---

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

FORM 20-F

[   ]REGISTRATION STATEMENT PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED **MARCH 31,
  2006**

OR

[   ]TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ]SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to
_______________

Commission File Number: 000-50953

EVOLVING GOLD CORP.(Exact
name of Registrant as specified in its charter)

CANADA(Jurisdiction of incorporation or
organization)

Suite 1500, 885 West Georgia Street Vancouver, British
Columbia, Canada V6E 4B3(Address of principal executive offices)

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

Securities registered or to be registered pursuant to Section
12(g) of the Act: COMMON SHARES WITHOUT PAR VALUE(Title
of Class)

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

The number of outstanding common shares of the Company as at
March 31, 2006 was 10,269,842 Common Shareswithout par
value.

---

Indicate by check mark if the Registrant is a well known
seasoned issuer as defined in Rule 405 of the Securities Act. YES [ 
 ] NO [X]

If this report is an annual or transition report, indicate by
check mark if the Registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. YES [ 
 ] NO [X]

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

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

Indicate by check mark which financial statement item the
registrant has elected to follow:Item 17 [X] Item 18 [   ]

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

- 2 -

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EVOLVING GOLD CORP.

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

|          |                                                                                    | Page
|--------- | ---------------------------------------------------------------------------------- | ----
|          |                                                                                    |     
|Glossary  |                                                                                    | 4   
|          |                                                                                    |     
|Part I    |                                                                                    |     
|          |                                                                                    |     
|Item 1.   | Identity of Directors, Senior Management and Advisors                              | 9   
|Item 2.   | Offer Statistics and Expected Timetable                                            | 9   
|Item 3.   | Key Information                                                                    | 9   
|Item 4.   | Information on the Company                                                         | 15  
|Item 4A.  | Unresolved Staff Comments                                                          | 40  
|Item 5.   | Operating and Financial Review and Prospects                                       | 40  
|Item 6.   | Directors, Senior Management, and Employees                                        | 45  
|Item 7.   | Major Shareholders and Related Party Transactions                                  | 50  
|Item 8.   | Financial Information                                                              | 52  
|Item 9.   | The Offer and Listing                                                              | 52  
|Item 10.  | Additional Information                                                             | 54  
|Item 11.  | Quantitative and Qualitative Disclosures About Market Risk                         | 64  
|Item 12.  | Description of Securities Other Than Equity Securities                             | 64  
|          |                                                                                    |     
|Part II   |                                                                                    |     
|          |                                                                                    |     
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                                    | 64  
|Item 14.  | Material Modifications to the Rights of Security Holders
      and Use of Proceeds | 65  
|Item 15.  | Controls and Procedures                                                            | 65  
|Item 16.  | Reserved                                                                           | 66  
|Item 16A. | Audit Committee Financial Expert                                                   | 66  
|Item 16B. | Code of Ethics                                                                     | 66  
|Item 16C. | Principal Accountant Fees and Services                                             | 66  
|Item 16D. | Exemptions from the Listing Standards for Audit Committee                          | 66  
|Item 16E. | Purchases of Equity Securities by the Company and Affiliated
      Purchasers      | 66  
|          |                                                                                    |     
|Part III  |                                                                                    |     
|          |                                                                                    |     
|Item 17.  | Financial Statements                                                               | 67  
|Item 18.  | Financial Statements                                                               | 67  
|Item 19.  | Exhibits                                                                           | 67  

- 3 -

---

GLOSSARY

|Term              | Definition                                                                                          
|----------------- | ----------------------------------------------------------------------------------------------------
|                  |                                                                                                     
|adularia          | A mineral, potassium feldspar                                                                       
|                  |                                                                                                     
|Ag                | Silver                                                                                              
|                  |                                                                                                     
|AHL               | AHL Holdings Ltd.                                                                                   
|                  |                                                                                                     
|anorthosite       | A plagioclase-rich intrusive rock                                                                   
|                  |                                                                                                     
|arsenopyrite      | A mineral composed of arsenic, iron and sulphur                                                     
|                  |                                                                                                     
|As                | Arsenic                                                                                             
|                  |                                                                                                     
|Au                | Gold                                                                                                
|                  |                                                                                                     
|Award Date        | The date of the grant of a stock option in the
      Company                                        
|                  |                                                                                                     
|Bi                | Bismuth                                                                                             
|                  |                                                                                                     
|BLM               | Bureau of Land Management, US Department of the
      Interior                                      
|                  |                                                                                                     
|brecciated        | A rock consisting of angular fragments                                                              
|                  |                                                                                                     
|CBCA              | Canadian Business Corporations Act                                                                  
|                  |                                                                                                     
|chalcopyrite      | A mineral composed of copper, iron and sulphur                                                      
|                  |                                                                                                     
|CNQ               | Canadian Quotation and Trading System                                                               
|                  |                                                                                                     
|Code              | Internal Revenue Code of 1986, as amended                                                           
|                  |                                                                                                     
|Company           | Evolving Gold Corp.                                                                                 
|                  |                                                                                                     
|Crone Geophysics  | Crone Geophysics and Exploration Limited Company                                                    
|                  |                                                                                                     
|CSAMT             | Controlled Source Audio Magnetic Tellurics,
      a geophysical method used in mineral exploration
|                  |                                                                                                     
|Cu                | Copper                                                                                              
|                  |                                                                                                     
|Dighem V          | A geophysical technique used for surveying                                                          
|                  |                                                                                                     
|Eligible Person   | Any individual that is eligible to be granted
      stock options under the Plan                    
|                  |                                                                                                     
|EM                | Electromagnetic                                                                                     
|                  |                                                                                                     
|Evolving Gold     | Evolving Gold Corp.                                                                                 
|                  |                                                                                                     
|fracture fillings | A fracture in rock mass filled with another material                                                
|                  |                                                                                                     
|galena            | A mineral composed of lead and sulphur                                                              
|                  |                                                                                                     
|Geocore           | Geocore Exploration Inc.                                                                            

- 4 -

---

|Term                                 | Definition                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Geocore Option and Royalty Agreement | The agreement dated May 4, 2005 made between the Company
      and Geocore pursuant to which the Company was granted an option to acquire
      an initial 60% undivided interest in the Labrador Property and a further
      20% undivided interest at a later date                                                                                                         
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|gneiss                               | A banded or foliated metamorphic rock, usually of the
      same composition as granite                                                                                                                                                                                                                                                                                       
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Golden Arc                           | Golden Arc Mining & Refining Inc., a Nevada
      Corporation                                                                                                                                                                                                                                                                                                                 
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Golden Arc Claims                    | The unpatented mining claims under option from Golden Arc                                                                                                                                                                                                                                                                                                                     
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Golden Sands                         | Golden Sands Exploration Inc.                                                                                                                                                                                                                                                                                                                                                 
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|GOR                                  | Gross productions                                                                                                                                                                                                                                                                                                                                                             
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|gossan                               | An exposed, oxidized portion of a mineral vein,
      especially a rust-coloured outcrop of iron ore                                                                                                                                                                                                                                                                          
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Hg                                   | Mercury                                                                                                                                                                                                                                                                                                                                                                       
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|induced polarization                 | A geophysical method used in mineral exploration                                                                                                                                                                                                                                                                                                                              
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|IRS                                  | Internal Revenue Service                                                                                                                                                                                                                                                                                                                                                      
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Labrador Property                    | A property located near the coast of northern Labrador,
      Canada, approximately 40 kilometres west-southwest of the village of Nain.                                                                                                                                                                                                                                      
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Malone Property                      | A property located in Lordsburg, New Mexico, U.S.A.                                                                                                                                                                                                                                                                                                                           
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Malone Property Agreement            | The agreement dated April 17, 2006 pursuant to which the
      Company entered into a quitclaim deed and royalty agreement with Newmont
      North America Exploration Ltd and was granted a 100% interest in exchange
      for payment of US$ 10,000 (paid) and an additional US$10,000 payable in
      one year and is subject to a royalty of 2% of net smelter returns.
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Mineral Property Agreement           | The agreement dated June 10, 2003 made between Zimtu and
      Jody Dahrouge, an unrelated individual, pursuant to which Mr. Dahrouge
      retained a 1% NSR royalty on minerals other than diamonds and 1% GOR on
      diamonds from the Murray Property                                                                                                                   
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Mo                                   | Molybdenum                                                                                                                                                                                                                                                                                                                                                                    
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Murray Property                      | A property consisting of one mineral claim of 2,965 acres
      located 78 kilometres Northeast of Yellowknife in the Cameron River Area,
      Northwest Territories, Canada                                                                                                                                                                                                 
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Murray Property Option Agreement     | The agreement dated July 22, 2003, as amended on
      September 16, 2004, made between the Company and Zimtu pursuant to which
      the Company was granted an option to acquire a 70% undivided interest in
      the Murray Property                                                                                                                                      
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|Murray Report                        | Summary Report on the Murray Property dated September
      3, 2003 prepared by independent consulting geologist Gary Vivian, P. Eng.                                                                                                                                                                                                                                       
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|NI 43-101                            | National Instrument 43-101 Standards of Disclosure for
      Mineral Projects                                                                                                                                                                                                                                                                                               
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|NSR                                  | Net smelter returns                                                                                                                                                                                                                                                                                                                                                           
|                                     |                                                                                                                                                                                                                                                                                                                                                                               
|open space fillings                  | Minerals filling an open space in the earth or a rock
      mass.                                                                                                                                                                                                                                                                                                             

- 5 -

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|Term                         | Definition                                                                                                                                                                    
|---------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                                                                                               
|Part XIII Tax                | Canadian withholding tax                                                                                                                                                      
|                             |                                                                                                                                                                               
|Pb                           | Lead                                                                                                                                                                          
|                             |                                                                                                                                                                               
|PFIC                         | Passive foreign investment company                                                                                                                                            
|                             |                                                                                                                                                                               
|Plan                         | Stock option plan of the Company dated September 28, 2004                                                                                                                     
|                             |                                                                                                                                                                               
|Pulse EM survey              | A time domain tool that uses large transmitting loops and
      a high power transmitter for surveying                                                                        
|                             |                                                                                                                                                                               
|pyrite, pyrrhotite           | A mineral composed of iron and sulphur                                                                                                                                        
|                             |                                                                                                                                                                               
|QEF                          | Qualified electing fund                                                                                                                                                       
|                             |                                                                                                                                                                               
|quartz                       | A mineral composed of silica and oxygen                                                                                                                                       
|                             |                                                                                                                                                                               
|Sante Fe                     | Sante Fe Pacific Mining Inc.                                                                                                                                                  
|                             |                                                                                                                                                                               
|Sb                           | Antimony                                                                                                                                                                      
|                             |                                                                                                                                                                               
|SFAS 123                     | Statement of Financial Accounting Standards No. 123
      Accounting for Stock-Based Compensation                                                                           
|                             |                                                                                                                                                                               
|SFAS 145                     | Statement of Financial Accounting Standards no. 145
      Rescission of FASB Statements No.4, 44, and 64, Amendment of FASB
      Statement No. 13 and Technical Corrections
|                             |                                                                                                                                                                               
|silica                       | A element, occasionally used to refer to the mineral,
      quartz                                                                                                            
|                             |                                                                                                                                                                               
|stockworks                   | A pattern of closely spaced fractures in rock, commonly
      filled with minerals of economic value                                                                          
|                             |                                                                                                                                                                               
|Tax Act                      | Income Tax Act(Canada)                                                                                                                                                        
|                             |                                                                                                                                                                               
|Treaty                       | The Canada-U.S. Income Tax Convention (1980) as amended
      by the Protocols signed on June 14, 1983, March 28, 1984, March 17, 1995
      and July 29, 1997                
|                             |                                                                                                                                                                               
|troctolitic                  | A mafic igneous rock                                                                                                                                                          
|                             |                                                                                                                                                                               
|U.S. Holder                  | A holder of common shares of the Company resident in the
      United States of America                                                                                       
|                             |                                                                                                                                                                               
|U.S. Taxpayer                | An individual who is a citizen or resident of the United
      States of America or a domestic corporation in the United States                                               
|                             |                                                                                                                                                                               
|Underlying Option Agreement  | The option and royalty agreement dated March 22, 2004,
      made between AHL and Golden Arc                                                                                  
|                             |                                                                                                                                                                               
|Veining                      | A fracture filled with a mineral usually of economic
      value                                                                                                              
|                             |                                                                                                                                                                               
|VLF-EM survey                | Very low frequency electromagnetic survey                                                                                                                                     
|                             |                                                                                                                                                                               
|Winnemucca Mountain Property | A property consisting of 266 mining claims located in
      Humboldt County, Nevada                                                                                           
|                             |                                                                                                                                                                               
|Winnemucca Option            | The option granted to the Company with respect to the
      Winnemucca Mountain Property under the Winnemucca Option and Royalty
      Agreement                              

- 6 -

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|Term                                    | Definition                                                                                                                                                                                                                                                                                                                                                                                                           
|--------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Winnemucca Option and Royalty Agreement | The agreement dated December 3, 2004 made among the
      Company, Golden and AHL, as amended on January 7, 2005, February 25, 2005,
      April 21, 2005, January 26, 2006, April 27, 2006, June 16, 2006 and as
      amended and restated on July 7, 2006 pursuant to which the Company was
      granted an option to acquire a 100% interest in the Winnemucca Mountain
      Property subject to 2% NSR royalty
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Zimtu                                   | International Zimtu Technologies Inc., a related public
      company                                                                                                                                                                                                                                                                                                                                                
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Zn                                      | Zinc                                                                                                                                                                                                                                                                                                                                                                                                                 

- 7 -

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INTRODUCTION

Evolving Gold Corp. was incorporated under the CBCA on June 19,
2003 as 6109527 Canada Ltd. On September 30, 2003, the Company amended its
Articles of Incorporation and changed its name to Evolving Gold Corp.

In this Annual Report, unless otherwise specified, all dollar
amounts are expressed in Canadian dollars.

BUSINESS OF EVOLVING GOLD CORP.

Evolving Gold is a company engaged in the acquisition and
exploration of mineral properties. Its properties have no known proven reserves
of minerals. Evolving Gold does not have any commercially producing mines or
sites, nor is it in the process of opening any commercial mines or sites.
Evolving Gold has not reported any revenue from operations since incorporation.
As such, it may be considered an exploration-stage company.

FORWARD-LOOKING STATEMENTS

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

Actual operational and financial results may differ materially
from the Company's expectations contained in the forward-looking statements due
to various factors, many of which are beyond the control of the Company. These
factors include, but are not limited to, the need for additional financing to
pursue the Companys business plan, risks involved in conducting business
outside of the United States, changes in Canadian or U.S. tax or other laws or
regulations, material changes in capital expenditures, as well as the risks and
uncertainties described in the section entitled Risk Factors set forth in Item
3 of this Annual Report.

- 8 -

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PART I

ITEM 1. Identity of Directors, Senior Management and
Advisors

Not Applicable.

ITEM 2. Offer Statistics and Expected Timetable.

Not Applicable.

ITEM 3. KEY INFORMATION.

3.A. Selected Financial Data

The following selected financial data is derived from the
audited financial statements of the Company for the last three fiscal years
ended March 31, 2006. The financial statements are presented in Canadian dollars
and have been prepared in accordance with generally accepted accounting
principles in Canada (CDN GAAP). Note 10 to the financial statements provides
a summary of the differences between Canadian GAAP and U.S. GAAP. The financial
information presented below for the year ended March 31, 2004 may not be
comparable to the financial information presented for the years ended March 31,
2005 and 2006 as the company was incorporated in June 2003 and increased
operations beginning in 2005.

Table No. 3Selected Financial Data (CDN$ in
000, except per share data)

|                                 |   | Year
      Ended March 31 |  
|-------------------------------- | - | ------------------------- | -
|                                 |   | 2006                      |  
|CANADIAN GAAP                    |   |                           |  
|Revenue                          |   | Nil                       |  
|Income (Loss) from Operations    | $ | (591                      | )
|Net Income (Loss) for the Period | $ | (591                      | )
|Net Income (Loss) Per Share      | $ | (0.07                     | )
|Dividends Per Share              |   | Nil                       |  
|Wtg. Avg. Shares (000)           |   | 8,505                     |  
|Period-end Shares (000)          |   | 10,269                    |  
|                                 |   |                           |  
|Working Capital                  | $ | 121                       |  
|Mineral Properties               | $ | 737                       |  
|Long-Term Debt                   |   | Nil                       |  
|Capital Stock                    | $ | 1,714                     |  
|Shareholders Equity (Deficit)   | $ | 859                       |  
|Total Assets                     | $ | 966                       |  
|                                 |   |                           |  
|US GAAP                          |   |                           |  
|Net Loss                         | $ | (1,112                    | )
|Loss Per Share                   | $ | (0.13                     | )
|Mineral Properties               |   | Nil                       |  
|Shareholders Equity             | $ | 122                       |  
|Total Assets                     | $ | 229                       |  

|(1) | Cumulative Net Loss since incorporation through March 31,
      2006 under US GAAP was $1,882,412.                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Under US GAAP, options granted to non-employees as
      compensation for services provided are fair valued and an expense
      recorded.

- 9 -

---

|(3) | Under US GAAP, all costs related to exploration stage
      properties are expensed in the period incurred.
|--- | -----------------------------------------------------------------------------------------------------------

Exchange Rates

The following table sets forth: (i) the average for the
financial period-end indicated and (ii) the high and low for each month during
the previous nine months, of the noon buying rates for U.S. dollars per Canadian
dollars for cable transfers as certified for customs purposes by the Federal
Reserve Bank of New York. Such rates are the inverse of rates quoted by the
Federal Reserve Bank of New York for Canadian dollars per U.S. $1.00.

Table No. 4 Exchange Rates

|            | March 31, 2006 | March 31, 2005 | March 31, 2004
|----------- | -------------- | -------------- | --------------
|            |                |                |               
|Average (1) | 0.8376         | 0.7818         | 0.7543        

|(1) | The average of the exchange rates on the last day of each
      month during the applicable year.
|--- | -------------------------------------------------------------------------------------------------

September
    August
    July
    June
    May
    April
    March
    February
    January2006
    2006
    2006
    2006
    2006
    2006
    2006
    2006
    2006High
    0.9048
    0.9037
    0.8999
    0.9098
    0.9100
    0.8926
    0.8834
    0.8788
    0.8744Low
    0.8872
    0.8840
    0.8760
    0.8896
    0.8903
    0.8534
    0.8531
    0.8638
    0.8528


On October 25, 2006, the rate of exchange for the U.S. dollar
was U.S.$1.00 = Cdn.$0.8890.

3.B. Capitalization and Indebtedness

Not Applicable.

3.C. Reasons For The Offer And Use Of Proceeds

Not Applicable

3.D. Risk Factors

The following provides a discussion of certain risks facing the
Company. Additional risks that are currently unknown or that are currently
deemed immaterial may also materially adversely affect the business, results of
operations, financial condition and cash flows of the Company.

Risks Related to the Company

Cumulative unsuccessful exploration efforts by Evolving Gold
personnel could result in the company having to cease operations.

The expenditures to be made by Evolving Gold in the exploration
of its properties as described herein may not result in discoveries of
mineralized material in commercial quantities. Most exploration projects do not
result in the discovery of commercially mineable ore deposits and this
occurrence could ultimately result in Evolving Gold having to cease operations.

- 10 -

---

Evolving Gold has no reserves on the properties in which it
has an interest and if reserves are not defined the company would have to cease
operations.

The properties in which Evolving Gold has an interest or the
concessions in which Evolving Gold has the right to earn an interest are in the
exploratory stage only and are without a known body of ore. If Evolving Gold
does not ultimately find a body of ore, it would have to cease operations.

Evolving Gold has minimal positive cash flow and no recent
history of significant earnings and is dependent upon public and private
distributions of equity to obtain capital in order to sustain operations. Public
distributions of capital result in dilution to existing shareholders.

None of the Companys properties have advanced to the
commercial production stage and the Company has no history of earnings or
positive cash flow from operations. The cumulative net loss since the Companys
inception under U.S. GAAP is $1,882,412. The Company does not know if it will
ever generate material revenue from mining operations or if it will ever achieve
self-sustaining commercial mining operations. Historically, the only source of
funds available to the Company has been through the sale of its common shares.
Any future additional equity financing would cause dilution to current
stockholders. Management has no current plans to enter into any debt obligations
and plans to meet all capital requirements through the issuance of the Companys
capital stock.

Evolving Gold currently has 1,015,000 share purchase options
outstanding and 4,256,742 share purchase warrants outstanding. If all of the
share purchase options and share purchase warrants were exercised, the number of
common shares issued and outstanding would increase from 12,269,842 (as of
September 25, 2006) to 17,541,584. This represents an increase of 43% in the
number of shares issued and outstanding and would result in dilution to current
shareholders.

The risks associated with penny stock classification could
affect the marketability of the common stock of Evolving Gold and shareholders
could find it difficult to sell their stock.

The Companys stock is subject to penny stock rules as
defined in 1934 Securities and Exchange Act rule 3a51-1. The Commission has
adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. The Companys common shares are subject to these
penny stock rules. Transaction costs associated with purchases and sales of
penny stocks are likely to be higher than those for other securities. Penny
stocks generally are equity securities with a price of less than U.S. $5.00
(other than securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange or
system).

The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customers account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customers confirmation.

In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules; the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the
Companys common shares in the United States and shareholders may find it more
difficult to sell their shares.

- 11 -

---

Evolving Gold is dependent on key personnel and the absence
of any of these individuals could result in the Company having to cease
operations.

While engaged in the business of exploiting mineral properties,
the nature of Evolving Golds business, its ability to continue its exploration
of potential exploration projects, and to build a competitive edge in the
marketplace, depends, in large part, on its ability to attract and maintain
qualified key management personnel. Competition for such personnel is intense
and the Company may not be able to attract and retain such personnel. Evolving
Golds growth will depend, on the efforts of its Senior Management, particularly
its President and Chief Executive Officer, Dr. Lawrence Dick; its Corporate
Secretary, Warren McIntyre; and, its Vice President of Exploration, Dr. Chris
Osterman. We do not carry key person insurance on senior management and other
personnel.

Evolving Golds directors may have a conflict of interest
with the company as such directors or senior management also serve on boards of
companies in the same industry as the Company.

Directors of the Company also serve as directors of other
similar companies involved in natural resource development. Accordingly, it may
occur that properties will be offered to both the Company and such other
companies. Furthermore, those other companies may participate in the same
properties as those in which the Company has an interest. As a result, there may
be situations which involve a conflict of interest. In that event, the directors
would not be entitled to vote at meetings of directors which evoke any such
conflict. The directors will attempt to avoid dealing with such other companies
in situations where conflicts might arise and will at all times use their best
efforts to act in the best interests of the Company. If the directors fail to do
so, however, there could be material adverse consequences to the Company, its
business and results of operations.

Dilution through employee/director/consultant options could
adversely affect Evolving Golds stockholders.

Because the success of Evolving Gold is highly dependent upon
its respective employees, the Company has granted to some or all of its key
employees, Directors and consultants options to purchase common shares as
non-cash incentives. To the extent that significant numbers of such options may
be granted and exercised, the interests of the other stockholders of the Company
may be diluted. There are currently 1,015,000 share purchase options
outstanding, which, if exercised, would result in an additional 1,015,000 common
shares being issued and outstanding. (For a breakdown of dilution, refer to the
risk factor entitled: Evolving Gold Has Minimal Positive Cash Flow and No
Recent History of Significant Earnings and Is Dependent upon Public and Private
Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public
distributions of capital result in dilution to existing shareholders)

U.S. Investors may not be able to enforce their civil
liabilities against us or our directors, controlling persons and officers.

It may be difficult to bring and enforce suits against Evolving
Gold. The Company is a corporation incorporated in Canada under the CBCA. A
majority of the Companys directors must be residents of Canada, and all or
substantial portions of their assets are located outside of the United States,
predominately in Canada. As a result, it may be difficult for U.S. holders of
our common shares to affect service of process on these persons within the
United States or to realize in the United States upon judgments rendered against
them. In addition, a shareholder should not assume that the courts of Canada (i)
would enforce judgments of U.S. courts obtained in actions against us or such
persons predicated upon the civil liability provisions of the U.S. federal
securities laws or other laws of the United States, or (ii) would enforce, in
original actions, liabilities against us or such persons predicated upon the
U.S. federal securities laws or other laws of the United States.

However, U.S. laws would generally be enforced by a Canadian
court provided that those laws are not contrary to Canadian public policy, are
not foreign penal laws or laws that deal with taxation or the taking of property
by a foreign government and provided that they are in compliance with applicable
Canadian legislation regarding the limitation of actions. Also, a Canadian court
would generally recognize a judgment obtained in a U.S. Court except, for
example:

- 12 -

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a)          
where the U.S. court where the judgment was rendered had no jurisdiction
according to applicable Canadian law;

b)           
the judgment was subject to ordinary remedy (appeal, judicial review and any
other judicial proceeding which renders the judgment not final, conclusive or
enforceable under the laws of the applicable state) or not final, conclusive or
enforceable under the laws of the applicable state;

c)           
the judgment was obtained by fraud or in any manner contrary to natural justice
or rendered in contravention of fundamental principles of procedure;

d)           
a dispute between the same parties, based on the same subject matter has given
rise to a judgment rendered in a Canadian court or has been decided in a third
country and the judgment meets the necessary conditions for recognition in a
Canadian court;

e)           
the outcome of the judgment of the U.S. court was inconsistent with Canadian
public policy;

f)           
the judgment enforces obligations arising from foreign penal laws or laws that
deal with taxation or the taking of property by a foreign government; or

g)           
there has not been compliance with applicable Canadian law dealing with the
limitation of actions.

As a foreign private issuer, Evolving Gold is exempt from
the Section 14 proxy rules and Section 16 of the 1934 Securities Act may result
in shareholders having less complete and timely data.

The submission of proxy and annual meeting of shareholder
information (prepared to Canadian standards) on Form 6-K may result in
shareholders having less complete and timely data. The exemption from Section 16
rules regarding sales of common shares by insiders may result in shareholders
having less data. This data includes:

1.           
  Insider trading data disclosed on Canadian regulatory websites is different.

2.           
U.S. companies have specified content and filing requirements regarding
disclosures to shareholders for the annual meeting and Canadian regulations
specify a modestly different content.

3.           
Canadian interim financial statements are not necessarily prepared according to
U.S. GAAP.

4.           
The filing deadlines for foreign private issuers are different than for U.S.
issuers.

Evolving Golds possible foreign investment company status
has consequences for U.S. Investors.

Potential investors who are U.S. taxpayers should be aware that
the Company could be considered a passive foreign investment company
(PFIC) for U.S. tax purposes for the fiscal year ended March 31, 2006.
If the Company is a PFIC for any year during a U.S. taxpayers holding period,
then such U.S. taxpayer generally will be required to treat any so-called
excess distribution received on its common shares, or any gain realized upon a
disposition of common shares, as ordinary income and to pay an interest charge
on a portion of such distribution or gain, unless the taxpayer makes a qualified
electing fund (QEF) election or a mark-to-market election with respect
to the shares of the Company. In certain circumstances, the sum of the tax and
the interest charge may exceed the amount of the excess distribution received,
or the amount of proceeds of disposition realized, by the taxpayer. A U.S.
taxpayer who makes a QEF election generally must report on a current basis its
share of the Companys net capital gain and ordinary earnings for any year in
which the Company is a PFIC, whether or not the Company distributes any amounts
to its shareholders. A U.S. taxpayer who makes the mark-to-market election
generally must include as ordinary income each year the excess of the fair
market value of the common shares over the taxpayers tax basis therein. See
also Item 10E United States Tax Consequences.

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Risks Related to the Industry

Operating hazards and risks associated with the mining
industry could result in Evolving Gold having to cease operations.

Resource exploration activities generally involve a high degree
of risk. Hazards such as unusual or unexpected formations and other conditions
are involved. Operations in which the Company has a direct or indirect interest
will be subject to all the hazards and risks normally incidental to exploration
for precious and base metals, any of which could result in work stoppages,
damage to or destruction of exploration facilities, damage to life and property,
environmental damage and legal liability for any or all damage. Evolving Gold
may become subject to liability for cave-ins and other hazards for which it
cannot insure or against which it may elect not to insure where premium costs
are disproportionate to the Companys perception of the relevant risks. The
payment of such insurance premiums and of such liabilities would reduce the
funds available for exploration activities and could force Evolving Gold to
cease operations.

The amount of capital necessary to meet all environmental
regulations associated with the exploration programs of the Company could be in
an amount great enough to force Evolving Gold to cease operations.

The current and anticipated future operations of the Company,
including further exploration activities require permits from various Federal
and Provincial governmental authorities in Canada and the United States.
(Evolving Gold has the required permissions to enable it to engage in
exploration work consisting of rock sampling and geophysical mapping.) Such
operations are subject to various laws governing land use, the protection of the
environment, production, exports, taxes, labour standards, occupational health,
waste disposal, toxic substances, mine safety and other matters. Unfavourable
amendments to current laws, regulations and permits governing operations and
activities of resource exploration companies, or more stringent implementation
thereof, could have a materially adverse impact on the Company and cause
increases in capital expenditures which could result in a cessation of
operations by the Company.

Failure to comply with applicable laws, regulations and
permitting requirements may result in enforcement actions there under, including
orders issued by regulatory or judicial authorities causing operations to cease
or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment or remedial actions. Parties
engaged in resource exploration may be required to compensate those suffering
loss or damage by reason of the mining activities and may have civil or criminal
fines or penalties imposed for violation of applicable laws or regulations.

Environmental regulations which impact work on the Labrador and
Malone properties include filing a safety plan, a spill contingency plan and an
emergency evacuation procedure. Management has delayed completion of such plans
as they negotiate work commitments on the Properties.

Large increases in capital expenditures resulting from any of
the above factors could force Evolving Gold to cease operations.

Mineral prices may not support corporate profit for Evolving
Gold.

