---



CONSOLIDATED FINANCIAL STATEMENTS



YEAR ENDED DECEMBER 31, 2005, FOURTEEN MONTHS ENDED DECEMBER
31, 2004 AND YEAR ENDED OCTOBER 31, 2003





(Expressed in Canadian Dollars, unless otherwise stated)

---

|                                                                                                                    |                                                                              | 
|------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | 
|                                                                                                                    |                                                                             
|                                                                                                                    |                                                                             
|KPMG LLP
      Chartered Accountants
      PO Box 10426 777 Dunsmuir Street
      Vancouver BC V7Y 1K3
      Canada | Telephone (604) 691-3000
      Fax (604) 691-3031
      Internet www.kpmg.ca

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors
  Anooraq Resources Corporation

We have audited the accompanying consolidated balance sheets
  of Anooraq Resources Corporation as at December 31, 2005 and 2004 and the consolidated
  statements of operations, deficit and cash flows for the year ended December
  31, 2005 and the fourteen months ended December 31, 2004. These consolidated
  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 audits.

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

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

The accompanying consolidated financial statements have been
  prepared assuming that the Company will continue as a going concern. As discussed
  in note 1 to the consolidated financial statements, the Company has insufficient
  working capital to meet its planned business objectives that raise substantial
  doubt about its ability to continue as a going concern. Management’s plans
  in regard to these matters are also described in note 1. The consolidated financial
  statements do not include any adjustments that might result from the outcome
  of this uncertainty.

As discussed in note 4 to the consolidated financial statements,
  the Company changed its method of accounting for variable interest entities
  during the year ended December 31, 2005.

Canadian generally accepted accounting principles vary in
  certain significant respects from accounting principles generally accepted in
  the United States of America. Information relating to the nature and effect
  of such differences is presented in note 12 to the consolidated financial statements.

**KPMG LLP (signed)**
  Chartered Accountants

Vancouver, Canada
  March 10, 2006

KPMG LLP, a Canadian limited liability partnership is the Canadian
  member firm of KPMG International, a Swiss cooperative.

---

ANOORAQ RESOURCES CORPORATIONConsolidated Balance Sheets(Expressed in
Canadian Dollars)

|                                                        |   | December 31 |   |   | December 31         |  
|------------------------------------------------------- | - | ----------- | - | - | ------------------- | -
|                                                        |   | 2005        |   |   | 2004                |  
|                                                        |   |             |   |   | (restated  note 4) |  
|Assets                                                  |   |             |   |   |                     |  
|                                                        |   |             |   |   |                     |  
|Current assets                                          |   |             |   |   |                     |  
|Cash and equivalents                                    | $ | 4,590,284   |   | $ | 14,945,355          |  
|Amounts
      receivable (note 5)                       |   | 219,875     |   |   | 513,489             |  
|Due from related parties (note
      9)                 |   | 233,205     |   |   | 190,042             |  
|Prepaid expenses                                        |   | 116,069     |   |   | 138,642             |  
|                                                        |   | 5,159,433   |   |   | 15,787,528          |  
|Equipment(note 6)                                       |   | 174,163     |   |   | 197,995             |  
|Mineral property interests(note 7)                      |   | 8,502,000   |   |   | 8,494,358           |  
|                                                        |   |             |   |   |                     |  
|                                                        | $ | 13,835,596  |   | $ | 24,479,881          |  
|                                                        |   |             |   |   |                     |  
|                                                        |   |             |   |   |                     |  
|Liabilities and
      Shareholders' Equity              |   |             |   |   |                     |  
|                                                        |   |             |   |   |                     |  
|Current Liabilities                                     |   |             |   |   |                     |  
|Accounts payable and accrued liabilities (note
      9) | $ | 378,997     |   | $ | 1,413,234           |  
|                                                        |   |             |   |   |                     |  
|Shareholders' equity                                    |   |             |   |   |                     |  
|Share capital
      (note 8)                            |   | 50,207,363  |   |   | 49,974,357          |  
|Contributed surplus (note 8(c))                         |   | 4,824,697   |   |   | 2,363,950           |  
|Deficit                                                 |   | (41,575,461 | ) |   | (29,271,660         | )
|                                                        |   | 13,456,599  |   |   | 23,066,647          |  
|                                                        |   |             |   |   |                     |  
|Nature of operations (note 1)                           |   |             |   |   |                     |  
|Commitments (note 7)                                    |   |             |   |   |                     |  
|                                                        | $ | 13,835,596  |   | $ | 24,479,881          |  

See accompanying notes to consolidated financial
statements

Approved by the Board of Directors

|/s/ Tumelo M. Motsisi | /s/ Popo Molefe
|--------------------- | ---------------
|                      |                
|Tumelo M. Motsisi     | Popo Molefe    
|Director              | Director       

---

ANOORAQ RESOURCES
CORPORATIONConsolidated Statements of
Operations(Expressed in Canadian Dollars)

|                                                                       |   |             |   |   | Fourteen     |   |   |            |  
|---------------------------------------------------------------------- | - | ----------- | - | - | ------------ | - | - | ---------- | -
|                                                                       |   | Year ended  |   |   | months ended |   |   | Year ended |  
|                                                                       |   | December 31 |   |   | December 31  |   |   | October 31 |  
|                                                                       |   | 2005        |   |   | 2004         |   |   | 2003       |  
|Expenses                                                               |   |             |   |   |              |   |   |            |  
|Accounting, audit and legal                                            | $ | 474,422     |   | $ | 479,731      |   | $ | 32,657     |  
|Conference and
      travel                                            |   | 646,992     |   |   | 486,481      |   |   | 180,613    |  
|Consulting                                                             |   | 965,720     |   |   | 536,216      |   |   | 100,974    |  
|Exploration
      (schedule)                                           |   | 5,240,321   |   |   | 7,860,266    |   |   | 1,963,784  |  
|Foreign exchange loss (gain)                                           |   | 68,720      |   |   | 145,199      |   |   | (19        | )
|Interest income                                                        |   | (119,779    | ) |   | (485,452     | ) |   | (46,060    | )
|Office and administration                                              |   | 551,278     |   |   | 457,571      |   |   | 131,216    |  
|Salaries and
      benefits                                            |   | 1,659,465   |   |   | 834,223      |   |   | 402,989    |  
|Stock-based compensation -
      office and administration (note 8(c)) |   | 1,822,010   |   |   | 1,426,006    |   |   | 477,087    |  
|Stock-based
      compensation - exploration (note 8(c))               |   | 714,243     |   |   | 1,040,542    |   |   | 8,875      |  
|Shareholders communications                                            |   | 260,155     |   |   | 342,848      |   |   | 193,835    |  
|Trust and filing                                                       |   | 85,254      |   |   | 159,633      |   |   | 17,539     |  
|Write-off (recovery) of amounts receivable                             |   |            |   |   | (256,000     | ) |   | 365,924    |  
|Loss before the following                                              |   | 12,368,801  |   |   | 13,027,264   |   |   | 3,829,414  |  
|Future income tax recovery (note 7(b))                                 |   | (65,000     | ) |   |             |   |   |           |  
|Loss for the period                                                    | $ | 12,303,801  |   | $ | 13,027,264   |   | $ | 3,829,414  |  
|                                                                       |   |             |   |   |              |   |   |            |  
|Basic and diluted loss per share                                       | $ | 0.08        |   | $ | 0.18         |   | $ | 0.11       |  
|                                                                       |   |             |   |   |              |   |   |            |  
|Weighted average number of common shares outstanding                   |   | 148,107,407 |   |   | 73,017,307   |   |   | 34,126,372 |  

See accompanying notes to consolidated financial
statements



Consolidated Statements of Deficit(Expressed in
Canadian Dollars)

|                             |   |             |   |   | Fourteen     |   |   |             |  
|---------------------------- | - | ----------- | - | - | ------------ | - | - | ----------- | -
|                             |   | Year ended  |   |   | months ended |   |   | Year ended  |  
|                             |   | December 31 |   |   | December 31  |   |   | October 31  |  
|                             |   | 2005        |   |   | 2004         |   |   | 2003        |  
|Deficit, beginning of period | $ | (29,271,660 | ) | $ | (16,244,396  | ) | $ | (12,414,982 | )
|Loss
      for the period    |   | (12,303,801 | ) |   | (13,027,264  | ) |   | (3,829,414  | )
|Deficit, end of the period   | $ | (41,575,461 | ) | $ | (29,271,660  | ) | $ | (16,244,396 | )

