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**SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549**

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[**x**]**    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**For the fiscal year ended July 31, 2006

**OR**

[  ] **   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**For the transition period from                to                

Commission File Number 000-49961

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| **Nevada**                                                              | **98-0351859**                              |
|-------------------------------------------------------------------------|---------------------------------------------|
| (State or other Jurisdiction of Incorporation or Organization)          | (IRS Employer								Identification Number) |
| ****

**101 Convention Center Drive,									7th Floor, Las Vegas, NV** | **89109**                                   |
| (Address of Principal Executive Offices)                                | (Zip Code)                                  |
| **1-888-888-1494**(Registrant's Telephone Number, Including Area Code)  |

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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]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act:   Yes  [  ]    No  [  ]

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				Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to the filing requirements for the past 90 days:    Yes  [x]    No  [  ]				Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:   Yes  [  ]    No  [x]				Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:				Larger accelerated filer  [  ]             Accelerated filer  [  ]                  Non-accelerated filer  [x]				Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  [  ]    No  [x]    				State issuer’s revenues for its most recent fiscal year.  July 31, 2006: $-0-**Aggregate market value of outstanding Common Stock held by non-affiliates:** As of October 31, 2006, the aggregate market value of outstanding Common Stock of the registrant held by non-affiliates was approximately $36,483,541.**Outstanding Common Stock:** As of October 31, 2006, the Company had 40,763,654 shares of Common Stock outstanding. 

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**TABLE OF CONTENTS**

| ** **                                                                                                                         | ** ** | **Page**
****
**** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|
| USE OF NAMES                                                                                                                       |       | 1                  |
| CURRENCY                                                                                                                           |       | 1                  |
| METRIC CONVERSION TABLE                                                                                                            |       | 1                  |
| UNCERTAINTY OF FORWARD-LOOKING STATEMENTS                                                                                          |       | 1                  |
| **PART I**                                                                                                                         |            |                    |
| ITEM 1. DESCRIPTION OF BUSINESS****                                                                                                |            | 1                  |
| ITEM 1A. RISK FACTORS                                                                                                              |       | 7                  |
| ITEM 1B. UNRESOLVED STAFF COMMENTS                                                                                                 |       | 12                 |
| ITEM 2. DESCRIPTION OF PROPERTY                                                                                                    |       | 12                 |
| ITEM 3. LEGAL PROCEEDINGS                                                                                                          |            | 34                 |
| ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS                                                                          |            | 34                 |
| **PART II**                                                                                                                        |            |                    |
| ITEM 5. MARKET FOR COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF							EQUITY SECURITIES   |            | 35                 |
| ITEM 6. SELECTED FINANCIAL DATA							ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |       | 40							40        |
| ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                 |            | 44                 |
| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                                |       | 44                 |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                       |       | 45                 |
| ITEM 9A. CONTROLS AND PROCEDURES                                                                                                   |       | 45                 |
| ITEM 9B. OTHER INFORMATION                                                                                                         |            | 46                 |
| **PART III**                                                                                                                       |            |                    |
| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT****       |            | 46                 |
| ITEM 11. EXECUTIVE COMPENSATION                                                                                                    |       | 49                 |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                            |       | 54                 |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                            |       | 56                 |
| ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                    |       | 58                 |
| **PART IV**                                                                                                                        |            |                    |
| ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES                                                                                  |            | 59                 |
| SIGNATURES                                                                                                                         |            | 61                 |

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**USE OF NAMES**

In this report, the terms “Magnus” and “Company”, unless the context otherwise requires, mean Magnus International Resources Inc. and its subsidiaries.

**CURRENCY**

Unless otherwise specified, all dollar amounts in this report are expressed in United States dollars.

**METRIC CONVERSION TABLE**

| **To Convert Imperial Measurement Units**

**** | **  **   | **To Metric Measurement Units**

**** | **   ** | **Multiply by**

**** |
|-------------------------------------------------|--------------------|---------------------------------------|------------------------|-----------------------|
| Acres                                           |     | Hectares                              |         | 0.4047                |
| Feet                                            |     | Meters                                |         | 0.3048                |
| Miles                                           |     | Kilometers                            |         | 1.6093                |
| Tons (short)                                    |     | Tonnes                                |         | 0.9071                |
| Gallons                                         |     | Liters                                |         | 3.7850                |
| Ounces (troy)                                   |     | Grams                                 |         | 31.103                |
| Ounces (troy) per ton (short)                   |     | Grams per tonne                       |         | 34.286                |

**UNCERTAINTY OF FORWARD-LOOKING STATEMENTS**

This document, including any documents that are incorporated by reference, contains forward-looking statements concerning, among other things, mineralized material, proven or probable reserves and cash operating costs. Such statements are typically punctuated by words or phrases such as “anticipates”, “estimates”, “projects”, “foresees”, “management believes”, “believes” and words or phrases of similar import. Such statements are subject to certain risks, uncertainties or assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors that could cause actual results to differ materially from those in such forward-looking statements are identified in this document under “Part I—Item 1. Description of the Business and Risk Factors”. Magnus assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such statements.

**PART I**

**ITEM 1.  DESCRIPTION OF BUSINESS					General Overview**Magnus is currently in the exploration stage and is engaged in the acquisition, exploration and development of precious and base metal properties around the world.  primary focus of the Company has been the exploration and development of gold properties in China.  To this end, the Company has entered, and plans to enter, various joint venture agreements with Chinese parties and entities (see “Letters of Intent and Preliminary Agreements” and “Joint Venture Agreements” below).  Generally, these joint venture arrangements require the Company to contribute capital toward the exploration and development of various properties while requiring the Chinese individual or entity to obtain mineral rights for desirable mineral properties in China, and obtain all required permits and licenses to commence exploration and mining activities.  The Chinese venture partner may also provide geological expertise and carry out geological

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				evaluations of joint venture properties. In the future, the Company may also set up wholly foreign invested enterprises in order to acquire mineral mining or exploration rights in China.				We are incorporated under the laws of the State of Nevada, USA on April 4, 2001 and have a July 31st fiscal year end.				The current addresses, telephone and facsimile numbers of the offices of the Company are:
| Canadian Office                                                                                                                             | United States Office                                                                                                           | China Office                                                                                                                                                                                                     | United Kingdom Office                                                                                           |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
| 1055 West Hastings St. Street, Suite 550							Vancouver, BC							Canada							V6E 2E9							Tel: (604) 694-1432							Fax: (604) 602-1499 | 101 Convention Center Drive							7th Floor							Las Vegas, Nevada, 89109							Tel: (702) 873-3488							Fax: (702) 221-0904 | Dushimingyuan Bldg.							No. A-2708, Central							Renmin Road							Kunming City, Yunnan Province							650031, People’s Republic							of China							Tel: 86--871--3642422							Fax: 86- 871- 3642420 | 1 Berkeley St.							London, United Kingdom							W1J 8DJ							Tel: 44-207-016-8844							Fax: 44-207-016-9100 |

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				certain conditions precedent being satisfied. If further funding is required for carrying out more exploration and development activities, Magnus will be responsible for providing such funding; however, Team 209 will remain a 10% owner of Long Teng Mining.				On September 29, 2004, this JV Agreement was approved by the Chinese Government and a business license for Long Teng Mining was issued.  The exploration license for the Huidong property was successfully transferred into the Joint Venture Company, Long Teng Mining, on July 27, 2005. 				On July 1, 2006, Magnus assigned its rights to Long Teng Mining to its wholly-owned subsidiary, Yunnan Long Teng Mining (BVI) Inc.				As of July 31, 2006, Magnus had made $2,680,000 in capital contributions to Long Teng Mining.***Yunnan Western Mining, Ltd.***On July 26, 2005, Magnus and First Fortune Investments Inc. entered into a Letter Agreement (the “Letter Agreement”) whereby Magnus agreed to acquire 100% of the issued and outstanding shares of Golden River Resources Corp., a private British Columbia company (“Golden River”), which was owned by First Fortune Investments Inc., and which was participating in a co-operative joint venture with Team 209 pursuant to an agreement dated August 29, 2003 (the “Mangshi Joint Venture”), between Golden River and Team 209.  The acquisition pursuant to the Letter Agreement between Magnus and First Fortune closed on November 25, 2005.				Under the Mangshi Joint Venture, Golden River and Team 209 formed a sino-foreign joint venture company, Yunnan Western Mining Ltd. (“Western Mining”). The Mangshi Joint Venture gives Golden River the right to earn a 90% interest in Western Mining, which holds a mineral exploration license comprising approximately 113.96 square kilometers.  The license is located in the Luxi Gold Belt in the western part of Yunnan Province, People’s Republic of China, and the property is known as the Mangshi Property (“Mangshi”).				Pursuant to the Letter Agreement, Magnus has acquired 100% of the shares of Golden River and the Company has assumed all of Golden River’s obligations and benefits under the terms of the Mangshi Joint Venture as of the closing date (November 25, 2005). The terms of the Mangshi Joint Venture will require the Company to expend, through its sino-foreign joint venture company, Yunnan Western Mining Ltd., a total of $3,010,000 on the area covered by the exploration license over a period of roughly four years. The amended Mangshi Joint Venture capital contribution schedule, which was approved by the Yunnan Provincial government, will require the following capital contributions by the following dates: $500,000 by December 31, 2005; an additional $1,000,000 by December 31, 2006; and an additional $1,510,000 by December 31, 2007.  Increments of 30% interest in Western Mining shall be earned for every aggregate of $1,000,000 contributed by the Company. Team 209 will retain a carried interest of 10% in Western Mining upon the completion of the contributions by the Company of the aggregate total of $3,010,000.  Further contributions by the Company beyond $3,010,000 will not dilute the 10% carried interest of Team 209.				As of July 31, 2006, Magnus had contributed $1,400,000 to Yunnan Western Mining.				Within the Mangshi exploration area are two smaller mining permits where Team 209 is conducting small scale heap leach mining operations.  On October 29, 2005, the Company (through Western Mining) agreed to purchase these mining permits from Team 209 (from a division of Team 209 known as 209 Geo-brigade of Yunnan Provincial Nuclear Industry, Mangshi Gold Mine).  Under the mining license transfer agreement (the “Transfer Agreement”), the mining license containing the permits will be transferred to Western Mining (the joint venture company holding the larger exploration license).  The existing heap leach operations will continue to be operated by Team 209 under the Transfer Agreement, but only to a maximum depth of 15 meters, only for a maximum period of 3 years from the date of execution and only for resources (gold in loose unconsolidated red soil) as defined under the agreement. Magnus maintains an option to purchase the existing estimated resources within the mining license.

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				Magnus is in the process of having the mining permits appraised, which is a necessary step under Chinese law before a formal request to transfer a mining license between two parties can be made.  The Company has submitted a valuation report and is awaiting further comment from the government on this. Formal license transfer can then proceed after this valuation approval. On June 26, 2006, Magnus, through its joint venture subsidiary, Yunnan Western Mining Ltd. ("Western Mining"), entered into an agreement (the "Agreement") to purchase all of the assets of the Mangshi Gold Mine of Team 209 (the "Mangshi Gold Mine"), a subsidiary of Geological Team 209 of the Nuclear Industry Department of the Peoples Republic of China ("Team 209") in exchange for payment of an aggregate of 22,000,000 RMB over the next three years. with its mining and exploration activities at Mangshi to date.

The Agreement provided that Western Mining would assign a team of specialists to confirm the exploration data of Mangshi Gold Mine and based on the report to be delivered by the specialists, Western Mining would determine whether to accept the mining license and the mining assets. 

Based on management’s decision to focus efforts on the Company’s Huidong drilling program, the Company has decided not to close on the Agreement.  Thus, for the time being, Mangshi Gold Mine will be allowed to continue its mining activities in designated areas of the Mangshi property, until the mining concession becomes the property of Magnus under the existing, October 29, 2005 agreement (see below). 

On October 29, 2005, the Company, through Western Mining, agreed to purchase the Mangshi mining license from Team 209 in exchange for 150,000 shares of common stock of the Company. Under that mining license transfer agreement, the mining license holding the permits were to be transferred to Western Mining, while the existing heap leach operations were to be allowed to continue to be operated by Team 209, but only to a maximum depth of 15 meters, only for a maximum period of 3 years from the date of execution and only for resources (gold in loose unconsolidated red soil) as defined under the agreement. The Company maintained an option to purchase the existing estimated resources within the mining license at any time. Under the current agreement, all existing mining rights immediately pass to Western Mining, and Western Mining plans to start operating the heap leach pads in the near future.***Other Projects***The Company actively investigates other areas in search of additional properties and additional joint venture opportunities. 

In April 20, 2006, Magnus had signed a license acquisition agreement with the Geologic Bureau of the Qinghai Provincial Nuclear Industry (“Qinghai Bureau”) under which Magnus has agreed to pay RMB 3,200,000 (approximately US $400,000) to acquire a 100% interest in a gold exploration license covering the Manzhanggang gold mining area, comprising an area of 50 square km.

Under the agreement, Magnus was to acquire a 33.36 square km exploration license currently held by the Qinghai Bureau, and the Qinghai Bureau was obligated to assist Magnus in acquiring an approximately 17 square kilometer adjacent concession for which a license expansion application is underway.

To hold the exploration license, Magnus was in the process of forming a Wholly Foreign Owned Enterprise, or WFOE, which allows foreign enterprises to own property and conduct business in China under certain guidelines. Once the formation of the WFOE was approved, the exploration license was to be transferred to it and all exploration activities conducted through the WFOE. Magnus had signed the transfer agreement directly on behalf of the to-be-formed WFOE.

Based on management’s decision to focus efforts on the Company’s efforts in China on its Huidong drilling program, the Company has decided to put the formation of the WFOE and the transfer of the Manzhanggang gold mining license on indefinite hold.  The Qinghai Bureau and Magnus have agreed to

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				consider the possibility of a future agreement in relation to Manzhanggang when Magnus has the additional time and resources required to conduct a comprehensive exploration program there.**Corporate Structure**The Board of Directors authorized a decision to re-domicile Golden River Resources Inc., a subsidiary of the Company, from British Columbia, Canada, to Nevis, in the West Indies.  This re-domicile was effective on March 20, 2006.

****

                                                                                  

**Notes:**(1) Under a joint venture agreement with Team 209, upon making full capital contributions the Company will own 90% of Yunnan Long Teng Mining Ltd. and Team 209 will own 10%.

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				(2) Under a joint venture agreement with Team 209, upon making full capital contributions the Company will own 90% of Yunnan Western Mining Ltd. and Team 209 will own 10%.**Employees**As of July 31, 2006, the Company had 4 full-time employees (over and above its directors, officers and consultants), employed at the Company’s office in Vancouver, British Columbia (three  in an administrative capacity and one as a bookkeeper). The Company uses consultants with specific skills to assist with various aspects of its project evaluation, due diligence, acquisition initiatives, corporate governance and property management.				The Company’s Chinese joint venture companies, Long Teng and Western Mining, have hired a large number of employees and contractors, mainly from Team 209, to explore their respective properties. Contract workers and groups are used by the Company on an ad hoc basis to assist in conducting the exploration programs, and the number used may fluctuate based on the exploration activities going on at any given time.  These entities also have various administrative, accounting and management staff.  Currently, Long Teng employs 11 people, and Western Mining employs 6 people.  As we require, we contract people from Team 209 and as of July 31, 2006 this number was approximately 30 for both projects inclusive.**Other Property Interests and Mining Claims**While the Company is actively seeking new prospects and is currently in the process of attempting to acquire African Mineral Fields Inc., it currently only has interests in the above noted joint venture properties in China.**Government Regulation**Mining operations and exploration activities are subject to various national, state, provincial and local laws and regulations in the United States, Canada and China, as well as other jurisdictions, which govern prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and other matters. The Company has pending applications for those licenses, permits and other authorizations currently required to conduct its explorations in China (through its joint venture companies).  In China, joint venture agreements, business licenses for joint venture companies, and the acquisition and transfer of exploration and mining permits are all acquired subject to government approval.  Such approval may involve many levels of government (i.e. Federal, Provincial, County and/or City approval), and the Company cannot guarantee that all such approvals will be successfully obtained even where a joint venture has been successfully established.  Moreover, even where joint venture agreements obtain government approval and business licenses are issued, there can be no guarantee that the transfer and/or acquisition of exploration and/or mining permits will be approved, nor can the Company guarantee that such approvals will be obtained from all levels of government required for such approval. 				The Company believes that it is and will continue to be in compliance in all material respects with applicable statutes and the regulations passed in China.  There are no current orders or directions relating to the Company with respect to the foregoing laws and regulations.**Environmental Regulation**The Company's exploration projects are subject to various federal, state and local laws and regulations governing protection of the environment, both in North America and in China. These laws are continually changing and, as a general matter, are becoming more restrictive. The Company's policy is to conduct business in a way that safeguards public health and the environment. The Company believes that its operations are conducted in material compliance with applicable laws and regulations.

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				Changes to current local, state or federal laws and regulations in the jurisdictions where the Company operates or may operate in the future could require additional capital expenditures and increased operating costs. Although the Company is unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could impact the economics of its projects.				In the preceding year, there were no material environmental incidents or non-compliance with any applicable environmental regulations. The Company estimates that it will not incur material capital expenditures for environmental control facilities during the current fiscal year.**Competition**The Company competes with other mining companies in connection with the acquisition of prospective properties and joint venture projects. There is competition for the limited number of opportunities, some of which is with other companies having substantially greater financial resources than the Company. As a result, the Company may have difficulty acquiring attractive projects at reasonable prices.

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The Company believes no single company has sufficient market power to affect the price or supply of gold or other minerals in the world market.**Subsequent Events**

****

On October 5, 2006 Magnus announced that it had entered into a letter of intent to acquire African Mineral Fields Inc., a British Virgin Islands company which holds an exclusive option to acquire 100% interests in four gold projects in Uganda.  Graham Taylor, President, CEO and a director of Magnus, is the founder, sole director and majority shareholder of African Mineral Fields.  The acquisition comes as part of Magnus’ decision to expand its mineral portfolio into Africa.

Subject to definitive agreement, the Company intends to issue a total of six million common shares and two hundred thousand Series “B” preferred shares to acquire 100% of African Mineral fields, Inc., which is majority owned by Graham Taylor, President, CEO and director of the Company.  The two hundred thousand Series “B” preferred shares will convert to up to two million common shares subject to the properties of African Mineral fields, Inc. developing a minimum of 250,000 resource category gold ounces and based upon one common share for each gold ounce in the inferred, resource and proven categories.**ITEM 1A.  Risk Factors**The following risk factors should be considered in connection with an evaluation of the business of the Company:**THE COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO JUDGE ITS PROSPECTS.**

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The Company has a limited operating history upon which an evaluation of the Company, its current business and its prospects can be based. You should consider any purchase of the Company's shares in light of the risks, expenses and problems frequently encountered by all companies in the early stages of its corporate development.

**LIQUIDITY AND CAPITAL RESOURCES ARE UNCERTAIN.**

For the year ended July 31, 2006, the Company had an operating loss of $9,401,834.  At July 31, 2006, the Company had working capital of $22,846. The Company may need to raise additional capital by way of an offering of equity securities, an offering of debt securities, or by obtaining financing through a bank or other entity. The Company has not established a limit as to the amount of debt it may incur nor has it adopted a ratio of its equity to debt allowance. If the Company needs to obtain additional financing, there is no assurance that financing will be available from any source, that it will be available on terms acceptable

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				to us, or that any future offering of securities will be successful. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of the Company’s outstanding common stock. The Company could suffer adverse consequences if it is unable to obtain additional capital which would cast substantial doubt on its ability to continue its operations and growth.**THE VALUE AND TRANSFERABILITY OF THE COMPANY'S SHARES MAY BE ADVERSELY IMPACTED BY THE LIMITED TRADING MARKET FOR ITS SHARES AND THE PENNY STOCK RULES.**

There is only a limited trading market for the Company's shares. The Company's common stock is traded in the over-the-counter market and "bid" and "asked" quotations regularly appear on the OTC Bulletin Board under the symbol "MGNU". There can be no assurance that the Company's common stock will trade at prices at or above its present level, and an inactive or illiquid trading market may have an adverse impact on the market price. In addition, holders of the Company's common stock may experience substantial difficulty in selling their securities as a result of the "penny stock rules," which restrict the ability of brokers to sell certain securities of companies whose assets or revenues fall below the thresholds established by those rules.

**FUTURE SALES OF SHARES MAY ADVERSELY IMPACT THE VALUE OF THE COMPANY'S STOCK.**

If required, the Company may seek to raise additional capital through the sale of common stock. Future sales of shares by the Company or its stockholders could cause the market price of its common stock to decline.

**MINERAL EXPLORATION AND DEVELOPMENT ACTIVITIES ARE SPECULATIVE IN NATURE.**

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital.

Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.

**THE COMPANY WILL BE SUBJECT TO OPERATING HAZARDS AND RISKS WHICH MAY ADVERSELY AFFECT THE COMPANY'S FINANCIAL CONDITION.**

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				Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The Company's operations will be subject to all the hazards and risks normally incidental to exploration, development and production of metals, such as unusual or unexpected formations, cave-ins or pollution, all of which could result in work stoppages, damage to property and possible environmental damage. The Company does not have general liability insurance covering its operations and does not presently intend to obtain liability insurance as to such hazards and liabilities. Payment of any liabilities as a result could have a materially adverse effect upon the Company's financial condition

**THE COMPANY'S ACTIVITIES WILL BE SUBJECT TO ENVIRONMENTAL AND OTHER INDUSTRY REGULATIONS WHICH COULD HAVE AN ADVERSE EFFECT ON THE FINANCIAL CONDITION OF THE COMPANY.**

The Company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations could have an adverse effect on the financial condition of the Company.

The operations of the Company including exploration and development activities and commencement of production on its properties, require permits from various federal, state, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, 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 mining operations 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 violations of applicable laws or regulations and, in particular, environmental laws.

**THE COMPANY IS SUBJECT TO A VARIETY OF APPROVAL REQUIREMENTS AT THE CHINESE CENTRAL, PROVINCIAL AND LOCAL GOVERNMENT LEVELS AND, IN PRACTICE, THERE IS SOME UNCERTAINTY SURROUNDING WHICH APPROVALS ARE ACTUALLY REQUIRED TO CONDUCT CERTAIN MINING AND EXPLORATION ACTIVITIES IN VARIOUS PARTS OF CHINA**

In China, two levels of government primarily deal with the approval of the establishment of a foreign-invested joint venture in mineral exploration and mining (“Mining JV”): the central and the local (e.g., provincial or municipal). China’s Ministry of Commerce (“MOFCOM”) is the central-government-level ministry in charge of reviewing and approving the establishment of Mining JVs.  Applications must be submitted to MOFCOM’s local-level counterparts for upward submission to MOFCOM. However, in practice, many provincial bureaus of commerce, such as those in Yunnan and Sichuan provinces, claim final approval authority and do not forward applications to MOFCOM.  To our knowledge, MOFCOM is aware of this practice but has not taken any steps to intervene or take action against Mining JVs which have been approved only at the provincial level.

