |            |           
| | Aircraft and helicopter                                                                       | 171,480     | 261,871    | 39,204    
| | Camp                                                                                          | 72,522      | 58,846     | 15,177    
| | Chemical analysis                                                                             | 38,751      | 52,832     | 25,033    
| | Drafting                                                                                      | 11,937      | 13,148     | 8,981     
| | Drilling and trenching                                                                        | 49,763      | 87,046     | -         
| | Equipment rental                                                                              | 15,741      | 16,228     | 4,975     
| | Freight                                                                                       | 11,350      | 12,341     | 722       
| | Geological and engineering                                                                    | 319,943     | 354,662    | 142,869   
| | Geophysical surveying                                                                         | 68,922      | -          | -         
| | Maps and reproductions                                                                        | 13,421      | 17,341     | 5,529     
| | Materials                                                                                     | 24,346      | 30,249     | 2,501     
| | Project management                                                                            | 73,452      | 97,443     | 26,607    
| | Recording and filing                                                                          | 216,415     | 67,720     | 36,389    
| | Travel                                                                                        | 28,129      | 36,006     | 12,756    
| |                                                                                               |             |            |           
| |                                                                                               | 1,116,172   | 1,105,733  | 320,743   
| | Exploration tax credits and grants                                                            | (18,736)    | (122,227)  | (62,131)  
| | Joint venture reimbursements                                                                  | (33,988)    | (145,641)  | -         
| | Reclamation obligation                                                                        | -           | 35,363     | -         
| |                                                                                               |             |            |           
| |                                                                                               | 1,063,448   | 873,228    | 258,612   
| |                                                                                               |             |            |           
| | Option Proceeds                                                                               | (163,500)   | (358,630)  | (191,792) 
| |                                                                                               |             |            |           
| | Net Expenditures For the Year                                                                 | 1,102,115   | 731,983    | 165,020   
| |                                                                                               |             |            |           
| | Cumulative Net Expenditures, 
Beginning of Year                                               | 2,567,028   | 1,835,045  | 1,670,025 
| |                                                                                               |             |            |           
| | Cumulative Net Expenditures, End of Year                                                      | 3,669,143   | 2,567,028  | 1,835,045 
| |                                                                                               |             |            |           
| | Property Write-downs and Abandonments                                                         | (571,931)   | (302,917)  | (193,421) 
| |                                                                                               |             |            |           
| | Net Cumulative Expenditures On Active Mineral Properties Charged to Operations From Inception | $ 3,097,212 | $2,264,111 | $1,641,624



The analysis of these expenditures by property or interest is reported in the Statements of Mineral Property Expenditures.



The Companys commitments to earn or acquire its mineral property interests are:



Thorn Property, British Columbia



On March 1, 2000 the Company entered into an agreement with Kohima Pacific Gold Corp. (Kohima) to earn a 100% interest in the Thorn mineral property, subject to a 3.5% net smelter return. The Company has earned its interest by making staged payments totalling $230,000, completing exploration expenditures of $50,000 and issuing a total of 200,000 common shares. The Company will issue an additional 200,000 shares upon commencement of commercial production from the property. The Company can purchase 2% of Kohimas underlying net smelter return (NSR) for $3,000,000.



On March 1, 2002, the Company granted CANGOLD Limited (CANGOLD) an option to earn a 51% interest in the Thorn property on completion of exploration expenditures of $1.2 million, cash payments totalling $190,000 and issuing 250,000 shares of CANGOLD to the Company. In September 2004, CANGOLD completed these requirements. The Company and CANGOLD have entered into a joint venture agreement for further development of the property. CANGOLD is currently operator for the project.



RDN Property, British Columbia



On July 31, 1997, the Company acquired a one-third interest in the RDN mineral claims from Equity Engineering Ltd. (Note 7) for $150,000 and acquired the remaining two-thirds interest, subject to a 1.34% net smelter return, by completing exploration expenditures and share issue requirements. The Company may purchase one-half of the NSR for $666,666.



The Company signed an option agreement, effective March 29, 2004, with Northgate Minerals Corporation (Northgate) which provides that Northgate can earn a 51% interest in the RDN Property on completion of the following:



Exploration expenditures of:

·

not less than $1,000,000 before December 31, 2004 (completed)

·

not less than an aggregate of $2,000,000 on or before December 31, 2005 
(as revised November 19, 2004) (completed)

·

not less than an aggregate of $3,000,000 on or before December 31, 2006
(as revised December 2, 2005)

·

not less than an aggregate of $5,000,000 on or before December 31, 2007
(as revised November 19, 2004)

Cash payments of:

·

$25,000 upon closing of the agreement (received)

·

$40,000 on or before March 1, 2005 (received)

·

$60,000 on or before March 1, 2006(received subsequent to year-end)

·

$75,000 on or before March 1, 2007



The Company is the project operator until Northgate has earned its 51% interest. Northgate may earn an additional 9% by completing a feasibility study and funding all expenditures up to completion of the feasibility study.



On December 14, 2005, the Company (40%) and Northgate (60%) purchased 100% of the LL property, which is contiguous with the RDN, for $30,000 cash, subject to an NSR of 2%. This royalty can be purchased at any time for $2,000,000.



Williams Property, British Columbia



On May 17, 2001 the Company entered into an option to earn a 100% interest in the property, subject to a 2.5% net smelter return. On June 25, 2002, the Company subsequently acquired half of the interest and half of the net smelter return pursuant to another agreement by issuing 75,000 common shares. The Company earned the remaining 50% interest by making cash payments totalling $57,500 and issuing 125,000 common shares. The Company will issue an additional 50,000 common shares upon commencement of commercial production from the property. The Company can purchase 0.75% of the NSR for $1,000,000. Advance royalty payments of $5,000 per year, commencing in December 2005, are payable to the underlying vendor.



Tide Property, British Columbia



On July 10, 2001 the Company purchased the Tide mineral property from Newmont Canada Limited for $10 and an agreement to give Newmont Canada Limited a three year right of first refusal to re-acquire the property if the Company decides to assign, transfer or dispose of its interest to a third party, and a 1.5% NSR in the event the property becomes commercially feasible to mine.



In October 2002, the Company granted Plutonic Capital Corp. (Plutonic) an option to earn a 51% interest in the property on completion of a combination of cash and share payments and exploration expenditures. In consideration for an extension, dated October 20, 2003, Plutonic issued an additional 100,000 common shares to the Company. In an option amendment agreement dated November 20, 2003, Plutonic assigned the agreement to Serengeti Resources Inc. (Serengeti). As compensation for this amendment, Serengeti issued 100,000 shares to the Company. Serengeti has assumed all of the obligations from the original and amended agreements with Plutonic:



Cash payments to the Company of:

·

$2,000 upon signing of the agreement (received)

·

$13,000 upon regulatory approval (received)

·

$15,000 on or before July 24, 2003 (received)

·

$25,000 on or before December 31, 2004  (as amended September 9, 2004-received)

·

$35,000 on or before December 31, 2005  (as amended September 9, 2004 -received)

·

$40,000 on or before December 31, 2006  (as amended September 9, 2004)



Issue to the Company or pay:

·

50,000 common shares or $20,000 on or before August 15, 2003 (received)

·

75,000 common shares or $35,000 on or before July 24, 2004 (received)

·

75,000 common shares or $60,000 on or before December 31, 2005
(as amended September 9, 2004) (received)

·

75,000 common shares or $85,000 on or before December 31, 2006 
(as amended September 9, 2004)



Fund expenditures of at least:

·

$185,000 on or before June 30, 2004 (completed)

·

an additional $250,000 on or before December 31, 2004 (completed)

·

an additional $400,000 on or before December 31, 2005 (completed)

·

an additional $600,000 on or before December 31, 2006



The Company is the operator for the exploration programs until Serengetis interest has vested. In November 2004 two additional claims (the Wave claims) were staked which were jointly explored with the Tide property but do not form part of the property agreement. In November 2005, the Wave claims were permitted to lapse.



Kizmet Property, British Columbia



The Company acquired the Kizmet (formerly Sutlahine) Property by staking 52 claims between April 2003 and January 2005. The Company signed a joint venture agreement with Barrick Gold Corporation (Barrick), effective February 26, 2005, to explore the Kizmet claims. Barrick contributed 170 claims to the joint venture and paid the Company $75,000 Canadian. In January 2006, the number of claims was reduced to 93 totalling 34,078 hectares.



Barrick can increase its interest in the property to an aggregate 80% upon completion of the following:



·

to 65% upon completion of aggregate exploration expenditures of $1,200,000 (USD) over a period of three years from the date of the formal agreement;

·

to 75% upon funding exploration expenditures of not less than $500,000 (USD) per year through to a production decision; and

·

at the Companys election, to 80% upon assisting the Company with project financing.