See accompanying notes to consolidated financial
statements

---

ANOORAQ RESOURCES CORPORATIONConsolidated Statements of Cash Flows(Expressed in
Canadian Dollars)

|                                                                   |   |             |   |   | Fourteen     |   |   |            |  
|------------------------------------------------------------------ | - | ----------- | - | - | ------------ | - | - | ---------- | -
|                                                                   |   | Year ended  |   |   | months ended |   |   | Year ended |  
|                                                                   |   | December 31 |   |   | December 31  |   |   | October 31 |  
|                                                                   |   | 2005        |   |   | 2004         |   |   | 2003       |  
|Operating activities                                               |   |             |   |   |              |   |   |            |  
|Loss for the period                                                | $ | (12,303,801 | ) | $ | (13,027,264  | ) | $ | (3,829,414 | )
|Items not
      involving cash                                     |   |             |   |   |              |   |   |            |  
|Amortization included in exploration expenses                      |   | 48,503      |   |   | 39,121       |   |   | 20,637     |  
|Future income tax recovery                                         |   | (65,000     | ) |   |             |   |   |           |  
|Stock-based compensation (note 8(c))                               |   | 2,536,253   |   |   | 2,466,548    |   |   | 485,962    |  
|Unrealized foreign exchange gain                                   |   | (165,312    | ) |   |             |   |   |           |  
|Equity loss in exploration expenditures (note 7)                   |   | 317,709     |   |   | 195,387      |   |   |           |  
|Amounts receivable written off                                     |   |            |   |   |             |   |   | 365,924    |  
|Shares issued for property option payments                         |   |             |   |   |              |   |   |            |  
|included in exploration expenses                                   |   |            |   |   | 340,000      |   |   | 203,125    |  
|Changes in non-cash operating
      working capital                |   |             |   |   |              |   |   |            |  
|Amounts receivable                                                 |   | 293,614     |   |   | (539,032     | ) |   | (100,715   | )
|Amounts due to and from related parties                            |   | (43,163     | ) |   |             |   |   |           |  
|Prepaid expenses                                                   |   | 22,573      |   |   | (77,823      | ) |   | (7,784     | )
|Accounts payable
      and accrued liabilities                     |   | (1,034,237  | ) |   | 884,957      |   |   | 436,163    |  
|Cash and equivalents used by operating activities                  |   | (10,392,861 | ) |   | (9,718,106   | ) |   | (2,426,102 | )
|                                                                   |   |             |   |   |              |   |   |            |  
|Investing activities                                               |   |             |   |   |              |   |   |            |  
|Mineral property acquistion costs                                  |   |            |   |   | (4,489,745   | ) |   |           |  
|Purchase of equipment                                              |   | (24,671     | ) |   | (220,126     | ) |   |           |  
|Equity investment                                                  |   | (95,039     | ) |   |             |   |   |           |  
|Cash and equivalents used by investing activities                  |   | (119,710    | ) |   | (4,709,871   | ) |   |           |  
|                                                                   |   |             |   |   |              |   |   |            |  
|Financing activities                                               |   |             |   |   |              |   |   |            |  
|Issuance of common shares                                          |   | 157,500     |   |   | 25,380,632   |   |   | 5,151,590  |  
|Issue costs                                                        |   |            |   |   | (1,421,698   | ) |   | (316,326   | )
|Cash
      and equivalents provided by financing activities        |   | 157,500     |   |   | 23,958,934   |   |   | 4,835,264  |  
|                                                                   |   |             |   |   |              |   |   |            |  
|Increase (decrease) in cash and
      equivalents                  |   | (10,355,071 | ) |   | 9,530,957    |   |   | 2,409,162  |  
|Cash and equivalents, beginning of period                          |   | 14,945,355  |   |   | 5,414,398    |   |   | 3,005,236  |  
|Cash and equivalents, end of period                                | $ | 4,590,284   |   | $ | 14,945,355   |   | $ | 5,414,398  |  
|                                                                   |   |             |   |   |              |   |   |            |  
|                                                                   |   |             |   |   |              |   |   |            |  
|Supplementary
      information                                    |   |             |   |   |              |   |   |            |  
|Interest paid                                                      | $ | 73,855      |   | $ | 23,584       |   | $ |           |  
|Interest received                                                  | $ | (193,634    | ) | $ | (509,036     | ) | $ | (46,060    | )
|Taxes paid                                                         | $ |            |   | $ |             |   | $ |           |  
|                                                                   |   |             |   |   |              |   |   |            |  
|Non-cash operating, financing and
      investing activities       |   |             |   |   |              |   |   |            |  
|Shares issued for property
      option agreements                 | $ |            |   | $ |             |   | $ | 203,125    |  
|Increase in mineral property for future
      income taxes         | $ |            |   | $ | 1,385,255    |   | $ |           |  
|Fair value of options
      allocated to shares issued on exercise | $ | 75,506      |   | $ |             |   | $ |           |  

See accompanying notes to consolidated financial
statements

---

ANOORAQ RESOURCES CORPORATIONConsolidated Schedules of Exploration
Expenses(Expressed in Canadian Dollars)

|                                                |   |             |  |   | Fourteen     |  |   |            | 
|----------------------------------------------- | - | ----------- |  | - | ------------ |  | - | ---------- | 
|Republic of South Africa                        |   | Year ended  |  |   | months ended |  |   | Year ended | 
|                                                |   | December 31 |  |   | December 31  |  |   | October 31 | 
|                                                |   | 2005        |  |   | 2004         |  |   | 2003       | 
|Northern Limb of the
      Bushveld Complex     |   |             |  |   |              |  |   |            | 
|Amortization                                    | $ | 48,503      |  | $ | 39,121       |  | $ | 20,637     | 
|Assays and analysis                             |   | 1,112,445   |  |   | 1,550,516    |  |   | 207,939    | 
|Drilling                                        |   | 2,023,315   |  |   | 2,972,042    |  |   | 308,552    | 
|Engineering                                     |   | 501,068     |  |   | 788,238      |  |   | 111,177    | 
|Environmental and socioeconomic                 |   | 63,316      |  |   | 68,689       |  |   | 63,142     | 
|Geological and
      consulting                 |   | 718,439     |  |   | 993,136      |  |   | 603,000    | 
|Graphics                                        |   | 2,661       |  |   | 47,101       |  |   | 32,772     | 
|Property fees and
      assessments             |   | 78,777      |  |   | 68,628       |  |   | 72,948     | 
|Property option payments                        |   | 31,108      |  |   | 369,765      |  |   | 213,125    | 
|Site activities                                 |   | 247,249     |  |   | 480,387      |  |   | 218,116    | 
|Transportation                                  |   | 99,561      |  |   | 229,157      |  |   | 112,376    | 
|                                                |   | 4,926,442   |  |   | 7,606,780    |  |   | 1,963,784  | 
|                                                |   |             |  |   |              |  |   |            | 
|Eastern Limb of the
      Bushveld Complex      |   |             |  |   |              |  |   |            | 
|Assays and analysis                             |   | 20,963      |  |   |             |  |   |           | 
|Drilling                                        |   | 182,014     |  |   |             |  |   |           | 
|Engineering                                     |   | 37,101      |  |   | 93,539       |  |   |           | 
|Geological and
      consulting                 |   | 40,896      |  |   | 29,294       |  |   |           | 
|Graphics                                        |   | 1,200       |  |   | 8,060        |  |   |           | 
|Environmental and
      socioeconomic           |   |            |  |   | 1,554        |  |   |           | 
|Property fees and assessments                   |   | 1,440       |  |   | 2,783        |  |   |           | 
|Site activities                                 |   | 29,950      |  |   | 4,533        |  |   |           | 
|Transportation                                  |   | 315         |  |   | 113,723      |  |   |           | 
|                                                |   | 313,879     |  |   | 253,486      |  |   |           | 
|                                                |   |             |  |   |              |  |   |            | 
|Exploration expenses
      before the following |   | 5,240,321   |  |   | 7,860,266    |  |   | 1,963,784  | 
|Stock-based compensation (note 8(c))            |   | 714,243     |  |   | 1,040,542    |  |   | 8,875      | 
|Exploration expenses                            |   | 5,954,564   |  |   | 8,900,808    |  |   | 1,972,659  | 
|Cumulative expenditures, beginning of period    |   | 16,892,216  |  |   | 7,991,408    |  |   | 6,018,749  | 
|Cumulative expenditures, end of period          | $ | 22,846,780  |  | $ | 16,892,216   |  | $ | 7,991,408  | 

See accompanying notes to consolidated financial
statements

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in
      Canadian Dollars)                                               

|1. | Nature of operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Anooraq Resources Corporation (the "Company" or
      "Anooraq") is incorporated in the Province of British Columbia, Canada and
      its principal business activity is the exploration of mineral property
      interests. Since 1999, the Company has focused on mineral property
      interests located in the Republic of South Africa, with particular
      attention on the Bushveld Complex (note 7).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During 2004, the Company changed its fiscal year end from
      October 31 to December 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company is in the process of exploring its mineral
      property interests and has not yet determined whether its mineral property
      interests contain economically recoverable mineral reserves. The
      underlying value and the recoverability of the amounts shown for mineral
      property interests are entirely dependent upon the existence of
      economically recoverable mineral reserves, the ability of the Company to
      obtain the necessary financing to complete the exploration and development
      of the mineral property interests, and future profitable production or
      proceeds from the disposition of the mineral property interests.                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The consolidated financial statements are prepared on the
      basis that the Company will continue as a going concern. Management
      recognizes that the Company will need to generate additional financial
      resources in order meet its planned business objectives. However, there
      can be no assurances that the Company will continue to obtain additional
      financial resources and/or achieve profitability or positive cash flows.
      If the Company is unable to obtain adequate additional financing, the
      Company will be required to curtail operations and exploration activities.
      Furthermore, failure to continue as a going concern would require that the
      Companys assets and liabilities be restated on a liquidation basis which
      would differ significantly from the going concern basis.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Basis of presentation and principles of
      consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | These financial statements have been prepared in
      accordance with Canadian generally accepted accounting principles. A
      reconciliation of material measurement differences between these
      principles and accounting principles generally accepted in the United
      States is shown in note 12.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The consolidated financial statements include the
      accounts of the Company and its subsidiaries, all of which are wholly
      owned. The Company's investment in the Ga-Phasha joint venture (note 7(b))
      is accounted for using the equity method (note 4).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | All material intercompany balances and transactions have
      been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | Significant accounting
policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|(a) | Cash and equivalents                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                  
|    | Cash and equivalents consist of cash and highly liquid
      investments, having maturity dates of three months or less from the date
      of purchase, that are readily convertible to known amounts of
  cash.
|    |                                                                                                                                                                                                                  
|(b) | Equipment                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                  
|    | Equipment is carried at cost less accumulated
      amortization. Amortization is provided on a declining balance basis at
      various rates ranging from 15% to 30% per
annum.                                