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				Once MOFCOM, or its authorized local counterpart has issued its approval documents, the Chinese partners to the joint venture would then apply to China’s State Adminstration of Industry and Commerce or its authorized local counterpart for a business license. The issuance of the business license marks the legal establishment of a Mining JV and confirms the permitted scope of the Mining JV’s activities. The business license is subject to annual review and renewal.

The Ministry of Land and Resources (“MOLAR”) is the central-government-level ministry in charge of exploration and mining licenses. Generally speaking, MOLAR holds the final authority to issue exploration and mining licenses to Mining JVs; however, for projects in Yunnan and Sichuan provinces, it has delegated this authority to the respective provincial-level bureaus of land and resources in those provinces.

The Company's Mining JVs have obtained approvals from MOFCOM’s local counterparts in Sichuan and in Yunnan, but not from MOFCOM. MOFCOM has not challenged these approvals but, if it did, such a development would have a material adverse impact on the Company’s ability to operate. Finally, approvals and licenses obtained by the Company are subject to renewal, and such renewal is typically at the complete discretion of the responsible branch of government.  If renewals for the Company’s current licenses, and any other approvals and licenses obtained by the Company in the future are not successfully obtained, this will have a material adverse impact on the Company’s ability to operate.

**COMPETITION MAY HAVE AN IMPACT ON THE COMPANY'S ABILITY TO ACQUIRE ATTRACTIVE MINERAL PROPERTIES, WHICH MAY HAVE AN ADVERSE IMPACT ON THE COMPANY'S OPERATIONS.**

Significant and increasing competition exists for the limited number of mineral acquisition opportunities available. As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than the Company, the Company may be unable to acquire attractive mineral properties on terms it considers acceptable. Accordingly, there can be no assurance that any exploration program intended by the Company on properties it intends to acquire will yield any reserves or result in any commercial mining operation.

**DOWNWARD FLUCTUATIONS IN METAL PRICES MAY SEVERELY REDUCE THE VALUE OF THE COMPANY.**

The Company has no control over the fluctuations in the prices of the metals for which it is exploring.  A significant decline in such prices would severely reduce the value of the Company.

**THE COMPANY CURRENTLY RELIES ON CERTAIN KEY INDIVIDUALS AND THE LOSS OF ONE OF THESE CERTAIN KEY INDIVIDUALS COULD HAVE AN ADVERSE EFFECT ON THE COMPANY.**

The Company's success depends to a certain degree upon certain key members of the management. These individuals are a significant factor in the Company's growth and success. The loss of the service of members of the management and certain key employees could have a material adverse effect on the Company. In particular, the success of the Company is highly dependant upon the efforts of the President, Treasurer, Secretary, CEO and director of the Company, Graham Taylor, the loss of whose services would have a material adverse effect on the success and development of the Company. 

**THE COMPANY DOES NOT MAINTAIN KEY MAN INSURANCE TO COMPENSATE THE COMPANY FOR THE LOSS OF CERTAIN KEY INDIVIDUALS.**

****

The Company does not anticipate having key man insurance in place in respect of any of its senior officers or personnel, although the Board has discussed and investigated the prospect of obtaining key man insurance for Graham Taylor.

----

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**THE COMPANY’S PRESIDENT AND CHIEF EXECUTIVE OFFICER, GRAHAM TAYLOR, ALSO SERVES AS PRESIDENT, CHIEF EXECUTIVE OFFICER AND/OR DIRECTOR FOR SOME OTHER ACTIVE COMPANIES.**Mr. Taylor also serves as president, chief executive officer and/or director for other active companies, including African Mineral Fields Inc. (which conducts exploration activities in Africa), Australian Mineral Fields Inc. (which conducts exploration activities in Australia) and Arcview Entertainment Inc. (a motion picture distribution company based in Nevada).  This list may also expand in the future. 

Mr. Taylor currently devotes 60% of his time to Magnus, 20% to Australian Mineral Fields, 15% to African Mineral Fields, and 5% to Arcview Entertainment.  As Mr. Taylor focuses a large part of his time on other companies, this may have a material adverse effect on the success and development of the Company. 

**WE ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY VIABLE DEPOSIT OR "RESERVE" EXISTS ON ANY PROPERTIES FOR WHICH THE COMPANY HAS, OR MIGHT OBTAIN, AN INTEREST.**

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The Company is an exploration stage company and cannot give assurance that a commercially viable deposit, or “reserve,” exists on any properties for which the Company currently has (through a joint venture agreement) or may have (through potential future joint venture agreements or acquisitions) an interest. Therefore, determination of the existence of a reserve depends on appropriate and sufficient exploration work and the evaluation of legal, economic, and environmental factors. If the Company fails to find a commercially viable deposit on any of its properties, its financial condition and results of operations will be materially adversely affected.

**WE REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL MINERAL DEPOSITS EXIST ON OUR PROPERTIES.**

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Any potential development and production of the Company’s exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand the Company’s operations on these exploration properties is anticipated to involve consideration and evaluation of several significant factors including, but not limited to:
    - Costs of bringing each property into production, including exploration work, preparation of production feasibility studies, and construction of production facilities;     Availability and costs of financing;Ongoing costs of production;
- Market prices for the minerals to be produced;     Environmental compliance regulations and restraints; andPolitical climate and/or governmental regulation and control.			
**GENERAL MINING RISKS**
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Factors beyond the control of Magnus may affect the marketability of any substances discovered from any resource properties the Company may acquire. Metal prices, in particular gold and copper prices, have fluctuated widely in recent years. Government regulations relating to price, royalties, allowable production and importing and exporting of minerals can adversely affect the Company. There can be no certainty that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and operations on any projects it may acquire and environmental concerns about mining in general continue to be a significant challenge for all mining companies.

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**ITEM 1B.  UNRESOLVED STAFF COMMENTS**None.**ITEM 2.  DESCRIPTION OF PROPERTIES.					Joint Venture Properties**The Company has two joint venture partnerships with Team 209 – Yunnan Long Teng Mining Ltd. and Yunnan Western Mining Ltd.  Team 209 is a group of experienced government geologists and has been instrumental in the rapid development of the Boka Gold Project (“Boka”) through its own joint venture partnership with Southwestern Resources Corp. (“Southwestern”), a British Columbia corporation that is listed and posted for trading on the Toronto Stock Exchange.  Magnus is working closely with Team 209 to pursue an exploration strategy on its own properties similar to that which resulted in the Boka discoveries.				Through its joint venture agreements with Team 209, the Company currently has interests, or contingent interests, in the following properties:

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**Property								Location**

**Property Size**

**Joint Venture								Company**

**Agreement Governing Company’s								Interest**

Sujiayakou, Weiliancun,							Maanshan district, Sichuan							Province, China (Huidong)

83.29 square							kilometers

Long Teng							Mining Ltd.

Cooperative Joint Venture Contract between							Magnus and Team 209 dated July 6, 2004

Luxi Gold Belt in the							western part of Yunnan							Province (Mangshi)

113.96 square							kilometers

Yunnan Western							Mining Ltd.

Cooperative Joint Venture Contract dated							August 29, 2003, between Golden River							Resources Inc., a Magnus subsidiary, and							Team 209.
			The JV Agreements with Team 209 grant the Company a right to participate in the proceeds from the properties above for a term of 30 years (for Huidong) and 25 years (for Mangshi) respectively, each of which may be extended. Such proceeds, if realized, will be split at a ratio of 90/10 (90% going to the Company, 10% going to Team 209), provided certain financing schedules are met by the Company (see “Description of Business – Joint Venture Agreements”.**Property Descriptions*Huidong Joint Venture Property***Property LocationThe 83 square kilometer Huidong property is located in Sichuan Province about 280 kilometers north of Kunming, a city of five million people in neighboring Yunnan Province.   The property is located in the eastern region of Huidong County of Sichuan Province and belongs to Gan Hai Zi Township, Ye Niu Ping Township and part of Song Ping Township of Huidong County.  Main access to the property is via county roads, with a county-to-township road heading west and simple roads linking each township. A major highway from Kunming running along the Jinsha Jiang River near the eastern boundary of the property is expected to be completed in 2006/7 which will dramatically improve access. Until then, access and transportation may be a challenge in some areas due to high mountains and deep valleys, and remote locations from the main highways.  However, as stated, smaller roads exist throughout the property and chances are reasonable that prospective mining sites may be located in the vicinity of an existing utility road.
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				The property is in a plateau region with an average altitude of 2,000 – 3,000 meters, and fierce earth surface cuts exist with relative height differences of some 1,000 meters in places. The Jinsha Jiang River passes through the eastern part of the property, at an altitude of approximately 680 meters. There are many seasonal rivers passing through the area heading east into the Jinsha Jiang River. The exploration area is located in subtropical climate, yet can be relatively chilly in the winter due to the higher altitudes. The annual average rainfall is 650 – 850 mm with a minimum annual rainfall of 570 mm. The majority of precipitation occurs between July and August (the rainy season), with a monthly rainfall of 150-200 mm.  During the rainy season, access can become more challenging as roads become harder to navigate and, in more extreme cases, roads get washed out and must be repaired.  However, we have also been constructing roads on the property in order to access areas where higher geochemical anomalies have been found, and access within the property is becoming better as a result.Regional GeologyThe Huidong Property lies along the Panxi Rift Zone, a series of north south trending faults and cross faults, structural weaknesses or cracks in the earth’s crust that were produced by shifts in tectonic plates. These faults, in turn, offered a structural and stratigraphic geological setting involving numerous shear zones that are ideal for the emplacement of large polymetallic mineralized systems. The whole Panxi Rift Zone is permeated with highly brecciated mineral systems.				The extreme bending, breaking, and crushing of rock associated with these shifts leads to the creation of rolling and thrusting faults and fragmented breccia rock, creating pathways or voids within which gold and copper bearing fluids can migrate towards the earth’s surface.				There are a number of government owned copper mines in the area, the closest being the Dongchuan Copper Camp about 50 kilometers southwest of Huidong. Over the past half century there has been little interest in gold exploration on the part of the Chinese federal government, which focused on the discovery and development of base metal deposits to support China’s industrial development.The Boka TrendVarious geological indicators point to Huidong being on trend (in alignment) with the north south oriented fault system that controls the multi-zone Boka Trend, which to date has yielded discoveries over a 25-kilometer-plus corridor. A number of shear zones on the Magnus joint venture bear a strong resemblance to shears along this structural zone or trend, including a 9.5 kilometer strike length that hosts the approximate dozen Boka gold discoveries.

Numerous gold-in-soil anomalies at Huidong also suggest that the Boka trend continues onto the Huidong Property. Southwestern Resources Corp. confirmed that there is conclusive proof of the “positive association between mineralization at the Boka Gold Project and gold-in-soil anomalies.”

Regional Mining History

The Boka Gold Project and the Huidong Property straddle five major copper producing areas in the Sichuan and Yunnan provinces. This area includes one of China’s highest yield mining areas, the Dongchuan Copper Camp, which is located about 50 kilometers west of Huidong and has been mined for more than 500 years.

For the past 50 years, the Chinese government has focused on the development of copper mines in these areas in support of industrialization. While the government has not developed the gold deposits in the area, local artisanal miners have, over the last several decades, recovered gold from small alluvial deposits in the area’s rivers that drain unexplored mountain terrain, as they also have from the rivers and streams near Huidong and the Boka Project for many years.

Since the 1999 Boka gold discovery, small scale miners had success by digging pits and tunnels into the mountainsides, where some found rich gold mineralization. The regional

14

				government has recently intervened and put an end to individual mining, but the tunnels and pits left behind aided Southwestern Resources and its joint venture partner, Team 209, in identifying gold zones with the greatest potential.

The Boka Trend Discovery

A Chinese government exploration team made the first discovery in the Boka Trend in 1999 following a program of stream sediment sampling and soil geochemistry. The word of the discovery spread quickly. More than 1,000 artisanal miners moved in and dug up to 200 tunnels and pits into the mountainsides. Many high grade zones have been found in these tunnels, where coarse, visible gold is often present.

Artisanal miners had also begun extracting gold from the mountainsides on the Magnus Huidong Property, which lies across the Jinsha River from the Boka Gold Project. These pits and tunnels are a part of the initial focus of the Company’s exploration activities.

To date, about a dozen key discovery zones have been identified (which are confined to a specific stratigraphic horizon) within the 25-kilometer-plus structural zone or trend at the Boka Gold Project. Mapping, surveying and geochemical sampling of the approximately 200 tunnels and pits excavated by artisan miners sped up the identification process of these zones rapidly.

In July 2005 Southwestern Resources reported a current combined indicated and inferred resource at the Boka project of 5.4 million ounces of gold. This significant, newly discovered resource is expected to increase in size and grade as Southwestern continues with expansion and infill drilling. A preliminary assessment and engineering scoping study was completed on the first two zones of the Boka gold system by Hatch Limited, a worldwide engineering firm with extensive experience in China. The study adopted a conservative approach to ore estimation using protocols and procedures in compliance with Canadian National Instrument 43-101. The Hatch study considers the Boka Project to be one of the significant gold discoveries of recent years. Furthermore, capital and operating costs for mining operations in this part of China are reported to be low. The complete study is available at Southwestern's website at www.swgold.com.Exploration Progress and Future Plans for the Huidong Property

Magnus and Team 209 are conducting a comprehensive gold and copper exploration program on the Huidong Property. The goal of the program is to define the extent of the gold and copper anomalies in the area. The program is well underway. Already completed were a two-stage geochemical soil and rock sampling program, and additional geological mapping and surveying to define targets for follow-up trenching, tunneling, and drilling. Generally, these exploration strategies are the same as those used at Boka, and they have helped the Company identify 3 potential target zones of high interest within the Huidong concession, as shown in the diagram below.

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***Figure 1: Huidong West / Dingjiaping (Target 1)***

Follow up exploration work completed by Team 209 and Magnus in late 2005 within Target area 1 (including the completion of an infill sampling program) generated coherent gold (Au) in soil anomalies, including one contiguous soil gold anomaly extending over 1.15 square kilometers in an area designated by the local village name of Dinjiaping.  The anomaly is outlined in more detail in the “Huidong Exploration Update with Diagrams” pdf report found at www.magnusresources.com.  The thickest portion of this gold in soil anomaly commonly contains soil gold concentrations of 100 ppb Au and above.  A concentration

16

				of 100 ppb or higher of gold in soil is considered to be clearly indicative of associated gold mineralization in the Huidong-Boka district.				More detailed investigation of Priority Area 1 revealed the presence of  old tunnels where historical gold mining has occurred. This is a very good indication of potentially high ore grades for gold since the gold concentrations in historical tunnels would typically have been high enough to warrant recovery by very labor-intensive and primitive mining methods.  Rocks from these tunnels and other exposures away from tunnels have been sampled and analyzed for Au (gold).  Thirteen of these sixteen rocks collected from the area of the 1.15 km2 soil returned Au concentrations of 1 g/tonne or higher, with the Au concentration range extending from below detection to as high as 7.2 g/tonne.  Further, there were 21 surface rock samples with greater than 1 g/tonne Au based on limited surface sampling.  The occurrence of gold-bearing rock samples at surface with these gold concentrations is considered highly encouraging.

Investigation of the surface gold features at Priority Area 1 continues.  A road cut sampling program is well underway to better define Au mineralized zones inferred by geological mapping and apparent in the soil and rock geochemistry completed to date.  The road building is underway to provide improved access to the strong soil Au geochemistry anomaly areas and expose potentially Au mineralized rocks where Au-enriched soils have been identified.  The road building program also serves to provide drill rig access to the surface gold features at Priority Area 1, so that the exploration investigation can progress efficiently. 				The road construction has advanced well, with over 5 km having been constructed to date, and the road is now accessing the target area at Dingjiaping.  Results have indicated soil samples containing up to 973 ppb Au in discrete areas that have been identified for follow up investigation.Huidong East (Target 2)A 4500 in-fill soil sampling program was commenced across all three target zones in late 2005 (guided by results from the 10,000 sample high and low density surveys conducted earlier in 2005), and analysis from 1227 soils taken from the eastern portion of the concession over an area referred to as Huidong East were received at the end of 2005.				A strong Au-in soil anomaly has been defined that confirms the previous anomaly feature observed in pulverized soils, and sharpens it significantly due to the higher density 80m x 40m sample spacing employed in the infill soil sampling program.				Soil Au analysis results over the Huidong East anomaly include strong Au-in-soil concentrations up to 438 ppb Au in a well-constrained area of approximately 1.6 km2. The soil Au concentrations at Huidong East compare extremely well with the 20 ppb Au soil concentration levels used to define significant Au mineralization at the Boka deposit, approximately 14 km to the south of this Au feature at Huidong East.				Factor analysis completed on the soil data shows a clear element grouping among gold (Au), copper (Cu), and Arsenic (As), within the soil Au anomaly. Copper and Arsenic also are reported to occur in elevated concentrations in association with Au at Boka, and the same element association at Huidong East suggest a possible mineralization style similar to that observed at Boka.

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Huidong South (Target 3)Infill soil sample results were received from the 2005 infill sampling program for 1612 sites in the Huidong South area of the Huidong Concession.  These soil analysis results provided the highest concentrations of gold and copper in soils observed on the Huidong Concession.  The highest concentrations of gold and copper in soil were observed in a single sample containing 3014 ppb Au (over 3 g/tonne Au) and over 1% copper.  This very high concentration of gold in soil occurred in a cluster of very high Au-in-soil concentrations.  Of the 1612 soil samples analyzed from Huidong South, 577 soils contained greater than or equal to 20 ppb Au, 160 soils contained greater than or equal to 50 ppb Au, and 45 soils contained greater than or equal to 100 ppb Au.

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				Current Drill Program and Geophysics Survey Results				Geophysics surveys, including IP/Resistivity, magnetics and Time Domain EM (TDEM) surveys, were completed by Logantek Pty Limited (Sydney, Australia) and the Baoding Geophysical Exploration Bureau (GEB) from Hebei, China. The surveys used modern Western geophysical exploration instruments and sophisticated processing and interpretation software.  The geophysics surveys were designed to detect fault zones as well as electrically conductive or chargeable rocks that are known to be associated with gold mineralization in the district.				Drilling began in late June 2006, to test coincident sites of favorable geology, surface geochemical gold anomalies (soils and rock outcrop), and geophysical features at depth.  Planned drilling locations are displayed in Figure 2, below.

***Figure 2: Planned drilling locations at Dingjiaping and Huidong East - Huidong Concession***

DingjiapingRoad building at Dingjiaping has exposed new areas of mineralized rocks. These occur both proximal to artisan gold mining tunnels and in newly identified zones associated with gold-bearing soils.  The current progress of roads and rock exposures is shown below.  The parallel roads to the east are designed to expose anticipated mineralization along two distinct elevation contours. 

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******

******

***Figure 3: Road progress, artisan gold mining tunnel locations, and soil geochemistry at Dingjiaping***

				Drilling, being carried out using a Longyear LF-90 drill rig, at the Dingjiaping target area began on July 25, 2006. Progress to date has been excellent with an average of 35 to 40 meters per day being drilled.				Magnus technical staff are encouraged by the styles of the sulphide mineralization that have been observed in the last two holes at Dingjiaping - DJP-3-06 and DJP-4-06. Sulphide mineralisation, mainly pyrite, that is associated with structural zones has been observed and is considered encouraging for potential gold mineralization. While the field observations are encouraging, Magnus’ management cautions investors that the Company must receive gold assay results from the analytical laboratory to determine the gold content, and a specific inference regarding the gold content of drill cores cannot be made.

19

***Figure 4: Drill Targets at Dingjiaping***

20

				A number of drill targets are being tested at Dingjiaping as displayed in Figure 4 above. Targets are based on careful geologic mapping, proximity to known gold-bearing artisan tunnels, very strong surface soil gold geochemistry in this target area, and high concentrations of gold in rock samples.

In general, a series of North-South and East-West fault zones and shear zones traverse the Dingjiaping area. Sites where these two sets of mineralized structural zones intersect or are met by other mapped faults and shears are considered especially favorable for large gold deposit systems, and will be tested in the planned drilling program.				A summary of the holes drilled to date in Dingjiaping follows:				1)       DJP-1-06				DJP-1-06 was planned to intersect extensions of the mineralized veins and structures exposed in artisan mining tunnels No. 6 (nearly N-S striking) and 7 (nearly E-W strike).  This hole went through a series of veining and breccia zones, in both carbonaceous phyllite shale and mudstone) and quartz phyllite (sandstone and siltstone) and intersected several sulphide-bearing intervals.				2)       DJP-2-06				DJP-2-06 was designed to intersect the western, deep extension of the mineralised vein exposed in Tunnel 7.  This hole appears to intersect the same part of the stratigraphy as in DJP-1-06, i.e. a sandy unit (quartz phyllite) between an upper and a lower muddy unit (carbonaceous phyllite).  Drilling revealed veining and brecciation at various areas along the hole with the most intense concentration found in quartz phyllite situated near the middle part of the hole. The drilling appears to have intersected the deep extension of the mineralized quartz-carbonate veins exposed in Tunnel 1.  Several zones with well developed structure and veining were intersected.				3)       DJP-3-06				This hole was drilled to test the extension along dip of those few mineralized veins and structures exposed on road-cut containing gold up to 2.7g/t. In addition, this hole cuts through a part of carbonaceous phyllite overlying that intersected in the first two holes. DJP-3-06 revealed a series of veining and brecciation zones, all in carbonaceous phyllite. This hole looks promising in terms of development of structure, veining and sulphide content.  Several intervals with good structure and veining have been intersected.

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***Figure 5: DJP-3-06 - veined and brecciated carbonaceous phyllite at 244 to 253m.***

4)       DJP-4-06				DJP-4-06 is targeting extensions of the mineralized veins exposed in road-cut channel sampling, which have values of up to 19g/t gold (Fig. 4).  The current drill hole DJP-4-06 is at 198.5 meters within sericite-quartz phyllite containing locally abundant sulphides.				As expected, this hole starts from the muddy unit (carbonaceous phyllite) and soon gets into the sandy unit (quartz phyllite).  Structures with quartz and/or quartz-carbonate veining are encountered frequently, and they appear to cluster into three major zones near 7-14m, 41-69m and 130-164m.  It appears that some of the high gold values assayed for samples from road-cut probably represent the structures and veins intersected in the two lower zones.  The first upper zone was not exposed and therefore not sampled on road-cut.				Photographs of some of the altered and mineralised core appear in Figure 5.