Jake Property, British Columbia



The Company signed an option agreement effective October 29, 2005 to earn a 100% interest in the Jake claims, subject to a 4% NSR, half of which can be purchased for US$2 million. The Company is to make cash payments of:

·

US$10,000 upon signing (paid)

·

US $20,000 on or before October 29, 2006

·

US $25,000 on or before October 29, 2007

·

US $30,000 on or before each of the third through ninth anniversary dates (US $210,000)

·

US $35,000 on or before October 29, 2015



The Company is to complete exploration expenditures of:

·

$100,000 (Canadian) on or before October 29, 2007

·

an aggregate of $300,000 (Canadian) on or before October 29, 2009



The Company staked an additional 36,033 hectares surrounding the original claim.



Adam Property, British Columbia



In April 2002 the Company acquired the Adam Property by staking 3 claims comprising 60 units. These claims have been converted to 2 claims totalling 1,823 hectares. The Company conducted a sampling and mapping program during August 2002 to fulfil the assessment work requirement to keep these claims in good standing until April 2007.



ER-Ogo-Fire Property, Alaska



Pursuant to the terms of an agreement dated August 30, 2001 with Engineer Mining Corp., the Company acquired a 100% interest in the ER property.



On January 30, 2002 the Company signed an exploration, development and mine operating agreement with AngloGold (U.S.A) Exploration Inc. (AngloGold) whereby AngloGold could earn a 50% interest in the ER-Ogo-Fire property. A December 17, 2003 amendment included the Jazz claims (staked by the Company) and the Zappa claims (staked by AngloGold) in the agreement. Effective December 31, 2005, a termination agreement was signed whereby AngloGold relinquished 100% ownership of the claims subject to an NSR of 2%, one-half of which can be purchased for $2,000.000 (US Dollars).



Eagle Property, Alaska



On January 30, 2002 the Company signed an exploration, development and mine operating agreement with AngloGold whereby AngloGold can earn a 50% interest in the Eagle property. A December 17, 2003 amendment included the Sand claims (staked by the Company) and the EX claims (staked by AngloGold) in the agreement. Effective December 31, 2005, a termination agreement was signed whereby AngloGold relinquished 100% ownership of the claims subject to an NSR of 2%, one-half of which can be purchased for $1,000.000 (US). In January 2006, the Company staked 362 claims near the Eagle property.



California-Surf properties, Alaska



The Company held a 30% joint venture interest in the California and Surf properties, which included several claim blocks. The joint venture partner, Western Keltic Mines Inc. (Western Keltic), held the remaining 70% interest in the properties.



In August 2003, Western Keltic sold its 70% interest in these claims to the Company, subject to a 1.75% NSR (of which 1% may be bought for $1,000,000), for the following payments:



·

$25,000, or 50,000 common shares at the election of the Company, upon completion of $1,500,000 of exploration expenditures subsequent to the agreement,

·

$50,000, or 50,000 common shares at the election of the Company, upon completion of an aggregate $3,000,000 of exploration expenditures subsequent to the agreement,

·

100,000 shares upon obtaining a positive feasibility study for placing any part of the property into commercial production.



The Company staked claims adjacent to the current project and the California-Surf group now includes 883 claims covering 98,080 acres.



Walker Lane Project, Nevada



In January 2005, the Company signed an agreement with Newmont Capital Limited (Newmont) targeting a defined project area in Nevadas Walker Lane Mineral Belt. The Company has committed to making $300,000 USD in exploration expenditures within the project area during the term of the two year agreement. The Company may, at its discretion, acquire one or more properties within the project area boundaries in which to conduct further exploration work. On the Companys acquisition of any property interest, Newmont will be granted an NSR of 2.0% to 3.0% on a sliding scale based on the price of gold. Newmont will have a one-time right to enter a 50:50 Joint Venture upon the Companys expenditures of $300,000 USD on an acquired property. When this right is exercised, Newmont will relinquish the NSR, manage the Joint Venture, and solely fund the next $1,000,000 USD in exploration expenditures to earn its 50% interest.



In September 2005 the Company staked 65 claims totalling 1,300 acres in one project area. In February 2006, 71 claims totalling 1,404 acres were added to the group.



Northgate Exploration Alliance



In December 2005, the Company signed a letter of agreement with Northgate to cooperatively generate new exploration properties. The initial phase will consist of data compilation with each company contributing up to $20,000. The second phase of field examination will be funded by contributions of $130,000 from each company. Upon acquisition of a property, Northgate shall have an option to earn 60% of the acquired property by making the first $1.5 million in exploration expenditures. Upon completion of the earn-in, expenditures will be shared pro-rata between the Company and Northgate. The Company will be operator during the compilation and field examination phases of the project.



FER Property, Yukon



Under an agreement with Boliden Limited (Boliden) dated July 1, 1998, as amended on October 28, 1999 and October 11, 2000, the Company has earned a 51% interest in the claims. The exploration expenditures required to earn an 85% interest were not completed. Bolidens interest in the property has been sold to Breakwater Resources Ltd. (Breakwater). The Company and Breakwater intend to enter into a joint venture for the further development of the claims. If either partys interest subsequently decreases to below 7.5%, that partys interest will be automatically converted to an NSR of 2%.



Simpson Property, Yukon



In January and April 2003, the Company acquired the Simpson Property by staking 38 claims in the Watson Lake Mining District. Thirty of these claims were allowed to lapse in December 2005. The remaining eight claims have expiry dates of December 2008. Four additional claims, comprising the Simpson Extension, were staked in August 2003. These four additional claims have been allowed to lapse.



Wernecke Breccias, Yukon



In January 2006, the Company signed an agreement with Fronteer Development Group Inc (Fronteer) to acquire 700 mineral claims and a proprietary geoscience dataset covering a large region of the northern Yukon known as the Wernecke Breccias, from Newmont Exploration Canada Limited (Newmont) and NVI Mining Ltd., a subsidiary of Breakwater Resources Ltd. (NVI).



To complete the acquisition, $2 million in exploration expenditures must be spent within four years.  Newmont and NVI retain a total 2% NSR and a right of first refusal, which terminates after completion of the exploration expenditures. There is a 7.5% to 15% Net Profits Interest payable to the underlying vendors.Fronteer will be operator of the project and will fund 100% of the exploration costs to earn an 80% interest, with the Company earning the remaining 20% interest.  Once the $2 million has been expended, a Joint Venture will be formed between Fronteer and the Company, and ongoing exploration expenses will be shared pro-rata subject to dilution for non participation.  Should either partys interest fall below 5%, their interest will be converted to a 3% Net Profits Interest after payback of capital.



Yukon Targeted Exploration Initiative



In December 2003, the Company signed an agreement with Newmont to focus on grass-roots exploration within a defined area in the Yukon. Expenditures for compilation and fieldwork were shared equally between the Company and Newmont.



6.

SHARE CAPITAL



Authorized:

unlimited common shares without par value



Issued and fully paid common shares

|                 |                                                                                  |                                                                                                                                                    | Number of Shares | Amount   
|---------------- | -------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | ---------
|January 31, 2003 | 12,334,621                                                                       | $  3,914,466                                                                                                                                      
|                 | Issued for cash                                                                  |                                                                                                                                                    |                 
|                 |                                                                                  | Exercise of warrants, net of issue costs of $771                                                                                                   | 1,211,000        | 508,729  
|                 |                                                                                  | Exercise of share purchase options, net of issue costs of $70 and including transfer from contributed surplus on the exercise of vested options    | 20,000           | 17,430   
|                 | Issued for mineral property interests, net of issue costs of $141                | 50,000                                                                                                                                             | 6,859           
|                 |                                                                                  |                                                                                                                                                    |                  |          
|January 31, 2004 | 13,615,621                                                                       | 4,447,484                                                                                                                                         
|                 | Issued for cash                                                                  |                                                                                                                                                    |                 
|                 |                                                                                  | Placement, net of issue costs of $235,103                                                                                                          | 2,986,907        | 2,424,097
|                 |                                                                                  | Exercise of warrants, net of issue costs of $2,742                                                                                                 | 1,110,000        | 503,758  
|                 |                                                                                  | Exercise of share purchase options, net of issue costs of $3,245 and including transfer from contributed surplus on the exercise of vested options | 100,000          | 74,165   
|                 | Issued for Mineral Deposits Research Unit membership, net of issue costs of $122 | 7,692                                                                                                                                              | 9,878           
|                 | Issued for mineral property interests, net of issue costs of $145                | 25,000                                                                                                                                             | 8,605           
|                 |                                                                                  |                                                                                                                                                    |                  |          
|January 31, 2005 | 17,855,220                                                                       | 7,467,987                                                                                                                                         
|                 | Issued for cash                                                                  |                                                                                                                                                    |                 
|                 |                                                                                  | Exercise of warrants, net of issue costs of $3,231                                                                                                 | 1,128,819        | 1,241,798
|                 |                                                                                  | Exercise of share purchase options, net of issue costs of $235 and including transfer from contributed surplus on the exercise of vested options   | 600,000          | 360,005  
|                 |                                                                                  | Flow-through shares, net of issue costs of $29,277 and future income taxes of $182,500                                                             | 415,500          | 288,223  
|                 |                                                                                  |                                                                                                                                                    |                  |          
|January 31, 2006 | 19,999,539                                                                       | $  9,358,013                                                                                                                                      