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|(c) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Exploration expenses incurred prior to determination of the feasibility of mining operations, and periodic option payments are expensed as incurred. Mineral property acquisition costs, and exploration and development expenditures
incurred subsequent to the determination of the feasibility of mining operations and the receipt of required construction and exploration permits, are capitalized until the property to which they relate is placed into production, sold, allowed to
lapse or abandoned.                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Mineral property acquisition costs include the cash consideration and the fair market value of common shares and warrants issued for mineral property interests, pursuant to the terms of the relevant agreement. These costs will be
amortized over the estimated life of the property following commencement of commercial production, or written off if the property is sold, allowed to lapse or abandoned or when an impairment in value has been determined to have occurred.                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(d) | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Investments in entities over which the Company exercises significant influence are accounted for using the equity method. Investments in joint ventures which the Company jointly controls, which are not variable interest entities,
are accounted for using the proportionate consolidation method. Other investments are recorded at cost and written down only when the Company has determined that a decline in value that is other than temporary has occurred.                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(e) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company records proceeds from share issuances net of issue costs. Shares issued for consideration other than cash are valued at the quoted price on the date the agreement to issue the shares was reached and announced.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(f) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are computed based on differences between the carrying amounts of assets and liabilities
on the balance sheet and their corresponding tax values, using the substantively enacted or enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Future income tax assets also result from unused loss carry forwards and other deductions. Future tax assets are recognized to the extent that they are considered more likely than not to be realized. The carrying value of future income tax assets is
adjusted, if necessary, by the use of a valuation allowance to reflect the amount that is considered to be more likely than not of realization.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(g) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Basic loss per share is calculated by dividing the loss available to common shareholders by the weighted average number of common shares outstanding during the period. For all periods presented, loss available to common
shareholders equals the reported loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Diluted loss per common share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding used for the calculation of diluted loss per share assumes that
the proceeds to be received on the exercise of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|    | dilutive share options and warrants are used to repurchase common shares at the average market price during the year. In the periods presented, diluted loss per share is the same as basic loss per share as the effect of including
outstanding options and warrants in the loss per share calculation would be anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(h) | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The carrying amounts of cash and equivalents, amounts receivable, and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. It is not practicable to determine the fair values of
amounts receivable due from to related parties (note 9) due to the related party nature of such amounts and the absence of a secondary market for such instruments.                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(i) | Translation of foreign currencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | All of the Company's foreign operations are integrated. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars at exchange rates in effect at the balance sheet date. Non-monetary
assets and liabilities are translated at historical exchange rates unless such items are carried at market, in which case they are translated at the exchange rates in effect on the balance sheet date. Revenues and expenses, except amortization, are
translated at the average exchange rates for the year. Amortization is translated at the same exchange rate as the assets to which it relates. Gains or losses on translation are recorded in the statement of operations.                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(j) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the reporting year. Significant areas requiring the use of management estimates include the determination of the impairment of mineral property interests, determination
of reclamation obligations, determination of valuation allowances for future income tax assets, and the assumptions used in determining fair value of non-cash stock-based compensation. Actual results could differ from these estimates.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(k) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company has a share option plan which is described in note 8(c). The Company records all stock-based payments granted on or after November 1, 2003 using the fair value method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Under the fair value method, stock-based payments are measured at the fair value of the consideration received or the fair value of the equity instruments issued or liabilities incurred, whichever is more reliably measurable, and
are charged to operations over the vesting period. The offset is credited to contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(l) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company recognizes statutory, contractual or other legal obligations related to the retirement of tangible long-lived assets when such obligations are incurred, if a reasonable estimate of fair value can be made. These
obligations are measured initially at fair value and the resulting costs                                                                                                                                                                                                                                                                                                                                                                                                                               

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|    | are capitalized to the carrying value of the related asset. In subsequent periods, the liability is adjusted for any changes in the amount or timing and for the discounting of the underlying future cash flows. The capitalized
asset retirement cost is amortized to operations over the life of the asset.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                               
|(m) | Segment disclosures                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                               
|    | The Company operates in a single operating segment, being the exploration of mineral properties in South Africa.                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                               
|(n) | Comparative figures                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                               
|    | Certain of the prior periods' comparative figures have been restated to conform to the presentation adopted for the current period.                                                                                                                                                                           

|4. | Change in accounting policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Effective January 1, 2005, the Company adopted the Canadian Institute of Chartered Accountants Handbook Accounting Guideline 15, "Consolidation of Variable Interest Entities" ("AcG15"). Pursuant to AcG15, the Company is
required to consolidate variable interest entities ("VIEs"), where it is the VIEs primary beneficiary. VIEs are entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity
at risk for the entity to finance its activities without additional subordinated financial support from other parties. The primary beneficiary is the party that has exposure to a majority of the expected losses and/or expected residual returns of
the VIE. The Company has concluded that the Ga-Phasha Project qualifies as a VIE but that the Company is not the primary beneficiary.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Accordingly, under AcG15, the Company's interest in the Ga-Phasha Project is accounted for using the equity method. Previously, the Company proportionately consolidated its interest. The Company has retroactively adopted this
standard with restatement of prior periods. On adoption of this new standard at January 1, 2005, the Company decreased amounts receivable by $24,045, decreased accounts payable and accrued liabilities by $219,423, decreased mineral property
interests by $195,387 and decreased future income tax liability by $1,385,255 at December 31, 2004. Deficit at January 1, 2005 and results of operations for the fourteen months ended December 31, 2004 and the year ended October 31, 2003
remained unchanged.                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company has combined the "Investment in Ga-Phasha Project" with mineral property interests, and has presented the exploration expenses related to the Ga-Phasha project together with exploration expenses. The effect of the
above required change in accounting policy on the Company's consolidated balance sheets at December 31, 2004 is summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

| |                                                                      |   | As at             |  
| | -------------------------------------------------------------------- | - | ----------------- | -
| | Consolidated
      Balance Sheets                                    |   | December 31, 2004 |  
| |                                                                      |   |                   |  
| | Total assets as originally stated                                    | $ | 26,025,635        |  
| | Exclusion of current assets of Micawber                              |   | (24,045           | )
| | Equity loss of "Investment in Ga-Phasha
      Project"               |   | (195,387          | )
| | Future income tax
      related to "Investment in Ga-Phasha Project" |   | (1,385,255        | )
| | Total assets, as restated                                            | $ | 24,420,948        |  
| |                                                                      |   |                   |  
| | Total liabilities as originally stated                               | $ | 2,958,988         |  
| | Exclusion of current liabilities of Micawber                         |   | (219,432          | )
| | Future income tax related to "Investment in Ga-Phasha
      Project" |   | (1,385,255        | )
| | Total liabilities
      as restated                                  | $ | 1,354,301         |  
| |                                                                      |   |                   |  
| | Shareholders'
      equity as originally stated and as restated      | $ | 23,066,647        |  

|5. | Amounts receivable
|-- | ------------------

| |                               |   | December 31 |  |   | December 31 | 
| | ----------------------------- | - | ----------- |  | - | ----------- | 
| |                               |   | 2005        |  |   | 2004        | 
| | Value-added taxes recoverable | $ | 31,987      |  | $ | 495,947     | 
| | Employee expense advances     |   | 45,196      |  |   | 10,354      | 
| | Other receivables             |   | 142,692     |  |   | 7,188       | 
| | Amounts
      receivable      | $ | 219,875     |  | $ | 513,489     | 

|6. | Equipment
|-- | ---------

December 31, 2005
    
    
    December 31, 2004Accumulated
    
    
    Net book
    
    
    
    
    