The resource exploration industry is intensely competitive and
even if commercial quantities of mineral resources are found (which is not
guaranteed), a profitable market may not exist for the sale. If a profitable
market does not exist, Evolving Gold may have to cease operations.

- 14 -

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ITEM 4. INFORMATION ON THE COMPANY

4.A. History of the Company

Incorporation and Name Changes

The Company was incorporated under the CBCA on June 19, 2003 as
6109527 Canada Ltd. On September 30, 2003, the Company changed its name to
Evolving Gold Corp. The Companys registered office is located at 1500  1055
West Georgia Street, PO Box 11117, Vancouver, British Columbia, Canada, V6E 4N7.
The Companys principal place of business is located at Suite 1500, 885 West
Georgia Street, Vancouver, British Columbia, V6E 4B3, and the telephone number
is (604) 685-6375 and the facsimile number is (604) 669-2960. The Companys
website address is www.evolvinggold.com and
e-mail address is info@evolvinggold.com. The
shares of the Company trade in Canada on the CNQ under the symbol GOLD and on
the Over-The-Counter Bulletin Board in the United States under the symbol
EVOGF.

Share Issuances

The Company has financed its operations through funds raised by
way of loans, public and private placements of common shares, shares issued for
property, shares issued in debt settlements, and shares issued upon exercise of
stock options and share purchase warrants. The following table shows the monies
raised by the Company as at October 25, 2006:

|Nature of Share Issuance        | Number of Shares | Amount    
|------------------------------- | ---------------- | ----------
|                                |                  |           
|Issue of Common Shares(1)       | 100              | $100      
|Exercise of Special Warrants(2) | 5,750,000        | $286,500  
|Exercise of Special Warrants(3) | 200,000          | $10,000   
|Exercise of Special Warrants(4) | 200,000          | $10,000   
|Issue of Common Shares(5)       | 400,000          | $64,000   
|Issue of Common Shares(6)       | 600,000          | $96,000   
|Issue of Common Shares(7)       | 200,000          | $32,000   
|Issue of Common Shares(8)       | 432,742          | $285,610  
|Exercise of Warrants(9)         | 40,000           | $10,000   
|Exercise of Options(10)         | 50,000           | $17,000   
|Issue of Common Shares(11)      | 400,000          | $244,000  
|Issue of Common Shares(12)      | 290,000          | $145,000  
|Issue of Common Shares(13)      | 1,367,000        | $381,000  
|Exercise of Warrants(14)        | 90,000           | $22,500   
|Exercise of Options(15)         | 250,000          | $62,500   
|Issue of Common Shares(16)      | 400,000          | $184,000  
|Issue of Common Shares(17)      | 1,600,000        | $450,000  
|                                |                  |           
|Total                           | 12,269,842       | $2,300,210

|(1) | These shares were issued to Alicia Cumming and Zimtu,
        the founders of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The Company issued 1,400,000 Series A Special
        Warrants at $0.01 per warrant for proceeds of $14,000. The Company issued
        3,250,000 Series B Special Warrants at $0.05 per warrant for
        total proceeds of $162,500. The Company issued 1,100,000 Series F
        Special Warrants at $0.10 per warrant for total proceeds of $110,000.
        Each Series A, B and F Special Warrant
        is exchangeable into one common share of the Company on or before the
        fifth day after the regulatory authorities of British Columbia, Alberta
        and Ontario issue a final receipt for a prospectus. The final receipt
        was issued on May 14, 2004 and all A, B and F
        Special Warrants were exercised.
|(3) | These Series L Special Warrants were issue
        at $0.05 per warrant for proceeds of $10,000 in September 2003 pursuant
        to an agreement for services with the Companys Canadian legal counsel,
        Mr. Bruce Bragagnolo.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4) | These Series P Special Warrants were issued
        at $0.05 per warrant for proceeds of $10,000 in September 2003 pursuant
        to an agreement to purchase the Murray Property. These warrants have all
        been exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

- 15 -

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|(5)  | Pursuant to the acquisition of the Winnemucca Mountain
        Property, the Company issued 100,000 common shares to Golden Arc, 200,000
        common shares to Golden Sands and 100,000 common shares with respect to
        finders fees on December 10, 2004, each share was issued at a deemed
        price of $0.16 per share.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6)  | Pursuant to the private placement on January 10, 2005,
        the Company issued 600,000 common shares at $0.16 per share.                                                                                                                                                                                                             
|(7)  | Pursuant to the acquisition of the Winnemucca Mountain
        Property, the Company issued 200,000 common shares to Golden Sands at
        a deemed price of $0.16 per share on February 25, 2005.                                                                                                                                    
|(8)  | Pursuant to the shares for debt private placement on
        May 25, 2005, the Company issued 432,742 common shares at a deemed price
        of $0.66 per share.                                                                                                                                                                       
|(9)  | In July 2005, 40,000 warrants were exercised at a price
        of $0.25 per share.                                                                                                                                                                                                                                                     
|(10) | On May 19, 2005, Penny Burnham, an employee of the Company,
        exercised 50,000 options at an exercise price of $0.34 per share.                                                                                                                                                                                                   
|(11) | Pursuant to the acquisition of the Winnemucca Mountain
        Property, the Company issued an additional 400,000 common shares to Golden
        Sands at a deemed price of $0.57 per share on August 25, 2005.                                                                                                                        
|(12) | Pursuant to the private placement on September 14, 2005,
        the Company issued 290,000 common shares at a deemed price of $0.50 per
        share.                                                                                                                                                                                 
|(13) | Pursuant to the private placement on January 17, 2006,
        the Company issued 1,270,000 common shares at $0.30 per share. In addition,
        97,000 additional shares were issued at a deemed price of $0.30 per share
        with respect to finders fees.                                                                      
|(14) | In February, 2006, 90,000 warrants were exercised at
        a price of $0.25 per share.                                                                                                                                                                                                                                                
|(15) | On February 17, 2006, Chris Osterman, a director of
        the Company, exercised 250,000 options at an exercise price of $0.25 per
        share.                                                                                                                                                                                     
|(16) | Pursuant to the acquisition of the Winnemucca Mountain
        Property, the Company issued an additional 400,000 common shares to Golden
        Sands at a deemed price of $0.46 per share on May 16, 2006.                                                                                                                           
|(17) | Pursuant to the private placement on September 13, 2006,
        the Company issued 1,500,000 common shares, and 100,000 common shares
        with respect to finders fees, at $0.30 per share.                                                                                                                                       

Capital Expenditures

The Company has not incurred any material capital expenditures
since inception.

4.B. BUSINESS OVERVIEW

Historical Corporate Development

The Companys principal business since its incorporation has
been the acquisition and exploration of natural resource properties with the
goal of placing into production any properties warranting such. The Company has
had no revenue since inception. All of the Companys assets are located in
Canada and the United States. The Company has interests in the Murray Property,
Winnemucca Mountain Property, Labrador Property and Malone Property. None of the
Companys properties have any known reserves of minerals.

On July 22, 2003, the Company entered into the Murray Property
Option Agreement with Zimtu pursuant to which the Company was granted an option
to acquire a 70% undivided interest in the Murray Property located in the
Cameron River Area of the Northwest Territories, Canada. At the time the Murray
Property Option Agreement was entered into, the Company was a wholly owned
subsidiary of Zimtu and as such, may be considered to be a party not dealing at
arms length with Zimtu because of the common management. The Murray Property
was originally staked by Jody Dahrouge and sold to Zimtu for the $13,200 cost of
staking and a 1% royalty. The Company is exploring for gold on the Murray
Property. The Murray Property is in a preliminary stage of exploration and does
not have a known commercial body of ore or minerals.

Under the terms of the Murray Property Option Agreement, the
Company agreed to acquire all of Zimtus right, title and interest in and to the
Murray Property and assume all liabilities and obligations in respect thereof in
consideration for $17,000 cash in the signing of the Agreement (paid) and the
issuance of 200,000 of the Series P Special Warrants to Zimtu (issued). The
Company must also incur $250,000 in exploration expenditures on the Murray
Property as follows: $15,000 on or before November 1, 2004, $85,000 on or before
July 22, 2005 and $150,000 on or before July 22, 2006. Zimtu is to receive a
royalty equal to 1% of the net smelter returns on minerals

- 16 -

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other than diamonds and 1% of the gross productions of diamonds
from the Murray Property. The Company can purchase one half of each royalty for
$500,000. With respect to the $15,000 exploration expenditure to be made on or
before November 1, 2004, the Company has contributed $6,226.50 for extension of
the work program and $2,577.23 for maps, geology and site visit preparations
with the remainder payment extended to on or before July 22, 2005. Currently,
payments have not been made and arrangements to extend the time frame for the
work commitments are being discussed.

Zimtu acquired the Murray Property pursuant to a Mineral
Property Agreement dated June 10, 2003 between Zimtu and Jody Dahrouge. Under
this agreement, Mr. Dahrouge will retain a 1% NSR royalty on mineral other than
diamonds and 1% GOR royalty on diamonds from the Murray Property. Zimtu had the
right to purchase one half of the NSR royalty and one half of the GOR royalty
from Mr. Dahrouge for $500,000 each.

The Companys business objective is to conduct further
exploration on the Murray Property and compile that information in an effort to
further define the mineralization potential of the Murray Property. The Company
planned an initial exploration program to be completed by October 2004 but due
to poor weather conditions, such work was postponed and no further work has been
done on the property. Additional work on the Murray Property will be contingent
upon extending the time frame for the work commitments currently under
discussion.

On December 3, 2004, the Company entered into the Winnemucca
Option and Royalty Agreement, as amended and restated on July 7, 2006, pursuant
to which the Company was granted an option to acquire a 100% interest, subject
to a 2% NSR royalty, in 62 unpatented mining claims (subsequently increased to
266 unpatented mining claims) located in Humboldt County, Nevada. In order to
exercise the Winnemucca Option, the Company must incur exploration expenditures
of US$4,000,000, make aggregate cash payments to Golden Sands of US$80,000
(paid) and issue and deliver 1,800,000 shares (1,300,000 have been issued) in
the capital of the Company as more particularly described in Item 4D, The
Winnemucca Mountain Property. The Company is also required to pay various costs
relating to the amending of the option agreement as well as for a
pre-feasibility study which is to be delivered to Golden Arc by June 30, 2009.
The Company was also required to prepare and deliver to Golden Sands and AHL a
technical report and an exploration expense report by July 31, 2006. This report
is currently being prepared.

Pursuant to a Letter Agreement between the Company and Meridian
Gold Inc. (subsequently assigned to Meridian Minerals Corp., dated September 22,
2005), the Company agreed to grant Meridian an earn-in to acquire, directly or
indirectly, an undivided 70% interest in the Companys option to purchase 100%
of the right, title and interest in the Winnemucca claims. Subsequent to March
31, 2006, the earn-in agreement was signed by Meridian. To complete the earn-in,
Meridian must do the following:

|- | make Cash Payments of US$80,000 on closing and an
      additional US$80,000, US$100,000 and US$240,000 on or before December 31,
      2006, December 31, 2007 and December 31, 2008, respectively;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                     
|- | fund exploration expenditures aggregating US$500,000 on
      or before December 31, 2006;                                                                                                          
|  |                                                                                                                                                                                                     
|- | fund exploration expenditures of US$1,500,000 on or
      before December 31, 2007;                                                                                                                 
|  |                                                                                                                                                                                                     
|- | fund exploration expenditures of an additional
      US$2,000,000 on or before December 31, 2008; and,                                                                                              
|  |                                                                                                                                                                                                     
|- | deliver a pre-feasibility study by June 30, 2009.                                                                                                                                                   

Upon Meridian satisfying its obligations and the successful
completion of the earn-in, Meridian and Evolving Gold plan to form a joint
venture for purposes of carrying out the project. There can be no assurance that
the project will be successful even if the payments noted above are made.

On May 4, 2005, the Company entered into an option and royalty
agreement with Geocore Exploration Inc. pursuant to which the Company was
granted the option to acquire an 80% interest, subject to a one and one-half
percent NSR royalty, in Geocores Voisey Bay Labrador Property. The option
comprises two parts: (1) the option to acquire a 60% interest in the Labrador
Property; and (2) the option to acquire a further 20% interest, for a total of

- 17 -

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80% interest in the Labrador Property. The first option is
exercisable by the Company upon paying Geocore $35,000 (paid) on signing the
Geocore Option and Royalty Agreement, incurring $200,000 of exploration expenses
by October 31, 2006 and $500,000 of cumulative exploration expenses by October
31, 2007. The second option is exercisable by the Company incurring $1 million
of cumulative exploration expenses by October 31, 2008.

On April 17, 2006 the Company entered into a quitclaim deed and
royalty agreement with Newmont North America Exploration Limited whereby the
Company was granted all rights, title estate and interest in unpatented mineral
claims located in Lordsburg, New Mexico, United States of America in exchange
for payment of US$10,000 (paid) and an additional US$10,000 payable by April 1,
2007. The agreement is subject to a royalty of 2% of net smelter returns. The
Company has incurred deferred exploration costs of $19,563 on the Malone
property during the three months ended June 30, 2006.

Since March 31, 2005 to date, the Company has concentrated the
majority of its efforts on exploration work on the Winnemucca Mountain Property,
Labrador Property and the Malone Property. The Company is an exploration stage
company and there is no assurance that a commercially viable mineral deposit
exists on any of its properties. Further evaluation will be required on the
Winnemucca Mountain Property, Labrador Property and Malone Property before a
final evaluation as to the economics and legal feasibility of the properties is
determined.

Plan Of Operations

Source of Funds for Fiscal 2007/2008

The Companys primary source of funds since incorporation has
been through the issuance of common shares. The Company has working capital of
$120,660 at March 31, 2006.

Use of Funds for Fiscal 2007/2008

If the Company is able to raise the funds required, during
fiscal 2007 and fiscal 2008, the Company estimates that it will expend $400,000
and $600,000, respectively, on general and administrative expenses, including
property evaluation costs, and $2 million and $3 million on property
acquisition/exploration expenses.

Material Effects of Government Regulations

The current and anticipated future operations of the Company,
including further exploration activities, require permits from various Canadian
Federal and Provincial governmental authorities. Such operations are subject to
various laws governing land use, the protection of the environment, production,
exports, taxes, labour standards, occupational health, waste disposal, toxic
substances, well safety and other matters. Unfavourable amendments to current
laws, regulations and permits governing operations and activities of resource
exploration companies, or more stringent implementation thereof, could have a
materially adverse impact on the Company and cause increases in capital
expenditures which could result in a cessation of operations by the Company. The
Company has had no material costs related to compliance and/or permits in recent
years, and anticipates no material costs in the next year.

4.C. Organization Structure

The Company has no subsidiaries.

4.D. Property, Plant and Equipment

The Company subleases its office space pursuant to the terms of
a written lease agreement at Suite 1500, 885 West Georgia Street, Vancouver,
British Columbia, Canada V6E 4B3. The term of the lease is one (1) year with
monthly rental payment of $2,700. The lease expires in September 2007.

The Company currently has a property interests created pursuant
to the Murray Property Option Agreement, WinnemuccaOption and Royalty
Agreement, the Geocore Option and Royalty Agreement and the Malone Property
Agreement.

- 18 -

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Even if the Company completes its exploration programs on its
properties and is successful in identifying mineral deposits, a substantial
amount of capital (approximately $3 million), over the next 3 years, will still
have to be spent on each deposit on further drilling and engineering studies
before management will know that the Company has a commercially viable mineral
deposit on each of the properties. No assurance can be provided that
commercially viable mineral deposits will be located on any of the Companys
properties.

The Murray Property

The Murray Property is without known reserves and the work
being done by the Company is exploratory in nature. The Companys interest in
the Murray Property stemmed from earlier exploration work, as described below,
that was done in the area.

Acquisition of Interest

On July 22, 2003, the Company entered into the Murray Property
Option Agreement with Zimtu, a related public company, pursuant to which the
Company was granted an option to acquire a 70% undivided interest in the Murray
Property. At the time of the Murray Property Option Agreement the Company was a
wholly owned subsidiary of Zimtu. Zimtu currently owns 3% of the outstanding
shares of the Company.

Under the terms of the original Murray Property Option
Agreement the Company acquired all of Zimtus right, title and interest in and
to the Murray Property and assumed all liabilities and obligations in respect
thereof in consideration for $17,000 cash on the signing of the Murray Property
Option Agreement and the issuance of 200,000 special warrants to Zimtu. The
Company was also to incur $250,000 in exploration expenditures on the Murray
Property as follows: $15,000 on or before November 1, 2004 (paid); $85,000 on or
before July 22, 2005; and, $150,000 on or before July 22, 2006. In 2005, the
Company deferred work on the Murray Property in favour of work on the Winnemucca
Property. A new agreement is currently being negotiated between the Company and
Zimtu in respect to the Murray Property.

Zimtu acquired the Murray Property pursuant to a Mineral
Property Agreement dated June 10, 2003 between Zimtu and Jody Dahrouge, an
unrelated individual. Under the Mineral Property Agreement, Mr. Dahrouge will
retain a 1% NSR royalty on minerals other than diamonds and 1% GOR royalty on
diamonds from the Murray Property. There is no assurance that any production
will ever occur on this property and there are currently no known reserves on
the Murray Property. Zimtu has the right to purchase one half of the NSR royalty
and one half of the GOR royalty from Mr. Dahrouge for $500,000 each.

Location

The Murray Property consists of one mineral claim totalling
2,965 acres and is located 78 kilometres northeast of Yellowknife, Northwest
Territories. It is three kilometres west of Gordon Lake (see map below).

- 19 -

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Accessibility, Climate, Infrastructure and Physiography

The Murray Property is approximately 78 kilometres northeast of
Yellowknife in the Northwest Territories (Figure 1). The current winter road to
the Diavik and Ekati diamond mines and the Lupin gold mine passes within five
kilometres east of the Murray Property, at Gordon Lake.

During summer months, access to the Murray Property is by
floatplane or helicopter. During winter months access is by ski-equipped
aircraft, helicopter or snowmobile from Gordon Lake. Yellowknife is the closest
community and offers a complete range of supplies and services for the mineral
exploration industry.

History and Previous Work

The Gordon Lake area, within which the Murray Property lies,
has a history of exploration, predominately for gold, of about 70 years.
Exploration of this region is considered sporadic, with long periods of
inactivity punctuated by a few months of intense exploration.

Exploration on the Murray Property has been restricted to an
initial trenching program in the late 1930s to early 1940s, and minor sampling
programs in the 1980s. No geophysical surveys have been recorded.

After the staking of the PAN claims in the late 1930s, the
Consolidated Mining and Smelting Company of Canada, an unrelated company,
excavated numerous trenches and pits throughout the Murray Property area. As
well, a shallow exploration shaft was sunk. Subsequent exploration by North Star
Mines, an unrelated company, resulted in

- 20 -

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the excavation of at least one new trench. Since virtually all
of the excavation took place over 60 years ago, the current state of the
trenches and pits is questionable.

Most early analysis from the Murray Property consisted of
analyses for precious metals (gold and silver), with occasional analyses for
base metals. Geochemical analyses were typically for gold on whole rock (vein
and wallrock) samples. Thirty-three samples collected by Nickerson (1972) were
analyzed for gold and silver at the Federal Assay Office in Yellowknife.

Mineralization

A commonality of most of the showings containing gold at and
near the Murray Property is quartz veining, open space and fracture fillings,
replacement bodies, stockworks and silica flooding of the host rock. Gold occurs
as native gold and may be associated with sulphide minerals such as
arsenopyrite, pyrrhotite, pyrite, chalcopyrite and galena. The gold-bearing
veins occur in structures of varying ages, suggesting multiple mineralization
events, as opposed to a single mineralization episode. Quartz is most often
dense blue-grey, but has also been observed as clear to milky white. The quartz
is typically massive and is occasionally brecciated.

The following five zones on the Murray Property are of current
interest to management:

TheNo. 1 Zone is the
westernmost zone at the Murray Property. Large amounts of quartz at the No. 1
Zone are found as veins and replacement bodies.

The No. 3 Zone is northeast of
the other zones and parallels a shear zone. This zone is composed of massive
blue-gray quartz and quartz stockwork replacement bodies.

TheNo. 5 Zone is located to the
southwest of the No. 3 Zone. Massive quartz veins or replacement fillings within
host rock, which is combined with silica, characterize this zone.

Quartz veins and stringers in
silicified wallrock are prevalent at the No. 6 Zone, which is located
directly east of the No. 1 Zone.

Management believes that the No. 7 Zone, which is south
of the other zones, may contain significant gold mineralization. (This has not
been proven to date and is based on visual observation by management.)
Mineralization is contained within a 0.5 to 2.5 foot wide by 30 foot long
quartz-filled fracture that is perpendicular to the strike of the surrounding
rock.

Planned Work Program by the Company

To date, the Company has completed no work, other than minor
exploration work on the Murray Property to fulfill the terms of the Murray
Option Property Agreement. Management commissioned and received an independent
technical report on the Murray Property, in accordance with Canadian National
Instrument 43-101 Standards of Disclosure for Mineral Projects.The
Summary Report on the Murray Property dated September 3, 2003 was prepared by
independent consulting geologist Gary Vivian, P. Eng.

The Company planned to engage in exploration work on the Murray
Property through the end of calendar 2004 with a budget of $15,000, however, due
to unfavourable weather conditions, the Company deferred such exploration
expenditures. No further work has been done on the Murray Property to date, as
work was postponed in favour of progressing work on the Winnemucca Property and
the Malone Property.

An initial work program will consist of geologic mapping and
rock sampling over a three week period. The success of this initial phase of
work will be evaluated based on the assays returned from the sampling, and the
surface and subsurface continuity of the mineralized zone based on the geologic
mapping. Should these factors indicate that there is not a clearly defined
target on the Murray Property, and then no additional funds would be expended on
exploration. However should, significant gold grades over or along a geological
or geophysical feature be

- 21 -

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encountered, then a drilling program would be called for to
test the gold grades in the subsurface. There is no detailed plan of exploration
beyond this point. The total meterage of holes to be drilled cannot be estimated
until the basic first phase of sampling and geological and geophysical mapping
is complete, however combined drilling and assaying costs will run between $150
and $200 per metre, and an initial drilling program consisting of 1,000 metres
would not be unreasonable. If positive assay results are obtained then
additional drilling programs and cost expenditures would be necessary. In vein
deposits, such as the Murray Property, a final drill hole pattern on 50 metre
vertical and horizontal intervals, and possibly less would be required to define
a mineral reserve. Decision points may occur after or during the drilling
program as to whether the Murray Property has a reasonable chance of outlining
ore. The probability of an individual prospect ever having reserves that meet
the requirements of Industry Guide 7 is remote, there is always a high
probability that the properties of Evolving Gold do not contain reserves, and
any funds spent on exploration will probably be lost. Even if ultimately
successful in outlining a sufficient tonnage and grade of mineralization,
extensive engineering studies are required to determine whether the
mineralization would constitute an ore reserve.

Mr. Gary J. Vivian, B.S., M.S. Geology, will conduct the
initial geological mapping and sampling on behalf of Evolving Gold. Mr. Vivian
graduated with a Master of Science degree from the University of Alberta in 1987
and had worked as a geologist with Noranda Exploration Company Ltd. for nine
years. Since 1988 he has worked with Aurora Geosciences, Ltd., a geological
consulting company of which he is a full partner.

The Winnemucca Mountain Property

The Winnemucca Mountain Property is without known reserves and
the work being done by the Company is exploratory in nature. The Companys
interest in the Winnemucca Mountain Property also stems from previous
exploration work described below.

Acquisition of Interest

On December 3, 2004, the Company entered into the WinnemuccaOption and Royalty Agreement pursuant to which the Company was granted the
Winnemucca Option to acquire a 100% interest in 62 unpatented mining claims
(subsequently increased to 266 unpatented mining claims as discussed further
below) located in Humboldt County, Nevada. In order to exercise the Winnemucca
Option, the Company must incur exploration expenditures of US$4,000,000, make
aggregate cash payments to Golden Sands of US$80,000 (paid) and issue and
deliver 1,800,000 shares (1,300,000 have been issued) in the capital of the
Company as follows:

| | (a) | Cash Payments           
| | --- | ------------------------
| |     | •                       
| |     | •                       
| |     | •                       
| |     |                         
| | (b) | Share Issuances         
| |     | •                       
| |     | •                       
| |     | •                       
| |     | •                       
| |     | •                       
| |     | •                       
| |     |                         
| | (c) | Exploration Expenditures
| |     | •                       
| |     | •                       
| |     | •                       

- 22 -

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A finders fee of 100,000 common shares in the capital of the
Company was issued in connection with the acquisition of the Winnemucca Mountain
Property in December 2004.

Under the WinnemuccaOption and Royalty Agreement, any
unpatented or patented mining claims located within three miles of the subject
claims acquired or located would, at the option of the other parties, form part
of the subject claims. Since entering into the WinnemuccaOption and
Royalty Agreement, 204 additional claims have been staked by AHL and the Company
with the result that there are now 266 unpatented subject claims in total.

The Winnemucca Mountain Property is subject to a 2% NSR
royalty. The Company has the right to purchase the royalty relating to the
Golden Arc Claims listed in the table below and any other unpatented mining
claims which may become subject to the option and royalty agreement between AHL
and Golden Arc for US$1,000,000 for each of the two percentage royalty points.
The Company is required to pay, in addition to the mentioned option payments,
advance royalty payments of US$10,000 by March 16, 2006 (paid), US$10,000 by
December 3, 2006, the second anniversary of the WinnemuccaOption and
Royalty Agreement and US$20,000 by December 3, 2007, the third anniversary of
the WinnemuccaOption and Royalty Agreement and each successive
anniversary until production commences at which time the obligation to pay
advance royalty payments will terminate. The total of the advance royalty
payments is to be deducted from the total amount of NSR royalty payable under
the Winnemucca Option and Royalty Agreement. The Company is also required to pay
various costs relating to the amending of the option agreement as well as for a
pre-feasibility study which is to be delivered to Golden Arc by June 30, 2009.
The Company was also required to prepare and deliver to Golden Sands and AHL a
technical report and an exploration expense report by July 31, 2006.

In September 2005, Evolving signed a letter of intent with
Meridian Gold Inc. (Meridian) regarding an option by Meridian to acquire,
directly or indirectly, an undivided 70% interest in 100% of Evolving Golds
option in the Property. On August 1, 2006, Evolving Gold announced that Meridian
signed a final option agreement. Meridian will assign their interest to Meridian
Minerals Corp. Under the terms of the agreement, Meridian can earn a 70%
interest in the property by making a total contribution of US$500,000 in staged
cash payments to Evolving Gold by December 31, 2008, investing a minimum of
US$500,000 in exploration expenditures before December 31, 2006 and incurring
total exploration expenditures of US$4,000,000 by December 31, 2008. Meridian
must also deliver a pre-feasibility report on the property before June 30, 2009.
Upon completion of the required payments and expenditures, Evolving Gold and
Meridian have agreed to establish a joint venture in respect of the property and
Meridian will contribute 136 claims it currently has rights to that adjoin the
property into the joint venture.

Mineral Claims

The Winnemucca Mountain Property consists of 266 unsurveyed
contiguous mining claims covering approximately 2,115 hectares on Lands
administered by the Bureau of Land Management, US Department of the Interior.