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**

***                                                                 Figure 6: Plan of DJP-4-06 design***

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**  **

*** ***

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***Figure7: DJP-4-06 core photos of intensely brecciated and veined quartz						phyllite (upper) and sulphide-bearing quartz phyllite***

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				This observed alteration and mineralization in holes DJP-3-06 and DJP-4-06 is typical of the rocks comprising gold ore at Southwestern’s Boka project, located south of Huidong along the same geologic trend. However, Magnus’ management cautions investors that while these initial visual results are encouraging, the Company must receive gold assay results from the analytical  laboratory to determine the gold content, and a specific inference regarding the gold content of drill cores cannot be made at this time.				Planning for the next holes in Dingjiaping is proceeding well with access now ready for drilling targets DJP-6, 7 & 9. Core sampling is now up-to-date with the drilling program, and drill core is being sent to the SGS laboratory on an ongoing basis. Currently, the SGS lab in Tianjin is processing an unusually large volume of material for gold assay causing a longer turnaround time of results for all of its clients. Management believes the program will lead to improved understanding of the mineralized systems already observed at Huidong, and could lead to a discovery in this very favorable exploration terrain.Huidong EastAt Huidong East, geophysical features within the surface soil gold anomalies have been identified which are consistent with interpreted fault zones through graphitic conductive zones or carbonaceous sediments. 				Strong localized IP chargeability in fault zones at the LaoShuiJing area within Huidong East may be the combined response from clay alteration, sheared graphite and sulphide (+Au) mineralization, and these features will be tested by drilling.  Drill targets (shown below) have been selected to test different types of conceptual models. Results of drilling will be used to refine the models to provide the best guide to locating gold mineralization in this area. 

25

 

 ***Figure 8: Drill targets at Laoshijing – Huidong East shown on color image of soil gold geochemistry.						Targeted geophysics features are explained in the diagram.***

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   ***Figure 9: Drill targets at Laoshijing – Huidong East shown on color image of soil gold geochemistry,						with elevation contour lines at 100m intervals.  Each square represents one square kilometer.***

Drilling at the Huidong East Target commenced in late June and is being completed by two Chinese built XY-2 drill rigs. Hole targeting is based on integrated geophysical and structural (from surface mapping) targets within a coherent and significant soil geochemical anomaly. Holes LSJ-6-06 and LSJ-11-06 are being drilled and are at depths of 120.98 and 81.3 meters respectively as of September 21, 2006.				There is a large surface anomaly feature to drill test at Huidong East, and we are still in the very early stages of drill testing the targets at Huidong East. What the Magnus team learns from drill intercepts of geophysical features and geologic targets in this early stage of drilling will guide the exploration and drilling program.

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***Figure 10: Drill hole collar LSJ-1-06, SL-06-06, LSJ-7-06, LSJ-8-06 and LSJ-11-06 at						Huidong East with surface gold geochemistry along mapped northwesterly fault structure***

Huidong SouthAt the Laowangshan area within the Huidong South target, reconnaissance geophysics has identified targets which coincide spatially with previously known zones of elevated gold and copper concentrations in soil.   Drill testing of geophysical anomaly features is planned to test depth extent of the surface mineralization (shown below).  Geophysical characteristics of each target to be tested are explained in the figure, and each target resides within a well-expressed surface feature of anomalous gold in soils.

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***Figure 11: Laowangshan area within the Huidong South target.  Four drill holes are						planned in preliminary testing of coincident gold in surface soils and geophysical						anomalies at depth.***

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***Figure 12: Laowangshan area within the Huidong South target.  Four drill holes are planned in						preliminary testing of coincident gold in surface soils and geophysical anomalies at depth. Proposed drill						targets at shown on colour image of soil gold geochemistry, with elevation contour lines at 100m						intervals.  Each square represents one square kilometer.***

***Mangshi Joint Venture Property***Property Location and GeologyThe Company’s Mangshi Property is located in the Luxi Gold Belt, a 40km northeasterly geological trend, in the southwestern part of Yunnan Province, Peoples Republic of China.  The exploration license held by Magnus and Team 209’s joint venture company, Yunnan Western Mining Ltd., is for 113.96 square kilometers located approximately 25km southwest of Luxi City. Sparton Resources Inc (TSX-V:SRI) is currently advancing a successful discovery along the same Luxi gold trend adjacent to Magnus’ Mangshi property. Depending on the cut-off grade used, Sparton’s staff has reported a minimum possible mineral deposit of between 210,000 and 320,000 oz gold at its Luxi property. This resource estimate is based on results reported up to mid-September 2005 from their first 34 drill holes.				Luxi City is a regional center of approximately 300,000 people and accessible by road and air transportation from several major destinations in China. The property itself also allows for easy access, with a major highway providing access to the exploration license area as close as 6 km away, and the surrounding terrain allows for easy over-ground access from the highway year round.

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				The Mangshi Property is chiefly underlain by a Permian dolomitic limestone and Triassic to Jurassic sedimentary units juxtaposed by northeasterly and generally west-dipping normal and reverse faults. There appear to be two styles of gold mineralization at the Mangshi Property. The gold at the two existing heap leach operations occur as fine particles in silicified and clay-altered clasts in a breccia-like flat-lying unit at the contact of Permian dolomitic limestone and Jurassic sandstone. The thickness of the breccia unit ranges up to 30 meters. The other style of mineralization comprises pyrite and gold in dominantly silicified and clay-altered fine grained Jurassic sandstone. This latter style of gold mineralization is deemed more significant as it bears resemblance to similar sedimentary rock-hosted gold deposits in neighboring Gizhou Province, which are considered of the Carlin type gold deposition model.Exploration HistoryThere is an abundance of geological information already available about the property, and a report on the property pursuant to Canadian National Instrument 43-101, dated October 27, 2003, has already been published. The report was prepared by Ruben S. Verzosa, P. Eng., and an updated version is available on the Company’s website located at www.magnusresources.com. Mr. Verzosa is a qualified person as defined by National Instrument 43-101 in Canada and is a member of the Association of Professional Engineers and Geoscientists of British Columbia. Mr. Verzosa has been hired by the Company to assist with the immediate exploration of the Mangshi Property.Exploration Progress and Future Plans for the Mangshi PropertyAn environmental baseline study was completed in 2005 to establish the environmental status upon commencement of exploration activity at Mangshi.   The exploration plan for the Mangshi Property comprises three scales of exploration:

Local scale exploration: focusing on the Maiwoba – Guoyuan – Mulingba Au shear zone
- Intermediate scale: follow-up trenching at the Qingtang River target   District scale Au targets: follow-up of stream drainage anomalies within the Mengdan exploration license			
Local scale exploration is designed to test the known Maiwoba – Guoyuan – Mulingba Au trend defined by Au-mineralized rock and greater than 100 ppb Au in soil. The Au trend is covered by the 113.96 km 2 exploration license (covered by the Mangshi Joint Venture) and the mining permits within the Mangshi Property (recently acquired by Yunnan Western Mining Ltd. by Transfer Agreement, see “Description of Business - Joint Venture Agreements - Yunnan Western Mining Ltd.”, above) at Maiwoba and Guoyuan.

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***Figure 13: Mangshi Exploration Area***

Testing along the Maiwoba - Guoyuan - Mulingba Au trend comprised additional detailed mapping and sampling of mineralized rock and identified breccia zones, as well as the pit floors from the small-scale oxide ore mining operations. A dipole-dipole Induced Polarization (IP) geophysical survey was executed by the Yunnan Institute of Geophysics and Geochemistryhas and completed 30 line kilometers of surveying. The IP survey identified zones of sulphides (pyrite) and zones of silicification along the depth extent of the northwest-dipping fault and shear zones believed to control Au mineralization in the area. Detailed drill target definition for the initial 5,000 meter diamond core drilling program was conducted based on the mapping, sampling, and geophysical surveying. The program is expected to test the depth extent of the Maiwoba - Guoyuan - Mulingba Au trend.				Exploration drilling has been ongoing on the Mangshi Concession, and to date 25 drill holes have been completed and a total of 5,282 meters of HQ core have been drilled.				A summary of the current drilling progress shows the progression of the drilling program.

**D.D.H. No.**

**Area / Zone**

**Length of								Hole (m)**

**Cumulative								Length (m)**

**Remarks**

MS05-01

MAIWOBA

336.00

336

FAA Au, ICP

MS05-02

MAIWOBA

300.00

636

FAA Au, ICP

32

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MS05-03

MAIWOBA

352.95

989

FAA Au, ICP

MS05-04

MAIWOBA

350.15

1,339

FAA Au, ICP

MS05-05

MAIWOBA

303.00

1,642

FAA Au, ICP

MS06-06

MAIWOBA

301.75

1,944

FAA Au, ICP

MS06-07

MAIWOBA

253.25

2,197

FAA Au, ICP

MS06-08

MAIWOBA

215.45

2,413

FAA Au, ICP

MS06-09

MAIWOBA

200.55

2,613

FAA Au, ICP

MS06-10

MAIWOBA

200.25

2,813

FAA Au, ICP

MS06-11

MAIWOBA

361.75

3,175

FAA Au, ICP

MS06-12

MAIWOBA

204.95

3,380

FAA Au, ICP

MS06-13

MAIWOBA

202.45

3,583

FAA Au, ICP

MS06-14

GUOYUAN

251.05

3,834

FAA Au, ICP

MS06-15

MAIWOBA

148.90

3,982

FAA Au, ICP

MS06-16

GUOYUAN

200.00

4,182

FAA Au, ICP

MS06-17

MAIWOBA

105.30

4,288

FAA Au, ICP

MS06-18

MAIWOBA

101.50

4,389

FAA Au, ICP

MS06-19

MAIWOBA

101.10

4,490

FAA Au, ICP

MS06-20

MAIWOBA

150.40

4,641

FAA Au, ICP

MS06-21

MAIWOBA

103.20

4,744

FAA Au, ICP

MS06-22

MAIWOBA

103.95

4,848

FAA Au, ICP

MS06-23

MAIWOBA

101.10

4,949

FAA Au, ICP

MS06-24

MAIWOBA

182.60

5,132

FAA Au, ICP

MS06-25

MAIWOBA

150.30

5,282

FAA Au, ICP
			Analysis results for these holes all have been received, and results from gold-mineralized intersections are tabulated below.
**HoleID**

**From (m)**

**To (m)**

**Length (m)**

**Weighted Assay (g/t)**

****

****

****

****

****

MS05-02

0.00

26.70

26.70

0.64

MS05-02

30.85

50.65

19.80

0.58

MS05-02

59.45

75.45

16.00

0.68

MS05-03

12.60

35.40

22.80

1.29

MS05-03

68.70

86.60

17.90

0.48

MS05-04

67.85

71.70

3.85

0.62

MS05-06

23.90

41.00

17.10

1.47

MS05-07

24.40

39.50

15.10

2.03

MS06-13

0.00

40.45

40.45

0.73

MS06-13

53.05

66.50

13.45

1.04

MS06-18

73.20

81.08

7.88

0.73

MS06-19

1.75

14.95

13.20

0.72

MS06-20

72.20

81.50

9.30

0.25

MS06-21

41.90

53.90

12.00

0.93

MS06-22

0.00

28.95

28.95

0.91

MS06-23

0.00

3.70

3.70

0.32

MS06-24

11.70

14.95

3.25

0.59

MS06-25

0.00

14.60

14.60

0.26

33

				Drill hole locations are displayed in the figure below.  The figure illustrates that only a relatively small portion of the mining license and mineralized trend at Mangshi has been drill tested. 

  

***Figure 14: Drill hole locations at the Mangshi property***

Additional information on the three kilometer-long soil geochemistry feature at Mangshi and more information on the exploration program at Mangshi can be found on the Company’s website at www.magnusresources.com.

34

**Leased Office Space**The Company currently leases four administrative offices: in Vancouver, British Columbia, Canada; in Kunming, China; in Las Vegas, Nevada; and in London, United Kingdom.  These leased properties are described in the table below:

**Address**

**Approximate Size**

**Lease Term**

**Approximate								monthly cost**

Suite 550-1055 West Pender Street,							Vancouver, BC, Canada  V6E 2E9

4900 Square feet

23 months							Expires May 30, 2008

Cdn.$8,500.

Dushimingyuan Bldg., No. A-2708,							Central Renmin Road, Kunming City,							Yunnan Province 650031,							People’s Republic of China

1000 Square feet

2 years (expires							March  31, 2007)  

RMB 5,500, which was							equal to approximately							$690 on July 31, 2006

101 Convention Center Drive,							7th Floor,							Las Vegas, NV, USA 89109

Shared Space,							2500 square feet

One year (expires							April 30, 2007)

 USD $2,000 (per year)

1 Berkeley Street,							London, UK, W1J 8DJ

Shared Space,							1500 square feet

Month to month

$500
**ITEM 3.  LEGAL PROCEEDINGS**Long Teng Mining has been named as defendant in litigation over responsibility for injuries allegedly sustained by an individual on a road leading to the Huidong property. It is alleged that a Long Teng vehicle startled the individual’s donkey, causing the individual to fall off the donkey and sustain injuries. Long Teng has retained counsel to defend the action. Magnus and Long Teng deny responsibility for the injuries. To be conservative, Long Teng has provided in its accounts for up to RMB 187,000 (approximately $US 24,000) in case of an adverse award.			Management is not aware of any other legal proceedings contemplated by any governmental authority or any other party involving the Company or its properties.  None of the Company’s directors, officer or affiliates is (i) a party adverse to the Company in any legal proceedings, or (ii) has an adverse interest to the Company in any legal proceedings.  Management is not aware of any other legal proceedings pending or that have been threatened against the Company or its properties.**ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS**N/A
35

**PART II**

**ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES					Market Information**The Common Shares of Magnus are listed and posted for trading on the OTC Bulletin Board under the symbol “MGNU”. The market for Magnus’ common stock is limited, volatile and sporadic.  The following table sets forth the high and low sale prices relating to Magnus’ common stock since it was listed and posted for trading on the OTCBB.  These quotations reflect inter-dealer prices without retail mark-up, mark-down, or commissions, and may not reflect actual transactions.

**Quarter Ended**

  

  

  

  

  

**2003**

**High Trade**

**Low Trade**

April 30

0.025

0.015

July 31

1.50

0.03

October 31

2.25

0.505

  

  

  

**2004**

  

  

January 31

0.725

0.25

April 30

1.35

0.495

July 31

1.11

0.85

October 31

1.26

0.90

  

  

  

**2005**

  

  

January 31

1.70

1.18

April 30

2.35

1.55

July 31

1.99

1.65

October 31

1.80

1.64

  

  

  

**2006**

  

  

January 31

2.25

1.60

April 30

3.93

2.10

July 31

2.50

1.73

**Holders**As of September 15, 2006, Magnus had at least 1,680 shareholders of record.**Dividends**The Company has never paid dividends. While any future dividends will be determined by the directors of the Company after consideration of the earnings, financial condition and other relevant factors, it is currently expected that available cash resources will be utilized in connection with the ongoing acquisition, exploration and development programs of the Company.**Section 15(g) of the Securities Exchange Act of 1934**The Company’s shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, which imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess

36

				of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by this Section 15(g), the broker/dealer must make a special suitability determination for the purchase and must have received the purchaser's written agreement to the transaction prior to the sale. Consequently, Section 15(g) may affect the ability of broker/dealers to sell the Company’s securities and also may affect your ability to sell your shares in the secondary market.				Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and the secondary market; terms important to an understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customer’s rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.**Recent Sales of Unregistered Securities**On August 12, 2005, the Company issued 133,000 shares (each a “Share”) to three individuals/entities in connection with the exercise of warrants at a price of $1.00 per Share for total proceeds of $133,000. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual/entity exercised.				On August 18, 2005, the Company issued 30,000 Units (each a “Unit”) to one entity due to the partial closing of the Company’s private placement at $1.00 per Unit for total proceeds of $30,000. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrants allowing the holder thereof to purchase one additional share of common stock of the Company at a price of $2.00 per share for a period of two years from the date of issuance of the warrants.  The Company believes that such issuance is exempt from registration under Regulation D and Section 4(2) under the Securities Act of 1933, as amended.				On August 18, 2005, the Company issued 726,800 Units (each a “Unit”) to twenty-six individuals/entities due to the closing of the Company’s private placement at $0.50 per Unit for total proceeds of $363,400. Each Unit consists of one share of common stock of the Company, one share purchase warrant to purchase one additional share of common stock of the Company at a price of $1.00 per share until October 31, 2005 (which was subsequently extended to January 31, 2006 with a slight price increase each month) and one piggyback warrant to purchase one additional share of common stock of the Company at $2.00 per share until January 9, 2006 (which was subsequently extended to September 30, 2006), exercisable only if the holder thereof first exercises the initial share purchase warrants. The Company believes that such issuance is exempt from registration as the securities were issued to the individuals/entities in an offshore transaction which was negotiated and consummated outside of the United States.				On August 26, 2005, the Company issued 285,714 shares (each a “Share”) to one entity in accordance with the terms of the Co-operative Joint Venture Contract between the Company and Geology Brigade 209 of the Nuclear Industry of Yunnan Province, China for the establishment of Long Teng Mining Ltd., dated July 6, 2004. The Company believes that such issuance is exempt from registration as the securities were issued to the entity in an offshore transaction which was negotiated and consummated outside of the United States.				On September 6, 2005, the Company issued 220,000 units (each a “Unit”) to five individuals due to the closing of the Company’s private placement at $1.00 per Unit for total proceeds of $220,000. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant to purchase one additional share of common stock of the Company at a price of $2.00 per share until

37

				September 6, 2007. The Company believes that such issuances are exempt from registration as the securities were issued to the individuals through an offshore transaction which was negotiated and consummated outside of the United States.				On September 14, 2005, the Company issued 150,000 shares (each a “Share”) to one individual in connection with the exercise of warrants at a price of $1.00 per Share for total proceeds of $150,000.  In addition, the warrant holder received a piggyback warrant in the same amount of warrants that the individual exercised.				On October 5, 2005, the Company issued 10,000 shares (each a “Share”) to one individual in connection with the exercise of warrants at a price of $1.00 per Share for total proceeds of $10,000.  In addition, the warrant holder received a piggyback warrant in the same amount of warrants that the individual exercised.				On October 31, 2005, the Company issued 51,000 shares (each a “Share”) to three individuals in connection with the exercise of warrants at a price of $1.00 for 40,000 Shares and at a price of $1.075 for 11,000 Shares for total proceeds of $51,825.  In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.				On November 2, 2005, the Company issued 63,137 shares (each a “Share”) to four individuals in connection with the exercise of warrants at a price of $1.075 for 11,637 Shares and at a price of $1.10 for 51,500 Shares for total proceeds of $69,160. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.				On December 15, 2005, the Company issued 400,000 shares (each a “Share”) to two individuals in connection with the exercise of warrants at a price of $1.125 for total proceeds of $450,000. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.				On December 19, 2005, the Company issued 200,000 shares to True North Management Ltd. in connection with shares earned under a finder’s fee agreement, dated April 6, 2004, between the Company and True North Management Ltd. relating to the Huidong Property and the execution of a formal joint venture agreement between the Company and Team 209, dated July 6, 2004.  The Company believes that such issuance is exempt from registration as the securities were issued to the entity through an offshore transaction which was negotiated and consummated outside of the United States.				On January 9, 2006, the Company issued 100,000 units (each a “Unit”) to two entities due to the final closing of the Company’s private placement at $0.50 per Unit for total proceeds of $50,000. These Units were fully paid for back in May of 2004.  Each Unit consists of one share of common stock of the Company, one share purchase warrant and one piggyback warrant, with each warrant entitling the holder to purchase one additional share of common stock of the Company at US$1.15 (as at January 31, increasing by $0.025 on the first day of each subsequent month) per warrant share until April 30, 2006, and each piggyback warrant entitling the holder to purchase one additional share of common stock of the Company at US$2.00 per piggyback warrant share until September 30, 2006, only if the warrants are first exercised. The Company believes that such issuances are exempt from registration as the securities were issued to the entities through an offshore transaction which was negotiated and consummated outside of the United States.				On January 9, 2006, Graham Taylor, President, CEO and a Director of the Company, exercised 800,000 stock options at a purchase price of USD$0.50 per share for total proceeds of $400,000. The resulting shares are restricted from re-sale for one year from the date of exercise. The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.

38

				On January 16, 2006, the Company issued 624,500 units (each a “Unit”) to 40 individuals/entities due to the first closing of the Company’s private placement at $1.25 per Unit for total proceeds of $780,625. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at US$2.00 per warrant share until January 17, 2008. The Company believes that such issuance is exempt from registration under Regulation D and Section 4(2) under the Securities Act of 1933, as amended, as well as Regulation S promulgated thereunder.				On January 24, 2006, the Company issued 100,000 Series A preferred shares to Graham Taylor, President, CEO and a Director of the Company at a price of $0.001 per share for total proceeds of $100. The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to Mr. Taylor through an offshore transaction which was negotiated and consummated outside of the United States. These Series A preferred shares have the following base characteristics:
Dividends: Series A Preferred Stock shall not participate in dividends.
- No Liquidation Preference: In the event of any liquidation, dissolution, or winding up of this Company, either voluntarily or involuntarily, the holders of the Series A Preferred Stock shall not be entitled to receive any distribution by reason of their ownership thereof.     Voting Rights: Each shareholder of Series A Preferred Stock of record shall have 1000 (one thousand) votes for each share of Series A Preferred Stock standing in his name in the books of the Company and shall be entitled to vote such shares at meetings of the common shareholders in all circumstances.			
January 25, 2006, the Company issued 270,000 shares (each a “Share”) to four individuals in connection with the exercise of warrants at a price of $1.15 for total proceeds of $310,500. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.				On February 22, 2006, the Company issued 25,532 shares (each a “Share”) to one individual in connection with the exercise of warrants at a price of $1.175 per Share for total proceeds of $30,000.  In addition, the warrant holder received a piggyback warrant in the same amount of warrants that the individual exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.				On March 15, 2006, the Company issued 209,000 shares to five individuals/entities in connection with the exercise of warrants at prices ranging from $1.00 to $1.175 per share for total proceeds of $224,075.  In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.				On March 20, 2006, the Company issued 1,087,000 units (each a “Unit”) to 33 individuals/entities due to the second closing of the Company’s private placement at $1.25 per Unit for total proceeds of $1,358,750.  Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at US$2.00 per warrant share until March 20, 2008. The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States.				On March 21, 2006, the Company issued 33,000 shares to three individuals in connection with the exercise of warrants at a price of $1.20 per share for total proceeds of $39,600.  In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.