The Company issues share purchase options to directors, officers, and employees of the Company and persons who provide ongoing services to the Company under an incentive stock option plan. Under the plan, the Company has reserved 1,300,000 shares to be issued pursuant to share purchase options. The exercise price of share purchase options will be no less than the closing price of the shares on the business day immediately preceding the date on which the option is granted less the discount permitted by the TSX Venture Exchange.  Options will expire no later than five years from the grant date, except that they will expire within thirty days when the holder is no longer qualified to hold the option (other than for cause, when the option will expire immediately). Individual grants in excess of 30,000 shares vest over two years with one-half vesting immediately, one-quarter vesting on the first anniversary date of the grant and the remaining one-quarter vesting on the second anniversary date.



| |                                    | January 31, 2006 |                                 | January 31, 2005
| | ---------------------------------- | ---------------- | ------------------------------- | ----------------
| |                                    | Number of shares | Weighted average exercise price |                 
| | Outstanding at beginning of year   | 1,645,000        | $    0.70                       |                 
| | Granted                            | 150,000          | 1.23                            |                 
| | Exercised                          | 600,000          | 0.25                            |                 
| | Outstanding at end of year         | 1,195,000        | 0.99                            |                 
| | Options exercisable at end of year | 1,130,000        | 1.00                            |                 







| |             | Options Outstanding |                | Options Exercisable
| | ----------- | ------------------- | -------------- | -------------------
| | Expiry Date | Number of shares    | Exercise price |                    
| | 02-Mar-06   | 50,000              | $      0.25    |                    
| | 15-Jan-08   | 75,000              | 0.60           |                    
| | 26-Mar-06   | 60,000              | 0.95           |                    
| | 18-Dec-08   | 455,000             | 0.95           |                    
| | 18-Jun-09   | 150,000             | 0.96           |                    
| | 09-Dec-09   | 255,000             | 1.21           |                    
| | 22-Dec-10   | 150,000             | 1.23           |                    
| |             | 1,195,000           |                |                    



The weighted average grant-date fair value of share purchase options granted during the year ended January 31, 2006 was $1.06 per share (2005 - $0.83). The Company determines the fair value of the options granted during a year for the purposes of determining share-based compensation expense using the Black-Scholes option pricing model using the following weighted average assumptions:



| |                         | January 31, 2006 |  | January 31, 2005 |  | January 31, 2004
| | ----------------------- | ---------------- |  | ---------------- |  | ----------------
| | Volatility              | 137%             |  | 110%             |  | 105%            
| | Risk-free interest rate | 3.84%            |  | 2.60%            |  | 2.75%           
| | Expected life           | 5 years          |  | 4.6 years        |  | 4.6 years       
| | Expected dividend yield | -                |  | -                |  | -               



7.

RELATED PARTY TRANSACTIONS





The Companys mineral property evaluation and exploration projects are managed by Equity Engineering Ltd. (Equity), a company indirectly owned and operated by officers and significant shareholders of the Company. Balances payable to Equity for fees and reimbursement of costs incurred on behalf of the Company have been separately disclosed as Payable to Related Party. Fees charged to the Company by Equity are on the same basis as those charged by Equity to unrelated third parties.





During the year ended January 31, 2006, the Company paid Equity $206,763 (2005 - $431,996, 2004 - $260,926) for geological consulting services and $244,871 (2005 - $203,099, 2004 - $144,087) for providing general corporate and administrative services composed of $1,117 (2005 - $14,457, 2004 - $6,396) for insurance, $4,279 (2005 - $3,711, 2004 - $2,200) for investor services, $99,305 (2005 - $96,462, 2004 - $66,264) for management services, $5,810 (2005 - $12,026, 2004 - $5,702) for office services, $62,696 (2005 - $39,172, 2004 - $36,582) for rent and $71,663 (2005 - $37,270, 2004 - $26,943) for support services.



It is anticipated that Equity will continue to provide geological consulting and administrative support services to the Company from time to time, and Equity will be remunerated for such services at Equitys standard commercial rates.



Equity is one of the underlying vendors who own a 7.5 to 15% Net Profits Interest (NPI) in the Wernecke Breccia property (Note 5). Equitys share of the NPI is 40%. In addition, two of the directors and officers of the Company each own 20% of a different company which is entitled to 10% of the NPI.



8.

INCOME TAXES



The Companys future income tax assets are:



| |                              |                            | January 31      
| | ---------------------------- | -------------------------- | ----------------
| |                              |                            | 2006            
| | Future income tax assets     |                            |                 
| |                              | Mineral property interests | $      1,859,190
| |                              | Other assets               | 49,447          
| |                              | Tax loss carry-forwards    | 3,203,278       
| |                              |                            | 5,111,915       
| |                              | Valuation allowance        | (5,111,915)     
| | Net future income tax assets | $                    -     |                 
| |                              |                            |                 
| |                              |                            |                 



A reconciliation of the provision for recovery of income taxes is as follows:



| |                                                                                    |                                                     | Year ended January 31
| | ---------------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------
| |                                                                                    |                                                     | 2006                 
| | Loss before income taxes                                                           | $      2,006,106                                    |                      
| |                                                                                    |                                                     |                      
| | Statutory tax rate                                                                 | 35.6%                                               |                      
| |                                                                                    |                                                     |                      
| | Recovery of income taxes based on combined Canadian and provincial statutory rates | $        714,174                                    |                      
| |                                                                                    |                                                     |                      
| | Add (deduct):                                                                      |                                                     |                      
| |                                                                                    | Non-deductible expenses                             | (32,663)             
| |                                                                                    | Tax effect of current  period losses not recognized | (681,511)            
| | Recovery of future income taxes arising from flow through share issue              | 182,500                                             |                      
| | Future income tax recovery                                                         | $           182,500                                 |                      
| |                                                                                    |                                                     |                      



At January 31, 2006, the Company has unrecognized non-capital losses for income tax purposes of approximately $3,203,278 that may be used to offset future taxable income. If unused, these losses will expire as follows:



| | 2007 | $    260,195
| | ---- | ------------
| | 2008 | 297,853     
| | 2009 | 322,057     
| | 2010 | 349,643     
| | 2011 | 412,759     
| | 2012 | 532,739     
| | 2013 | 1,028,032   
| |      | $ 3,203,278 



9.

FINANCIAL INSTRUMENTS



(a)

Fair value of financial instruments



The Companys financial instruments include cash, accounts receivable and accounts payable, payable to related party and joint venture deposits. The carrying values of these instruments in these financial statements approximate their fair values. The fair value of the marketable securities is disclosed in Note 3.



(b)

Foreign exchange risk



The Company incurs certain expenses in currencies other than the Canadian dollar. As such, the Company is subject to foreign exchange risk as a result of fluctuations in exchange rates.



(c)

Market risk



The Companys financial instruments include marketable securities which are publicly traded and therefore are subject to the market risks that affect all publicly traded securities. Some of these shares are thinly traded which could result in lower quoted market values.



10.

DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES



These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP). Accounting principles under Canadian GAAP which differ in certain respects from United States generally accepted accounting principles (U.S. GAAP) are:





(a)

Flow-through shares



The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes.  This statement requires the proceeds from shares issued pursuant to a flow-through offering to be allocated between the offering of shares and the sale of tax benefits, such as the renunciation of exploration expenditures to shareholders.  The sale of tax benefits is to be recorded as a deferred tax liability until the related asset is amortized or sold. Under Canadian GAAP, the estimated future income tax arising from the renunciation of expenses to subscribers is recorded as a cost of issuing the shares.  The Company has determined that there is no difference in the reported liabilities and shareholders equity arising from this difference in accounting policies.





(b)

Earnings per share



The weighted average number of shares outstanding used in the calculation of earnings per share under Canadian GAAP includes shares held in escrow. These shares are excluded in the calculation under U.S. GAAP.





(c)

Reconciliation



The effect of the differences between Canadian GAAP and U.S. GAAP on the consolidated financial statements is summarized as follows:



Loss per Share

| |                                                                   | 2006       | 2005       | 2004      
| | ----------------------------------------------------------------- | ---------- | ---------- | ----------
| |                                                                   |            |            |           
| | Weighted average number of shares outstanding under Canadian GAAP | 18,656,974 | 17,231,840 | 13,383,727
| | Escrow shares                                                     | -          | 29,865     | 209,865   
| | Weighted average number of shares outstanding under U.S. GAAP     | 18,656,974 | 17,201,975 | 13,173,862
| |                                                                   |            |            |           
| | Loss Per Share under U.S. GAAP                                    | $0.10      | $0.09      | $0.07     



11.