    Accumulated
    
    
    Net bookCost
    
    
    amortization
    
    
    value
    
    
    Cost
    
    
    amortization
    
    
    valueOffice
    $
    90,520
    
    $
    48,462
    
    $
    42,058
    
    $
    65,846
    
    $
    34,794
    
    $
    31,052Vehicles
    
    253,468
    
    
    121,363
    
    
    132,105
    
    
    253,468
    
    
    86,525
    
    
    166,943$
    343,988
    
    $
    169,825
    
    $
    174,163
    
    $
    319,314
    
    $
    121,319
    
    $
    197,995


---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|7. | Mineral property
interests
|-- | --------------------------

| |                                                     |   | Year ended        |   |   | 14 months ended   |  
| | --------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
| |                                                     |   | December 31, 2005 |   |   | December 31, 2004 |  
| | Ga-Phasha Project (note 7(b))                       |   |                   |   |   |                   |  
| | Balance, beginning of period                        | $ | 4,294,358         |   | $ |                  |  
| | Acquisition costs during the
      period           |   |                  |   |   | 5,875,000         |  
| | Future income tax liability                         |   |                  |   |   | (1,385,255        | )
| | Equity loss  exploration
      expenses            |   | (317,709          | ) |   | (195,387          | )
| | Net investments during the period                   |   | 95,039            |   |   |                  |  
| | Equity gain  future income
      tax recovery      |   | 65,000.           |   |   |                  |  
| | Equity gain  foreign exchange                      |   | 165,312.          |   |   |                  |  
| | Ga-Phasha Project, end of
      period              |   | 4,302,000         |   |   | 4,294,358.        |  
| | Platreef Properties  acquisition costs (note 7(a)) |   | 4,200,000         |   |   | 4,200,000         |  
| | Balance, end of period                              | $ | 8,502,000         |   | $ | 8,494,358         |  

|(a) | Northern Limb of the Bushveld Complex, South Africa
      Platreef
|--- | ------------------------------------------------------------------

In October 1999, the Company acquired
a two-stage right to purchase up to 100% of Pinnacle Resources Inc.'s
("Pinnacle") South African subsidiary, Plateau Resources (Proprietary) Limited
("Plateau"), which holds the Platreef platinum group mineral ("PGM") properties
located on the Northern Limb of the Bushveld Complex in South Africa.

Pursuant to the acquisition agreement,
the Company issued 378,500 shares during the period October 1999 to November
2003. On November 13, 2003, the Company issued an additional 400,000 common
shares as full and final negotiated settlement under this agreement and thereby
completed its acquisition of Plateau.

In South Africa, many mineral claim
areas were historically defined by farm boundaries and are commonly referred to
as "farms".

On May 23, 2000, the Company added to
its mineral rights in the region by acquiring through Plateau the option to
purchase a 100% interest in portion 2 of the Elandsfontein 766LR farm located
contiguous to the pre-existing Platreef properties, pursuant to an agreement
with MSA Projects (Proprietary) Limited. The option required staged issuances of
a maximum of 500,000 common shares of the Company (of which 412,500 shares have
been issued to December 31, 2005 and no further share issuances are expected)
and aggregate cash payments up to a maximum of US$350,000 (of which US$69,250
and $15,000 have been paid).

In July 2001, Plateau acquired the
right to purchase a 100 percent interest in the farm Hamburg 737LR (2,126
hectares) and Portion 1 of the farm Elandsfontein 766LR (428 hectares), located
contiguous to the north end of the then-existing Platreef properties.
Consideration for the exploration rights to these properties, which are in
effect for a five year term, consists of payments of US$2.00 per hectare in year
one escalating in stages to

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

US$4.50 per hectare in year five. To
purchase the farms outright, a payment of US$325 per hectare is required if the
option is exercised in year one, escalating in stages to US$600 per hectare in
year five.

In August 2002, the Company entered
into a five year prospecting contract, expiring August 2007, with an option to
extend the agreement for an additional three years with the South African
Department of Mines and Energy (DME) for farm Noord Holland 775LR (1,229
hectares) bringing the aggregate land package of its Platreef Property to
approximately 13,400 hectares. Annual option fees ranging from South African
Rand ("ZAR") 3 per hectare to ZAR 18 per hectare are payable to the DME.

Rietfontein

On October 10, 2001, the Company
completed an agreement with African Minerals Ltd., now Ivanhoe Nickel and
Platinum Ltd. (Ivanplats), a private affiliate of Ivanhoe Capital Corporation,
whereby Ivanplats has the right to earn a 50% interest in the Company's 2,900
hectare Rietfontein 2KS farm ("Rietfontein"). Under the terms of this agreement,
Ivanplats must incur at least $750,000 in expenditures pursuant to exploration
activities undertaken on Rietfontein in accordance with an approved program in
each of the ensuing two years (of which the year one program has been completed)
to obtain the right to form a 50/50 joint venture with the Company on
Rietfontein. There is disagreement over budgets, compilation and analysis of the
exploration results, and the overall adequacy and completeness of Ivanplats
exploration activities. The Company and Ivanplats are currently in discussions
over these matters, both outside of and within a formal arbitration process,
pursuant to the terms of the earn-in agreement.

Kwanda (Rustenburg)

On May 16, 2002, the Company completed
an agreement with Rustenburg Platinum Mines Limited ("Rustenburg"), a wholly
owned subsidiary of Anglo American Platinum Corporation Limited (together "Anglo
Platinum"), for the right to acquire up to an 80% interest in twelve PGM
properties located on the Northern Limb of the Bushveld Complex.

Under the agreements with Anglo
Platinum, the Company has acquired an initial 50% interest in the PGM rights to
the twelve farms and can maintain this interest by making staged exploration
expenditure totalling ZAR 25 million within five years. The Company is required
to, and did, spend ZAR 2.5 million in year one, ZAR 5 million in year two, and
is required to spend ZAR 5 million in each of years three and four and ZAR 7.5
million in year five. The Company has not yet fulfilled its expenditure
requirements in respect of year three, but is in negotiations with Rustenburg to
amend the exploration expenditure schedule.

If a mineral resource is identified,
the Company can earn an additional 30% interest by bringing the property into
commercial production. Rustenburg will retain a 20% interest in the joint
venture. The agreements also include plans to involve local communities in
future development of the properties. Any participation by local and regional
communities will be provided out of Rustenburg's interest and any participation
in the

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

venture by a Historically
Disadvantaged South Africans ("HDSA") partner will be provided out of the
Company's interest.

Boikgantsho (Drenthe-Overysel)

On November 26, 2003, the Company
announced that it had entered into a Joint Venture Agreement with Potgietersrust
Platinums Limited ("PPRust"), a wholly owned subsidiary of Anglo American
Platinum Corporation Limited (together "Anglo Platinum"). The Joint Venture was
formed to explore and develop PGMs, gold and nickel mineralization on the
Company's Drenthe 778LR and Witrivier 777LR farms and a portion of PPRust's
adjacent Overysel 815LR farm. These farms are located on the Northern Limb of
the Bushveld Complex.

The objective is to explore and
develop a large-scale open pit deposit with the potential to utilize nearby
milling, smelting and refining facilities which could provide substantial cost
advantages to a new mining project. The Company contributed its rights to the
Drenthe 778LR farm on which a large PGM-nickel resource has been outlined in the
Drenthe deposit, and will contribute the Witrivier 777LR farm if the deposit
extends north on to Witrivier 777LR. PPRust is contributing its rights to the
northern portion of the Overysel 815LR farm which lies south of and contiguous
to the Drenthe 778LR farm.

Pursuant to the terms of the Joint
Venture Agreement, the Company and Anglo Platinum formed an initial 50/50 Joint
Venture (the "Boikgantsho JV") to explore these farms for a period of up to five
years. During that period, Anooraq will operate the exploration programs, and
spend up to ZAR 12.35 million (of which the entire amount has been spent) on
behalf of the Boikgantsho JV. Anooraq will then have the option to proceed on a
year-by-year basis and to take the project to a bankable feasibility study
("BFS") level.

Once a BFS has been completed, the
parties, by agreement, may proceed to exploitation subject to relevant
regulatory requirements. If both partners decide to proceed, then a joint
management committee will be established to oversee development and operations.
At commencement of exploitation, the joint venture interest allotted to each of
Anooraq and Anglo Platinum will be determined in proportion to the relative
value of the metals contained in each contributed property as reflected in the
BFS. Anooraq or Anglo Platinum, as the case may be, each has the right to make a
cash payment to the other party or to fund additional capital contributions to
equalize their respective contributions. During development, the Boikgantsho JV
will be seeking a Black Economic Empowerment ("BEE") partner to participate in
the project (which may be Anooraq itself) with the original Boikgantsho JV
partners dividing the remaining interest.

Should the Company choose not to
proceed, Anglo Platinum has the option of acquiring the Company's interest at
the aggregate of (i) the net present value of exploiting the Company's mineral
rights as a stand alone mining operation, by applying an agreed discount rate as
determined in the BFS, and (ii) all exploration expenditures (as defined in the
agreement) incurred by the Company up to the completion of the BFS. Should Anglo
Platinum decide not to contribute to exploitation, its interest will be diluted
over time pursuant to a formula taking into account expenditure on the project
by the contributory parties. Anglo Platinum will remain entitled to a minimum
12.5% non-

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

contributory interest, adjusted
depending on the final PGM royalty to be established under the South African
Mineral and Petroleum Royalty Bill, to a maximum of 15%.

