FORM 10-KSB

                   SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

         [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
                 For the fiscal year ended ________________
                                     OR
          [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
       For the transition period from June 1, 1996 to December 31, 1996

                        GOLDEN QUEEN MINING CO. LTD.
          (Exact name of registrant as specified in its charter)

Province of British Columbia       0-21777               Not Applicable
(State or other jurisdiction     (Commission             (IRS Employer
 of incorporation)               File Number)          Identification No.)

                      Green Flag Building, Suite 211-A
                             104 South Freya
                         Spokane, Washington 99202 
                 (Address of principal executive offices)

      Registrant's telephone number, including area code: (509) 535-4022

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

  Securities registered pursuant to section 12(g) of the Act:  Common Stock,
                                                           without par value


Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [ ]  No [X] 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB.  [ ] 

The issuer's revenues for its most recent fiscal year (seven months ended
December 31, 1996) were $238,289.  The aggregate market value of the voting
stock held by non-affiliates at March 31, 1997 was $20,559,838.  The number of
shares of common stock outstanding at such date was 22,208,400 shares.

Transitional Small Business Disclosure Format.  Yes [ ]  No [X]

<PAGE>

                     GOLDEN QUEEN MINING CO. LTD. 
        TRANSITION REPORT ON FORM 10-KSB FOR THE SEVEN MONTH
                    PERIOD ENDED DECEMBER 31, 1996

                         TABLE OF CONTENTS

SAFE HARBOR STATEMENT

GLOSSARY
                                                                      Page
PART I

     Item 1:  Description of Business                                  1

     Item 2:  Description of Property                                  9

     Item 3:  Legal Proceedings                                       13

     Item 4:  Submission of Matters to a Vote of Security Holders     13


PART II

     Item 5:  Market for Common Equity and Related Stockholder 
               Matters                                                13

     Item 6:  Management's Discussion and Analysis or Plan 
               of Operation                                           14

     Item 7:  Financial Statements                                    17

     Item 8:  Changes in and Disagreements with Accountants on 
               Accounting and Financial Disclosure                    17


PART III

     Item 9:  Directors and Executive Officers, Promoters and Control 
               Persons; Compliance with Section 16(a) of 
               the Exchange Act                                       18

     Item 10:  Executive Compensation                                 20

     Item 11:  Security Ownership of Certain Beneficial Owners 
                and Management                                        25

     Item 12:  Certain Relationships and Related Transactions         26

     Item 13:  Exhibits and Reports on Form 8-K                       28

SIGNATURES





                                     (i)
<PAGE>
                           Safe Harbor Statement

Except for the historical information contained herein, certain of the matters
discussed in this report are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties.  Potential risks and uncertainties include, without limitation,
the likelihood of continued losses from operations pending development of the
Company's Soledad Mountain Project in Kern County, California, the need to
obtain significant additional financing in order to develop the project, risks
associated with the mining industry generally, environmental risks associated
with mining, fluctuating gold prices, and other factors that may affect future
results as described below.

The Company has no revenue from mining operations and has incurred losses from
inception through December 31, 1996 of approximately $1,921,000.  This trend
is expected to continue for at least the next two years and is expected to
reverse only if, as and when gold is produced from the Soledad Mountain
Project.    

No assurance can be given that the Soledad Mountain Project will be placed
into production.  Based upon currently available information, the Company
estimates that it will need approximately $47,800,000 to begin production,
which is expected to come from additional sales of common stock, and from bank
borrowings or other means.  Alternatively, the Company may determine that it
is in the best interests of its shareholders to enter into a joint development
or similar arrangement with another mining company to develop the Soledad
Mountain Project.  

The Company does not have a commitment for bank financing or for the
underwriting of additional shares of its common stock, and is not a party to
any agreement or arrangement providing for the joint development of the
Soledad Mountain Project.  Whether and to what extent such financing can be
obtained will depend on a number of factors, not the least of which is the
price of gold.  Gold prices fluctuate widely and are affected by numerous
factors beyond the Company's control, such as inflation, the strength of the
United States dollar and foreign currencies, global and regional demand, and
the political and economic conditions of major gold producing countries
throughout the world.  As of May 1, 1997, world gold prices were approximately
$365 per ounce, a reduction of approximately 10% from prices a year ago.  If
gold prices do not strengthen, it may not be economical for the Company to
place the Soledad Mountain Project into production. 

The Company is subject to all of the risks inherent in the mining industry,
including environmental hazards, industrial accidents, labor disputes, unusual
or unexpected geologic formations, cave-ins, flooding and periodic
interruptions due to inclement weather.  These risks could result in damage
to, or destruction of, mineral properties and production facilities, personal
injury, environmental damage, delays, monetary losses and legal liability. 
Although the Company maintains or can be expected to maintain insurance within
ranges of coverage consistent with industry practice, no assurance can be
given that such insurance will be available at economically feasible premiums. 
Insurance against environmental risks (including pollution or other hazards
resulting from the disposal of waste products generated from exploration and
production activities) is not generally available to the Company or other
companies in the mining industry.  Were the Company subjected to environmental
liabilities, the payment of such liabilities would reduce the funds available
to the Company.  Were the Company unable to fund fully the cost of remedying
an environmental problem, it might be required to suspend operations or enter
into interim compliance measures pending completion of remedial activities.

                                    (ii)
<PAGE>

                                  Glossary

Certain terms used throughout this report are defined below.  

     Ag.  silver.

     Au.  gold.

     AuEq.  Gold equivalent, being a measurement of gold and silver on a
combined basis calculated to reflect the price and recovery differentials
between the two metals.

     alluvial.  Adjectivally used to identify minerals deposited over time by
moving water.  

     basement or bedrock.  Solid rock underlying an alluvial deposit.  

     Cretaceous Period.  A period in geologic time approximately 65 to 141
million years ago.

     deposit.  A mineral deposit or mineralized material is a mineralized
underground body which has been intersected by sufficient closely-spaced drill
holes or underground sampling to support sufficient tonnage and average
grade(s) of metal(s) to warrant further exploration or development activities. 
A deposit does not qualify as a commercially minable ore body (reserves) under
standards promulgated by the Securities and Exchange Commission until a final,
comprehensive economic, technical and legal feasibility study based upon test
results has been concluded.  

     development stage.  Activities related to the preparation of a
commercially minable deposit for extraction.  

     exploration stage.  Activities such as drilling, bulk sampling, assaying
and surveying related to the search for minable deposits.

     fault or faulting.  A fracture in the earth's crust accompanied by a
displacement of one side of the fracture with respect to the other and in a
direction parallel to the fracture.

     floating cone and inverted cone.  A computerized methodology used to
approximate the shape of a near-optimal economic open pit mine plan based on
applied cutoff grade criteria and pit slopes.

     grade.  A term used to assign value to reserves, such as ounces per ton
or carats per ton.  

     HDPE.  High density polyethylene, which is a plastic used to create an
impervious membrane.
 
     heap leaching.  A gold extraction process involving the percolation of
cyanide solution through crushed ore heaped on an impervious pad or base.

     hectare.  A metric measurement of area equivalent to 10,000 square
meters. 
     igneous.  Rocks formed by the cooling and solidifying of magna or lava.  

     intrusive.  Rock which while molten penetrated into or between other
rocks, but solidified before reaching the surface.

     lode mining.  The extraction of ore from a deposit occurring in place
within definite boundaries separating it from the adjoining rocks

     linear kriging.  A geostatistical method of resource analysis.        

     magnetic surveying.  A mineral exploration technique which employs a
magnetometer to measure the magnetic intensity of an area to determine
possible mineralization.  

                                    (iii)
<PAGE>

     Merrill-Crowe process.  A process used to recover soluble gold and silver
from a leaching solution by precipitating with zinc dust after the solution
has been clarified and deoxygenated by vacuum treatment.

     Middle Miocene Epoch.  A period in geologic time approximately 6 to 22
million years ago.

     mill site claims.  A plot of ground suitable for the erection of a mill
or reduction works to be used in connection with mining operations.

     mineralization.  The presence of minerals in a specific area or
geological formation.  

     molybdenite.  A mineral containing molybdenum disulfide, a source of
molybdenum.  

     ore.  A natural aggregate of one or more minerals which, at a specified
time and place, may be mined and sold at a profit or from which some part may
be profitably separated.

     overburden.  Waste rock and other materials which must be removed from
the surface in order to mine underlying mineralization.

     pit phasing analysis.  A method used to optimize the mining sequence in
an open pit mine design.  

     placer mining.  The extraction of ore from sediment rich in concentrated
mineralization due to the high specific gravity of the mineralization.

     polymetallic.  Adjectivally used to describe a deposit or formation
containing many minerals.  

     production stage.  Activities related to the actual exploitation or
extraction of a mineral deposit.  

     reserves.  That part of a mineral deposit which could be economically and
legally extracted or produced at the time of determination.  Reserves are
subcategorized as either PROVEN (MEASURED) RESERVES, for which (a) quantity is
computed from dimensions revealed in outcrops, trenches, workings or drill
holes, and grade and/or quality are computed from the results of detailed
sampling, and (b) the sites for inspection, sampling and measurement are
spaced so closely and geologic character is so well defined that size, shape,
depth and mineral content are well-established; or PROBABLE (INDICATED)
RESERVES, for which quantity and grade and/or quality are computed from
information similar to that used for proven (measured) reserves, yet the sites
for inspection, sampling and measurement are farther apart.  

     shear zone.  A tabular zone of rock which has been crushed and fragmented
by parallel fractures due to "shearing" along a fault or zone of weakness. 
Shear zones can be mineralized with ore-forming solutions.  

     schists.  A strongly foliated crystalline rock which readily splits into
sheets or slabs as a result of the planar alignment of the constituent
crystals.  

     stripping ratio.  The tonnage of waste material removed to allow the
mining of one ton of ore in an open pit.

     sulfides or sulfide bodies.   Compounds of sulphur with other metallic
elements.  

     trend.  The directional line of a rock bed or formation.  

     volcanic, volcaniclastic or volcanogenic rock.  Rock composed of clasts
or pieces that are of volcanic composition.  

                                    (iv)
<PAGE>

                                   PART I

Item 1.  DESCRIPTION OF BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS.  Golden Queen Mining Co. Ltd. (the "Company")
is engaged in the development of certain mineral properties located in the
Mojave Mining District of Kern County, California known as the Soledad
Mountain Project.

The Company was incorporated under the laws of the Province of British
Columbia on November 21, 1985.  It acquired its initial interest in the
Soledad Mountain Project in 1986 through the acquisition of all of the
outstanding shares of Golden Queen Mining Company, Inc. (the "Subsidiary"), a
California corporation through which the Company conducts all of its business. 
Since 1986 the Company has been engaged in acquiring additional interests in
the project area, and in exploring for gold and other minerals.

A gold deposit was first outlined by the Company at the Soledad Mountain
Project in 1988, although the size of the deposit was insufficient to justify
further development; consequently, the project remained dormant for several
years.  Beginning in 1994, the Company renewed its exploration activities on
the project using funds obtained in a 1993 private placement of its common
stock.  This exploration program was completed in October 1994 and outlined
562,000 ounces of gold equivalent.  By October 1996, following further
exploration, the Company concluded that proven and probable ore reserves had
increased to 24.8 million tonnes (27.3 million tons) at an average grade of
0.84 grams per tonne (0.024 ounces per ton) of gold and 14.70 grams per tonne
(0.428 ounces per ton) of silver.  Total contained ounces are estimated at
666,400 ounces of gold and 11,695,000 ounces of silver, or approximately
791,500 ounces of gold equivalent.

Substantially all exploration activities at the project have been completed. 
The Company now intends to develop the project as an open pit gold and silver
mining and cyanide heap leach recovery operation; the Company's plans include
the construction of facilities, mining by open pit methods and processing
precious metals ores at a rate of up to 3.6 million tonnes (4 million tons)
per year for at least seven years.  This will be followed by heap
detoxification and reclamation of the project site.  The Company expects to
begin producing gold and silver from the project in the second half of 1998.

The registered office of the Company is located at 1600 - 925 West Georgia
Street, Vancouver, British Columbia  V6C 3L2; the executive offices of the
Company are located at Suite 211-A, Green Flag Building, 104 South Freya,
Spokane, Washington 99202.  Unless otherwise indicated, all references to
"Golden Queen" mean Golden Queen Mining Co. Ltd. and all references to the
"Company" include Golden Queen and the Subsidiary.

PROJECT BACKGROUND.  The Soledad Mountain Project is located within the Mojave
Mining District, along with the nearby Cactus Gold Mine, Standard Hill Mine
and Tropico Mine.  Mining in the area dates back into the late 19th century,
but the most significant production occurred from the 1930s to 1942, when Gold
Fields Mining Company of South Africa operated a 272-ton per day cyanide mill,
evidenced by the large piled tailings on the north slope of Soledad Mountain. 
No historical operators attempted open pit mining in the project area.

The Company was introduced to the Soledad Mountain deposit in the mid-1980s by
George Phelps, who held an interest in certain mining properties in the area
through the Subsidiary.  On reviewing old maps of the underground mining,
management of the Company was impressed with the horizontal extent to which
the significant precious metals extended into the foot and hanging walls of
the major veins.  Golden Queen acquired Mr. Phelps' property interests in 1986
by acquiring all of the outstanding shares of the Subsidiary.  Shortly
thereafter, land consolidation began in earnest and the Company commenced an
initial program of 12 diamond drill holes and limited underground check
sampling.  The next phases of exploration, lasting through 1990, consisted of
reverse circulation drilling and more extensive underground check sampling.

By the end of 1995, a total of 587 surface drill holes had probed the numerous
structures of the project area for ore reserves.  In addition, 7,994 meters
(26,220 feet) of underground drilling and cross-cuts were sampled to bolster
the understanding of surface drilling results and provide assay data in deeper
portions of ore-bearing structures.

                                   1
<PAGE>

EXPLORATION.

GENERAL.  Several major drilling campaigns and a program to resample the
underground workings have been completed, along with metallurgical testing for
process amenability.  Aerial survey topographic mapping and collection of
baseline data for environmental permitting have also been conducted.

High grade precious metal mineralization is associated with steeply-dipping
epithermal fissure veins occupying faults and fracture zones that cross-cut
the rock units in a general north-west trend.  This is the ore that was mined
and processed by the previous mining operation of Gold Fields Mining Company
in the 1930s and early 1940s, but a considerable amount of this material
remains and is incorporated into the present reserves.  Surrounding the veins
are siliceous envelopes that contain lower grade, but still ore-grade,
material that forms the major portion of the reserve tonnage.

SAMPLING AND BLOCK MODEL CONSTRUCTION.  Sampling and block model computer
modeling are analytical tools used by the mining industry to test the economic
validity of an ore deposit.  Gold and silver content data derived from drill
hole samples is introduced into a three-dimensional computer model of the
project area.  Different variables, such as mining costs, ore processing costs
and metals prices, are then introduced into the model to determine the
economic viability of mining all or a portion of the deposit.  

To facilitate the testing of the Soledad Mountain deposit, a block model was
constructed and values were ascribed to each 25-foot by 25-foot by 20-foot
block of material within the mineralized deposit.  These values were derived
from the gold and silver content of ore samples taken from diamond and reverse
circulation drill holes, surface trenches and underground cross-cuts in the
vicinity of each block.  The data used in the block model analysis comprises
64,081.7 meters (210,188 feet) of assayed material, taken from fourteen
different vein systems in the district.  This data is summarized as follows:


     Diamond drilling               2,169.4 meters      ( 7,116 feet)
     Reverse circulation drilling  53,918.2 meters     (176,851 feet)
     Old cross-cuts (1930s)         3,290.2 meters      (10,792 feet)
     Underground drilling (1930s)   3,235.8 meters      (10,614 feet)
     Recent cross-cuts (1980s)      1,468.1 meters      ( 4,815 feet)
                                   ---------------     --------------
                                   64,081.7 meters     (210,188 feet)
                                   ===============     ==============

There are 587 drill holes currently stored in the Company's data files.  Of
these, 564 were completed by the reverse circulation method, 15 are diamond
core and eight are open hole rotary.  Also stored in the database are 279
underground cross-cut channels and drill holes, which include a mix of values
from Gold Fields Mining Company's production records and those collected more
recently by the Company.

The computer model constructed for the Soledad Mountain Project was based on a
geological interpretation developed by the Company.  Rock types, veins, low-
grade disseminated surrounding envelopes, mined-out slopes and zones of
internal waste were delineated on cross-sections, transferred to bench plans,
digitized and loaded into the model.  Plan block maps were plotted from the
model to check the block code assignments and corrections were made where
necessary.  For this study, veins were defined as outlined areas containing
grades greater than 3.43 grams per tonne (0.100 ounces per ton) of gold
equivalent and lower grade disseminated envelopes enclosed material that
ranged from 3.43 to 0.34 grams per tonne (0.100 to 0.010 ounces per ton) of
gold equivalent.  All the remaining blocks in the model that did not fall into
one of the described ore categories were considered waste.  Since ore and
waste zones were defined in the model blocks but not in the drill hole
composites, the code of the block penetrated by the drill hole was assigned
back to the composite to ensure a consistent one-to-one match during the grade
assignment process.

Linear kriging was used to estimate gold block grades in the model.  Grades
were estimated for the veins and disseminated areas independently to maintain
the integrity of each zone.  The separation of vein, disseminated and waste
zones was maintained by allowing only composites coded as vein to be used to
estimate a block designated as vein and, similarly, only disseminated
composites influenced disseminated blocks.  Each structural zone was kriged
separately.  A gold equivalent grade was then calculated based on assumed
prices for gold and silver and an expected silver recovery rate.  The
calculation was done for all blocks containing estimated gold and silver
grades and the resulting value was stored back into the block.  Minable
reserves and all subsequent mine planning work were based on this value.