These claims have been recorded with the BLM as follows(1):

Claim Name
    BLM
      Serial No.
    Registered Owner(3)
    Location
    Expiry Date(4)DateThe Golden Arc ClaimsWM #1
    733156
    AHL
    01/04/1996
    September 1, 2007WM #2
    405978
    AHL
    04/11/1987
    September 1, 2007WM#3
    733157
    AHL
    01/04/1996
    September 1, 2007WM #4
    405980
    AHL
    04/11/1987
    September 1, 2007WM #5
    733158
    AHL
    01/04/1996
    September 1, 2007WM #6
    405982
    AHL
    04/11/1987
    September 1, 2007WM #8
    405983
    AHL
    04/11/1987
    September 1, 2007WM #10
    405984
    AHL
    04/11/1987
    September 1, 2007Golden West #6
    733140
    AHL
    01/02/1996
    September 1, 2007Golden West #7
    733141
    AHL
    01/02/1996
    September 1, 2007Golden West #8
    733142
    AHL
    01/02/1996
    September 1, 2007Golden West #9
    733143
    AHL
    01/02/1996
    September 1, 2007


- 23 -

---

Claim Name
    BLM
      Serial No.
    Registered Owner(3)
    Location
    Expiry Date(4)DateGolden West #10
    733144
    AHL
    01/02/1996
    September 1, 2007Golden West #11
    733145
    AHL
    01/02/1996
    September 1, 2007Golden West #12
    733146
    AHL
    01/02/1996
    September 1, 2007Golden West #13
    733147
    AHL
    01/02/1996
    September 1, 2007Golden West #14
    733148
    AHL
    01/03/1996
    September 1, 2007Golden West #15
    733149
    AHL
    01/03/1996
    September 1, 2007Golden West #16
    733150
    AHL
    01/03/1996
    September 1, 2007Golden West #17
    733151
    AHL
    01/03/1996
    September 1, 2007Golden West #18
    733152
    AHL
    01/03/1996
    September 1, 2007Golden West #19
    733153
    AHL
    01/03/1996
    September 1, 2007Amended Golden West Frac A
    733154
    AHL
    01/03/1996
    September 1, 2007Amended Golden West Frac B
    733155
    AHL
    01/03/1996
    September 1, 2007WM 206
    917492
    AHL
    11/19/2005
    September 1, 2007WM 207
    917493
    AHL
    11/19/2005
    September 1, 2007WM 208
    917494
    AHL
    11/19/2005
    September 1, 2007T&C #1
    479032
    AHL
    05/08/1988
    September 1, 2007T&C #2
    479033
    AHL
    05/08/1998
    September 1, 2007T&C #3
    479034
    AHL
    05/08/1998
    September 1, 2007TJ #12
    155540
    AHL
    04/02/1980
    September 1, 2007TJ #14
    733159
    AHL
    01/04/1996
    September 1, 2007TJ #15
    733160
    AHL
    01/04/1996
    September 1, 2007TJ #16
    155544
    AHL
    04/04/1980
    September 1, 2007TJ #17
    155545
    AHL
    04/04/1980
    September 1, 2007TJ #18
    155546
    AHL
    04/04/1980
    September 1, 2007TJ #19
    155547
    AHL
    04/02/1980
    September 1, 2007TJ #29
    155557
    AHL
    04/04/1980
    September 1, 2007TJ#30
    155558
    AHL
    04/17/1980
    September 1, 2007TJ #34
    155562
    AHL
    04/17/1980
    September 1, 2007Additional ClaimsWM 101
    NMC887954
    AHL
    11/10/2004
    September 1, 2007WM 102
    NMC887955
    AHL
    11/10/2004
    September 1, 2007WM 103
    NMC887956
    AHL
    11/10/2004
    September 1, 2007WM 104
    NMC887957
    AHL
    11/10/2004
    September 1, 2007WM 105
    NMC887958
    AHL
    11/10/2004
    September 1, 2007WM 106
    NMC887959
    AHL
    11/10/2004
    September 1, 2007WM 107
    NMC887960
    AHL
    11/10/2004
    September 1, 2007WM 108
    NMC887961
    AHL
    11/10/2004
    September 1, 2007WM 109
    NMC887962
    AHL
    11/10/2004
    September 1, 2007WM 110
    NMC887963
    AHL
    11/10/2004
    September 1, 2007WM 111
    NMC887964
    AHL
    11/10/2004
    September 1, 2007WM 112
    NMC887965
    AHL
    11/10/2004
    September 1, 2007WM 113
    NMC887966
    AHL
    11/10/2004
    September 1, 2007WM 114
    NMC887967
    AHL
    11/10/2004
    September 1, 2007WM 115
    NMC887968
    AHL
    11/10/2004
    September 1, 2007WM 116
    NMC887969
    AHL
    11/10/2004
    September 1, 2007WM 117
    NMC887970
    AHL
    11/10/2004
    September 1, 2007WM 118
    NMC887971
    AHL
    11/10/2004
    September 1, 2007WM 119
    NMC887972
    AHL
    11/10/2004
    September 1, 2007WM 120
    NMC887973
    AHL
    11/10/2004
    September 1, 2007WM 121
    NMC887974
    AHL
    11/13/2004
    September 1, 2007


- 24 -

---

Claim Name
    BLM
      Serial No.
    Registered Owner(3)
    Location
    Expiry Date(4)DateWM 122
    NMC887975
    AHL
    11/10/2004
    September 1, 2007WM 123
    NMC887976
    AHL
    11/10/2004
    September 1, 2007WM 124
    NMC887977
    AHL
    11/10/2004
    September 1, 2007WM 125
    NMC887978
    AHL
    11/10/2004
    September 1, 2007WM 126
    NMC887979
    AHL
    12/10/2004
    September 1, 2007WM 127
    NMC887980
    AHL
    12/10/2004
    September 1, 2007WM 128
    NMC887981
    AHL
    12/10/2004
    September 1, 2007WM 129
    NMC887982
    AHL
    12/10/2004
    September 1, 2007WM 130
    NMC887983
    AHL
    12/10/2004
    September 1, 2007WM 131
    NMC887984
    AHL
    12/10/2004
    September 1, 2007WM 132
    NMC887985
    AHL
    12/10/2004
    September 1, 2007WM 133
    NMC887986
    AHL
    12/10/2004
    September 1, 2007WM 134
    NMC887987
    AHL
    12/10/2004
    September 1, 2007WM 135
    NMC887988
    AHL
    12/10/2004
    September 1, 2007WM 136
    NMC894073
    AHL
    2/2/2005
    September 1, 2007WM 137
    NMC894074
    AHL
    2/2/2005
    September 1, 2007WM 138
    NMC894075
    AHL
    2/2/2005
    September 1, 2007WM 139
    NMC894076
    AHL
    2/2/2005
    September 1, 2007WM 140
    NMC894077
    AHL
    2/2/2005
    September 1, 2007WM 141
    NMC894078
    AHL
    2/2/2005
    September 1, 2007WM 142
    NMC894079
    AHL
    2/2/2005
    September 1, 2007WM 143
    NMC894080
    AHL
    2/2/2005
    September 1, 2007WM 144
    NMC894081
    AHL
    2/2/2005
    September 1, 2007WM 145
    NMC894082
    AHL
    2/2/2005
    September 1, 2007WM 146
    NMC894083
    AHL
    2/2/2005
    September 1, 2007WM 147
    NMC894084
    AHL
    2/2/2005
    September 1, 2007WM 148
    NMC894085
    AHL
    2/2/2005
    September 1, 2007WM 149
    NMC894086
    AHL
    2/2/2005
    September 1, 2007WM 150
    NMC894087
    AHL
    2/2/2005
    September 1, 2007WM 151
    NMC894088
    AHL
    2/2/2005
    September 1, 2007WM 152
    NMC894089
    AHL
    2/2/2005
    September 1, 2007WM 153
    NMC894090
    AHL
    2/2/2005
    September 1, 2007WM 154
    NMC894091
    AHL
    2/2/2005
    September 1, 2007WM 155
    NMC894092
    AHL
    2/2/2005
    September 1, 2007WM 156
    NMC894093
    AHL
    2/2/2005
    September 1, 2007WM 157
    NMC894094
    AHL
    2/2/2005
    September 1, 2007WM 158
    NMC894095
    AHL
    2/2/2005
    September 1, 2007WM 159
    NMC894096
    AHL
    2/2/2005
    September 1, 2007WM 160
    NMC894097
    AHL
    2/2/2005
    September 1, 2007WM 161
    NMC894098
    AHL
    2/2/2005
    September 1, 2007WM 162
    NMC894099
    AHL
    2/2/2005
    September 1, 2007WM 163
    NMC894100
    AHL
    2/2/2005
    September 1, 2007WM 164
    NMC894101
    AHL
    2/2/2005
    September 1, 2007WM 165
    NMC894102
    AHL
    2/2/2005
    September 1, 2007WM 166
    NMC894103
    AHL
    2/2/2005
    September 1, 2007WM 167
    NMC894104
    AHL
    2/2/2005
    September 1, 2007WM 168
    NMC894105
    AHL
    2/2/2005
    September 1, 2007WM 169
    NMC894106
    AHL
    2/2/2005
    September 1, 2007WM 170
    NMC894107
    AHL
    2/3/2005
    September 1, 2007WM 171
    NMC894108
    AHL
    2/3/2005
    September 1, 2007WM 172
    NMC894109
    AHL
    2/3/2005
    September 1, 2007WM 173
    NMC894110
    AHL
    2/3/2005
    September 1, 2007


- 25 -

---

Claim Name
    BLM
      Serial No.
    Registered Owner(3)
    Location
    Expiry Date(4)DateWM 174
    NMC894111
    AHL
    2/3/2005
    September 1, 2007WM 175
    NMC894112
    AHL
    2/3/2005
    September 1, 2007WM 176
    NMC894113
    AHL
    2/3/2005
    September 1, 2007WM 177
    NMC894114
    AHL
    2/3/2005
    September 1, 2007WM 178
    NMC894115
    AHL
    2/3/2005
    September 1, 2007WM 179
    NMC894116
    AHL
    2/3/2005
    September 1, 2007WM 180
    NMC894117
    AHL
    2/3/2005
    September 1, 2007WM 181
    NMC894118
    AHL
    2/3/2005
    September 1, 2007WM 182
    NMC894119
    AHL
    2/3/2005
    September 1, 2007WM 183
    NMC894120
    AHL
    2/3/2005
    September 1, 2007WM 184
    NMC894121
    AHL
    2/3/2005
    September 1, 2007WM 185
    NMC894122
    AHL
    2/3/2005
    September 1, 2007WM 186
    NMC894123
    AHL
    2/3/2005
    September 1, 2007WM 187
    NMC894124
    AHL
    2/3/2005
    September 1, 2007WM 188
    NMC894125
    AHL
    2/3/2005
    September 1, 2007WM 189
    NMC894126
    AHL
    2/3/2005
    September 1, 2007WM 190
    NMC894 127
    AHL
    2/3/2005
    September 1, 2007WM 191
    NMC894128
    AHL
    2/3/2005
    September 1, 2007WM 192
    NMC894129
    AHL
    2/3/2005
    September 1, 2007WM 193
    NMC894130
    AHL
    2/3/2005
    September 1, 2007WM 194
    NMC894131
    AHL
    2/3/2005
    September 1, 2007WM 195
    NMC894132
    AHL
    2/3/2005
    September 1, 2007WM 196
    NMC894133
    AHL
    2/3/2005
    September 1, 2007WM 197
    NMC894134
    AHL
    2/3/2005
    September 1, 2007WM 198
    NMC894135
    AHL
    2/3/2005
    September 1, 2007WM 199
    NMC894136
    AHL
    2/3/2005
    September 1, 2007WM 200
    NMC894137
    AHL
    2/3/2005
    September 1, 2007WM 201
    NMC894138
    AHL
    2/4/2005
    September 1, 2007WM 202
    NMC894139
    AHL
    2/4/2005
    September 1, 2007WM 203
    NMC894140
    AHL
    2/4/2005
    September 1, 2007WM 204
    NMC894141
    AHL
    2/4/2005
    September 1, 2007WM 221
    NMC908914
    AHL
    9/1/2005
    September 1, 2007WM 222
    NMC908915
    AHL
    9/1/2005
    September 1, 2007WM 223
    NMC908916
    AHL
    9/1/2005
    September 1, 2007WM 224
    NMC908917
    AHL
    9/1/2005
    September 1, 2007WM 230
    NMC908923
    AHL
    9/1/2005
    September 1, 2007WM 231
    NMC908924
    AHL
    9/1/2005
    September 1, 2007WM 232
    NMC908925
    AHL
    9/1/2005
    September 1, 2007WM 233
    NMC908926
    AHL
    9/1/2005
    September 1, 2007WM 234
    NMC908927
    AHL
    9/1/2005
    September 1, 2007WM 235
    NMC908928
    AHL
    9/1/2005
    September 1, 2007WM 236
    NMC908929
    AHL
    9/1/2005
    September 1, 2007WM 237
    NMC908930
    AHL
    9/1/2005
    September 1, 2007WM 238
    NMC908931
    AHL
    9/1/2005
    September 1, 2007WM 239
    NMC908932
    AHL
    9/1/2005
    September 1, 2007WM 240
    NMC908933
    AHL
    9/1/2005
    September 1, 2007WM 241
    NMC908934
    AHL
    9/1/2005
    September 1, 2007WM 242
    NMC908935
    AHL
    9/1/2005
    September 1, 2007WM 243
    NMC908936
    AHL
    9/1/2005
    September 1, 2007WM 244
    NMC908937
    AHL
    9/1/2005
    September 1, 2007WM 245
    NMC908938
    AHL
    9/1/2005
    September 1, 2007WM 246
    NMC908939
    AHL
    9/1/2005
    September 1, 2007


- 26 -

---

Claim Name
    BLM
      Serial No.
    Registered Owner(3)
    Location
    Expiry Date(4)DateWM 247
    NMC908940
    AHL
    9/1/2005
    September 1, 2007WM 248
    NMC908941
    AHL
    9/1/2005
    September 1, 2007WM 249
    NMC908942
    AHL
    9/1/2005
    September 1, 2007WM 250
    NMC908943
    AHL
    9/1/2005
    September 1, 2007WM 251
    NMC908944
    AHL
    9/1/2005
    September 1, 2007WM 252
    NMC908945
    AHL
    9/1/2005
    September 1, 2007WM 253
    NMC908946
    AHL
    9/1/2005
    September 1, 2007WM 254
    NMC908947
    AHL
    9/1/2005
    September 1, 2007WM 255
    NMC908948
    AHL
    9/1/2005
    September 1, 2007WM 256
    NMC908949
    AHL
    9/1/2005
    September 1, 2007WM 257
    NMC908950
    AHL
    9/1/2005
    September 1, 2007WM 258
    NMC908951
    AHL
    9/1/2005
    September 1, 2007WM 259
    NMC908952
    AHL
    9/1/2005
    September 1, 2007WM 260
    NMC908953
    AHL
    9/1/2005
    September 1, 2007WM 261
    NMC908954
    AHL
    9/1/2005
    September 1, 2007WM 262
    NMC908955
    AHL
    9/1/2005
    September 1, 2007WM 263
    NMC908956
    AHL
    9/1/2005
    September 1, 2007WM 264
    NMC908957
    AHL
    9/1/2005
    September 1, 2007WM 265
    NMC908958
    AHL
    9/1/2005
    September 1, 2007WM 266
    NMC908959
    AHL
    9/1/2005
    September 1, 2007WM 267
    NMC908960
    AHL
    9/1/2005
    September 1, 2007WM 268
    NMC908961
    AHL
    9/1/2005
    September 1, 2007WM 269
    NMC908962
    AHL
    9/1/2005
    September 1, 2007WM 270
    NMC908963
    AHL
    9/1/2005
    September 1, 2007WM 271
    NMC908964
    AHL
    9/1/2005
    September 1, 2007WM 272
    NMC908965
    AHL
    9/1/2005
    September 1, 2007WM 273
    NMC908966
    AHL
    9/1/2005
    September 1, 2007WM 274
    NMC908967
    AHL
    9/1/2005
    September 1, 2007WM 275
    NMC908968
    AHL
    9/1/2005
    September 1, 2007WM 276
    NMC908969
    AHL
    9/1/2005
    September 1, 2007WM 277
    NMC908970
    AHL
    9/1/2005
    September 1, 2007WM 278
    NMC908971
    AHL
    9/1/2005
    September 1, 2007WM 279
    NMC908972
    AHL
    9/1/2005
    September 1, 2007WM 280
    NMC908973
    AHL
    9/1/2005
    September 1, 2007WM 281
    NMC908974
    AHL
    9/1/2005
    September 1, 2007WM 282
    NMC908975
    AHL
    9/1/2005
    September 1, 2007WM 283
    NMC908976
    AHL
    9/1/2005
    September 1, 2007WM 284
    NMC908977
    AHL
    9/1/2005
    September 1, 2007WM 285
    NMC908978
    AHL
    9/1/2005
    September 1, 2007WM 286
    NMC908979
    AHL
    9/1/2005
    September 1, 2007WM 287
    NMC908980
    AHL
    9/1/2005
    September 1, 2007WM 288
    NMC908981
    AHL
    9/1/2005
    September 1, 2007WM 289
    NMC908982
    AHL
    9/1/2005
    September 1, 2007WM 290
    NMC908983
    AHL
    9/1/2005
    September 1, 2007WM 291
    NMC908984
    AHL
    9/1/2005
    September 1, 2007WM 292
    NMC908985
    AHL
    9/1/2005
    September 1, 2007WM 293
    NMC908986
    AHL
    9/1/2005
    September 1, 2007WM 294
    NMC908987
    AHL
    9/1/2005
    September 1, 2007V/M 295
    NMC908988
    AHL
    9/1/2005
    September 1, 2007VIM 296
    NMC908989
    AHL
    9/1/2005
    September 1, 2007VIM 297
    NMC908990
    AHL
    9/1/2005
    September 1, 2007WM 298
    NMC908991
    AHL
    9/1/2005
    September 1, 2007


- 27 -

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Claim Name
    BLM
      Serial No.
    Registered Owner(3)
    Location
    Expiry Date(4)DateWM 299
    NMC908992
    AHL
    9/1/2005
    September 1, 2007WM 300
    NMC908993
    AHL
    9/1/2005
    September 1, 2007WM 301
    NMC908994
    AHL
    9/1/2005
    September 1, 2007WM 302
    NMC908995
    AHL
    9/1/2005
    September 1, 2007WM 303
    NMC908996
    AHL
    9/1/2005
    September 1, 2007WM 304
    NMC908997
    AHL
    9/1/2005
    September 1, 2007WM 305
    NMC908998
    AHL
    9/1/2005
    September 1, 2007WM 306
    NMC908999
    AHL
    9/1/2005
    September 1, 2007WM 307
    NMC909000
    AHL
    9/1/2005
    September 1, 2007WM 308
    NMC909001
    AHL
    9/1/2005
    September 1, 2007WM 309
    NMC909002
    AHL
    9/1/2005
    September 1, 2007WM 310
    NMC909003
    AHL
    9/1/2005
    September 1, 2007WM 311
    NMC909004
    AHL
    9/1/2005
    September 1, 2007WM 312
    NMC909005
    AHL
    9/1/2005
    September 1, 2007WM 313
    NMC909006
    AHL
    9/1/2005
    September 1, 2007WM 314
    NMC909007
    AHL
    9/1/2005
    September 1, 2007WM 315
    NMC909008
    AHL
    9/1/2005
    September 1, 2007WM 316
    NMC909009
    AHL
    9/1/2005
    September 1, 2007WM 317
    NMC909010
    AHL
    9/1/2005
    September 1, 2007WM 318
    NMC909011
    AHL
    9/1/2005
    September 1, 2007WM 319
    NMC909012
    AHL
    9/1/2005
    September 1, 2007WM 320
    NMC909013
    AHL
    9/1/2005
    September 1, 2007WM 321
    NMC909014
    AHL
    9/1/2005
    September 1, 2007WM 322
    NMC909015
    AHL
    9/1/2005
    September 1, 2007WM 323
    NMC909016
    AHL
    9/1/2005
    September 1, 2007WM 324
    NMC909017
    AHL
    9/1/2005
    September 1, 2007WM 325
    NMC909018
    AHL
    9/1/2005
    September 1, 2007WM 326
    NMC909019
    AHL
    9/1/2005
    September 1, 2007WM 327
    NMC909020
    AHL
    9/1/2005
    September 1, 2007WM 328
    NMC909021
    AHL
    9/1/2005
    September 1, 2007WM 329
    NMC909022
    AHL
    9/1/2005
    September 1, 2007WM 330
    NMC909023
    AHL
    9/1/2005
    September 1, 2007WM 331
    NMC909024
    AHL
    9/1/2005
    September 1, 2007WM 332
    NMC909025
    AHL
    9/1/2005
    September 1, 2007WM 333
    NMC909026
    AHL
    9/1/2005
    September 1, 2007WM 334
    NMC909027
    AHL
    9/1/2005
    September 1, 2007WM 335
    NMC909028
    AHL
    9/1/2005
    September 1, 2007WM 336
    NMC909029
    AHL
    9/1/2005
    September 1, 2007WM 337
    NMC909030
    AHL
    9/1/2005
    September 1, 2007WM 338
    NMC909031
    AHL
    9/1/2005
    September 1, 2007WM 339
    NMC909032
    AHL
    9/1/2005
    September 1, 2007WM 340
    NMC909033
    AHL
    9/1/2005
    September 1, 2007WM 341
    NMC909034
    AHL
    9/1/2005
    September 1, 2007WM 342
    NMC909035
    AHL
    9/1/2005
    September 1, 2007WM 343
    NMC909036
    AHL
    9/1/2005
    September 1, 2007WM 344
    NMC909037
    AHL
    9/1/2005
    September 1, 2007WM 345
    NMC909038
    AHL
    9/1/2005
    September 1, 2007WM 346
    NMC909039
    AHL
    9/1/2005
    September 1, 2007WM 347
    NMC909040
    AHL
    9/1/2005
    September 1, 2007


|(1) | Claim data on the Winnemucca Mountain Property have been
      provided to the author of the report by AHL. The author of the report has
      not independently reviewed or verified any of the claim details.
      Therefore, the author of the report has no opinion on the validity of the
      claims.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 28 -

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|(2) | Under the terms of the Underlying Option Agreement,
        Golden Arc was required to have the title to all mineral claims subject
        to that agreement transferred to AHL. As of the date of the report, all
        of such transfers have been completed.                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | If the option contained in the Underlying Option Agreement
        is not exercised, then AHL is required to return title to the Golden Arc
        Claims to Golden Arc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(4) | In order to maintain the mineral claims comprising the
        Winnemucca Mountain Property in good standing, the Company must pay to
        the BLM a maintenance fee of US$125 per mineral claim prior to September
        1, 2007 and, in each successive year, the Company must pay the County
        in which the mining claims are located (the Humboldt County) a yearly
        fee prior to November 1 and file a form called a Notice of Intent
        to Hold. If the Company fails to duly pay such fees and file such
        form, then the mining claims will lapse and the Company will lose all
        interest that it has in these mining claims.

Location, Accessibility, Climate, Local Resources,
Infrastructure and Physiography

The Winnemucca Mountain Property is located in north-western
Nevada, approximately 6 kilometres northwest of the municipality of Winnemucca.
The property is within the Winnemucca Mountain Mining District of Humboldt
County. The claims are situated on certain sections of the west flank of the
Winnemucca Mountain. A map showing the location of and access to the Winnemucca
Mountain Property is attached on page 30.

The Winnemucca Mountain Property is accessible from State Route
49, a graded gravel road from Winnemucca to Jungo. The claims that comprise the
Winnemucca Mountain Property lie in an irregular, northerly trending block along
the western flanks of Winnemucca Mountain. The mountain slopes are generally
moderate along the west side of the claims, steepening on the east and in
drainages. Pediment and alluvium cover is extensive, particularly in the
western, or lower, part of the property where a classic bajada is developed.
Within the claims, elevations range from approximately 1435 metres in the
southwest corner to nearly 2000 metres in the east. The area is devoid of trees,
and vegetation consists of sagebrush and sparse grass. The climate in southern
Humboldt County is arid with annual rainfall averaging 20 cm (8 inches;
Winnemucca Chamber of Commerce Website) and snowfall of 38 cm (16 inches; Nevada
Climate Summaries Website). The area is characterized by hot summers and short,
cold winters.

History and Previous Work

Gold and silver were first discovered in the Winnemucca Mining
District in 1863 and several smelters were constructed along the Humboldt River
during the 1860s. In late 1988, Santa Fe Pacific Mining, Inc. (now Newmont
Mining Corporation) (Santa Fe) entered into a joint venture with Arctic
Precious Metals Inc. with respect to the Winnemucca Mountain Property and became
operator. Previous exploration work performed by Santa Fe focused on the
pediment-covered Swordfish Zone. Between 1988 and 1990, Santa Fe conducted
geological mapping, rock sampling, trenching, CSAMT, induced polarization
geophysical surveys, collected 286 auger hole bedrock samples and completed a
total of 18,260 metres (52,470.8 feet) in 73 reverse circulation drill holes. In
1994, Anvil Resources Ltd. acquired the Winnemucca Mountain Property, became
project operator and performed internal compilation work, prepared a topographic
base map and collected surface samples to confirm previous gold tenors. An
induced polarization (IP) survey conducted in 1996 confirmed that resistivity
highs correlated well with known mineralized areas and delineated two new target
zones. There has been no record of exploration work since 1996.

Present Condition and Current State of
Exploration

The Winnemucca Mountain Property is undeveloped and does not
contain any open-pit or underground mines. There is no plant or equipment
located on the property. No reserves have been identified on the mineral claims
that comprise the Winnemucca Mountain Property.

Mineralization

The Winnemucca Mountain Property and surrounding area has had a
long history of mineral exploration. As a result, gold occurrences and targets
have been identified at several areas within the current property boundaries.
Types of gold-bearing occurrences identified to date on the Winnemucca Mountain
Property are: quartz stockworks in hornfelsed intrusive contact zones, quartz
veins, volcanic breccias, and quartz-calcite veins. The most intensively
explored sector of the property to date is called the Swordfish zone.

- 29 -

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Gold mineralization at the Swordfish Zone occurs within a
northeast-trending, low sulfide, quartz-adularia vein-type and brecciated
system. Santa Fe completed 73 reverse circulation drill holes, nearly all of
which were focused on the Swordfish Zone. Near the end of Santa Fes tenure on
the Winnemucca Mountain Property, gold mineralization was found approximately
500 metres northeast of the Swordfish Zone, at what is now called the SF
Extension Zone. This intercept has never been followed up by further drilling,
and has been interpreted by the Company to indicate that the Swordfish Zone may
be much more extensive than previously indicated, and that higher gold grades
may occur in structurally-controlled zones northeast of Swordfish. The SF
Extension, and beyond to the northeast, is a high-priority drill target for the
Company.

In addition to the Swordfish and SF Extension areas, additional
exploration targets have been identified and are comprised of multiple
outcropping vein-style occurrences reported to carry anomalous gold values that
have yet to be explored in detail.

Planned Work Program by the Company

The Company has obtained a geological report on the Winnemucca
Mountain Property prepared by Harmen J. Keyser, Professional Geologist dated
January 20, 2005. The geological report has been prepared in accordance with the
requirements of National Instrument Policy 43-101. The geological report
recommends the completion of a two stage exploration program on the Winnemucca
Mountain Property, with the first stage consisting of geochemical sampling,
geophysical surveying and geological mapping, and the second stage consisting of
a drilling program. During 2005, the Company completed the first stage of the
recommended program, including: obtaining all missing exploration data from
prior operators for thorough compilation and review of existing exploration data
acquiring additional land; mapping the Winnemucca Mountain Property and
surrounding areas with special attention paid to understanding structure; and,
investigating outcropping gold mineralization reported in the eastern part of
the property

Prior to the first-stage of the recommended program, the
Company entered into negotiations with Meridian Gold wherein Meridian Gold will
act as operator of the project and will continue the recommended surface and
drilling programs.

- 30 -

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Labrador Property

The Labrador Property is without known reserves and the work
being done by the Company is exploratory in nature. The Companys interest in
the Labrador Property stems from the adjoining property being underlain by
copper-nickel orebody and the results of previous exploration work as described
below.

Acquisition of Interest

On May 4, 2005, the Company entered into the Geocore Option and
Royalty Agreement, pursuant to which the Company was granted the option to
acquire an 80% interest, subject to a one and one-half percent NSR royalty, in
the Labrador Property. The option comprises of two parts: (1) the option to
acquire a 60% interest; and (2) the option to acquire a further 20% interest,
for a total of 80% interest, both in the Labrador Property. The first option is
exercisable by the Company upon paying Geocore $35,000 (paid) on signing the
Geocore Option and Royalty Agreement, incurring $200,000 of exploration expenses
by October 31, 2006 and $500,000 of cumulative exploration expenses by October
31, 2007. The second option is exercisable by the Company incurring $1 million
of cumulative exploration expenses by October 31, 2008.

Mineral Claims

The property consists of two mineral rights licences covering a
total of 7,900 hectares. The original property held by Geocore consisted of
mineral licence number 798M and 799M which were amalgamated into one new mineral
rights licence 009710M. The southern portion of mineral licence 009710M
(formerly 798M, Ikadlivik Brook) consists of 92 claims covering 2,300 hectares.
The NE corner is located at 56° 24 N and 62° 19 W. The northern portion of
mineral licence 009710M (formerly 799M, Annakhtalak Bay) is contiguous to the
north of 798M and consists of 100 claims covering 2,500 hectares. Its NE corner
is located at 56° 29 N and 62° 15 W. These former licences are situated some
40 to 44 kilometres west-southwest of the village of Nain on the east coast of
northern Labrador. For descriptive purposes, the southern and northern portions
of mineral licence 009710M will be referred to their former names licence 798M
and 799M.

Mineral rights licence 011037M, consisting of 124 claims and
covering some 3,100 hectares forms part of the property subject to the Geocore
Option and Royalty Agreement. These claims were map staked on May 18, 2005 and
the licence was issued June 17, 2005. This licence adjoins the former mineral
licence 798M on the west.

Mineral licence 798M was acquired by Fleck Resources Ltd. (now
Polymet Mining Corp.) in 1994 (licence was issued on December 22, 1994). An
option was granted to Anvil Resources Ltd. to acquire a 50% interest in the
property by incurring exploration expenses of $1.35 million by October 31, 1999
on this property and on mineral licence 799M (licence issued on December 22,
19994) of Pacific Golden Spike Resources Ltd. (also held under option) which
adjoins licence 798M on the north. In 1998, both mineral licences 798M and 799M
were acquired by Geocore (formerly Anvil Resources Ltd.). In 2003, the two
licences were amalgamated to become mineral rights licence 009710M with a
renewal date of December 22, 2009. According to the Mines and Energy Mineral
Rights Database System Report, a report on the Labrador Property is due February
20, 2006 and $110,002.72 must be expended on the licence by December 22, 2007.

During the term of the Geocore Option and Royalty Agreement, if
the Company or Geocore stakes any new mineral claims within 2 kilometres of the
existing mineral claims under the agreement, the other party has an option to
make the new claims part of the agreement.

Location

The Labrador Property is located near the coast of northern
Labrador, Canada, approximately 40 kilometres west-southwest of the village of
Nain. The property is contiguous and covers an area of approximately 4,800
hectares.

- 31 -

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Accessibility, Climate, Infrastructure and Physiography

Access to the southern part of the Labrador Property (former
licence 798M and licence 011037M) is by helicopter or float plane from the
village of Nain, about 44 kilometres to the east-northeast or from Goose Bay,
320 kilometres to the south. Access to the northern part of the Labrador
Property (formerly Licence 799M) is by boat via Annakhtalak Bay or by helicopter
or boat from Nain. Fuel and supplies for the field programs can be sent to Nain
by ship container, then unloaded and ferried to the properties by helicopter.
Communications from Goose Bay and Nain with exploration camps are by satellite
telephone. Field personnel can be hired from Goose Bay; very little in the way
of field personnel or supplies are available at Nain. There are no known
environmental liabilities resulting from past work on the property.

Terrain in the Labrador Property is relatively rugged with up
to 450 metres of relief. Elevation varies from near tidewater by Annakhtalak Bay
at the northeast (former 799M) to 60 metres above seal level on Ikadlivik Brook,
which crosses the centre of former licence 798M, to high points of 460 metres
above sea level at the southern and northern ends of the property.

Climate in the area is typical of a northern coastal location
with severe, cold, wet winters lasting from October to May and relatively wet,
cool summers. The exploration season is restricted by the inclement climate.
High winds are a common feature of the northern Labrador coast, as is frequent
fog and mist.

