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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, DC 20549

FORM 10-QSB/A(Amendment No.
1)

[X]Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the quarterly period ended March 31, 2006

[    ]Transition Report Under Section 13
or 15(d) of the Securities Exchange Act of 1934

For the transition period ________ to ________

COMMISSION FILE NUMBER **000-33189**

CANYON COPPER CORP.(Exact
name of small business issuer as specified in its charter)

|NEVADA                                                               | 88-0452792                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)
|                                                                     |                                  
|Suite 408  1199 West Pender Street                                  |                                  
|Vancouver, BC, Canada                                                | V6E 2R1                          
|(Address of principal executive offices)                             | (Zip Code)                       
|                                                                     |                                  
|(604) 331-9326                                                       |                                  
|Issuer's telephone number                                            |                                  

ABERDENE MINES LIMITEDFormer name, former
address and former fiscal year, if changed since last report

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

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act): Yes [   ] No
[X]

State the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date: As of May 11,
2006, the Registrant had 65,555,596 shares of common stock, with a par value
of $0.00001, issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes
[   ] No [X]

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Explanatory Note

Canyon Copper Corp. (the "Company") is amending this Quarterly
Report on Form 10-QSB for the following reasons:

| | (i)  | The Company has restated the accompanying financial
      statements for the period ended March 31, 2006 to include the recognition
      of an other than temporary loss in net loss relating to the Companys
      investment securities, and made the corresponding changes to Item 2.
      Management's Discussion And Analysis Or Plan Of Operation.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                              
| | (ii) | The Company has augmented its accounting policy for
      investment securities (Note 2(d)) of the accompanying interim financial
      statements for the period ended March 31, 2006.                                                                                                                                                                      

Other than the foregoing items, no part of the Quarterly Report
on Form 10-QSB filed on May 22, 2006 is being amended, and the filing of this
Amended Quarterly Report on Form 10-QSB/A should not be understood to mean that
any other statements contained therein are untrue or incomplete as of any date
subsequent to May 22, 2006.

2

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PART I. FINANCIAL INFORMATION

ITEM
1.           FINANCIAL
STATEMENTS.

3

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Aberdene Mines Limited 
  (An Exploration Stage Company)

March 31, 2006





|                                  | Index
|--------------------------------- | -----
|                                  |      
|Balance Sheets                    | F-2  
|                                  |      
|Statements of Operations          | F-3  
|                                  |      
|Statements of Cash Flows          | F-4  
|                                  |      
|Notes to the Financial Statements | F-5  

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Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Balance Sheets 
  (expressed in U.S. dollars) 
  (unaudited)