                                   2
<PAGE>

The mineralized deposit includes all blocks within the model limits, but with
no assumptions as to economic viability.  The geological resource, based on a
cut-off grade of 0.342 grams per tonne (0.010 ounces per ton) of gold
equivalent, is comprised of 73,703,000 tonnes (81,261,000 tons) averaging 0.82
grams per tonne (0.024 ounces per ton) of gold and 13.06 grams per tonne
(0.381 ounces per ton) of silver, or 0.99 grams per tonne (0.029 ounces per
ton) of gold equivalent.

FLOATING CONE RESOURCES.  The calculation of the ore reserve portion of the
mineralized deposit was made by the application of the following economic cut-
off criteria in floating cone analyses for preliminary pit design:  gold
prices of $375 and $400 per ounce; a development rock mining cost per tonne of
waste and ore of $0.77 ($0.70 per ton); internal costs of $3.64 per tonne
($3.30 per ton), comprised of processing and general/administrative costs of
$2.98 and $0.66 per tonne, ($2.70 and $0.60 per ton), respectively; a design
cost of $4.41 per tonne ($4.00 per ton), comprised of processing, mining and
general/administrative costs of $2.98, $0.77 and $0.66 per tonne ($2.70, $0.70
and $0.60 per ton), respectively; a design cut-off grade of 0.404 grams per
tonne (0.012 ounces per ton) of gold and an internal cut-off grade of 0.342
grams per tonne (0.010 ounces per ton) of gold; a refining recovery rate of
100%; and process recovery rates of 80% for gold and 70% for silver.

A floating cone represents an inverted cone designed without regard to
practical considerations that make ore extraction economically effective.  The
pit outlines require optimization procedures to adjust pit outlines for mining
and final calculation of minable ore reserves.  Such optimization procedures
include the smoothing of abrupt changes in pit wall configuration for slope
stability, the smoothing of intermediate benches and pit floors for efficient
equipment utilization and the addition of haul roads.

Once floating cone pits are modified to represent minable pits, pit phasing
analyses investigate the sequencing of individual pits and portions of pits in
an effort to maximize profitability.  Maximizing profitability implies
minimizing costs through efficient haul profiles and associated cost-effective
load-haul match up of mining equipment and maximizing the ore grade delivered
to the crusher.  Pit phasing analyses involve an iterative process of
comparing one scenario to another.

The result of this optimization process is a report summarizing practical pit
shapes, minable reserves and an associated production schedule that reflects
pit phasing.  The haul profiles developed for the production schedule provide
the basis for estimating mine capital and operating costs.

Floating cone reserves for gold prices of $375 per ounce ($12.06 per gram) and
$400 per ounce ($12.86 per gram) are as follows:

          $375 opt Au                       $400 opt Au
     --------------------               --------------------

     Tonnes    25,220,000               Tonnes    40,824,000
     Tons      27,800,000               Tons      45,000,000
     AuEq g/t       1.029               AuEq g/t       1.097
     AuEq oz/ton     .030               AuEq oz/ton     .032
     Au g/t         0.857               Au g/t         0.926
     Au oz/ton       .025               Au oz/ton       .027
     Ag g/t        14.572               Ag g/t        13.646
     Ag oz/ton       .427               Ag oz/ton       .400

In the $375 per ounce of gold floating cone reserve, material classified as
vein represents 2.5% of the tons and 12% of the contained gold equivalent.

ORE RESERVES.  The Soledad Mountain Project contains a current minable ore
reserve, classified as proven and probable, totaling 24.8 million tonnes (27.3
million tons) averaging 0.84 grams per tonne (0.024 ounces per ton) of gold
and 14.70 grams per tonne (0.428 ounces per ton) of silver.  Total contained
ounces are 666,400 ounces of gold and 11,695,000 ounces of silver, or
approximately 791,500 ounces of gold equivalent.

In addition, the project contains a mineralized deposit estimated to contain
68,000 tonnes (61,773 tons) averaging 0.71 grams per tonne (0.021 ounces per
ton) of gold and 13.15 grams per tonne (0.376 ounces per ton) of silver.  This
mineralized deposit does not qualify as a commercially minable ore body and
will not so qualify unless and until additional exploration is undertaken and
a final study based on test results is concluded.

                                   3
<PAGE>

The following table sets forth information concerning proven and probable
minable ore reserves, based on a cutoff grade of 0.37 grams per tonne (0.011
ounces per ton) of gold equivalent.

<TABLE>
<CAPTION>
                                   Proven and Probable Reserves

                       Ore         AuEq      AuEq       Au         Au       Ag           Ag
     Category         Tonnes       g/mt       oz       g/mt        oz      g/mt          oz
     --------       ----------     ----      -------   ----      -------   -----     ----------
     <S>            <C>            <C>       <C>       <C>       <C>       <C>       <C>

     Proven         22,002,000     1.01      716,500   0.85      604,400   14.82     10,486,200
     Probable        2,753,000     0.85       75,000   0.70       62,000   13.66      1,208,600

</TABLE>

The Company estimates that the current minable ore reserve will support ore
production at a rate of up to 3.6 million tonnes (4.0 million tons) per year
for at least seven years.  Considering a possible three-year period of heap
detoxification, gold production could extend the life of the project to ten
years.  Further extension is a possibility if additional drilling provides
better definition of minable reserves in those areas that currently have
limited drilling intercepts and/or limited underground sampling.  The average
stripping ratio is projected to be approximately 2.4 to 1.  The projected mine
life, stripping ratios and ore production rates at the Soledad Mountain
Project are believed by the Company to be well within industry standards.  

METALLURGY.  There are three principal types of ore represented in the Soledad
Mountain reserves:  quartz latite, rhyolites and pyroclastics.  Metallurgical
testing has been performed on more than 200 samples of these ore types from
the Project Area over a period of eight years.

The following ore processing methods were evaluated in the assessment of the
Soledad Mountain Project:  slurry cyanide leaching, gravity separation,
flotation and heap leaching.  The tests confirmed heap leaching as the best
processing method for the Project, largely as a result of the relatively low
grade of the ore to be processed.  The location of the Project and the climate
in the Project Area are well adapted to heap leaching and the process has been
successfully applied by other mining companies to nearby ore bodies.

Based on the high ratio of silver to gold in the deposits, the Merrill-Crowe
process is considered to be the most appropriate process for the recovery of
gold and silver from the leaching solution.  As a consequence of the presence
of trace elements of mercury in the ore, the recovery plant for the project
will be required to incorporate a mercury retort to remove mercury from the
precipitate.

The test data indicate that crush size is the most important factor affecting
metal recovery and that crushing the ore to a size of 10 mesh, about the
finest size possible using crushers without milling, will be required to
realize optimal recoveries.  It is anticipated that the ore will be
agglomerated with cement as a binding agent at the rate of 4.5 kilograms of
cement per tonne (10 lbs. per ton) of ore.  The average cyanide consumption
rate for the project is expected to be 0.23 kilograms of cyanide per tonne
(0.5 lbs. per ton) of ore processed.  The tests indicate average expected
ultimate gold and silver recoveries of 75% to 80% and 65% to 75%,
respectively.

MINING AND ORE RECOVERY PLAN.

MINING.  Mining at the Soledad Mountain Project is proposed to be conducted by
conventional open pit techniques.  It is anticipated that operations will be
carried out by the Company's own employees.

Open pit mining is generally associated with a spiral haulage ramp that is
extended as the pit deepens.  At Soledad Mountain, the majority of the ore
will be excavated by cutting back into canyons or along hillsides.  As well,
the ore is not in a single pit, but in a network of smaller pits with pit
walls frequently overlapping. The current mining plan involves initial low
elevation mining for the first two years of production, followed by mining at
the higher levels in subsequent years.  The road extending from the ore
stockpile area at the process plant site up to the highest elevations on
Soledad Mountain must be built before any excavation can begin on the highest
benches in each pit area.  A total of about 6,400 meters (20,992 feet) of road
will be required:  2,500 meters (8,200 feet) to facilitate the first two years
of mining at low elevations and then further extensions to the highest benches
of Soledad Mountain for the remaining mine life.

                                   4
<PAGE>

The Company is planning to mine at a rate of up to 3.6 million tonnes (4.0
million tons) of ore per year on the basis of two 10-hour shifts per day, 355
days per year.  This schedule would provide ore to the crusher at a rate of
10,250 tonnes (11,299 tons) per day and an average of 24,490 tonnes (26,995
tons) of waste per day.  All waste will be deposited on a series of dump sites
east, south and west of the pit areas.

Ground water has been reported only in the deepest gold mine workings below
823 meters (2,699 feet) in elevation.  All open pit mining is expected to be
dry, except for occasional rains and very occasional winter snow.  Old
workings from historical underground mining will be encountered.  However,
based on the experience of other operations, it is not expected that the old
mine workings will significantly interfere with mining operations.

CRUSHING, CONVEYING AND STACKING.  An 726-tonne (800 tons) per hour, four-
stage crushing circuit will be installed at the Soledad Mountain Project.  The
primary crushing system will be comprised of a vibrating grizzly feeder with
12.7-centimeter (5.0-in.) apertures and a 1.2-meter (48-inch) by 1.5-meter
(60-inch) jaw crusher with a closed side setting of 12.7 centimeters (5.0
in.).  The grizzly undersize and the jaw crusher product will be combined and
conveyed to the secondary crushing circuit.  Secondary crushing will be done
in a 2.13-meter (7-foot) standard cone crusher.  Third and fourth stage
crushing will be done in two identical circuits.  Abrasion index tests
indicate that the ore is fairly abrasive and can be expected to result in
higher than average wear rates for crushing equipment.

Crushed ore will be combined on a single belt conveyor for sampling and
agglomeration.  Cement will be added to the belt conveyor at the rate of five
kilograms per tonne of ore by a variable speed screw conveyor.  The belt
conveyor will discharge directly into an agglomeration drum.  Water and barren
solution will be added in increments in the agglomerator to bring the ore to
an 11% moisture content.  A totalizing belt scale on the final product belt
will control the cement and water additions and record daily tonnages.  The
agglomeration drum will discharge onto a conveyor that feeds the heap
conveying and stacking system.

In the primary crushing circuit, dust will be controlled by high pressure
water sprays.  In the secondary, tertiary and quaternary crushing circuits,
dust will be controlled by central dry bag dust collectors.  Individual dry
dust collectors will be used on the cement silo and at outlying conveyor
transfers.

The agglomerated ores will be conveyed to a radial stacking system by a series
of portable and semi portable conveyors.  The conveying system will consist of
a series of 0.914-meter (3-foot) wide semi-portable and portable conveyors. 
The semi-portable conveyors will transport the crushed ore to the central area
of the leach pad and the portable conveyors will transport crushed ore to the
stacker.  The stacking system will consist of a self-propelled bin conveyor
and a 39.6-meter (130-foot) long radial stacker with a 6.1-meter (20-foot)
long slinger.  The radial stacker will be equipped for lifting and hydraulic
wheel positioning.  The hydraulic drive will be sized for the slopes of the
leach pad.

LEACHING.  The heap leach pad will be located on the north slope of Soledad
Mountain.  It will be a side hill pad with a perimeter dike to support the toe
of the heap and to create solution storage capacity.  The leach pad is
designed to minimize impacts on the surrounding environment, wildlife and
waters.  It is designed as a dedicated pad; that is, ore is stacked, leached,
rinsed and left in place for reclamation.  The pad will be located downslope
of the proposed mine pit along the base of Soledad Mountain and will be
divided into four cells to correspond with ore production and pad capacity
requirements.  The capacity of the pool in each cell is designed to have
sufficient storage for up to eight hours of solution application and 12 hours
of drain down in the event of a pump or power failure and to store the
estimated precipitation from a 100-year 24-hour storm event.  Additional
storage is currently required for three of the four cells, as presently
designed, and is expected to be obtained by subexcavating the leach pad
foundation within the solution storage area.

Leach solution will be distributed over the heap by a system of pipes and
emitters.  Once the solution is applied to the ore and percolates throughout
the heap, it will drain along the base of the heap.  The solution flow will be
intercepted and collected by 10-centimeter (4.0 in.) diameter perforated pipes
installed on top of the liner system and routed into one of three solid
manifold pipes.  The manifold pipe will then route the solution to the
solution collection sump.  This drainage system is designed to minimize the
hydraulic head applied over the composite liner system and increase the rate
of solution recovery. 

Solution will be recovered from the heap by a submerged sump pump in the low
area of the cell.  The sump pump will be used to recover solutions to a tank
and booster pump station that will then pump solution to the solution storage
tanks at the Merrill-Crowe plant.  The pipelines will be located within the
lined cell for containment in the event of a pipe leak.  The pad for the pump
will be designed to drain into the leach pad to control leaks from the pump.

                                   5
<PAGE>

The pad liner system will consist of four components:  the prepared subgrade,
the liner material, a solution collection system on top of the liner and a
protective overliner material.  The prepared subgrade will be a well-graded
material prepared and compacted to a surface for placement of the appropriate
liner material.  The pad liner will be constructed as a double-liner system
with two different sections.  The liner within the solution storage area will
be double-lined with HDPE material and a leak collection and recovery system,
including leak detection monitors and a pipe collection system, between the
two liners.  The lower liner placed on the subgrade will be 40-mil thick HDPE
and the upper liner will be 60-mil thick HDPE.  Pad liner placed upslope of
the solution storage area will be a composite liner that will consist of low-
permeability soil liner directly overlain by a 60-mil thick HDPE liner.  The
60-mil thick HDPE liner will be continuous with the 60-mil thick liner in the
solution storage area.  Protective overliner material will be crushed ore
placed in a 0.5 to 1.0-meter (1.6 feet to 3.3 feet) thick lift over the lined
area.  This protective overliner will serve to secure the solution collection
piping and provide direct access in the pad area for lightweight vehicles and
the conveyor system.  Initial placement of the material will be integrated
with pad construction to create a working area of sufficient size for
production.  Thereafter, laying of the pipes and spreading of the overliner
will be done in conjunction with the pad loading plans.

The leach recovery schedule is based on three parameters:  the metallurgical
characteristics of the ore, physical delays in the handling of ore and
solutions and the retention of values in solution within the heap.  Once the
heap has been under leach for a complete leach cycle and a constant daily
tonnage is being stacked, estimated recoveries are as follows:

                   Percentage of 80% Gold, 75% Silver
                   ----------------------------------

                    Days           Au             Ag
                    ----           --             --
                     90             60             40
                    180             15             25
                    270             10             15
                    360            7.5             10
                    450            5.0              5
                    540            2.5              5
                                   ---            ---
                                   100            100
                                   ===            ===

Additional recovery on a 100% recovery basis is expected to be as follows:


                    Days           Au             Ag
                    ----           --             --
                     960           2.0            3.0
                    1320           1.0            2.0

The modification for the first year's production schedule must take into
account the load-to-leach delays, delays from the additional lifts and, most
importantly, the values retained in heap solutions.  The heaps will be
detoxified prior to closure by a rinse of a combination of fresh water and
peroxide-treated recycled water.  The heap will be rinsed by cells.  Each cell
is estimated to require a two-year period to detoxify to required cyanide
levels.  The amount of fresh water available is limited by the well source and
the other demands of production: agglomeration and dust suppression.  During
the production years, 18.9 liters (5 gallons) per second will be available. 
After mining has ceased, 37.9 liters (10 gallons) per second will be
available.  The addition of fresh water must be matched by the loss of water
to evaporation.  Production during the detoxification period will come from
two sources.  Gold and silver will be recovered as a result of extending the
leach cycle and from the solutions entrained in the heap that are rinsed
during the period.

RECOVERY.  The Soledad Mountain Project gold recovery plant will be a
conventional Merrill-Crowe circuit because of the high silver content in the
ore.  The ore body average silver content is 14.78 grams per tonne (.43 oz.
per ton) but the silver content of the feed will occasionally exceed 34.3
grams per tonne (1.0 oz. per ton).  During heap detoxification, when cyanide
levels drop below levels suitable for Merrill-Crowe processing, a small carbon
plant will be used.

CLOSURE, RECLAMATION AND BONDING.  The reclamation requirement for the Soledad
Mountain Project includes removal of all structures, shaping and seeding of
the heaps, seeding of portions of the waste dumps and the ripping up or
removal of all roads.  The mine pits will require little or no reclamation. 
Reclamation requirements are influenced by the fact that the Soledad Mountain
Project is located in a desert climate, with less than 14.5 centimeters (5.7
in.) of annual rainfall.  Reclaimed slopes may be as steep as 1:1 and there is
no requirement for demonstration of re-vegetation.  Growth media (generally,
the 

                                   6
<PAGE>

top 5.0 centimeters [2 in.] of cover) will be removed from the waste dump and
heap leach sites and stockpiled for final reclamation.  It is expected that
the growth media will contain most of the seeds necessary for the reclamation. 
The waste dumps and heaps will be benched by bulldozer upon the completion of
mining and roadways will be ripped up.  The growth media will be distributed
along the benches and in the roadways.

Several bonds will be required for the Soledad Mountain Project:  a Surface
Mining and Reclamation Act bond, to be held by Kern County, to cover the
general reclamation of the site, including the waste dumps, roads, mine pits
and building removal; a detoxification and closure bond, to be held by the
Lahontan Regional Water Quality Control Board (the "LRWQCB"), relating to the
heap back process areas; and an "unforeseen event bond", to be held by the
LRWQCB, which is intended to bond for a catastrophe that would contaminate
surface or ground water with processed water.  As there are no surface streams
at Soledad Mountain, the bond would apply to ground water only.  The amounts
of these bonds will be determined by the regulatory authorities when permits
are granted for the Soledad Mountain Project.  The Company expects to meet
these bonding requirements by purchasing surety bonds from one or more
insurers.  Alternatively, the Company may post money market securities, such
as certificates of deposit, or bank letters of credit in lieu of, or in
addition to, such surety bonds.

Based on currently available information, the Company estimates that the costs
of complying with environmental requirements pertaining to the Soledad
Mountain Project, including land reclamation, will be approximately $3,000,000
once production at the mine commences, increasing to $5,000,000 by the end of
the life of the mine.    