Vegetation is sparse consisting of mosses, tundra and a few
stunted willows and brushes. The northern end of the claims is largely covered
by alluvium, about 10% of the claims is underlain by lakes.

History and Previous Work

In 1994, former mineral licences 798M and 799M were acquired by
original vendors Teracan Ventures Inc. Prior to that time there is no recorded
history of exploration on the properties.

Former Licence 798M

In early 1995, a computer enhanced gossan anomaly map for
former licence 798M was derived from Landsat Imagery technology. Using the
evaluation of gossans noted on this map as a starting point, a program of
geological mapping, rock and sediment sampling and prospecting was carried out
by Fleck Resources Ltd. An airborne Dighem V geophysical survey was carried out
on licence 798M in June, 1995 and reported in December, 1995. Expenditures in
1995 totalled $86,612.84.

In 1996, Teracan Ventures conducted geological mapping and
sampling on former licence 798M on an extensive grid, rock samples collected
from 128 surface exposures and gossans. A zone with coincident geophysical
anomalies and containing a series of gossans, with varying amounts of oxidized
pyrrhotite and magnetite was located on the west central area of the property.
This area was partly tested by 4,418 feet of diamond drilling in 13 holes.
Expenditures during the 1996 program totalled $456,508.41.

The 1997 work program on licence 798M consisted of the
preparation of two grids (Center and South), a Pulse EM survey on the Center
Grid, a magnetometer and VLF-EM survey on the Center and South Grids and soil
sampling for enzyme leach analysis on the Center and South Grids. A total of
$242,857.95 was spent on the 1997 program.

Former Licence 799M

In 1995, work on former licence 799M consisted of prospecting,
ground VLF-EM and magnetometer surveys. In addition, geological mapping was
conducted along with rock-geochemistry in the central portion of the grid.
Expenditures during 1995 totalled $110,731.50 on this licence. No field work was
conducted in 1996. During 1997, a total of seven diamond drill holes at six
sites, for a total of 3,795 feet, were completed to test anomalies indicated by
the 1995 Crone geophysical surveys. All mineralized sections were sampled and
assayed. Reported expenditures for 1997 totalled $224,020.38; no work has been
conducted on former licence 799M since 1997.

- 32 -

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Licence 011037M

In 1995 the area covered by the recently staked mineral rights
licence 011037M was owned by the joint venture of NDT Ventures Ltd. (The
Northaire Group) and Primero Industries Ltd. Work consisted of electromagnetic
and magnetic surveys followed by diamond drilling. The work targeted
electromagnetic conductors adjacent to an anorthosite/gneiss contact. The first
target was to test a series of geophysical anomalies in an area of relative high
conductance with anomalous Ni-Cu values. Details of the work and results from
exploration on this property (Fraser Claims) are not known.

Present Condition and Current State of Exploration

Like the Winnemucca Mountain Property, the Labrador Property is
undeveloped and does not contain any open-pit or underground mines. There is no
plant or equipment located on the property. No reserves have been identified on
the mineral claims that compromise the Labrador Property.

Mineralization

The mineralization sought in the Labrador Property is
copper-nickel-cobalt sulphide mineralization within Middle Proterozoic mafic
rocks of the Nain Plutonic Suite. The mineralization on the Labrador Property is
contained within a troctolitic dyke associated with a layered and massive
troctolitic mafic intrusion.

In 1995, numerous gossans on licence 798M, which were located
from a study of a Landsat TM Image, were investigated by prospecting and
sampling. Prospecting of these gossan sites revealed varying amounts of oxidized
pyrrhotite and magnetite in anorthosite. Analytical results of rock samples from
fifteen of the gossans sampled indicated above background values for copper,
nickel and/or cobalt.

On the former licence 799M no gossans were reported in the
anorthosites, however, rock geochemical sampling was carried out. This sampling
resulted in locating above background values for copper, nickel and/or
cobalt.

Diamond drill testing on former licence 798M of coincident
geophysical and geological targets on the west grid area during the 1996 program
consisted of 13 shallow diamond drill holes. The rock intersected in the holes
is mostly fresh appearing, coarse-grained anorthosite. Sulphide mineralization
in drill hole VW-1 occurs in a dark, even-textured, medium-grained magnetic
rock, identified in thin section as picrite (olivine bearing gabbro).

Diamond drill testing on licence 799M was intended to test
shallow VLF-EM anomalies outlined in the 1995 exploration program. Seven holes
were drilled during the 1997 field season, however, no sulphides of economic
interest were intersected during this program.

Results of exploration on licence 011037M are not available.

Planned Work Program by the Company

The Company has obtained a geological report on the Labrador
Property prepared by Michael H. Sanguinetti, Professional Engineer dated June 6,
2005. The geological report recommends a success-contingent phased exploration
program on mineral licences 009710M and 011037M comprising the Labrador Property
to determine if sufficient potential exists warranting a more extensive
exploration program. The writer of the report on the Labrador Property relied on
the written reports and practical field work of other professional engineers and
geologists.

Exploration Work on 009710M (formerly 798M and 799M)

Phase 1 with respect to work done on licence 009710M (formerly
798M) will include: re-establishing the Center and South Grids, ground
geophysical surveys, prospecting, detailed geological mapping, rock sampling and
soil sampling for enzyme leach analysis. If this initial stage is successful in
locating a worthwhile target, the report recommends subsequent diamond drilling.
Phase 1 with respect to work done on licence 009710M (formerly 799M) will
include air photo interpretation studies (before attending the field), detailed
prospecting and mapping,

- 33 -

---

geochemical evaluation of existing diamond drill core,
geochemical rock and soil sampling and correlation. The total estimated cost of
Phase 1 is $330,000. If the initial exploration stage yields positive results,
the report recommends commencing Phase 2 of the exploration program.

Phase 2 with respect to work done on 009710M is estimated to
cost $400,000 and will include: geophysical and geochemical surveying and an
allowance of 1,200 metres of diamond drilling. The work in Phase 2 may possibly
be carried out in the same field season as that of Phase 1.

Exploration Work on 011037M

Phase 1 and Phase 2 with respect to work done on 011037M is
estimated to cost $50,000 and $100,000, respectively. Phase 1 work would consist
of research, compilation and evaluation of all previous exploration conducted on
the area of the present licence and correlation of this data with results of
exploration on mineral licence 009710M. Phase 2 work would consist of the
following: geological mapping, prospecting, grid preparation and deep
penetrating geophysical surveys. The report recommends that work on 011037M be
carried out in conjunction with the exploration of 009710M. If Phase 1 and 2
yield positive results, the report recommends diamond drilling.

To satisfy exploration expenditures obligations under the
Geocore Option and Royalty Agreement and to effect the phased success-contingent
work program, the Company plans to raise $1,000,000 through equity financing.
There is no assurance that the Company will be able to raise the funds necessary
to proceed with the recommended work program.

Malone Property

On April 17, 2006 the Company entered into a quitclaim deed and
royalty agreement with Newmont North America Exploration Limited whereby the
Company was granted all rights, title, estate and interest in unpatented mineral
claims located in Lordsburg, New Mexico, United States of America in exchange
for payment of US$ 10,000 (paid) and an additional US$ 10,000 payable in one
year. The agreement is subject to a royalty of 2% of net smelter returns. The
Company has incurred deferred exploration costs of $19,563 on this property
during the three months ended June 30, 2006.

Mineral Claims and Location

The Malone property in south-west New Mexico (Figure 1) is
wholly owned by the Company. It consists of 80 MAL claims that were staked in
the February 2005 (Figure 2). The claims cover a partial rectangular area that
is approximately 4 km long north to south and 1.7 km wide east to west.

The property lies in Grant County of New Mexico (Figure 1) in
Sections 17-20, and 29 and 30, in T20S and R16W. It is situated approximately 17
miles northeast of Lordsburg township, New Mexico, and is easily accessible from
State Highway No. 90 which connects Lordsburg and Silver City. At UTM
731915-3597835, approximately 17 miles from Lordsburg, access is made by turning
north-north-west onto the Mill Canyon Road (dirt road No. 859). A drive of
approximately 3 miles reaches the southern claim boundary.

- 34 -

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Figure 1: Location of the Malone claim block in SW New Mexico

Access, Climate, and Infrastructure

The district surrounding the Malone property has a basin and
range topography characterized by wide, flat, alluvial-covered semi-desert
plains that alternate with elongate stretches of rocky hills and escarpments.
The semi-desert vegetation is sparse, and there is no difficulty for foot
access. Elevations on the claims range from 1,700 metres up to 2,000 metres. The
topography is dominated by the north to south trending Brock Ridge whose highest
point (Mill Hill) reaches 2,000 metres.

The claims lie in an arid, semi desert part of New Mexico that
has a low annual rainfall. The summers are hot and dry with temperatures
exceeding 25 degrees Celsius. Winters are also dry and temperatures can reach
down to freezing.

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Figure 2: The Malone claims, SW New Mexico.

History and Previous Work

Early work at Malone may have taken place in the 1890s. There
are a number of prospect pits and adits in the southern part of the property,
all of which are inaccessible. One adit labeled the Paracutin lode suggests that
more recent work, possibly in the 1940s or 1950s may have taken place, but
there is no record of this work. Additionally, at least three drillhole collars
were noted during the Companys initial reconnaissance of the property. Results
of that drilling are not known.

In 2005, Newmont Gold Corporation staked the MAL 1-80 claims
with the concept that mineralization in the granite may be related to an alkali
gold system. Q. Hennigh and J.T Ray, Newmont geologists, collected 232 samples
which were analyzed for gold, silver, and trace elements.

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Present Condition and Current State of Exploration

During 2005, the Company undertook property-scale geological
mapping and geochemical sampling of the Malone property. Subsequently, Dr. G. E.
Ray was contracted to prepare an NI 43-101 compliant report, including a
recommended program for follow-up exploration.

Property Geology

Regionally, the Malone claims lie in a zone of northerly to
north-west trending Basin and Range structures that lie off the south-east flank
of the Colorado Plateau. Extensional faulting and rifting during Tertiary time
was accompanied by continental volcanism dominated by rhyolite tuffs and flows,
with lesser amounts of andesite.

The exposed geology on the property includes a package of
northerly striking and easterly dipping Tertiary age volcaniclastics and flows.
This package overlies a highly leucocratic Pre-Cambrian granitoid basement. The
nature of the volcanic-granite contact is uncertain, but the Dr. Ray believes it
represents a steep easterly dipping fault that was related to recurrent
down-dropping along the western margin of a graben structure.

The Tertiary rhyodacitic volcaniclastics outcrop extensively
along the north-north-west trending Brock Ridge escarpment but the older
granitoids are only seen in a relatively narrow belt at lower elevation
immediately west of the ridge. The Pre-Cambrian basement includes several
generations of intrusive granitic rocks that range from fine to extremely coarse
grained and pegmatitic. Many are cut by several sets of brittle planar
structures, some of which contain quartz-feldspar ± pyrite veins up to 2 metres
thick. Locally the hosting granitoids are extensively and pervasively
overprinted and bleached by clay-sericite ± silica ± pyrite alteration, as well
as being stained or coated by Fe and Mn oxides. Extensive zones of quartz vein
stockworks also cut the granites.

The following types of basement granitic rocks occur on the
claims:

Type 1: An early generation of coarse to very coarse
grained massive and quartz-rich leuco-granite that ranges from weakly to
strongly feldspar porphyritic.

Type 2: A fine to coarse grained quartz-rich
granite-microgranite that is commonly bleached and which tends to be less
feldspar porphyritic than the Type 1 rock. In many cases the Type 1 and 2
granites are separated by a fault which may contain gold-bearing quartz
veins.

In addition, dikes of aplite, dacite-microgranite and K spar
rich pegmatite occur in the basement rocks on the claim.

Structures on the property are dominated by brittle faulting
and block tilting, as evident from the easterly dip of the younger Tertiary
volcanics. No small scale folds were noted and all the igneous rocks are
unfoliated. The brittle faults are probably related to the regional extension
that accompanied the formation of the grabens and half-grabens, as well as the
extrusive volcanism. The claims are believed to overlie the fault-zone boundary
of one graben, and the 35 to 55 degree easterly dip of the volcanics shows that
most of the graben-related movement in this area involved east-side
down-dropping accompanied by easterly tilting.

Plotted rose diagrams of the planar structures show the
following:

| | (1) | The major brittle faults (up to 3 meters thick) are
      generally steep to sub-vertical (60 to 90 degrees). Several sets are
      present, the most common of which has an average strike azimuth of 115
      degrees (east-south-east to west-north-west). Less common sets strike east
      to west (azimuth 095 degrees) and north to north-north-east.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                
| | (2) | Sets of thin, closely spaced hair-line fractures occur
      where the granitic rocks have undergone brittle shattering.                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                
| | (3) | There are several sets of planar structures containing
      veins and dikes of either fine-grained granitic aplite or very coarse
      grained K-spar-rich pegmatites. One set strikes east-south-east, similar
      to an important set of major fault.                                                                                                    

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The nature of the volcanic-granite contact and the age of the
gold-silver mineralization are unknown. However, Dr. Ray believes that the
volcanic-granitic contact represents a graben-related fault zone that has
controlled the gold-bearing quartz veins. The following geological and
structural history is suggested:

| | (1) | Unconformable deposition of the Tertiary volcanics on a
      peneplaned granitic basement, possibly coeval with incipient development
      of graben structures.                                                                                                                                                                                                                      
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Continued down-drop movement along a steeply east-dipping
      structure that formed the western margin of a graben; movement resulted in
      easterly tilting of the volcanics accompanied by fault-controlled
      mesothermal and epithermal mineralization that extended up into both the
      granites and younger volcanics.                                                 
| | (3) | Continued graben down-dropping east of the structure
      resulted in the mineralized granites to the west being juxtaposed against
      unaltered volcanics further east. Subsequent erosion has exposed the
      granite- hosted mesothermal mineralization, while east of the main
      structure the epithermal portion of the system may exist at depth in the
      volcanics.

If this model is correct it suggests the following:

| | (i)   | The main granite-volcanic structure(s) is steep
      east-dipping.                                                                                                                                                                                                                                                                        
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | The Malone gold-silver mineralization is not related to
      the granite intrusions but is instead controlled by splay and cross-faults
      related to an extensional graben structure. It may post-date the Tertiary
      volcanics, but is more likely to have been coeval with the
    volcanism.                                   
| | (iii) | The volcanic rocks east of the structure could host
      epithermal mineralization, although this may be too deep to be
      economically viable. However, other granite-hosted mineralized structures
      may be present in the alluvium-covered western part of the claims, and
      some exploration should be done over this area.

Mineralization

The Malone gold-silver mineralization is mainly hosted by
planar quartz veins and irregular quartz stockworks and stringer zones. In
addition, some of the wide areas of fracturing with silicification and
disseminated pyrite represent good bulk tonnage targets, although to date little
methodical work has been done.

Assay chemistry suggests the gold is free although nothing is
known about the size of the gold grains, or whether they are spatially
associated with mineral crystals such as pyrite or quartz. Positive gold-silver
correlations suggest some of the silver is held in the lattice of the gold
grains, and it is also possible that some electrum is present. It is not known
whether some gold is chemically locked in the lattices of pyrite or any other
sulfides, and some of the granite-bearing pyritic zones should be systematically
tested for precious metals. Generally the precious metals are not associated
with significant base metals. Sporadic trace chalcopyrite is reported, and
assays suggest the local presence of some sphalerite and galen.

Previous sampling work done by a third party on the Malone claims
  show maximum values of 17.7 ppm Au and 695 ppm Ag, indicating the presence of
  high grade Bonanza-type mineralization (Table 1B). In addition, assays up to
  1320 ppm Cu, 148 ppm As, 112 ppm Bi, 0.87 ppm Hg, 672 ppm Mo, 62 ppm Sb, 1.08%
  Pb and 1.59% Zn were present. The silver:gold ratios for the 178 samples average
  39.1. Binary plots show there is a good to moderate positive correlation between
  Au:Ag, Au:As, Au:Pb, Au:Cu and Au:Sb. However, there appears to be no significant
  correlation between Au:Hg, Au:Bi and Au:Zn.

Consulting geologist Dr. G.E. Ray, working on behalf of the
Company, collected 23 additional samples. This work included taking 13 chip
samples, each 8 feet in length, around the margins of an open pit located at UTM
732296-3604138. This pit exposes the structural contact between Type 1 and Type
2 granites, and the contact is occupied by one or more mineralized quartz veins
as well as some adjacent silica flooding and quartz stockworks. The assay
results from the open pit demonstrate that not only is the narrow zone of
fracturing and veining enriched in precious metals, but the stockwork-veined
Type 1 granite adjacent to the zone is enriched also with values up to 0.095
oz/t Au and 10 oz/t Ag. This indicates that other stockwork zones on the
property should be tested for their bulk tonnage potential.

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Planned Work Program by the Company

At the Malone property, consultant Dr. G.E .Ray has outlined a
success-contingent exploration program which the Company intends to carry out.
Dr. Rays conclusions are that at Malone, Pre-Cambrian granitic rocks host
Au-Ag-bearing mesothermal and possibly deep-level epithermal quartz veins,
stockworks and stringer zones. Assays from over 200 samples indicate the
presence of some high grade Bonanza-type precious metal mineralization, as well
as the possibility of bulk tonnage targets in the stockwork zones. The Au-Ag
mineralization is generally not associated with very high quantities of base
metals or other pathfinder elements such as Bi, As, Sb or Hg. The granite-hosted
quartz veins, which reach up to 2 meters in width, are probably controlled by a
steep easterly dipping structural zone related to Tertiary-age extensional
movements related to graben down-dropping. Many of the larger veins
preferentially occur along the structural contact between two different
generations of granite (Type 1 and Type 2). Mapping the distribution of these
two granite types may be useful in the discovery of more veins and stockwork
zones.

Dr. Ray recommended further exploration for the following
reasons:

| | (i)   | There has been widespread past near surface small-scale
      mining via shallow pits and short tunnels/adits although little is known
      about this work.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | Recent grab and chip sampling indicates the local
      presence of high Au and Ag values in the quartz veins and in some quartz
      stockwork zones.      
| | (iii) | To his knowledge, there has been no modern exploration
      conducted on the property.                                                                      

The recommended exploration involves:

| | (a) | Further geochemical sampling, including rock, grid-soil
      and creek silt sampling. Emphasis should be directed to searching for both
      high grade veins and lower grade bulk tonnage deposits.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Some suitable geophysical methods could be used under
      areas of alluvial cover to detect vein structures.                                                                                        
| | (c) | Areas with favourable geology and geochemistry should be
      drilled.                                                                                                                               

Compliance with Government Regulation

Murray Property

All mineral exploration activities undertaken on the Murray
Property must be completed in accordance with the Territorial Land Use
Regulations of the Canadian Department of Indian and Northern Affairs. The
Territorial Land Use Regulations do not impose any permitting requirements for
the initial stages of exploration work involving prospecting, staking or
locating a mineral claim unless the exploration requires the use of equipment or
material that normally requires a permit. The regulations prescribe thresholds
that will require either a Class B land use permit or a Class A land use permit
depending on the amount of physical disturbance to the land. The exploration
work to be completed on the Murray Property consisting of geologic mapping and
rock sampling will not meet the threshold requirements that would require a land
use permit due to the fact that no equipment will be necessary. Accordingly, the
Company may proceed with the initial phase of exploration without any land use
permit.

Winnemucca Mountain Property

The Company will be required to conduct all mineral exploration
activities on the Winnemucca Mountain Property in accordance with the Bureau of
Land Management of the United States Department of the Interior. No permits will
be required to be obtained in connection with the completion of stage one of the
planned exploration program on the Winnemucca Mountain Property. The Company
will be required to obtain a permit prior to the initiation of the second stage
of the recommended exploration program as this stage will involve drilling on
the property. A plan of operation would be required to be submitted to the BLM
in connection with the permit application. It is estimated that it would take
approximately 3-6 weeks to obtain the required permit at an estimated cost of
approximately

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US$50. The Company will also have to provide a reclamation bond
in the order of US$10,000 to US$20,000 before drilling may be commenced.

To date, payments have been made to the BLM and to Humboldt
county, Nevada to maintain the claims comprising the Winnemucca Mountain
Property in good standing.

Labrador Property

Mineral rights in Labrador are acquired by map staking of
mineral licences composed of claim units, within which each claim measures 500
metres north-south by 500 metres east-west (25 hectares). A mineral exploration
licence is issued for a term of twenty years. To maintain a licence in good
standing for a twenty year term, the Company must carry out and report on
exploration assessment work, and renew the licence every five years. The minimum
amount of annual assessment work required to be done on each licence varies as
follows:

Time PeriodCost (per claim)
    (No. of Years)$200
    1$400
    5$600
    6  10$900
    11  15$1,200
    16  20


The renewal fee for five, ten and fifteen years are $25, $50
and $100 per claim, respectively.

An Application for Exploration Approval and Notice of Planned
Exploration Work with a detailed description of the activity must be submitted
to the Department of Mines and an Exploration Approval from the department
received before any activity causing ground disturbance is begun.

Malone Property

The Company will be required to conduct all mineral exploration
activities on the Malone Property in accordance with the Bureau of Land
Management of the United States Department of the Interior. No permits will be
required to be obtained in connection with the completion of stage one of the
planned exploration program on the Malone Property. The Company will be required
to obtain a permit prior to the initiation of the second stage of the
recommended exploration program as this stage will involve drilling on the
property. A plan of operation would be required to be submitted to the BLM in
connection with the permit application. It is estimated that it would take
approximately 3-6 weeks to obtain the required permit at an estimated cost of
approximately US$50. The Company will also have to provide a reclamation bond in
the order of US$10,000 to US$20,000 before drilling may be commenced.

To date, the Company has made payments to maintain the claims
comprising the Malone Property in good standing. The Company has also paid
county fees to Humboldt county in the state of Nevada.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal year ended March 31,
2006 and 2005 should be read in conjunction with the financial statements of the
Company and the notes thereto.

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5.A. Results of Operations

The Company has been in existence since June 2003. Since that
time, the Company has completed private placements and raised $2,300,210 in cash
and has entered into the Murray Property Option Agreement, the WinnemuccaOption and Royalty Agreement and the Geocore Option and Royalty Agreement
and the Malone Property Option and Agreement. The Companys private placements
occurred in Canada pursuant to the exemption provided under Section 3.1 of
Multilateral Instrument 45-103. The private placements were to Canadian
residents in transactions completed in accordance with Rule 903 of Regulation S
of the Securities Act of 1933 as the transactions were offshore
transactions completed without any directed selling efforts in the United
States, with each of the terms offshore transactions and directed selling
efforts having the meanings prescribed in Regulation S. For fiscal 2007, the
Company intends to continue exploration efforts on the Murray Property, the
Winnemucca Mountain Property, and the Labrador Property and then to determine
upon which property to further focus its exploration efforts.

During the year ended March 31, 2006, the Company reported a
net loss of $590,779 ($0.07 loss per share) compared to a loss of $402,218
reported for the fiscal year ended March 31, 2005. The Company did not generate
any revenue during either of the reporting periods and expenses increased from
$402,225 at March 31, 2005 to $590,779 for the 2006 fiscal year. The increase in
net loss for 2006 is primarily due to stock-based compensation, a write-down of
exploration expenditures and an increase in advertising and travel. Stock-based
compensation of $224,925 was recorded for the year ended March 31, 2006 versus
$128,165 for the 2005 fiscal year. The Company recorded a write-down of the
Murray property exploration expenditures amounting to $44,038 for the year ended
March 31, 2006 versus nil for the previous year. Advertising and travel of
$109,473 was incurred for the year ended March 31, 2006 compared to $31,389 for
the previous year as more tradeshows were attended, additional stock market
publications were subscribed to and service agreements were negotiated with two
investor relations specialists. Major expense items in 2006 also included
accounting of $47,852, consulting of $51,605, and legal of $55,715 which all
increased over the 2005 fiscal year as a direct reflection of the increase in
activity related to property option, private placement and stock option and
other agreements prepared or amended during the year.

During the year ended March 31, 2005, the Company reported a
net loss of $402,218 ($0.07 loss per share) compared to a loss of $152,118
reported for the period from incorporation on June 19, 2003 to March 31, 2004.
The Company did not generate any revenue during either of the reporting periods
and expenses increased from $152,133 at March 31, 2004 to $402,225 for the 2005
fiscal period. The significant increase in net loss for 2005 is primarily due to
four main factors. Firstly, the net loss for 2004 includes results for a shorter
nine month fiscal period when the Company was not yet a registered issuer
compared to the twelve month period ended March 31, 2005 when various exchange
filings were required. The effects arising from this first factor are evidenced
by increases of $10,787 in accounting, $24,852 in promotion and advertising and
$31,569 in transfer agent expenses. Secondly, $128,165 of stock-based
compensation was recorded in 2005 as compared to nil in 2004. Thirdly,
additional legal costs were incurred as the Company developed its operations.
Lastly, the Company incurred consulting fees of $21,396 in 2005 during the
process of obtaining approval to list its shares on the Over-The-Counter
Bulletin Board Quotation System in the United States. Major expense items in
2005 also included management fees of $103,879 (2004 - $53,400), and consulting
fees of $35,264 (2004 - $20,500). Rent and administration decreased from $41,445
to $16,800 in 2005 as the Company re-negotiated the terms of payment for this
expense.

5.B. Liquidity and Capital Resources

Fiscal Year Ended March 31, 2006

Since incorporation in June 2003, the Companys capital
resources have been limited. The Company has had to rely upon the sale of equity
securities for the cash required for capital acquisitions, exploration and
development, and administration, among other things.

The Company will continue to require funds to meet its
obligations under the Malone Property Option Agreement, the Winnemucca Option
and Royalty Agreement and Geocore Option and Royalty Agreement and as a result,
will have to continue to rely on equity and debt financing during such period.
There can be no assurance that financing,

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whether debt or equity, will always be available to the Company
in the amount required at any particular time or for any particular period or,
if available, that it can be obtained on terms satisfactory to the Company. In
order to maintain the Winnemucca Option and Royalty Agreement in good standing
the Company must expend a total of US$4,000,000 on the Winnemucca Mountain
Property over a period of three years, and deliver a pre-feasibility study by
June 30, 2009. In addition, the Company must incur cumulative exploration
expenses of $1,000,000 by October 31, 2008 with respect to the Geocore Option
and Royalty Agreement. The Company does not have any other commitments for
material capital expenditures over either the near or long term, and none are
presently contemplated other than as disclosed above and or over normal
operating requirements.

In May, 2005, the Company issued 432,742 units to existing
shareholders in exchange for settlement of $285,610 in debt at a price of $0.66
per unit. Each unit consists of one common share and one share purchase warrant.
Each warrant entitles the holder to purchase an additional common share at $0.82
until expiry in May, 2007.

In July, 2005 a total of $27,000 was raised from the conversion
of 40,000 warrants at $0.25 per share and the exercise of 50,000 options at
$0.34 per share.

In August, 2005 the Company issued 400,000 common shares for
deemed proceeds of $244,000 as part of the share issue required under the terms
of the Winnemucca property option agreement.

In September, 2005 the Company completed a non-brokered private
placement whereby 290,000 units were issued in exchanged for cash proceeds of
$145,000. Each unit consists of one common share and one share purchase warrant.
Each warrant entitles the holder to purchase an additional common share at $0.55
until expiry in September, 2007.

In January, 2006 the Company completed a private placement
whereby 1,270,000 units were issued at a price of $0.30 per unit resulting in
proceeds of $381,000. Each unit is comprised of one common share and one share
purchase warrant. Each warrant will entitle the holder to purchase one common
share of the Company at a price of $0.40 per share exercisable until expiry in
January, 2008. An additional 97,000 warrants with identical terms, $4,500 in
cash, and 97,000 units were paid as finders fees pursuant to this issue.

In February, 2006, 90,000 warrants were converted at $0.25 per
share resulting in cash proceeds of $22,500, and 250,000 shares were issued at
$0.25 per share on the exercise of options by a director resulting in cash
proceeds of $62,500.

Subsequent to year end on May 16, 2006 the Company issued an
additional 400,000 common shares to Golden Sands at a deemed price of $0.46 per
share.

Also subsequent to year end on September 13, 2006, the Company
completed a non-brokered private placement of 1,500,000 units at a price of
$0.30 per unit for total proceeds of $450,000. Each unit consists of one common
share and one non transferable common share purchase warrant. Each warrant
entitles the holder thereof to purchase an additional common share of the
Company at an exercise price of $0.40 per share for a period of two years from
the date of issuance. The Company paid finders fees of 100,000 units in
connection with this private placement. One finder also received a finders
warrant. Such warrants have a four month hold period from the date of issue.

Financial Condition and Cash Flows

The Company has working capital of $120,660 as at March 31,
2006 compared to a negative working capital of $(143,711) as at March 31, 2005.
The increase in working capital corresponds directly to the proceeds received
during the year from the issue of shares offset by the operating expenses of the
Company. The Company anticipates that it will require approximately $1.5 million
over the next twelve months in undertaking its plan of operations, which amount
will include completion of the initial stages of exploration on the Malone
Property, the Winnemucca Mountain Property and the Labrador Property. Due to
these financing requirements, the Company plans to return to the junior resource
capital markets in the near future in order to complete additional financings
necessary to fund the Companys ongoing operating cash requirements. The Company
does not have any arrangements in place for this financing and there is no
assurance that the Company will obtain this financing.

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US GAAP Reconciliation

Under Canadian GAAP, mineral properties, including exploration
and acquisition costs, are carried at cost and written down if the properties
are abandoned, sold or if management decides not to pursue the properties. Under
US GAAP, all expenditures relating to mineral interests prior to the completion
of a definitive feasibility study, which establishes proven and probable
reserves, must be expensed as incurred. Once a final feasibility study has been
completed, additional costs incurred to bring a mine into production are
capitalized.

See the Companys audited annual financial statements for the
year ended March 31, 2006, particularly Note 10 for quantification of the
differences.