ENVIRONMENTAL



The Companys exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment, and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. Managements current estimate of reclamation and other future site restoration costs to be incurred for existing mining interests has been included in these financial statements.



12.

OPERATING SEGMENT INFORMATION



The Company operates in one industry segment only within three geographical areas, Alaska, Canada and Nevada. All subsidiaries are operated as one entity with management in common located at the Companys head office.



The following table shows the cash attributable to each operating segment for the fiscal years ending January 31:



| |        | 2006            | 2005            | 2004         
| | ------ | --------------- | --------------- | -------------
| | Canada | $     2,797,535 | $    2,618,968  | $     838,342
| | Alaska | 25,818          | 105,115         | 79,572       
| | Nevada | 12,674          | -               | -            
| |        | $     2,836,027 | $     2,724,083 | $     917,914



All other assets are held solely by the Canadian segment.



The following table shows the revenue attributable to each operating segment:



| |        | 2006          | 2005          | 2004         
| | ------ | ------------- | ------------- | -------------
| | Canada | $     275,376 | $    392,154  | $     208,128
| | Alaska | 837           | 95,173        | 39,899       
| | Nevada | 136           | -             | -            
| |        | $     276,349 | $     487,327 | $     248,027



Exploration expenditures on the Companys mineral properties by geographical segments are shown in the Consolidated Statement of Exploration Expenditures.



13.

SUBSEQUENT EVENTS



On March 28, 2006, the Company announced that a private placement has been negotiated to raise $2.55 million. The private placement will consist of 1,500,000 units at a price of $1.70 per unit with each Unit consisting of one common share and one non-transferable share purchase warrant ("Warrant"). Each Warrant entitles the holder to purchase, for a period of two years from the closing of the private placement, one  additional common share at a price of $2.00 per share in year one and $2.25 per share in year two. The Warrants will contain a provision whereby if, during the term of any unexercised Warrant commencing four months after the Closing, the common shares of the Company trade on any exchange for a period of 20 consecutive trading days at a price of $2.50 per share or greater in year one or $2.75 per share or greater in year two the Company may, at its option and by notice in writing to each holder, require the holder of the Warrant to exercise such Warrant within 30 days, failing which the Warrant will be deemed to have expired. The proceeds from the private placement financing will be used for continued exploration of the Company's mineral property interests, development of other projects and for general corporate purposes.



Subsequent to year-end, options to purchase 150,000 shares were exercised at prices ranging from $0.25 to $1.21. This increased the number of common shares issued and outstanding to 20,149,539 as of March 31, 2006.













RIMFIRE MINERALS CORPORATION





Management Discussion 
and Analysis







Form 51-102F1

For the year ended

January 31, 2006













1.1

Date



The information in this form includes financial results for the year ending January 31, 2006 with other information current to April 30, 2006.



1.2

Overall Performance



Rimfire Minerals Corporation is a junior mineral explorer listed on the TSX Venture Exchange, trading under the symbol RFM. Rimfire explores for precious and base metals in British Columbia, Yukon Territory, Nevada and Alaska.



British Columbia remained the focus of Rimfires exploration efforts in 2005, with six active projects in the province. While traditionally focused on northern British Columbia, Yukon Territory and Alaska, the Company diversified its geographic presence with the commencement of fieldwork and project acquisitions in Nevada under the terms of the Walker Lane agreement with Newmont.



Opportunities to strengthen Rimfires presence and bring new exploration projects into the project pipeline in traditional target areas were acted upon, with the Company acquiring large land positions in the Pogo area of Alaska, the Wernecke Mountains, Yukon Territory, with new partner Fronteer Development Group, and southern British Columbia with the Jake acquisition.



To capitalize on the strong relationship with partner Northgate Minerals, the Company embarked on an alliance with Northgate to jointly generate and explore precious metals exploration targets in Canada, potentially adding another level of diversification to the Companys geographic spread.



Two additional technical staff were added to help administer these new projects and assist in generating new exploration targets. In support, Rimfires marketing activities have focused on messaging to existing and potential joint venture partners as well as the investing public.



2005 Exploration Overview



British Columbia



During 2005, three of the Companys projects were drilled by joint venture or option partners; RDN, Thorn and Tide. There were a total of 19 holes drilled totaling 3,093 metres. In addition, groundwork and geophysical surveys were completed on the Tide and Kizmet projects. The Company conducted geophysical and prospecting-mapping programs at the wholly-owned Williams property and preliminary field examination of the Jake property. Subsequent to year-end, a trenching and geophysical survey was conducted on the Jake property.



Alaska



The commencement of mining by Teck Cominco/Sumitomo at the Pogo Gold Mine and a gold discovery by AngloGold Ashanti NA in the Goodpaster District led Rimfire to re-interpret data from previous programs and newly published government surveys to define new targets within the district. Subsequently, the Company staked claims covering 53,695 ha (132,680 acres). The Company expects to have secured a partner to conduct regional exploration on these claims in 2006. Subsequent to year end, an agreement was completed with AngloGold Ashanti (U.S.A.) Exploration Inc. to reacquirethe Eagle and ER-Ogo-Fire properties subject to a net smelter royalty.



Nevada



During the first half of the year, the company identified potential targets for exploration and conducted limited field examinations under the Walker Lane Exploration Alliance with Newmont Capital Limited. A total of 136 claims were staked in the Poncho-Crow project area and the company is negotiating to acquire existing claims in the same area. The company expects to conduct surface programs and a drill program on the claims in 2006.



Yukon Territory



In January 2006, the Company signed an agreement jointly with Fronteer Development Group Inc (Fronteer) to acquire 700 mineral claims and a proprietary geoscience dataset, covering a large region of the northern Yukon known as the Wernecke Breccias, from Newmont Exploration Canada Limited and NVI Mining Ltd., a subsidiary of Breakwater Resources Ltd. Fronteer, as project operator, staked additional claims under the agreement and will undertake exploration work in 2006.



Financial Overview for Fiscal Year Ended January 31, 2006



The Company completed one financing in 2005 consisting of 400,000 flow-through shares at $1.25. This provided $500,000 to be used for exploration at the Williams and Thorn properties within BC. The strategic advantage of this placement was to interest institutional investors in the Company.



Exploration expenditures were almost the same in the current year as they were in the previous fiscal year but the options proceeds, exploration tax credits and joint venture reimbursement were significantly less. This resulted in an overall increase in mineral property costs of approximately one-third from the previous year. The Company expanded the number of exploration projects and increased Company participation in existing projects. During 2006, the Company will be participating in an exploration alliance with Northgate Minerals which will maintain the current level of exploration expenditures.



General and administrative expenditures have increased slightly from the previous year for two reasons. Audit and legal costs have increased by 50%. Part of this is due to the increased work required to comply with new auditing regulations and part is due to increased corporate governance and oversight requiring knowledge of regulations and statutes. The second factor increasing administrative costs is the addition of two geologists to the staff part way through the year. This increases the Companys ability to manage existing projects as well as to generate new project ideas and the resources to carry them out.



The Companys working capital as of January 31, 2006 was $2,905,645, comprised primarily of term deposits and other forms of cash, compared to $2,844,579 at the end of the previous fiscal year. This is sufficient to complete the planned exploration initiatives for the current year without a requirement for additional financing.



1.3

Selected Annual Performance



The selected consolidated financial information set out below has been obtained from financial statements, which reflect the Companys operations in the mineral exploration business.



The following table summarizes information pertaining to operations of the Company for the last three fiscal years ended January 31, 2006. These results have been restated in accordance with the Companys use of the fair value method of accounting for stock option compensation that was adopted January 31, 2004:





| |                                                      | 2006
($)    | 2005
($)    | 2004
($) 
| | ---------------------------------------------------- | ----------- | ----------- | ---------
| | Revenues                                             | 76,572      | 72,989      | 24,401   
| | Other Income 
(Option Proceeds & JV Management Fees) | 199,777     | 414,338     | 223,626  
| | Exploration & Development Expenses                   | 1,265,615   | 1,090,613   | 356,812  
| | General and Administrative Expenses                  | 967,576     | 928,213     | 847,462  
| | Net Income (Loss)                                    | (1,823,606) | (1,495,680) | (901,405)
| | Per Share                                            | (0.10)      | (0.09)      | (0.07)   
| | Total assets                                         | 3,095,488   | 3,153,025   | 1,176,633
| | Long-Term Liabilities                                | NIL         | NIL         | NIL      
| | Cash dividends declared                              | NIL         | NIL         | NIL      



The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada, which conform in all material respects with accounting principles generally accepted in the United States of America, except as described in Note 10 to the consolidated financial statements and which include the following significant policies:



·

Marketable securities are recorded at acquisition cost and are written down to market value when declines in value are significant and other than temporary.