PERMITTING PROCESS.  A number of permits and approvals are required with
respect to all aspects of construction, operations and closure of a mine at
the Soledad Mountain Project.  While approvals do not constitute a permit as
such, they are an integral part of the permit process and have significant
importance.  The Company expects the permitting process for the Soledad
Mountain Project to be relatively straightforward.  There is a long mining
tradition in the area of the project and the surrounding area and Kern County
has designated mining as one of the best uses for land in the area of the
project.  Two similar projects are located nearby, one in the final phases of
operation and the other in closure.  The Company is not aware of any sensitive
plants or animals in or near the project area.

The Kern County Planning and Development Department has the lead role in the
development and review of the environmental documents in accordance with the
Memorandum of Understanding between Kern County and the United States
Department of the Interior's Bureau of Land Management (the "BLM").  An
environmental impact report ("EIR") is required by the California
Environmental Quality Act wherever cyanide is used to process precious metal
ores and the United States National Environmental Policy Act requires some
form of environmental review, with an environmental impact statement ("EIS")
being the most comprehensive of these.

In February 1996, the Company submitted a draft combined EIR/EIS report,
prepared by an independent contractor, to Kern County and the BLM.  The
permitting process provides for public comments and two public meetings were
held by the BLM in April 1996.  There is also opportunity for the public to
provide written comments.  

The public comment period ended June 30, 1996; the Company received comments
directed toward the project's effect on ground water quality and quantity, air
quality, the effect of development on native species of plants and animals,
the visual impact of the project and the potential hazards associated with
transporting supplies and chemicals to the project site.  These comments and
the results of specific studies undertaken partially in response to the
comments will be incorporated in the combined EIR/EIS report, and this
document will then be released to the public for three months, after which
time the BLM will give its "Record of Decision" and Kern County will provide
its decision.  The Company expects that it will receive the final decisions on
its permitting application by late 1997.

The Company believes that an unfavorable decision by either the BLM or Kern
County would become known before the EIR/EIS is complete, since both agencies
are expected to express their preferred alternative in the draft EIR/EIS.  If
the project is viewed disfavorably, the Company will either continue to
mitigate the BLM's and Kern County's concerns until approval is granted, or
redesign the plan of operation to an acceptable standard.  Were the plan of
operation to be redesigned, the permitting process could begin anew.

                                   7
<PAGE>

ENVIRONMENTAL ISSUES.

ACID GENERATION.  A number of samples representing different rock types from
the Project site were tested for acid generation/neutralization potential. 
Two methods for evaluating acid generation/neutralization potential were used
in the review of each of the samples.  Under one method, none of the samples
were found to be acid generating or acid toxic as indicated by pH level. 
Using a second technique, one sample was found to be marginally acid
generating.  Because the rock type represented by this one sample would
constitute approximately 10% of the waste and will be disbursed throughout the
several dumps with overwhelming volumes of rock that have an excess of
buffering capacity, the Company is of the view that this waste is unlikely to
create an acid generation problem.

To meet closure requirements, all of the processed material will remain on the
lined pad following rinsing.  The Company believes that this, along with large
amounts of cement and other basic compounds used in solution to be used in
acidity control, will mean that there will be no material risk of acid
generation in the heaps.

HYDROLOGIC DATA.  The Soledad Mountain Project is in the northern portion of
the Antelope Valley ground water basin and experiences an average annual
rainfall of less than 14.5 centimeters (5.7 in.).  There are no surface waters
of any kind, other than the periodic runoff that follows the rare heavy rains
that typically occur during the winter months.  Drainage in the area of the
project is controlled by a series of deeply incised gullies and channels that
ultimately drain to the north-west into the Chaffee hydrologic area.  The
water that does not evaporate typically percolates into the Antelope Valley
ground water.  No water quality data are available for surface runoff.  Ground
water in the bedrock underlying the area is almost certainly very modest in
quantity and is restricted to fractures.  The alluvial cover on the valley
fill are known sources of important amounts of ground water.  Water in these
cases is typically at 55 to 61 meters (180 to 200 feet) in depth.  

Wells in the shallow alluvium are historically low yield in nature, while
those in areas with a substantial amount of alluvial fill can be important
producers.  Water quality data are limited; however, sufficient data are
available to confirm that the water is acceptable for the process applications
proposed.

WATER QUALITY ISSUES.  Once mining at the project has commenced, control of
surface water in the area will be achieved through the construction of
intercept trenches to preclude the uncontrolled runoff from coming into
contact with the leach heaps or other materials that might degrade water
quality.  Also, the heap leach process that the Company intends to employ does
not include direct or indirect waste water discharges.

Ground water protection from leaching solutions will be achieved through the
use of a double liner system augmented by a leachate collection and recovery
system.  A monitoring system below the liner will also be incorporated for
leak detection.  Additional monitoring wells will be placed down gradient in
the direction of probable flow as an additional protective feature.

AIR QUALITY ISSUES.  The project lies within the Southeast Desert Air Basin,
which is under the jurisdiction of the Kern County Air Pollution Control
District.  The area is designated as unclassified for PM(10) emissions (that
portion of the total suspended particulates less than 10 microns in size) and
as a non-attainment area for ozone.  The typically windy conditions and very
dry nature of the area are probably responsible for the high PM(10) background
levels recorded at several nearby monitoring stations.  On-site air sampling
was conducted for approximately one year with high background PM(10) levels
found.

Fugitive dust, when combined with the background dust, may cause unacceptable
levels of PM(10) emissions off-site, and may represent the greatest potential
environmental issue.  A PM(10) level of 44 micrograms per cubic meter is
projected by computer modelling utilizing a mining rate of 30 million tons per
year of ore and waste.  This level is below the California attainment standard
of 50 micrograms per cubic meter and the Federal standard of 150 micrograms
per cubic meter.  However, the Company believes that it will achieve
compliance with applicable standards by a greater margin, as a result of the
fact that the modelling methodology assumes worst likely case conditions which
are considered unlikely to be encountered in actual operations and based on
the use by the Company of commonly-accepted dust control techniques in all
phases of mining and crushing.

FACILITIES AND EMPLOYEES.  The Company's principal executive offices are
located in a 1,200-square foot facility at 104 South Freya Street in Spokane,
Washington.  The Company also leased facilities at Rosamond, California until
December, 1996.  At March 31, 1997, the Company employed three full-time and
zero part-time management, finance and administrative employees at its Spokane
office, and 12 full-time and zero part-time employees at its Mojave office.

                                   8
<PAGE>

Item 2.  DESCRIPTION OF PROPERTY.

LOCATION AND ACCESS.  The Soledad Mountain Project is located in the Mojave
Mining District in Kern County in southern California, approximately
2.4 kilometers (1.5 miles) from Highway 14, a paved, four-lane highway.  Los
Angeles, California is about 145 kilometers (90 miles) south of the project
and the metropolitan area of Lancaster/Palmdale, California is less than 48
kilometers (30 miles) to the south by Highway 14.  Secondary paved access
roads extend from Highway 14 and encircle Soledad Mountain, providing access
to the project site.  Major power lines come to within a few hundred meters of
the plant electrical substation on the north-east corner of the project.  

While there is no source of water naturally occurring on the site in
quantities sufficient for the expected needs of the project, an area
controlled by the Company to the north of Soledad Mountain is recommended for
well development at an estimated depth of 61 to 122 meters (200 to 400 feet). 
An alternate site, also controlled by the Company, to the west of Soledad
Mountain is estimated to require drilling to a depth of 213 meters (699 feet).

The population centers of Mojave, Lancaster, Bakersfield and Los Angeles, all
located within a 161-kilometer (100-mile) radius of the project, are sources
for the labor, supplies, material and equipment needed for the project.  The
Santa Fe Railway line runs parallel to, and just east of, Highway 14.  The
town of Mojave, California provides a convenient railhead for delivery of
large pieces of equipment.  Other aspects of regional infrastructure already
in place and available to support the Soledad Mountain Project include
hospitals, ambulance service, fire fighting service, garbage disposal,
schools, living accommodations, shopping, airline services and recreational
areas.

Local climatic conditions reflect the high desert environment of the Mojave
Desert in southern California.  Conditions are variable, with temperatures
ranging from below freezing in the winter to more than 40.6 degrees Celsius 
(105 degrees F) in the summer.  Wind is a factor with respect to structural 
stability, as gusts frequently reach 100 to 130 kilometers (62 to 81 miles) 
per hour.  Flora and fauna are sparse in the project area, reflective of the
Mojave Desert environment.  No perennial streams or springs exist in the 
project area and the only surface run-off occurs during the heavy rainstorms
that are most prevalent from December through March of each year.







         [The balance of this page has been intentionally left blank.]

                                   9
<PAGE>

The Soledad Mountain Project is more particularly identified on the following
map.


     The property is located in Kern County, California, to the north of Los
Angeles, California.  The legal description of the property is included in
the section entitled "Land Ownership and Mining Rights."


                                    10
<PAGE>

LAND OWNERSHIP AND MINING RIGHTS.  The legal description of the Soledad
Mountain Project area includes portions of Sections 5, 6, 7 and 8 in Township
10 North, Range 12 West and Sections 1 and 12 in Township 10 North, Range 13
West, San Bernardino Baseline and Meridian.  Most of the mining and processing
facilities will be located in Section 6 in Township 10 North, Range 12 West. 
The project area is a 497-hectare (1,228 acres) contiguous block within an
area of approximately 1,012 hectares (2,501 acres) held by the Company.  The
project property is comprised of 33 patented lode mining claims, 123
unpatented lode mining claims, one unpatented placer mining claim, one
patented mill site claim, six unpatented mill site claims and 379 hectares
(937 acres) of fee land.  One hectare is approximately equal to 2.471 acres.

The project property is held by the Company through the Subsidiary under a
variety of agreements with 79 property owners.  These agreements include 64
mining leases, two exploration agreements with options to purchase and five
purchase agreements that are in various stages of completion.  The Company
believes that all of the land necessary for the development of the project has
either been secured under one of these agreements or is controlled by the
Company through ownership of the land in fee or where the Company is the
holder of unpatented claims.

The Company commissioned a formal title opinion covering the project property
which was rendered in August and September 1996.  With such a complicated
ownership history as is common in historic mining districts, it is typical for
title problems to exist with respect to properties in the area in which the
project is located.  The title opinion reveals that the few title questions
which exist with respect to title to the property do not present a material
threat to the project.  The Company is attempting to resolve the title issues
of which it is currently aware with the assistance of its California counsel,
a law firm with experience in title matters relating to properties in the
Mojave Mining District.

A comprehensive land survey of the project area has not yet been undertaken. 
Since 1993, the whole of the project area and much of the immediate
surrounding area has been segregated from appropriation under the United
States General Mining Law of 1872.  The segregation terminates May 8, 2000 and
is additional protection to the Company in the event open ground exists in the
project area.

The various property purchase agreements to which the Company is a party
typically require payment by the Company of the purchase price over an
extended period of time.  In most cases, a somewhat larger advance payment was
made at the time the agreement was entered into and, in some instances, a
larger payment is due at the time the purchase is completed.  Certain of the
property purchase agreements require the payment by the Company of royalties
upon the commencement of commercial production from the project.  As of the
date of this registration statement, approximately $2,800,000 remained to be
paid by the Company under these various property purchase agreements. 
Approximately $1,100,000 of this amount is due within the ensuing twelve
months. 

The leases to which the Company is a party typically require payment in the
form of advance minimum royalties.  With one exception, these payments are
subject to a credit when production from the project starts.  In both the
leases and the purchase agreements, applicable royalties are restricted to the
property covered by the lease or agreement, as the case may be.  Most of the
royalties are of the net smelter return ("NSR") type and are based on a
sliding scale, with the percentage amount of the royalty being a function of
the ore grade on the property to which the royalty relates.  Typically, the
royalties are 5% NSR or less, with an expected average of 3.1% NSR based on
the sliding scale royalty percentage and the modest grade of the deposit. 
Many of the leases provide that the royalty payable to the lessor is subject
to adjustment in the event that the interest of such lessor in the property 
leased to the Company is greater or less than represented by the lessor in 
such lease.  A number of the agreements have an additional modest royalty 
consideration which applies in the event that non-mineral commodities, such 
as aggregates, from the property are sold.

PROPERTY ACQUISITIONS.  In the three years preceding the date of this report,
the Subsidiary acquired a number of property interests in the Soledad Mountain
Project area, at a total cost of approximately $2,700,000, in the following
transactions.  

In March 1995, the Subsidiary acquired 1.2 hectares (3 acres) of fee land from
William and Dorothy Meier of Valley County, Idaho.  In April 1995, the
Subsidiary acquired an option to purchase all of the outstanding shares of
Karma Wegmann Corp., a California corporation, from Grace W. Meehl, Madge W.
Wolff, Stephen G. Wegmann, Michael L. Wegmann, John G. Hodgson, Virginia L.
Sigl, Patrick L. Wolff and George P. Wolff, most of whom reside in California. 
Karma Wegmann Corp. owns an aggregate of six patented lode mining claims,
seven unpatented lode mining claims and one patented mill site claim in the
project area.  In January 1996, the Subsidiary exercised its option to
purchase such shares.  Pursuant to the terms of the Subsidiary's agreement
with the owners of the shares of Karma Wegmann Corp., such shares will be held
in escrow and will remain registered in the names of the vendors until the
vendors have received the final installment of the purchase price, which

                                    11
<PAGE>

is payable on the earlier of July 1, 1999 or whenever the Soledad Mountain
Project is brought into sustained production.  In September 1995, the
Subsidiary entered into an agreement to acquire 16.2 hectares (40 acres) of
fee land from the Paveen Gupta Medical Corporate Defined Benefit Pension Plan
of Culver City, California.  This acquisition was completed in November 1996. 
In March 1996, the Subsidiary acquired three unpatented mining claims from
Eric W. Godfrey, James P. Sigl, the Joseph Meehl Estate, John G. Meehl and the
Meehl Family Trust of Venice, California.  In June 1996, the Subsidiary
acquired two parcels of property aggregating approximately four hectares (10
acres) from the Federal Home Loan Mortgage Corporation of Texas and Rolando
and Delia Cruz of Texas.  One of such parcels is adjacent to the project area
and the other is within the project area.  In August 1996, the Subsidiary
entered into a purchase agreement with Southwestern Refining Corporation of
California to acquire approximately twelve hectares (30 acres) of property
within the project area.  This transaction closed in September 1996.    

The Subsidiary has purchased the following parcels outside of the mine site
area.  In June, 1996, a home and two hectares (5.0 acres) from Federal Home
Loan Mortgage Corporation.  In September, 1996, a home and two hectares (5.0
acres) from James and Diane Prentice of California.  In September 1996, the
Subsidiary purchased approximately two hectares (4.9 acres) of property
outside the project area from James and Diane Prentice of California.  In
December, 1996, a home and two hectares (5.0 acres) from Richard and Kimberly
Smith of California.  In January, 1997, a home and two hectares (5.0 acres)
from Guadalupe and Enriqueta Munoz of California.  In January, 1997, one
hectare (2.5 acres) from Larry Mettert of California.

The Company does not require additional properties to place the Soledad
Mountain Project into production, and has no present plans to acquire any
properties within the mine area.  The Company continually evaluates other
precious metals mining opportunities for possible acquisition or joint
venture, and from time-to-time engages in exploratory discussions regarding
such opportunities.  As of the date of this registration statement, the
Company has no agreement, undertaking or other arrangement with any person
regarding the acquisition of mining properties outside the Soledad Mountain
Project area.

GEOLOGY.

REGIONAL GEOLOGY.  The structural history of the western United States is
complex, with orogenic events occurring from the Late Cretaceous Period to the
Middle Miocene Epoch (approximately 74.5 million to 16 million years ago). 
The Sierra Nevada Range and the San Bernardino Mountains, the principal arcs
surrounding the Soledad Mountain area, are relatively narrow, with well-
defined zones of calc-alkaline volcanic and plutonic activity.  Deposits of
copper, iron, molybdenum, tungsten, gold and silver are associated with these
orogenic events.  Miocene volcanic units rest unconformably on Late Cretaceous
quartz monzonite (Sierra Nevada Batholith) basement.  This suggests that the
volcanic center at Soledad Mountain may lie in a domed or tectonically-
elevated area, perhaps the topographic margin of a caldera with the central
collapsed area represented by the accumulation of tuffaceous sediments south
of Soledad Mountain in the Rosamond Hills area.

SITE GEOLOGY.  Soledad Mountain is a moderately-eroded silicic volcanic center
of Middle-to-Late Miocene Epoch (approximately 21.5 million to 16.9 million
years ago) and is interpreted as part of a large caldera.  Volcanics consist
of felsic flows, tuffs and breccias with rock types ranging from quartz latite
to rhyolite.  Faults have disrupted all major rock types with the major faults
trending N10 degrees E to N40 degrees W.  The faults dip from 70 degrees to 90
degrees near the surface and 45 degrees to 60 degrees at depth.  On the north-
east side of the project area, the faults tend to dip toward the north-east,
while the faults on the south-west side tend to dip towards the south-west. 
From east to west, the principal veins crop out within a north-west-trending
belt about 1,219 meters (3,998 feet) wide and about 1,981 meters (6,498 feet)
long.

The mountain consists of coalescing and interpenetrating volcanic domes, along
with lava flows and pyroclastic ash-fall tuffs and flows.  Volcanic
compositions range from quartz latite to rhyolites with ages ranging from
21.5 to 16.9 million years.  Other past gold producing structures in the
district show similar characteristics to Soledad Mountain.  Common features
are an epithermal hot spring style of mineralization, host rocks consisting of
calc-alkaline volcanics and structurally controlled mineralization.  The gold
mines within the Mojave Mining District appear to line the rim of a collapsed
caldera.  The center of the caldera is south-east of Soledad Mountain, north
of the Tropico Mine and south-east of the Cactus Gold Mine.  