|                                                               |  | March 31,   |   |  | June 30,   |  
|-------------------------------------------------------------- |  | ----------- | - |  | ---------- | -
|                                                               |  | 2006        |   |  | 2005       |  
|                                                               |  | $           |   |  | $          |  
|                                                               |  | (Restated - |   |  |            |  
|                                                               |  | Note 10)    |   |  |            |  
|                                                               |  |             |   |  |            |  
|ASSETS                                                         |  |             |   |  |            |  
|Current Assets                                                 |  |             |   |  |            |  
|Cash                                                           |  | 1,323,285   |   |  | 48,816     |  
|Amounts receivable                                             |  | 33,000      |   |  |           |  
|Investment securities                                          |  | 247,722     |   |  | 294,077    |  
|Prepaid
      expenses and deposits                            |  | 73,765      |   |  | 10,082     |  
|Total Current Assets                                           |  | 1,677,772   |   |  | 352,975    |  
|Property and Equipment
      (Note 3)                          |  | 8,403       |   |  | 4,221      |  
|Total Assets                                                   |  | 1,686,175   |   |  | 357,196    |  
|                                                               |  |             |   |  |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                 |  |             |   |  |            |  
|Current Liabilities                                            |  |             |   |  |            |  
|Accounts payable                                               |  | 216,903     |   |  | 70,635     |  
|Accrued liabilities                                            |  | 170,300     |   |  | 44,698     |  
|Due to related parties (Note 5)                                |  | 3,983       |   |  | 58,633     |  
|Convertible
      debentures (Note 6)                          |  | 284,999     |   |  |           |  
|Total Current Liabilities                                      |  | 676,185     |   |  | 173,966    |  
|Convertible Debentures
      (Note 6)                          |  |            |   |  | 284,999    |  
|Total Liabilities                                              |  | 676,185     |   |  | 458,965    |  
|Contingencies and Commitments (Note 1 and 8)                   |  |             |   |  |            |  
|Subsequent Events (Note 9)                                     |  |             |   |  |            |  
|Stockholders Equity (Deficit)                                 |  |             |   |  |            |  
|Preferred Stock                                                |  |             |   |  |            |  
|Authorized: 100,000,000 shares, par value $0.00001             |  |             |   |  |            |  
|Issued and outstanding: 500,000
      shares                   |  | 5           |   |  | 5          |  
|Common Stock                                                   |  |             |   |  |            |  
|Authorized: 100,000,000 shares,
      par value $0.00001       |  |             |   |  |            |  
|Issued and outstanding: 65,555,596 shares and
      53,991,852 |  |             |   |  |            |  
|shares, respectively                                           |  | 656         |   |  | 540        |  
|Additional Paid-in Capital                                     |  | 9,956,611   |   |  | 6,325,951  |  
|Common Stock Subscriptions Receivable                          |  | (3,600      | ) |  |           |  
|Accumulated Other Comprehensive Loss                           |  |            |   |  | (437, 712  | )
|Deficit Accumulated During the Exploration Stage               |  | (8,943,682  | ) |  | (5,990,553 | )
|Total Stockholders
      Equity (Deficit)                     |  | 1,009,990   |   |  | (101,769   | )
|Total Liabilities and Stockholders Equity (Deficit)           |  | 1,686,175   |   |  | 357,196    |  

The Accompanying Notes are an Integral Part of These Financial
  Statements 
  F-2

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Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Statements of Operations 
  (expressed in U.S. dollars)
  (unaudited)

Accumulatedfrom January 21,2000(Date of
      
      
      For the
      
      
      For theInception) to
      
      
      Three Months Ended
      
      
      Nine Months EndedMarch 31,
      
      
      March 31,
      
      
      March 31,2006
      
      
      2006
      
      
      2005
      
      
      2006
      
      
      2005$
      
      
      $
      
      
      $
      
      
      $
      
      
      $(Restated -
      
      
      (Restated -
      
      
      
      
      
      (Restated -Note 10)
      
      
      Note 10)
      
      
      
      
      
      Note 10 )Revenue
      
      
      
      
      
      
      
      
      
      
      
      
      
      Operating ExpensesDepreciation
      
      4,396
      
      
      1,018
      
      
      249
      
      
      2,388
      
      
      751Foreign exchange loss
        (gain)
      
      (29,630
      )
      
      (14,499
      )
      
      7,624
      
      
      10,082
      
      
      (52,940
      )General and administrative
      
      3,247,823
      
      
      244,944
      
      
      127,987
      
      
      716,689
      
      
      553,998Mineral property costs
      
      4,755,025
      
      
      882,789
      
      
      187,911
      
      
      1,790,602
      
      
      1,465,969Total Operating Expenses
      
      7,977,614
      
      
      1,114,252
      
      
      316,147
      
      
      2,519,761
      
      
      2,020,718Operating Loss
      
      (7,977,614
      )
      
      (1,114,252
      )
      
      (316,147
      )
      
      (2,519,761
      )
      
      (2,020,718
      )Other Income (Expense)Gain (loss) on settlement
        of debt
      
      (2,872
      )
      
      10,963
      
      
      -
      
      
      10,963
      
      
      -Interest on convertible debentures
      
      (215,949
      )
      
      (6,976
      )
      
      (4,498
      )
      
      (20,182
      )
      
      (7,135
      )Loss on sale of investment
        securities
      
      (411,430
      )
      
      -
      
      
      (191,582
      )
      
      (88,332
      )
      
      (240,171
      )Unrealized loss on investment securities
      
      (335,817
      )
      
      (1,825
      )
      
      -
      
      
      (335,817
      )
      
      -Total Other Income (Expense)
      
      (966,068
      )
      
      2,162
      
      
      (203,704
      )
      
      (433,368
      )
      