Critical Accounting Policies

Management is required to make judgments, estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On a regular basis, we evaluate our
estimates and assumptions. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

The significant US GAAP versus Canadian GAAP accounting
policies that are most critical to aid in fully understanding and evaluating
reported financial results include: the expensing of mineral property
acquisition/exploration costs; utilizing a ceiling test for the carrying value
of producing mineral properties; and accounting for stock-based compensation.

The Company capitalizes mineral property acquisition and
exploration costs until the Murray Property is placed into production, sold,
allowed to lapse or otherwise abandoned. All mineral property acquisition and
exploration costs have been acquired for cash and/or common shares. The Company
performs periodic evaluations to evaluate recoverability of mineral property
costs. Under SEC interpretation of US GAAP, all such acquisition and/or
exploration costs are expensed in the period incurred.

For US GAAP purposes, the Company had elected under Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123) to continue to apply the intrinsic value based
method of accounting for stock-based compensation under APB 25 Accounting for
Stock Issued to Employees. Under the intrinsic value method, stock compensation
is the excess, if any, of the quoted market value of the stock at the measured
date of the grant over the amount an optionee must pay to acquire the stock.
Under US GAAP, the issue of stock options to non-employees is accounted for
under SFAS 123. The fair value of the stock options granted to non-employees
will be estimated using the Black-Scholes option pricing model and the following
weighted-average assumptions: dividend yield; expected volatility; risk-free
interest rate; and expected average option life.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board, or
FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 141
Business Combinations, or SFAS 141, and SFAS No. 142, Goodwill and Other
Intangible Assets, or SFAS 142. SFAS 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase method of
accounting. Under SFAS 142, goodwill and intangible assets with indefinite lives
are no longer amortized but are reviewed for impairment annually or more
frequently if impairment indicators arise. All other intangible assets will
continue to be amortized over their estimated useful lives. The amortization
provisions of SFAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, we are required to adopt SFAS 142 effective July 1, 2002. The
adoption of SFAS 141 and SFAS 142 is not expected to have a material impact on
our financial position or results of operations.

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In August 2001, the FASB issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, or SFAS 144. Although SFAS 144
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, or SFAS 121, it retains the
requirements of SFAS 121 regarding recognition of impairment loss for long-lived
assets to be held and used (based on undiscounted cash flows) and resolves
certain implementation issues. Under SFAS 144, companies will (1) recognize an
impairment loss only if the carrying amount of a long-lived asset is not
recoverable based on its undiscounted future cash flows and (2) measure an
impairment loss as the difference between the carrying amount and fair value of
the asset. SFAS 144 also provides guidance on accounting and disclosure issues
surrounding long-lived assets to be disposed of by sale. The adoption of SFAS
144 on July 1, 2002 is not expected to have a material impact on our financial
position or results of operations.

On April 30, 2002, the FASB issued Statement of Financial
Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections (SFAS
145). Among other amendments and rescissions, SFAS No.145 eliminates the
requirement that gains and losses from the extinguishments of debt be aggregated
and, if material, classified as an extraordinary item, net of the related income
tax effect, unless such gains and losses meet the criteria in paragraph 20 of
Accounting Principles Board Opinion No. 30, Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. The adoption of SFAS
145 on May 15, 2002 did not have a material impact on our financial position or
results of operations.

In July 2002, the Financial Accounting Standards Board issued
SFAS No. 146, Accounting for Exit or Disposal Activities. SFAS No. 146 addresses
the recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including costs related to terminating a contract
that is not a capital lease and termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 supercedes Emerging Issues Task
Force Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring). SFAS No. 146 will be effective for exit or disposal
activities of the Company that are initiated after December 31, 2002 and are not
expected to have a material impact on our financial position or results of
operations.

On January 27, 2005, the CICA issued Section 3855 of the
Handbook titled Financial Instruments - Recognition and Measurement. It expands
Handbook section 3860, Financial Instruments - Disclosure and Presentation by
prescribing when a financial instrument is to be recognized on the balance sheet
and at what amount. It also specifies how financial instrument gains and losses
are to be presented. All financial instruments will be required to be classified
into various categories. Held to maturity investments, loans and receivables are
measured at amortized cost with amortization of premium or discounts and losses
and impairment included in current period interest income or expense. Held for
trading financial assets and liabilities are measured at fair market value with
all gains and losses included in net income in the period in which they arise.
All available for sale financial assets are measured at fair market value with
revaluation gains and losses included in other comprehensive income until the
asset is removed from the balance sheet and losses due to impairment included in
net income. All other financial liabilities are to be carried at amortized cost.
The mandatory effective date is for fiscal years beginning on or after October
1, 2006, with optional early recognition for fiscal years beginning on or after
December 31, 2004. The Company intends to adopt this standard in its fiscal year
ending March 31, 2008. At present, the Company's most significant financial
instruments are cash, accounts receivable and accounts payable. This new section
requires little difference in accounting for these financial instruments from
current standards.

5.C. Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.

5.D. Tabular disclosure of contractual obligations

Not Applicable.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6.A. Directors and Senior Management

The following table sets forth information as at October 25,
2006 relating to the directors and senior officers of the Company.

Table No. 6Directors and Senior Management

Name
    Position
    Age
    Date of First Election Or
      AppointmentLawrence Dick (1)
    President, CEO & Director
    54
    June 19, 2003Warren McIntyre (1)
    Corporate Secretary, CFO & Director
    44
    June 19, 2003Paul Cowley (1)
    Director
    50
    September 15, 2004Chris Osterman
    Director
    49
    July 15, 2004


|(1) | Member of Audit Committee.
|--- | --------------------------

Lawrence Dick (President, CEO and Director): Dr.
Dick is a Professional Geologist who received a B.Sc. (Hons.) from the
University of British Columbia in 1973 and a Ph.D. in Economic Geology from
Queens University in 1979. He also serves as the Vice President of Exploration
and a Director of Continuum Resources Ltd., an unrelated public company. He has
been in those capacities with Continuum Resources Ltd. since 2002. During 2001
and 2002 he was a self employed geological consultant. He has been a Director of
General Minerals Corp., an unrelated public company, since 1994 and he served as
the Executive Vice President of General Minerals Corp. from August, 1995 until
January 2001. From 1980 to 1984 Dr. Dick served as the Manager of Exploration
for Chevron Minerals Ltd. based in Santiago, Chile. Dr. Dick spends 50% of his
time on the affairs of the Company.

Chris Osterman (Vice President, Exploration and
Director): Dr. Osterman has 25 years of experience in the mining and
exploration industry. Starting as a mining engineer at the San Manuel mine in
Arizona in 1979, Dr. Osterman later received a M.S. in Geological Engineering
from the University of Arizona (1984) and a Ph.D. in Geology from the Colorado
School of Mines (1999). His experience includes gold, nickel and copper mining
and exploration in Southern Africa, silver exploration in Bolivia and porphyry
copper exploration in Mexico, Chile, Peru and Mongolia. He has spent over three
years in search for epithermal gold and silver deposits in the western Sierra
Madres and porphyry copper deposits in Sonora, Mexico. Dr. Osterman has been
self-employed for the past five years. Dr. Osterman spends 50% of his time on
the affairs on the issuer.

Warren McIntyre (Corporate Secretary, CFO and
Director): Mr. McIntyre has been a corporate communications consultant
since January of 2001. During that time he acted as a consultant for Plus
International, an unrelated public company (January 2001 until September 2001);
Evolve Financial, a private investor relations firm, (2001 until October 2002);
Dolphins Resorts, a chain of vacation resorts (November 2002 until February
2003); and he also serves as Corporate Secretary and Director of Continuum
Resources Ltd., an unrelated public Company (March 2003 to present). Mr.
McIntyre spends 50% of his time on the affairs of the Company.

Paul Cowley (Director): Mr. Cowley is a
professional geologist who received his Bachelor of Science (Honours) in Geology
from the University of British Columbia in 1979. Since April of 2000 he has been
the Vice President of Exploration and a Consulting Geologist for Gold City
Industries Ltd., an unrelated public company. During 2002 he was also a
Consulting Geologist and the Reverse Circulation Supervisor for Cumberland
Resources Corp., an unrelated public company. During 2000 and 2001 he also
served as a Consulting Geologist and Regional Exploration Manager for the Hope
Bay Joint Venture. He was the Vice President of Exploration and a Director of
Rampton Resource Corp. from April of 1997 until April of 1999. He has also
served as the President, CEO and a Director since 1997 of Alliance Mining Ltd.,
an unrelated public company. In all of these capacities, Mr. Cowley has been
involved in all facets of mineral exploration. Mr. Cowley spends 5% of his time
on the affairs of the issuer.

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The Directors have served in their respective capacities since
their election and/or appointment and will serve until the next Annual General
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. The Senior Management
serves at the pleasure of the Board of Directors.

No Director and/or Senior Management had been the subject of
any order, judgment, or decree of any governmental agency or administrator or of
any court or competent jurisdiction, revoking or suspending for cause any
license, permit or other authority of such person or of any corporation of which
he is a Director and/or Senior Management, to engage in the securities business
or in the sale of a particular security or temporarily or permanently
restraining or enjoining any such person or any corporation of which he is an
officer or director from engaging in or continuing any
conduct/practice/employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanour involving a
security or any aspect of the securities business or of theft or of any felony.

There are no family relationships between any two or more
Directors or Senior Management. There are no arrangements or understandings with
major shareholders, customers, suppliers or others, pursuant to which any person
referred to above was selected as a Director or member of senior management.

6.B. Compensation

Cash Compensation

Total compensation accrued or paid to all directors and senior
officers of the Company during the year ended March 31, 2006 was $47,675. The
following table sets forth options granted to the Companys senior officers in
the fiscal year ended March 31, 2006.

Table No. 7Stock Option Grants / Senior
Management / Directors

Name
    Number of
      Options Granted
    % Of Total
      Options Granted
    Exercise Price per
      Share
    Grant Date
    Expiration Date
    Mkt. Value of Securities
      Underlying Options on Date of GrantDr. Lawrence A. Dick
    185,000
    100
    $0.82
    May 16, 2005
    May 16, 2009
    $0.82


The following table provides certain information concerning
stock option exercises during fiscal 2006 by the Companys senior officers and
directors.

Table No. 8Aggregated Stock Options Exercises /
Unexercised Stock Options Stock Option Values / Senior Management/Directors
as at March 31, 2006

Name
    Number of Shares
      Acquired on Exercise
    Aggregate Value
      Realized
    Number of
      Unexercised Options at Fiscal Year-End
      Exercisable/Unexercisable
    Value of Unexercised
      In-the- Money Options at Fiscal Year-End
      Exercisable/UnexercisableDr. Chris Osterman
    250,000
    Nil
    Nil
    NilPaul Cowley
    Nil
    Nil
    250,000
    NilDr. Lawrence A. Dick
    Nil
    Nil
    185,000
    Nil


No Stock Options were exercised during the year ended March 31,
2006 by senior management or directors other than as set out above. In April,
2006 the Company issued options to directors, consultants and an employee to
acquire up to an aggregate of 430,000 shares at an exercise price of $0.36 per
share.

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Director Compensation. The Company had no formal plan
for compensating its Directors for their service in their capacity as Directors.
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors. The Board of Directors may award special remuneration to any
Director undertaking any special services on behalf of the Company other than
services ordinarily required of a Director. Other than indicated below no
Director received any compensation for his services as a Director, including
committee participation and/or special assignments.

Stock Options. The Company may grant stock options to
Directors, Senior Management, employees and consultants. As at October 25, 2006,
1,015,000 stock options have been granted and remain unexercised. Refer to Table
No. 7 and 8 for information about stock options held by Directors and Senior
Management.

Change of Control Remuneration. The Company had no plans
or arrangements in respect of remuneration received or that may be received by
Executive Officers of the Company in Fiscal 2006 to compensate such officers in
the event of termination of employment (as a result of resignation, retirement,
change of control) or a change of responsibilities following a change of
control, where the value of such compensation exceeds US$60,000 per Senior
Management.

Other Compensation. No Senior Management/Director
received other compensation in excess of the lesser of US$25,000 or 10% of
such officers cash compensation, and all Senior Management/Directors as a group
did not receive other compensation which exceeded US$25,000 times the number of
persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation. Except for
the Companys stock option plan, the Company had no material bonus or profit
sharing plans pursuant to which cash or non-cash compensation is or may be paid
to the Companys Directors or Senior Management.

Pension/Retirement Benefits. No funds were set aside or
accrued by the Company during Fiscal 2005 to provide pension, retirement or
similar benefits for Directors or Senior Management.

6.C. Board Practices

The Directors have served in their respective capacities since
their election and/or appointment and will serve until the next Annual General
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. The Senior Management
serves at the pleasure of the Board of Directors.

The Company has an Audit Committee, which advises the Board of
  Directors with respect to the engagement of the independent auditors of the
  Company and reviews the scope and results of the Companys audits with
  the independent auditors, the Companys internal accounting controls, and
  the professional services furnished by the independent auditors to the Company.
  The current members of the Audit Committee are: Lawrence Dick, Warren McIntyre
  and Paul Cowley. The Audit Committee met twice during fiscal 2006.

6.D. Employees

The Company has no employees, excluding Senior Management, and
has utilized only independent contractors, who perform work on the Companys
properties.

6.E. Share Ownership

The following table sets forth, to the Companys knowledge, as
of October 25, 2006, information relating to shares of the Company held by
directors and officers of the Company and persons owning more than 5% of the
Companys outstanding shares:

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Table No. 9Shareholdings of Directors and Senior
Management

|                                    | Amount and Nature of | Percent of
|----------------------------------- | -------------------- | ----------
|Name of Beneficial Owner            | Beneficial Ownership | Class(5)  
|Alex Lenec (5%
      holder)(1)     | 1,728,532            | 7.4%      
|Lawrence Dick (2)                   | 1,111,155            | 8.8%      
|Warren McIntyre(3)                  | 675,049              | 5.4%      
|Chris Osterman(4)                   | 80,000               | 0.6%      
|Paul Cowley (4)                     | 330,000              | 2.6%      
|Total Directors/Officers 5% Holders | 3,924,736            | 28.7%     

|(1) | Mr. Lenec holds 358,500 shares directly and 895,016
      shares through Golden Sands. In addition, Mr. Lenec holds warrants to
      acquire 410,000 shares directly and warrants to acquire 65,016 shares
      through Golden Sands.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Dr. Dick holds 744,640 shares, 265,000 options and
      101,515 warrants.                                                                                                                                                             
|(3) | Mr. McIntyre holds 423,837 shares, 80,000 options and
      171,212 warrants.                                                                                                                                                          
|(4) | These shares are represented by currently exercisable
      share purchase options.                                                                                                                                                    
|(5) | Percentages based on 12,269,842 shares outstanding as at
      October 25, 2006 plus the number of options and/or warrants available to
      each individual shareholder.                                                             

Stock Options. The terms of incentive options that may
be granted by the Company are in accordance with the rules and policies of the
CNQ and the British Columbia Securities Commission, including the number of
common shares under option, the exercise price and expiry date of such options
and any amendments thereto. The Company adopted a formal written stock option
plan on September 28, 2004.

The principal purposes of the Companys stock option program
are to (a) assist the company in attracting, retaining, and motivating
directors, officers and employees of the Company and, (b) to closely align the
personal interests of such directors, officers and employees with the interests
of the Company and its shareholders.

The Plan provides that stock options may be granted to service
providers for the Company. The term service providers means (a) any full or
part-time employee or Officer, or insider of the Company or any of its
subsidiaries; (b) any other person employed by a company or individual providing
management services to the Company; (c) any other person or company engaged to
provide ongoing consulting services for the Company or any entity controlled by
the Company or (d) any individual engaged to provide services that promote the
purchase or sale of the issued securities (any person in (a), (b), (c) or (d));
and (e) any registered retirement savings plan established by such Eligible
Person, or any corporation controlled by such Eligible Person, the issued and
outstanding voting shares of which are, and will continue to be, beneficially
owned, directly or indirectly, by such Eligible Person and/or spouse, children
and/or grandchildren of such Eligible Person. For stock options to Employees,
Consultants or Management Company Employees, the Company must represent that the
optionee is a bona fide Employee, Consultant or Management Company Employee as
the case may be. The terms insider Controlled and subsidiary shall have
the meanings ascribed thereto in the Securities Act (Ontario) from time
to time. Subject to the foregoing, the board of directors or Committee, as
applicable, shall have full and final authority to determine the persons who are
to be granted options under the Plan and the number of shares subject to each
option.

The Plan shall be administered by the board of directors of the
Company or a committee established by the board of directors for that purpose.
Subject to approval of the granting of options by the board of directors or
Committee, as applicable, the Company shall grant options under the Plan.

The Plan provides that the aggregate number of shares of the
Company, which may be issued and sold under the Plan, will not exceed 10% of the
issued shares of the Company. The Company shall not, upon the exercise of any
option, be required to issue or deliver any shares prior to (a) the admission of
such shares to listing on any stock exchange on which the Companys shares may
them be listed, and (b) the completion of such registration or other

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qualification of such shares under any law, rules or regulation
as the Company shall determine to be necessary or advisable. If any shares
cannot be issued to any optionee for whatever reason, the obligation of the
Company to issue such shares shall terminate and any option exercise price paid
to the Company shall be returned to the optionee.

If a stock option expires or otherwise terminates for any
reason without having been exercised in full, the number of common shares
reserved for issuance under that expired or terminated stock option shall again
be available for the purposes of the Plan. Any stock option outstanding when the
Plan is terminated will remain in effect until it is exercised or it expires.
The Plan provides that it is solely within the discretion of the Board to
determine who should receive stock options and in what amounts, subject to the
following conditions:

(a)          
Options will be non-assignable and non-transferable except that they will be
exercisable by the personal representative of the option holder in the event of
the option holders death;

(b)          
Options may be exercisable for a maximum of five years from grant date;

(c)           Options
to acquire no more than 5% of the issued shares of the Company may be granted to
any one individual in any 12-month period;

(d)          Options
to acquire no more than 2% of the issued shares of the Company may be granted to
any one consultant in any 12-month period;

(e)          
Options to acquire no more than an aggregate of 2% of the issued shares of the
Company may be granted to an employee conducting investor relations activities
(as defined in TSX Venture Exchange Policy 1.1), in any 12 month period;

(f)          
 Options to acquire no more than 10% of the issued shares of the Company
may be granted to any insiders in any 12-month period;

(g)           
Options held by an option holder who is a director, employee, consultant or
management company employee must expire within 90 days after the option holder
ceases to be a director, employee, consultant or management company employee;

(h)             Options
held by an option holder who is engaged in investor relations activities must
expire within 30 days after the option holder ceases to be employed by the
Company to provide investor relations activities; and

(i)             
In the event of an option holders death, the option holders personal
representative may exercise any portion of the option holders vested
outstanding options for a period of one year following the option holders
death.

The Plan provides that other terms and conditions may be
attached to a particular stock option, such terms and conditions to be referred
to in a schedule attached to the option certificate. Stock options granted to
directors, senior officers, employees or consultants will vest when granted
unless otherwise determined by the Board on a case by case basis, other than
stock options granted to consultants performing investor relations activities,
which will vest in stages over 12 months with no more than one-fourth of the
options vesting in any three month period.

The price at which an option holder may purchase a common share
upon the exercise of a stock option will be as set forth in the option
certificate issued in respect of such option and in any event will not be less
than the discounted market price of the Companys common shares as of the date
of the grant of the stock option. Investors should consult their own tax
advisors in this regard. The market price of the Companys common shares for a
particular Award Date will typically be the closing trading price of the
Companys common shares on the day immediately preceding the Award Date, or
otherwise in accordance with the terms of the Plan. Where there is no such
closing price or trade on the prior trading day market price shall mean the
average of the most recent bid and ask of the

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shares of the Company on any stock exchange on which the shares
are listed or dealing network on which the shares of the Company trade.

In no case will a stock option be exercisable at a price less
than the minimum prescribed by each of the organized trading facilities or the
applicable regulatory authorities that would apply to the award of the stock
option in question.

Common shares will not be issued pursuant to stock options
granted under the Plan until they have been fully paid for by the option holder.
The Company will not provide financial assistance to option holders to assist
them in exercising their stock options.

The following table sets forth information as of October 25,
2006 relating to stock options held by directors, officers, employees and
consultants of the Company:

Table No. 10Stock Options Outstanding as at
October 25, 2006

|                       | Number of Shares of | Exercise |                    |                   
|---------------------- | ------------------- | -------- | ------------------ | ------------------
|Name                   | Common Stock        | Price    | Grant Date         | Expiration Date   
|Officers/Directors:    |                     |          |                    |                   
|Paul Cowley            | 250,000             | $0.25    | September 15, 2004 | September 15, 2009
|Dr. Lawrence A. Dick   | 185,000             | $0.82    | May 16, 2005       | May 16, 2009      
|Warren McIntyre        | 80,000              | $0.36    | April 4, 2006      | April 4, 2011     
|Dr. Chris Osterman     | 80,000              | $0.36    | April 4, 2006      | April 4, 2011     
|Paul Cowley            | 80,000              | $0.36    | April 4, 2006      | April 4, 2011     
|Dr. Larry Dick         | 80,000              | $0.36    | April 4, 2006      | April 4, 2011     
|                       |                     |          |                    |                   
|Employees/Consultants: |                     |          |                    |                   
|Microcap               | 150,000             | $0.30    | February 8, 2006   | December 31, 2006 
|Kate Barteaux          | 30,000              | $0.36    | April 4, 2006      | April 4, 2011     
|Rudy
      De Jonge    | 40,000              | $0.36    | April 4, 2006      | April 4, 2011     
|David Eaton            | 40,000              | $0.36    | April 4, 2006      | April 4, 2011     
|                       |                     |          |                    |                   
|Grand Total            | 1,015,000           |          |                    |                   

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders

For holdings by major shareholders, see Item 6.E and Table No.
9. The Companys major shareholders do not have different voting rights. As at
October 23, 2006, there were 12,269,842 common shares outstanding held by 38
holders of record resident in Canada holding 11,858,342 common shares, 4
holders of record resident in the USA holding 161,500 common shares and 1
holder of record resident in another country holding 250,000 common
shares.

7.B. Related Party Transactions

For the Year Ended March 31, 2006

During the year ended March 31, 2006, the Company issued
392,727 common shares to directors of the Company, pursuant to the exercise of
warrants and options and a shares-for-debt settlement, at various prices for
total proceeds of $148,500. Deferred exploration costs, promotion and
advertising, rent and consulting fees for the year ended March 31, 2006 include
$107,505 (2005: Nil), $2,442 (2005: $450), $9,000 (2005: $4050) and $47,675
(2005:

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$70,000) respectively, charged by directors and a significant
shareholder of the Company. As at that date accounts payable and accrued
liabilities include $64,257 owing to related parties.

These charges were measured by the exchange amount, which is
the amount agreed upon by the transacting parties. The related parties are
Lawrence Dick, Warren McIntyre, Chris Osterman and a significant shareholder of
the Company.

During the period ended March 31, 2005, the Company incurred
the following charges with Zimtu, a former shareholder, a company with a common
director:

Consulting
    $
    52,500Management fees
    
    14,500Promotion and advertising
    
    450Rent and administration fees
    
    4,050$
    74,500


These charges were measured by the exchange amount, which is
the amount agreed upon by the transacting parties. The related parties are,
Zimtu, Warren McIntyre, Rudy DeJong and St. Cloud Mining Services Ltd. During
the year ended March 31, 2005, the Company issued 150,000 units at a price of
$0.16 per unit for total proceeds of $24,000 to directors of the Company. The
related parties are Lawrence Dick and Warren McIntyre. As at March 31, 2005,
accounts payable and accrued liabilities include $52,500 due to Warren McIntyre,
a director of the Company, for consulting services.

Accounting Fees

The Company paid accounting fees of $1,900 and $14,250 to
Amisano Hanson during Fiscal 2005 and Fiscal 2006 (to date), respectively. These
accounting fees consisted of auditing the Companys annual financial
statements.

Shareholder Loans

None.

Amounts Owing to Senior Management/Directors

Except as disclosed in this Annual Report, there have been no
transactions since March 31, 2005, or proposed transactions, which have
materially affected or will materially affect the Company in which any director,
executive officer, or beneficial holder of more than 5% of the outstanding
common shares, or any of their respective relatives, spouses, associates or
affiliates has had or will have any direct or material indirect interest.
Management believes the transactions referenced above were on terms at least as
favourable to the Company as the Company could have obtained from unaffiliated
parties.

7.C. Interests of Experts and Counsel

Not Applicable.

ITEM 8. FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

The Companys financial statements are stated in Canadian
Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP), the application of which, in the case of the
Company, conforms in all material respects for the periods presented with United
States GAAP, except as discussed in footnotes to the financial statements.

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The financial statements as required under Item 17 are attached
hereto and found immediately following the text of this Annual Report. The audit
reports of Amisano Hanson, Independent Chartered Accountants, are included
herein immediately preceding the financial statements.

Legal Proceedings

The Directors and the management of the Company do not know of
any material, active or pending, legal proceedings against them; nor is the
Company involved as a plaintiff in any material proceeding or pending
litigation. The Directors and the management of the Company know of no active or
pending proceedings against anyone that might materially adversely affect an
interest of the Company.

8.B. Significant Changes

Other than as described in this document, there have been no
significant changes since the financial statements contained herein.

ITEM 9. THE OFFER AND LISTING

9.A. Common Share Trading Information

The Companys common shares trade on the CNQ in Toronto,
Ontario, Canada, under the symbol GOLD. The Company applied for listing on the
CNQ and began trading on the CNQ on June 14, 2004. Further, the Companys common
shares began trading on the Over-The-Counter Bulletin Board Quotation System
under the symbol EVOGF on July 26, 2005.

Table No. 13 sets forth the high and low sales prices on the
CNQ for the periods indicated. No other disclosure is provided as the Company
began trading on June 14, 2004.

Table No. 13Common Shares Trading Activity

CNQ
      OTCCanadian Dollars
      U.S. DollarsHigh
      Low
      High
      LowMonthlySeptember 30, 2006
      $0.28
      $0.20
      $0.28
      $0.20August 31, 2006
      $0.45
      $0.25
      $0.42
      $0.27July 31, 2006
      $0.335
      $0.31
      $0.40
      $0.25June 30, 2006
      $0.43
      $0.30
      $0.43
      $0.30May 31, 2006
      $0.57
      $0.46
      $0.51
      $0.37April 30, 2006
      $0.48
      $0.36
      $0.42
      $0.32QuarterlySeptember 30, 2006
      $0.45
      $0.20
      $0.42
      $0.20June 30, 2006
      $0.57
      $0.30
      $0.51
      $0.30March 31, 2006
      $0.42
      $0.25
      $0.345
      $0.22December 31, 2005
      $0.65
      $0.29
      $0.55
      $0.22September 30, 2005
      $0.82
      $0.51
      $0.68
      $0.40June 30, 2006
      $1.05
      $0.60
      $0.71
      $0.71March 31, 2006
      $0.60
      $0.30
      N/A
      N/ADecember 31, 2004
      $0.38
      $0.14
      N/A
      N/A


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CNQ
      OTCCanadian Dollars
      U.S. DollarsHigh
      Low
      High
      LowYearlyMarch 31, 2006
      $1.05
      $0.25
      $0.71
      $0.22March 31, 2005
      $0.60
      $0.14
      N/A
      N/A


Common Share Description

Registrar/Common Shares Outstanding/Shareholders

The Company has an authorized capital of an unlimited number of
common shares without par value. As of September 28, 2006 a total of 12,269,842
shares were issued and outstanding. All shares are initially issued and
registered in the name of the shareholder or its nominee. There are no
restrictions on the transferability of the shares imposed by the Companys
contacting documents. The registrar and transfer agent for the common shares is
Pacific Corporate Trust of Canada located at 595 Burrard Street, 3rd Floor,
Vancouver, B.C. Canada, V6C 3B8.

Common Share Description

All of the authorized common shares of the Company are of the
same class and, once issued, rank equally as to dividends, voting powers, and
participation in assets.

Holders of common shares are entitled to one vote for each
share held of record on all matters to be acted upon by the shareholders.
Holders of common shares are entitled to receive such dividends as may be
declared from time to time by the Board of Directors, in its discretion, out of
funds legally available therefore.

Upon liquidation, dissolution or winding up of the Company,
holders of common shares are entitled to receive pro rata the assets of
Company, if any, remaining after payments of all debts and liabilities.

No shares have been issued subject to call or assessment. There
are no pre-emptive or conversion rights and no provisions for redemption or
purchase for cancellation, surrender, or sinking or purchase funds.

Provisions as to the modification, amendment or variation of
such shareholder rights or provisions are contained in the CBCA. Unless the
CBCA, the Companys Articles or Articles of Incorporation otherwise provide, any
action to be taken by a resolution of the shareholders may be taken by an
ordinary resolution, being approval by a vote of a majority of the votes cast in
respect of the matter at the shareholders meeting.

There are no restrictions on the repurchase or redemption of
common shares of the Company while there is any arrearage in the payment of
dividends or sinking fund instalments.

Stock Options

Refer to Item 6.E for information relating to the Companys
stock options.

Share Purchase Warrants

As of March 31, 2006 there were 2,656,742 share purchase
warrants outstanding. Subsequent to year ended on September 12, 2006, the
Company closed a private placement of 1,500,000 units, and paid a finders fee
of 100,000 units, at a price of $0.30 per unit. Each unit consists of one common
share and one non-transferable common share purchase warrant. Each warrant
entitles the holder thereof to purchase an additional common share of the
Company

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at an exercise price of $0.40 for a period of two years from
the data of issuance. Such warrants have a four-month hold period expiring
January 12, 2007.

As such, as at October 25, 2006, there were 4,256,742 share
purchase warrants outstanding.

9.C. Stock Exchanges Identified

The common shares of the Company trade on CNQ and the
Over-The-Counter Bulletin Board. Refer to Item 9.A.

ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

Not applicable.