The Standard Hill Mine, north-east of Soledad Mountain, consists of faults
filled with quartz veins that cross-cut quartz monzonite and quartz latite
volcanics.  The veins strike north to north-west with shallow dips towards the
east and north-east, respectively.  This deposit represents a mineralization
lower in the system than Soledad Mountain.  The Tropico Mine, seven miles to
the south, consists of Cretaceous quartz monzonite overlain by volcanics of
quartz latite flow-banded rhyolite and rhyolite porphyry similar to those of
Soledad Mountain.  The veins strike east to west and dip 65 to 70 degrees to
the south.  Quartz veins fill pre-mineral faults, with movement continuing
during and after mineralization.  The Cactus Gold Mine, five 

                                    12
<PAGE>

miles to the west, consists of quartz latite to rhyolite flows, resting
unconformably on quartz monzonite.  The strikes of the veins vary from north-
east to north-west, with the dips varying from the south-east to north-east. 
Mineralization is associated with quartz-filled faults, fault breccia and
zones of silicification and argillization of the wall rock.

The mineralized faults at Soledad Mountain show two distinct dip directions. 
The faults on the north-east portion of Soledad Mountain dip 60 to 85 degrees
to the north-east.  Faults on the south-west portion of Soledad Mountain dip
60 to 85 degrees to the south-west.  The area between these sets of faults
represents a vent axis trending north-west, forming an elevated crest with an
underlying competent root system.  Upon the collapse of the caldera, block
faulting along the slopes was deflected away from the vent axis and its
competent root system.  Mineralization occurs in a series of epithermal veins,
faults and shear zones.  Vein widths vary up to fifteen meters and are
consistent along strike and down dip.  Some of them have been mined to a
vertical depth of 305 meters (1,000 feet).  Testing has shown that the
principal ore minerals are native gold, electrum and a suite of silver
minerals consisting of acanthite, native silver, pyrargyrite and polybasite in
a gangue of oxidized, brecciated, quartz with minor pyrite.  Traces of
sphalerite, chalcopyrite and galena are also present.

The lateral extent of mineralization in the different volcanic units at
Soledad Mountain varies.  Mineralization of the volcanic flow units of quartz
latite, flow-banded rhyolite and porphyritic rhyolite is generally confined to
faults and fault breccias and shows a weak lateral potential for
mineralization into the wall rock.  Where mineralized faults and veins cross-
cut the middle and upper pyroclastic units, a wider halo of mineralization
into the host rock occurs.  This indicates penetration of hydrothermal
solutions into the more permeable and porous tuffaceous units of the Soledad
Mountain complex.

The Company believes the geology of the Soledad Mountain Project area is
conducive to its intended operations.

Item 3.  LEGAL PROCEEDINGS.

Neither the Company nor any of its mining properties are subject to any legal
proceedings.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 1996.


                                PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

PRICE RANGE OF COMMON SHARES.  The common stock of the Company is listed and
traded on the Toronto Stock Exchange.  The following table sets out the price
range of the common stock as reported by the Toronto Stock Exchange for the
calendar periods indicated.

        Year Ended 
     December 31, 1995               High                Low

     First Quarter                 C$1.90              C$1.30
     Second Quarter                  1.95                1.00
     Third Quarter                   1.84                1.26
     Fourth Quarter                  1.65                1.20

        Year Ended 
     December 31, 1996

     First Quarter                 C$2.55              C$1.29
     Second Quarter                  3.20                2.09
     Third Quarter                   2.55                1.87
     Fourth Quarter                  2.90                2.27

                                    13
<PAGE>

DIVIDEND POLICY AND RECORD.  The Company has never paid dividends on its
Common Stock.  The Company's present policy is to retain any earnings for use
in its business and it does not intend to pay dividends on the common stock in
the foreseeable future.  Payment of any cash dividends in the future will
depend upon the earnings and financial condition of the Company, any covenants
in loan documents and other factors the board of directors of the Company may
consider to be appropriate.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

INTRODUCTION.  On May 21, 1996, the board of directors of the Company approved
the adoption of a change in the fiscal year-end of the Company, from May 31st
to December 31st.  This change took effect with the year ending December 31,
1996.  The following is a discussion of the operating results of the Company
for the fiscal year ended May 31, 1996 and for the seven-month period ended
December 31, 1996.  Effective May 21, 1996, the Company changed the currency
in which it reports its financial results from the Canadian dollar to the U.S.
dollar.  All comparative figures in the Company's consolidated financial
statements included in this report and the discussion which follows are in
U.S. dollars.

STATEMENTS OF OPERATIONS AND DEFICIT AND CHANGES IN FINANCIAL POSITION DATA.

RESULTS OF OPERATIONS.

OVERVIEW.  During the periods indicated in the discussion which follows, the
Company has been in the exploration and development stage of its business and
therefore has earned no revenue from its operations.  Variations in the level
of expenses between periods have been as a result of the nature, timing and
cost of the activities undertaken in the various periods.  Financing of the
continued exploration and development of the Soledad Mountain Project during
such periods has been obtained through the sale of shares of common stock of
the Company in predominantly offshore transactions, and through borrowings.

Operating results of the Company are summarized as follows:

<TABLE>
<CAPTION>

                         Annualized Results  Seven Months Ended   Year Ended  *   Cumulative Since
                         December 31, 1996   December 31, 1996   May 31, 1996 *      Inception
                         ------------------  ------------------  ------------ *   ----------------
<S>                      <C>                 <C>                 <C>              <C>   
General and admin-
  istrative expense      $ 917,000           $ 535,131           $ 437,131    *   $2,141,857
Interest expense            97,000              56,472              35,167    *      206,582
Interest income            408,000             238,289              50,539    *      711,020
                          --------            --------            --------    *    ---------
Net loss                 $(598,000)          $(348,948)          $(426,380)       (1,921,039)

</TABLE>

For the seven month period ended December 31, 1996, the Company incurred
general and administrative expenses of $535,000 ($917,000 on an annualized
basis), as compared to $437,000 for the year ended May 31, 1996.  The increase
is primarily due to increased salaries resulting from the hiring of additional
management personnel in December 1995.  Interest expense for the seven month
period ended December 31, 1996 was $56,000 ($97,000 on an annualized basis),
as compared to $35,000 for the year ended May 31, 1996.  The increase is due
to an increase in the Company's average balance of long term debt, which
resulted from the acquisition of certain mining properties.  Interest income
for the seven month period ended December 31, 1996 was $328,000 ($408,000 on
an annualized basis), as compared to $51,000 for the year ended May 31, 1996. 
The increase was due to a higher average cash balance during the year, as a
result of funds raised through the issue of special warrants in the year ended
May 31, 1996.  As a result of the foregoing factors, the Company incurred a
net loss of $349,000 for the seven month period ended December 31, 1996, as
compared to a net loss of $426,000 for the year ended May 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES.

GENERAL.  The Company acquired the Soledad Mountain Project in 1986 and since
then has been engaged in solidifying its land position and conducting several
drilling and sampling programs in order to delineate ore reserves on the
project.  The Company continues to focus its attention on exploring and
developing the project, with a view toward commencing production in the second
half of 1998.

                                    14
<PAGE>

As previously discussed, the Company has been in the exploration or
development stage of its operations since inception, and has no reported
revenues from operations to date.  From its inception through December 31,
1996, the Company has used $1,203,000 in operating activities, primarily as a
result of cumulative losses of $1,921,000.  Additionally, the Company has used
$15,978,000 in investing activities, primarily consisting of $14,741,000 in
expenditures related to the Soledad Mountain Project, and fixed asset
purchases of $745,000.  Funds used in the Company's operating and investing
activities have been provided primarily through funds provided by the
Company's financing activities, including $2,900,000 in net borrowings under
various long term debt arrangements and $19,700,000 raised through the sale of
equity securities.

At December 31, 1996, the Company held $5,400,000 in cash and cash
equivalents.  As is discussed below, under the heading "Plan of Operations",
based upon currently available information the Company estimates that it will
need approximately $47,800,000 to begin production at the Soledad Mountain
Project.  This financing is expected to be derived from additional sales of
common stock, and from bank borrowings or other means.  Alternatively, the
Company may determine that it is in the best interests of its shareholders to
enter into a joint development or similar arrangement with another mining
company to develop the Soledad Mountain Project.  

The Company does not have a commitment for bank financing or for the
underwriting of additional shares of its common stock, and is not a party to
any agreement or arrangement providing for the joint development of the
Soledad Mountain Project.  Whether and to what extent additional or
alternative financing options are pursued by the Company will depend on a
number of important factors, including:  the results of further development
activities at the Soledad Mountain Project, management's assessment of the
financial markets, the overall capital requirements for development of the
project, and the price of gold.  Gold prices fluctuate widely and are affected
by numerous factors beyond the Company's control, such as inflation, the
strength of the United States dollar and foreign currencies, global and
regional demand, and the political and economic conditions of major gold
producing countries throughout the world.  As of May 1, 1997, world gold
prices were approximately $365 per ounce, a reduction of approximately 8% from
prices a year ago.  If gold prices do not strengthen, it may not be economical
for the Company to place the Soledad Mountain Project into production.

In May 1997, the Company entered into an agreement with an underwriter,
pursuant to which the underwriter has agreed to purchase, for resale, on a
private placement basis, 3,000,000 special warrants, at a price of $1.58
(C$2.20) per special warrant.  Each of the special warrants will be
exchangeable into one share of common stock of the Company, subject to
adjustment in certain circumstances.  Through this placement of special
warrants, the Company plans to raise proceeds of approximately $4,740,000
(C$6,600,000).  The underwriter also has the option to purchase, for resale,
up to an additional 500,000 special warrants at the same price.  This option
to purchase expires on the closing date of the special warrant issue.  The
proceeds raised will be used to fund ongoing capital expenditures at the
Soledad Mountain Project, and for general corporate purposes.  The closing of
the issue is scheduled for May 29, 1997 and is subject to certain conditions,
including the receipt of approval from the Toronto Stock Exchange and the
execution of a definitive underwriting agreement.  The special warrants will
be sold principally to non-U.S. investors.

SEVEN MONTH PERIOD ENDED DECEMBER 31, 1996.  For the seven month period ended
December 31, 1996, the Company used $261,000 in its operating activities,
primarily as a result of the $349,000 reported net loss.  $231,000 of this was
used in financing activities, including debt repayment of $117,000 and costs
of $124,000 associated with issuing shares.  $3,889,000 was used in investing
activities, primarily consisting of $2,794,000 in exploration expenditures and
$460,000 in property acquisitions both related to the Soledad Mountain
Project, and fixed asset purchases of $632,000.  As a result of the foregoing,
the Company's cash balance decreased by $4,382,000, to $5,436,000, at December
31, 1996.

YEAR ENDED MAY 31, 1996.  For the year ended May 31, 1996, the Company used
$278,000 in its operating activities, primarily as a result of the reported
net loss of $426,000.  $12,537,000 was provided by financing activities as a
result of $1,100,000 in debt issuance and $11,376,000 raised through the sale
of equity securities.  $2,582,000 was used in investing activities, primarily
consisting of $1,848,000 in exploration expenditures and $422,000 in property
acquisitions both related to the Soledad Mountain Project.  As a result of the
foregoing, the Company's cash balance increased by $9,677,000, to $9,818,000,
at May 31, 1996. 

                                    15
<PAGE>

PLAN OF OPERATIONS.

PROPOSED ACTIVITIES AND ESTIMATED COSTS.  As is more specifically disclosed in
Item 1 of this report, in the subsection entitled "Mining Ore and Recovery
Plan," the Company has substantially completed its exploration of the Soledad
Mountain Project and intends to develop the project as an open pit gold and
silver mining and cyanide heap leach recovery operation.  The Company's plans
include the construction of facilities, mining by open pit methods and
processing precious metals ores at a rate of up to 3.6 million tonnes (4
million tons) per year for at least seven years.  This will be followed by
heap detoxification and reclamation of the project site.  The Company expects
to begin producing gold and silver from the project in the second half of
1998.

The total capital cost of the Soledad Mountain Project is estimated to be
$59,500,000, consisting of an initial capital component and a future component
covering deferred and replacement capital, including reclamation.  Initial
capital costs required to put the project into production are estimated to be
$47,800,000.  This estimate is based on a 12-month construction period
starting immediately after permits are received.  The estimate includes
purchases of all equipment and facilities, including mobile equipment. 
Deferred and replacement capital costs required to complete all facilities to
accommodate life-of-mine ore production are estimated to be $11,700,000,
including continuation of land acquisition payments, leach pad additions,
equipment replacement and/or major overhauls and heap rinse down.

Based on a stripping ratio of 2.49 to 1, the Company estimates total operating
costs of $5.92 per tonne ($5.36 per ton) of ore processed, comprised of mining
costs of $2.79 per tonne ($2.53 per ton), processing costs of $2.59 per tonne
($2.34 per ton) and general and administrative costs of $0.55 per tonne ($0.50
per ton).  The feasibility report prepared for the Company by Pincock, Allen &
Holt described below concludes that these proposed operating costs have been
estimated in accordance with industry practice.  The Company estimates that
94,300 ounces per year of gold equivalent can be produced at a direct cash
cost of $223 per ounce and a total operating cost, including royalties and
local taxes, of $245 per ounce.  Total production cost, including capital but
excluding sunk cost, is estimated at $334 per ounce of gold equivalent.

In addition, the Company had budgeted $5,400,000 for additional on-going
drilling to further delineate ore at the Soledad Mountain Project.  These
proposed drilling activities include:  a $2,200,000 deep drilling program to
determine whether substantial minable reserves, estimated on the basis of
underground cross-cut assays from the 1930s and 1940s to be approximately 13.6
million tonnes (15.0 million tons), exist at 152 to 366 meters (500 to 1,200
feet) below the surface of the project; a $300,000 drilling program to further
delineate ore at the stockworks area of the proposed mine; a $1,400,000 in-
fill drilling program to be conducted during the first two years of mine
production to facilitate detailed mine planning; and a $1,500,000 program to
explore the south-east extension of one identified ore vein to determine
whether there is a continuation of the structure.

The following table summarizes the activities proposed to be undertaken by the
Company during the twelve-month period commencing January 1, 1997, and the
estimated costs of such activities.

          Underground drilling                    $2,000,000
          Surface drilling                         1,000,000
          Engineering design                       2,400,000
          Permitting and feasibility study         1,000,000

                                                   ---------
                                   Total          $6,400,000

The Company has expended approximately $2,000,000 to complete a final bankable
feasibility study prepared by Pincock, Allen & Holt of Lakewood, Colorado in
December 1996.  This expenditure was necessary to complete the design of the
crushing plant, ore heap, solution handling systems, haul roads and associated
surface infrastructure at the Soledad Mountain Project.  The bankable
feasibility study is now at a level of accuracy deemed appropriate for project
financing purposes.  An internal preliminary feasibility study was prepared by
the Company and reviewed by Pincock, Allen & Holt in early 1996; that report,
however, was a study of the project generated solely for internal purposes, to
ascertain the economic viability of the project.  It was not prepared for
purposes of obtaining bankable feasibility.

                                    16
<PAGE>

Item 7.  FINANCIAL STATEMENTS.

The audited consolidated balance sheets of the Company for the seven month
transition period ended December 31, 1996 and for the year ended May 31, 1996,
and audited consolidated statements of loss, cash flows and changes in
stockholders' equity for the seven-month transition period ended December 31,
1996, for the year ended May 31, 1996, and for the period from inception
(November 21, 1985) through December 31, 1996, included elsewhere in this
report have been audited by BDO Dunwoody, Vancouver, British Columbia, and are
included herein in reliance upon the report of such firm as experts in
accounting and auditing.

Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

On October 4, 1996, the audit committee of the board of directors of the
Company and the board of directors itself, each acting in accordance with the
prior determination of the Company's management, determined to replace
Chambers, Phillips & Co., (now Mackay & Partners), the Company's current
accountants, with BDO Dunwoody.  Such change was approved by the Company's
shareholders at the annual general meeting of shareholders held on November
13, 1996.  

This change was recommended by management based upon the fact that BDO
Dunwoody's United States affiliated firm, BDO Seidman LLP, maintains offices
in Spokane, Washington, where the Company's executive offices are located. 

During the fiscal years ended May 31, 1996 and 1995, Chambers, Phillips &
Co.'s reports on the financial statements of the Company contained no adverse
opinion or disclaimer of opinion, or were qualified or modified as to
uncertainty, audit scope or accounting principles.  During such periods, there
were no disagreements with Chambers, Phillips & Co. on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the satisfaction of such
firm, would have caused them to make reference to the subject matter of such
disagreement in their reports on such financial statements.



         [The balance of this page has been intentionally left blank.]


                                    17
<PAGE>

                                 PART III

Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The names, ages, business experience for at least the past five years and
positions of the directors and executive officers of the Company as of March
31, 1997, are as follows.  The Company's board of directors consists of six
directors.  All directors serve until the next annual meeting of the Company's
stockholders or until their successors are elected and qualified.  Executive
officers of the Company are appointed by the board of directors. 

<TABLE>
<CAPTION>

Name and Age of                    Position with
Director or Executive Officer      the Company                   Principal Occupation
-----------------------------      --------------                --------------------
<S>                           <C>                                <C>

Paul A. Bailly (1)            Director and Chairman of the       Chairman of Castle Group, Inc. (a gold
Age: 70                        Board until December 31, 1996     mining investment company)

Steven W. Banning (2)         President, Chief Executive         Officer of the Company
Age: 45                        and Director

Bernard F. Goodson            Vice-President - Administra-       Officer of the Company
Age: 59                        tion and Controller

Richard W. Graeme             Vice-President - Operations        Officer of the Company
Age: 55

Gordon C. Gutrath (2)         Director                           Chairman of Queenstake Resources Ltd.
Age: 59                                                          (a mineral exploration company)

Jerrold W. Schramm (1)        Director                           Partner, Lawson Lundell Lawson & McIntosh
Age: 36                                                          (barristers and solicitors)

Chester Shynkaryk (1)         Secretary and Director             President of Visionary Mining Corporation
Age: 52                                                          (a mineral exploration company)

Edward G. Thompson (2)        Director and Chairman of           President of E.G. Thompson Mining       
Age: 60                       the Board as of January 29, 1997   Consultants Inc.