39

				On March 29, 2006, the Company issued 340,000 shares (each a “Share”) to three individuals/entities in connection with the exercise of warrants at a price of $1.20 per Share, for total proceeds of $408,000. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual/entity exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States.				On April 4, 2006, the Company issued 100,000 shares (each a “Share”) to one individual in connection with the exercise of warrants at a price of $1.20 per Share, for total proceeds of $120,000. In addition the warrant holder received a piggyback warrant in the same amount of warrants that the individual exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.				On April 10, 2006, the Company issued 250,000 shares (each a “Share”) to one individual in connection with the exercise of stock options at a price of $0.50 per Share for total proceeds of $125,000. The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individual through an offshore transaction which was negotiated consummated outside of the United States.				On April 10, 2006, the Company issued 668,250 units (each a “Unit”) to 53 entities due to the closing of the Company’s private placement at $1.60 per Unit for total proceeds of $1,069,200. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at US$2.40 per warrant share until April 19, 2008. The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the entities through an offshore transaction which was negotiated and consummated outside of the United States.				On April 20, 2006, the Company issued 96,000 shares (each a “Share”) to six individuals in connection with the exercise of stock options at a price of $0.50 per share for total proceeds of $48,000. The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.				On April 20, 2006, the Company issued 390,000 shares (each a “Share”) to four individuals/entities in connection with the exercise of warrants at a price of $1.225 per Share, for total proceeds of $477,750.  In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States.				On June 8, 2006 the Company issued 657,263 shares (each a “Share”) to sixteen individuals/entities in connection with the exercise of warrants at a price of $1.225 per share for total proceeds of $805,147. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States. 				On June 8, 2006 the Company issued 21,276 shares (each a “Share”) to one individual in connection with the exercise of warrants at a price of $1.175 per share for total proceeds of $25,000. In addition, the warrant

40

				holder received a piggyback warrant in the same amount of warrants that each individual exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.				On June 22, 2006, the Company issued an aggregate of 2,322,164 shares (each a “Share”) to 18 individuals/entities in connection with the exercise of warrants at a price of $1.225 per Share, for total proceeds of $2,844,651 by way of promissory notes in favour of the Company, which also includes an escrow arrangement.  In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual/entity exercised.  The Company believes that such issuance is exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended, as the securities were issued to the individuals/entities through offshore transactions which were negotiated outside of the United States and consummated outside of the United States.				The promissory note and escrow agreements entered into between the 18 individuals/entities, the Company and the escrow agent provides that each of the 18 individuals/entities (each called a “Borrower”) promises to pay to the Company the certain amount owing to the Company for the exercise of the certain amount of warrants exercised at a price of $1.225 per share on or before August 31, 2006 (the “Due Date”) and if the Borrower fails to pay by the Due Date, then the Borrower has 30 days to cure such default.  In addition, the Borrower has agreed to place into escrow with the escrow agent the shares of common stock of the Company received from the exercise of warrants (the “Shares”) and if the Borrower fails to pay the amount owing to the Company by the Due Date and also fails to cure any default on payment for a period of 30 days after the Due Date, then the Shares placed in escrow will be forfeited back to the Company and cancelled.  A copy of the form of the promissory note and escrow agreement was attached as Exhibit 10.1 to the Company’s Form 10-QSB that was filed with the SEC on EDGAR on June 14, 2006 and incorporated by reference.				On October 13, 2006, the Company provided each of the Borrowers a notice of default, which provided each Borrower 30 days to make payment on the promissory note or else the shares that were issued and held in escrow will be surrendered to the Company for cancellation.  On November 15 2006, 2,322,164 shares are expected to be cancelled, which would result in the issued and outstanding shares being 38,441,490 instead of 40,763,654.				The funds received from the investors mentioned above have been and will be used for property exploration expenses, salaries, consultant fees, consultant expenses, general and administrative expenses, working capital and property acquisition payments.**ITEM 6.  SELECTED FINANCIAL DATA**

****

  

2006

2005

2004

2003

Loss from Operations

9,401,834

3,771,493

1,737,327

35,282

Loss from Operations per share

0.27

0.15

0.08

0.0

Total Assets

1,251,451

2,233,599

838,169

23
**ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**The following discussion and analysis should be read in conjunction with the consolidated financial statements of the Company for the period ended July 31, 2006, and the related notes thereto.
41

**Overview**Magnus is currently in the development stage and is engaged in the acquisition, exploration and development of precious and base metals.  To this end, the Company has entered, and plans to enter, various joint venture agreements with Chinese parties and entities (see “Description of Business - Letters of Intent and Preliminary Agreements” and “Description of Business - Joint Venture Agreements” above).  Generally, these joint venture arrangements require the Company to contribute capital toward the exploration and development of various properties while requiring the Chinese individual or entity to obtain mineral rights for desirable mineral properties in China, and obtain all required permits and licenses to commence exploration and mining activities.**Outlook**Mineral prices rose steadily during our last fiscal year. At July 31, 2005, the price of gold was $429.50 per ounce compared to $635.30 at July 28, 2006, representing an increase of approximately 48%. Similarly, the value of copper and the value of silver both increased during the same period. Management believes that this trend will continue, and as a result the properties that are owned and controlled by the Company which contain mineralized material could gain in value.  However, there is no assurance that gold prices will continue to rise.				At April 30, 2006, we had interests in two properties that might contain mineralized material (see “Description of Business - Joint Venture Properties”, above), and one further interest than may materialize in the near future (see “Other Projects”, above).				The Company does not currently generate operating cash flows. Subject to sustained mineral prices, management expects to generate revenues and cash flows in the future.				The Company had working capital of $22,846 at July 31, 2006. Total cash requirements stipulated under the Company’s Joint Venture Agreements with Team 209 of China calls for a $5,000,000 equity investment into the joint venture company called Yunnan Long Teng Mining Ltd., and a $3,010,000 investment into the joint venture company called Yunnan Western Mining Ltd., by Magnus.

Under the Huidong (Long Teng) joint venture agreement, Magnus is required to contribute not less than $460,000 within three months after the issuance of the joint venture company business license; $1,000,000 within twenty four (24) months after the issuance of the joint venture company business license; $1,550,000 within thirty-six (36) months after the issuance of the joint venture company business license; and based on the results of the exploration by the joint venture company, if required, an additional $1,990,000 within forty-eight (48) months after the issuance of the joint venture company business license. As of  November 3, 2006 the Company had contributed $2,965,000 to the joint venture company. . The business license for the joint venture company was approved and issued on July 29, 2004. Thus, the Company has 36 months from July 29 2004 to contribute an additional $45,000 to the joint venture as per the schedule above.

Under the Mangshi Joint Venture Agreement, Magnus was required to contribute to the joint venture company a total of $500,000 by December 31, 2005; an additional $1,000,000 by December 31, 2006; and an additional $1,510,000 by December 31, 2007. As of  November 3, 2006, the Company had contributed $1,447,500 to Yunnan Western Mining Ltd.. thus leaving it due to contribute an additional  $ 52,500 to the joint venture by December 31, 2006 as per the schedule above.

The Company will need to raise additional funds through private placements in order to meet its future investment requirements in the above joint ventures. While the Company has been successful in raising money by private placements in the past, there are no guarantees that the Company will be successful in the future. Management believes, however, that absent sufficient funding through a private placement or some other financing the Company will not generate sufficient revenue to cover any shortfall in the next year.

42

**Results from Operations**

***Summary***

The Company's consolidated net loss for the current fiscal year was $9,401,834 or $0.27 per share compared to the previous year’s consolidated net loss of $3,771,493 or $0.15 per share for a net increase of $5,630,341.  The largest expense was related to the cost of exploration of the properties in China (see “Letters of Intent and Preliminary Agreements” and “Joint Venture Agreements”). The second largest expense was related to investor relations.

***Mineral production and revenue***

As we are still an exploration stage company and in the exploration stage of development on our two Chinese properties, we have not, as of yet, produced any revenues nor produced any minerals.

***Exploration, property evaluation and holding costs***

We are committed to contribute at least $3,010,000 to the Long Teng Mining joint venture company within 36 months of July 29, 2004, of which 2,680,000 was contributed by July 31, 2006.  In addition, the Company is committed to contribute a total of at least $1,500,000 to the Mangshi Joint Venture by December 31, 2006 which $1,400,000 was contributed by July 31, 2006  This contribution is used for the ongoing geological testing described above under “Exploration Progress and Future Plans for Mangshi Property.”  At this preliminary stage, it is difficult to estimate whether the exploration costs will exceed the Company’s total capital commitments required under the joint venture agreements. ******

***Corporate administration and investor relations***

Corporate administrative and investor relations costs were $2,808,692 in the current fiscal year compared to $462,387 in the previous year, representing an increase of $2,346,305.   Included in these costs are the costs of an investor relations program started in the year, and business development costs in association with new joint ventures in China.  Also included are travel expenses for executives and geologists to China, travel to various conferences, and other miscellaneous office expenses.

**Financial Position, Liquidity and Capital Resources**

***Cash used in Operations***

Cash used in operations was $8,216,610 in the current fiscal year compared to cash uses of $2,794,681 in the previous year.   

The increase of $5,421,929 can be attributed to the exploration and administrative increases noted above, the addition of the Mangshi Joint Venture, an employee and several consultants, and other costs (legal, accounting, etc.) associated with increased business activity.

***Financing Activities***

The Company received cash from financing activities of $7,105,030 in the current fiscal year compared to $4,155,805 in the previous year.

As of September 30, 2006, the Company has received payment for subscriptions to purchase 350,000 units (each a “Unit”) of the Company at a price of $1.00 per Unit for total proceeds of $350,000.  Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant (each a “Warrant”).  Each whole Warrant entitles the holder thereof to acquire one

43

				additional share of common stock of the Company at an exercise price of $2.00 per share with an expiry date of two years from the date of issuance of the Warrants.

Financing activities for the year are described fully above under “Recent Sales of Unregistered Securities”.

***Liquidity and Capital Resources***

At July 31, 2006, the Company's total assets were $1,251,451 as compared to $2,233,599 the previous year. Long-term liabilities as of July 31, 2006 totaled $0 as compared to $0 in the previous year.  The Company had working capital of $22,846 at July 31, 2006.  The Company has received payment for additional subscriptions to purchase 107,143 units of the Company (see above under “Financing Activities”), and intends to do additional financings in the future.

Major cash commitments in the next fiscal year are related to proposed exploration activities, corporate administration, investor relations and operations (including financial commitments to the Chinese joint venture companies, as described above).

The consolidated financial statements have been prepared on a going-concern basis which assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future.  

The Company has experienced total losses amounting to $14,910,654 as of July 31, 2006.  As of July 31, 2006, the Company had a total of $414,695 in cash and cash equivalents; however this amount is insufficient to sustain operations over the course of the next twelve months. These factors raise substantial doubt about the Company's ability to continue as a going concern.  The ability of the Company to meet its commitments as they become payable, including the completion of acquisitions, exploration and development of mineral properties and projects, is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations.  There are no assurances that the Company will be successful in achieving these goals.

The Company is in the process of exploring and evaluating its mineral properties and projects and has not yet determined whether these properties contain economically recoverable ore reserves.  The underlying value of the mineral properties is entirely dependent on the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or sufficient proceeds from the disposition thereof.

The financial statements do not give effect to adjustments to the amounts and classifications to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

**Transactions with Related Parties / Subsequent Events**

On October 5, 2006 Magnus announced that it had entered into a letter of intent to acquire African Mineral Fields Inc., a British Virgin Islands company which holds an exclusive option to acquire 100% interests in four gold projects in Uganda.  Graham Taylor, President, CEO and a director of Magnus, is the founder, sole director and majority shareholder of African Mineral Fields Inc.  The acquisition comes as part of Magnus’ decision to expand its mineral portfolio into Africa.				Subject to definitive agreement, the Company intends to issue a total of six million common shares and two hundred thousand Series “B” preferred shares to acquire 100% of African Mineral Fields, Inc., which is majority owned by Graham Taylor, President, CEO and director of the Company.  The two hundred thousand Series “B” preferred shares will convert to up to two million common shares subject to the properties of African Mineral Fields Inc. developing a minimum of 250,000 resource category gold ounces and based upon one common share for each gold ounce in the inferred, resource and proven categories.

44

**ITEM 7A.  QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK**Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse change in foreign currency and interest rates. **Exchange Rate**Our reporting currency is United States Dollars (“USD”).  The Chinese Renminbi (“RMB”) has been informally pegged to the USD.  However, China is under international pressure to adopt a more flexible exchange rate system. If the RMB were no longer pegged to the USD, rate fluctuations may have a material impact on the Company’s consolidated financial reporting and make realistic revenue projections difficult.  Recently (July 2005) the Renminbi was allowed to rise 2%.  This has not had an appreciable effect on our operations and seems unlikely to do so.

As Renminbi is used for expenditures by Magnus and its subsidiaries in conducting their operations in China, the fluctuation of exchange rates of Renminbi may have positive or negative impacts on the results of operations of the Company.

**Interest Rate**

Interest rates in China are low and stable and inflation is well controlled, due to the habit of the population to deposit and save money in the banks (among with other reasons, such as the PRC’s perennial balance of trade surplus).  Our loans, if any, relate mainly to trade payables and are mainly short-term.  However our debt is likely to rise with physical plant in connection with expansion and, were interest rates to rise at the same time, this could become a significant impact on our operating and financing activities.				We have not entered into derivative contracts either to hedge existing risks or for speculative purposes.**ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA					Index to the Financial Statements					                                                                                                                                                          **Index				Report of Independent Registered Public Accounting Firm dated November 10, 2006.......................... F-1				Consolidated Balance Sheet................................................................................................................ F–2				Consolidated Statement of Operations................................................................................................ F–3				Consolidated Statement of Cash Flows .............................................................................................. F–4				Consolidated Statement of Stockholders’ Equity (Deficit).................................................................... F–5				Notes to the Consolidated Financial Statements.................................................................................. F–7

****

***REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM***

**The Board of Directors and Stockholders of				Magnus International Resources Inc.**(A development stage company)We have audited the accompanying consolidated balance sheet of **Magnus International Resources Inc.**(a development stage company) as of July 31, 2006, the related consolidated statements of stockholders’ equity (deficit), operations and cash flows for the year ended July 31, 2006 and for the period from August 1, 2002 (re-entered into developing stage on June 2, 2003 described in Note 2) to July 31, 2006.  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 audit. The consolidated financial statements as of July 31, 2005 and for the cumulative period from August 1, 2002 to July 31, 2005 were audited by other auditors whose reports dated October 31, 2003, October 15, 2004 and November 15, 2005 expressed unqualified opinions on those statements.  The financial statements for the period from August 1, 2002 to July 31, 2005 include total revenues and net loss of $nil and $5,585,963 since inception ($77,143 before re-entering into developing stage and $5,508,820 after re-entering into developing stage), respectively.  Our opinion on the statements of stockholders’ equity (deficit), operations and cash flows for the period August 1, 2002 (re-entered into developing stage on June 2, 2003) to July 31, 2006, insofar as it relates to amounts for prior periods through July 31, 2005 is based solely on the reports of other auditors. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.			In our opinion, based on our audit and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of July 31, 2006, and the results of its operations and its cash flows for the year ended July 31, 2006, and for the cumulative period from August 1, 2002 (re-entered into developing stage on June 2, 2003) to July 31, 2006 in conformity with U.S. generally accepted accounting principles. 			The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has recurring losses from operations since inception and has a working capital deficiency that raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.			Schumacher & Associates, Inc.			Certified Public Accountants			2525 15th Street, Suite 3H			Denver, Colorado 80211			November 10, 2006

F-1(a)

******

***REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM*The Board of Directors and Stockholders of 					Magnus International Resources Inc.** (formerly Gravity Spin Holdings, Inc.)				 (A development stage company)We have audited the accompanying consolidated balance sheet of **Magnus International Resources Inc.**(a development stage company) as of July 31, 2005, the related consolidated statements of stockholders’ equity (deficit), operations and cash flows for the year ended July 31, 2005 and for the period from August 1, 2002 (re-entered into developing stage on June 2, 2003 described in Note 2) to July 31, 2005.  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 audit. The consolidated financial statements as of July 31, 2004 and for the cumulative period from August 1, 2002 to July 31, 2004 were audited by other auditors whose reports dated October 31, 2003 and October 15, 2004 expressed unqualified opinions on those statements.  The financial statements for the period from August 1, 2002 to July 31, 2004 include total revenues and net loss of $nil and $1,814,470 since inception ($77,143 before re-entering into developing stage and $1,737,327 after re-entering into developing stage), respectively.  Our opinion on the statements of stockholders’ equity (deficit), operations and cash flows for the period August 1, 2002 (re-entered into developing stage on June 2, 2003) to July 31, 2005, insofar as it relates to amounts for prior periods through July 31, 2004 is based solely on the reports of other auditors.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion.				In our opinion, based on our audit and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of July 31, 2005, and the results of its operations and its cash flows for the year ended July 31, 2005, and for the cumulative period from August 1, 2002 (re-entered into developing stage on June 2, 2003) to July 31, 2005 in conformity with U.S. generally accepted accounting principles. 				The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has recurring losses from operations since inception and has a working capital deficiency that raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.				Vancouver, Canada                                                                            /s/ Ernst & Young LLP				November 15, 2005                                                                            Chartered Accountants

F-1(b)
**MOORE STEPHENS ELLIS FOSTER LTD.** CHARTERED ACCOUNTANTS1650 West 1st Avenue			Vancouver, BC  Canada   V6J 1G1			Telephone:  (604) 734-1112  Facsimile: (604) 714-5916			Website:  www.ellisfoster.com**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM****To the Board of Directors and Stockholders****MAGNUS INTERNATIONAL RESOUCES INC. (“the Company”)**(formerly Gravity Spin Holdings, Inc.)		(an exploration stage enterprise)		We have audited the consolidated statements of operations, cash flows and stockholders’ equity of **Magnus International Resources Inc.**(formerly Gravity Spin Holdings, Inc.) (an exploration stage enterprise) for the year ended July 31, 2004. These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.  The Company’s consolidated financial statements as of and for the year ended July 31, 2003 were audited by other auditors whose report, dated October 31, 2003, expressed an unqualified opinion on these statements.  The other auditors’ report has been furnished to us, and our report, insofar as it relates to the amounts included for such prior period, is based solely on the report of such other auditors.		We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.		In our opinion, the consolidated financial statements of the Company present fairly, in all material respects, the results of its operations and its cash flows for the year ended July 31, 2004, in conformity with U.S. generally accepted accounting principles.		The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, the Company has insufficient working capital, has sustained operating loss, and has insufficient capital to continue these sustained losses, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.		Vancouver, Canada                                                       “Moore Stephens Ellis Foster Ltd.”		October 15, 2004                                                                 Chartered Accountants
**MS*******An independently owned and operated member of Moore Stephens North America, Inc.  Members in principal cities throughout North America. 						Moore Stephens North America, Inc. is a member of Moore Stephens International Limited, members in principal cities throughout the world.*