10.B. Memorandum and Articles of Association

The Company has unlimited common shares without par value
authorized. As of October 25, 2006, there were 12,269,842 common shares issued
and outstanding.

The Company was incorporated on June 19, 2003 under the CBCA.
There are no restrictions on the business that the Company may carry on in the
Articles of Incorporation.

A director of the Company is not allowed to vote on a proposal,
arrangement, contract or transaction in which the director is materially
interested. A director who is, in any way, directly or indirectly, interested in
a material contract or proposed material contract with the Company shall
disclose the nature and extent of his interest at a meeting of the directors in
accordance with the provisions of the CBCA. A director shall not vote in respect
of any such contract unless the contract is:

(a)          
one primarily relating to the directors remuneration as a director, officer,
employee or agent of the Company or an affiliate;

(b)          
one for indemnity or insurance of the director; or

(c)           
one with an affiliate.

Article 7 of the Companys bylaws address the borrowing powers
of the directors. The borrowing powers are summarized as follows:

The Directors may, from time to time on behalf of the Company:

(a)            
borrow money in such manner and amount, on such security from such sources and
upon such terms and conditions as they think fit;

(b)             issue
bonds or other debt instruments outright or as security for any liability or
obligation for either the Company or any other person;

(c)             
mortgage any part or the whole of any property or assets of the Company;

There are no age limit requirements pertaining to the
retirement or non-retirement of directors and a director need not be a
shareholder of the Company. The rights, preferences and restrictions attaching
to each class of the Companys shares are as follows:

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Common Shares

All of the authorized shares of common stock of the Company are
of the same class and, once issued, rank equally as to dividends, voting powers,
and participation in assets. Holders of common stock are entitled to one vote
for each share held of record on all matters to be acted upon by the
shareholders. Holders of common stock are entitled to receive such dividends as
may be declared from time to time by the Board of Directors, in its discretion,
out of funds legally available therefore.

Upon liquidation, dissolution or winding up of the Company,
holders of common stock are entitled to receive pro rata the assets of
Company, if any, remaining after payments of all debts and liabilities. No
shares have been issued subject to call or assessment. There are no pre-emptive
or conversion rights and no provisions for redemption or purchase for
cancellation, surrender, or sinking or purchase funds.

The Company may by ordinary resolution filed with the Registrar
amend its Memorandum to increase the authorized capital of the Company by:

| | (a) | creating shares with par value or shares without par
      value                                          
| | --- | ----------------------------------------------------------------------------------------------------------
| |     |                                                                                                           
| | (b) | increasing the number of shares with par value or without
      par value                                 
| |     |                                                                                                           
| | (c) | increasing the par value of a class of shares with par
      value, if no shares of that class are issued.

The Company may by special resolution alter its Memorandum to
subdivide, consolidate or change the designation of any or all of its shares in
such manner and with such consents of members holding a class of shares as the
Company Act provides.

The Company may alter its Memorandum or Articles:

| | (a) | by special resolution, to create, define and attach
      special rights and restrictions to any shares, and
| | --- | ------------------------------------------------------------------------------------------------------------
| |     |                                                                                                             
| | (b) | by special resolution to vary or abrogate any special
      rights and restrictions attached to any shares  

But no right attached to any issued shares shall be prejudiced
or interfered with unless all members holding shares of each class whose right
is so affected has given consent in writing, or unless a resolution consenting
is passed by three-fourths of such holders at a separate class meeting of the
holders.

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

The conditions governing the manner in which annual meetings
and special meetings of shareholders are convoked, including conditions of
admission are described in Articles 39 and 40 of the Companys bylaws. These
conditions are summarized as follows:

Annual Meeting. An annual meeting shall be held once in
every calendar year at such time and place as determined by the Directors, but
not more than 15 months after the holding of the last preceding annual
meeting.

Special Meetings. The Board, the Chairman of the Board,
the Managing Director or the President may convene a special meeting whenever
they see fit. Others who wish to convene a meeting may requisition to do so
through the process provided under the Corporations Act.

Every member who is present in person shall have one vote and
every member shall have one vote for which he is the registered holder either in
person or by proxy. A member holding more than one share in respect of which he
is

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entitled to vote shall be entitled to a proxy holder, or one or
more alternate proxy holders to attend, act and vote for him.

There are no limitations on the rights to own securities.

There are no provisions of the Companys articles of
association, charter or bylaws that would have an effect of delaying, deferring
or preventing a change in control of the Company and that would operate only
with respect to a merger, acquisition or corporate restructuring involving the
Company.

10.C. Material Contracts

| | (a) | Meridian Earn-in Agreement between the Company and
      Meridian dated July 31, 2006.                               
| | --- | ---------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                      
| | (b) | Amended and Restated Option and Royalty Agreement among
      the Company, Golden Sands and AHL dated July 7, 2006.  
| |     |                                                                                                                      
| | (c) | Malone Property Agreement between the Company and Newmont
      North America Exploration Ltd., dated April 17,
2006.

10.D. Exchange Controls

The Company is a corporation incorporated under the CBCA. There
is no law or governmental decree or regulation in Canada that restricts the
export or import of capital, or affects the remittance of dividends, interest or
other payments to a non-resident holder of common shares, other than withholding
tax requirements. Any such remittances to United States residents are generally
subject to withholding tax, however no such remittances are likely in the
foreseeable future. See Taxation below.

There is no limitation imposed by the laws of Canada or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote its common shares, other than as provided in theInvestment Canada Act(Canada) (the Investment Act). The following
discussion summarizes the material features of the Investment Act for a
non-resident who proposes to acquire a controlling number of the Companys
common shares. The disclosure herein is general only, it is not a substitute for
independent advice from an investors own advisor and does not anticipate
statutory or regulatory amendments. The Company does not believe the Investment
Act will have any affect on it or its non-Canadian shareholders due to a number
of factors including the nature of its operations and the Companys relatively
small capitalization.

The Investment Act generally prohibits implementation of a
reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture (each an entity) that is not
a Canadian as defined in the Investment Act (i.e. a non-Canadian), unless
after review the Director of Investments appointed by the Minister responsible
for theInvestment Act is satisfied that the investment is likely to be
of net benefit to Canada. The size and nature of a proposed transaction may give
rise to an obligation to notify the Director to seek an advance ruling. An
investment in the Companys common shares of the Company by a non-Canadian
(other than a WTO Investor as that term is defined in theInvestment
Act and which term includes entities which are nationals of or are controlled by
nationals of member states of the World Trade Organization) when the Company was
not controlled by a WTO Investor, would be reviewable under the Investment
Actif it was an investment to acquire control of the Company and the
value of the assets of the Company, as determined in accordance with the
regulations promulgated under the Investment Act, was over a certain figure, or
if an order for review was made by the federal cabinet on the grounds that the
investment related to Canadas cultural heritage or national identity,
regardless of the value of the assets of the Company. An investment in the
Common Shares by a WTO Investor, or by a non-Canadian when the Company was
controlled by a WTO Investor, would be reviewable under the Investment Act if it
was an investment to acquire control of the Company and the value of the assets
of the Company, as determined in accordance with the regulations promulgated
under the Investment Act, was not less than a specified amount which for 2006
exceeds $265 million. A non-Canadian would acquire control of the Company for
the purposes of the Investment Act if the non-Canadian acquired a majority of
the Common Shares of the Company. The acquisition of less than a majority but
one-third or more of the Common Shares would be

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presumed to be an acquisition of control of the Company unless
it could be established that, on the acquisition, the Company was not controlled
in fact by the acquirer through the ownership of the Common Shares.

The foregoing assumes the Company will not engage in the
production of uranium or own an interest in a producing uranium property in
Canada, or provide any financial service or transportation service, as the rules
governing these businesses are different.

Certain transactions relating to the Common Shares would be
exempt from the Investment Act, including:

(a)           an
acquisition of the Common Shares by a person in the ordinary course of that
persons business as a trader or dealer in securities,

(b)           an
acquisition of control of the Company in connection with the realization of
security granted for a loan or other financial assistance and not for a purpose
related to the provisions of the Investment Act, and

(c)           an
acquisition of control of the Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control in fact of the Company, through the ownership of the Common
Shares, remained unchanged.

10.E. Taxation

Material Canadian Federal Income Tax Consequences for United
States Residents

The following summarizes the principal Canadian federal income
tax considerations generally applicable to the holding and disposition of Common
Shares of the Company by a holder (a) who, for the purposes of the Income Tax
Act (Canada) the (Tax Act), is not resident in Canada, deals at arms length
with the Company, holds the Common Shares as capital property and does not use
or hold the Common Shares in the course of carrying on, or otherwise in
connection with, a business in Canada, and (b) who, for the purposes of the
Canada-United States Income Tax Convention (the Treaty), is a resident of the
United States, has never been a resident of Canada, has not held or used (and
does not hold or use) Common Shares in connection with a permanent establishment
or fixed base in Canada, and who qualifies for the full benefits of the Treaty.
Holders who meet all such criteria in clauses (a) and (b) are referred to herein
as a U.S. Holder or U.S. Holders, and this summary only addresses such U.S.
Holders. The summary does not deal with special situations, such as particular
circumstances of traders or dealers, limited liability companies, tax-exempt
entities, insurers, financial institutions (including those to which the
mark-to-market provisions of the Tax Act apply), or otherwise.

This summary is based on the current provisions of the Tax Act
and the regulations thereunder, all proposed amendments to the Tax Act and
regulations publicly announced by the Minister of Finance (Canada) to the date
hereof, the current provisions of the Treaty and the current administrative
practices of the Canada Revenue Agency. It has been assumed that all currently
proposed amendments to the Tax Act and regulations will be enacted as proposed
and that there will be no other relevant change in any governing law, the Treaty
or administrative policy, although no assurance can be given in these respects.
This summary does not take into account provincial, U.S., state or other foreign
income tax considerations.

This summary is not exhaustive of all possible Canadian income
tax consequences. It is not intended as legal or tax advice to any particular
U.S. Holder and should not be so construed. The tax consequences to a U.S.
Holder will depend on that U.S. Holders particular circumstances.
Accordingly, all U.S. Holders or prospective U.S. Holders should consult
their own tax advisors with respect to the tax consequences applicable to them
having regard to their own particular circumstances. The discussion below is
qualified accordingly.

Dividend

Dividends paid or deemed to be paid or credited by the Company
to a U.S. Holder are subject to Canadian withholding tax. Under the Treaty, the
rate of withholding tax on dividends paid to a U.S. Holder is generally

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limited to 15% of the gross dividend (or 5% in the case of
corporate shareholders owning at least 10% of the Companys voting shares).

Disposition

A U.S. Holder is not subject to tax under the Tax Act in
respect of a capital gain realized on the disposition of a Common Share in the
open market unless the share is taxable Canadian property to the holder
thereof, and even then only if the U.S. Holder is not entitled to relief under
the Treaty.

A Common Share will be taxable Canadian property to a U.S.
Holder if, at any time during the 60 month period ending at the time of
disposition, the U.S. Holder or persons with whom the U.S. Holder did not deal
at arms length (or the U.S. Holder together with such persons) owned 25% or
more of the issued shares of any class or series of the Company.

A U.S. Holder holding Common Shares as taxable Canadian
property should consult with the U.S. Holders own tax advisors in advance of
any disposition or deemed disposition of Common Shares under the Tax Act in
order to determine whether any relief from tax under the Tax Act may be
available by virtue of the Treaty. A U.S. Holder may in general qualify for such
relief under the Treaty provided the value of the Common Shares at the relevant
time is not derived principally from real property situated in Canada.

ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE
COMPANYS COMMON SHARES

United States Tax Consequences

United States Federal Income Tax Consequences

The following is a discussion of all material United States
federal income tax consequences, under current law, generally applicable to a
U.S. Holder (as hereinafter defined) of common shares of the Company. This
discussion does not address all potentially relevant federal income tax matters
and it does not address consequences peculiar to persons subject to special
provisions of federal income tax law, such as those described below as excluded
from the definition of a U.S. Holder. In addition, this discussion does not
cover any state, local or foreign tax consequences. (see Taxation  Canadian
Federal Income Tax Consequences above). Accordingly, we strongly urge and
encourage holders and prospective holders of common shares of the Company to
consult their own tax advisors about the specific federal, state, local, and
foreign tax consequences to them of purchasing, owning and disposing of common
shares of the Company, based upon their individual circumstances.

The following discussion is based upon the sections of the
Internal Revenue Code of 1986, as amended (the Code), Treasury
Regulations, published Internal Revenue Service (IRS) rulings,
published administrative positions of the IRS and court decisions that are
currently applicable, any or all of which could be materially and adversely
changed, possibly on a retroactive basis, at any time and which are subject to
differing interpretations. This discussion does not consider the potential
effects, both adverse and beneficial, of any proposed legislation which, if
enacted, could be applied, possibly on a retroactive basis, at any time.

U.S. Holders

As used herein, a U.S. Holder means a holder of common shares
of the Company who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, an estate whose income is
taxable in the United States irrespective of source or a trust subject to the
primary supervision of a court within the United States and control of a United
States fiduciary as described Section 7701(a)(30) of the Code. This summary does
not address the tax consequences to, and U.S. Holder does not include, persons
subject to specific provisions of federal income tax law, such as tax-exempt
organizations, qualified retirement plans, individual retirement accounts and
other tax-deferred accounts, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-

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dealers, non-resident alien individuals, persons or entities
that have a functional currency other than the U.S. dollar, shareholders
subject to the alternative minimum tax, shareholders who hold common shares as
part of a straddle, hedging or conversion transaction, and shareholders who
acquired their common shares through the exercise of employee stock options or
otherwise as compensation for services. This summary is limited to U.S. Holders
who own common shares as capital assets and who own (directly and indirectly,
pursuant to applicable rules of constructive ownership) no more than 5% of the
value of the total outstanding stock of the Company. This summary does not
address the consequences to a person or entity holding an interest in a
shareholder or the consequences to a person of the ownership, exercise or
disposition of any options, warrants or other rights to acquire common shares.
In addition, this summary does not address special rules applicable to United
States persons (as defined in Section 7701(a)(30) of the Code) holding common
shares through a foreign partnership or to foreign persons holding common shares
through a domestic partnership.

Distribution on Common Shares of the Company

In general, U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to common shares of the Company
are required to include in gross income for United States federal income tax
purposes the gross amount of such distributions, equal to the U.S. dollar value
of such distributions on the date of receipt (based on the exchange rate on such
date), to the extent that the Company has current or accumulated earnings and
profits, without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be credited, subject to certain
limitations, against the U.S. Holders federal income tax liability or,
alternatively, may be deducted in computing the U.S. Holders federal taxable
income by those who itemize deductions. (See more detailed discussion at
Foreign Tax Credit below). To the extent that distributions exceed current or
accumulated earnings and profits of the Company, they will be treated first as a
return of capital up to the U.S. Holders adjusted basis in the common shares
and thereafter as gain from the sale or exchange of property. Preferential tax
rates for long-term capital gains are applicable to a U.S. Holder which is an
individual, estate or trust. There are currently no preferential tax rates for
long-term capital gains for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is
not converted by the recipient into U.S. dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, provided that there are no expenses associated with the transaction that
meet the requirements for deductibility as a trade or business expense (other
than travel expenses in connection with a business trip) or as an expense for
the production of income.

Dividends paid on the common shares of the Company generally
will not be eligible for the dividends received deduction provided to
corporations receiving dividends from certain United States corporations. A U.S.
Holder which is a corporation and which owns shares representing at least 10% of
the voting power and value of the Company may, under certain circumstances, be
entitled to a 70% (or 80% if the U.S. Holder owns shares representing at least
20% of the voting power and value of the Company) deduction of the United States
source portion of dividends received from the Company (unless the Company
qualifies as a foreign personal holding company or a passive foreign
investment company, as defined below). The Company does not anticipate that it
will earn any United States income, however, and therefore does not anticipate
that any U.S. Holder will be eligible for the dividends received deduction.

Under current Treasury Regulations, dividends paid on the
Companys common shares, if any, generally will not be subject to information
reporting and generally will not be subject to U.S. backup withholding tax.
However, dividends and the proceeds from a sale of the Companys common shares
paid in the U.S. through a U.S. or U.S. related paying agent (including a
broker) will be subject to U.S. information reporting requirements and may also
be subject to the 31% U.S. backup withholding tax, unless the paying agent is
furnished with a duly completed and signed Form W-9. Any amounts withheld under
the U.S. backup withholding tax rules will be allowed as a refund or a credit
against the U.S. Holders U.S. federal income tax liability, provided the
required information is furnished to the IRS.

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Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions)
Canadian income tax with respect to the ownership of common shares of the
Company may be entitled, at the option of the U.S. Holder, to either receive a
deduction or a tax credit for such foreign tax paid or withheld. Generally, it
will be more advantageous to claim a credit because a credit reduces United
States federal income taxes on a dollar-for-dollar basis, while a deduction
merely reduces the taxpayers income subject to tax. This election is made on a
year-by-year basis and generally applies to all foreign taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations which apply to the credit; among which is the general
limitation that the credit cannot exceed the proportionate share of the U.S.
Holders United States income tax liability that the U.S. Holders foreign
source income bears to his or its worldwide taxable income. In the determination
of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern this
classification process. In addition, this limitation is calculated separately
with respect to specific classes of income such as passive income, high
withholding tax interest, financial services income, shipping income, and
certain other classifications of income. Dividends distributed by the Company
will generally constitute passive income or, in the case of certain U.S.
Holders, financial services income for these purposes. The availability of the
foreign tax credit and the application of the limitations on the credit are fact
specific, and U.S. Holders of common shares of the Company are urged to consult
their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company

In general, U.S. Holders will recognize gain or loss upon the
sale of common shares of the Company equal to the difference, if any, between
(i) the amount of cash plus the fair market value of any property received, and
(ii) the shareholders tax basis in the common shares of the Company.
Preferential tax rates apply to long-term capital gains of U.S. Holders which
are individuals, estates or trusts. In general, gain or loss on the sale of
common shares of the Company will be long-term capital gain or loss if the
common shares are a capital asset in the hands of the U.S. Holder and are held
for more than one year. Deductions for net capital losses are subject to
significant limitations. For U.S. Holders which are not corporations, any unused
portion of such net capital loss may be carried over to be used in later tax
years until such net capital loss is thereby exhausted. For U.S. Holders that
are corporations (other than corporations subject to Subchapter S of the Code),
an unused net capital loss may be carried back three years and carried forward
five years from the loss year to be offset against capital gains until such net
capital loss is thereby exhausted.

Other Considerations

Set forth below are certain material exceptions to the
above-described general rules describing the United States federal income tax
consequences resulting from the holding and disposition of common shares:

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total
combined voting power or the total value of the Companys outstanding shares is
owned, directly or indirectly (pursuant to applicable rules of constructive
ownership), by five or fewer individuals who are citizens or residents of the
United States and 60% or more of the Companys gross income for such year is
derived from certain passive sources (e.g., from certain interest and
dividends), the Company may be treated as a foreign personal holding company.
In that event, U.S. Holders that hold common shares would be required to include
in gross income for such year their allocable portions of such passive income to
the extent the Company does not actually distribute such income. The Company
does not believe that it currently qualifies as a foreign personal holding
company. However, there can be no assurance that the Company will not be
considered a foreign personal holding company for the current or any future
taxable year.

Foreign Investment Company

If 50% or more of the combined voting power or total value of
the Companys outstanding shares is held, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701(a)(31)), and the Company

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is found to be engaged primarily in the business of investing,
reinvesting, or trading in securities, commodities, or any interest therein, it
is possible that the Company may be treated as a foreign investment company as
defined in Section 1246 of the Code, causing all or part of any gain realized by
a U.S. Holder selling or exchanging common shares to be treated as ordinary
income rather than capital gain. The Company does not believe that it currently
qualifies as a foreign investment company. However, there can be no assurance
that the Company will not be considered a foreign investment company for the
current or any future taxable year.

Passive Foreign Investment Company

United States income tax law contains rules governing PFICs
which can have significant tax effects on U.S. Holders of foreign corporations.
These rules do not apply to non-U.S. Holders. Section 1297 of the Code defines a
PFIC as a corporation that is not formed in the United States if, for any
taxable year, either (i) 75% or more of its gross income is passive income,
which includes interest, dividends and certain rents and royalties or (ii) the
average percentage, by fair market value (or, if the corporation is not publicly
traded and either is a controlled foreign corporation or makes an election, by
adjusted tax basis), of its assets that produce or are held for the production
of passive income is 50% or more. The Company was not a PFIC for the fiscal
year ended March 31, 2004, and while the Company does not expect to qualify as a
PFIC for the fiscal year ending March 31, 2005, it may qualify as a PFIC in
future fiscal years. Each U.S. Holder of the Company is urged to consult a tax
advisor with respect to how the PFIC rules affect such U.S. Holders tax
situation.

Each U.S. Holder who holds stock in a foreign corporation
during any year in which such corporation qualifies as a PFIC is subject to
United States federal income taxation under one of three alternative tax regimes
at the election of such U.S. Holder. The following is a discussion of such
alternative tax regimes applied to such U.S. Holders of the Company. In
addition, special rules apply if a foreign corporation qualifies as both a PFIC
and a controlled foreign corporation (as defined below) and a U.S. Holder
owns, actually or constructively, 10% or more of the total combined voting power
of all classes of stock entitled to vote of such foreign corporation (See more
detailed discussion at Controlled Foreign Corporation below).

A U.S. Holder who elects to treat the Company as a qualified
electing fund (QEF) will be subject, under Section 1293 of the Code, to
current federal income tax for any taxable year to which the election applies in
which the Company qualifies as a PFIC on his pro rata share of the
Companys (i) net capital gain (the excess of net long-term capital gain over
net short-term capital loss), which will be taxed as long-term capital gain, and
(ii) ordinary earnings (the excess of earnings and profits over net capital
gain), which will be taxed as ordinary income, in each case, for the
shareholders taxable year in which (or with which) the Companys taxable year
ends, regardless of whether such amounts are actually distributed. A U.S.
Holders tax basis in the common shares will be increased by any such amount
that is included in income but not distributed.

The procedure a U.S. Holder must comply with in making an
effective QEF election, and the consequences of such election, will depend on
whether the year of the election is the first year in the U.S. Holders holding
period in which the Company is a PFIC. If the U.S. Holder makes a QEF election
in such first year, i.e., a timely QEF election, then the U.S. Holder may make
the QEF election by simply filing the appropriate documents at the time the U.S.
Holder files his tax return for such first year. If, however, the Company
qualified as a PFIC in a prior year during the U.S. Holders holding period,
then, in order to avoid the Section 1291 rules discussed below, in addition to
filing documents, the U.S. Holder must elect to recognize under the rules of
Section 1291 of the Code (discussed herein), (i) any gain that he would
otherwise recognize if the U.S. Holder sold his stock on the qualification date
or (ii) if the Company is a controlled foreign corporation, the U.S. Holders
pro rata share of the Companys post-1986 earnings and profits as of the
qualification date. The qualification date is the first day of the Companys
first tax year in which the Company qualified as a QEF with respect to such U.S.
Holder. For purposes of this discussion, a U.S. Holder who makes (i) a timely
QEF election, or (ii) an untimely QEF election and either of the above-described
gain-recognition elections under Section 1291 is referred to herein as an
Electing U.S. Holder. A U.S. Holder who holds common shares at any time during
a year of the Company in which the Company is a PFIC and who is not an Electing
U.S. Holder (including a U.S. Holder who makes an untimely QEF election and
makes neither of the above-described gain-recognition elections) is referred to
herein as a Non-Electing U.S. Holder. An Electing U.S. Holder (i) generally
treats any gain realized on the disposition of his Registrant common shares as
capital gain; and (ii) may either avoid interest charges resulting from PFIC
status altogether, or make an annual

- 61 -

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election, subject to certain limitations, to defer payment of
current taxes on his share of the Companys annual realized net capital gain and
ordinary earnings subject, however, to an interest charge. If the U.S. Holder is
not a corporation, any interest charge imposed under the PFIC regime would be
treated as personal interest that is not deductible.

In order for a U.S. Holder to make (or maintain) a valid QEF
election, the Company must provide certain information regarding its net capital
gains and ordinary earnings and permit its books and records to be examined to
verify such information. The Company intends to make the necessary information
available to U.S. Holders to permit them to make (and maintain) QEF elections
with respect to the Company. The Company urges each U.S. Holder to consult a tax
advisor regarding the availability of, and procedure for making, the QEF
election.

A QEF election, once made with respect to the Company, applies
to the tax year for which it was made and to all subsequent tax years, unless
the election is invalidated or terminated, or the IRS consents to revocation of
the election. If a U.S. Holder makes a QEF election and the Company ceases to
qualify as a PFIC in a subsequent tax year, the QEF election will remain in
effect, although not applicable, during those tax years in which the Company
does not qualify as a PFIC. Therefore, if the Company again qualifies as a PFIC
in a subsequent tax year, the QEF election will be effective and the U.S. Holder
will be subject to the rules described above for Electing U.S. Holders in such
tax year and any subsequent tax years in which the Company qualifies as a PFIC.
In addition, the QEF election remains in effect, although not applicable, with
respect to an Electing U.S. Holder even after such U.S. Holder disposes of all
of his or its direct and indirect interest in the shares of the Company.
Therefore, if such U.S. Holder reacquires an interest in the Company, that U.S.
Holder will be subject to the rules described above for Electing U.S. Holders
for each tax year in which the Company qualifies as a PFIC.

In the case of a Non-Electing U.S. Holder, special taxation
rules under Section 1291 of the Code will apply to (i) gains realized on the
disposition (or deemed to be realized by reasons of a pledge) of his Registrant
common shares and (ii) certain excess distributions, as defined in Section
1291(b), by the Company.

A Non-Electing U.S. Holder generally would be required to pro
rate all gains realized on the disposition of his Registrant common shares and
all excess distributions on his Registrant common shares over the entire holding
period for the common shares. All gains or excess distributions allocated to
prior years of the U.S. Holder (excluding any portion of the holders period
prior to the first day of the first year of the Company (i) which began after
December 31, 1986, and (ii) for which the Company was a PFIC) would be taxed at
the highest tax rate for each such prior year applicable to ordinary income. The
Non-Electing U.S. Holder also would be liable for interest on the foregoing tax
liability for each such prior year calculated as if such liability had been due
with respect to each such prior year. A Non-Electing U.S. Holder that is not a
corporation must treat this interest charge as personal interest which, as
discussed above, is wholly non-deductible. The balance, if any, of the gain or
the excess distribution will be treated as ordinary income in the year of the
disposition or distribution, and no interest charge will be incurred with
respect to such balance. In certain circumstances, the sum of the tax and the
PFIC interest charge may exceed the amount of the excess distribution received,
or the amount of proceeds of disposition realized, by the U.S. Holder.

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

Effective for tax years of U.S. Holders beginning after
December 31, 1997, U.S. Holders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC may elect to mark such
stock to the market annually (a mark-to-market election). If such an election
is made, such U.S. Holder will generally not be subject to the special taxation
rules of Section 1291 discussed above. However, if the mark-to-market election
is made by a Non-Electing U.S. Holder after the beginning of the holding period
for the PFIC stock, then the Section 1291 rules will apply to certain
dispositions of, distributions on and other amounts taxable with respect to the
Company common shares. A U.S. Holder who makes the mark-to market election will
include in income for each taxable year for which the election is in effect an
amount equal to the excess, if any, of the fair market value of the

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common shares of the Company as of the close of such tax year
over such U.S. Holders adjusted basis in such common shares. In addition, the
U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of
such U.S. Holders adjusted tax basis in the common shares over the fair market
value of such shares as of the close of the tax year, or (ii) the excess, if
any, of (A) the mark-to-market gains for the common shares in the Company
included by such U.S. Holder for prior tax years, including any amount which
would have been treated as a mark-to-market gain for any prior tax year but for
the Section 1291 rules discussed above with respect to Non-Electing U.S.
Holders, over (B) the mark-to-market losses for shares that were allowed as
deductions for prior tax years. A U.S. Holders adjusted tax basis in the common
shares of the Company will be adjusted to reflect the amount included in or
deducted from income as a result of a mark-to-market election. A mark-to-market
election applies to the taxable year in which the election is made and to each
subsequent taxable year, unless the Company common shares cease to be
marketable, as specifically defined, or the IRS consents to revocation of the
election. Because the IRS has not established procedures for making a
mark-to-market election, U.S. Holders are urged to consult their tax advisor
regarding the manner of making such an election. No view is expressed regarding
whether common shares of the Company are marketable for these purposes or
whether the election will be available.

Under Section 1291(f) of the Code, the IRS has issued Proposed
Treasury Regulations that, subject to certain exceptions, would treat as taxable
certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally
not otherwise taxed, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. Generally, in such cases the basis of
the Company common shares in the hands of the transferee and the basis of any
property received in the exchange for those common shares would be increased by
the amount of gain recognized. Under the Proposed Treasury Regulations, an
Electing U.S. Holder would not be taxed on certain transfers of PFIC stock, such
as gifts, exchanges pursuant to corporate reorganizations, and transfers at
death. The transferees basis in this case will depend on the manner of the
transfer. In the case of a transfer by an Electing U.S. Holder upon death, for
example, the transferees basis is generally equal to the fair market value of
the Electing U.S. Holders common shares as of the date of death under Section
1014 of the Code. The specific tax effect to the U.S. Holder and the transferee
may vary based on the manner in which the common shares are transferred. Each
U.S. Holder of the Company is urged to consult a tax advisor with respect to how
the PFIC rules affect his or its tax situation.

Whether or not a U.S. Holder makes a timely QEF election with
respect to common shares of the Company, certain adverse rules may apply in the
event that both the Company and any foreign corporation in which the Company
directly or indirectly holds shares is a PFIC (a lower-tier PFIC). Pursuant to
certain Proposed Treasury Regulations, a U.S. Holder would be treated as owning
his or its proportionate amount of any lower-tier PFIC shares, and generally
would be subject to the PFIC rules with respect to such indirectly-held PFIC
shares unless such U.S. Holder makes a timely QEF election with respect thereto.
The Company intends to make the necessary information available to U.S. Holders
to permit them to make (and maintain) QEF elections with respect to each
subsidiary of the Company that is a PFIC.