·

The Companys mineral property interests are composed of mineral properties owned by the Company and rights to ownership of mineral properties, which the Company can earn through cash or share payments, incurring exploration expenditures and combinations thereof. The Company accounts for its mineral property interests whereby all acquisition and exploration costs are charged to expense as incurred and all property sales and option proceeds received are credited to income. When the existence of a mineral reserve on a property has been established, future acquisition, exploration and development costs will be capitalized for that property. After commercial production on the property commences, the net capitalized costs will be charged to future operations using the unit of production method based on estimated recoverable reserves on the property.

·

When options to purchase shares are issued to employees or directors, the fair value of the options on the date of the grant is recognized as compensation expense, with a corresponding increase in contributed surplus, over the period during which the related options vest. When options to purchase shares are issued to non-employees in return for goods and services, the fair value of the options issued is recognized as an expense, with a corresponding increase in contributed surplus, in the period in which the goods or services are received or are expected to be received. The consideration received on the exercise of share options is credited to share capital. When options are exercised, previously recorded compensation is reclassified from contributed surplus to share capital to fully reflect the consideration for the shares issued.

·

The Company follows the asset and liability method of accounting for income taxes.  Under this method, future income tax assets and liabilities are recorded based on temporary differences between the carrying amount of balance sheet items and their corresponding tax bases.  In addition, the future tax benefits of income tax assets, including unused tax losses, are recognized, subject to a valuation allowance, to the extent that it is more likely than not that such future benefits will ultimately be realized.  Future income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to apply when the tax liabilities or assets are to be either settled or realized.

·

Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using historical rates. Revenue and expense items are translated at exchange rates prevailing at the time of the transaction. Foreign exchange gains and losses are included in the determination of income.

·

The basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. The diluted loss per share reflects the potential dilution of common share equivalents, such as the convertible notes payable and outstanding stock options, in the weighted average number of common shares outstanding during the year, if dilutive. For this purpose, the if converted method is used for the assumed conversion of the convertible notes payable at the beginning of the year. In addition, the treasury stock method is used for the assumed proceeds upon the exercise of stock options that are used to purchase common shares at the average market price during the year. Common share equivalents have been excluded from the computation of diluted earnings per share for the periods presented as including them would have been anti-dilutive.



1.4

Results of Operations



For the year ended January 31, 2006, Rimfire incurred a net loss of $1,823,606 ($0.10 per share) compared to a net loss of $1,495,680 ($0.09 per share) in the previous year. Revenue declined by $15,848 as interest revenue remained steady but joint venture management fees decreased due to reduction in number of projects under management. Completion of earn-in on the Thorn property contributed to a decline in option proceeds from $358,630 for the year ended January 2005 to $163,500 for the current year.



The major increases in general and administrative expenses are for rent and salaries and support services. Rent during the year increased from $39,172 in 2004 to $63,832 in 2005 as office renovations were completed at the end of the first quarter allowing more office space for the use of Company staff. Salaries and support services increased from $163,503 in 2004 to $255,550 in 2005. This reflects the addition of two fulltime staff members and additional support services provided by Equity Engineering Ltd.



Investor services expense has been split into two components to reflect the re-alignment of marketing strategies. Investor services expense includes only the costs required to maintain a public listing and to provide services to current shareholders. This includes listing fees and transfer agent costs. Marketing expense includes the costs to provide information to new and existing shareholders as well as trade show participation intended to raise the companys profile in the marketplace. Prior results have been reclassified to conform to the new presentation. Total expenditures on both components are reduced in the current year. The change to a strategic marketing focus rather than trade show participation is primarily responsible for the changes in expenditures.



Accounting and legal costs are sharply increased for the current year. Part of this is based on increased audit procedures required to comply with changes in accounting and auditing standards. It is anticipated that there will be an increase of approximately 20% in the amount of time involved in the audit. The second factor is the number and complexity of property option and exploration agreements undertaken by the company during the year. Most of these costs are included in acquisition costs for the individual properties but some are corporate expenses related directly to setting up a new subsidiary to hold claims in Nevada.



Exploration expenditures, excluding those by joint-venture partners, totaled $1,116,172 ($1,105,733), and property acquisition costs totaled $202,167 ($217,385). These costs were offset by joint venture reimbursements totaling $33,988 ($145,641.) The British Columbia Mineral Exploration Tax Credit Program will reimburse the Company for 20% of eligible expenditures in that jurisdiction. For the fiscal year ended January 31, 2006, exploration tax credits are only $18,736 since the remainder of exploration expenditures were renounced to flow-through investors from the private placement completed during the second quarter.



Several factors come into play when comparing current fiscal year exploration expenditures to previous years. The first is the companys decision to undertake geophysical and geochemical surveys on the Williams property. This program accounted for one-fifth of the companys exploration expenditures. Another factor was the acquisition of new claims in the Goodpaster region of Alaska. Exploration work in Nevada for the Walker Lane Alliance project also increased total exploration expenditures for the current fiscal year. The final factor was completion of earn-in for the Thorn property requiring the Company to pay 49% of exploration expenditures. British Columbia expenditures were financed with a flow-through share placement which reduced mineral exploration tax credits which otherwise would have offset 20% of the expenditures.



The Corporation is in the exploration stage and its properties are presently without a known body of commercial ore. Its principal mineral properties are the following:



British Columbia



RDN



The RDN Property is located in the Liard Mining Division of British Columbia, approximately 120 kilometres northwest of Stewart, British Columbia. This property, covering approximately 10,139 hectares, is currently optioned to Northgate Minerals Corporation. The RDN property has had a protracted history of exploration; beginning in the late 1980s and spurred on in the 1990s by the discovery of gold-silver-rich massive sulphide in similar rocks at Eskay Creek, 50 kilometres to the south. The RDN property is largely underlain by Jurassic Hazelton Group stratigraphy similar in age, lithology and geochemistry to the Eskay Creek volcanogenic massive sulphide (VMS) deposit. Late in the year, the company acquired the LL property which surrounds the north end of the RDN property.



In the 2005 program, six drill holes were completed for a total of 1,470 metres in two target areas: Blind Fault and Arctic Grid. Drilling at the Arctic Grid target intersected stratigraphy equivalent in age and geological setting to that hosting the Eskay Creek deposit. Three holes in the Blind Fault area targeted a 300 x 50 metre zone of vein and disseminated silver-lead-zinc mineralization in volcanic and sedimentary rocks where native silver was discovered in 2004. Continuous surface channel sampling in 2005 returned 24.7 metres averaging 24.9 g/t silver. Hole RDN05-42 intersected three silver-bearing intervals. Based on the geological similarities to Eskay observed on surface and in drill holes, Northgate has expressed its intent to continue exploring the property for gold-silver rich massive sulphide deposits in 2006. The 2006 program, budgeted at $1 million, will consist of airborne geophysical surveys, groundwork and drilling at the Arctic Grid.



The work program was conducted by Equity Engineering Ltd. under the direction of Murray Jones, P.Geo. ALS Chemex Labs Ltd. of North Vancouver analyzed drill core samples as well as the rock samples. A technical report has been filed on SEDAR.



Thorn



The Thorn Property is located in the Atlin Mining Division of British Columbia, approximately 120 kilometres northwest of Telegraph Creek. This property, covering 15,583 hectares, is a joint venture with Cangold Limited who has acquired a 51% interest in the property. The Thorn high-sulphidation vein system is hosted by feldspar-quartz-biotite-phyric diorite of the Late Cretaceous (ca. 91 Ma) Thorn Stock, which intrudes Upper Triassic Stuhini Group volcanic and sedimentary rocks. These high-sulphidation silver-gold-copper-bearing veins represent the prime exploration targets on the Thorn property. Lesser focus will be placed on the Oban Zone, although potential for additional breccia pipes should be considered.



The main aspects of the 2005 exploration program included 17.4 line-kilometres of IP geophysical surveying and 655.8 metres of drilling in five holes. The 2005 IP helped to further outline and define the Talisker Zone, and located two new anomalies further north: the Balvenie and Cutty Sark Zones. Geological mapping and rock sampling during 2005 focused on the margins of the Thorn Stock and the overlying Windy Table Formation volcanic units as recent age dating of these rocks revealed that they may be affected by mineralizing events at the Thorn.



Two holes were drilled at the Talisker Zone, which has now been extended over a strike length of at least 200 metres with intercepts in both 2005 step out holes including 4.2 metres of 4.44 g/t gold, 407.9 g/t silver and 2.95 % copper in THN05-37. Two holes, which tested the new IP target at the Cutty Sark anomaly, intersected the first occurrences of lithologically controlled alteration on the property. One hole tested the far eastern extent of the Balvenie Zone, another vein system parallel to the Talisker Zone.



The drilling and sampling programs were conducted under the direction of Robert Brown, P.Geo. ALS Chemex Labs Ltd. of North Vancouver analyzed drill core samples as well as the rock, soil and silt samples. A technical report has been filed on SEDAR.