Anglo Platinum has the right to enter
into a PGM Ore or Concentrate Purchase and Disposal Agreement at the
exploitation phase, based on standard commercial terms, whereby PGM produced
from the operation would be treated at Anglo Platinum's facilities.

|(b) | Eastern Limb of the Bushveld Complex, South Africa
      Ga-Phasha Project
|--- | --------------------------------------------------------------------------

In January 2004, the Company announced
it had agreed to terms whereby the Company and Pelawan Investments (Proprietary)
Limited ("Pelawan"), a private South African BEE company, would combine their
respective PGM assets, comprising the Company's Northern and Western Limb PGM
projects and Pelawan's 50% participation interest in the Ga-Phasha (previously
known as Paschaskraal) PGM Project ("Ga-Phasha") on the Eastern Limb of the
Bushveld Complex in South Africa. The Ga-Phasha property consists of four farms
 Portion 1 of Paschaskraal 466KS, and the whole of farms Klipfontein 465KS, De
Kamp 507KS and Avoca 472KS  covering an area of approximately 9,700 hectares.

The mineral title relating to the
Ga-Phasha Project is held by Micawber 277 (Proprietary) Limited ("Micawber"), a
private South African corporation which was owned 50% by Anglo Platinum and 50%
by Pelawan.

Pursuant to the terms of the agreement
between the Company and Pelawan, the Company acquired Pelawan's 50% shareholding
in Micawber and the rights to its 50% participation interest in the Ga-Phasha
Project in return for 91.2 million common shares of the Company (the
"Consideration Shares") and cash payments totalling ZAR 15,652,744 ($3,055,416).
Approximately 83 million Consideration Shares are being held in escrow until the
earlier of September 29, 2010 or twelve months after the commencement of
commercial production from the Ga-Phasha Project at which time they will be
released.

The transaction was completed on
September 29, 2004 and consequently Anooraq became a BEE company, by virtue of
being majority owned by HDSAs. The Ga-Phasha Project is a 50/50 joint venture
between the Company, through Plateau, and Anglo Platinum, through its wholly
owned subsidiary Rustenburg Platinum Mines Limited, governed by, among other
things, a shareholders' agreement relating to Micawber entered into on September
22, 2004. Work on the Ga-Phasha Project is continuing toward the preparation of
a bankable feasibility study.

The share exchange agreement which
gave effect to the combination provides that if any financings in relation to
the Ga-Phasha and Drenthe-Overysel (subsequently renamed "Boikgantsho") Projects
(the Projects) take place prior to a particular date (the Finalization Date)
and the shareholder dilution associated with of such financings cause Pelawans
shareholding in Anooraq to fall below a 52% minimum shareholding, Anooraq will
issue additional common shares to Pelawan in order to maintain that minimum.
Such 52% minimum shareholding allows for compliance with BEE equity

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

requirements under South African
mineral legislation and was also a requirement of the South African Reserve Bank
for approving the transaction. Originally the Finalization Date was September
30, 2005 but that date, by agreement in November 2005 between Anooraq and
Pelawan, was extended.

The share exchange agreement further
provided that, to the extent that no such dilutive financings had actually taken
place by the Finalization Date, certain dilutive financings were deemed to have
occurred by that date. The purpose was to make allowance for the dilutive effect
on Pelawans shareholding of the anticipated financings for mine development of
the Projects and, in this way, safeguard the status of Anooraq as a BEE company.
For the purposes of calculating whether, by virtue of such deemed dilutive
financings, any common shares are required to be issued to Pelawan in order to
maintain a minimum 52% shareholding, the share exchange agreement provides that
the quantum of such deemed financings will equal: (a) 30% of the estimated
development costs in accordance with the bankable feasibility studies in respect
of the Projects, less cash on hand, or (b) to the extent that such bankable
feasibility studies have not been prepared as at the Finalization Date, $70.8
million related to the Ga-Phasha Project and $27.6 million related to the
Drenthe-Overysel Project, less cash on hand (the Deemed Dilutive Financings).
Following the Finalization Date, Anooraq has the right but not the obligation to
issue additional common shares to Pelawan in order to maintain Pelawans minimum
shareholding.

Neither additional financings nor
bankable feasibility studies for the Projects had been completed by Anooraq as
at September 30, 2005 and, in the absence of an amending agreement between the
parties, a dilutive financing totaling $98.4 million and share issuances (based
on the share price at the date of the deemed dilutive financing) would have been
deemed to have taken place as at such date and the Company would have been
obligated to issue to Pelawan that number of shares which, after notionally
giving effect to the Deemed Dilutive Financings, would have resulted in Pelawan
continuing to hold a 52% interest in the Company. In November 2005, Anooraq and
Pelawan agreed to extend the Finalization Date to the earlier of:

| | (a) | the first date at which both the Drenthe-Overysel
      financing and the Ga- Phasha financings shall, in fact, have
    occurred;          
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                             
| | (b) | any date which is within a 60-day period following an
      announcement by Anooraq of a further material transaction, as defined;
      and
| |     |                                                                                                                                             
| | (c) | December 31, 2006.                                                                                                                          

None of these events have occurred at
December 31, 2005. Accordingly, the additional common shares which would, under
the original terms of the share exchange agreement, have become issuable to
Pelawan by Anooraq as of September 30, 2005 were not required to be issued at
that time and the determination of whether any additional common shares will be
required to be issued to Pelawan in light of any actual or deemed dilutive
financings will be made in due course on the Finalization Date, as amended. The
method for determining whether such additional common shares will be issuable
upon the Finalization Date remains as described above. Upon the Finalization
Date, the dilutive financings for the purposes of calculating whether any
additional common shares are

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

issuable to Pelawan will be the actual
dilutive financings undertaken in relation to the Projects to date and, to the
extent that no such financings have been undertaken, the Deemed Dilutive
Financings described above.

The transaction constituted a reverse
take-over under the policies of the TSX Venture Exchange. This transaction was
accounted for as an acquisition by Anooraq of Micawber's 50% interest in its
mineral properties. However, because neither the fair value of the Anooraq
shares issued, nor the fair value of the mineral property interests acquired
could be readily determined, the acquisition was recorded at the net book value,
as determined in accordance with Canadian generally accepted accounting
principles, of Micawber's net assets acquired, being nil, plus related
transaction costs.

The acquisition costs were accounted
for as follows:

Cash payments totaling ZAR
      15,652,744
    $
    3,055,416Financial, legal, advisory, and other fees
    
    1,419,329Estimated South African stamp
      duties
    
    15,000Book value of Micawber's net assets acquired
    
    Future income taxes
    
    1,385,255Acquisition cost, Ga-Phasha Project
    $
    5,875,000


Commencing September 24, 2004, the
date of completion of the reverse take-over transaction, the Company accounts
for its interest in Micawber, which holds the Ga-Phasha Project, using the
equity method. The Ga-Phasha Project includes for the year ended December 31,
2005 an equity loss relating to exploration expenses of $317,709 (fourteen month
period ended December 31, 2004  $195,387), an equity gain for future income tax
recovery of $197,597 (fourteen month period ended December 31, 2004  $nil), and
an equity gain for foreign exchange of $195,357 (fourteen month period ended
December 31, 2004  $nil).

|c) | Western Limb of the Bushveld Complex, South Africa
      Thusong Joint Venture
|-- | ------------------------------------------------------------------------------

In May 2003, the Company entered into
a joint venture agreement with Rustenburg to form a joint venture to explore and
develop PGMs, gold and nickel mineralization on the Wachteenbietjieslaagte 4JQ,
Vogelstruiskraal 400KQ and Cyferkuil 1JQ farms, which are located on the western
limb of the Bushveld Complex, approximately 75 kilometres north of the town of
Rustenburg, adjacent to Anglo Platinums Union operations.

Pursuant to the terms of the joint
venture agreement, the Company and Anglo Platinum will form an initial 50/50
joint venture (the "Thusong JV") to explore the three farms for a period of up
to five years from the date of the agreement. During that period, the Company
will operate exploration programs, and spend up to ZAR 12 million on behalf of
the Thusong JV. The Company will have the option to proceed to take the project
to a BFS level. Once the BFS has been completed, the parties, by agreement, may
jointly or separately proceed to exploitation. During development, the Thusong
JV will be seeking a BEE partner (which could be the Company itself) to
participate in the project. If both partners decide to proceed, then a joint
management committee will be established to oversee development and operations.
Should Anglo Platinum decide not to contribute to

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

exploitation, its interest will be
diluted over time pursuant to a formula taking into account expenditure on the
project by the contributing parties. Anglo Platinum will remain entitled to a
minimum 17.5% non-contributory interest, adjusted depending on the final PGM
royalty established under the South African Mineral and Petroleum Royalty Bill
to a maximum of 20%. Should the Company decide not to proceed, Anglo Platinum
has the right to buy out the Companys interest at the pro-rata net present
value of exploiting the farms as determined in the BFS.