Under the Proposed Treasury Regulations, a U.S. Holder who does
not make a timely QEF election with respect to a lower-tier PFIC generally would
be subject to tax (and the PFIC interest charge) on (i) any excess distribution
deemed to have been received with respect to his or its lower-tier PFIC shares
and (ii) any gain deemed to arise from a so-called indirect disposition of
such shares. For this purpose, an indirect disposition of lower-tier PFIC shares
would generally include (i) a disposition by the Company (or an intermediate
entity) of lower-tier PFIC shares, and (ii) any other transaction resulting in a
diminution of the U.S. Holders proportionate ownership of the lower-tier PFIC,
including an issuance of additional common shares by the Company (or an
intermediate entity). Accordingly, each prospective U.S. Holder should be aware
that he or it could be subject to tax even if such U.S. Holder receives no
distributions from the Company and does not dispose of its common shares. The
Company strongly urges each prospective U.S. Holder to consult a tax advisor
with respect to the adverse rules applicable, under the Proposed Treasury
Regulations, to U.S. Holders of lower-tier PFIC shares.

Certain special, generally adverse, rules will apply with
respect to Registrant common shares while the Company is a PFIC unless the U.S.
Holder makes a timely QEF election. For example under Section 1298(b)(6) of the
Code, a U.S. Holder who uses PFIC stock as security for a loan (including a
margin loan) will, except as may be provided in regulations, be treated as
having made a taxable disposition of such shares.

- 63 -

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Controlled Foreign Corporation

If more than 50% of the total combined voting power of all
classes of shares entitled to vote or the total value of the shares of the
Company is owned, actually or constructively, by citizens or residents of the
United States, United States domestic partnerships or corporation, or estates or
trusts other than foreign estates or trusts (as defined by the Code Section
7701(a)(31)), each of which own, actually or constructively, 10% or more of the
total combined voting power of all classes of shares entitled to vote of the
Company (United States Shareholder), the Company could be treated as a
controlled foreign corporation (CFC) under Subpart F of the Code. This
classification would effect many complex results, one of which is the inclusion
of certain income of a CFC which is subject to current U.S. tax. The United
States generally taxes United States Shareholders of a CFC currently on their
pro rata shares of the Subpart F income of the CFC. Such United States
Shareholders are generally treated as having received a current distribution out
of the CFCs Subpart F income and are also subject to current U.S. tax on their
pro rata shares of increases in the CFCs earnings invested in U.S.
property. The foreign tax credit described above may reduce the U.S. tax on
these amounts. In addition, under Section 1248 of the Code, gain from the sale
or exchange of shares by a U.S. Holder of common shares of the Company which is
or was a United States Shareholder at any time during the five-year period
ending on the date of the sale or exchange is treated as ordinary income to the
extent of earnings and profits of the Company attributable to the shares sold or
exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign
corporation generally will not be treated as a PFIC with respect to United
States Shareholders of the CFC. This rule generally will be effective for
taxable years of United States Shareholders beginning after 1997 and for taxable
years of foreign corporations ending with or within such taxable years of United
States Shareholders. Special rules apply to United States Shareholders who are
subject to the special taxation rules under Section 1291 discussed above with
respect to a PFIC. Because of the complexity of Subpart F, a more detailed
review of these rules is outside of the scope of this discussion. The Company
does not believe that it currently qualifies as a CFC. However, there can be no
assurance that the Company will not be considered a CFC for the current or any
future taxable year.

10.F. Dividends and Paying Agents

Not Applicable.

10.G. Statement by Experts

Not Applicable.

10.H. Document on Display

The documents concerning the Company referred to in this Annual
Report may be viewed at Suite 1200, 1188 West Georgia Street, Vancouver, British
Columbia, Canada during normal business hours.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

None.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not Applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

- 64 -

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

Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES

The Company carried out an evaluation of the effectiveness of
the design and operation of the Companys disclosure controls and procedures as
of March 31, 2006 being the date of our most recently completed fiscal year.
Based upon that evaluation, our chief executive officer and our chief financial
officer concluded that the Companys disclosure controls and procedures are
effective in timely alerting management to material information relating to us
required to be included in our periodic SEC filings.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Securities Exchange Act of 1934 (the
Exchange Act) is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed our
reports filed under the Exchange Act is accumulated and communicated to
management, including our chief executive officer and chief financial officer to
allow timely decisions regarding required disclosure.

During our most recently completed fiscal year ended March 31,
2006, there were no changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably likely to affect, our
internal control over financial reporting.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not have an audit committee financial expert
serving on its audit committee. The Company has had some difficulty in
attracting financial experts to serve on its board of directors, due to the
Companys small size. The Company believes its financial statements are not
complex, and the Company does not view the retention of a financial expert as
critical to its further development. However, the Company is currently
considering appointing a director to the board and to the audit committee who
would be a financial expert.

ITEM 16B. CODE OF ETHICS

The Company has not formally adopted a written code of ethics.
The Company is reviewing the adoption of a formal code of ethics. The Company
has guided its conduct by the provisions of the British Columbia Business
Corporations Act and the securities legislation applicable to it. Due to its
size, management had not deemed it necessary to adopt a formal written code of
ethics at this time.

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

A. Audit Fees

The aggregate fees billed by the auditors of the Company were
$17,250 and $16,800 for the fiscal years ended March 31, 2005 and 2006,
respectively. These fees relate to the audit of the Companys financial
statements.

B. Audit-Related Fees

Nil

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C. Tax Fees

Nil

D. All Other Fees

Nil

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

Not Applicable.

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

Not Applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

This Annual Report on Form 20-F includes the Companys audited
financial statements for the years ended March 31, 2006 and 2005, including the
following:

1.         
 Independent Auditors Report of Amisano Hanson dated July 18, 2006.

2.          
Balance Sheets as at March 31, 2006 and March 31, 2005.

3.         
Statements of Operations for the year ended March 31, 2006 and 2005 and for the
period from June 19, 2003 (date of incorporation) to March 31, 2004.

4.           
Statements of Cash Flows for the year ended March 31, 2006 and 2005 and for the
period from June 19, 2003 (date of incorporation) to March 31, 2004.

5.            
Statement of Shareholders Equity for the period from June 19, 2003 (date of
incorporation) to March 31, 2006.

6.           
Notes to the Financial Statements.

ITEM 18. FINANCIAL STATEMENTS

The Company has elected to provide financial statements
pursuant to Item 17.

ITEM 19. EXHIBITS

The following exhibits are included in this Form 20-F:

- 66 -

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|EXHIBITNUMBER | DESCRIPTION OFEXHIBIT                                                                                                                                                           
|------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                 
|11.1          | Amended
        and Restated Option and Royalty Agreement among the Company, Golden Sands
        and AHL dated July 7, 2006.                                                   
|              |                                                                                                                                                                                 
|11.2          | Meridian
        Earn-in Agreement between the Company and Meridian dated July 31, 2006.                                                                                        
|              |                                                                                                                                                                                 
|11.3          | Malone
        Property Agreement between the Company and Newmont North America Exploration
        Ltd., dated April 17, 2006.                                                 
|              |                                                                                                                                                                                 
|12.1          | Certification
        of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002(1)                                                           
|              |                                                                                                                                                                                 
|12.2          | Certification
        of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002(1)                                                           
|              |                                                                                                                                                                                 
|13.1          | Certification
        of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350,
        as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1)
|              |                                                                                                                                                                                 
|13.2          | Certification
        of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350,
        as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1)

|(1) | Filed as an exhibit to this Annual Report on Form 20-F
      for the fiscal year ended March 31, 2006.
|--- | ------------------------------------------------------------------------------------------------------

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EVOLVING GOLD CORP.

(An Exploration Stage Company)

REPORT AND FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

---

|A PARTNERSHIP OF INCORPORATED PROFESSIONALS | AMISANO HANSON      
|------------------------------------------- | --------------------
|                                            | CHARTEREDACCOUNTANTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors, Evolving Gold Corp. (An Exploration
Stage Company)

We have audited the balance sheets of Evolving Gold Corp. as at
March 31, 2006 and 2005 and the statements of operations, cash flows and
shareholders equity for the years ended March 31, 2006 and 2005 and for the
period from June 19, 2003 (Date of Inception) to March 31, 2004. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, these financial statements present fairly, in
all material respects, the financial position of the Company as at March 31,
2006 and 2005 and the results of its operations and its cash flows for the years
ended March 31, 2006 and 2005 and for the period from June 19, 2003 (Date of
Inception) to March 31, 2004, in accordance with generally accepted accounting
principles in Canada.

|Vancouver, Canada | /s/AMISANO HANSON  
|----------------- | ---------------------
|July 18, 2006     | Chartered Accountants

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA  U.S.
REPORTING CONFLICT

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) when
the financial statements are affected by conditions and events that cast
substantial doubt on the Companys ability to continue as a going concern. The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a going concern that assumes the realization of assets
and discharge of liabilities in the normal course of business. As discussed in
Note 1 to the accompanying financial statements and in respect of the
accumulated losses from operations, substantial doubt about the Companys
ability to continuing as a going concern exists. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Our report to the shareholders dated July 18, 2006, is
expressed in accordance with Canadian reporting standards, which do not permit a
reference to such events and conditions in the auditors report when these are
adequately disclosed in the financial statements.

|Vancouver, Canada | /s/AMISANO HANSON  
|----------------- | ---------------------
|July 18, 2006     | Chartered Accountants

- 1 -

|750 WEST PENDER STREET, SUITE 604 | TELEPHONE: | 604-689-0188     
|--------------------------------- | ---------- | -----------------
|VANCOUVER CANADA                  | FACSIMILE: | 604-689-9773     
|V6C 2T7                           | E-MAIL:    | amishan@telus.net

---

EVOLVING GOLD CORP.(An Exploration Stage Company)
BALANCE SHEETS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|                                                          |   | 2006       |   |   | 2005     |  
|--------------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                          |   |            |   |   |          |  
|**ASSETS**                                                |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|Current                                                   |   |            |   |   |          |  
|Cash                                                      | $ | 222,953    |   | $ | 2,754    |  
|Other receivable                                          |   | 4,961      |   |   | 3,985    |  
|                                                          |   |            |   |   |          |  
|                                                          |   | 227,914    |   |   | 6,739    |  
|                                                          |   |            |   |   |          |  
|Equipment, net of accumulated depreciation
      of $44   |   | 1,187      |   |   | -        |  
|Mineral properties  Notes 3, 5 and 8, Schedule 1         |   | 737,297    |   |   | 216,140  |  
|                                                          |   |            |   |   |          |  
|                                                          | $ | 966,398    |   | $ | 222,879  |  
|                                                          |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|LIABILITIES                                               |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|Current                                                   |   |            |   |   |          |  
|Accounts payable and accrued
      liabilities  Note 5   | $ | 107,254    |   | $ | 140,450  |  
|Advance payable                                           |   | -          |   |   | 10,000   |  
|                                                          |   |            |   |   |          |  
|                                                          |   | 107,254    |   |   | 150,450  |  
|                                                          |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|SHAREHOLDERS' EQUITY                                      |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|Share capital  Notes 4, 5 and 8                          |   |            |   |   |          |  
|Authorized:                                               |   |            |   |   |          |  
|Unlimited number of common shares
      without par value |   |            |   |   |          |  
|Issued:                                                   |   |            |   |   |          |  
|10,269,842 shares (2005: 7,350,100
      shares)          |   | 1,713,844  |   |   | 498,600  |  
|Contributed surplus  Note 4                              |   | 290,415    |   |   | 128,165  |  
|Deficit accumulated during the exploration stage          |   | (1,145,115 | ) |   | (554,336 | )
|                                                          |   |            |   |   |          |  
|                                                          |   | 859,144    |   |   | 72,429   |  
|                                                          |   |            |   |   |          |  
|                                                          | $ | 966,398    |   | $ | 222,879  |  
|                                                          |   |            |   |   |          |  
|Nature and Continuance of Operations  Note 1             |   |            |   |   |          |  
|Commitments  Notes 3, 4 and 8                            |   |            |   |   |          |  
|Subsequent Events  Notes 3, 4 and 8                      |   |            |   |   |          |  

APPROVED BY THE DIRECTORS:

|Warren
      McIntyre | Director | Paul Cowley | Director
|----------------------- | -------- | ------------- | --------
|Warren McIntyre         |          | Paul Cowley   |         

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.(An Exploration Stage Company)
STATEMENTS OF OPERATIONS for the years ended March 31, 2006 and 2005
and for the period from June 19, 2003 (Date of Inception) to March 31, 2004
(Stated in Canadian Dollars)

|                                                    |   |            |   |   |              |   |   | June 19, 2003 |  
|--------------------------------------------------- | - | ---------- | - | - | ------------ | - | - | ------------- | -
|                                                    |   |            |   |   |              |   |   | (Date of      |  
|                                                    |   | Year ended |   |   | Inception)   |  
|                                                    |   | March 31,  |   |   | to March 31, |  
|                                                    |   | 2006       |   |   | 2005         |   |   | 2004          |  
|                                                    |   |            |   |   |              |   |   |               |  
|Expenses                                            |   |            |   |   |              |   |   |               |  
|Accounting                                          | $ | 47,852     |   | $ | 16,390       |   | $ | 5,603         |  
|Bank charges and interest                           |   | 1,593      |   |   | 920          |   |   | 223           |  
|Consulting  Note 5                                 |   | 51,605     |   |   | 35,264       |   |   | 20,500        |  
|Depreciation                                        |   | 44         |   |   | -            |   |   | -             |  
|Legal                                               |   | 55,715     |   |   | 30,820       |   |   | 21,450        |  
|Management fees  Note 5                            |   | 7,279      |   |   | 103,879      |   |   | 53,400        |  
|Office
      and miscellaneous                      |   | 13,713     |   |   | 4,689        |   |   | 635           |  
|Promotion, advertising
      and travel  Note 5    |   | 109,473    |   |   | 31,389       |   |   | 6,537         |  
|Rent and
      administration fees  Note 5         |   | 15,007     |   |   | 16,800       |   |   | 41,445        |  
|Stock-based compensation
       Note 4             |   | 224,925    |   |   | 128,165      |   |   | -             |  
|Transfer
      agent and filing fees                |   | 19,535     |   |   | 33,909       |   |   | 2,340         |  
|Write-down of exploration
      expenditures        |   | 44,038     |   |   | -            |   |   | -             |  
|                                                    |   |            |   |   |              |   |   |               |  
|Loss for the period before other item               |   | (590,779   | ) |   | (402,225     | ) |   | (152,133      | )
|                                                    |   |            |   |   |              |   |   |               |  
|Other item:                                         |   |            |   |   |              |   |   |               |  
|Interest
      income                               |   | -          |   |   | 7            |   |   | 15            |  
|                                                    |   |            |   |   |              |   |   |               |  
|Net loss for the period                             | $ | (590,779   | ) | $ | (402,218     | ) | $ | (152,118      | )
|                                                    |   |            |   |   |              |   |   |               |  
|Basic and diluted loss per
      share              | $ | (0.07      | ) | $ | (0.07        | ) | $ | N/A           |  
|                                                    |   |            |   |   |              |   |   |               |  
|Weighted average number of
      shares outstanding |   | 8,505,316  |   |   | 5,601,196    |   |   | 1             |  

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS for the years ended March 31, 2006 and 2005
and for the period from June 19, 2003 (Date of Inception) to March 31, 2004
(Stated in Canadian Dollars)

|                                                                       |   |            |   |   |              |   |   | June 19, 2003 |  
|---------------------------------------------------------------------- | - | ---------- | - | - | ------------ | - | - | ------------- | -
|                                                                       |   |            |   |   |              |   |   | (Date of      |  
|                                                                       |   | Year ended |   |   | Inception)   |  
|                                                                       |   | March 31,  |   |   | to March 31, |  
|                                                                       |   | 2006       |   |   | 2005         |   |   | 2004          |  
|                                                                       |   |            |   |   |              |   |   |               |  
|Operating Activities                                                   |   |            |   |   |              |   |   |               |  
|Net loss
      for the period                                          | $ | (590,779   | ) | $ | (402,218     | ) | $ | (152,118      | )
|Add items not affecting
      cash:                                    |   |            |   |   |              |   |   |               |  
|Stock-based compensation                                               |   | 224,925    |   |   | 128,165      |   |   | -             |  
|Special warrants issued for legal fees                                 |   | -          |   |   | -            |   |   | 10,000        |  
|Depreciation                                                           |   | 44         |   |   | -            |   |   | -             |  
|Write-down of mineral exploration expenditures                         |   | 44,038     |   |   | -            |   |   | -             |  
|Changes
      in non-cash working capital items related to operations: |   |            |   |   |              |   |   |               |  
|Other receivable                                                       |   | (976       | ) |   | (6           | ) |   | (3,979        | )
|Prepaid expenses                                                       |   | -          |   |   | 25,550       |   |   | (25,550       | )
|Accounts payable and accrued liabilities                               |   | 252,414    |   |   | 125,217      |   |   | 15,233        |  
|                                                                       |   |            |   |   |              |   |   |               |  
|                                                                       |   | (70,334    | ) |   | (123,292     | ) |   | (156,414      | )
|                                                                       |   |            |   |   |              |   |   |               |  
|Investing Activities                                                   |   |            |   |   |              |   |   |               |  
|Purchase
      of equipment                                            |   | (1,231     | ) |   | -            |   |   | -             |  
|Deferred exploration
      costs                                       |   | (147,729   | ) |   | (56,093      | ) |   | -             |  
|Acquisition of resource properties                                     |   | (173,466   | ) |   | (37,047      | ) |   | (17,000       | )
|                                                                       |   |            |   |   |              |   |   |               |  
|                                                                       |   | (322,426   | ) |   | (93,140      | ) |   | (17,000       | )
|                                                                       |   |            |   |   |              |   |   |               |  
|Financing Activities                                                   |   |            |   |   |              |   |   |               |  
|Issue of common shares
      for cash, net of share issue expense      |   | 622,959    |   |   | 96,000       |   |   | 100           |  
|Special
      warrants                                                 |   | -          |   |   | -            |   |   | 286,500       |  
|Advance payable                                                        |   | (10,000    | ) |   | 10,000       |   |   | -             |  
|                                                                       |   |            |   |   |              |   |   |               |  
|                                                                       |   | 612,959    |   |   | 106,000      |   |   | 286,600       |  
|                                                                       |   |            |   |   |              |   |   |               |  
|Increase (decrease) in cash during the period                          |   | 220,199    |   |   | (110,432     | ) |   | 113,186       |  
|                                                                       |   |            |   |   |              |   |   |               |  
|Cash, beginning of the period                                          |   | 2,754      |   |   | 113,186      |   |   | -             |  
|                                                                       |   |            |   |   |              |   |   |               |  
|Cash, end of the period                                                | $ | 222,953    |   | $ | 2,754        |   | $ | 113,186       |  
|                                                                       |   |            |   |   |              |   |   |               |  
|Supplemental disclosure of cash flow
      information:                |   |            |   |   |              |   |   |               |  
|Exchange
      of special warrants for common shares                   | $ | -          |   | $ | 306,500      |   | $ | -             |  
|Shares issued for share
      issue expense                            |   | 29,100     |   |   | -            |   |   | -             |  
|Shares
      issued for acquisition of mineral property                |   | 244,000    |   |   | 96,000       |   |   | 10,000        |  
|Shares issued for debt
      settlement                                |   | 285,610    |   |   | -            |   |   | -             |  
|Warrants
      issued for finders fee                                 |   | 11,640     |   |   | -            |   |   | -             |  
|                                                                       |   |            |   |   |              |   |   |               |  
|                                                                       | $ | 570,350    |   | $ | 402,500      |   | $ | 10,000        |  

SEE ACCOMPANYING NOTES

---

EVOLVINGGOLDCORP.(An
Exploration Stage Company) STATEMENT OF SHAREHOLDERS EQUITY for the
period from June 19, 2003 (Date of Inception) to March 31, 2006 (Stated
in Canadian Dollars)

|                                                           |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   | Deficit     |   |   |          |  
|---------------------------------------------------------- |  | --------- |  | - | ------- |  |  | ---------- | - | - | -------- | - | - | ----------- |  | - | ----------- | - | - | -------- | -
|                                                           |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   | Accumulated |   |   |          |  
|                                                           |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   | During the  |   |   |          |  
|                                                           |  |           |  |   |         |  |  | Special    |   |   |          |   |   | Contributed |  |   | Exploration |   |   |          |  
|                                                           |  | Shares    |  |   | Amount  |  |  | Warrants   |   |   | Amount   |   |   | Surplus     |  |   | Stage       |   |   | Total    |  
|                                                           |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   |             |   |   |          |  
|Issuance of
      shares                     -
      at $1 |  | 100       |  | $ | 100     |  |  | -          |   | $ | -        |   | $ | -           |  | $ | -           |   | $ | 100      |  
|Issuance of A
      warrants          - at
      $0.01   |  | -         |  |   | -       |  |  | 1,400,000  |   |   | 14,000   |   |   | -           |  |   | -           |   |   | 14,000   |  
|Issuance of B
      warrants           - at
      $0.05  |  | -         |  |   | -       |  |  | 3,250,000  |   |   | 162,500  |   |   | -           |  |   | -           |   |   | 162,500  |  
|Issuance of F
      warrants           - at
      $0.10  |  | -         |  |   | -       |  |  | 1,100,000  |   |   | 110,000  |   |   | -           |  |   | -           |   |   | 110,000  |  
|Issuance of L
      warrants           - at $0.05        |  | -         |  |   | -       |  |  | 200,000    |   |   | 10,000   |   |   | -           |  |   | -           |   |   | 10,000   |  
|Issuance of P warrants for mineral property              |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   |             |   |   |          |  
|acquisition                        
          - $0.05      |  | -         |  |   | -       |  |  | 200,000    |   |   | 10,000   |   |   | -           |  |   | -           |   |   | 10,000   |  
|Net loss for the period ended March 31, 2004               |  | -         |  |   | -       |  |  | -          |   |   | -        |   |   | -           |  |   | (152,118    | ) |   | (152,118 | )
|                                                           |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   |             |   |   |          |  
|Balance, March 31, 2004                                    |  | 100       |  |   | 100     |  |  | 6,150,000  |   |   | 306,500  |   |   | -           |  |   | (152,118    | ) |   | 154,482  |  
|Issue of shares                                            |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   |             |   |   |          |  
|Pursuant to conversion of special
      warrants           |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   |             |   |   |          |  
|Series A warrants                                        |  | 1,400,000 |  |   | 14,000  |  |  | (1,400,000 | ) |   | (14,000  | ) |   | -           |  |   | -           |   |   | -        |  
|Series B warrants                                        |  | 3,250,000 |  |   | 162,500 |  |  | (3,250,000 | ) |   | (162,500 | ) |   | -           |  |   | -           |   |   | -        |  
|Series F warrants                                        |  | 1,100,000 |  |   | 110,000 |  |  | (1,100,000 | ) |   | (110,000 | ) |   | -           |  |   | -           |   |   | -        |  
|Series L warrants                                        |  | 200,000   |  |   | 10,000  |  |  | (200,000   | ) |   | (10,000  | ) |   | -           |  |   | -           |   |   | -        |  
|Series P warrants                                        |  | 200,000   |  |   | 10,000  |  |  | (200,000   | ) |   | (10,000  | ) |   | -           |  |   | -           |   |   | -        |  
|Pursuant to resource property acquisition                  |  |           |  |   |         |  |  |            |   |   |          |   |   |             |  |   |             |   |   |          |  
|- at $0.16                                                 |  | 600,000   |  |   | 96,000  |  |  | -          |   |   | -        |   |   | -           |  |   | -           |   |   | 96,000   |  
|Pursuant to private placement  - at $0.16                  |  | 600,000   |  |   | 96,000  |  |  | -          |   |   | -        |   |   | -           |  |   | -           |   |   | 96,000   |  
|Stock-based compensation charge                            |  | -         |  |   | -       |  |  | -          |   |   | -        |   |   | 128,165     |  |   | -           |   |   | 128,165  |  
|Net loss for the year ended March 31, 2005                 |  | -         |  |   | -       |  |  | -          |   |   | -        |   |   | -           |  |   | (402,218    | ) |   | (402,218 | )

/contd

SEE ACCOMPANYING NOTES

---

| | EVOLVING GOLD CORP.                                                           | Continued
| | ----------------------------------------------------------------------------- | ---------
| | (An Exploration Stage Company)                                                |          
| | STATEMENT OF SHAREHOLDERS EQUITY                                             |          
| | for the period from June 19, 2003 (Date of
      Inception) to March 31, 2006 |          
| | (Stated in Canadian Dollars)                                                  |          

|                                                      |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   | Deficit     |   |   |          |  
|----------------------------------------------------- |  | ---------- |  | - | --------- | - |  | -------- |  | - | ------ |  | - | ----------- | - | - | ----------- | - | - | -------- | -
|                                                      |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   | Accumulated |   |   |          |  
|                                                      |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   | During the  |   |   |          |  
|                                                      |  |            |  |   |           |   |  | Special  |  |   |        |  |   | Contributed |   |   | Exploration |   |   |          |  
|                                                      |  | Shares     |  |   | Amount    |   |  | Warrants |  |   | Amount |  |   | Surplus     |   |   | Stage       |   |   | Total    |  
|                                                      |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   |             |   |   |          |  
|                                                      |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   |             |   |   |          |  
|Balance, March 31, 2005                               |  | 7,350,100  |  |   | 498,600   |   |  | -        |  |   | -      |  |   | 128,165     |   |   | (554,336    | ) |   | 72,429   |  
|Issuance of shares                                    |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   |             |   |   |          |  
|Pursuant to resource
      property acquisition       |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   |             |   |   |          |  
|- at $0.61                                            |  | 400,000    |  |   | 244,000   |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | 244,000  |  
|Pursuant to debt settlement  
        - at $0.66      |  | 432,742    |  |   | 285,610   |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | 285,610  |  
|Pursuant to private placement  - at
      $0.50       |  | 290,000    |  |   | 145,000   |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | 145,000  |  
|Pursuant to private placement  -
      at $0.30       |  | 1,270,000  |  |   | 381,000   |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | 381,000  |  
|Pursuant to conversion of options                     |  | 300,000    |  |   | 79,500    |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | 79,500   |  
|Pursuant to conversion
      of warrants              |  | 130,000    |  |   | 32,500    |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | 32,500   |  
|Stock-based compensation charge                       |  | -          |  |   | -         |   |  | -        |  |   | -      |  |   | 224,925     |   |   | -           |   |   | 224,925  |  
|Transfer from contributed surplus on
      conversion |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   |             |   |   |          |  
|of stock options                                      |  | -          |  |   | 74,315    |   |  | -        |  |   | -      |  |   | (74,315     | ) |   | -           |   |   | -        |  
|Share issue expense  Cash                            |  | -          |  |   | (15,041   | ) |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | (15,041  | )
|Finders fees                                          |  | 97,000     |  |   | -         |   |  | -        |  |   | -      |  |   | -           |   |   | -           |   |   | -        |  
|Finders warrants                                      |  | -          |  |   | (11,640   | ) |  | -        |  |   | -      |  |   | 11,640      |   |   | -           |   |   | -        |  
|Net loss for the year ended March 31, 2006            |  | -          |  |   | -         |   |  | -        |  |   | -      |  |   | -           |   |   | (590,779    | ) |   | (590,779 | )
|                                                      |  |            |  |   |           |   |  |          |  |   |        |  |   |             |   |   |             |   |   |          |  
|Balance, March 31, 2006                               |  | 10,269,842 |  | $ | 1,713,844 |   |  | -        |  | $ | -      |  | $ | 290,415     |   | $ | (1,145,115  | ) | $ | 859,144  |  

SEE ACCOMPANYING NOTES

---

| | EVOLVING GOLD CORP.                               | Schedule 1
| | ------------------------------------------------- | ----------
| | (An Exploration Stage Company)                    |           
| |                                                   |           
| |                                                   |           
| | SCHEDULE OF MINERAL PROPERTIES                    |           
| | for the years ended March 31,
      2006 and 2005 |           
| | (Stated in Canadian
      Dollars)                |           

Canada
    
    
    United StatesMurray
    
    
    Voisey Bay
    
    
    Black Hills
    
    
    WinnemucaProperty
    
    
    Property
    
    
    Property
    
    
    Property
    
    
    TotalBalance, March 31, 2004
    $
    27,000
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    27,000Acquisition costsCash
    
    -
    
    
    -
    
    
    -
    
    
    37,046
    
    
    37,046Special
      warrants
    
    -
    
    
    -
    
    
    -
    
    
    96,000
    
    
    96,000-
    
    
    -
    
    
    -
    
    
    133,046
    
    
    133,046Deferred exploration costsDrafting
    
    -
    
    
    -
    
    
    -
    
    
    314
    
    
    314Field expenses and other
    
    -
    
    
    -
    
    
    -
    
    
    5,300
    
    
    5,300Geological consulting
    
    2,411
    
    
    -
    
    
    -
    
    
    12,691
    
    
    15,102Staking and recording
      costs
    
    5,206
    
    
    -
    
    
    -
    
    
    30,172
    
    
    35,3787,617
    
    
    -
    
    
    -
    
    
    48,477
    
    
    56,094Balance, March 31, 2005
    
    34,617
    
    
    -
    
    
    -
    
    
    181,523
    
    
    216,140Acquisition costsCash
    
    -
    
    
    35,000
    
    
    -
    
    
    61,525
    
    
    96,525Advance royalty payments
    
    -
    
    
    -
    
    
    -
    
    
    11,608
    
    
    11,608Shares
    
    -
    
    
    -
    
    
    -
    
    
    244,000
    
    
    244,000Legal
    
    
    
    
    1,647
    
    
    
    
    
    37,949
    
    
    39,596-
    
    
    36,647
    
    
    -
    
    
    355,082
    
    
    391,729Deferred exploration costsDrafting
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Field
      expenses and other
    
    3,381
    
    
    -
    
    
    -
    
    
    -
    
    
    3,381Geological consulting 
      Note 5
    
    -
    
    
    14,731
    
    
    6,040
    
    
    60,011
    
    
    80,782Staking
      and recording costs  Note 5
    
    -
    
    
    7,440
    
    
    -
    
    
    81,863
    
    
    89,3033,381
    
    
    22,171
    
    
    6,040
    
    
    141,874
    
    
    173,466Write-down of properties
    
    (37,998
    )
    
    -
    
    
    (6,040
    )
    
    -
    
    
    (44,038
    )Balance, March 31, 2006
    $
    -
    
    $
    58,818
    
    $
    -
    
    $
    678,479
    
    $
    737,297


SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 1 | Nature and Continuance of
      Operations
|------ | ------------------------------------------

Evolving Gold Corp. (the Company)
was incorporated as 6109527 Canada Ltd. on June 19, 2003, under the Canada
Business Corporation Act and is in the business of acquiring, exploring and
evaluating mineral properties. On September 30, 2003, the Company changed its
name to Evolving Gold Corp. At March 31, 2006, the Company was in the
exploration stage and had interests in mineral properties located in the
Northwest Territories and Nevada, United States of America.