      (194,366
      )Net Loss
      
      (8,943,682
      )
      
      (1,112,090
      )
      
      (519,851
      )
      
      (2,953,129
      )
      
      (2,215,084
      )Other Comprehensive LossUnrealized gain (loss) on investment securities
      
      
      
      
      
      
      
      210,105
      
      
      
      
      
      (480,903
      )Comprehensive Loss
      
      (8,943,682
      )
      
      (1,112,090
      )
      
      (309,746
      )
      
      (2,953,129
      )
      
      (2,695,987
      )Net Loss Per Share
         Basic and Diluted
      
      
      
      
      (0.02
      )
      
      (0.01
      )
      
      (0.05
      )
      
      (0.04
      )Weighted Average Shares Outstanding
      
      
      
      
      61,450,000
      
      
      62,822,000
      
      
      59,355,000
      
      
      69,053,000


The Accompanying Notes are an Integral Part of These Financial
  Statements 
  F-3

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Statements of Cash Flows 
  (expressed in U.S. dollars) 
  (unaudited)

|                                                                 |  | For the           |  
|---------------------------------------------------------------- |  | ----------------- | -
|                                                                 |  | Nine Months Ended |  
|                                                                 |  | March 31,         |  
|                                                                 |  | 2006              |  
|                                                                 |  | $                 |  
|                                                                 |  | (Restated -       |  
|                                                                 |  | Note 10)          |  
|Operating Activities                                             |  |                   |  
|                                                                 |  |                   |  
|Net loss                                                         |  | (2,953,129        | )
|                                                                 |  |                   |  
|Adjustments to reconcile net loss
      to net cash used in      |  |                   |  
|operating activities:                                            |  |                   |  
|                                                                 |  |                   |  
|Depreciation                                                     |  | 2,388             |  
|Foreign exchange
      translation loss (gain)                   |  | 11,795            |  
|Impairment of mineral property
      costs                       |  | 455,000           |  
|Loss on sale
      of investment securities                      |  | 88,332            |  
|Unrealized loss on investment
      securities                   |  | 335,817           |  
|Stock-based
      compensation                                   |  | 45,109            |  
|Stock issued for mineral
      property costs                    |  | 294,750           |  
|                                                                 |  |                   |  
|Changes in operating assets and liabilities:                     |  |                   |  
|                                                                 |  |                   |  
|Amounts receivable                                               |  | (33,000           | )
|Prepaid expenses
      and deposits                              |  | (63,683           | )
|Accounts payable and accrued liabilities                         |  | 271,870           |  
|Due to related parties                                           |  | (31,065           | )
|                                                                 |  |                   |  
|Net Cash Used in Operating Activities                            |  | (1,575,816        | )
|                                                                 |  |                   |  
|Investing Activities                                             |  |                   |  
|                                                                 |  |                   |  
|Mineral property costs                                           |  | (455,000          | )
|Proceeds from the sale of investment securities                  |  | 48,123            |  
|Purchase of property and equipment                               |  | (6,570            | )
|                                                                 |  |                   |  
|Net Cash Used in Investing Activities                            |  | (413,447          | )
|                                                                 |  |                   |  
|Financing Activities                                             |  |                   |  
|                                                                 |  |                   |  
|Proceeds from issuance
      of convertible debentures           |  |                  |  
|Issuance of common stock                                         |  | 3,486,400         |  
|Share issuance costs                                             |  | (222,668          | )
|                                                                 |  |                   |  
|Net Cash Provided by Financing Activities                        |  | 3,263,732         |  
|                                                                 |  |                   |  
|Increase (Decrease) in Cash                                      |  | 1,274,469         |  
|                                                                 |  |                   |  
|Cash  Beginning of Period                                       |  | 48,816            |  
|                                                                 |  |                   |  
|Cash  End of Period                                             |  | 1,323,285         |  
|                                                                 |  |                   |  
|Non-cash Investing and Financing Activities:                     |  |                   |  
|                                                                 |  |                   |  
|Preferred stock issued
      for investment securities           |  |                  |  
|Investment securities used to pay the finders
      fee for the |  |                   |  
|preferred
      stock issuance                                   |  |                  |  
|Issuance of common shares to settle debt                         |  | 23,585            |  
|Stock issued for mineral property costs                          |  | 294,750           |  
|                                                                 |  |                   |  
|Supplemental Disclosures:                                        |  |                   |  
|                                                                 |  |                   |  
|Interest paid                                                    |  |                  |  
|Income
      taxes paid                                          |  |                  |  