Under current South African legislation, as permits expire (or
by April 30, 2006) the Company is required to convert its old order rights to
new order rights, which the Company has commenced. The Company sees no reason to
expect that such conversions will be not be approved in the normal course.

|8. | Share capital
|-- | -------------

|(a) | Authorized share capital                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------
|    |                                                                                                                 
|    | The Company's authorized share capital consists of an
      unlimited number of common shares without par value.
|    |                                                                                                                 
|(b) | Issued and outstanding common
  shares                                                                          

| | Common shares issued and outstanding                                     |   |       |  |  | Number of   |  |   | Dollar     |  
| | ------------------------------------------------------------------------ | - | ----- |  |  | ----------- |  | - | ---------- | -
| |                                                                          |   | Price |  |  | Shares      |  |   | Amount     |  
| | Balance, October 31, 2002                                                |   |       |  |  | 32,148,463  |  | $ | 20,048,474 |  
| | Issued during fiscal 2003                                                |   |       |  |  |             |  |   |            |  
| | Shares issued
      for property option                                  | $ | 0.75  |  |  | 270,833     |  |   | 203,125    |  
| | Share purchase options exercised                                         | $ | 0.60  |  |  | 1,206,000   |  |   | 720,090    |  
| | Share purchase
      warrants exercised                                  | $ | 0.72  |  |  | 5,138,876   |  |   | 3,435,560  |  
| | Private placement, May 2003, net of issue costs
      (note 8(f))        | $ | 0.52  |  |  | 1,400,000   |  |   | 679,614    |  
| | Balance, October 31, 2003                                                |   |       |  |  | 40,164,172  |  |   | 25,086,863 |  
| | Issued during fiscal 2004                                                |   |       |  |  |             |  |   |            |  
| | Shares issued
      for property option (note 7(a))                      | $ | 0.85  |  |  | 400,000     |  |   | 340,000    |  
| | Fair value of stock options
      allocated to shares issued on exercise |   |      |  |  |            |  |   | 588,560    |  
| | Share purchase
      options exercised                                   | $ | 0.75  |  |  | 3,419,300   |  |   | 2,555,390  |  
| | Share purchase warrants
      exercised                                  | $ | 0.85  |  |  | 3,313,125   |  |   | 2,822,529  |  
| | Private
      placement, Dec 2003, net of issue costs (note 8(e))        | $ | 2.10  |  |  | 9,523,810   |  |   | 18,635,143 |  
| | Shares issued to acquire
      Ga-Phasha Project (note 7(b))             |   |       |  |  | 91,200,000  |  |   |           |  
| | Share issue cost of Ga-Phasha project                                    |   |       |  |  |            |  |   | (54,128    | )
| | Balance, December 31, 2004                                               |   |       |  |  | 148,020,407 |  |   | 49,974,357 |  
| | Share purchase
      options exercised                                   | $ | 0.79  |  |  | 200,000     |  |   | 157,500    |  
| | Fair value of stock options allocated to shares
      issued on exercise |   |      |  |  |            |  |   | 75,506     |  
| | Balance, December 31, 2005                                               |   |       |  |  | 148,220,407 |  | $ | 50,207,363 |  

|(c) | Share option plan                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                   
|    | The Company has a share option plan approved by the
      Companys shareholders that allows it to grant options, subject to
      regulatory terms and approval, to its directors, employees, officers,
      and

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

consultants to, as at December 31,
2005, acquire up to 13,453,200 common shares, of which 4,778,200 options were
outstanding and 8,675,000 remained available to grant. The exercise price of
each option is set by the Board of Directors at the time of grant but cannot be
less than the market price (less permissible discounts) on the TSX Venture
Exchange. Options have a term of up to a maximum of ten years (however, the
Company has historically granted options for up to a term of five years), and
terminate 30 days following the termination of the optionees employment or term
of engagement, except in the case of retirement or death. Vesting of options is
at the discretion of the Board of Directors at the time the options are granted.

The continuity of share purchase
options is as follows:

| |                            |                |                   | Contractual     
| | -------------------------- | -------------- | ----------------- | ----------------
| |                            | Weighted       |                   | weighted average
| |                            | average        |                   | remaining life  
| |                            | exercise price | Number of options | (years)         
| | Balance, October 31, 2002  | $ 0.75         | 3,756,500         | 1.59            
| | Granted                    | 1.35           | 2,852,000         |                 
| | Exercised                  | 0.60           | (1,206,000)       |                 
| | Expired                    | 0.56           | (88,500)          |                 
| | Cancelled                  | 0.68           | (114,000)         |                 
| | Balance, October 31, 2003  | $ 1.12         | 5,200,000         | 1.36            
| | Granted                    | 1.89           | 897,500           |                 
| | Exercised                  | 0.75           | (3,419,300)       |                 
| | Cancelled                  | 0.97           | (68,200)          |                 
| | Balance, December 31, 2004 | $ 1.87         | 2,610,000         | 1.54            
| | Granted                    | 1.39           | 4,233,200         |                 
| | Exercised                  | 0.79           | (200,000)         |                 
| | Expired                    | 2.00           | (1,522,500)       |                 
| | Cancelled                  | 1.60           | (342,500)         |                 
| | Balance, December 31, 2005 | $ 1.47         | 4,778,200         | 3.61            

Options outstanding and exercisable at
December 31, 2005 were as follows:

Number ofoptionsExpiry date
    Option price
    outstandingOctober 26, 2006
    $ 1.95
    535,000October 26, 2006
    $ 2.00
    35,000October 26, 2006
    $ 1.64
    200,000July 01, 2007
    $ 0.95
    100,000September 28, 2007
    $ 1.40
    435,000December 14, 2007
    $ 1.40
    408,200December 14, 2010
    $ 1.40
    3,065,000Total
    
    4,778,200Average option price
    
    $ 1.47


---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

The exercise prices of all share
purchase options granted during the period were equal to the market price at the
grant date. Using an option pricing model with the assumptions noted below, the
estimated fair value of all options granted have been reflected in the
consolidated statement of operations as follows:

| |                                                                   |   |             |   |   | Fourteen    |   |   |            | 
| | ----------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ---------- | 
| |                                                                   |   |             |   |   | months      |   |   |            | 
| |                                                                   |   | Year ended  |   |   | ended       |   |   | Year ended | 
| |                                                                   |   | December 31 |   |   | December 31 |   |   | October 31 | 
| |                                                                   |   | 2005        |   |   | 2004        |   |   | 2003       | 
| | Stock-based compensation 
      Exploration                      | $ | 714,243     |   | $ | 1,040,542   |   | $ | 8,875      | 
| | Stock-based compensation  Office and administration              |   | 1,822,010   |   |   | 1,426,006   |   |   | 477,087    | 
| | Credited to contributed
      surplus during the period           |   | 2,536,253   |   |   | 2,466,548   |   |   | 485,962    | 
| | Share purchase options exercised, credited to
      share capital |   | (75,506     | ) |   | (588,560    | ) |   |           | 
| | Contributed surplus, beginning of the period                      |   | 2,363,950   |   |   | 485,962     |   |   |           | 
| | Contributed surplus, end of period                                | $ | 4,824,697   |   | $ | 2,363,950   |   | $ | 485,962    | 

The assumptions used to estimate the
fair value of options granted during the period were:

| |                         | 2005    | 2004    | 2003   
| | ----------------------- | ------- | ------- | -------
| | Risk free interest rate | 3%      | 3%      | 3%     
| | Expected life           | 4 years | 2 years | 2 years
| | Volatility              | 82%     | 88%     | 40%    
| | Expected dividends      | nil     | nil     | nil    

|(d) | Share purchase warrants                                       
|--- | --------------------------------------------------------------
|    |                                                               
|    | The continuity of share purchase warrants is as
      follows:

Note
      Reference
    
    
    
    
    
    
    
    
    
    
    8
    (e)Expiry date
    
    Aug. 28,
    
    
    Dec. 21,
    
    
    Dec. 27,
    
    
    June 1,2003
    
    
    2003
    
    
    2003
    
    
    2005Exercise price
    $
    0.70
    
    $
    0.85
    
    $
    0.88
    
    $
    2.50
    
    
    TOTALBalance, October 31, 2002
    
    4,500,000
    
    
    3,692,718
    
    
    259,283
    
    
    
    
    
    8,452,001Exercised
    
    (4,500,000
    )
    
    (592,000
    )
    
    (46,876
    )
    
    
    
    
    (5,138,876
    )Balance, October 31, 2003
    
    
    
    
    3,100,718
    
    
    212,407
    
    
    
    
    
    3,313,125Issued
    
    
    
    
    
    
    
    
    
    
    5,333,334
    
    
    5,333,334Exercised
    
    
    
    
    (3,100,718
    )
    
    (212,407
    )
    
    
    
    
    (3,313,125
    )Balance, December 31, 2004
    
    
    
    
    
    
    
    
    
    
    5,333,334
    
    
    5,333,334Issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    (5,333,334
    )
    