Tide



The Tide Property is located in the Skeena Mining Division of British Columbia, approximately 36 kilometres north of Stewart, British Columbia. This property, covering 2,960 hectares, is currently optioned to Serengeti Resources Inc. The Tide property lies in the heart of the Early Jurassic Stewart-Unuk-Iskut metallogenic belt, which hosts a number of silver-gold+copper vein and porphyry deposits associated with 193-198 Ma porphyritic intrusives,



The primary focus of the 2005 drilling was to follow up the 2004 drilling discovery of gold mineralization at the 36 Zone. Eight holes totaling 967 metres were drilled, four targeting the 36 Zone and four targeting the 52 Zone. The holes in the 36 Zone had mineralized intervals which extended the zone to the northeast, southwest and in depth. Infill soil geochemical sampling between the 36 Zone and the South Pit soil anomalies to the south showed that the two anomalies are continuous as defined by gold values in excess of 500 ppb (0.5 g/t) gold. This gold-arsenic+/-antimony anomaly is now approximately 500 metres by 2100 metres in size, with diamond drilling having tested an area of 170 by 350 metres. Favourable results from preliminary metallurgical studies show that this mineralization is amenable to leaching, with gold recoveries averaging 73-81%. Prospecting and trenching were completed at the 52 Zone. The diamond drilling, combined with the surface results, has shown mineralization in this zone to be highly variable in nature.



The drilling and sampling programs were conducted under the direction of Henry Awmack, P.Eng. ALS Chemex Labs Ltd. of North Vancouver analyzed the samples. A technical report has been filed on SEDAR.



Williams



The Williams Property, covering 10,727 hectares, is located in the Liard Mining Division of British Columbia, approximately 150 kilometres southeast of Dease Lake, British Columbia and 330 kilometres north of Smithers. The Williams property covers two distinct gold-bearing prospects in north-central British Columbia. The T-Bill prospect is a 3 km2area of carbonate-sericite alteration, highly anomalous gold-arsenic soil geochemistry and gold-bearing quartz-sulphide veining. Drilling by Cominco and Du Pont in 1983 and 1984 intersected six separate two-metre intercepts grading greater than 15 g/tonne gold. A single 2003 drill hole (WG03-10) oriented to better intersect this structural corridor intersected four separate vein zones. The GIC prospect, located three kilometres to the north, is a previously unrecognized porphyry gold-copper target consisting of a poorly explained 0.7 km2 gold-copper soil geochemical anomaly centred on a prominent gossan.



The 2005 exploration program focused on the GIC prospect. Mapping, prospecting, and soil sampling followed by geophysical surveys outlined a compelling new copper-gold porphyry target. Induced Polarization (IP) surveys at the GIC prospect identified a strong 600 by 1800 metre chargeability high anomaly coincident with and adjacent to known gold and copper mineralization. A 500 x 1,400 metre, east-west trending copper soil geochemical anomaly, enclosing two discrete 300 x 500-750 metre gold soil anomalies lies to the north, partially overlapping the northern edge of the GIC chargeability anomaly. The rest of the geophysical anomaly is masked by glacial till except for an isolated outcrop where a chip sample returned 0.22 % copper and 0.22 g/tonne gold over 3.73 metres. Several gossans lie within the soil anomaly.



The sampling programs were conducted by Equity Engineering Ltd. under the direction of Henry Awmack, P.Eng. ALS Chemex Labs Ltd. of North Vancouver analyzed the samples. A technical report has been filed on SEDAR.



Kizmet Project



The Kizmet Project, formerly called the Sutlahine, is a joint venture with Barrick Gold Corporation. Rimfire staked the SUTL and LJ claims to the northwest of the Thorn property, based on favourable regional geochemical stream sediment survey data and similar geology to that of the Thorn property. The Company contributed claims totalling 27,939 hectares to the joint venture while Barrick contributed claims covering an area of 67,865 hectares. In January 2006, the number of claims was reduced to 93 totalling 34,078 hectares.



Barrick conducted a prospecting, mapping and stream sediment sampling program that identified several anomalous areas that will require more detailed work. A technical report has not been filed on the Kizmet Project.



Jake Property



The Jake Property, covering 37,237 hectares, is located in Kamloops Mining Division of British Columbia, approximately 13 kilometres west of Clearwater, BC. The Company signed an option agreement effective October 29, 2005 to earn a 100% interest in the Jake claims (1,204 hectares), subject to a 4% NSR, half of which can be purchased for US$2 million. The Company will make cash payments totalling USD$300,000 and complete an aggregate of $300,000 (Canadian) in exploration expenditures before October 29, 2009. The surrounding claims were staked to cover geology prospective for high grade intrusion related gold mineralization. In March 2006, the Company undertook an initial ground magnetics and VLF electromagnetics survey to identify targets for additional exploration later in the year. Mechanical trenching was conducted at the original discovery exposing six veins over the length of the 74 metre trench. The results of this survey have not yet been compiled.



Expenditures by the Company on the British Columbia properties during the fiscal year ended January 31, 2006 were:



|                                   | Jake      | Kizmet     | RDN        | Thorn       | Tide           | Williams   
|---------------------------------- | --------- | ---------- | ---------- | ----------- | -------------- | -----------
|Acquisition costs                  | $14,256   | $  7,806   | $   31,342 | $ 15,665    | $            - | $     5,000
|                                   |           |            |            |             |                |            
|Exploration costs                  |           |            |            |             |                |            
|Aircraft and helicopter            | -         | 840        | -          | 109,121     | -              | 46,761     
|Camp                               | 285       | 762        | 287        | 30,961      | 326            | 15,062     
|Chemical analysis                  | 440       | -          | -          | 11,594      | -              | 5,969      
|Drafting                           | -         | 200        | -          | 3,063       | 50             | 2,625      
|Drilling & trenching               | -         | -          | -          | 49,763      | -              | -          
|Equipment rentals                  | 45        | 462        | 150        | 1,042       | 61             | 6,040      
|Freight                            | -         | -          | -          | 8,964       | -              | 2,220      
|Geological & engineering           | 5,922     | 5,254      | 5,091      | 96,111      | 7,684          | 46,099     
|Geophysical surveying              | -         | -          | -          | 28,044      | -              | 40,878     
|Maps and reproductions             | 406       | 98         | 8          | 1,491       | 602            | 2,144      
|Materials                          | -         | -          | -          | 13,985      | -              | 4,886      
|Project management                 | 48        | 27         | 8          | 52,845      | 78             | 18,321     
|Recording and filing               | 14,473    | 2,007      | 70         | 3,462       | -              | 16,294     
|Travel                             | 183       | 1,962      | 146        | 7,257       | 112            | 1,544      
|                                   | 21,802    | 11,612     | 5,760      | 417,703     | 8,913          | 208,843    
|                                   |           |            |            |             |                |            
|                                   |           |            |            |             |                |            
|Exploration tax credits            | (263)     | (717)      | (106)      | (2889)      | (997)          | (13,762)   
|Joint venture payments             | -         | (560)      | (18,042)   | (5,465)     | (364)          | -          
|                                   | 21,539    | 10,335     | (12,388)   | 409,349     | 7,552          | 195,081    
|                                   |           |            |            |             |                |            
|Option proceeds                    | -         | (75,000)   | (40,000)   | -           | (48,500)       | -          
|                                   |           |            |            |             |                |            
|Cumulative Net Expenditures        |           |            |            |             |               
|Beginning of Year                  | -         | 185,321    | 800,676    | 665,276     | (59,978)       | 190,955    
|Property write-down or abandonment | -         | -          | -          | -           | (1,719)        | -          
|End of Year                        | $  35,795 | $  128,462 | $ 779,630  | $ 1,090,290 | $(102,645)     | $ 391,036  



United States



Alaska Properties



The Alaska Properties, located in the Goodpaster Mining District, Alaska, 65 kilometres northeast of Delta Junction, consist of six claim groups totaling 74,000 ha (182,800 acres). The ER-Ogo-Fire and Eagle claim groups were optioned to AngloGold (U.S.A) Exploration Inc. Effective December 31, 2005, an agreement was negotiated to re-acquire 100% interest in the claims subject to a 2% NSR. The Bou, Hawk, Swede and California-Surf groups are wholly owned by Rimfire Alaska, Ltd. Two distinct, but related, target types have emerged on these properties: (1) high-grade, structurally-related gold-quartz veins, and; (2) lower-grade bulk tonnage sheeted vein systems. Each of the claim groups has demonstrated multi-element silt and soil geochemical anomalies and/or gold-bearing rock samples, providing abundant justification to carry out extensive exploration on each of the properties.



Late in the year, data from previous programs and newly published government surveys was re-interpreted and new targets defined. Subsequently, the company staked 842 claims covering 53,695 ha (132,680 acres). The Company expects to conduct regional exploration on these claims in 2006 on its own behalf or under an option or joint venture agreement if a partner is secured.



A technical report for the Alaska properties has been filed on SEDAR. The Qualified Person for this property is Mark Baknes, P.Geo. Vice President, Exploration for the Company.