F-1(c)
**MAGNUS INTERNATIONAL RESOURCES INC.*****(An Exploration Stage Company)******Consolidated Balance Sheets******(Expressed in US Dollars)***    Note 2 - Basis of Presentation - going concern							July 31							 July 3120062005  							ASSETSCURRENT ASSETSCash							$							       414,695							$							    1,832,171Advances receivable from related party (Note 10)							21,292							73,701Prepaid expenses and other							         70,169							42,345Deposit receivable (Note 3)							       250,000							                -    Total current assets							       756,156							    1,948,217  Fixed assets (Note 4)							       495,295							      285,382  Investment in Joint Ventures (Note 5)							                 -							                -Mineral Property Licenses (Note 5)							                 -							                -      Total assets							$							    1,251,451							$							    2,233,599======================    							LIABILITIES AND STOCKHOLDERS' EQUITY  CURRENT LIABILITIESAccounts payable including related party payable of $125,107						(2005 - $Nil) (Note 10)							$							       425,088							$							      229,921Accrued liabilities including related party liabilities of $65,179						(2005 - $Nil) (Note 10)							       308,222							        66,061    Total current liabilities							       733,310							      295,982  COMMITMENTS  MINORITY INTEREST							                 -							                -  STOCKHOLDERS' EQUITYCommon stock (Note 8)Authorized 100,000,000 shares at par value of $0.001 eachIssued and outstanding 40,763,654 (2005 - 30,500,018)							         40,764							        30,500Preferred stock (Note 9)Authorized 1,000,000 shares at par value of $0.001 eachIssued and outstanding 100,000 (2005 - Nil)							             100							                -Subscriptions received							       150,000							    1,114,650Promissory notes receivable for subscriptions (Note 8)							   (2,844,651)							                -Common stock to be issued							       542,820							      690,000Additional paid-in capital							   17,631,608							    5,688,430Accumulated deficit prior to exploration stage							       (77,143)							      (77,143)Accumulated deficit during exploration stage							 (14,910,654)							  (5,508,820)Accumulated other comprehensive income (loss)							       (14,703)							                -Total stockholders' equity							       518,141							    1,937,617Total liabilities and stockholder's equity							$							    1,251,451							$							    2,233,599======================  							The accompanying notes to the consolidated financial statements are an integral part of these statements.							F-2**MAGNUS INTERNATIONAL RESOURCES INC.*****(An Exploration Stage Company)******Consolidated Statements of Operations******(Expressed in US Dollars)***  							Exploration stage							through July 31,							2006							                 Year Ended July 31                 							2006							2005    EXPENSESConsulting							$							        1,022,398							 $ 							        582,611							 $ 							     1,939,447Finder fees							                   -  							          32,375							        674,375Investor relations (Note 11)							        1,728,729							          24,777							     1,753,506Legal and professional fees							           397,700							        146,737							        688,403Exploration licenses							        1,276,177							     1,303,932							     2,580,109Geological expenses							        2,406,726							        258,630							     2,665,356Amortization							             77,980							          25,634							        104,261Salaries and benefits							           341,438							        138,500							        580,123Stock-based compensation (Note 12)							        1,068,142							        572,650							     1,917,497Travel							           433,692							        248,037							        744,361Other administrative expenses							        1,079,963							        437,610							     1,694,327Total expenses							        9,832,945							     3,771,493							   15,341,765  Net loss for the period before minority interests							        9,832,945							     3,771,493							   15,341,765  Minority interest in loss for the period							           431,111							                -  							        431,111  Net loss for the period							$							     9,401,834							 $ 							     3,771,493							 $ 							   14,910,654=================================  Other comprehensive income (loss)Foreign currency translation							$							       (14,703)							 $ 							                -  							 $ 							        (14,703)=================================  Net loss per common share - basic and fully diluted: Net loss for the period 							$							            0.27							$							             0.15======================  Weighted average number of common stock outstanding							 34,808,816							    24,599,234======================  							The accompanying notes to the consolidated financial statements are an integral part of these statements.							F-3**MAGNUS INTERNATIONAL RESOURCES INC.*****(An Exploration Stage Company)******Consolidated Statements of Cash Flows******(Expressed in US Dollars)***    						Exploration stage						through						July 31, 2006						                  Year Ended  July 31            						2006						2005Cash and cash equivalent from (used in) operating					activities:Net (loss)						$						(9,401,834)						$						(3,771,493)						$						(14,910,654)Adjustments to reconcile net loss to net cash used in					operating activities:Stock-based compensation						1,068,142						572,650						1,917,497Stock issued / allotted for services and licenses						255,000						500,000						1,369,000Amortization of fixed assets						77,980						25,634						104,261Minority interest in net loss						(431,111)						-						(431,111)Loss on disposition of fixed assets						3,300						-						3,300Net change in operating assets and liabilities:Advances receivable and prepaid expenses						24,585						(59,940)						(91,461)Deposit receivable						(250,000)						-						(250,000)Accounts payable and accrued liabilities						437,328						(61,532)						733,310Net cash and cash equivalent from (used in) operating					activities						(8,216,610)						(2,794,681)						(11,555,858)  Cash and cash equivalent from (used in) investing activities:Advance from (to) joint venture company						-						500,000						-Advances on license acquisitions						-						-						-Purchase of capital assets						(287,077)						(302,408)						(598,740)Net cash and cash equivalent from (used in) investing					activities						(287,077)						197,592						(598,740)  Cash and cash equivalent from financing activities:Issue of Preferred Shares						100						-						100Options exercised						573,000						-						573,000Warrants exercised						2,969,332						620,000						3,589,332Subscriptions received						3,242,325						3,535,805						8,105,384Finders' fees paid in respect of private placements						(110,838)						-						(110,838)Contributions attributable to minority interests						431,111						-						431,111Net cash and cash equivalent from financing activities						7,105,030						4,155,805						12,588,089  Effect of other comprehensive income (loss) on cash						(18,819)						-						(18,819)  Increase in cash and cash equivalent						(1,417,476)						1,558,716						414,672  Cash and cash equivalent, beginning of period						1,832,171						273,455						23Cash and cash equivalent, end of period						$						414,695						$						1,832,171						$						414,695===================================    						The accompanying notes to the consolidated financial statements are an integral part of these statements.						F-4**MAGNUS INTERNATIONAL RESOURCES INC.*****(An Exploration Stage Company)******Consolidated Statement of Stockholders' Equity******(Expressed in US Dollars)******(Unaudited - Prepared by Management)***Common							Stock Amount Preferred							stock Subscription							received Promissory							notes							receivable for							subscriptions Common							Stock to be							Issued Cumulative							Other							Comprehen-							sive Income							(loss) Additional							Paid in							Capital Deficit							Accumulated							During							Exploration							Stage Deficit							Accumulated							Prior to							Exploration							Stage Stockholders’							Equity Balance July 31, 200221,543,200$   21,543$     -  $                 -  $               -  $              -  $      2,362$         59,008$                 -  $   (109,417)$       (26,504)Capital contributed by						shareholder--  -  -  -  -  -  3,086-  -  3,086Disposition of paid-in capital						for subsidiary sold--  -  -  -  -  -  (6,471)-  -  (6,471)Net income for the year--  -  -  -  -  (2,362)-  -  32,27429,912  Balance July 31, 200321,543,200$   21,543$     -  $                 -  $               -  $              -  $           -  $         55,623$                 -  $     (77,143)$                23Shares issued as finder’s fees in						connection with a letter of intent,						December 31, 2003200,000200-  -  -  -  -  79,800-  -  80,000Shares issued as finder’s fees in						connection with two letters of intent,						January 15, 2004400,000400-  -  -  -  -  171,600-  -  172,000Shares issued as consulting fees,						ranging from $0.26 to $0.54 per						share, between November 30, 2004						and February 29, 2004400,000400-  -  -  -  -  171,600-  -  172,000200,000 Shares allotted as a finder’s						fee in connection with a joint venture						agreement, July 6, 2004-  -  -  -  -  190,000-  -  -  -  190,000Shares subscription received-  -  -  1,327,254-  -  -  -  -  -  1,327,254Stock-based  compensation-  -  -  -  -  -  -  276,705-  -  276,705Net loss for the year -  -  -  -  -  -  -  -  (1,737,327)-  (1,737,327)  Balance July 31, 200422,543,200$   22,543$     -  $    1,327,254$               -  $    190,000$           -  $       755,328$  (1,737,327)$     (77,143)$       480,655  -  -  Share subscriptions received -  -  -  3,535,805-  -  -  -  -  -  3,535,805Stock Based compensation-  -  -  -  -  -  -  572,650-  -  572,650Shares Issued pursuant to units						subscribed 7,336,8187,337-  (3,748,409)-  -  -  3,741,072-  -  -  Exercise of Warrants ($1.00) 620,000620-  -  -  -  -  619,380-  -  620,000
F-5
285,714 shares allotted in return						pursuant to agreement to issue						$500,000 worth of shares upon						transfer of exploration licence-  -          -                      -  -  500,000-  -  -  -  500,000Net loss for the year-  -          -                      -  -  -  -  -  (3,771,493)-  (3,771,493)  Balance July 31, 200530,500,018$   30,500$     -  $    1,114,650$               -  $    690,000$           -  $    5,688,430$  (5,508,820)$     (77,143)$    1,937,617  Share subscriptions received -  -  -  3,242,325-  - -  -  -  -  3,242,325Shares allotted as finders' fees-  -  -  -  -  287,820-  (287,820)-  -  -  Finders' fee paid in cash-  -  -  -  -  - -  (110,838)-  -  (110,838)Finders' fee shares issued200,000200-  -  -  (190,000)-  189,800-  -  -  Shares allotted for acqusition of						mining licenses-  -  -  -  -  255,000-  -  -  -  255,000Stock-based compensation-  -  -  -  -  - -  1,068,142-  -  1,068,142Shares issued pursuant to						subscriptions3,456,5503,456-  (3,871,975)-  -  -  3,868,519-  -  -  Subscriptions received in cash for						exercise of warrants-  -  -  2,969,332-  -  -  -  -  -  2,969,332Subscriptions received by promissory						note for exercise of warrants-  -  -  2,844,651(2,844,651)-  -  -  -  -  -  Shares issued pursuant to exercise of						warrants 5,175,3725,176-  (6,148,983)-  -  -  6,143,807-  -  -  Shares issued pursuant to exercise of						Options1,146,0001,146-  -  -  -  -  571,854-  -  573,000Shares issued pursuant to agreement285,714286-  -  (500,000)-  499,714-  -  -  Preferred stock subscribed and issued-  -  100-  -  -  -  -  -  -  100Minority interest in deficit recognized						on license transfer-  -  -  -  -  -  -  -  -  -  -  Net loss for the year-  -  -  -  -  -  (14,703)-  (9,401,834)-  (9,416,537)  Balance July 31, 200640,763,654$   40,764$   100$       150,000$(2,844,651)$    542,820$  (14,703)$  17,631,608$(14,910,654)$     (77,143)$       518,141===========================================================================================    The accompanying notes to the consolidated financial statements are an integral part of these statements.
F-6

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

**1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES					Organization and Description of Business**The Company was incorporated as Gravity Spin Holdings, Inc. in the State of Nevada on April 4, 2001. On June 30, 2001, the Company acquired all the outstanding stock of Gravity Spin, Inc. (“Gravity Spin”, formerly E-Fusion ATP Inc.), a company incorporated on March 3, 2000 in Canada, by issuing 10,000,000 shares of its common stock.  Gravity Spin engaged in advertising, sales promotion, graphic design, branding, new media, and design services principally in Canada.  The two companies were under common control.  Prior to the acquisition, the Company had only nominal assets and liabilities. The transaction was treated as a reverse acquisition for accounting purposes, which is a capital transaction and not a business combination. The Company sold its subsidiary, Gravity Spin, Inc., on June 2, 2003.				Subsequent to the sale of its operating subsidiary on June 2, 2003, the Company entered an exploration stage in pursuit of new business opportunities (Note 5).  As an exploration stage company, the Company presents its financial statements in conformity with the accounting principles generally accepted in the United States that apply in establishing operating enterprises.  The Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from the inception of the exploration stage through July 31, 2006. 				The Company formed a subsidiary called Gravity Spin Event Marketing, Inc., in May 2003.  The Company formed two new subsidiaries called Magnus International Resources Inc. (“Magnus BVI”) and Magnus Resources (HK) Limited (“Magnus HK”) in April 2004 and December 29, 2003, respectively. Gravity Marketing, Magnus BVI and Magnus HK have no transactions as of July 31, 2006.				Effective May 4, 2004 the Company changed its name to Magnus International Resources Inc.  The Company has an office in Vancouver, Canada.				On September 29, 2004 the joint venture agreement entered into by the Company on July 6, 2004 was approved by the Chinese government.  With the approval, a new joint venture company, Yunnan Long Teng Mining Ltd., (“Long Teng”) was formed.  The company owns 90% of the issued shares of Long Teng as at July 31, 2006.  The activities of Long Teng are governed by the joint venture agreement.				The Company owns 100% of Golden River Resources Corp. (“Golden River”). Golden River is participating in a co-operative joint venture in China. Under the joint venture, Golden River acquires a 90% interest in the sino-foreign joint venture company Yunnan Western Mining Ltd. (“Western Mining”) by making capital contributions on the schedule required by the joint venture agreement. Golden River has recognized its interest in Western Mining as 90%.

F-7

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)						Notes to Consolidated Financial Statements						July 31, 2006						(Expressed in US Dollars)***

**Principles of Consolidation**The consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries, Golden River,****Gravity Marketing, Magnus BVI and Magnus HK and its 90%-owned subsidiaries, Long Teng and (indirectly) Western Mining.  All significant inter-company balances and transactions are eliminated. Minority interest represents the other venturer’s interests in the net assets of the joint venture companies after deducting the minority interest share of net losses of the ventures.**Cash and Cash Equivalents**Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased.  As at July 31, 2006 and 2005, the Company did not have any cash equivalents.

**Mineral Properties and Exploration Expenses**

Mineral property acquisition, exploration and development costs are charged to operations as incurred until such time that proven or probable ore reserves are discovered.  From that time forward, the Company will capitalize all costs to the extent that future cash flow from reserves equals or exceeds the costs deferred.  The deferred costs will be amortized using the unit-of-production method when a property reaches commercial production. As at July 31, 2006, the Company did not have proven or probable reserves. 

**Asset Retirement Obligations**

The Company has adopted SFAS No. 143, *Accounting for Asset Retirement Obligations* which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred.   SFAS No. 143 requires a liability to be recorded for the present value of the estimated site restoration costs with corresponding increase to the carrying amount of the related long-lived asset.  The liability will be accreted and the asset will be depreciated over the life of the related assets.  Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made.

The Company has recorded the estimated site restoration costs attributable to the work completed on the mineral properties in China to July 31, 2006.  In the future, the Company may have additional asset retirement obligations in respect of the mineral properties in China. Under Chinese law, companies with exploration licences may be required to incur expenses to reclaim the properties or to pay for disruption to properties. The obligations and amounts with respect to a given property are subject to negotiation with the government at the time the work on a property is completed.

F-8

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

**Fixed Assets**Fixed assets are carried at cost less a provision for depreciation on a straight-line basis over their estimated useful lives as follows:
Computer equipment 							3 to 5 yearsComputer software 							3 yearsField equipment 							5 yearsLeasehold improvements 							2 yearsOffice furniture and equipment 							5 yearsVehicles 							10 years**Advertising Expenses**Advertising expenses are expensed as incurred. **Foreign Currency**
The parent company’s operation of the Company is located in Canada.  It maintains both U.S. Dollar and Canadian Dollar bank accounts.  Transactions in foreign currencies are translated into the functional currency, which is U.S. Dollars, at the rate in effect at the time of the transaction. Monetary assets and liabilities denominated in the foreign currencies are presented in the balance sheet at the rate in effect at the balance sheet date.  Transaction gains and losses that arise from exchange rate fluctuations are included in the results of operations.			The subsidiaries’ operations of the Company are located in China, and they maintain their accounting records in Chinese Renminbi Yuan.  The monetary assets and liabilities of the subsidiaries are translated into U.S. Dollars at the rate in effect at the balance sheet date.  Revenue and expenses are translated at the average exchange rate.  The resulting foreign exchange gains and losses that arise from exchange rate fluctuations are included in the results of operations. **Use of Estimates**

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles of United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared.    Actual results could differ from those estimates.**Loss Per Share**Basic earnings (loss) per share of common stock is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding during the period.  Diluted

F-9

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

earnings (loss) per share is equal to the basic loss per share for the year ended July 31, 2006 and 2005 because common stock equivalents consisting of options to acquire 4,935,000 (2005 – 4,330,000) shares of common stock and warrants to acquire 1,524,874 (2005 – 7,256,818) shares of common stock that are outstanding at July 31, 2006 and 2005 are anti-dilutive, however, they may be dilutive in future.**Fair Value of Financial Instruments**The carrying value of cash, advances receivable, and accounts payable and accrued liabilities at July 31, 2006 and 2005, reflected in these financial statements, approximates their fair value due to the short-term maturity of the instruments. **Comprehensive Income**The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income”.  Comprehensive income includes net income and all changes in equity during a period that arises from non-owner sources, such as foreign currency items and unrealized gains and losses on certain investments in equity securities. **Income taxes**

The Company records deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."  The statement requires recognition of deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse.  A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.**Concentrations**The Company uses one supplier, Geology Brigade 209 of the Nuclear Industry of Yunnan Province of China (“Team 209”), which is also the joint venture partner, to supply the licenses and exploration permits and approximately 75% of the manpower and technical expertise for the minerals exploration at the Company’s two joint ventures in China.			The Company holds cash in bank accounts that are not insured against financial institution failure due to holding US currency in Canada and holding US and Chinese currency in China.**Impairment of Long-Lived Assets**The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operation cash flows in accordance with SFAS No. 144, *Accounting for the Impairment or Disposal of Long-lived Assets. *If impairment is deemed to exist, the asset will be

F-10

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

written down to its fair value.  Fair value is generally determined using a discounted cash flow analysis.  As at July 31, 2006 and 2005, the Company does not believe any adjustment for impairment is required.**Finders’ fees**

Finders’ fees paid to consultants for referring investors are capitalized and are offset against the proceeds of the offering if successful and are expensed and charged to operations if the offering is not successful.**Stock-Based Compensation**			As of July 31, 2006, the Company has implemented the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), *Share- Based Payment*(“SFAS No. 123R”), which replaced Statement of Financial Accounting Standards No. 123, *Accounting for Stock-Based Compensation* (“SFAS No. 123”) as amended by No. 148, *Accounting for Stock-Based Compensation – Transition and Disclosure*. Compensation expense is recorded in accordance with the fair value recognition provisions of SFAS 123R beginning in 2006 for options issued to employees. Prior to 2006, the Company accounted for stock options granted to its employees and directors using the intrinsic value method of accounting, as prescribed in Accounting Principles Board Opinion No. 25 *Accounting for Stock Issued to Employees* and related interpretations.  Under the intrinsic value method, no compensation expense is recorded if the exercise price of the options is equal to or greater than the market price of the underlying stock on the date of grant.  As the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense was recognized under APB25 for 2005 and prior. 			Options issued to non-employees are recorded in accordance with the fair value recognition provisions of SFAS No. 123R, which are the same as the provisions previously followed under SFAS No. 123.*.*The Company has a stock-based compensation plan that is described more fully in Note 9.**New Accounting Pronouncements**In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB No. 29, Accounting for Nonmonetary Transactions”.  SFAS No. 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance.  SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.  The adoption of FASB No. 153 does not have a material impact on the Company’s consolidated financial statements.

F-11

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. SFAS No. 154 replaces APB Opinion No. 20 “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The adoption of SFAS No. 154 does not have any impact on the Company’s consolidated financial statements.

There were various other accounting standards and interpretations issued during 2006, none of which are expected to have a material impact on the Company's financial position, operations or cash flows.**2. BASIS OF PRESENTATION – GOING CONCERN**

These consolidated financial statements have been prepared on a going-concern basis which assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future.  

The Company has experienced losses since the inception of the exploration stage amounting to $14,910,654 as of July 31, 2006.  As of July 31, 2006, the Company had a total of $414,695 in cash and cash equivalents, however this amount is insufficient to sustain operations over the course of the next year. These factors raise substantial doubt about the Company's ability to continue as a going concern.  The ability of the Company to meet its commitments as they become payable, including the completion of acquisitions, exploration and development of mineral properties and projects, is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations.  There are no assurances that the Company will be successful in achieving these goals.

The Company is in the process of exploring and evaluating its mineral properties and projects and has not yet determined whether these properties contain economically recoverable ore reserves.  The underlying value of the mineral properties is entirely dependent on the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or sufficient proceeds from the disposition thereof.

These financial statements do not give effect to adjustments to the amounts and classifications to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.**3. DEPOSIT RECEIVABLE**

The deposit receivable is in respect of an option to purchase a 30% interest in a rutile titanium property in central China. Under the Term Sheet Agreement, $500,000 was paid by the Company to the property owner on agreement execution, refundable in the event Magnus determines not to proceed.****The Company had a 90 day due diligence period from the date of execution of the

F-12

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

Agreement allowing the Company not to proceed if the property was deemed by the Company’s geology staff not to be economically viable. The Company has determined the property is not economically viable, and gave notice within the 90 day period that the Company would not proceed. The property owner has given verbal assurances of intention to refund the deposit but has delayed repayment for several months. As of October 10, 2006, the Company has received $250,000 of the deposit refund. The Company has provided an allowance  of $250,000 in case the deposit refund is not received in full.**4. FIXED ASSETS**

Fixed assets consist of the following:

** **

**  **

July 31, 2006

 

July 31, 2005

  

****

 

Computer equipment

**$**

87,968

$

41,444

Computer software

****

46,415

10,264

Field equipment

****

141,567

32,752

Leasehold improvements

****

8,409

8,264

Office furniture and equipment

****

61,152

21,583

Vehicles

****

254,769

197,356

**  **

****

 

** **

****

601,948

311,663

Less: Accumulated depreciation

****

104,985

26,281

 

****

 

 

**$**

495,295

$

285,382
========================**5. MINERAL PROPERTIES AND JOINT VENTURES**To July 31, 2006, the Company had entered into the following material agreements with respect to mineral properties and exploration licenses in China.**Yunnan Long Teng Mining Ltd.**On July 6, 2004, the Company entered into a formal Cooperative Joint Venture Contract (“JV Agreement”) with Geology Brigade 209 of the Nuclear Industry of Yunnan Province of China ("Team 209") to form a new joint venture company called Yunnan Long Teng Mining Ltd. (“Long Teng”), a Chinese corporation.  Long Teng will carry out mineral exploration and development in Luquan county, Yunnan province and Huidong county, Sichuan province, China.  Under the terms of the JV Agreement, the Company will contribute $5,000,000 as an equity investment into Long Teng over the next four (4) years and Team 209 will transfer certain gold and copper exploration licenses to Long Teng in return for US$678,513 (RMB5,500,000) and a 10% interest in Long Teng.  Upon initial capital contributions by the Company and the transfer of
F-13

**MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***

the exploration licenses by Team 209, the Company will own a 90% interest in Long Teng.  Subject to certain conditions precedent being satisfied, the Company is required to contribute $5,000,000 as follows:
- not less than $460,000 within three months after the issuance of the business license;   $1,000,000 within twenty-four months after the issuance of the business license;$1,550,000 within thirty-six months after the issuance of the business license; and
- an additional $1,990,000 within forty-eight months after the issuance of the business license, if required, based on the results of the exploration by Long Teng.		  If further funding is required for carrying out more exploration and development activities, the Company will be responsible for providing such funding.  Team 209 will remain a 10% owner of Long Teng.    The Company was required to provide Team 209 with the equivalent of $750,000 in shares of its common stock within 15 days after the issuance of the business license of Long Teng, the joint venture company, and the completion of transfer of exploration licenses for the two joint venture properties ($250,000 in shares for successful transfer of the Luquan property license and $500,000 in shares for the successful transfer of the Huidong license, respectively).  On September 29, 2004, the JV Agreement was approved by the Chinese Government and a business license for Long Teng Mining Ltd. was issued.    The exploration license for one of the two properties covered by the Joint Venture Agreement (Huidong) was successfully transferred into the Joint Venture Company, Long Teng, on July 27, 2005.  In connection with this successful transfer, Magnus issued Team 209 $500,000 in common shares.  The parties agreed to value the common stock at $1.75 at the time the exploration license had been successfully transferred.  Thus, 285,714 shares were issued to Team 209 on August 26, 2005.   In July and August of 2005, the Board of Directors gathered all available geological information surrounding the Luquan property, and upon consultation with senior Company geologists, it was determined that the Company’s resources would be better expended on the exploration of the Company’s two core projects and in seeking out other prospective properties.  After consultation with Team 209, it was agreed that Team 209 would not transfer the Luquan exploration license to Long Teng Mining, and that the Luquan property would not be explored by Long Teng Mining. 			The Company agreed to pay a finder’s fee of 200,000 shares of its common stock valued at $190,000 and $200,000 cash to a corporation. The finder’s fee, totaling $390,000, was expensed in 2004.  The 200,000 shares were issued on December 15, 2005.**Yunnan Western Mining, Ltd.**On July 26, 2005, Magnus and First Fortune Investments Inc. entered into a Letter Agreement (the “Letter Agreement”) whereby  Magnus agreed to acquire 100% of the issued and outstanding shares of Golden River Resources Corp., a private British Columbia company (“Golden River”), which was  
F-14
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  owned by First Fortune Investments Inc. (“First Fortune”), and which was participating in a co-operative joint venture with Team 209 pursuant to an agreement dated August 29, 2003 (the “Mangshi Joint Venture”), between Golden River and Team 209. The acquisition of Golden River was completed on November 25, 2005.			Under the Mangshi Joint Venture, Golden River and Team 209 formed a Sino-foreign joint venture company, Yunnan Western Mining Ltd. (“Western Mining”).  The Mangshi Joint Venture gives Golden River a 90% interest in Western Mining, which holds a mineral exploration license comprising approximately 114 square kilometers.  The license is located in the Luxi Gold Belt in the western part of Yunnan Province, People’s Republic of China, and the property is known as the Mangshi Property (“Mangshi”).    Pursuant to the Letter Agreement, Magnus acquired 100% of the shares of Golden River for a total consideration of up to $400,000. $300,000 of the consideration was payable to First Fortune and up to $100,000 is payable directly to Team 209 on behalf of First Fortune towards Golden River’s outstanding debt owing to Team 209 with respect to operating costs of Western Mining to date.  The Company has paid the $300,000 to First Fortune.    Upon closing the Letter Agreement on November 25, 2005, the Company assumed all of Golden River’s obligations and benefits under the terms of the Mangshi Joint Venture.  The terms of the Mangshi Joint Venture require Golden River to expend, through its Sino-foreign joint venture company, Yunnan Western Mining Ltd., a total of $3,010,000 on the area covered by the exploration license over a period of roughly four years.  The amended Mangshi Joint Venture capital contribution schedule, which was approved by the Yunnan Provincial government, requires the following capital contributions by the following dates: $500,000 by December 31, 2005; an additional $1,000,000 by December 31, 2006, and; an additional $1,510,000 by December 31, 2007.  Increments of 30% interest in Western Mining shall be earned for every aggregate of $1,000,000 contributed by the Company.  Team 209 will retain a carried interest of 10% in Western Mining upon the completion of the contributions by the Company of the aggregate total of $3,010,000.  Further contributions by the Company beyond $3,010,000 will not dilute the 10% carried interest of Team 209. (Note 10). As at July 31, 2006, Golden River has directly contributed $1,400,000 in capital to Yunnan Western Mining Ltd.    Within the Mangshi exploration area are two smaller mining permits where Team 209 is conducting small scale heap leach mining operations.  On October 29, 2005, the Company (through Western Mining) agreed to purchase these mining permits from Team 209 (from a division of Team 209 known as 209 Geo-brigade of Yunnan Provincial Nuclear Industry, Mangshi Gold Mine) in exchange for 150,000 shares of common stock of the Company. The shares have not yet been issued as of July 31, 2006. The Company has recognized the allotment of the shares at a value of $1.70 per share, being the trading price of the company’s stock on October 29, 2005.**Kangding Kangma Mining Ltd.**  On December 2, 2004 Magnus agreed to purchase Kangding Kangma Mining Ltd., Co. (“Kangding” or “Kangding Kangma”), of Sichuan Province, China, which owns a mining license  
F-15
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  for approximately 3 square kilometers in Sichuan Province known as the Xintaizi mining area (“Xintaizi”).  Magnus and Team 209 had planned to form a new joint venture company and apply for all necessary approvals from the Chinese government to begin development of the Xintaizi project.			Under the agreement to purchase Kangding Kangma, the Company was to pay, on behalf of Long Teng, RMB 2,100,000 (approximately $253,725 US dollars) to Kangding Kangma’s owners (the “Vendors”).  RMB 1,150,000 (about US$139,026) has been paid to the Vendors as of July 31, 2005, with the remaining RMB 950,000 due on the day the transfer of Kangding Kangma’s equity is successfully registered in the name of Magnus and Team 209 (in proportions of 90% and 10% respectively) and such transfer is effected and approved under Chinese law.   As of October 30, 2005, the equity in Kangding Kangma had been successfully transferred to the Deputy General Manager of Long Teng, acting as agent to Magnus.  However, the subsequent transfer of Kangding Kangma to Magnus and Team 209 was significantly delayed.        			Initial exploration work conducted by the Company indicated ore grades in the Xintaizi area were insufficient to justify further exploration.  Team 209 formally agreed, in an agreement signed October 30, 2005, to assume ongoing ownership and liability for Kangding Kangma and the Xintaizi Mining License, and to compensate Magnus for the delays in the transfer of the equity.  Under the Agreement on Compensation for the Failed Transfer of Mining Rights for the Xintaizi Gold Mine in Kangding, Magnus, through Long Teng Mining, will receive 1,500,000 RMB within 20 days of execution of the Compensation Agreement.  From the date of execution of the Compensation Agreement, Team 209 has assumed all ownership and liability for Kangding Kangma and the Company has no further involvement in Kangding Kangma. As of July 31, 2006 the compensation has not been paid, but has been recovered by way of offset against amounts owing by Yunnan Long Teng Mining Ltd. to Team 209.**6. ENVIRONMENTAL RESTORATION COSTS**The Company’s exploration work results in damage to forests and disruption of lands and water supplies for which the Company will be required to provide compensation or remediation. The Company has provided for all known and estimable liabilities for costs of remediation or compensation based on the work carried out to July 31, 2006. The Company has recognized $82,418 in such costs to July 31, 2006. Accrued liabilities includes $62,750 for remediation and compensation liabilities, which is management’s estimate of the liabilities existing as at July 31, 2006. **7. LEASES**The Company has the following commitments for leased office premises:			Vancouver, Canada - $7,517 per month for 22 months from July 31, 2006			Kunming, China - $690 per month for 8 months from July 31, 2006			Las Vegas, Nevada - $ 167 per month for 9 months from July 31, 2006			London, UK - $500 per month, on month to month basis  
F-16
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  **8. COMMON STOCK**Effective May 4, 2004, the Company increased its authorized share capital from 25,000,000 shares to 100,000,000 shares and approved a two for one forward stock split. All references in the accompanying financial statements to the number of common stock outstanding and per share amounts have been restated to reflect the stock split.  The subscription agreements for common stock, warrants and piggyback warrants described below have been adjusted as to shares and share prices corresponding to the stock split.    On August 12, 2005, the Company issued 133,000 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.00 for total proceeds of $133,000. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.  On August 15, 2005, the Company issued in aggregate 726,800 units (each a “Unit”) under a private placement at $0.50 per Unit.  Each Unit consists of one share of common stock, one share purchase warrant to purchase an additional one share of common stock of the Company until January 31, 2006 at a price of $1.025 per share as at August 1, 2005 and increasing in price by $0.025 on the first day of each subsequent month, and one piggyback warrant to purchase an additional one share of common stock of the Company at a price of $2.00 per share until September 30, 2006, only if the holder thereof first exercises the share purchase warrants.      On August 15, 2005 the Company issued 30,000 units and on August 30, 2005 the Company issued 220,000 units (each a “Unit”) under a private placement at $1.00 per Unit.  Each Unit consists of one share of common stock and one-half of one share purchase warrant (each a “Warrant”), with each whole Warrant entitling the holder thereof to purchase one additional share of common stock of the Company at a price of $2.00 per share until May 25, 2007.    On August 26, 2005, the Company issued 285,714 shares (each a “Share”) to Team 209 in accordance with the terms of the Co-operative Joint Venture Contract between the Company and Team 209 for the establishment of Yunnan Long Teng Mining Ltd., dated July 6, 2004.  On September 14, 2005, the Company issued 150,000 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.00 per Share for total proceeds of $150,000.  In addition, the warrant holder received a piggyback warrant in the same amount of warrants that the individual exercised.  On October 5, 2005, the Company issued 10,000 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.00 per Share for total proceeds of $10,000.  In addition, the warrant holder received a piggyback warrant in the same amount of warrants that the individual exercised.  On October 31, 2005, the Company issued 51,000 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.00 for 40,000 Shares and at a price of $1.075 for 11,000  
F-17
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  Shares for total proceeds of $51,825.  In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.  On November 2, 2005, the Company issued 63,137 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.075 for 11,637 Shares and at a price of $1.10 for 51,500 Shares for total proceeds of $69,160. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.  On December 15, 2005, the Company issued 400,000 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.125 for total proceeds of $450,000. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.  On December 19, 2005, the Company issued 200,000 shares in connection with shares earned under a finder’s fee agreement, dated April 6, 2004, relating to the Huidong Property as described in Note 5.  On January 9, 2006, the Company issued in aggregate 100,000 units (each a “Unit”) under a private placement at $0.50 per Unit.  Each Unit consists of one share of common stock, one share purchase warrant to purchase an additional one share of common stock of the Company until April 30, 2006 at a price of $1.15 per share as of January 31, 2006 and increasing in price by $0.025 on the first day of each subsequent month, and one piggyback warrant to purchase an additional one share of common stock of the Company at a price of $2.00 per share until September 30, 2006, only if the holder thereof first exercises the share purchase warrants.      On January 9, 2006, a Director of the Company exercised 800,000 stock options at a purchase price of USD$0.50 per share for total proceeds of $400,000.    On January 16, 2006 the Company issued 624,500 units (each a “Unit”) under a private placement at $1.25 per Unit.  Each Unit consists of one share of common stock and one-half of one share purchase warrant (each a “Warrant”), with each whole Warrant entitling the holder thereof to purchase one additional share of common stock of the Company at a price of $2.00 per share until May 25, 2007.    On January 25, 2006, the Company issued 270,000 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.15 for total proceeds of $310,500. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.    On March 20, 2006, the Company issued 1,087,000 units (each a “Unit”) due to the second closing of the Company’s private placement at $1.25 per Unit for total proceeds of $1,358,750. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at US$2.00 per warrant share until March 20, 2008.  
F-18
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  On April 10, 2006, the Company issued 668,250 units (each a “Unit”) due to the closing of the Company’s private placement at $1.60 per Unit for total proceeds of $1,069,200. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at US$2.40 per warrant share until April 19, 2008.    On April 10, 2006, the Company issued 250,000 shares (each a “Share”) to one individual in connection with the exercise of stock options at a price of $0.50 per Share for total proceeds of $125,000.    On April 20, 2006, the Company issued 96,000 shares (each a “Share”) in connection with the exercise of stock options at a price of $0.50 per share for total proceeds of $48,000.    During the three months ended April 30, 2006, the Company issued 1,097,532 shares in connection with the exercise of warrants at prices ranging from $1.00 to $1.225 per share for total proceeds of $1,299,425. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.    On June 7, 2006, the Company issued 678,539 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.225 for total proceeds of $830,147. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised.    On June 21, 2006, the Company issued 2,322,164 shares (each a “Share”) in connection with the exercise of warrants at a price of $1.225 for total proceeds of $2,844,651. In addition, each warrant holder received a piggyback warrant in the same amount of warrants that each individual exercised. The proceeds for these exercises of warrants were received between April 20 and April 30, 2006 by way of promissory notes, which also include an escrow arrangement, in favor of the Company. The promissory note and escrow agreements entered into between the unitholders exercising the warrants (each called a “Borrower”), the Company and the escrow agent provides that each of the Borrowers promises to pay to the Company the certain amount owing to the Company for the exercise of the certain amount of warrants exercised at a price of $1.225 per share on or before August 31, 2006 (the “Due Date”) and if the Borrower fails to pay by the Due Date, then the Borrower has 30 days to cure such default.  In addition, the Borrower has agreed to place into escrow with the escrow agent the shares of common stock of the Company received from the exercise of warrants (the “Shares”) and if the Borrower fails to pay the amount owing to the Company by the Due Date and also fails to cure any default on payment for a period of 30 days after the Due Date, then the Shares placed in escrow will be forfeited back to the Company and cancelled. The Company has recorded the receipt of the promissory notes as a reduction in stockholders’ equity. As at October 31, 2006,  the Company has not received any payment in satisfaction of promissory notes. The Company has contacted each Borrower and has been informed that none of the borrowers intends to pay their promissory note. The shares corresponding to outstanding promissory notes will accordingly be cancelled.  
F-19
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  At July 31, 2006, the Company has received $150,000 in cash payments in connection with a private placement of units at $1.40 for which the units have not yet been issued.			The Company has agreed to pay certain individuals Units as finders’ fees for assisting the Company in raising funds in connection with its recent private placements of units at $0.50 (each Unit consisting of one common share and one warrant exercisable at $1.00), $1.25 (each Unit consisting of one common share and one half warrant, with each whole exercisable at $2.00), $1.40 (each Unit consisting of one common share and one half warrant, with each whole warrant exercisable at $2.00) and $1.60 (each Unit consisting of one common share and one half warrant, with each whole warrant exercisable at $2.40).  It was determined that individuals who had successfully placed certain investors into private placements would receive restricted shares and warrants in the Company at the rate of 10% of the total number of private placement units sold. The Company has allotted 217,189 Units as finders’ fees at July 31, 2006, with each Unit valued at the same price as the Units placed. In addition, the Company paid $110,838 in cash in the year ended July 31, 2006 to another consultant as finders’ fees in respect of private placements.    Warrants outstanding and exercisable as of July 31, 2006:  
Exercise Price****

Number of Warrants ****

Expiry Date****

 $ 1.15 ****

     20,000 ****

08/31/2006****

 $ 2.00 ****

       80,000 ****

05/24/2007****

 $ 2.00 ****

           15,000 ****

08/15/2007****

 $ 2.00 ****

     220,000 ****

08/30/2007****

 $ 2.00 ****

         312,250 ****

01/16/2008****

 $ 2.00 ****

         543,500 ****

03/16/2008****

 $ 2.40 ****

         334,124 ****

04/10/2008****

 ****

1,524,874 ****

 ****
================    9. PREFERRED STOCK Effective April 8, 2005, the Company amended its Articles of Incorporation to create 1,000,000 shares of preferred stock with a par value of $0.001 each, and approved the issue of 100,000 such preferred shares as Series “A” preferred shares to management of the Company. The Series “A” preferred shares entitle the holder to 1,000 votes per share, shall not participate in dividends and shall not participate in any distribution upon liquidation, dissolution or winding up of the Company. 100,000 Series “A” preferred shares were issued to the Chief Executive Officer of the Company and fully paid for at a price of $0.001 per share on January 23, 2006.     10. RELATED PARTY TRANSACTIONS Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:         
F-20
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  In the year ended July 31, 2006, the Company accrued $120,000 (2005 paid $120,000) to the chief executive officer of the Company for consulting services rendered, $20,000 of which remained payable as at July 31, 2006 (2005 - $ Nil).  The Company paid $134,116 (2005 - $nil) to a director of the Company for geological consulting services rendered.    As of July 31, 2006 the Company has an advance receivable of $21,292 (2005 - $87,671) from a company controlled by a director of Long Teng.    During the year the Company incurred $123,602 in investor relations services provided by a company controlled by the chief executive officer. As of July 31, 2006 the Company has an account payable of $123,602 (2005 - $ Nil) to that company.    The Company entered into a consulting agreement (the “Agreement”) with an individual who was appointed as a director of Long Teng in September 2004.  Pursuant to the Agreement, the Company pays a fee of $10,000 per month.  The Agreement originally had a term of two years expiring on February 28, 2006, and has been extended on a month-to-month basis.  During the year ended July 31, 2006, the Company incurred $120,000 (2005 – $120,000) in consulting fees under the terms of the Agreement, $10,000 of which remained payable as at July 31, 2006 (2005 - $Nil).    The Company paid $128,000 (2005 - $96,000) to two relatives of a director of the Company for consulting services rendered. The Company has agreed to pay shares and warrants valued at $94,380 to relatives of directors as finders’ fees, which are included in the finders’ fees as more fully described in note 8.**11.** **INVESTOR RELATIONS EXPENSES**  Investor relations expenses consist of amounts paid pursuant to a service agreement (the “Agreement”) with Parker Communication Corporation (“Parker”).  In consideration of the services performed by Parker and various vendors and sub-contractors retained by it for printing, distributing and other related costs, the Company paid Parker, which includes payment of Parker’s overhead incurred and profit in connection with performance of this Agreement as follows:  
(A)  An initial non-refundable deposit of $100,000 upon execution;				(B)  A two-year option to purchase 250,000 shares of the Company’s Common Stock at One Dollar and Seventy-Five Cents ($1.75) per share dated as of November 1, 2005;				(C)   A two-year option to purchase 250,000 shares of the Company’s Common Stock at Three Dollars and Fifty Cents ($3.50) per share dated as of November 1, 2005;
    
F-21
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  
(D)  An agreed-upon industry standard per-piece price of Eighty-nine Cents ($.89) for each direct mailing or other piece payable as follows: 50% of monies owed within 30 days of the execution of this agreement, balance of monies owed prior to public distribution, and out of those payments Parker is responsible for paying all vendors, printing and distribution costs related directly to that distribution; and				(E)   Reimbursement of out-of-pocket disbursements not directly related to (D) above within 15 days of receipt of documentation from Parker.
  The Company paid Parker $1,574,938 and the options for 500,000 shares in respect of these services in the year.**12. STOCK-BASED COMPENSATION**The Company’s 2004 Stock Option Plan (the “Plan”) allows the Company to award stock options for up to 6,000,000 shares to its directors, officers, employees, and consultants.  The plan is administered by the Company’s Board of Directors, or its assigned committee, who has discretion as to the awards and terms of the options to be issued. Upon exercise of options, shares are issued from treasury.    During the year ended July 31, 2004, 4,000,000 (post-split) stock options were granted under the Plan with the exercise price of $0.50 per share, being the market price at the time of the grant.  Of these options, 1,660,000 were issued to directors and employees and 2,340,000 were issued to consultants.    166,667 of 4,000,000 options vested on February 1, 2004 (the “Initial Vesting Date”) with the reminder to vest in equal monthly proportions over a period of twenty-three (23) months from the Initial Vesting Date.  The options expire on January 26, 2009.    During the year ended July 31, 2005, 390,000 stock options were granted under the Plan with the exercise price of $1.60 per share, being the market price at the time of the grant.  Of these options, 130,000 were issued to directors and employees and 260,000 were issued to consultants. The options vest in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date.  The options expire on February 18, 2010.  60,000 stock options granted to a consultant were forfeited during the year ended July 31, 2005 and 326,000 stock options granted to consultants were forfeited during the year ended July 31, 2006.    During the three months ended January 31, 2006, 1,398,000 stock options were granted under the Plan with the exercise price of $1.70 per share, being the market price at the time of the grant.  Of these options, 305,000 were issued to directors and employees and 1,093,000 were issued to consultants. The options vest in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date.  653,000 of these options expire on November 1, 2011 and 745,000  
F-22
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  expire on December 15, 2011. 75,000 options granted to a consultant were forfeited during the year ended July 31, 2006.			On November 1, 2005, 250,000 stock options were granted under the Plan with the exercise price of $1.75 and 250,000 stock options were granted under the Plan with the exercise price of $3.50 pursuant to a services agreement. These options vested immediately and expire on November 1, 2007.    On January 31, 2006, 60,000 stock options were granted under the Plan with the exercise price of $2.15 per share, being the market price at the time of the grant.  All of these options were issued to consultants. The options vest in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of April 30, 2006. The options expire on January 31, 2012. 30,000 of these options were forfeited during the year ended July 31, 2006.    On February 1, 2006, 60,000 stock options were granted under the Plan to a consultant, with the exercise price of $2.20 per share. The options vest in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of February 1, 2006. The options expire on February 1, 2012.    On April 12, 2006, 54,000 stock options were granted under the Plan to two employees, with the exercise price of $2.59 per share. The options vest in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of April 12, 2006. The options expire on April 12, 2012.    On April 27, 2006, 210,000 stock options were granted under the Plan to three employees, with the exercise price of $2.35 per share. The options vest in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of April 27, 2006. The options expire on April 27, 2012.			A summary of the Company’s stock option activities is presented below:  
Employee/Director

Non-						employeeOptions

Weighted						Average						ExercisePrice

Weighted						Average						Grant-dateFair Value

Aggregate						IntrinsicValue

**Options Outstanding**,						July 31, 2003****

Options granted:

1,624,000

2,376,000

      0.50

0.47

1,880,000

**Options Outstanding**,						July 31, 2004****

1,624,000

2,376,000

0.50

0.47

1,880,000

						Options granted:

130,000

 260,000

       1.60

1.05

409,500
    
F-23
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***    
Options held by individuals						who changed status from						consultant to employee

      322,000

(322,000)

    0.50

0.47

151,340

						Options forfeited

             -  

         (60,000)

           1.60

1.05

63,000

**Options Outstanding**,						July 31, 2005 ****

  2,076,000

2,254,000

        0.59

0.51

2,226,500

						Options granted:

        569,000

1,713,000

2.01

0.79

1,805,120

						Options exercised:

(1,050,000)

  (96,000)

        0.50

0.47

538,620

						Options held by individuals						who changed status from						consultant to employee

    200,000

(200,000)

1.60

1.05

210,000

						Options forfeited

             -  

  (431,000)

       0.76

0.58

249,370

**Options Outstanding**,						July 31, 2006****

 1,795,000

3,240,000

1.24

0.64

3,243,630
====================   		Compensation cost related to options to vest in the future will be recognized as the related options vest.  Outstanding options vest as follows:     
Range of Exercise Prices

Number

Weighted

Average						Exercise

Aggregate						Intrinsic

High

Low

of Shares

Price

Value
						Vested at July 31,
2006 and earlier

3.50

0.50

3,707,306

1.01

2,005,200

2007

2.59

1.60

669,000

1.80

625,600

2008

2.59

1.60

586,500

1.81

539,000

2009

2.59

1.70

72,194

1.91

73,830

5,035,000

3,243,630
======================   		Non-vested options are as follows:     
Number outstanding

Total fair value

Weighted average grant-date fair value

Non-vested options						outstanding, July 31, 2005

1,284,167

768,375

0.60

Non-vested options						outstanding, July 31, 2006

1,327,694

1,234,755

0.93

Options vested in 2006

1,826,556

1,068,142

0.58
    
F-24
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  If not previously exercised or canceled, options outstanding at July 31, 2006 will expire as follows:  
Range of Exercise Prices

Number

Weighted						average

Expiry Date

High

Low

of Shares

exercise price

Year Ending July 31,

 

 

 

2008

3.50

1.75

500,000

2.63

2009

0.50

0.50

2,528,000

0.50

2010

1.60

1.60

330,000

1.60

2012

2.59

1.70

1,677,000

1.84

5,035,000
===========   		The fair values of the options granted in the year ended July 31, 2006 were estimated at values ranging from $0.18 per share to $1.08 per share. The fair values of the options granted in the years 2005 and 2004 were estimated at $1.05 per share and $0.47 per share, respectively, using the Black-Scholes Option Pricing Model with the following weighted average assumptions:     
2006

2005

2004

  

Volatility:

53%

80%

256%

Risk-free interest rate:

4.04%

3.13%

2.54%

Dividend yield:

--

--

--

Expected lives   (years):

5

5

5
   		Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility.  Changes in the underlying assumptions can materially affect the fair value estimates and therefore, in management’s opinion, existing models do not necessarily provide reliable measure of the fair value of the Company’s stock options.    		The following table illustrates the effect on net earnings (loss) and earnings (loss) per share for the 2006 year as reported due to implementation of SFAS 123R and for the 2005 year on a proforma basis if the Company had applied the fair value recognition provision of SFAS 123R:         
F-25
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  
2006

2005

  

Net loss before effect of SFAS 123R

  $  (8,993,006)

$  (3,771,493)

Deduct: Total stock-based employee compensation  expenses

(408,828)