Christopher M.T. Thompson     Director as of January 29, 1997    President of Castle Group, Inc.
Age: 49
____________________

(1)  Member of the compensation committee of the board of directors.

(2)  Member of the audit committee of the board of directors.

</TABLE>

BIOGRAPHICAL INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS.

PAUL A. BAILLY was a director of the Company from 1987 through December 31,
1996, last serving as Chairman.  He is also chairman of Castle Group, Inc., a
position he has held since 1992.  From 1984 to 1992, Mr. Bailly served as
president of Fulcrum Management, Inc.  He graduated from the University of
Nance in France in 1948 with a master of sciences degree in geology and
mineralogy, and later received a degree in geological engineering from the
same institution.

STEVEN W. BANNING has been president and chief executive officer of the
Company since 1995.  From 1984 through 1995, he was employed by Pegasus Gold
Inc., last serving as its vice president of operations.  Mr. Banning graduated
from Montana College of Mineral Science and Technology in 1974 with a degree
in mineral dressing engineering.

                                    18
<PAGE>

BERNARD F. GOODSON has been vice president of administration and controller of
the Company since April 1996.  From May 1991 to January 1996, he was vice
president of finance of Pintlar Corporation, a mining company headquartered in
Kellogg, Idaho.  Mr. Goodson graduated from Lewis and Clark State College in
1981 with a degree in management technology.

RICHARD W. GRAEME has been executive vice president of operations of the
Company since November 1996, and for ten month prior to that was vice
president of operations.  From January 1994 to February 1996, he was principal
mine engineer for Mine Development Associates, and from January 1991 to
January 1994, he served as chief executive officer of Mining Remedial Recovery
Corp.  Mr. Graeme graduated from the University of Arizona in 1972 with a
degree in Geological Engineering.

GORDON C. GUTRATH has been a director of the Company since 1987.  Since
November of 1995, he has also served as chairman of Queenstake Resources,
which he founded in 1977; he served as its president from 1977 until November
1995.  Mr. Gutrath is a professional geologist and a registered professional
engineer in British Columbia.  He graduated from the University of British
Columbia in 1960 with a degree in Geology.

JERROLD W. SCHRAMM has been a director of the Company since 1996.  He is also
a partner in the law firm Lawson Lundell Lawson & McIntosh, a position he has
held since February 1994, and for approximately six and one-half years prior
to that was an associate of the firm.  He obtained an undergraduate degree in
commerce from the University of British Columbia in 1983 and a law degree from
the University of Toronto in 1986.

CHESTER SHYNKARYK has been a director of the Company since 1985, and from 1985
to 1995, served as its president.  Since 1996, he has also served as president
of Visionary Mining Corporation, a mineral exploration company. 

EDWARD G. THOMPSON has been a director of the Company since 1994, and was
elected its chairman effective January 29, 1997.  Since 1990 he has also
served as president of E. G. Thompson Mining Consultants, Inc., which he owns. 
Mr. Thompson graduated from the University of Toronto in 1959 with a degree in
mining geology and in 1960 earned a degree in economic geology.

CHRISTOPHER M. T. THOMPSON has been a director of the Company since January
1997.  Since 1992 he has also served as president of Castle Group, Inc., and
from January 1984 to October 1992, he was employed by Fulcrum Management,
Inc., last serving as its chief financial officer.  Mr. Thompson received a
degree in law and economics from Rhodes University in South Africa in 1969 and
a Master of Science degree from Bradford University in the United Kingdom in
1971.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.  The Company was not
subject to the provisions of Section 16(a) of the Exchange Act during the year
ended December 31, 1996.




         [The balance of this page has been intentionally left blank.]


                                    19
<PAGE>

Item 10.  EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE.

The following table discloses compensation received by the Company's former
chief executive officer, its president and current chief executive officer,
its vice president of administration and controller, and its vice president of
operations for the seven month period ended December 31, 1996 and for the
prior fiscal years ended May 31 1996 and 1995.  

                          Annual Compensation
-----------------------------------------------------------------------------
                                                                    Other
                                                                    Annual
Executive Officer             Year (1)  Salary      Bonus        Compensation
-----------------             --------  ------      -----        ------------

Paul A. Bailly (2)            1996        -           -               -
Chief Executive Officer       1996        -           -               -
 (former)                     1995        -           -               -

Steven W. Banning (3)         1996      $116,667      -          $ 2,100 (4)
President and Chief           1996       100,000      -            1,800
 Executive Officer            1995        -           -               -

Bernard F. Goodson (6)        1996        46,669      -            2,100 (4)
Vice President of             1996         6,667      -              300
 Administration and           1995        -           -                -
 Controller    

Richard W. Graeme (7)         1996        64,167      -                -
Vice President of             1996        36,667      -                -
 Operations                   1995        -           -                -
___________________

<TABLE>
<CAPTION>


                                      Long-Term Compensation
-----------------------------------------------------------------------------------------------
                                        Dollar Value    Securities                   All Other
                                        of Restricted   Underlying     LTIP           Compen-
Executive Officer             Year (1)  Stock Awards   Options/SARS   Payouts          ation
-----------------             --------  ------------   ------------   --------       ----------
<S>                           <C>       <C>            <C>            <C>            <C>

Paul A. Bailly (2)            1996           -               -           -              -
Chief Executive Officer       1996           -            120,000        -              -
 (former)                     1995           -             50,000        -              -

Steven W. Banning (3)         1996           -            190,000 (5)    -              -
President and Chief           1996           -            810,000        -              -
 Executive Officer            1995           -               -           -              -

Bernard F. Goodson (6)        1996           -            100,000        -              -
Vice President of             1996           -               -           -              -
 Administration and           1995           -               -           -              -
 Controller    

Richard W. Graeme (7)         1996           -            200,000        -              -
Vice President of             1996           -               -           -              -
 Operations                   1995           -               -           -              -
___________________

</TABLE>

(1)  The first year shown in the foregoing table for each of the named
     executive officers covers the seven month period ended December 31, 1996. 
     The second and third years shown in the table are for the years ended May
     31, 1996 and 1995, respectively.

(2)  Mr. Bailly was chief executive officer of the Company until December 1,
     1995.

(3)  Mr. Banning was not employed by the Company until December 1, 1995 and,
     accordingly, was employed by the Company for six months during the fiscal
     year ended May 31, 1996.

(4)  Represents automobile allowances paid to Mr. Banning and Mr. Goodson.

(5)  Pursuant to Mr. Banning's employment agreement, the Company is obligated
     to grant Mr. Banning options to purchase an aggregate of 1,000,000 shares
     of common stock, exercisable at the closing price of the common stock on
     the Toronto Stock Exchange as of the date of grant.  Pursuant to this
     agreement, Mr. Banning was granted options for the purchase of 680,000
     shares on December 1, 1995, which options are exercisable at C$1.35
     ($0.99) per share, and was granted options for the purchase of an
     additional 130,000 shares on February 21, 1996, which options are
     exercisable at C$1.51 ($1.11) per share.  Options to purchase the
     remaining 190,000 shares were granted to Mr. Banning in November 1996,
     following shareholder approval of certain amendments to the Company's
     stock option plan.  These options are exercisable at C$2.43 ($1.79) per
     share.

(6)  Mr. Goodson was not employed by the Company until May 1, 1996 and,
     accordingly, was employed by the Company for one month during the fiscal
     year ended May 31, 1996.

(7)  Mr. Graeme was not employed by the Company until February 1, 1996 and,
     accordingly, was employed by the Company for four months during the
     fiscal year ended May 31, 1996.

                                    20
<PAGE>

TABLE OF AGGREGATED OPTIONS EXERCISED DURING THE FISCAL YEAR ENDED DECEMBER
31, 1996 AND FISCAL YEAR-END OPTION VALUES.  The following table sets out
certain information with respect to options to purchase shares of the common
stock of the Company exercised during the seven month period ended December
31, 1996 by the Company's former chief executive officer, its president and
current chief executive officer, its vice president of administration and
controller, and its vice president of operations, and options held by such
persons at the end of such year.  Information with respect the value of such
options is set forth in Canadian dollars, being the currency in which such
options are denominated.  At March 31, 1997, each Canadian dollar was
approximately equal to $1.3679.

<TABLE>
<CAPTION>
                                                        Unexercised               Value of Unexercised
                         Securities     Aggregate       Options at              in-the-Money Options at
                          Acquired        Value      December 31, 1996             December 31, 1996
                         on Exercise    Realized            (#)                           (C$)
                             (#)          (C$)    Exercisable/Unexercisable   Exercisable/Unexercisable (1)
                         ------------   --------  -------------------------   -----------------------------
<S>                      <C>            <C>       <C>                           <C>

Paul A. Bailly           18,000         4,750       102,000 /       0             255,800 /         0
Steven W. Banning             0             0       333,333 / 666,667             833,333 / 1,666,667
Bernard F. Goodson            0             0        33,333 /  66,667              83,333 /   166,667
Richard W. Graeme             0             0        66,666 / 133,334             166,665 /   333,335
____________________

</TABLE>

(1)  The closing price of the common stock of the Company on The Toronto Stock
     Exchange on December 31, 1996 was C$2.50 ($1.88).  

(2)  Of such options, options to purchase an aggregate of 40,000 shares of
     common stock were exercisable at C$0.592 ($0.44) per share and options to
     purchase an aggregate of 50,000 shares of common stock were exercisable
     at C$0.55 ($0.40) per share.  All of these options were exercised on July
     19, 1995.

TABLE OF OPTIONS GRANTED DURING THE SEVEN MONTH PERIOD ENDED DECEMBER 31,
1996.  The following table sets out certain information with respect to
options to purchase shares of common stock of the Company granted to the
Company's then chief executive officer, its president and current chief
executive officer, its vice president of administration and controller, and
its vice president of operations during the seven month period ended
December 31, 1996.  None of the other named executive officers of the Company
were granted options during such year.  

<TABLE>
<CAPTION>

                                                                           Market Value of
                         Securities       % of Total                       Shares Underlying
                           Under        Options Granted     Exercise or     Options on the
                          Options       to Employees in     Base Price      Date of Grant
                          Granted        the Financial       (C$-US$/         (C$-US$/        Expiration
Name                        (#)              Year             Share)           Share)            Date
----                     ----------     ---------------     ------------   -------------   ---------------
<S>                      <C>            <C>                 <C>            <C>

Steven W. Banning (1)    190,000            58.50            2.43 (1.79)    2.43 (1.79)    October 4, 2001

____________________

</TABLE>

(1)  Pursuant to Mr. Banning's employment agreement, the Company agreed to
     grant Mr. Banning options to purchase an aggregate of 1,000,000 shares of
     common stock of the Company.  Options to purchase 810,000 of these shares
     had been granted to Mr. Banning as of May 31, 1996.  Options to purchase
     the remaining 190,000 shares were granted to Mr. Banning in October 1996,
     following shareholder approval of certain amendments to the Company's
     stock option plan.  The Company has also agreed to pay to Mr. Banning
     certain amounts upon the exercise by him of certain of these options,
     which amounts are equal to the difference between the exercise price of
     the options as of the date they were granted to Mr. Banning and the
     market price of the stock on the date the Company agreed to grant him
     such options.  With respect to options to purchase 130,000 shares of
     common stock expiring on February 21, 2001, such amount is equal to the
     difference between C$1.51 ($1.11) per share (the exercise price of such
     options on the date of grant) and C$1.35 ($0.99) per share (the market
     price of the common stock on the date the Company agreed to grant such
     options), and with respect to options to purchase 190,000 shares of
     common stock expiring on October 4, 2001, such amount is equal to the
     difference between C$2.43 ($1.79) per share (the exercise price of such
     options on the date of grant) and C$1.35 ($0.99) per share (the market
     price of the common stock on the date the Company agreed to grant such
     options). 

                                    21
<PAGE>

TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT
CONTRACTS.  

EMPLOYMENT AGREEMENTS WITH STEVEN W. BANNING, BERNARD F. GOODSON AND RICHARD
W. GRAEME.  During the fiscal year ended May 31, 1996, the Company entered
into employment agreements with Mr. Banning, its president and chief executive
officer; Mr. Goodson, its vice president of administration and controller; and
Mr. Graeme, its vice president of operations.  Each of such agreements
provides for the payment of salary and bonuses, the granting of certain
options to purchase shares of common stock to the employee and the provision
of certain benefits, including those offered to employees generally.  Mr.
Banning receives an annual salary of $200,000 pursuant to his employment
agreement with the Company.  Mr. Goodson and Mr. Graeme receive annual
salaries of $80,000 and $110,000, respectively, pursuant to their agreements.

The employment agreements with Mr. Banning, Mr. Goodson and Mr. Graeme also
contain provisions relating to their compensation in the event of termination
of employment other than for cause.  If the Company terminates Mr. Banning's
or Mr. Graeme's employment for any reason other than for cause, the Company is
required to pay the terminated employee an amount equal to 24 months' salary. 
In the event Mr. Goodson's employment is terminated for any reason other than
for cause, the Company is obligated to pay him an amount equal to 12 months'
salary.

Finally, the agreements provide that if there is a "change in control" (as
defined in the agreements) of the Company and the employee's employment is
subsequently terminated (unless such termination is for cause or by the
employee for other than "good reason" as defined in the agreements), the
employee is entitled to receive a lump sum severance payment equal to two
times the employee's then current annual base salary in the case of Mr.
Banning and Mr. Graeme, and one times the employee's then current annual base
salary in the case of Mr. Goodson.  The agreements provide for the
continuation of benefits then provided to the employee for a period of 24 
months after termination in the case of Mr. Banning and Mr. Graeme, and 12
 months after termination in the case of Mr. Goodson.  Any existing stock 
options then held by the employee will vest immediately and may be exercised
 by the employee at any time within three months following the date of 
his termination.

The employment agreements with Mr. Banning and Mr. Graeme are each for a term
of two years.  The employment agreement with Mr. Goodson is for a term of one
year.  Each provides, however, that the employee may terminate his employment
upon six months' prior written notice to the Company.

CONSULTING AGREEMENT WITH ERIC W. KINNEBERG.  Pursuant to the terms of a
consulting agreement dated February 1, 1996 between the Subsidiary and Mr.
Kinneberg, Mr. Kinneberg has agreed to serve as a consultant to the Subsidiary
with respect to financial and related matters, and to perform such other
consulting services to the Subsidiary, as the Subsidiary may propose.  As
consideration for such services, the Subsidiary has agreed to pay Mr.
Kinneberg at the rate of $1,000 per day for services rendered and has further
agreed to reimburse him for out-of-pocket expenses incurred in the performance
of his services.  The consulting agreement obligates Mr. Kinneberg to submit
invoices to the Subsidiary no less often than monthly, specifying the services
rendered during the month, and allows the Company to deduct $325 per month
from amounts otherwise payable to Mr. Kinneberg for use of the Company's
offices.

The consulting agreement with Mr. Kinneberg was for a term of one month and is
thereafter renewable, unless terminated either by the Company or Mr.
Kinneberg, on a month-to-month basis.  Since February 1, 1996, the Company has
paid Mr. Kinneberg approximately $72,000 pursuant to the agreement.        

COMPENSATION OF DIRECTORS.  The Company does not pay directors' fees.  While
the Company has no written policy or standard arrangements in this regard, it
is currently the policy of the Company to grant options to purchase shares of
its common stock to its directors under the stock option plan described below
under the heading "Stock Option Plan".  Generally, each director is granted
options to purchase an aggregate of 90,000 shares of common stock and such
additional number of shares of common stock as may be appropriate in
particular circumstances given other responsibilities assumed by the director
in the Company's affairs and contributions made by such director to the
Company.

                                    22
<PAGE>

There were no options to purchase shares of common stock of the Company
granted to the directors of the Company during the seven month transition
period ended December 31, 1996.

There are no other arrangements under which directors of the Company were
compensated by the Company during the seven month transition period ended
December 31, 1996 for their services in their capacity as directors and,
without limiting the generality of the foregoing, no additional amounts are
payable under any standard arrangements for committee participation or special
assignments, except that the articles of incorporation of the Company provide
that the directors are entitled to be paid reasonable travelling, hotel and
other expenses incurred by them in the performance of their duties as
directors.  The Company's articles of incorporation also provide that if a
director is called upon to perform any professional or other services for the
Company that, in the opinion of the directors, is outside of the ordinary
duties of a director, such director may be paid a remuneration to be fixed by
the directors and such remuneration may be either in addition to or in
substitution for any other remuneration that such director may be entitled to
receive.

STOCK OPTION PLAN.  On November 27, 1992, the shareholders of the Company
approved the establishment of a stock option plan (the "Stock Option Plan")
for directors, officers and employees of the Company and its subsidiaries. 
The Stock Option Plan is administered by the Compensation Committee of the
board of directors of the Company.  The Stock Option Plan provides that a
maximum of 10% of the number of shares of common stock issued and outstanding
from time to time will be reserved, set aside and made available for issuance
pursuant to options granted from time to time under such plan, provided that,
under the terms of the Stock Option Plan, no person is entitled to be granted
options to purchase shares of common stock constituting more than 5% of the
number of outstanding shares of common stock.

The Stock Option Plan provides that the exercise price of each option granted
shall not be less than the market price of the common stock on the Toronto
Stock Exchange as of the date the option is granted.  The Stock Option Plan
provides that all options granted under such plan will expire not later than
five years after the date of grant.

Options granted under the Stock Option Plan are not transferable, other than
by will or other testamentary instrument or the laws of succession.  In the
event that an optionee is dismissed, removed or otherwise ceases to be a
director, officer or employee of the Company or its subsidiaries (other than
for cause or as a result of his or her death), all unexercised options held by
such person terminate on the earlier of 30 days after the optionee ceases to
be a director, officer or employee of the Company or its subsidiaries or the
normal expiration date of such unexercised options.  In the event that an
optionee is dismissed as a director, officer or employee of the Company or one
of its subsidiaries for cause, all unexercised options held by such person
immediately terminate.