Walker Lane



Walker Lane Exploration Alliance with Newmont Mining Corporation targets a defined project area in Nevadas Walker Lane Mineral Belt. The company has access to Newmont's geological, geochemical and geophysical databases for the project area, as well as dedicated technical assistance and the use of Newmont's "neural network" (pattern recognition) target map.



During the first half of the year, the company identified potential targets for exploration and conducted limited field examinations. During the third quarter, 65 claims (526 ha, 1300 acres) were staked in one project area. Subsequent to year end an additional 71 (568 ha, 1404 acres) claims were staked adjoining the original group. The Company is negotiating with a third party for additional claims in the area. This acquisition is expected to be completed after the date of this report. No detailed property work on the Walker Lane projects has been completed; however, the company expects to conduct surface programs and a drill program on the claims in 2006. A technical report has not been filed. The Qualified Person for this property is Mark Baknes, P.Geo. Vice President, Exploration for the Company.



Expenditures by the Company during the fiscal year ended January 31, 2006 (all amounts in Canadian Dollars) were:



|                            | Alaska      | Walker Lane
|--------------------------- | ----------- | -----------
|Acquisition costs           | $ 104,692   | $13,323    
|                            |             |            
|Exploration costs           |             |            
|Aircraft and helicopter     | 13,097      | -          
|Camp                        | 1,424       | 21,268     
|Chemical analysis           | -           | 19,922     
|Drafting                    | 2,994       | 555        
|Drilling & trenching        | -           | -          
|Equipment rentals           | -           | 7,406      
|Freight                     | -           | 166        
|Geological and engineering  | 18,809      | 92,422     
|Geophysical surveying       | -           | -          
|Maps and reproductions      | 1,852       | 5,057      
|Materials                   | 2,576       | 2,684      
|Project management          | 569         | 282        
|Recording and filing        | 153,465     | 16,144     
|Travel                      | -           | 16,041     
|                            | 194,786     | 181,947    
|                            |             |            
|Exploration tax credits     | -           | -          
|Joint venture payments      | -           | -          
|                            | 194,786     | 181,947    
|                            |             |            
|Option proceeds             | -           | -          
|                            |             |            
|Cumulative Net Expenditures |            
|Beginning of Year           | 23,621      | 28,644     
|End of Year                 | $   323,099 | $   223,914





Yukon Territory



Wernecke Breccias



In January 2006, the Company signed an agreement jointly with Fronteer Development Group Inc (Fronteer) to acquire 700 mineral claims and a proprietary geoscience dataset, covering a large region of the northern Yukon known as the Wernecke Breccias, from Newmont Exploration Canada Limited (Newmont) and NVI Mining Ltd., a subsidiary of Breakwater Resources Ltd. (NVI). Fronteer has staked additional claims under the agreement. There is a 7.5% to 15% Net Profits Interest payable to the underlying vendors.



Fronteer will be operator for the project and will undertake exploration work in 2006.



Other Properties



The Companys other mineral property interests are:



·

The Adam Property, covering 1,823 hectares, is located in the Skeena Mining Division of British Columbia, approximately 70 kilometres northwest of Stewart. The Company owns 100% of these claims.



·

The Fer Property, consisting of 118 claims, is located in the Watson Lake Mining District of Yukon Territory, approximately 20 kilometres west of Tungsten in the Northwest Territories and approximately 200 kilometres north of Watson Lake, Yukon Territory. The Company owns a 51% interest in these claims.



·

The Simpson Property, consisting of 8 claims, is located in the Watson Lake Mining District of Yukon Territory, approximately 105 kilometres northwest of Watson Lake, Yukon Territory. The Company owns 100% of these claims.



·

The Yukon Targeted Exploration Initiative was a joint venture with Newmont Canada Limited focused on grass-roots exploration within a defined area. Costs incurred during 2005 were shared equally between the two companies. No claims have been staked within this defined area.



The following table shows the detailed expenditures for the Companys other properties during the fiscal year.



|                                   | Adam      | Fer       | Wernecke  | Yukon Targeted | Other      
|---------------------------------- | --------- | --------- | --------- | -------------- | -----------
|Acquisition costs                  | $       - | $       - | $   9,091 | $         -    | $     992  
|                                   |           |           |           |                |            
|Exploration costs                  |           |           |           |                |            
|Aircraft and helicopter            | -         | -         | -         | -              | 1,661      
|Camp                               | -         | 133       | 83        | 1,637          | 294        
|Chemical analysis                  | -         | -         | -         | -              | 826        
|Drafting                           | -         | -         | -         | 2,100          | 350        
|Drilling & trenching               | -         | -         | -         | -              | -          
|Equipment rentals                  | -         | -         | -         | -              | 535        
|Freight                            | -         | -         | -         | -              | -          
|Geological & engineering           | 2,358     | -         | 381       | 7,068          | 32,744     
|Geophysical surveying              | -         | -         | -         | -              | -          
|Maps and reproductions             | 8         | -         | 64        | 1,281          | 410        
|Materials                          | -         | -         | -         | 213            | 2          
|Project management                 | -         | -         | -         | 986            | 288        
|Recording and filing               | -         | 10,500    | -         | -              | -          
|Travel                             | -         | -         | -         | -              | 884        
|                                   | 2,366     | 10,633    | 528       | 13,285         | 37,994     
|                                   |           |           |           |                |            
|Exploration tax credits            | (2)       | -         | -         | -              | -          
|Reclamation obligation             | -         | -         | -         | -              | -          
|Joint venture payments             | -         | (7,306)   | -         | (1,140)        | (1,111)    
|                                   | 2,364     | 3,327     | 528       | 12,145         | 36,883     
|                                   |           |           |           |                |            
|Option proceeds                    | -         | -         | -         | -              | -          
|                                   |           |           |           |                |            
|Cumulative Net Expenditures        |           |           |           |               
|Beginning of Year                  | 60,336    | 100,802   | -         | 185,450        | 83,004     
|Property write-down or abandonment | -         | -         | -         | (197,595)      | (69,696)   
|End of Year                        | $62,700   | $104,129  | $9,619    | $         -    | $    51,183





The notes accompanying the consolidated financial statements contain additional details regarding option or joint venture agreements for each property.



At present, the Corporation does not intend to undertake any exploration at its own expense on the RDN, Tide, Adam, or Yukon Properties for the 2006 fiscal year. Option agreements in place require other corporations to complete exploration programs on some of these properties.



In the event that joint venture partners are not obtained for the remaining properties, the Corporation may pay the required carrying costs from working capital or allow these claims to be returned to the vendor or be forfeited to the State, Province or Territory as the case may be.



Cangold is the operator for the Thorn property and the Company will have the option to contribute 49% of the expenditures for the project or face dilution of the Companys interest at the rate of 1% reduction for each $50,000 of the proportionate share of the program in which the company does not participate.



1.5

Summary of Quarterly Results



The following table summarizes information regarding the Company's operations on a quarterly basis for the last two fiscal years.



| | Quarter
Ended    | Mineral Property
Revenue
$ | Other
Revenue
$ | Income
(loss)
$ | Income (loss)
per share
$
| | ---------------- | -------------------------- | --------------- | --------------- | -------------------------
| | January 31, 2006 | 124,943                    | 29,773          | (515,970)       | (0.03)                   
| | October 31, 2005 | 18,353                     | 18,778          | (513,695)       | (0.03)                   
| | July 31, 2005    | 15,891                     | 13,265          | (567,371)       | (0.03)                   
| | April 30, 2005   | 40,590                     | 14,756          | (226,570)       | (0.01)                   
| | January 31, 2005 | 89,691                     | 17,765          | (680,298)       | (0.04)                   
| | October 31, 2004 | 184,254                    | 39,468          | (307,839)       | (0.02)                   
| | July 31, 2004    | 54,516                     | 12,942          | (299,310)       | (0.03)                   
| | April 30, 2004   | 85,877                     | 2,814           | (208,233)       | (0.01)                   



Expenditures generally exhibit a seasonal variation being lower in the first and last quarters and higher during the second and third quarters of each year. This variation is due to the climate where exploration is taking place, which restricts exploration to the summer months. The reported figures as shown above have some of this seasonality masked by share-based compensation awards.



1.6

Liquidity



The Companys working capital as of January 31, 2006 was $2,905,645, comprised primarily of term deposits and other forms of cash, compared to $2,844,579 at the previous fiscal year end. The Company expects that current working capital will be sufficient for the 2006 and 2007 fiscal years.



The Companys issued and outstanding shares stood at 19,999,539 at January 31, 2006. The placements completed during the second quarter and exercise of share purchase warrants represents most of the increase from the 17,855,220 common shares that were issued and outstanding at the previous fiscal year-end. During the year, 150,000 employee stock options were granted and 600,000 options were exercised. 980,000 previously granted director and employee options exercisable before December 2009 remain outstanding. If all remaining options are exercised, a maximum of $1,114,525 will be added to Rimfires treasury, and shares outstanding will total 21,129,539.