(419,517)

Net loss as reported 2006, pro-forma 2005

$ (9,401,834)

$ (4,191,010)
======================
  

Loss per share:

  Basic and diluted before effect of SFAS 123R

$         (0.26)

$         (0.15)
======================
  

  Basic and diluted as reported 2006, pro-forma 2005

$         (0.27)

$         (0.17)
======================    13.    INCOME TAXES The Company is subject to United States income taxes, Canadian income taxes (to the extent of its operations in Canada) and Chinese income taxes (to the extent of its operations in China).  The company had no income tax expense during the reported periods due to net operating losses.    		A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:     
2006

2005

  

Loss for the year

$

(9,401,834)

$

(3,771,493)

Average statutory tax rate

35%

35%

  

Expected income tax provision

$

(3,290,642)

$

(1,320,023)

Impact of tax rate difference in foreign jurisdiction

65,529

34,393 

Non-deductible stock-based compensation

373,850

200,428

Licenses acquired through stock allotment

84,150

165,000

Tax basis of deferred expenses in excess of book cost

997,078

402,482

Unrecognized tax losses

1,770,035

517,720

  

Income tax expense

$

--

$

--
======================   		Significant components of deferred income tax assets are as follows:         
F-26
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  
2006

2005

  

Net operating losses carried forward in United States

$

2,287,755

$

517,720

Excess of tax basis over book cost of deferred expenses						in China

   1,399,560

     402,482

Valuation allowance

(3,687,315)

(920,202)

****

****

Net deferred income tax assets

**$**

**-**

$

--
======================   		The Company has net operating losses carried forward of $6,537,000 for United States tax purposes which will expire in 2026 if not utilized.     14. SEGMENTED INFORMATION The Company is operating in a single segment based upon the Company’s organizational structure, the way in which its operations are managed and evaluated, the availability of separate financial results and materiality considerations.  The Company’s assets by geographical location are as follows:    		                                                                                      July 31, 2006                    July 31, 2005 Canada                                                                         $     472,144                   $  1,495,563  		United States                                                                                 --                                  --  		China                                                                                    779,307                           738,036       		Total                                                                             $  1,251,451                  $   2,233,599  		                                                                                     =========                  =========     15. SUBSEQUENT EVENT On October 4, 2006 the Company announced that it has entered into a letter of intent to acquire African Mineral Fields, a company which acquired two gold projects in Uganda on September 1, 2006 and holds exclusive options to acquire 100% interests in two additional gold projects in Uganda.		   Subject to definitive agreement, the Company will issue a total of six million common shares and two hundred thousand Series “B” preferred shares to acquire 100% of  African Mineral Fields, Inc., which is majority owned by the President and CEO of the Company.  The two hundred thousand Series “B” preferred shares will convert to up to two million common shares subject to the properties of African Mineral Fields, Inc. developing a minimum of 250,000 resource category gold ounces and based upon one common share being issued for each gold ounce in the inferred, resource and proven categories.  
F-27
          **MAGNUS INTERNATIONAL RESOURCES INC.*(An Exploration Stage Company)					Notes to Consolidated Financial Statements					July 31, 2006					(Expressed in US Dollars)***  African Mineral Fields has retained the services of parties familiar with its projects in Uganda to conduct exploration on the projects. The exploration team has completed systematic geological and surface geochemical investigations in Uganda over the past several years, focusing attention on major fault and structural zones that are known controls on world-class gold deposit locations in adjacent countries.			If all options are exercised, African Mineral Fields will control a portfolio of gold properties along prospective regional structures where reconnaissance exploration has commenced. Several of the properties are drill ready, and will be drilled during the coming year under work programs.  
F-28
        
****
  
45
    
**Supplementary Data**
  ****  
  

Year Ended July 31, 2005

  

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Net sales

-

-

-

-

Gross profit

-

-

-

-

Net loss

1,977,654

723,567

595,347

474,925

Net loss per share

0.08

0.03

0.03

0.02
  ****  ****    
  

Year Ended July 31, 2006

   

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Net sales

-

-

-

-

Gross profit

-

-

-

-

Net loss

3,171,367

2,927,231

2,666,007

637,229

Net loss per share

0.09

0.08

0.08

0.02
    ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On December 16, 2005 the Company dismissed Ernst & Young LLP as the principal independent accountant of the Company.  The Board of Directors of the Company authorized the dismissal of Ernst & Young LLP on December 16, 2005.    		During the Company's preceding fiscal year, there were no disagreements with Ernst & Young LLP which were not resolved on any matter concerning accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Ernst & Young LLP would have caused Ernst & Young LLP to make reference to the subject matter of the disagreements in connection with its reports.  Ernst & Young LLP as the Company’s principal independent accountant, did not provide an adverse opinion or disclaimer of opinion to the Company’s financial statements, nor modify its opinion as to uncertainty, audit scope or accounting principles.  The audit opinion of Ernst & Young LLP was modified to contain a going concern qualification for the Company's fiscal year ended July 31, 2005.    		On December 19, 2005, the board of directors of the Company approved and authorized the engagement of Schumacher & Associates, Inc., Independent Registered Public Accountants of, Denver, Colorado, as the principal independent accountant for the Company.     ITEM 9A.  CONTROLS AND PROCEDURES As of the end of the period covered by this Annual Report, an evaluation was performed by our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of the disclosure controls and procedures.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures were effective.    		In June 2005, the Magnus Board of Directors implemented the following financial controls on Long Teng Mining, its operating subsidiary in China:     - The acting Manager for Long Teng Mining, Mr. Anthony Tam, was to be the only member of the Long Teng Board to have signing authority (or the Chinese equivalent) over Long Teng accounts;   Either the General Manager or Deputy General Manager can approve expenditures under US$150;Both the General Manager and Deputy General Manager need to approve expenditures from US$151 to US$1000;and		

46

The General Manager and either the Chairman of Long Teng Mining (Graham Taylor) or the other Magnus director (formerly Peter Smith, now Steven Tan) and the Deputy General Manager or the Deputy Chairman need to approve any expenditures above US$1000.		
There have been no other significant changes in the Company’s internal controls over the financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.			The Company intends to add the following additional elements to its financial controls and procedures in the near future:
to form an audit committee, which is expected to contain a majority of disinterested directors;
- to appoint a financial expert who will also be appointed as a director of the Company and the Company’s audit committee; and   to adopt a code of ethics.		
**ITEM 9B.  OTHER INFORMATION**Not applicable.

**PART III**

**ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT****Current Directors and Executive Officers**As of the date of this Annual Report, the Company’s directors and executive officers are as follows:**Name                                       Age             Offices Held**Graham Taylor                            37               President, CEO, CFO, Secretary, Treasurer and Director				Steven (Sek Toh) Tan                 71               Director				Genesio Circosta                        49               Vice President of Exploration, China				The Directors hold their positions until the next annual general meeting of the Company’s shareholders or until their successors are duly elected and qualified.  The Company’s executive officers serve at the pleasure of the Board of Directors.				The backgrounds of our directors and executive officers are as follows:**GRAHAM TAYLOR** is the principal founder of Magnus. He has been the President and CEO of the Company since November 24, 2003. Mr. Taylor is also the founder and President of Technique Capital Corporation, which was founded in 1999 and is a venture capital, mergers and acquisitions, and corporate advisory firm for North American, Chinese and other international companies. Mr. Taylor has eleven years of experience in the world of global finance, having started his finance career in the investment industry in London, England with the international investment banks Nomura International and Banque National de Paris. In 1996, he returned to Vancouver, British Columbia, Canada to establish himself as a financier to small cap companies publicly listed in Canada and in the United States. Since that time, Mr. Taylor has been involved in private and public securities deal structuring and financing for a variety of companies

47

				spanning several different industries. Mr. Taylor attended the University of British Columbia as well as Simon Fraser University in British Columbia and has qualified to graduate with a Bachelor Degree in Business Administration (BBA).**STEVEN TAN** has been a director of the company since February 8, 2005. Mr. Tan is a professional engineer who received his mechanical engineering certification from Loughborough University (Midlands, United Kingdom) in 1960 and a D.I.C. degree from the Imperial College of Science and Technology in London in 1961. In 1964, Mr. Tan founded Setron, a company that he would turn into the largest television and electronic equipment manufacturer in South East Asia, and which listed on the Singapore Stock Exchange. Mr. Tan eventually sold Setron to Haw Par International in 1980. Also in 1980, the Republic of Singapore acknowledged Mr. Tan's contributions to his country by presenting him with a lifetime contribution Public Service Medal (P.B.M.). Mr. Tan has extensive experience serving on the Boards of both public and private companies, but has not served on the Board of a public company in the last five years.**GENESIO CIRCOSTA** has been an officer of the Company (Vice President of Exploration in China) since April 27, 2006.  Mr. Circosta has over 28 years experience as an exploration geologist and exploration manager on a large number of projects ranging from grass-roots and generative projects to advanced delineation projects. His previous experience includes over 17 years of project management and generative exploration for the Placer Dome Asia Group, within China, Australia, Papua New Guinea, The Philippines and Indonesia, with a focus on gold projects but also including exploration for Cu-Au, Pb-Zn and mineral sands.   Mr. Circosta has spent the last two and a half years working mainly with Placer Dome (China) Ltd., managing Placer's exploration and generative activities within China and Asia. Some of his other previous employers include Placer Dome Exploration Indonesia (where he acted as project manager for various projects in Kalimantan, Sulawesi and Java, and as generative and exploration geologist for Indonesia), Kidston Gold Mines (where he managed the delineation and exploration drill programs of the then newly discovered Eldridge deposit at the north end of the Kidston breccia pipe), and Misima Mines Pty Ltd. (where he served as Senior Exploration Geologist).**Significant Employees /Consultants**				The Company entered into consulting agreements with True North Management Ltd. (“True North”), a company organized under the laws of Hong Kong, on November 1, 2003 and March 1, 2004, to act as our liaison with various Chinese contacts and to consult on various matters involving geology and geographic reports.  True North is, in effect, Mr. Anthony Tam, who is currently the sole owner and director of True North.  Magnus currently pays True North a monthly consulting fee of $10,000 per month for providing consulting services designed to assist the Company as its chief representative in China with respect to negotiations on joint venture option agreements on properties of merit as well as initial geological assessment and engineering assessment of properties of merit to help develop the business of the Company.  Cumulative to July 31, 2006, True North Management has earned under finder’s fee agreements with Magnus, $200,000 in cash and 800,000 shares of common stock of Magnus.  As of July 31, 2006, all 800,000 of these finder’s fee shares had been issued to True North and the $200,000 had been paid to True North.  The finder’s fee arrangements in relation to the signing of various letters of intent and formal joint ventures are summarized in the following table:
****
**Project / Task**

**True North’s Remuneration**

Guangxi Bobai Yingqiao Silver Mine Project signing						of Letter of Intent

200,000 shares of common stock

Jinlong Mountain Gold signing of Letter of Intent

200,000 shares of common stock

Qilian County of Qinghai Province signing of Letter						of Intent

200,000 shares of common stock

Huidong signing of formal Joint Venture Agreement

200,000 shares (1) of common stock and $200,000
		(1) As of November 1, 2006, these 200,000 shares are due and owing.
48

			Furthermore, Mr. Anthony Tam has also been issued 200,000 shares under a consulting agreement entered into between the Company and Mr. Tam on November 29, 2003, with an effective date of November 1, 2003 and a termination date of February 28, 2004, whereby Mr. Tam provided consulting services designed to assist the Company as its chief representative in China with respect to negotiations on joint venture option agreements on properties of merit as well as initial geological assessment and engineering assessment of properties of merit to help develop the business of the Company.  The 200,000 shares that were issued to Mr. Tam were subsequently registered on a Form S-8, which was filed on April 9, 2004.**ANTHONY TAM** has been consulting for the Company, through True North, since November of 2003.  During the past five years, Mr. Tam has lived in Hong Kong.  Over that period, he spent July 1999 to October 2003 working as general manager for Unimet Capital Ltd. (a Canadian company specializing in mineral investment in China), November of 2002 to December of 2003 consulting with the Manele Bay Venture (a gold exploration project in Guizhou and Yunnan provinces, China), and November of 2003 to the present working as a consultant to the Company in China.  Mr. Tam has received a B.Sc. in Engineering from Queen’s University in Kingston, Ontario (1971), a B.Sc. in Mining Engineering from Queen’s (1973), and he is a Chartered Accountant (British Columbia, 1978).**Involvement in Certain Legal Proceedings**To our knowledge, during the past five years, no present or former director or executive officer of the Company: (1) filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or present of such a person, or any partnership in which he was a general partner at or within two yeas before the time of such filing, or any corporation or business association of which he was an executive officer within two years before the time of such filing; (2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director of any investment company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodity laws; (4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity; (5) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law and the judgment in subsequently reversed, suspended or vacate; (6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

**Compliance with Section 16(a) of the Exchange Act**

Section 16(a) of the Exchange Act, as amended, requires our executive officers, directors and persons who beneficially own more than 10% of our shares of common stock to file reports of their beneficial ownership and changes in ownership (Forms 3, 4 and 5, and any amendment thereto) with the SEC.  Executive officers, directors, and greater-than-ten percent holders are required to furnish us with copies of all Section 16(a) forms they file.

Based solely upon a review of the Forms 3, 4, and 5 furnished to us for the fiscal year ended July 31, 2006, we have determined that our directors, officers, and greater than 10% beneficial owners complied with all applicable Section 16 filing requirements, except as described below.

49

			Mr. Genesio Circosta failed to timely file his Form 3 within 10 days of his appointment as the Vice President of Exploration in China for the Company on April 27, 2006.  Mr. Circosta has been informed of such, and is in the process of filing his Form 3.			Mr. Pete Smith has failed to timely file his Form 5 relating to his resignation as a director and Vice President of Corporate Affairs of the Company on June 23, 2006.**Information concerning the Company's audit committee, including designation of the “Audit Committee Financial Expert” under applicable Securities and Exchange Commission rules**At the present time, the Company does not have an audit committee, nor does it have a financial expert on the Board of Directors.  The Company intends to search for and have a financial expert appointed to the Board of Directors in the near future. In addition, the Company intends to appoint an audit committee in the near future.**Code of Ethics**At the present time, the Company has not adopted a code of ethics.  The Company intends to adopt a code of ethics in the near future.**ITEM 11.  EXECUTIVE COMPENSATION**The following table sets forth information with respect to compensation paid by the Company to the Chief Executive Officer during the three most recent fiscal years.  The Company did not have any other highly compensated executive officers with annual salary and bonus in excess of $100,000 per year.
**Name and							Principal							Position****Fiscal							Year****Salary****Bonus****Other							Annual							Compen							sation****Restricted							Stock							Awards****Securities							Underlying							Options							/SARS****LTIP							Payouts****All Other							Compen-							sation**Graham					Taylor(1)					President,					CEO, CFO,					Secretary,					Treasurer and					Director2006					2005					2004$120,000					$120,000					$90,000None					None					NoneNone					None					NoneNone					None					NoneNone					None					1,600,000(2)None					None					NoneNone					None					NoneGenesio					Circosta (3)					Vice Pres. of					Exploration in					China2006120,000NoneNoneNone150,000NoneNone		(1)  Mr. Graham Taylor was appointed the President, CEO, CFO, Secretary, Treasurer and a Director of the Company on November 24, 2003. As of December 1, 2003, Mr. Taylor is being paid a consulting fee of $120,000 per year to serve as the President, CEO, CFO, Secretary, Treasurer and a Director of the Company.		(2)  On January 26, 2004, the Board of Directors granted 4,000,000 stock options to various directors, officers, employees and consultants of the Company.  Mr. Taylor was granted 1,600,000 stock options with the following terms:  1/24 of the options vested on February 1, 2004, and a further 1/24 of the original grant vests on the first day of each subsequent month.  The exercise price for these stock options is $0.50 per share.  These stock options have an expiry date of January 26, 2009. As of the date of this Annual Report, Mr. Taylor has exercised 800,000 options.
50

			(3)  Mr. Genesio Circosta was appointed the Vice President of Exploration in China of the Company on April 27, 2006. 			Officers and directors of the Company are reimbursed for any out-of-pocket expenses incurred by them on behalf of the Company.  None of the Company's directors or officers is currently a party to employment agreements with the Company. The Company presently has no pension or annuity programs.  However, as of August of 2005, the Company has initiated an employment group health and benefits plan, which gives some employees and consultants limited health, dental, travel insurance and life insurance benefits. 			No long term incentive plan awards were made to any executive officer during the fiscal year ended July 31, 2006.**Option/SAR Grants in Fiscal Year**

****

**Name and							Principal Position**

**Number of							Securities							Underlying							Options/							SARS							Granted**

**% of Total							Options/							SARS							Granted to							Employees in							Fiscal Year**

****

****

****

**Exercise or							Base Price							($/Sh)**

****

****

**Expiration							Date**

****

****

**Market Price on							Date of Grant							($/Sh)**
  
Doug Smith,						Consultant

30,000

$1.70

November 1, 2011

$1.70

Michael Raven						Consultant

30,000

$1.70

November 1, 2011

$1.70

Michael Tan						Consultant

300,000

$1.70

November 1, 2011

$1.70

Hsien Loong Wong						Consultant

60,000

$1.70

November 1, 2011

$1.70

Wei Ming Chua						Consultant

60,000

$1.70

November 1, 2011

$1.70

Steven MacMullan						Consultant

18,000

$1.70

November 1, 2011

$1.70

Jennifer Yager						Employee

30,000

9.8%

$1.70

November 1, 2011

$1.70

Dean Eyman						Consultant

50,000

$1.70

November 1, 2011

$1.70

Parker						Communication						Consultant

250,000

$1.75

November 1, 2007

$1.75

Parker						Communication						Consultant

250,000

$3.50

November 1, 2007

$3.50

Paul Taufen						Director

200,000

$1.70

November 1, 2011

$1.70

Ruben S. Verzosa						Consultant

100,000

$1.70

November 1, 2011

$1.70

Kai Yang						Consultant

100,000

$1.70

November 1,  2011

$1.70

Peter Smith						Consultant

75,000

$1.70

November 1,  2011

$1.70

51

David Lorge						Consultant

100,000

$1.70

December 15, 2011

$1.70

Leon Ma						Consultant

60,000

$1.70

December 15, 2011

$1.70

Rui Zhang						Consultant

60,000

$1.70

December 15, 2011

$1.70

Dennis Tan						Consultant

50,000

$1.70

December 15, 2011

$1.70

James Tvedt						Consultant

30,000

$2.15

January 31, 2012

$2.15

Rita Chou						Consultant

60,000

$2.20

February 1, 2012

$2.20

Elaine Xiong						Employee

24,000

8.2%

$2.59

April 12, 2012

$2.59

Kevin Pidwerbeski						Employee

30,000

10.2%

$2.59

April 12, 2012

$2.59

Genesio Circosta						Employee

150,000

51.0%

$2.35

April 27, 2012

$2.35

Yang Yang						Employee

30,000

10.2%

$2.35

April 27, 2012

$2.35

Yuan Hai Tao						Employee

30,000

10.2%

$2.35

April 27, 2012

$2.35
**Aggregated Option/SAR Exercises and Year-End Option/SAR Value Table**
****

****

****

****

**Name**

****

****

**Securities							Acquired							on Exercise							(#)**

****

****

**Aggregate							Value							Realized ($)**

****

****

**Unexercised							Options/SARs at							FY-End (#)**

****

****

****

**Value of Unexercised							in the Money							Options/SARs at FY							End ($)**

****

Graham Taylor						President, CEO						and Director

800,000

$400,000

800,000						(Exercisable)

$ 1,104,000 (Exercisable)						$ 0 (Unexercisable)

Peter Smith						Former Director

250,000

$125,000

16,667 (Exercisable)						58,333 (Unexercisable)

$ 3,000 (Exercisable)						$ 10,500 (Unexercisable)

Anthony Tam						Consultant

None

None

1,000,000 (Exercisable)

$ 1,380,000 (Exercisable)						$ 0 (Unexercisable)

Michael Tan						Consultant

None

None

487,000 (Exercisable)						225,000 (Unexercisable)

$582,060 (Exercisable)						$ 40,500 (Unexercisable)

52

Roberto Ebrahimi						Consultant

None

None

48,000 (Exercisable)

$ 66,240 (Exercisable)						$ 0 (Unexercisable)

Devlin Jensen						Consultant

80,000

$40,000

0 (Exercisable)

$ 0 (Exercisable)						$ 0 (Unexercisable)

Tracey Gabert						Employee

None

None

80,000 (Exercisable)						20,000 (Unexercisable)

$ 88,400 (Exercisable)						$ 5,600 (Unexercisable)

Mike Shannon						Consultant

50,000

$8,000

34,000 (Exercisable)						0 (Unexercisable)

$ 46,920 (Exercisable)						$ 0 (Unexercisable)

Tom Stepp						Consultant

None

None

24,000 (Exercisable)

$33,120 (Exercisable)						$ 0 (Unexercisable)

Xiang Li						Employee

None

None

27,500 (Exercisable)						3,500 (Unexercisable)

$ 34,100 (Exercisable)						$ 980 (Unexercisable)

Qin Minzhu						Consultant

         None

None

16,000 (Exercisable)						4,000 (Unexercisable)

$ 17,680 (Exercisable)						$ 1,120 (Unexercisable)

Paul Muto						Consultant

None

None

30,000 (Exercisable)

$ 41,400 (Exercisable)						$ 0 (Unexercisable)

Earl Abbott						Consultant

None

None

24,000 (Exercisable)

$ 33,120 (Exercisable)						$ 0 (Unexercisable)

Jay Bassan						Consultant

None

None

24,000 (Exercisable)

$ 33,120 (Exercisable)						$ 0 (Unexercisable

Aida Leung						Consultant

None

None

12,000 (Exercisable)

$16,560 (Exercisable)						$ 0 (Unexercisable)

Nick Leung						Consultant

None

None

12,000 (Exercisable)

$16,560 (Exercisable)						$ 0 (Unexercisable)

Patrick Cotter						Consultant

None

None

12,000 (Exercisable)

$16,560 (Exercisable)						$ 0 (Unexercisable

Paul Taufen (1)						Former Director

None

None

144,444 (Exercisable)						255,556 (Unexercisable)

$ 36,000 (Exercisable)						$ 56,000 (Unexercisable)

Steven Tan						Director

None

None

37,500  (Exercisable)						37,500 (Unexercisable)

$ 10,500 (Exercisable)						$ 10,500 (Unexercisable)

Doug Smith, Consultant

None

None

7,500 (Exercisable)						22,500 (Unexercisable)

$1,350 (Exercisable)						$ 4,050 (Unexercisable)