On February 21, 1996, the board of directors authorized the amendment of the
Stock Option Plan to replace the current "rolling maximum" limitation on the
number of shares of common stock issuable pursuant to the exercise of options
granted under such plan with a fixed maximum of 3,300,000 shares of common
stock.  The directors also approved amendments to, among other things, provide
that options granted to officers of the Company and its subsidiaries vest as
to one-third of the number of shares of common stock issuable upon the
exercise of the options granted on the date of grant and as to an additional
one-third of such number of shares on each of the next two anniversaries of
such date.  

The amendments to the Stock Option Plan were approved by the stockholders of
the Company at the annual general meeting of stockholders held on November 13,
1996, and were subsequently also approved by the Toronto Stock Exchange.





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                                    23
<PAGE>

OPTIONS TO PURCHASE SECURITIES.  As at December 31, 1996, options to acquire
an aggregate of 2,257,000 shares of common stock were outstanding under the
Stock Option Plan as follows:

<TABLE>
<CAPTION>

                                                                            Number of
                                                                              Common      Exercise Price
                                                                           Shares Under    Per Common
Class of Optionees                 Date of Grant       Expiry Date         Options (1)    Share (C$-US$)
------------------                 -------------       -----------         ------------   ----------------
<S>                                <C>                 <C>                 <C>            <C>       <C>

Executive officers of Golden       December 1, 1995    December 1, 2000    680,000 (2)    C$1.35    (0.99)
  Queen (four persons)             February 21, 1996   February 21, 2001   450,000 (2)      1.51    (1.11)
                                   May 21, 1996        May 21, 2001        100,000          3.00    (2.18)
                                   October 4, 1996     October 4, 2001     190,000          2.43    (1.79)

Directors of Golden Queen who are  December 21, 1993   December 21, 1998    75,000        C$0.592   (0.44)
  not also executive officers of   August 24, 1994     August 24, 1999     100,000           0.55   (0.40)
  Golden Queen                     September 21, 1994  September 21, 1999   90,000           1.50   (1.10)
  (three persons)                  December 2, 1994    December 2, 1999     70,000           1.45   (1.07)
                                   February 21, 1996   February 21, 2001    20,000           1.51   (1.11)

Executive officers of the          September 21, 1994  September 21, 1999  130,000        C$1.50    (1.10)
  Subsidiary who are not           February 21, 1996   February 21, 2001    90,000          1.51    (1.11)
  also executive officers
  or directors of Golden
  Queen (two persons)

All other employees of the         March 4, 1994       March 4, 1999        30,000        C$0.76    (0.56)
  Subsidiary                       August 24, 1994     August 24, 1999      45,000          0.55    (0.40)
  (eleven persons)                 July 20, 1995       July 20, 2000        70,000          1.35    (0.99)
                                   June 27, 1996       June 27, 1996        50,000          2.30    (1.69)
                                   November 19, 1996   November 19, 2000    85,000          2.60    (1.94)
                                   
____________________

</TABLE>

(1)  Includes all shares of common stock issuable upon the exercise of options
     granted as at May 31, 1996, including those that had not vested at such
     date and those that were subject to approval of the Company's
     stockholders and the Toronto Stock Exchange.  As noted above, such
     approvals were obtained in November 1996.

(2)  Certain of these options are held by Steven W. Banning.  As noted above
     in the section of this registration statement entitled "-Termination of
     Employment, Change in Responsibilities and Employment Contracts," the
     Company granted Mr. Banning options to acquire an additional 190,000
     shares of common stock in November 1996 pursuant to the terms of his
     employment agreement with the Company.  

At the annual general meeting of stockholders of the Company held on November
13, 1996, the shareholders of the Company approved, among other things, the
grant to officers and directors of the Company and the Subsidiary of options
to purchase an aggregate of 1,340,000 shares of common stock, as follows:

                                              Number of Common
       Optionee                              Shares Under Option
       --------                              -------------------

     Paul A. Bailly                               120,000
     Steven W. Banning                            810,000
     Richard W. Graeme                            200,000
     Raymond E. Grant                              90,000
     Bernard Goodson                              100,000
     Edward G. Thompson                            20,000

Such options were granted pursuant to the Stock Option Plan, as amended at the
annual general meeting of stockholders.  See the section of this registration
statement entitled "-Stock Option Plan" above. 

                                    24
<PAGE>

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth as of March 31, 1997, the names of, and number
of shares of common stock of the Company beneficially owned by, persons known
to the Company to own more than five percent (5%) of the Company's common
stock; the names of, and number of shares beneficially owned by each director
and executive officer of the Company; and the number of shares beneficially
owned by, of all directors and executive officers as a group.  At such date,
the number of shares of common stock of the Company outstanding or deemed
outstanding pursuant to presently exercisable options and warrants was
27,874,500 shares.  
                              Amount and Nature of
                              Beneficial Ownership
                              (all direct unless            Percent
Name of Owner                 otherwise noted)              of Class
-------------                 --------------------          --------

Paul A. Bailly (1)                   306,176                 1.10%

Steven W. Banning (2), (3)         1,000,000                 3.58%

Bernard Goodson (4)                  100,000                 0.36%

Richard W. Graeme (5)                200,000                 0.72%

Gordon C. Gutrath (2), (6)           195,000                 0.70%

Jerrold W. Schramm (2), (7)           90,000                 0.32%

Chester Shynkaryk (2), (8)           389,508                 1.40%

Edward G. Thompson (2), (9)          183,200                 0.66%

Christopher M.T. Thompson (10)       462,866                 1.66%

All directors and executive 
  officers as a group 
  (9 persons) (11)                 2,926,750                10.50%

VenturesTrident II, L.P. (12)      4,758,061                17.07%

Landon T. Clay (13)                6,269,094                22.49%

Minven, Inc. (14)                  4,758,061                17.07%
__________________

(1)  Mr. Bailey's tenure as a director of the Company ended on December 31,
     1996.  
(2)  Currently a director of the Company.
(3)  Includes presently exercisable options for the purchase of 333,333 shares
     of common stock.  
(4)  Includes presently exercisable options for the purchase of 333,333 shares
     of common stock.  
(5)  Includes presently exercisable options for the purchase of 66,666 shares
     of common stock.  
(6)  Includes presently exercisable options for the purchase of 90,000 shares
     of common stock.  
(7)  Includes presently exercisable options for the purchase of 90,000 shares
     of common stock.  
(8)  Includes presently exercisable options for the purchase of 175,000 shares
     of common stock.  
(9)  Includes presently exercisable options for the purchase of 130,000 shares
     of common stock.  
(10) Mr. Thompson's tenure as a director of the Company commenced January 29,
     1997.  Includes presently exercisable options for the purchase of 130,000
     shares of common stock.
(11) Excluding Mr. Bailey, who ceased being a director December 31, 1996, the
     number of shares of common stock held by all directors and executive
     officers of the Company as a group was 2,620,574 shares or approximately
     9.40% of the outstanding common stock.  Included in such amount are
     presently exercisable options for the purchase of 1,361,666 shares.

                  [Footnotes continued on following page.] 

                                    25
<PAGE>

(12) VenturesTrident II, L.P. is an investment limited partnership comprised
     of forty limited partners and one general partner, Fulcrum Management
     Partners II, L.P., a limited partnership.  The general partners of
     Fulcrum Management Partners II, L.P. are Landon T. Clay and Minven, Inc. 
     Minven, Inc. is a wholly-owned subsidiary of Eaton-Vance, Inc., 25% of
     whose outstanding common stock is owned by Mr. Clay.
(13) Consists of shares of common stock of the Company held in five trusts to
     which Mr. Clay is related.  As noted in footnote 12, Mr. Clay is also one
     of two general partners of Fulcrum Management Partners II, L.P., the
     general partner of VenturesTrident II, L.P. The shares of common stock of
     the Company held beneficially and of record by VenturesTrident II, L.P.
     have been attributed to Mr. Clay in the foregoing table.  Also includes
     presently exercisable options for the purchase of 686,100 shares of
     common stock.
(14) As is noted in footnote 12, Minven, Inc. is one two general partners of
     Fulcrum Management Partners II, L.P., the general partner of
     VenturesTrident II, L.P.  The shares of common stock of the Company held
     beneficially and of record by VenturesTrident II, L.P. have been
     attributed to Minven, Inc. in the foregoing table.

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

TRANSACTIONS WITH VENTURESTRIDENT II, L.P.  VenturesTrident II, L.P. ("VT II")
is a Massachusetts limited partnership which as of March 1, 1997 owns
4,758,061 shares of common stock of the Company, or approximately 19.6% of the
outstanding common stock at such date.  VT II acquired its shares as follows: 


     During December 1993, the Company issued an aggregate of 5,748,491 shares
     of common stock to various purchasers at the price of C$0.35 ($0.26) per
     share; 1,500,000 of these shares were issued to VT II. 

     During the fiscal year ended May 31, 1994, the Subsidiary entered into a
     short-term borrowing arrangement with VT II.  The Subsidiary borrowed
     $200,000 from VT II pursuant to this arrangement and agreed to pay VT II
     interest at the rate of 8% per annum.  The loan was repaid during the
     year through the issuance of 759,714 shares of common stock of the
     Company to VT II, at the price of C$0.35 ($0.26) per share.  Such
     issuance was as part of a private placement by the Company of 5,748,491
     shares of common stock to various purchasers.

     During the fiscal year ended May 31, 1993, the Company entered into two
     short-term borrowing arrangements with VT II L.P.  The Company borrowed
     $130,000 from VT II and $70,000 from VT I LP pursuant to these
     arrangements and agreed to pay VT II interest at the rate of 11% per
     annum.  The loans were repaid in October 1995 through the issuance of
     137,179 shares of common stock of the Company to VT II and 73,495 shares
     to VT I LP, at the price of C$1.78 ($1.31) per share.

     During the fiscal year ended May 31, 1994, the Company entered into
     borrowing arrangements with VenturesTrident I, L.P. ("VT I"), which is
     affiliated with VT II, and with Tamarack Mining Inc., a corporation
     related to VT I.  The Company borrowed $75,000 from VT II and $25,000
     from Tamarack pursuant to these arrangements, and agreed to pay the
     lenders interest at the rates of 11% and 12% per annum, respectively. 
     The Tamarack note was assigned to VT I in June, 1995.  The loans were
     repaid in October 1995 through the issuance of 73,977 shares and 24,659
     shares of common stock of the Company to VT II and VT I respectively, at
     the price of C$1.78 ($1.31) per share.

     During the fiscal year ended May 31, 1995, the Company entered into a
     short-term borrowing arrangement with VT II.  The Company borrowed
     $250,000 from VT II pursuant to this arrangement and agreed to pay VT II
     interest at the rate of 12% per annum.  The loan became due on November
     1, 1995 and was repaid in October 1995 through the issuance of 196,905
     shares of common stock of the Company to VT II, at the price of C$1.78
     ($1.31).

     On October 13, 1995, the Company issued 408,061 shares of common stock to
     VT II and 98,154 shares of common stock to VT I at the price of C$1.78
     ($1.31) per share.

TRANSACTIONS WITH LANDON T. CLAY AND AFFILIATED ENTITIES.  Landon T. Clay is
one of the two general partners of Fulcrum Management Partners II, L.P., a
limited partnership which is the general partners of VT II.  Accordingly, Mr.
Clay may be considered to be affiliated with VT II.  The second general
partner of Fulcrum Management Partners II, L.P. is Minven, Inc., a wholly
owned subsidiary of Eaton-Vance, Inc., 25% of whose outstanding shares of
common stock are owned by Mr. Clay.  In addition, Mr. Clay is related to five
trusts which hold an aggregate of 824,933 shares of common stock of the
Company, or approximately 3.7% of the common stock outstanding as of March 31,
1997.  

                                    26
<PAGE>

The transactions between the Company or the Subsidiary and VT II described in
the preceding subsection may be attributable to Mr. Clay by virtue of his
affiliation with Fulcrum Management and VT II.  In addition, the Company,
Golden Queen and the Subsidiary entered into the following additional
transactions with Mr. Clay or his affiliates:

     In December 1993, the Company issued an aggregate of 5,748,491 shares of
     common stock to various purchasers at the price of C$0.35 ($0.26) per
     share; 375,939 of such shares were issued to the Landon T. Clay Lead
     Trust.

     In August 1995, Golden Queen completed a private placement of 1,929,160
     shares of common stock at a price of C$1.25 ($0.92) per share.  272,600
     of these shares were issued to the Landon T. Clay Charitable Lead Trust
     and 163,560 shares were issued to the Landon T. Clay Charitable Lead
     Trust II.

     On March 19, 1996, the Subsidiary issued two debentures in the aggregate
     principal amount of $1,000,000 to the Landon T. Clay Charitable Lead
     Trust II and the Landon T. Clay Charitable Lead Trust dated 11/30/83. 
     The principal amounts of the debentures are convertible at the option of
     their holders into shares of common stock of the Company at a conversion
     price of C$2.00 ($1.46) per share, subject to customary "anti-dilution"
     provisions set out in the debenture instruments.  The debentures have a
     two-year term and bear interest at a rate of 9.5% per annum.  If the
     principal amounts of the debentures were converted into shares of common
     stock, an aggregate of 686,100 shares of common stock would be issued to
     the holders of the debentures.  As of March 31, 1997, the debentures had
     not been converted.

TRANSACTIONS WITH CHESTER SHYNKARYK.  In December 1993, the Company issued an
aggregate of 5,748,491 shares of common stock to various purchasers at the
price of C$0.35 ($0.26) per share; 375,939 of such shares were issued to
Chester Shynkaryk, who at the time was the president and a director of the
Company.  

During the fiscal years ended May 31, 1996, 1995 and 1994, the Company paid
consulting fees of C$50,000 ($37,000), C$30,000 ($22,000) and C$24,000
($18,000) to Mr. Shynkaryk for services rendered by him as the Company's
president, pursuant to the terms of a management agreement dated June 30,
1986, as amended January 30, 1990.  The agreement obligated Mr. Shynkaryk to
perform services for the Company consistent with his title as president,
including investigating opportunities for the Company to participate in the
exploration and development of resource properties, procuring financing for
the Company, when required, and, in general, assisting in the general
administration of the Company.  These fees were payable to Mr. Shynkaryk at
the rate of C$3,500 per month.  The agreement was terminated in December 1995,
when Mr. Banning replaced Mr. Shynkaryk as president.
 
TRANSACTIONS WITH CASTLE GROUP, INC.  During the year ended May 31, 1996, the
Company paid $102,500 to Castle Group, Inc. as reimbursement of amounts paid
by Castle Group, Inc. under the terms of Mr. Banning's employment agreement
with the Company.  Castle Group, Inc. manages VT II, which is affiliated with
the Company.  In addition, Paul A. Bailly, who was a director and chairman of
the Company until December 31, 1996, was also chairman of Castle Group, Inc. 
It is not expected that Castle Group, Inc. will provide future services to the
Company.

TRANSACTIONS WITH LAWSON LUNDELL LAWSON & MCINTOSH.  Jerrold W. Schramm, a
director of Golden Queen, is a partner of the law firm of Lawson Lundell
Lawson & McIntosh, which was retained as counsel to the Company during the
fiscal year ended May 31, 1996.  During such year, the Company paid Lawson
Lundell Lawson & McIntosh $19,384 for legal services rendered on the Company's
and the Subsidiary's behalf.  No members of the firm of Lawson Lundell Lawson
& McIntosh, inclusive of Mr. Schramm, owned any shares of common stock of the
Company at March 1, 1997.




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                                    27
<PAGE>

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBITS.  The following exhibits filed as part of this report.  Exhibits
previously filed are incorporated by reference, as noted. 

   Exhibit 
   -------

      3.1      Certificate and Articles of Incorporation of the registrant
               under the Company Act of British Columbia, as amended. 
               Previously filed as Exhibit 3.1 to the registrant's
               registration statement on Form 10-SB and incorporated by
               reference herein.   

     10.1      Warrant Indenture dated May 23, 1996 between the registrant and
               Montreal Trust Company of Canada, as trustee.  Previously filed
               as Exhibit 10.1 to the registrant's registration statement on
               Form 10-SB and incorporated by reference herein.

     10.2      Employment agreement dated April 2, 1996 among the registrant,
               Castle Group, Inc. and Steven W. Banning.  Previously filed as
               Exhibit 10.2 to the registrant's registration statement on Form
               10-SB and incorporated by reference herein.

     10.3      Employment agreement dated May 8, 1996 between the registrant
               and Richard W. Graeme.  Previously filed as Exhibit 10.3 to the
               registrant's registration statement on Form 10-SB and
               incorporated by reference herein.

     10.4      Employment agreement dated May 24, 1996 between the registrant
               and Bernard F. Goodson.  Previously filed as Exhibit 10.4 to
               the registrant's registration statement on Form 10-SB and
               incorporated by reference herein.  

     10.5      Lease dated October 20, 1994 between the Subsidiary and
               William J. Warner with respect to certain property within the
               project area.  Previously filed as Exhibit 10.5 to the
               registrant's registration statement on Form 10-SB and
               incorporated by reference herein.

     10.6      Lease dated September 19, 1994 between the Subsidiary and
               Western Centennials, Inc. with respect to certain property
               within the project area.  Previously filed as Exhibit 10.6 to
               the registrant's registration statement on Form 10-SB and
               incorporated by reference herein.

     10.7      Purchase agreement dated March 8, 1995 between the Subsidiary
               and William and Dorothy Meier with respect to the acquisition
               by the Subsidiary of certain property within the project area. 
               Previously filed as Exhibit 10.7 to the registrant's
               registration statement on Form 10-SB and incorporated by
               reference herein. 