The Accompanying Notes are an Integral Part of These Financial
  Statements 
  F-4

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Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|1. | Exploration Stage Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Aberdene Mines Limited (the Company) was
        incorporated in the State of Nevada, U.S.A. on January 21, 2000. The Company
        is an Exploration Stage Company, as defined by Statement of Financial
        Accounting Standard (SFAS) No. 7 Accounting and Reporting
        by Development Stage Enterprises. The Companys principal
        business plan is to acquire, explore and develop mineral properties and
        ultimately seek earnings by exploiting mineral claims. Refer to Note 4
        for mineral claims being acquired through option agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company has been in the exploration stage since
        its formation in January 2000 and has not yet realized any revenues from
        its planned operations. It is primarily engaged in the acquisition, exploration
        and development of mining properties. Upon location of a commercial mineable
        reserve, the Company will actively prepare the site for extraction and
        enter a development stage. At present, management devotes most of its
        activities to raise sufficient funds to further explore and develop its
        mineral properties. Planned principal activities have not yet begun. The
        ability of the Company to emerge from the exploration stage with respect
        to any planned principal business activity is dependent upon its successful
        efforts to raise additional equity financing and/or attain profitable
        mining operations. The Company has working capital of $1,001,587 as at
        March 31, 2006 and has accumulated losses from inception to March 31,
        2006 totalling $8,943,682. The Company also has significant mineral property
        acquisition and exploration commitments. There is no guarantee that the
        Company will be able to complete any of the above objectives. These factors
        raise substantial doubt regarding the Companys ability to continue
        as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | a) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | These financial statements and related notes are prepared
        in conformity with accounting principles generally accepted in the United
        States and are expressed in U.S. dollars. The Companys fiscal year-end
        is June 30.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | b) | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The preparation of financial statements in conformity
        with accounting principles generally accepted in the United States 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. Actual results
        could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | c) | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company considers all highly liquid instruments
        with maturity of three months or less at the time of issuance to be cash
        equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | d) | Investment Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company reports investments in debt and marketable
        equity securities at fair value based on quoted market prices or, if quoted
        prices are not available, discounted expected cash flows using market
        rates commensurate with credit quality and maturity of the investment.
        All investment securities are designated as available for sale with unrealized
        gains and losses included in stockholders' equity. Unrealized losses that
        are other than temporary are recognized in earnings. Realized gains and
        losses are accounted for on the specific identification method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company periodically reviews these investments for
        other-than-temporary declines in fair value based on the specific identification
        method and writes down investments to their fair value when an other-than-temporary
        decline has occurred. When determining whether a decline is other-than-temporary,
        the Company examines (i) the length of time and the extent to which the
        fair value of an investment has been lower than its carrying value: (ii)
        the financial condition and near-term prospects of the investee, including
        any specific events that may influence the operations of the investee
        such as changes in technology that may impair the earnings potential of
        the investee: and (iii) the Companys intent and ability to retain
        its investment in the investee for a sufficient period of time to allow
        for any anticipated recovery in market value. The Company generally believes
        that an other-than-temporary decline has occurred when the fair value
        of the investment is below the carrying value for one year, absent of
        evidence to the contrary. Accordingly, the Company recognized an unrealized
        loss on investment of $335,817 for the period ended March 31, 2006, as
        the fair value of the investment was below the carrying value for excess
        of one year.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | e) | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | Property and equipment consists of computer equipment
        and office equipment, which are recorded at cost and depreciated over
        their estimated useful life of three years on a straight-line basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-5

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Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | f)                                                            
|   |                                                               
|   |                                                               
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|   | g)                                                            
|   |                                                               
|   |                                                               
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|   | h)                                                            
|   |                                                               
|   |                                                               
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|   | i)                                                            
|   |                                                               
|   |                                                               
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|   | j)                                                            
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|   | k)                                                            
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|   |                                                               
|   | l)                                                            
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|   |                                                               