The Companys financial instruments are all fully cashable at any time so there are no restrictions on availability of funds. There is no long-term debt. The Companys current obligations include rent on office premises which requires 6-month written notice. The other current obligations are statutory withholding and payroll taxes.



1.7

Capital Resources



The companys primary capital assets are mineral property interests. The company expenses all costs related to mineral properties so they do not appear on the Companys balance sheet as an asset.



None of the property agreements are binding on the Company or on the Companys option partners, with the exception of the Walker Lane Alliance where total expenditures shown below are required by the agreement. If management chooses to continue with exploration, the following schedule of payments will be required in the next year:



| | Property           | Amount                                                                                                                                                                            | Date of payment                                     
| | ------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------
| | Adam               | Nil                                                                                                                                                                               |                                                     
| | Alaska properties  | Project exploration $105,500 USD
(approximately $124,500 CAD)
Claim rental - $91,180 USD (approximately $107,600 CAD)
Assessment & filing - $3,347 USD
(approximately $3,850 CAD) | August 31, 2006

November 30, 2006
November 30, 2006
| | Fer                | 51% of cash in lieu and filing $5,355                                                                                                                                             | June 10, 2006                                       
| | Jake               | Cash payment of $20,000 USD
(approximately $22,878 CAD)
Exploration totalling $100,000 CAD                                                                                        | October 29, 2006
October 29, 2007                   
| | Kizmet             | Nil                                                                                                                                                                               |                                                     
| | Northgate Alliance | 50% of compilation and exploration to a maximum of $150,000                                                                                                                       | July 31, 2006                                       
| | RDN                | Nil                                                                                                                                                                               |                                                     
| | Thorn              | Nil                                                                                                                                                                               |                                                     
| | Tide               | Nil                                                                                                                                                                               |                                                     
| | Walker Lane        | Claim rental fee $17,000 USD
(approximately $20,800 CAD)
Project exploration totalling $300,000 USD
(approximately $376,750 CAD)                                                  | August 31, 2006

December 31, 2006                  
| | Wernecke Breccias  | Nil                                                                                                                                                                               |                                                     
| | Williams           | Advance royalty payment - $5,000                                                                                                                                                  | December 15, 2006                                   



All of these payments can be made from current assets without any requirement to pursue additional financing.



1.8

Off-Balance Sheet Arrangements



The Company does not utilize off-balance sheet arrangements.



1.9

Transactions with Related Parties



The Companys mineral property evaluation and exploration projects are managed by Equity Engineering Ltd. (Equity), a company indirectly owned and operated by officers and directors of the Company. Balances payable to Equity for fees and reimbursement of costs incurred on behalf of the Company have been separately disclosed in the financial statements as Payable to Related Party. Fees charged to the Company by Equity are on the same basis as those charged by Equity to unrelated third parties.



During the fiscal year ended January 31, 2006, the company paid Equity $206,763 (2005 - $431,996) for geological consulting services, excluding costs paid by joint venture partners, and $244,871 (2005 - $203,098) for providing general corporate and administrative services. General corporate and administrative services provided by Equity during the period consisted of the following: $1,117  insurance (2005 - $14,457) $4,279 - investor services (2005 - $3,711); $99,305- management services (2005 - $96,462); $5,810  office (2005 - $12,026); $62,696  rent (2005 - $39,172); and $71,663 - support services (2005 - $37,270). Increases in rent reflects the additional office space occupied by the companys employees while the cost of support services reflects additional administrative support as well as increased salaries for support personnel. The company now purchases general liability and property insurance independently from Equity Engineering Ltd, so this amount is no longer paid to a related company.



It is anticipated that Equity will continue to provide geological consulting and administrative support services to the Company from time to time, and Equity will be remunerated for such services at standard commercial rates.



Equity Engineering Ltd. is one of the underlying vendors who own a 7.5 to 15% Net Profits Interest (NPI) for the Wernecke Breccia property. Equitys share of the NPI is 40%. In addition, two of the directors and officers each own 20% of a different company which is entitled to 10% of the NPI.



1.10

Fourth Quarter



The Company has an incentive stock option plan for directors and employees. During the fourth quarter, the directors authorized the granting of most of the remaining stock options available under the plan. Since the company has adopted a policy of accounting for share-based compensation at fair market value, this resulted in a significant increase in expense for the fourth quarter. Addition of two full-time geologists also increased the costs for salaries and support.



Exploration expenses during the fourth quarter were lower than in the previous year because field work, specifically drilling, was carried out in early to mid-November 2004. However, acquisition expenditures were higher in the current year than they were in the previous year because the Company staked a large block of claims in Alaska and finalized several exploration agreements during the fourth quarter.



Reclamation obligations for each property with substantial exploration programs under the direction of the Company were re-evaluated to determine if allowances which had been previously estimated were still valid. The only changes in the amount of the estimate were related to use of current interest rates for the discount rate. This did not result in a significant change to the estimates. When the reclamation activities are completed, this liability will be reduced by the actual costs incurred with any variance reported as reclamation obligation expense in that period. Several properties do not have reclamation obligations accrued as yet since no exploration work has been undertaken.



1.11

Proposed Transactions



On March 28, 2006 the Company announced that a private placement has been negotiated to raise $2.55 million. The private placement will consist of 1,500,000 units at a price of $1.70 per unit with each unit consisting of one common share and one non-transferable share purchase warrant ("Warrant"). Each Warrant entitles the holder to purchase, for a period of two years from the closing of the private placement, one additional common share at a price of $2.00 per share in year one and $2.25 per share in year two. The Warrants will contain a provision whereby if, during the term of any unexercised Warrant commencing four months after the Closing, the common shares of the Company trade on any exchange for a period of 20 consecutive trading days at a price of $2.50 per share or greater in year one or $2.75 per share or greater in year two the Company may, at its option and by notice in writing to each holder, require the holder of the Warrant to exercise such Warrant within 30 days, failing which the Warrant will be deemed to have expired. The proceeds from the private placement financing will be used for continued exploration of the Company's properties, development of other projects and for general corporate purposes. This financing closed on April 13, 2006 with gross proceeds of $2,550,000. Share issue costs will be approximately $162,000. Common shares issued and outstanding has been increased to 21,721,539. There were 1,572,000 share purchase warrants issued. 140,000 Brokers warrants at an exercise price of $1.70 were issued in conjunction with the placement. The expiry date for all warrants is April 13, 2008.



1.12

Critical Accounting Estimates



Not applicable



1.13

Changes in Accounting Policies including Initial Adoption



Flow-through shares transfer the tax benefits of Canadian exploration expenditures from the Company to the individual investor. As a result, the Company may be liable for future income taxes. Accounting recommendations of the Canadian Institute of Chartered Accountants require that the cost of future income taxes related to the resulting temporary difference is recorded as a cost of issuing the securities to the investors on the date when the forms renouncing the expenditures are filed. This policy came into effect for all shares issued after March 19, 2004. The company issued flow-through shares in June 2005 and renounced the expenditures in January 2006; therefore this policy was implemented for the fiscal year ended January 31, 2006.







1.14

Financial Instruments and Other Instruments



The company does not employ a hedging strategy or a foreign exchange protection strategy. The majority of the Companys income and expenses are denominated in Canadian dollars. The income which is received in U.S. Dollars is preserved in a U.S. Dollar account for use in paying U.S. Dollar denominated expenses.



1.15

Other Requirements



The Company has filed an alternative form of Annual Information Form on SEDAR at www.sedar.com. The Company also files technical reports on all material properties, press releases and material change reports on SEDAR. The company is a foreign private issuer as defined by the Securities and Exchange Commission in the United States. As such, the Company files an annual report on Form 20-F and interim reports and other filings on Form 6-K. These reports are available on EDGAR at www.sec.gov/edgar.shtml. Additional information about the company can be accessed at the companys website (www.rimfireminerals.com.)



Additional Disclosure for Venture Issuers without Significant Revenue



Please refer to the Statement of Loss and Deficit and Note 5 in the financial statements regarding the components of general and administrative and exploration costs for the Companys mineral property interests.



Disclosure of Outstanding Share Data



Please refer to Note 6 of the financial statements for details of share issues prior to January 31, 2006. Subsequent to year-end, 150,000 share purchase options were exercised at prices of $0.25 to $1.21. 1,572,000 shares were issued pursuant to the private placement. This increased the number of common shares issued and outstanding to 21,721,539 as of April 30, 2006.



Forward-Looking Information



This MD&A may contain certain forward-looking statements. These forward-looking statements include estimates, forecasts, and statements as to managements expectations with respect to, among other things, future metal production and production costs, potential mineralization and reserves, exploration results, progress in the development of mineral properties, demand and market outlook for commodities and future plans and objectives of Rimfire Minerals Corporation. Forward-looking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate, anticipate, believe, or continue or the negative thereof or variations thereon or similar terminology. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management are inherently subject to significant business, economic and competitive uncertainties and contingencies. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Rimfire expressly disclaims any intention, or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.