                                    28
<PAGE>

     10.8      Stock option purchase agreement dated April 1, 1995 between the
               Subsidiary and Grace W. Meehl, Madge W. Wolff, Stephen G.
               Wegmann, Michael L. Wegmann, John G. Hodgson, Virginia L. Sigl,
               Patrick L. Wolff and George P. Wolff with respect to the
               acquisition by the Subsidiary of an option to purchase all of
               the outstanding shares of KWC.  Previously filed as Exhibit
               10.8 to the registrant's registration statement on Form 10-SB
               and incorporated by reference herein.

     10.9      Purchase agreement dated September 22, 1995 between the
               Subsidiary and the Paveen Gupta Medical Corporate Defined
               Benefit Pension Plan with respect to the acquisition by the
               Subsidiary of certain property within the project area. 
               Previously filed as Exhibit 10.9 to the registrant's
               registration statement on Form 10-SB and incorporated by
               reference herein.

     10.10     Purchase agreement dated March 29, 1996 between the Subsidiary
               and the Meehl Family Trust and others with respect to the
               acquisition by the Subsidiary of certain property within the
               project area.  Previously filed as Exhibit 10.10 to the
               registrant's registration statement on Form 10-SB and
               incorporated by reference herein.

     10.11     Mineral exploration agreement and option to lease or purchase
               dated January 25, 1996 between the Soledad-Mojave Mining
               Syndicate and the Subsidiary with respect to the potential
               acquisition by the Subsidiary of 129.5 hectares of fee land
               within the project area.  Previously filed as Exhibit 10.11 to
               the registrant's registration statement on Form 10-SB and
               incorporated by reference herein.

     10.12     Purchase agreement dated August 1, 1996 between the Subsidiary
               and Southwestern Refining Corporation with respect to the
               acquisition by the Subsidiary of certain property and mill
               tailings within the project area.  Previously filed as Exhibit
               10.12 to the registrant's registration statement on Form 10-SB
               and incorporated by reference herein. 

     10.13     Stock option plan of the registrant, as amended.  Filed as
               Exhibit 10.13 to the registrant's registration statement on
               Form 10-SB and incorporated by reference herein. 

     10.14     Management agreement dated June 30, 1986, as amended January
               30, 1990, between the registrant and Chester Shynkaryk.  Filed
               as Exhibit 10.14 to the registrant's registration statement on
               Form 10-SB and incorporated by reference herein.

     10.15     Forms of debentures issued by the registrant to Landon T. Clay
               Charitable Lead Trust II and Landon T. Clay Charitable Lead
               Trust dated November 30, 1983.  Filed as Exhibit 10.15 to the
               registrant's registration statement on Form 10-SB and
               incorporated by reference herein. 

                                    29
<PAGE>

     10.16     Consulting agreement dated February 1, 1996 between the
               registrant and Eric E. Kinneberg.  Filed as Exhibit 10.16 to
               the registrant's registration statement on Form 10-SB and
               incorporated by reference herein.

     21.0      Subsidiaries of the Registrant.  Previously filed as Exhibit
               21.0 to the registrant's registration statement on Form 10-SB
               and incorporated by reference herein.  

     24.0      Power of attorney and consent on Form F-X.  Previously filed as
               Exhibit 24.0 to the registrant's registration statement on Form
               10-SB and incorporated by reference herein.  

     27.0      Financial Data Schedule.  Filed herewith.

     99.0      Report of Mackay & Partners with respect to May 31, 1996 
               financial statements of the Registrant.  Filed herewith.

FORM 8-K REPORTS.  No reports on Form 8-K were filed by the registrant during
the fourth quarter of 1996.





       [The balance of this page has been intentionally left blank.]

                                    30
<PAGE>

Report of Independent Auditors

To the Shareholders of
Golden Queen Mining Co. Ltd.
Vancouver, B.C.

We have audited the accompanying consolidated balance sheet of Golden Queen
Mining Co. Ltd. and subsidiary (a development stage company) as of December
31, 1996 and the related consolidated statements of loss, changes in
stockholders' equity, and cash flows for the seven month period then ended. 
We have also audited the statements of loss, stockholders' equity and cash
flows for the period from inception (November 21, 1985) through December 31,
1996, except that we did not audit these financial statements for the period
from inception (November 21, 1985) through May 31, 1996; those statements were
audited by other auditors whose report dated July 12, 1996, expressed an
unqualified opinion on those statements.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.  Our
opinion, insofar as it relates to the amounts for the period from inception
(November 21, 1985) through May 31, 1996, is based solely on the report of the
other auditors.

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

In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Golden Queen Mining Co. Ltd. and
subsidiary as of December 31, 1996 and the results of its operations and its
cash flows for the seven month period ended December 31, 1996, and the period
from inception (November 21, 1985) through December 31, 1996, in conformity
with generally accepted accounting principles in the United States.

BDO Dunwoody
Chartered Accountants
(Internationally BDO Binder)

February 19, 1997
Vancouver, British Columbia




                                    31
<PAGE>

                       GOLDEN QUEEN MINING CO. LTD.
                       (a development stage company)
                        Consolidated Balance Sheets
                             (U.S. dollars)


                                   December 31,          May 31,
Assets                                1996                1996
------                             ------------          -------

Current Assets:
 Cash and cash equivalents         $ 5,436,497         $ 9,818,003
 Receivables                           133,164               7,215
 Prepaid expenses and 
  other current assets                  55,603              62,774
                                    ----------          ----------

Total current assets                 5,625,264           9,887,992

Property and equipment, net 
  (Note 1)                             683,310              70,432
Mineral properties 
  (Notes 2, 5 and 9)                14,741,678          10,403,384
Other assets (Note 3)                  353,500             350,000
                                    ----------          ----------
                                   $21,403,752         $20,711,808
                                    ==========          ==========

Liabilities and Shareholders' Equity

Current Liabilities:
 Accounts payable                  $   507,713         $   347,121
 Accrued liabilities                    69,046              42,694
 Current maturities of long-term 
  debt (Note 5)                        203,175              91,771
                                    ----------          ----------
Total current liabilities              779,934             481,586
Long-term debt, less current 
  maturities (Note 5)                1,901,520           1,045,230
                                    ----------          ----------

Total liabilities                    2,681,454           1,526,816

Commitments and Contingencies 
  (Note 9)

Shareholders' Equity (Notes 6 and 7)

Preferred shares, no par, 3,000,000 
  shares authorized; 0 shares 
  outstanding                                -                   -
  Common shares, without par, 
  100,000,000 shares authorized;
  22,051,400 and 16,533,400
  shares issued (Notes 6 and 7)     20,886,029          20,875,969
Deficit accumulated during the 
  development stage                 (2,163,731)         (1,690,977)
                                    ----------          ----------

Total shareholders' equity          18,722,298          19,184,992
                                    ----------          ----------
                                   $21,403,752         $20,711,808
                                    ==========          ==========

     See accompanying summary of accounting policies and notes to consolidated
financial statements.

                                    32
<PAGE>

                        GOLDEN QUEEN MINING CO. LTD.
                       (a development stage company)
                      Consolidated Statements of Loss
                             (U.S. dollars)

<TABLE>
<CAPTION>

                                                                                       Cumulative Amounts
                                                                                     From Date of Inception
                                                                                      (November 21, 1985)
                                        Seven Months Ended       Year Ended               through 
                                        December 31, 1996        May 31, 1996          December 31, 1996
                                        -----------------        ------------        -----------------------
<S>                                     <C>                      <C>                 <C>

General and administrative expenses     $   535,131              $   437,131              $ 2,141,857
Interest expense                             56,472                   35,167                  206,582
Interest income                            (238,289)                 (50,539)                (711,020)
Abandoned mineral interests                                                                   277,251
Other (income) expense                       (4,366)                   4,621                    6,369
                                         ----------               ----------               ----------

Net loss                                $   348,948              $   426,380              $ 1,921,039
                                         ==========               ==========               ==========

Net loss per share                      $     (0.02)             $     (0.03)
                                         ==========               ==========

Weighted average shares outstanding      19,446,428               15,832,203


</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


                                    33
<PAGE>

                       GOLDEN QUEEN MINING CO. LTD.
                      (a development stage company)
        Consolidated Statements of Changes in Stockholders' Equity
                             (U.S. dollars)

<TABLE>
<CAPTION>

From the Date of Inception
  (November 21, 1985)                  Common Stock              Accumulated
through December 31, 1996          Shares         Amount           Deficit      Total
-----------------------------------------------------------------------------------------
<S>                                <C>            <C>            <C>            <C>

November 21, 1985
 Issuance of common shares 
   for cash                        1,425,001      $ 141,313      $      -       $141,313
 Net loss for the year                     -              -       (15,032)       (15,032)
                                   ------------------------------------------------------

Balance, May 31, 1986              1,425,001        141,313       (15,032)       126,281
 Issuance of common shares 
   for cash                          550,000        256,971             -        256,971
 Issuance of common shares for 
   mineral property                   25,000         13,742             -         13,742
 Net loss for the year                     -              -       (58,907)       (58,907)
                                   ------------------------------------------------------

Balance, May 31, 1987              2,000,001        412,026       (73,939)       338,087
 Issuance of common shares 
  for cash                         1,858,748      1,753,413             -      1,753,413
 Net income for the year                   -              -        38,739         38,739
                                   ------------------------------------------------------

Balance, May 31, 1988              3,858,749      2,165,439       (35,200)     2,130,239
 Issuance of common shares 
   for cash                        1,328,750      1,814,133             -      1,814,133
 Issuance of common shares
   for mineral property              100,000        227,819             -        227,819
 Net loss for the year                     -              -      (202,160)      (202,160)
                                   ------------------------------------------------------

Balance, May 31, 1989              5,287,499      4,207,391      (237,360)     3,970,031
 Issuance of common shares 
   for cash                        1,769,767      2,771,815             -      2,771,815
 Issuance of common shares
   for mineral property                8,875         14,855             -         14,855
 Net loss for the year                     -              -      (115,966)      (115,966) 
                                   ------------------------------------------------------

Balance, May 31, 1990              7,066,141      6,994,061      (353,326)     6,640,735
 Net income for the year                   -              -        28,706         28,706
                                   ------------------------------------------------------

Balance, May 31, 1991              7,066,141      6,994,061      (324,620)     6,669,441
 Net loss for the year                     -              -      (157,931)      (157,931) 
                                   ------------------------------------------------------

Balance, May 31, 1992              7,066,141      6,994,061      (482,551)     6,511,510
 Net loss for the year                     -              -      (285,391)      (285,391)
                                   ------------------------------------------------------
</TABLE>

                                    34
<PAGE>

                       GOLDEN QUEEN MINING CO. LTD.
                      (a development stage company)
        Consolidated Statements of Changes in Stockholders' Equity
                             (U.S. dollars)

<TABLE>
<CAPTION>

From the Date of Inception
  (November 21, 1985)                  Common Stock              Accumulated
through December 31, 1996          Shares         Amount           Deficit      Total
-----------------------------------------------------------------------------------------
<S>                                <C>            <C>            <C>            <C>

Balance, May 31, 1993              7,066,141      6,994,061      (767,942)     6,226,119
 Issuance of common shares
   for cash                        5,834,491      1,536,260             -      1,536,260
 Share issue costs                         -              -       (18,160)       (18,160)
 Issuance of common shares
   for mineral property              128,493         23,795             -         23,795
 Loss for the year                         -              -      (158,193)      (158,193)
                                   ------------------------------------------------------

Balance, May 31, 1994              13,029,125     8,554,116      (944,295)     7,609,821
 Issuance of common shares 
   for cash                           648,900       182,866             -        182,866
 Loss for the year                                               (219,576)      (219,576)
                                   ------------------------------------------------------

Balance, May 31, 1995              13,678,025     8,736,982    (1,163,871)     7,573,111
 Issuance of common shares 
   for cash                         2,349,160     2,023,268             -      2,023,268
 Issuance of common shares 
   for debt                           506,215       662,282             -        662,282
 Issuance of 5,500,000 special 
   warrants                                 -     9,453,437             -      9,453,437
 Special warrants issue cost                -             -      (100,726)      (100,726)
 Loss for the year                          -             -      (426,380)      (426,380)
                                   ------------------------------------------------------

Balance, May 31, 1996              16,533,400     20,875,969   (1,690,977)    19,184,992
 Issuance of common shares 
   for cash                            18,000         10,060            -         10,060
 Issuance of common shares
   for special warrants             5,500,000              -            -              -
 Special warrants issue cost                -              -     (123,806)      (123,806)
 Net loss for the period                    -              -     (348,948)      (348,948)
                                   ------------------------------------------------------

Balance, December 31, 1996         22,051,400    $20,886,029  $(2,163,731)   $18,722,298
                                   ======================================================

</TABLE>


   See accompanying summary of accounting policies and notes to consolidated   
                           financial statements.

                                    35
<PAGE>

                       GOLDEN QUEEN MINING CO. LTD.
                      (a development stage company)
                  Consolidated Statements of Cash Flows
                            (U.S. dollars)

            Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                                       Cumulative Amounts
                                                                                     From Date of Inception
                                                                                       (November 21, 1985)
                                        Seven Months Ended       Year Ended                 through
                                        December 31, 1996        May 31, 1996          December 31, 1996
                                        ------------------       ------------        -----------------------
<S>                                     <C>                      <C>                 <C>

Operating Activities:
  Net loss                                   $(348,948)           $(426,380)              $(1,921,039)
  Adjustments to reconcile net loss to
     cash used in operating activities:
          Write-off of mineral properties            -                    -                   277,251
          Amortization and depreciation         19,236               20,982                    41,910
          Loss on disposition of property 
            and equipment                          214                4,621                    10,949
  Changes in assets and liabilities:
          Receivables                         (125,949)              11,441                  (133,164)
          Prepaid expenses and other 
            current assets                        7,171             (57,381)                  (55,603)
          Accounts payable and accrued 
            liabilities                         186,944             168,699                   576,759
                                             ----------          ----------                 ---------

Cash used in operating activities              (261,332)           (278,018)               (1,202,937)
                                             ----------          ----------                 ---------

Investment Activities:
  Deferred exploration and development
      expenditures                           (2,793,637)         (1,848,009)              (10,979,784)
  Deposits on mineral properties                 (3,500)           (250,000)                 (353,500)
  Purchase of mineral properties               (459,824)           (422,703)               (3,908,934)
  Purchase of property and equipment           (632,328)            (61,716)                 (744,661)
  Proceeds from sale of property and 
   equipment                                          -                   -                     8,492
                                             ----------          ----------                ----------

Cash used in investment activities           (3,889,289)         (2,582,428)              (15,978,387)
                                             ----------          ----------                ----------
Financing Activities:
     Borrowing under long-term debt                   -           1,173,281                 3,766,502
     Payment of long-term debt                 (117,139)            (11,785)                 (849,525)
     Issuance of common stock for cash           10,060           2,023,268                10,490,099
     Share issue costs                         (123,806)           (100,726)                 (242,692)
     Issuance of special warrants                     -           9,453,437                 9,453,437
                                             ----------          ----------                 ---------

Cash provided by (used in) financing 
  activities                                   (230,885)         12,537,475                22,617,821
                                             ----------          ----------                ----------
</TABLE>

                                    36
<PAGE>

                       GOLDEN QUEEN MINING CO. LTD.
                      (a development stage company)
                  Consolidated Statements of Cash Flows
                            (U.S. dollars)

            Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                                       Cumulative Amounts
                                                                                     From Date of Inception
                                                                                       (November 21, 1985)
                                        Seven Months Ended       Year Ended                 through
                                        December 31, 1996        May 31, 1996          December 31, 1996
                                        ------------------       ------------        -----------------------
<S>                                     <C>                      <C>                 <C>

Net change in cash and cash equivalents      (4,381,506)          9,677,029                5,436,497

Cash and cash equivalents, beginning 
  balance                                     9,818,003             140,974                        -
                                             ----------          ----------                ---------

Cash and cash equivalents, ending balance    $5,436,497          $9,818,003               $5,436,497
                                              =========           =========                =========

Non-cash financing and investing activities:
  Conversion of long-term debt to common 
     shares                                  $        -          $  662,282               $  662,282
  Mineral property acquired through the
     issuance of long-term debt              $1,084,833          $        -               $1,084,833
  Exchange of note for future royalty 
     payments                                $        -          $        -               $  150,000
  Shares for mineral property                $        -          $        -               $  280,211

Cash paid during the period for:
  Interest                                   $   88,361          $   15,903               $  349,605
  Income taxes                                        -          $        -               $        -

</TABLE>


   See accompanying summary of accounting policies and notes to consolidated
                            financial statements.

                                    37
<PAGE>

                        GOLDEN QUEEN MINING CO. LTD.
                       (a development stage company)
                Notes to Consolidated Financial Statements

NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION.  Golden Queen Mining Co.
Ltd. ("Golden Queen" or the "Company") is engaged in acquiring and maintaining
gold mining properties for exploration, future development and production. 
The Company was formed on November 21, 1985.  Since its inception, the Company
has been in the development stage. Planned activities involve bringing to
operation a precious metals mine located in Kern County, California.  These
consolidated financial statements include the accounts of Golden Queen Mining
Co. Ltd. ("Golden Queen") and its wholly-owned subsidiary, Golden Queen Mining
Company, Inc. (the "Subsidiary").

The underlying value of the Company's mineral properties and related deferred
exploration and development expenditures is dependent on the existence and
economic recovery of ore reserves, confirmation of the Company's interest in
the underlying mineral claims, the ability to obtain necessary financing to
complete the development, and future profitable production or proceeds from
the disposition thereof.

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.  The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States.  The consolidated financial statements are
special purpose statements prepared for inclusion in the Company's annual
filing with the Securities and Exchange Commission.

FISCAL-YEAR CHANGE.  The Board of Directors approved a change in the Company's
fiscal year end from May 31 to December 31, effective calendar year beginning
January 1, 1997.  A seven-month fiscal transition period from June 1, 1996
through December 31, 1996 will precede the start of the new calendar-year
cycle.  Fiscal years presented and referred to in these consolidated financial
statements and notes thereto are on a May 31 fiscal-year basis unless
otherwise noted.