Michael Raven Consultant

None

None

7,500 (Exercisable)						22,500 (Unexercisable

$1,350 (Exercisable)						$ 4,050 (Unexercisable)

Hsien Loong Wong						Consultant

None

None

15,000 (Exercisable)						45,000 (Unexercisable)

$ 2,700 (Exercisable)						$ 8,100 (Unexercisable)

Wei Ming Chua Consultant

None

None

15,000 (Exercisable)						45,000 (Unexercisable)

$ 2,700 (Exercisable)						$ 8,100 (Unexercisable)

53

Steven MacMullan						Consultant

None

None

4,500 (Exercisable)						13,500 (Unexercisable)

$ 810 (Exercisable)						$2,430 (Unexercisable)

Jennifer Yager						Employee

None

None

7,500 (Exercisable)						22,500 (Unexercisable)

$1,350 (Exercisable)						$ 4,050 (Unexercisable

Dean Eyman						Consultant

None

None

12,500 (Exercisable)						37,500 (Unexercisable)

$ 2,250 (Exercisable)						$ 6,750 (Unexercisable)

Parker						Communication						Consultant

None

None

 500,000 (Exercisable)						0 (Unexercisable)

$ 32,500 (Exercisable)						$ 0 (Unexercisable)

Ruben S. Verzosa						Consultant

None

None

22,222 (Exercisable)						77,778 (Unexercisable)

$ 4,000 (Exercisable)						$ 14,000 (Unexercisable)

Kai Yang						Consultant

None

None

22,222 (Exercisable)						77,778 (Unexercisable)

$ 4,000 (Exercisable)						$ 14,000 (Unexercisable)

David Lorge						Consultant

None

None

22,222 (Exercisable)						77,778 (Unexercisable)

$ 4,000 (Exercisable)						$ 14,000 (Unexercisable)

Leon Ma						Consultant

None

None

13,333 (Exercisable)						46,667 (Unexercisable)

$ 2,400 (Exercisable)$ 8,400 (Unexercisable)

Rui Zhang						Consultant

None

None

13,333 (Exercisable)						46,667 (Unexercisable)

$ 2,400 (Exercisable)						$ 8,400 (Unexercisable)

Dennis Tan						Consultant

None

None

11,111 (Exercisable)						38,889 (Unexercisable)

$ 2,000 (Exercisable)						$ 7,000 (Unexercisable)

James Tvedt						Consultant

None

None

5,000 (Exercisable)						25,000 (Unexercisable)

$ 0 (Exercisable)						$ 0 (Unexercisable)

Rita Chou						Consultant

None

None

10,000 (Exercisable)						50,000 (Unexercisable)

$ 0 (Exercisable)						$ 0 (Unexercisable)

Elaine Xiong						Employee

None

None

2,667 (Exercisable)						21,333 (Unexercisable)

$ 0 (Exercisable)						$ 0 (Unexercisable)

Kevin Pidwerbeski						Employee

None

None

3,333 (Exercisable)						26,667 (Unexercisable)

$ 0 3,540 (Exercisable)						$0 28,800 (Unexercisable)

Genesio Circosta						Employee

None

None

12,500 (Exercisable)						137,500 (Unexercisable)

$ 13,500 (Exercisable)						$148,500 (Unexercisable)

Yang Yang						Employee

None

None

2,500 (Exercisable)27,500 (Unexercisable)

$ 2,700 (Exercisable)						$ 29,700 (Unexercisable)

Yuan Hai Tao						Employee

None

None

2,500 (Exercisable)						27,500 (Unexercisable)

$ 2,700 (Exercisable)						$ 29,700 (Unexercisable)

54

			(1)    Dr. Paul Taufen passed away unexpectedly on August 19, 2006.  The estate of Dr. Taufen will have the ability to exercise the stock options that had vested as of August 19, 2006, which amounts to 144,444 stock options, for a period of one year from the date of Dr. Taufen’s passing.**ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**The following table sets forth information as of the date of this Annual Report, with respect to the Company’s directors, named executive officers, and each person who is known by the Company to own beneficially, more than five percent (5%) of the Company’s common stock, and with respect to shares owned beneficially by all of the Company’s directors and executive officers as a group.  Common Stock not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire shares within 60 days is treated as outstanding only when determining the amount and percentage of Common Stock owned by such individual.  Except as noted, each person or entity has sole voting and sole investment power with respect to the shares shown.			As of the date of this Annual Report, there are 40,763,654 shares of common stock issued and outstanding.

**Name and Address of							Beneficial Owner**

****

**Position**

**Amount and Nature of							Beneficial Ownership ***

**Percent of							Common Stock (1)**

						Graham Taylor						c/o 1 Berkeley St.						London, United Kingdom						W1J 8DJ

						President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director

						1,600,000 (2)

						3.85%

Steven Tan						32-3088 Francis Road						Richmond, BC						V7C 5V9

Director

48,185 (3)

(*)

Excel Corporation						Suite 4 Temple Bldg.						Main & Prince William St. Charlestown, Federation of St. Kitts & Nevis

Shareholder

6,666,666 (4)

16.35%

Emerson Corporation						Suite 4 Temple Bldg.						Main & Prince William St. Charlestown, Federation of St. Kitts & Nevis

Shareholder

6,666,668 (5)

16.35%

Anthony Tam						Ste. 702, Block 81,						Xiangxi Estate						Luo Wu, Shenzhen						Guangdong, China

Consultant

1,800,000 (6)

4.31%

Genesio Circosta						5 Warriparinga Avenue						Craigburn Farm						South Australia, 5156

Vice President of						Exploration in China

37,503 (7)

(*)

55

All officers and directors as a group (3 persons)

1,685,688 (8)

4.05%
		(*)     indicates less than 1%		(1)     Beneficial ownership of common stock has been determined for this purpose in accordance with Rule 13d-3 under the Exchange Act, under which a person is deemed to be the beneficial owner of securities if such person has or shares voting power or investment power with respect to such securities, has the right to acquire beneficial ownership within 60 days or acquires such securities with the purpose or effect of changing or influencing the control of the Company.		(2)     This figure includes 800,000 shares directly owned by Mr. Graham Taylor and 800,000 stock options which have already vested.		(3)     This figure includes 43,995 stock options which have already vested as of the date of this Annual Report and 4,190 stock options which will vest within 60 days of the date of this Annual Report.		(4)     Excel Corporation is a corporation organized under the laws of the Federation of St. Kitts & Nevis, West Indies, all of the outstanding shares of which are held byExcel Trust. The trustee of Excel Trust is IFG Trust Services Inc. The beneficiary of Excel Trust is Graham Taylor, however, IFG Trust Services Inc. has sole voting and dispositive power of the 6,666,666 shares held by Excel Corporation.		(5)     Emerson Corporation is a corporation organized under the laws of the Federation of St. Kitts & Nevis, West Indies, all of the outstanding shares of which are held by Emerson Trust.  The trustee of Emerson Trust is IFG Trust Services Inc.  The beneficiary of Emerson Trust is Graham Taylor, however, IFG Trust Services Inc. has sole voting and dispositive power of the 6,666,668 shares held by Emerson Corporation.		(6)     This figure includes 200,000 shares directly held by Mr. Tam, 600,000 shares indirectly held by Mr. Tam through True North Management Ltd. (see “Significant Employees/Consultants”), 1,000,000 stock options which have already vested.  The Company is also obligated to issue to Mr. Tam another 200,000 shares under an existing finder’s fee agreement, however, the Company has not yet issued these shares and these 200,000 shares have not been included in this figure.		(7)    This figure includes 29,169 stock options which have already vested as of the date of this Annual Report and 8,334 stock options which will vest within 60 days of the date of this Annual Report.		(8)     This figure includes 800,000 shares which are directly owned by Graham Taylor, 800,000 stock options which are owned by Graham Taylor and which have vested as of the date off this Annual Report , 48,185 stock options which are owned by Steven Tan and which have vested or will vest within 60 days of the date of this Annual Report, and 37,503 stock options which are owned by Genesio Circosta and which have vested or will vest within 60 days of the date of this Annual Report.**Securities Authorized for Issuance under Equity Compensation Plans**On January 9, 2004, the Board of Directors of the Company unanimously approved and adopted a stock option plan (the “Stock Option Plan”).  The purpose of the Stock Option Plan is to advance the interests of the Company and its shareholders by affording key personnel of the Company an opportunity for investment in the Company and the incentive advantages inherent in stock ownership in the Company. Pursuant to the provisions of the Stock Option Plan, stock options (the “Stock Options”) will be granted only to key personnel of the Company, generally defined as a person designated by the Board of Directors upon whose judgment, initiative and efforts the Company may rely including any director, officer, employee or consultant of the Company.		
The Stock Option Plan is to be administered by the Board of Directors of the Company, which shall determine (i) the persons to be granted Stock Options under the Stock Option Plan; (ii) the number of shares subject to each option; (iii) the exercise price of each Stock Option; and (iv) whether the Stock Option shall be exercisable at any time during the option period of ten (10) years or whether the Stock Option shall be exercisable in installments or by vesting only. The Stock Option Plan provides authorization to the Board of Directors to grant Stock Options to purchase a total number of shares of common stock of the Company, not to exceed thirty percent (30%) of the total issued and outstanding shares of common stock of the Company as at the date of adoption by the Board of Directors of the Stock Option Plan. At the time the Stock Option is granted under the Stock Option Plan, the Board of Directors

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			shall fix and determine the exercise price at which shares of common stock of the Company may be acquired; provided, however, that any such exercise price shall not be less than that permitted under the rules and policies of any stock exchange or over-the-counter market which is applicable to the Company. 			In the event an optionee who is a director or officer of the Company ceases to serve in that position, any Stock Option held by such optionee generally may be exercisable within up to ninety (90) days after the effective date that his position ceases, and after such ninety-day period any unexercised Stock Option shall expire. In the event an optionee who is an employee or consultant of the Company ceases to be employed by the Company, any Stock Option held by such optionee generally may be exercisable within up to ninety (90) days (or up to thirty (30) days where the optionee provided only investor relations services to the Company) after the effective date that his employment ceases, and after such ninety or thirty-day period any unexercised Stock Option shall expire.

No Stock Options granted under the Stock Option Plan will be transferable by the optionee, and each Stock Option will be exercisable during the lifetime of the optionee subject to the option period of ten (10) years or limitations described above. Any Stock Option held by an optionee at the time of his death may be exercised by his estate within one (1) year of his death or such longer period as the Board of Directors may determine.

The exercise price of a Stock Option granted pursuant to the Stock Option Plan shall be paid in cash or certified funds upon exercise of the option.**Incentive Stock Options**The Stock Option Plan further provides that, subject to the provisions of the Stock Option Plan, the Board of Directors may grant to any key personnel of the Company who is an employee eligible to receive options one or more incentive stock options to purchase the number of shares of common stock allotted by the Board of Directors (the “Incentive Stock Options”). The option price per share of common stock deliverable upon the exercise of an Incentive Stock Option shall be no less than fair market value of a share of common stock on the date of grant of the Incentive Stock Option. In accordance with the terms of the Stock Option Plan, “fair market value” of the Incentive Stock Option as of any date shall not be less than the closing price for the shares of common stock on the last trading day preceding the date of grant. The option term of each Incentive Stock Option shall be determined by the Board of Directors, which shall not commence sooner than from the date of grant and shall terminate no later than ten (10) years from the date of grant of the Incentive Stock Option, subject to possible early termination as described above. 

As of the date of this Annual Report, the Company has 5,925,444 Stock Options and/or Incentive Stock Options outstanding.**ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**On November 29, 2003, Magnus and Mr. Anthony Tam entered into a consulting agreement (the “Consulting Agreement”) with an effective date of November 1, 2003 and a termination date of February 28, 2004, whereby Mr. Tam provided to the Company consulting services designed to assist the Company as its chief representative in China with respect to negotiations on joint venture option agreements on properties of merit as well as initial geological assessment and engineering assessment of properties of merit to help develop the business of the Company.  As consideration for Mr. Tam’s services, the Company issued 100,000 shares of common stock of the Company and registered such shares on a Form S-8, which was filed on April 9, 2004.

On December 31, 2003, Magnus entered into a Finder’s Fee Agreement with True North Management Ltd. (“True North”), whereby Magnus issued 200,000 shares of common stock of Magnus to True North for the execution of the letter of intent entered into between Magnus and Guangxi Non-ferrous Metals Trading & Management Company (“Guangxi”), a company organized under the laws of the People's Republic of

57

			China, for the further prospecting and development of the Guangxi Bobai Yingqiao Silver Mine located in Yingqiao Town, Bobai County in Guangxi Province, China. 			On January 15, 2004, Magnus entered into a Finder’s Fee Agreement with True North, whereby Magnus issued 400,000 shares of common stock of Magnus to True North for the execution of the two letters of intent entered into between Magnus and Team 209 with respect to forming two co-operative joint venture companies for the exploration and development of the gold and copper deposits in the 129.5 sq. km. area of the Jinlong Mountain gold district and the exploration and development of the gold and copper deposits in the 200 sq. km. area of the Zhamashi gold and copper deposits in Qilian County of Qinghai Province. 			On February 24, 2004, Magnus and Michael Tan entered into a consulting agreement whereby Magnus pays Michael Tan $8,000 per month in consulting fees for assisting Magnus in management and marketing to develop the business of Magnus.  Michael Tan is the son of one of the Company’s directors, Steven Tan.  This agreement has a term of three years and as of the date of this Annual Report, this consulting agreement remains in effect.			On March 1, 2004, Magnus and True North (beneficially owned by Mr. Anthony Tam) entered into a consulting agreement whereby Magnus pays True North $10,000 per month in consulting fees for providing consulting services designed to assist the Company as its chief representative in China with respect to negotiations on joint venture option agreements on properties of merit as well as initial geological assessment and engineering assessment of properties of merit to help develop the business of the Company (see “Significant Employees/Consultants”).  As of the date of this Annual Report, this consulting arrangement remains in effect.

On April 6, 2004, Magnus entered into a Finder’s Fee Agreement with True North, whereby Magnus agreed to issue 200,000 shares of common stock of Magnus and $200,000 to True North upon the execution of a formal joint venture agreement between Magnus and Team 209 for the formation of a co-operative joint venture company to carry out minerals exploration and development in an 83.29 sq. km. area of Huidong County in Sichuan Province located across the Jinsha Jiang River to the immediate northwest of the Boka gold project in Yunnan Province.  A formal joint venture agreement was executed between Magnus and Team 209 on July 6, 2004.  Magnus issued the shares to True North during the year ended July 31,2006.  

On April 6, 2004, Magnus entered into a Finder’s Fee Agreement with True North, whereby Magnus agreed to issue 100,000 shares of common stock of Magnus and $100,000 to True North upon the execution of a formal joint venture agreement between Magnus and Team 209 for the formation of a co-operative joint venture company to carry out mineral exploration and development in the 200 sq. km. area of Zhamashi gold and copper deposits in Qilian County of Qinghai Province.  As of the date of this Annual Report Magnus and Team 209 have not executed a formal joint venture agreement with respect to the Zhamashi gold and copper deposits in Qilian County.  The deadline for executing this formal joint venture has passed, and it does not appear that the joint venture, in this case, will formalize.

In relation to the Huidong Joint Venture Agreement, Magnus is required to provide Team 209 with the equivalent of $750,000 in shares of its common stock within 15 days after the Chinese government approves of the issuance of the Long Teng Mining Ltd. business license and the transfer of all relevant exploration permits from Team 209 into Long Teng Mining Ltd.  Of the $750,000 in shares to be issued to Team 209, $500,000 is in relation to the Huidong property and $250,000 is in relation to the Luquan property.

On September 29, 2004, the Huidong Joint Venture Agreement was approved by the Chinese Government and a business license for Long Teng Mining Ltd. was issued.  The exploration license for one of the two properties covered by the Joint Venture Agreement (Huidong) was successfully transferred into the Joint Venture Company, Long Teng, on July 27, 2005.  In connection with this successful transfer, Magnus issued Team 209 $500,000 in common shares.  The parties agreed to value the common stock at $1.75 at

58

			the time the exploration license had been successfully transferred.  Thus, 285,714 shares were issued to Team 209.  In addition, Magnus appointed Messrs. Graham Taylor, Pete Smith, and Anthony Tam to the Long Teng board.  However, on June 23, 2006, Pete Smith resigned from all positions with Magnus and its subsidiaries.

On October 5, 2006 Magnus announced that it had entered into a letter of intent to acquire 100% of the issued and outstanding shares in the capital of African Mineral Fields Inc., a British Virgin Islands company, which holds an exclusive option to acquire 100% interests in four gold projects in Uganda.  Graham Taylor, President, CEO and a director of Magnus, is the founder, sole director and majority shareholder of African Mineral Fields Inc.  When the board of directors of Magnus votes on approving this transaction, Mr. Graham Taylor will abstain from voting as a director on such transaction.

**ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES**

**Audit Fees**The aggregate fees billed for the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-QSBs or services that are normally provided by the accountant in connection with statutory and regulatory engagements for those fiscal years was:			2006 – $85,600 - Schumacher & Associates Inc.			2005 – $77,942- Moore Stephens Ellis Foster Ltd., Ernst & Young			2004 - $13,710 - Moore Stephens Ellis Foster Ltd.			2003 – $16,203 Miller & McCollom**Audit - Related Fees**The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported in the preceding paragraph:			2006 – Nil – Schumacher & Associates Inc.			2005 – Nil – Moore Stephens Ellis Foster Ltd., Ernst & Young			2004 – Nil – Moore Stephens Ellis Foster Ltd.			2004 – Nil – Miller & McCollom			2003 – Nil – Miller & McCollom**Tax Fees**The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:			2006 – Nil – Shumacher and Associates Inc.			2005 – Nil – Moore Stephens Ellis Foster Ltd., Ernst & Young			2004 – Nil – Moore Stephens Ellis Foster Ltd.			2004 – Nil – Miller & McCollom			2003 – Nil – Miller & McCollom**All Other Fees**The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:

59

			2006 – Nil – Schumacher and Associates Inc.			2005 – Nil – Moore Stephens Ellis Foster Ltd., Ernst & Young			2004 – Nil – Moore Stephens Ellis Foster Ltd.			2004 – Nil – Miller & McCollom			2003 – Nil – Miller & McCollom**ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES**The following exhibits are filed as part of this Annual Report:

Exhibit #

 

3.1 *

Certificate of Amendment to the Articles of Incorporation filed April 29, 2004

10.1 **

Consulting Agreement entered into between the Company and Anthony Tam, dated November 29, 2003

10.2 **

Consulting Agreement entered into between the Company and Michael Tan, dated November 29, 2003

10.3 **

Letter of Intent entered into between the Company and Guangxi Non-ferrous Metals Trading & Management Company, dated December 31, 2003

10.4 *

Finder’s Fee Agreement entered into between the Company and True North Management Ltd., dated December 31, 2003

10.5 *

Stock Option Plan dated January 9, 2004

10.6 **

Letter of Intent entered into between the Company and Team 209 with respect to the Jinlong Mountain gold district, dated January 15, 2004

10.7 **

Letter of Intent entered into between the Company and Team 209 with respect to the Zhamashi gold and copper deposits in Qilian County, dated January 15, 2004

10.8 *

Finder’s Fee Agreement entered into between the Company and True North Management Ltd., dated January 15, 2004

10.9 *

Consulting Agreement entered into between the Company and Michael Tan, dated March 1, 2004

10.10 *

Consulting Agreement entered into between the Company and True North Management Ltd., dated March 1, 2004

10.11 **

Preliminary Joint Venture Agreement entered into between the Company and Team 209 with respect to the 83.29 sq. km. area in Huidong County, dated April 6, 2004

10.12 **

Preliminary Joint Venture Agreement entered into between the Company and Team 209 with respect to Zhamashi gold and copper deposits in Qilian County, dated April 6, 2004

10.13 *

Finder’s Fee Agreement entered into between the Company and True North Management Ltd. with respect to the 83.29 sq. km. area in Huidong County, dated April 6, 2004

10.14 *

Finder’s Fee Agreement entered into between the Company and True North Management Ltd. with respect to the Zhamashi gold and copper deposits in Qilian County, dated April 6, 2004

10.15 *

Cooperative Joint Venture Contract entered into between the Company and Team 209, dated July 6, 2004

10.16 **

Letter  Agreement between Magnus and First Fortune to acquire Golden River Resources, dated July 26, 2005

10.17 **

Mangshi Joint Venture Agreement between Golden River and Team 209, dated August 29, 2003

10.18 **

Media Services Agreement between Magnus and Parker Communication Corporation, dated September 23, 2005

10.19 **

Mining License Transfer Agreement between Long Teng and Team 209 Division, dated October 29, 2005

10.20 **

Agreement on Compensation for the Failed Transfer of Mining Rights for the Xintaizi Gold Mine in Kangding, dated October 30, 2005

10.21 (1)

Exploration License Transfer Contract among Geologic Bureau of Quinhai Provincial Nuclear Industry and Quinghai Minerals Inc. dated April 20, 2006

10.22 (2)

Term Sheet Agreement with Sinoglobe Worldwide Limited dated March 23, 2006

16.1 (3)

Letter on Change in Certifying Accountant

31.1

Certificate pursuant to Rule 13a-14(a)

32.1

Certificate pursuant to 18 U.S.C. §1350

99.1 **

Kangding Kangma Mining Licnese and Xintaizi Prospect Property Recommendation, Dr. Paul Taufen, October 19, 2005
		(*)   Previously filed as exhibits to Form 10-KSB filed on November 15, 2004 and incorporated by reference.
60

			(**) Previously filed as exhibits to Form 10-KSB filed on December 16, 2005 and incorporated by reference.			(1)   Previously filed as Exhibit 10.1 to the Form 8-K filed on March 29, 2006 and incorporated by reference			(2)   Previously filed as Exhibit 10.1 to the Form 8-K filed on March 23, 2006 and incorporated by reference			(3)   Previously filed as Exhibit 16.1 to the Form 8-K filed on December 20, 2005 and incorporated by reference

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**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 13 day of November, 2006.

 

**MAGNUS INTERNATIONAL							RESOURCES INC.**(Registrant)

By: /s/ *Graham Taylor                                 *

 

Graham Taylor

 

 President and Chief Executive Officer
		Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
**Signature**

****

**Title**

****

**Date**

****

/s/ Graham Taylor                          						Graham Taylor

 

President, CEO, CFO, Secretary, Treasurer and Director

 

November 13, 2006

/s/ Steven Tan                                Steven Tan

						 

						Director

						 

						November 13, 2006

62

**Exhibit Index**

Exhibit #****

****

Page#****

31.1

Certification under Rule 13a-14(a).

63

32.1

Certification under Section 1350.

65

******