    (5,333,334
    )Balance, December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    


|(e) | Private placement, December 2003                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                             
|    | During December 2003, the Company completed a $20 million
      private placement financing of 9,523,810 units at a price of $2.10 per
      unit. Each unit was comprised of one common share and one-half of a common
      share purchase warrant, with each whole warrant exercisable at $2.50
      per

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|    | common share until June 1, 2005. The agents received
      571,429 share purchase warrants each exercisable into one common share at
      $2.50 per common share until June 1, 2005. The fair value of warrants
      issued has been presented on a net basis in share capital. During the year
      ended December 31, 2005, these warrants expired unexercised.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(f) | Private placement, May 2003                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                     
|    | On May 27, 2003, the Company completed a private
      placement financing consisting of 1,400,000 common shares at a price of
      $0.52 per share.                                                                                                                                                                                                               

|9. | Related party transactions and
  balances
|-- | -----------------------------------------

| |                                                 |  |      |  |   |             |  |   | Fourteen     |  |   |             | 
| | ----------------------------------------------- |  | ---- |  | - | ----------- |  | - | ------------ |  | - | ----------- | 
| |                                                 |  |      |  |   | Year ended  |  |   | months ended |  |   | Year ended  | 
| |                                                 |  | Note |  |   | December 31 |  |   | December 31  |  |   | December 31 | 
| | Services rendered by                            |  | ref  |  |   | 2005        |  |   | 2004         |  |   | 2003        | 
| | Hunter Dickinson Inc.                           |  | (a)  |  | $ | 1,297,159   |  | $ | 1,512,441    |  | $ | 1,281,758   | 
| | Hunter Dickinson Group Inc.                     |  | (b)  |  |   | 9,600       |  |   | 17,360       |  |   | 28,722      | 
| | Pelawan Investments
      (Proprietary) Limited |  | (c)  |  |   | 658,035     |  |   | 745,438      |  |   |            | 
| | CEC Engineering Ltd.                            |  | (d)  |  |   | 166,662     |  |   | 135,104      |  |   | 166,969     | 

| |                                                 |  |     |  |   | As at       |   |   | As at       |   |  |  | 
| | ----------------------------------------------- |  | --- |  | - | ----------- | - | - | ----------- | - |  |  | 
| |                                                 |  |     |  |   | December 31 |   |   | December 31 |   |  |  | 
| | Related party balances receivable (payable)     |  |     |  |   | 2005        |   |   | 2004        |   |  |  | 
| | Hunter Dickinson
      Inc.                     |  | (a) |  | $ | 233,205     |   | $ | 24,195      |   |  |  | 
| | CEC Engineering Ltd.                            |  | (d) |  |   | (48,506     | ) |   | 24,118      |   |  |  | 
| | Pelawan
      Investments (Proprietary) Limited |  | (c) |  |   |            |   |   | 44,080      |   |  |  | 
| | Tecnicos HD de Mexico SA de CV                  |  | (a) |  |   |            |   |   | (58,933     | ) |  |  | 
| | Servicios HD de Mexico SA de CV                 |  | (a) |  |   |            |   |   | 97,649      |   |  |  | 

|(a) | Hunter Dickinson Inc. ("HDI") is a private company owned
      equally by nine public companies, one of which is Anooraq. HDI and its
      wholly owned subsidiaries, including Tecnicos HD de Mexico SA de CV and
      Servicios HD de Mexico SA de CV have certain directors in common with the
      Company, and provide geological, corporate development, administrative and
      management services to, and incur third party costs on behalf of, the
      Company on a full cost recovery basis pursuant to an agreement dated
      December 31, 1996. The balances receivable from (payable to) HDI and its
      subsidiaries have resulted from advances against future work, services, or
      cost reimbursements, or from HDI providing periodic short-term working
      capital advances to the Company.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(b) | Hunter Dickinson Group Inc. ("HDGI") is a private company
      with certain directors in common with the Company that provides consulting
      services to, and incurs costs on behalf of, the Company, at market
      rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c) | Pelawan is a private South African BEE company which is a
      significant shareholder of the Company and which has certain directors in
      common with the Company (note 7(b)). Pelawan became a majority shareholder
      on September 29, 2004. During the year ended December 31, 2005, the
      Company paid or accrued $658,035 (fourteen months ended December 31, 2004
                                                                                                                                                                                                                                                                                                                                                                                                                                         

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|    | $745,438) for technical, corporate development,
      administrative and management services provided to, and repayment of costs
      paid on behalf of, the Company.                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                   
|(d) | During the year ended December 31, 2005, the Company paid
      or accrued $166,662 (fourteen months ended December 31, 2004  $135,104 to
      CEC Engineering Ltd ("CEC"), a private company owned by a former director,
      for engineering and project management services at market rates.
|    |                                                                                                                                                                                                                                                                                                   
|(e) | Micawber is a private South African corporation which is
      owned 50% by Anglo Platinum and 50% by the Company; hence it is a related
      party. The Company accounts for its investment in Micawber using the
      equity method (note 7(b)).                                              

|10. | Income taxes                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                    
|    | As at December 31, 2005 the tax effect of the significant
      components within the Companys future tax asset (liability) were as
      follows:

| |                             |   | December
      31, |   |   | December
      31, |  
| | --------------------------- | - | ------------------ | - | - | ------------------ | -
| |                             |   | 2005               |   |   | 2004               |  
| |                             |   |                    |   |   | (restated)         |  
| | Future income tax assets    |   |                    |   |   |                    |  
| | Mineral property interests  | $ | 4,428,000          |   | $ | 4,008,000          |  
| | Loss carry forwards         |   | 4,408,000          |   |   | 2,783,000          |  
| | Equipment                   |   | 20,000             |   |   | 7,000              |  
| | Resource-related tax pools  |   |                   |   |   |                   |  
| | Other
      tax pools       |   | 582,000            |   |   | 471,000            |  
| | Subtotal                    |   | 9,438,000          |   |   | 7,269,000          |  
| | Valuation allowance         |   | (9,438,000         | ) |   | (7,269,000         | )
| | Net future income tax asset |   |                   |   |   |                   |  
| |                             |   |                    |   |   |                    |  
| | Future income tax liability |   |                    |   |   |                    |  
| | Mineral property interests  | $ | 1,154,943          |   | $ | 1,385,255          |  

The Companys future income tax
liability relates to its equity investment in the Ga-Phasha Project.

Income tax expense differs from the
amount that would result from applying the Canadian federal and provincial tax
rates to earnings before income taxes. These differences result from the
following items:

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

| |                                                               |   | December 31 |   |   | December 31 |  
| | ------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
| |                                                               |   | 2005        |   |   | 2004        |  
| |                                                               |   |             |   |   | (restated)  |  
| | Combined Canadian federal and provincial
      statutory rate |   | 34.87%      |   |   | 35.62%      |  
| |                                                               |   |             |   |   |             |  
| | Income tax at statutory rates                                 | $ | (4,174,000  | ) | $ | (4,640,000  | )
| | Non-deductible items                                          |   | 905,000     |   |   | 709,000     |  
| | Difference in foreign tax rates                               |   | 455,000     |   |   | 616,000     |  
| | Reduction in statutory tax rates                              |   | 223,000     |   |   | 58,000      |  
| | Benefit of unrealized FX loss                                 |   | (237,000    | ) |   |            |  
| | Other                                                         |   | (64,000     | ) |   | (312,000    | )
| | Change due to foreign exchange                                |   | 658,000     |   |   |            |  
| | Valuation
      allowance                                     |   | 2,169,000   |   |   | 3,569,000   |  
| |                                                               | $ | (65,000     | ) | $ |            |  

At December 31, 2005, the Company had
losses available for income tax purposes in Canada totalling approximately $8.6
million (2004  $6.6 million), expiring in various periods from 2006 to
2015.