CASH AND CASH EQUIVALENTS.  For purposes of balance sheet classification and
the statements of cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.

PROPERTY AND EQUIPMENT.  Property and equipment are stated at cost. 
Depreciation is provided by the straight-line method with a half-year
convention over the estimated service lives of the respective assets, which
range from 5 to 29-1/2 years.

MINERAL PROPERTIES.  Mineral properties include the cost of advance minimum
royalty payments, the cost of capitalized property leases, share payments, and
the cost of property acquired either by cash payment or the issuance of term
debt.  Expenditures for exploration and development on specific proven
properties are also capitalized.  These costs will be amortized against
subsequent revenues, or charged to operations at the time the related property
is determined to have an impairment of value.

In accordance with the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed Of," management of the Company
reviews the carrying value of its mineral properties on a regular basis. 
Estimated discounted future cash flow from the mineral properties is compared
with the current carrying value.  Reductions to the carrying value are
recorded to the extent the net book value of the property exceeds the estimate
of future discounted cash flow.

FOREIGN CURRENCY TRANSLATION.  Golden Queen has adopted the United States
dollar as its reporting currency for its financial statements prepared after
May 21, 1996 as the United States dollar is the currency of the primary
economic environment in which Golden Queen and the Subsidiary conduct business
and is considered the appropriate functional currency for the Company's
operations.  Accordingly, the financial statements of the Company have been
translated by the temporal method with translation gains and losses included
in earnings.  Under this method, the operations of the Company have been
converted into U.S. dollars at the following rates of exchange:

      (i) Monetary assets and monetary liabilities - at a rate of exchange
          prevailing at the balance sheet date; 
     (ii) All other assets - at a rate of exchange prevailing at the time of
          the transactions;
    (iii) Revenue and expenses - at the average rate of exchange prevailing
          during the period.

                                    38
<PAGE>

The exchange rate prevailing at both December 31, 1996 and May 31, 1996 was
1.37.  The average rates of exchange during the seven month period ended
December 31, 1996 and the year ended May 31, 1996 were 1.36 and 1.37,
respectively.

NET LOSS PER SHARE.  The net loss per common share was computed by dividing
the net loss by the weighted average number of common stock shares outstanding
for each period presented.  Shares issuable upon exercise of outstanding stock
options, warrants and convertible debentures have been excluded from the
computation as their effect on net loss per share would be antidilutive.

ENVIRONMENTAL AND RECLAMATION COSTS.  The Company currently has no active
reclamation projects, but expenditures relating to ongoing environmental and
reclamation programs would either be expensed as incurred or capitalized and
depreciated depending on the status of the related mineral property and their
future economic benefits.  The recording of provisions generally commences
when a reasonably definitive estimate of cost and remaining project life can
be determined.

ESTIMATES.  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS.  The carrying amount reported in the
balance sheets for cash and cash equivalents, accounts receivables, accounts
payable and accrued expenses approximate fair value because of the immediate
or short-term maturity of these financial instruments.  The fair value of
long-term debt approximates its carrying value as the stated rates of the debt
reflect recent market conditions.

RECLASSIFICATIONS.  Certain amounts in the May 31, 1996 financial statements
have been reclassified to conform to the 1996 presentation.

NEW PRONOUNCEMENTS.  Effective June 1, 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to be Disposed of".  The new standard establishes new guidelines regarding
when impairment losses on long-lived assets, which include property and
equipment, certain identifiable intangible assets and goodwill, should be
recognized and how impairment losses should be measured.  The adoption of this
standard did not have an impact on the Company's financial position or results
of operations.

Effective June 1, 1996, the Company adopted the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation".  SFAS No. 123
establishes a new, fair value-based method of measuring stock-based
compensation, but does not require an entity to adopt the new method for
preparing its basic financial statements.  For entities not adopting the new
method for preparing basic financial statements, SFAS No. 123 requires
disclosures in the footnotes of pro forma net earnings and earnings per share
information as if the fair value-based method had been adopted.  In accordance
with the provisions of SFAS No. 123, the Company accounts for transactions
with individuals other than employees in which goods or services are the
consideration received for the issuance of equity instruments based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable.

Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128") issued by the Financial Accounting Standards Board ("FASB")
is effective for financial statements with fiscal years beginning after
December 15, 1997.  The new standard simplifies guidelines regarding the
calculation and presentation of earnings per share.  The Company does not
expect adoption to have a material effect on the presentation of its results
of operations.

                                    39
<PAGE>

1.   PROPERTY AND EQUIPMENT.

Property and equipment consisted of:
                                        December 31,        May 31,
                                            1996             1996

     Furniture and fixtures             $    67,320    $    51,685
     Equipment                               82,916         48,340
     Automobiles                            108,495         21,134
     Rental properties                      262,886              -
     Construction in progress               231,333              -
                                            -------        -------
                                            752,950        121,159
     Less accumulated depreciation           69,640         50,727
                                            -------        -------
     Net property and equipment         $   683,310    $    70,432
                                            =======         ======

2.   MINERAL PROPERTIES.  The Company has capitalized the amounts which have
been paid to acquire property rights and for services rendered in the
exploration, drilling, sampling, engineering and other related technical,
managerial and professional services toward the evaluation and development of
certain mining claims known as the Soledad Property ("Soledad"), Mojave Mining
District, Kern County, California.

The Company's investment in mineral properties consisted of the following:

                                            December 31,      May 31,
                                                 1996          1996

     Deferred exploration and
      development expenditures,
      beginning of period                    $ 7,006,202    $ 5,212,878
     Costs capitalized during the year:
      Engineering                                368,160        335,284
      Geology/drilling                         1,279,775        718,895
      Permitting/environmental                   504,915        276,080
      Metallurgical testing                       31,552        202,950
      Administrative and other direct costs      609,235        260,115
     Deferred exploration and
      development expenditures,
      end of period                            9,799,839      7,006,202
     Properties                                4,941,839      3,397,182
                                              ----------     ----------
     Mineral properties                      $14,741,678    $10,403,384
                                              ==========     ==========

In January 1997, the Company acquired two additional properties adjacent to
the proposed mine in separate transactions for $150,790.

3.   OTHER ASSETS.  On April 1, 1995, the Company acquired an option to
purchase all of the issued and outstanding shares of a privately held
California corporation holding an interest in a previously uncontracted tract
of land located near the Soledad site.  The option called for an initial non-
refundable payment of $100,000 in exchange for access to the property for a
period of nine months to evaluate the presence of mineral reserves.  At the
end of the nine month period, the Company chose to exercise its option to
purchase the shares of the corporation by making the initial purchase payment
of $250,000.  An additional $500,000 is due under the option agreement upon
the sooner of commencement of site construction or July 1, 1997.  An
additional $750,000 is due upon reaching sustained production or July 1, 1999
whichever comes first.  The Company has no legal obligation to continue making
payment and cannot perfect its rights as a shareholder of the corporation
until full payment under the option is made.  Upon commencement of commercial
production, the Company will pay a royalty of 1% of gross smelter returns for
a period of up to 60 years, not to exceed $60,000,000.

                                    40
<PAGE>

4.   INCOME TAXES.  At December 31, 1996 and May 31, 1996, the Company had
deferred tax assets of approximately $127,000 and $301,000 principally arising
from net operating carryforwards for income tax purposes, offset by
development costs expended for income tax purposes but capitalized for
financial reporting purposes.  As management of the Company cannot determine
if it is more likely than not that the Company will receive the benefit of
this asset, a valuation allowance equal to the deferred tax asset has been
established at both December 31, 1996 and May 31, 1996.

As at December 31, 1996, the Company had net operating loss carryforwards
available to reduce taxable income in future years as follows:
          Country                  Amount              Expiration Dates

     United States                 $8,450,000             2003-2011
     Canada                        $  580,000             1997-2003

The potential effect on future income taxes which may result from the
application of these losses has not been reflected in these financial
statements.

5.   LONG-TERM DEBT.

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                 December 31,               May 31,
                                                                    1996                     1996

<S>                                                              <C>                      <C>
Debenture convertible at the option of the holder into 
  common shares at a conversion price of C$2.00 ($1.46) 
  per common share.  The debenture bears interest at 9.5%,
  due March 19, 1998, unsecured                                  $1,000,000               $1,000,000

Note due to a corporation, payable in monthly installments
  of $9,275, including interest at prime plus 2% (10.25% at
  December 31, 1996) maturing September 2001, collateralized
  by mineral property.                                              850,000                        -

12% note due, payable in monthly installments of $16,659 
  including interest, maturing November 1997, collateralized 
  by mineral property.                                              157,783                        -

9% note due, payable in monthly installments of $600 including
  interest, maturing June 2006, collateralized 
  by mineral property.                                               45,838                        -

10% note due to a collective group of individuals, payable in 
  monthly installments of $1,500 including interest, maturing 
  at the earlier of April 1999 or commencement of production, 
  collateralized by mineral property.                                42,074                   49,858

Non-interest bearing note payable to an individual, due in two
  installments: $5,000 on July 1, 1997 and $4,000 July 1, 1999,
  secured by a grant deed, collateralized by well and related 
  water rights.                                                       9,000                    9,000

10% note due to an individual, payable in monthly installments
  of $1,500 including interest, repaid in December 1996, 
  collateralized by mineral property.                                     -                   78,143

                                    41
<PAGE>

Total long-term debt                                              2,104,695                1,137,001
Current maturities                                                  203,175                   91,771
                                                                  ---------                ---------
Long-term debt, less current maturities                          $1,901,520               $1,045,230
                                                                  =========                =========

Scheduled long-term maturities at December 31,1996 are as follows:

          Year ending December 31,                                                     Amount

          1997                                                                       $  203,175
          1998                                                                        1,047,250
          1999                                                                           51,815
          2000                                                                           38,433
          2001                                                                           42,508
          Thereafter                                                                    721,514
                                                                                      ---------
                                                                                     $2,104,695
                                                                                      =========
</TABLE>

6.   SHARE CAPITAL.  On May 23, 1996 the Company issued 5,500,000 Special
Warrants under a Special Warrant indenture in exchange for $9,453,473.  All of
the special warrants were exercised on September 10, 1996, without additional
payment, for one common share and one-half of one warrant.  Each full warrant
issued upon exercise of the special warrants entitles its holder to purchase
one common share at a price of C$2.90 ($2.13 U.S. dollars).  All of the
2,750,000 warrants are outstanding at December 31, 1996 and are exercisable
through November 28, 1997.

7.   STOCK OPTION PLAN.  Under its amended 1996 stock option plan, the Company
may grant options to purchase up to 3,300,000 shares of common stock to
officers, directors and employees.  The exercise price for all stock options
is the closing price of the Company's common shares (in Canadian dollars) as
traded on the Toronto Stock Exchange on the date of grant.  Options issued to
directors who are not employees vest immediately.  For all other options, the
right to exercise vests over a two year period in equal increments on the date
of grant and on each of the first two anniversaries of such date.  All stock
options issued and outstanding as of December 31, 1996 expire at a date
determined by the Company's Board of Directors, not exceeding five years from
the date of grant, or after 39 months from the date of grant if not specified.

The following is a summary of stock option activity: 

                         Seven Month Period Ended         Year Ended
                            December 31, 1996            May 31, 1996
                         ------------------------     -------------------- 
                          Shares / Price Range        Shares / Price Range

Beginning of period      1,950,000 / $0.40-2.18      935,000 / $0.39-1.10
Options granted            325,000 / $1.69-1.9     1,435,000 / $0.99-2.18
Options exercised         (18,000) / $0.56         (420,000) / $0.39-1.07
End of period            2,257,000 / $0.40-2.18    1,950,000 / $0.40-2.18
Options exercisable      1,560,332 / $0.40-2.18    1,210,000 / $0.40-2.18


                                    42
<PAGE>

The following table summarizes information about fixed-price stock options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>



                                     Options Outstanding                Options Exercisable
                                   ------------------------           ------------------------
                                   Weighted-      Weighted-                          Weighted-
                                    Average       Average                            Average
     Range of           Number     Contractual    Exercise              Number       Exercise
      Prices         Outstanding     Life           Price             Exercisable     Price
     -----------------------------------------------------------------------------------------
     <S>             <C>            <C>           <C>                  <C>           <C>
         
     $0.40 - .44      220,000         2.5          0.41                 220,000       0.41
      0.56             12,000         2.2          0.56                  12,000       0.56
      0.99            750,000         3.9          0.99                 523,333       0.99
      1.07 - 1.11     850,000         3.7          1.10                 630,000       1.10
      1.69 - 1.79     240,000         4.7          1.77                 113,333       1.75
      1.94             85,000         3.2          1.94                  28,333       1.94
      2.18            100,000         4.4          2.18                  33,333       2.18
     ----------------------------------------------------------------------------------------- 
     $0.40 - 2.18   2,257,000         3.8          1.15               1,560,332       1.05

</TABLE>

Subsequent to December 31, 1996, additional stock options were granted for the
purchase of up to 130,000 common shares at C$2.70 ($2.01 U.S. dollars) per
share exercisable to January 29, 2002.

The Company accounts for stock-based compensation plans by applying APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations.  Under APB Opinion No. 25, because the exercise price of the
Company's employee stock options approximates the market price of the
underlying stock at the date of grant, no compensation cost is recognized.

FASB Statement No. 123, "Accounting for Stock-Based Compensation" (FAS 123)
requires the Company to provide pro forma information regarding net income and
earnings per share as if compensation cost for the Company's stock option
plans had been determined in accordance with the fair value based method
prescribed in FAS 123.  The Company estimates the fair value of each stock
option at the grant date by using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 1996 and 1995,
respectively:  no dividend yield for each year; expected volatility of 40
percent; and risk-free interest rates of 5.0 percent.

Under the accounting provisions of FAS 123, the Company's net loss and loss
per share would have been reduced to the pro forma amounts indicated below:

                              Seven Month Period Ended       Year Ended    
                                  December 31, 1996         May 31, 1996
     Net loss:
       As reported                 $(348,948)               $(426,380)
       Pro forma                    (420,348)                (440,880)

     Loss per share:
       As reported                     (0.02)                   (0.03)
       Pro forma                       (0.02)                   (0.03)

8.   RELATED PARTY TRANSACTIONS.  During the fiscal year ending May 31, 1996,
transactions with related parties consisted of consulting fees paid to a
director and an affiliate of a director of $138,996 and office and
administrative costs paid to the same director of $3,745.  Also, until March
1996, office space and secretarial services were provided to the Company at no
cost by a company related through common directors.

Notes payable and accrued interest due to related parties were repaid during
the year ended May 31, 1996 by the issue of common shares (Notes 5 and 6).

                                    43
<PAGE>

9.   COMMITMENTS AND CONTINGENCIES.  The Company's investment in mineral
properties includes an exclusive lease to explore, develop and mine the
Soledad site.  The lease is for a minimum twenty year period, continuing on as
long as the property remains in production subject to processing a minimum of
12,000 tons of ore per year.  The lease is also subject to production
royalties of 3% to 7.5% of net smelter returns depending on the quality of ore
eventually extracted.  All advance minimum royalties paid, amounting to
$100,000 per year, are applied against any future production royalties.  

The Company has agreed to issue 100,000 common shares upon commencement of
commercial production in connection with certain property acquisitions.

The Company has entered into various exploration right, lease option and
property acquisition agreements on the above claims.  The lease agreements
have various terms and require annual  payments of approximately $275,000. 
All are subject to a sliding scale royalty on net smelter returns beginning 
at 3%.

During the year ended May 31, 1996 the Company entered into employment
contracts with three of its executive officers. The agreements provide for the
payment of salary and bonus, the granting of options, and certain employee
benefits. The agreements also contain provisions for lump-sum payments based
on the employee's salary upon termination for reasons other than for cause, up
to an aggregate amount of $700,000.

On September 19, 1994 the Company entered into a mining lease agreement
granting exclusive exploration and development rights on property adjacent to
claims previously described.  The term of the agreement is for 20 years and
consideration included a cash payment of $30,000 and annual minimum lease
payments of $10,000.

On November 8, 1995, the Company signed an option to purchase certain mining
claims and millsites for a total purchase price of $65,000.  $13,000 has been
paid and a note payable for $52,000 at 10% interest with monthly payments of
$1,500 is outstanding.  All principal will be due in three years or at the
start of production, whichever occurs first.  The Company will pay a 3% net
smelter return royalty not to exceed $500,000.

On December 30, 1994, the Company signed an amendment to a September 25, 1989
agreement of purchase for certain leasehold interests and unpatented claims. 
Under the terms of the amendment, the outstanding balance on the $150,000 note
was canceled and production royalty granted on all products produced from the
property up to a maximum payment of $300,000 plus simple interest.  The
outstanding balance on the canceled note was credited to mineral properties.

10.  FINANCIAL RESULTS FOR THE SEVEN MONTH PERIOD ENDED DECEMBER 31, 1995
(UNAUDITED).  During the seven month period ended December 31, 1995, the
Company had no revenue and a net loss of approximately $201,000 or $.01 per
share.








                                    44
<PAGE>

                                SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.  

GOLDEN QUEEN MINING CO. LTD.

By:   /s/ Steven W. Banning
     ------------------------------
      its President 
                              
     Date: May 26, 1997


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.  


By:  /s/ Gordon C. Gutrath
     ------------------------------
      a Director

     Date: May 26, 1997

By:  /s/ Jerrold W. Schramm
     ------------------------------
      a Director

     Date: May 26, 1997

By:  /s/ Edward G. Thompson
     ------------------------------
      a Director

     Date: May 26, 1997

By:  /s/ Chester Shynkaryk
     ------------------------------
      a Director

     Date: May 26, 1997

By:  /s/ Christopher M.T. Thompson
     ------------------------------
      a Director

     Date: May 26, 1997

By:  /s/ Bernard F. Goodson
     ------------------------------
      its Principal Financial
      and Accounting Officer

     Date: May 26, 1997