The recoverability of amounts shown
for mineral properties is dependent upon the discovery of economically
recoverable reserves, confirmation of the Companys interest in the underlying
mineral claims, the ability of the Company to obtain financing to complete their
development, and future profitable production or disposition thereof.

These financial statements have been
prepared in accordance with generally accepted accounting principles applicable
to a going concern, which assumes that the Company will be able to meet its
obligations and continue its operations for its next fiscal year. Realization
values may be substantially different from carrying values as shown and these
financial statements do not give effect to adjustments that would be necessary
to the carrying values and classification of assets and liabilities should the
Company be unable to continue as a going concern. At March 31, 2006, the Company
does not have sufficient cash to fund its operations for the next fiscal year,
has not yet achieved profitable operations, has accumulated losses of $1,145,115
since its inception and expects to incur further losses in the development of
its business, all of which casts substantial doubt about the Companys ability
to continue as a going concern. The Companys ability to continue as a going
concern is dependent upon its ability to generate future profitable operations
and/or to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due. The
Company anticipates that additional funding will be in the form of equity
financing from the sale of common shares. The Company may also seek to obtain
short-term loans from the directors of the company. There are no current
arrangements in place for equity funding or short-term loans.

|Note 2 | Summary of Significant
      Accounting Policies
|------ | ------------------------------------------------

The financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles in Canada. Differences with respect to accounting principles
generally accepted in the United States of American are described in Note 10.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates, which have been made using careful judgement.
Actual results may vary from these estimates.

The financial statements, have in
managements opinion, been properly prepared within the framework of the
significant accounting policies summarized below:

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 2 | Summary of Significant
      Accounting Policies (contd)
|------ | ----------------------------------------------------------

| | a) | Mineral Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company defers the cost of acquiring, maintaining its
      interest, exploring and developing mineral properties until such time as
      the properties are placed into production, abandoned, sold or considered
      to be impaired in value. Costs of producing properties will be amortized
      on a unit of production basis and costs of abandoned properties are
      written-off. Proceeds received from the sale of interests in mineral
      properties are credited to the carrying value of the mineral properties,
      with any excess included in operations. Write-downs due to impairment in
      value are charged to operations.                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company is in the process of exploring and developing
      its mineral properties and has not yet determined the amount of reserves
      available. Management reviews the carrying value of mineral properties on
      a periodic basis and will recognize impairment in value based upon current
      exploration results, the prospect of further work being carried out by the
      Company, the assessment of future probability of profitable revenues from
      the property or from the sale of the property. Amounts shown for
      properties represent costs incurred net of write-downs and recoveries, and
      are not intended to represent present or future values.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Environmental expenditures that relate to current
      operations are expensed or capitalized as appropriate. Expenditures that
      relate to an existing condition caused by past operations and which do not
      contribute to current or future revenue generation are expensed.
      Liabilities are recorded when environmental assessments and/or remedial
      efforts are probable, and the costs can be reasonably estimated.
      Generally, the timing of these accruals coincides with the earlier of
      completion of a feasibility study or the Companys commitment to a plan of
      action based on the then known facts.                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company follows the asset and liability method of
      accounting for income taxes. Under this method, current income taxes are
      recognized for the estimated income taxes payable for the current period.
      Future income tax assets and liabilities are recognized for temporary
      differences between the tax and accounting basis of assets and liabilities
      as well as for the benefit of losses available to be carried forward to
      future years for tax purposes only if it is more likely than not that they
      can be realized.                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | c) | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company has a stock-based compensation plan as
      disclosed in Note 4, whereby stock options are granted in accordance with
      the policies of regulatory authorities. The fair value of all share
      purchase options are expensed over their vesting period with a
      corresponding increase to contributed surplus. Upon exercise of share
      purchase options, the consideration paid by the option holder, together
      with the amount previously recognized in contributed surplus, is recorded
      as an increase to share capital.                                                                                                                              

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 2 | Summary of Significant
      Accounting Policies (contd)
|------ | ----------------------------------------------------------

| | c) | Stock Based Compensation (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company uses the Black-Scholes option valuation model
      to calculate the fair value of share purchase options at the date of
      grant. Option pricing models require the input of highly subjective
      assumptions, including the expected price volatility. Changes in these
      assumptions can materially affect the fair value estimate and, therefore,
      the existing models do not necessarily provide a reliable single measure
      of the fair value of the Companys share purchase options.                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | d) | Basic and Diluted Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Basic loss per share is computed by dividing the loss for
      the year by the weighted average number of common shares outstanding
      during the year. Diluted loss per share reflects the potential dilution
      that could occur if potentially dilutive securities were exercised or
      converted to common stock. The dilutive effect of options and warrants and
      their equivalent is computed by application of the treasury stock method
      and the effect of convertible securities by the if converted method.
      Fully dilutive amounts are not presented when the effect of the
      computations are anti-dilutive due to the losses incurred. Accordingly,
      there is no difference in the amounts presented for basic and diluted loss
      per share.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | e) | Exploration Stage Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company is an exploration stage company as defined in
      Statement of Financial Accounting Standards No. 7 Accounting and
      Reporting by Development Stage Enterprises. The Company is devoting its
      present efforts to exploring and developing its mineral properties. All
      losses accumulated since inception has been considered as part of the
      Companys exploration stage activities.                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | f) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The carrying value of the Companys financial
      instruments, consisting of cash and accounts payable and accrued
      liabilities approximate their fair value due to the short-term maturity of
      such instruments. Unless otherwise noted, it is managements opinion that
      the Company is not exposed to significant interest, currency or credit
      risks arising from these financial instruments.                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | g) | Equipment and Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Equipment is carried at cost and consist of a computer.
      Depreciation is calculated on the straight-line method over the estimated
      useful life of the asset, being three years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 3 | Mineral Properties
|------ | ------------------

| | a) | Murray Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Pursuant to a property option agreement dated July 22,
      2003 and amended September 16, 2004, between the Company and International
      Zimtu Technologies Inc., a public company, the Company has the option to
      earn a 70% undivided interest in certain mineral claims (the Property),
      located 78 kilometres northeast of Yellowknife, Northwest
    Territories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | During the year ended March 31, 2006, the Company
      abandoned this option and wrote-off $37,998 in resource property
    costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | Voisey Bay Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Pursuant to an option agreement dated May 4, 2005 between
      the Company and Geocore Exploration Inc. the Company was granted the right
      to acquire a 60% interest in a licence to a mine and explore 192 claims
      located in Labrador, Canada in exchange for $35,000 (paid) and the
      obligation to incur exploration expenditures of $200,000 by October 31,
      2006 ($22,171 incurred at March 31, 2006) and an additional $300,000 by
      October 31, 2007. The Company also has the option to purchase an
      additional 20% interest in this property in exchange for a further
      exploration expenditure commitment of $500,000 by October 31, 2008 and
      delivering notice of intent to exercise the additional 20% option. The
      property is subject to a 1.50% net smelter return. The Company may
      purchase up to 50% of the royalty by paying $250,000 for each 0.25% of the
      royalty.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | c) | Winnemuca Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Pursuant to an option agreement dated December 3, 2004
      and amended January 7, 2005, February 25, 2005, April 21, 2005, January
      26, 2006, April 27, 2006, June 16, 2006 and July 7, 2006, with Golden
      Sands Exploration Inc. (Golden) and its subsidiary company AHL Holdings
      Ltd. (AHL), the company was granted the right to acquire a 100% interest
      in unpatented mining claims (referred to as Golden Arc claims), located in
      Humbolt County, Nevada (the Winnemuca Property). In addition the Company
      has staked additional unpatented mining claims.                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In order to vest its interest in the Winnemuca Property
      the Company must make aggregate cash payments to Golden of US$70,000,
      issue 1,800,000 shares to Golden (or its nominee), incur exploration
      expenditures of US$4,000,000 and make advance royalty payments as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | a)        Cash
      Payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| | - | US $80,000 (paid) (including US
      $10,000 for extension agreement);
| | - | -----------------------------------------------------------------------

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 3 | Mineral Properties (contd)
|------ | ----------------------------
|       |                             
|       | c)                          
|       |                             
|       |                             

| | - | 900,000 shares; (issued)                      
| | - | ----------------------------------------------
| | - | 400,000 shares on May 16, 2006, (issued);     
| | - | 500,000 shares on or before December 31, 2007;

| | c)  | Various legal costs     
| | --- | ------------------------
| |     |                         
| |     | -                       
| |     |                         
| | d)  | Exploration Expenditures
| |     |                         
| |     | -                       
| |     | -                       
| |     | -                       
| |     |                         
| | iv) | Advance Royalty Payments
| |     |                         
| |     | -                       
| |     | -                       
| |     | -                       
| |     | -                       

All advance royalty payments will be
deducted from the net smelter return royalty payments otherwise needed to be
made.

The Company must pay for a
pre-feasibility study and have it delivered to Golden by June 30, 2009. The
Company must also prepare a technical report and an exploration expense report
and deliver this to Golden with all relevant data, information and reports by
July 31, 2006.

In addition, a finders fee of 100,000
shares was paid by the Company in December 2004 in connection with this
transaction.

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 3 | Mineral Properties
      (contd)
|------ | ----------------------------------

| | c) | Winnemuca Property (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The Winnemuca Property is subject to a 2% net smelter
      return (NSR). With respect to the original Golden Arc unpatented mineral
      claims, the Company may purchase the NSR for US $1,000,000 per 1% or an
      aggregate of US $2,000,000. No agreement exists for such purchase of the
      NSR on the remaining mineral claims.                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Pursuant to a Letter Agreement between Evolving and
      Meridian Gold Inc. (subsequently assigned to Meridan Minerals Corp.
      (Meridian)) dated September 22, 2005, Evolving agreed to grant Meridian
      an earn-in to acquire, directly or indirectly, an undivided 70% interest
      in Evolvings option to purchase 100% of the right, title and interest in
      the Winnemucca Claims. In May 2006 the earn-in agreement was prepared and
      is not as yet signed by Meridian.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | To complete the earn-in Meridian must make the
      following:                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | - | Cash payments of US$80,000 on closing, and an additional
      US$80,000, US$100,000 and US$240,000 on or before December 31, 2006,
      December 31, 2007 and December 31, 2008 respectively.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                
| | - | Fund exploration expenditures aggregating US$ 500,000 on
      or before December 31, 2006.                                                                                                    
| |   |                                                                                                                                                                                                
| | - | Fund exploration expenditures of US$ 1,500,000 on or
      before December 31, 2007.                                                                                                           
| |   |                                                                                                                                                                                                
| | - | Fund exploration expenditures of an additional US$
      2,000,000 on or before December 31, 2008.                                                                                             

| |    | Upon Meridian satisfying its obligations and the
      successful completion of the earn-in, Meridian and Evolving will form a
      joint venture for purposes of carrying out the project.                                                                                                                         
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                      
| | d) | Black Hills Property                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                      
| |    | The Company incurred data acquisition and geological
      costs on this property located in the United States. During the year ended
      March 31, 2006, the Company wrote-off resource property costs totalling
      $6,040 (2005: $Nil) as the Company is not planning any further work on
      this property.

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 4 | Share Capital Note 8                                                                                                             
|------ | ----------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                   
|       | Escrow Shares                                                                                                                     
|       |                                                                                                                                   
|       | As at March 31, 2006, 598,215
      shares were held in escrow. The schedule of release for the escrow shares
      is as follows:

199,405
    shares on March 31,
      2006, (subsequently released)199,405
    shares on September 30,
      2006199,405
    shares on March 31,
      2007598,215


Commitments:

Warrants

In May 2005 the Company completed a
shares for debt issue of 432,742 units at a price of $0.66 per unit for
proceeds of $285,610. Each unit consists of one common share and one share
purchase warrant. Each warrant entitles the holder thereof the right to purchase
one additional common share of the Company at a price of $0.82 per share to May
25, 2007.

In July 2005, 40,000 warrants were
exercised at $0.25 per share for proceeds of $10,000.

In September 2005, the Company
completed a non-brokered private placement of 290,000 units at $0.50 per unit
resulting in proceeds of $145,000. Each unit was comprised of one common share
and one share purchase warrant. Each warrant will entitle the holder to purchase
one common share of the Company at a price of $0.55 per share until September
14, 2007.

In January 2006, the Company completed
a private placement of 1,270,000 units at $0.30 per unit resulting in proceeds
of $381,000. Each unit was comprised of one common share and one share purchase
warrant. Each warrant will entitle the holder to purchase one common share of
the Company at a price of $0.40 per share until January 18, 2008.

The Company applied the residual
approach and allocated the total proceeds of $526,000 to the common shares and
$nil to the attached warrants to the private placements. Finders fees for the
January, 2006 private placement were paid in cash of $ 4,500 and by the issue of
97,000 units. In addition, an additional 97,000 warrants were issued which
entitles the agent to purchase 97,000 shares at $0.40 per share for a period of
two years. The fair value of these warrants is $11,640 as determined using the
same option pricing model and assumptions used for share purchase options. This
amount has been charged to share issue costs and credited to contributed
surplus.

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 4 | Share Capital Note 8  (contd)                                                                                                                                                   
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                    
|       | Commitments:  (contd)                                                                                                                                                            
|       |                                                                                                                                                                                    
|       | Warrants (contd)                                                                                                                                                                 
|       |                                                                                                                                                                                    
|       | In February 2006, 90,000 warrants were exercised at $0.25
      per share for proceeds of $22,500.                                                                                 
|       |                                                                                                                                                                                    
|       | At March 31, 2006, there were 2,656,742 share purchase
      warrants outstanding entitling the holders thereof the right to purchase
      one common share for each warrant held:

Number of Shares
    Exercise Price
    Expiry Date470,000
    $0.25
    January 10, 2007432,742
    $0.82
    May 25, 2007290,000
    $0.55
    September 14, 20071,464,000
    $0.40
    January 18, 20082,656,742


Stock Option Plan and Stock-based
Compensation

A summary of the status of the stock
option plan as of March 31, 2006 and 2005 and changes during the years then
ended is presented below:

| |                                  |  | 2006      |   |   | 2005     | 
| | -------------------------------- |  | --------- | - | - | -------- | 
| |                                  |  |           |   |   | Weighted | 
| |                                  |  |           |   |   | Average  | 
| |                                  |  | Number of |   |   | Exercise | 
| |                                  |  | Options   |   |   | Price    | 
| |                                  |  |           |   |   |          | 
| | Outstanding, beginning of period |  | 550,000   |   | $ | 0.26     | 
| | Granted                          |  | 485,000   |   |   | 0.61     | 
| | Cancelled                        |  | (150,000  | ) |   | 0.65     | 
| | Exercised                        |  | (300,000  | ) |   | 0.26     | 
| |                                  |  |           |   |   |          | 
| | Outstanding and exercisable, end |  |           |   |   |          | 
| | of year                          |  | 585,000   |   | $ | 0.44     | 

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 4 | Share Capital Note 8 
      (contd)                                         
|------ | -------------------------------------------------------------------------------
|       |                                                                                
|       | Details of stock options
      outstanding as at March 31, 2006 are as follows:

Number of Shares
    Exercise Price
    Expiry Date250,000
    $0.25
    September 15, 2009185,000
    $0.82
    May 16, 2009150,000
    $0.30
    January 20, 2011585,000


The Company established a share
purchase option plan (the Plan) in September 2004. The Board of Directors
administers the Plan, pursuant to which the Board of Directors may grant from
time to time incentive stock options up to an aggregate maximum of 10% of the
issued and outstanding shares of the Company to directors, officers, employees,
consultants or advisors. All options granted under the Plan shall expire not
later than the fifth anniversary of the date the options were granted.

The exercise price of an option is
determined by the Board of Directors, but shall not be less than the market
price of the common shares of the Company on the CNQ on the last business day
before the date on which the options are granted, less any discount permitted by
the rules of the exchange. Vesting and terms are at the discretion of the Board
of Directors.

During the year ended March 31, 2006,
the Company granted options to directors and two consultants for 185,000,
150,000 and 150,000 shares pursuant to the Plan exercisable at $0.82, $0.65 and
$0.30 per share respectively.

During the year ended March 31, 2006,
the Company recorded stock-based compensation expense of $224,925 (2005:
$128,265) and transferred $74,315 of stock-based compensation that had
previously been recorded as contributed surplus, to share capital which related
to exercised options.

The weighted fair value of the share
purchase options granted during the year ended March 31, 2006 of $0.46 per
option (2005: $0.23) is estimated using an option pricing model with the
following assumptions:

2006
    2005Average risk-free interest
      rate
    3.4% to 3.8%
    3.6% to 4.0%Expected life
    4.0 to 5.0 years
    5.0 yearsExpected volatility
    111% to 125%
    138% to 155%Expected dividends
    Nil
    Nil


---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 5 | Related Party Transactions                                                                                                                       
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                  
|       | During the periods ended March 31, the Company incurred
      charges to a significant shareholder and directors of the Company as
      follows:

| |                                    |   |            |  |   |               |  |   | June 19, 2003 | 
| | ---------------------------------- | - | ---------- |  | - | ------------- |  | - | ------------- | 
| |                                    |   |            |  |   |               |  |   | (Date of      | 
| |                                    |   | Year ended |  |   | Inception) to | 
| |                                    |   | March 31,  |  |   | March 31,     | 
| |                                    |   | 2006       |  |   | 2005          |  |   | 2004          | 
| |                                    |   |            |  |   |               |  |   |               | 
| | Consulting                         | $ | 40,396     |  | $ | -             |  | $ | 10,500        | 
| | Management fees                    |   | 7,279      |  |   | 70,000        |  |   | 52,400        | 
| | Promotion and advertising          |   | 2,442      |  |   | 450           |  |   | 2,500         | 
| | Rent and administration fees       |   | 9,000      |  |   | 4,050         |  |   | 41,445        | 
| | Deferred exploration costs         |   |            |  |   |               |  |   |               | 
| | - geological consulting            |   | 25,000     |  |   | -             |  |   | -             | 
| | - staking
      cost and recording |   | 82,505     |  |   | -             |  |   | -             | 
| |                                    |   |            |  |   |               |  |   |               | 
| |                                    | $ | 166,622    |  | $ | 74,500        |  | $ | 106,845       | 

|       | Accounts payable and accrued liabilities includes $64,257
      (2005: $52,500) due to a significant shareholder and a director of the
      Company.                                                                                                                                                      
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                            
|       | During the year ended March 31, 2006, the Company issued
      392,727 common shares to directors of the Company pursuant to exercise of
      warrants and options and debt settlement at various prices for total
      proceeds of $148,500.                                                            
|       |                                                                                                                                                                                                                                                                                                            
|       | During the year ended March 31, 2005, the Company issued
      150,000 units at a price of $0.16 per unit for total proceeds of $24,000
      to directors of the Company.                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                            
|Note 6 | Corporation Income Taxes                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                            
|       | The Company has accumulated a total of $96,816 in
      Canadian development and exploration resource expenditures and $520,519 in
      foreign exploration and development expenses. These amounts are available
      to carry forward and offset future taxable income at various rates per
      year.
|       |                                                                                                                                                                                                                                                                                                            
|       | The Company has accumulated non-capital losses totalling
      $800,809 that can be used to offset taxable income of future years. The
      non-capital losses expire as follows:                                                                                                                         

2011
    $
    152,1182015
    
    274,0532016
    
    374,638$
    800,809


---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 6 | Corporation Income Taxes
      (contd)                                                  
|------ | ------------------------------------------------------------------------------------------
|       |                                                                                           
|       | The significant components of the
      Companys future income tax assets are as follows:

| |                                    |   | 2006     |   |   | 2005     |  
| | ---------------------------------- | - | -------- | - | - | -------- | -
| |                                    |   |          |   |   |          |  
| | Non-capital losses carried forward | $ | 276,199  |   | $ | 151,802  |  
| | Temporary differences              |   | 12,194   |   |   | -        |  
| | Resource property                  |   | 15,189   |   |   | -        |  
| | Less: valuation allowance          |   | (303,582 | ) |   | (151,802 | )
| |                                    |   |          |   |   |          |  
| |                                    | $ | -        |   | $ | -        |  

|       | The Company has recorded a valuation allowance against
      its future income tax assets based on the extent to which it is more
      likely than not that sufficient taxable income will be realized in the
      future to utilize all the future tax assets.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                  
|Note 7 | Segmented Information                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                  
|       | The Company operates in one reportable operating segment,
      being the exploration and evaluation of mineral properties for
      development. Geographical information is as follows:                                                                        

| |              |   |                       |   |   |               |   |   |          |   |   |               |  |   | June 19, 2003       |  
| | ------------ | - | --------------------- | - | - | ------------- | - | - | -------- | - | - | ------------- |  | - | ------------------- | -
| |              |   |                       |   |   |               |   |   |          |   |   |               |  |   | (Date of Inception) |  
| |              |   | Year ending March 31, |   |   | to March 31,  |  
| |              |   | 2006                  |   |   | 2005          |   |   | 2004     |  
| |              |   | Canada                |   |   | United States |   |   | Canada   |   |   | United States |  |   | Canada              |  
| |              |   |                       |   |   |               |   |   |          |   |   |               |  |   |                     |  
| | Net loss     | $ | (584,379              | ) | $ | (6,040        | ) | $ | (402,218 | ) | $ | -             |  | $ | (152,118            | )
| |              |   |                       |   |   |               |   |   |          |   |   |               |  |   |                     |  
| | Total Assets | $ | 287,919               |   | $ | 678,479       |   | $ | 41,356   |   | $ | 181,523       |  |   |                     |  

|Note 8 | Subsequent Events Note 4    
|------ | -----------------------------
|       |                              
|       | Subsequent to March 31, 2006:

| | a) | On April 4, 2006, the Company granted 580,000 share
      purchase options to directors and consultants exercisable at $0.36 per
      share until April 7, 2011.                                                                                                                                                                                                                                                                                                                                     
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b) | On April 17, 2006 the Company entered into a quitclaim
      deed and royalty agreement with Newmont North America Exploration Limited
      whereby the Company was granted all rights, title, estate and interest in
      unpatented mineral claims located in Lordsburg, New Mexico, United States
      of America in exchange for payment of US$ 10,000 (paid) and an additional
      US$ 10,000 payable in one year. The agreement is subject to a royalty of
      2% of net smelter returns.

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 9  | Comparative Figures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | Certain March 31, 2005 comparative figures have been
      restated to conform with the presentation adopted in the current year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Note 10 | Differences Between Canadian and United States
      Generally Accepted AccountingPrinciples                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | The financial statements have been prepared in accordance
      with accounting principles generally accepted in Canada that differ in
      certain respects with those principles and practices that the Company
      would have followed had its financial statements been prepared in
      accordance with accounting principles and practices generally accepted in
      the United States of America.                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | The Companys accounting principles generally accepted in
      Canada differ from accounting principles generally accepted in the United
      States of America as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | Mineral Properties and Deferred Exploration Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | Under accounting principles generally accepted in Canada
      (Canadian GAAP) mineral property acquisition and exploration costs may
      be deferred and amortized to the extent they meet certain criteria. Under
      accounting principles generally accepted in the United States of America
      (US GAAP) mineral property acquisition costs are considered tangible
      assets and must be capitalized unless the mineral properties do not have
      proven reserves. Management reviews capitalized costs for impairment
      annually and has determined that there is an impairment. Therefore an
      additional mineral property expense is required under US GAAP.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | The impact on the financial statements is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                                                          |   |            |   |   |              |   |   | June 19, 2003 |  
| | -------------------------------------------------------- | - | ---------- | - | - | ------------ | - | - | ------------- | -
| |                                                          |   |            |   |   |              |   |   | (Date of      |  
| |                                                          |   | Year ended |   |   | Inception)   |  
| |                                                          |   | March 31,  |   |   | to March 31, |  
| | Statement of Loss                                        |   | 2006       |   |   | 2005         |   |   | 2004          |  
| |                                                          |   |            |   |   |              |   |   |               |  
| | Net loss for the period per
      Canadian GAAP          | $ | (590,779   | ) | $ | (402,218     | ) | $ | (152,118      | )
| | Mineral property exploration and acquisition
      costs |   | (521,157   | ) |   | (189,140     | ) |   | (27,000       | )
| |                                                          |   |            |   |   |              |   |   |               |  
| | Net loss for the period per US GAAP                      | $ | (1,111,936 | ) | $ | (591,358     | ) | $ | (179,118      | )
| |                                                          |   |            |   |   |              |   |   |               |  
| | Basic and diluted loss per share per US GAAP             | $ | (0.13      | ) | $ | (0.11        | ) |   |               |  

---

EVOLVING GOLD CORP.(An Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS

March 31, 2006 and 2005

(Stated in Canadian Dollars)

|Note 10 | Differences Between Canadian and United States
      Generally Accepted AccountingPrinciples (contd)
|------- | ------------------------------------------------------------------------------------------------------

| |                                                                 |   |            |   |   |              |   |   | June 19, 2003 |  
| | --------------------------------------------------------------- | - | ---------- | - | - | ------------ | - | - | ------------- | -
| |                                                                 |   |            |   |   |              |   |   | (Date of      |  
| |                                                                 |   | Year ended |   |   | Inception)   |  
| |                                                                 |   | March 31,  |   |   | to March 31, |  
| | Statement of Cash Flows                                         |   | 2006       |   |   | 2005         |   |   | 2004          |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Cash flows used in operating activities per
      Canadian GAAP | $ | (70,334    | ) | $ | (123,292     | ) | $ | (156,414      | )
| | Mineral properties acquired and exploration costs               |   |            |   |   |              |   |   |               |  
| | incurred                                                        |   | (321,195   | ) |   | (93,140      | ) |   | (17,000       | )
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Cash flows used in operating activities per
      US            |   |            |   |   |              |   |   |               |  
| | GAAP                                                            |   | (391,529   | ) |   | (216,432     | ) |   | (173,414      | )
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Cash flows used in investing activities per Canadian            |   |            |   |   |              |   |   |               |  
| | GAAP                                                            |   | (322,426   | ) |   | (93,140      | ) |   | (17,000       | )
| | Mineral properties acquired and exploration costs               |   |            |   |   |              |   |   |               |  
| | incurred                                                        |   | 321,195    |   |   | 93,140       |   |   | 17,000        |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Cash flows provided by investing activities
      per US        |   |            |   |   |              |   |   |               |  
| | GAAP                                                            |   | (1,231     | ) |   | -            |   |   | -             |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Cash flows provided by financing activities per                 |   |            |   |   |              |   |   |               |  
| | Canadian and US GAAP                                            |   | 612,959    |   |   | 106,000      |   |   | 286,600       |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Increase (decrease) in cash per Canadian and
      US           |   |            |   |   |              |   |   |               |  
| | GAAP                                                            | $ | 220,199    |   | $ | (110,432     | ) | $ | 113,186       |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Balance Sheet                                                   |   |            |   |   | 2006         |   |   | 2005          |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Total assets per Canadian GAAP                                  |   |            |   | $ | 966,398      |   | $ | 222,879       |  
| | Mineral property exploration and acquisition
      costs        |   |            |   |   | (737,297     | ) |   | (216,140      | )
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Total assets per US GAAP                                        |   |            |   |   | 229,101      |   |   | 6,739         |  
| | Total liabilities per Canadian and US GAAP                      |   |            |   |   | (107,254     | ) |   | (150,450      | )
| |                                                                 |   |            |   |   |              |   |   |               |  
| |                                                                 |   |            |   | $ | 121,847      |   | $ | (143,711      | )
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Shareholders Equity                                            |   |            |   |   |              |   |   |               |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Deficit, per Canadian GAAP                                      |   |            |   | $ | (1,145,115   | ) | $ | (554,336      | )
| | Mineral property exploration and acquisition
      costs        |   |            |   |   | (737,297     | ) |   | (216,140      | )
| |                                                                 |   |            |   |   |              |   |   |               |  
| | Deficit, per US GAAP                                            |   |            |   |   | (1,882,412   | ) |   | (770,476      | )
| | Share capital per Canadian and US GAAP                          |   |            |   |   | 1,713,844    |   |   | 498,600       |  
| | Contributed surplus per Canadian and US GAAP                    |   |            |   |   | 290,415      |   |   | 128,165       |  
| |                                                                 |   |            |   |   |              |   |   |               |  
| |                                                                 |   |            |   | $ | 121,847      |   | $ | (143,711      | )

---

SIGNATURE PAGE

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

|                        | EVOLVING GOLD CORP.                         
|----------------------- | --------------------------------------------
|                        |                                             
|Dated: October 30, 2006 | Signed: /s/ Warren
      McIntyre         
|                        | Warren McIntyre,                            
|                        | Corporate Secretary, Chief Financial Officer
|                        | and Director                                

---