|**11.** | **Segmented information**
|------- | -------------------------

| | For the year ended        |   |            |   |   |        |   |   |                    |   |   |             |  
| | ------------------------- | - | ---------- | - | - | ------ | - | - | ------------------ | - | - | ----------- | -
| | December 31, 2005         |   | Canada     |   |   | Mexico |   |   | South
      Africa |   |   | Total       |  
| | Exploration expenditures  | $ |           |   | $ |       |   | $ | 5,240,321          |   | $ | 5,240,321   |  
| | Loss for the year         |   | (4,302,015 | ) |   | (8,841 | ) |   | (7,992,945         | ) |   | (12,303,801 | )
| | Interest and other income |   | 190,578    |   |   |       |   |   | (70,799            | ) |   | 119,779     |  
| | Total assets              |   | 4,645,858  |   |   | 32,166 |   |   | 9,157,572          |   |   | 13,835,596  |  
| | Equipment                 |   |           |   |   |       |   |   | 174,163            |   |   | 174,163     |  

| | For the 14 months ended   |   |            |   |   |        |   |   |                    |   |   |             |  
| | ------------------------- | - | ---------- | - | - | ------ | - | - | ------------------ | - | - | ----------- | -
| | December 31, 2004         |   | Canada     |   |   | Mexico |   |   | South
      Africa |   |   | Total       |  
| | Exploration expenditures  | $ |           |   | $ |       |   | $ | 7,860,266          |   | $ | 7,860,266   |  
| | Loss for the year         |   | (4,086,230 | ) |   | (4,323 | ) |   | (8,936,711         | ) |   | (13,027,264 | )
| | Interest and other income |   | 432,551    |   |   |       |   |   | 52,901             |   |   | 485,452     |  
| | Total assets              |   | 14,685,470 |   |   | 44,151 |   |   | 9,750,260          |   |   | 24,479,881  |  
| | Equipment                 |   |           |   |   |       |   |   | 197,995            |   |   | 197,995     |  

| | For the year ended        |   |            |   |   |          |   |   |                    |   |   |            |  
| | ------------------------- | - | ---------- | - | - | -------- | - | - | ------------------ | - | - | ---------- | -
| | October 31, 2003          |   | Canada     |   |   | Mexico   |   |   | South
      Africa |   |   | Total      |  
| | Exploration expenditures  | $ |           |   | $ |         |   | $ | 1,963,784          |   | $ | 1,963,784  |  
| | Loss for the year         |   | (1,672,726 | ) |   | (128,681 | ) |   | (2,028,007         | ) |   | (3,829,414 | )
| | Interest and other income |   | 43,978     |   |   |         |   |   | 2,082              |   |   | 46,060     |  

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

|12. | Differences between Canadian and United States
      generally accepted accounting principles
|--- | ---------------------------------------------------------------------------------------------

The consolidated financial statements
have been prepared in accordance with Canadian generally accepted accounting
principles (Canadian GAAP), which differ in certain material respects from
those principles that the Company would have followed had its consolidated
financial statements been prepared in accordance with United States generally
accepted accounting principles (US GAAP).

Had the Company followed US GAAP,
certain items on the consolidated statements of operations and deficit, and
balance sheets would have been reported as follows:

| |                                                 |   | As at        |  |   | As at        | 
| | ----------------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                                 |   | December 31, |  |   | December 31, | 
| |                                                 |   | 2005         |  |   | 2004         | 
| |                                                 |   |              |  |   |              | 
| | Consolidated Balance Sheets                     |   |              |  |   |              | 
| | Total assets under Canadian
      GAAP          | $ | 13,835,596   |  | $ | 24,479,881   | 
| | Adjustments under US GAAP                       |   |             |  |   |             | 
| | Total assets under US GAAP                      | $ | 13,835,596   |  | $ | 24,479,881   | 
| |                                                 |   |              |  |   |              | 
| | Total liabilities under
      Canadian GAAP     | $ | 378,997      |  | $ | 1,413,234    | 
| | Adjustments under US GAAP                       |   |             |  |   |             | 
| | Total liabilities under Canadian and US GAAP    | $ | 378,997      |  | $ | 1,413,234    | 
| |                                                 |   |              |  |   |              | 
| | Shareholders equity under Canadian and US GAAP | $ | 13,456,599   |  | $ | 23,066,647   | 

| |                                        |   |              |  |   | Fourteen     |  |   |             | 
| | -------------------------------------- | - | ------------ |  | - | ------------ |  | - | ----------- | 
| |                                        |   | Year ended   |  |   | months ended |  |   | Year ended  | 
| |                                        |   | December 31, |  |   | December 31, |  |   | October 31, | 
| | Consolidated Statements of Operations  |   | 2005         |  |   | 2004         |  |   | 2003        | 
| |                                        |   |              |  |   |              |  |   |             | 
| | Loss for the year under Canadian       |   |              |  |   |              |  |   |             | 
| | and US GAAP                            | $ | 12,303,801   |  | $ | 13,027,264   |  | $ | 3,829,414   | 
| |                                        |   |              |  |   |              |  |   |             | 
| | Basic and diluted loss per
      share |   |              |  |   |              |  |   |             | 
| | for the year under Canadian            |   |              |  |   |              |  |   |             | 
| | and US GAAP                            | $ | 0.08         |  | $ | 0.18         |  | $ | 0.11        | 

There are no material differences
between Canadian GAAP and US GAAP in the consolidated statements of cash flows
for the years ended December 31, 2005, the fourteen months ended December 31,
2004, and the year ended October 31, 2003.

| | (a) | United States Statement of Financial Accounting Standards
      No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation",
      requires that stock-based compensation be accounted for based on a fair
      value methodology, although in certain instances it allows the effects to
      be disclosed in the notes to the financial statements rather than in the
      statement of operations. SFAS 123 also allows an entity to continue to
      measure compensation costs for stock-based compensation plans using the
      intrinsic value based method of accounting as prescribed by APB Opinion
      No. 25 ("APB 25"). To October 31, 2002, the Company had elected to measure
      compensation cost for its plans using APB 25 for US GAAP purposes. As a
      result of changes to Canadian GAAP for the year ended October 31, 2003,
      there were no
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

| |     | material differences in the treatment by the Company with
      respect to stock based compensation under US and Canadian GAAP for the
      year ended October 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | United States Statement of Financial Accounting Standards
      148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition
      and Disclosure - an amendment of FASB Statement No. 123", permits a
      company to adopt a fair value methodology on a prospective basis.
      Effective November 1, 2003, for US GAAP purposes, the Company
      prospectively adopted the fair value method of accounting for stock-based
      compensation, a treatment consistent with the accounting treatment used
      for Canadian GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | For the years ended December 31, 2005, the fourteen
      months ended December 31, 2004, and year ended October 31, 2003, there
      were no differences in stock-based compensation expense in respect of
      employee or non-employee share options which would be required to be
      charged to operations under both Canadian and US GAAP. However, for US
      GAAP purposes, stock- based compensation would be classified in the
      consolidated statements of operations by the nature of the services
      provided and not as a separate line item.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | In December 2004, the FASB issued SFAS No. 153,
      Exchanges of Non-Monetary Assets, an Amendment of APB Opinion No.
      29. The guidance in APB No. 29, Accounting for Non- Monetary
      Transactions, is based on the principle that exchanges of non-monetary
      assets should be measured based on the fair value of the assets exchanged.
      However, the guidance in that Opinion included certain exceptions to that
      principle. This Statement amends APB No. 29 to eliminate the exception for
      exchanges of similar productive assets and replaces it with a general
      exception for exchanges of non-monetary assets that do not have commercial
      substance. A non-monetary exchange has commercial substance if the future
      cash flows of the entity are expected to change significantly as a result
      of the exchange. This statement will be effective for fiscal periods
      beginning after June 15, 2005. Earlier application is permitted for
      non-monetary asset exchanges incurred during fiscal years beginning after
      the date this Statement was issued. The Company adopted SFAS 153 on
      January 1, 2005 on a prospective basis, and there are no material
      differences between the treatment under Canadian and US GAAP.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (c) | During the year ended December 31, 2004, for US GAAP
      purposes, the Company adopted FASB Interpretation No. 46R, Consolidation
      of Variable Interest Entities (FIN 46R). Pursuant to FIN 46R, under US
      GAAP the Company is required to consolidate variable interest entities
      (VIEs), where it is the entitys primary beneficiary. VIEs are entities
      in which equity investors do not have the characteristics of a controlling
      financial interest or do not have sufficient equity at risk for the entity
      to finance its activities without additional subordinated financial
      support from other parties. The primary beneficiary is the party that has
      exposure to a majority of the expected losses and/or expected residual
      returns of the VIE. The Company has concluded that its interest in the
      Ga-Phasha Project qualifies as a VIE but that the Company is not the
      primary beneficiary. As disclosed in note 4, the Company adopted similar
      accounting standards in Canada for the consolidation of variable interest
      entities on a retroactive basis. As a result, there are no material
      differences between the treatment under Canadian and US GAAP.                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (d) | Pursuant to US GAAP, the Company would be considered an
      exploration stage company as the Company is devoting efforts to
      establishing commercially viable mineral
properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

---

|ANOORAQ RESOURCES CORPORATION                                                       
|------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                          
|For the year ended December 31, 2005, fourteen months ended
      December 31, 2004,
|and the year ended October 31, 2003                                                 
|(Expressed in Canadian
      Dollars)                                               

| |     | However, the identification of the Company as such for
      accounting purposes does not impact the measurement principles applied in
      these consolidated financial statements.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                      
| | (e) | Impact of recent United States accounting
      pronouncements:                                                                                                                      

| | (i) | In March 2005, the EITF issued EITF 04-6, "Accounting
      for Stripping Costs in the Mining Industry". The consensus indicated
      that costs of removing overburden and waste materials ("stripping costs")
      after production begins, represent variable production costs and should be
      considered a component of mineral inventory cost subject to the guidance
      in Chapter 4 of Accounting Research Bulletin No. 43, "Restatement and
      Revision of Accounting Research Bulletins". EITF 04-6 is effective for
      fiscal years beginning after December 15, 2005 and upon adoption, can be
      applied by either retroactively restating prior periods or using a
      cumulative catch-up adjustment. The Company believes this Statement will
      have no impact on the financial statements of the Company once
    adopted.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---