F-6

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Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | m)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               

| |                                                            |  | Three Months Ended |   |  | Nine Months Ended |  
| | ---------------------------------------------------------- |  | ------------------ | - |  | ----------------- | -
| |                                                            |  | March 31,          |   |  | March 31,         |  
| |                                                            |  | 2005               |   |  | 2006              |  
| |                                                            |  |                    |   |  |                   |  
| |                                                            |  |                    |   |  | (Restated        |  
| |                                                            |  |                    |   |  | Note 10)          |  
| |                                                            |  |                    |   |  |                   |  
| | Net loss  as reported                                     |  | (519,851           | ) |  | (2,953,129        | )
| | Add: Stock-based compensation expense included in net      |  |                    |   |  |                   |  
| | loss  as reported                                         |  |                   |   |  |                  |  
| | Deduct: Stock-based compensation expense                   |  |                    |   |  |                   |  
| | determined under fair value method                         |  |                   |   |  |                  |  
| |                                                            |  |                    |   |  |                   |  
| | Net loss  pro forma                                       |  | (519,851           | ) |  | (2,953,129        | )
| |                                                            |  |                    |   |  |                   |  
| | Net loss per share (basic and diluted) 
      as reported |  | (0.01              | ) |  | (0.05             | )
| | Net loss per share (basic and diluted)  pro forma         |  | (0.01              | ) |  | (0.05             | )

The fair value of the options granted
  during the period was estimated at the date of grant using the Black-Scholes
  option pricing model using the following weighted average assumptions: risk
  free interest rate of 4.11%, expected volatility of 214%, an expected option
  life of 2.5 years and no expected dividends. The weighted average fair value
  of options granted was $0.30 per option. There was no dilutive impact of potential
  common shares associated with stock options, by application of the treasury
  stock method, as the Company had net losses.

F-7

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | m)                                                            
|   |                                                               
|   |                                                               

Three Months EndedMarch 31, 2006WeightedNumber of
      
      
      AverageOptions
      
      
      Exercise PriceBalance, Beginning of Period
      
      3,000,000
      
      
      $0.30Granted
      
      150,000
      
      
      0.35Cancelled/Forfeited
      
      
      
      
      Exercised
      
      
      
      
      Balance, End of Period
      
      3,150,000
      
      
      $0.30


As at March 31, 2006, the following
  options are outstanding:

Outstanding and ExercisableWeighted AverageExercise
      Number of
      Remaining Contractual
      Weighted AveragePrice
      Shares
      Life
        (years)
      Exercise Price$ 0.30
      3,000,000
      4.03
      $ 0.30$ 0.35
      150,000
      4.35
      $
        0.353,150,000
      4.05
      $ 0.30


| | n) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In May 2005, the Financial Accounting Standards Board
        (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections
         A Replacement of APB Opinion No. 20 and SFAS No. 3. SFAS
        154 changes the requirements for the accounting for and reporting of a
        change in accounting principle and applies to all voluntary changes in
        accounting principle. It also applies to changes required by an accounting
        pronouncement in the unusual instance that the pronouncement does not
        include specific transition provisions. SFAS 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 provisions
        of SFAS No. 154 are effective for accounting changes and correction of
        errors made in fiscal years beginning after December 15, 2005. The adoption
        of this standard did not have a material effect on the Companys
        results of operations or financial position.                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In December 2004, the FASB issued SFAS No. 153, Exchanges
        of Nonmonetary Assets - An Amendment of APB Opinion No. 29. The
        guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions,
        is based on the principle that exchanges of nonmonetary assets should
        be measured based on the fair value of the assets exchanged. The guidance
        in that Opinion, however, included certain exceptions to that principle.
        SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary
        exchanges of similar productive assets and replaces it with a general
        exception for exchanges of nonmonetary assets that do not have commercial
        substance. A nonmonetary exchange has commercial substance if the future
        cash flows of the entity are expected to change significantly as a result
        of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary
        asset exchanges occurring in fiscal periods beginning after June 15, 2005.
        Early application is permitted and companies must apply the standard prospectively.
        The adoption of this standard did not have a material effect on the Companys
        results of operations or financial position.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The FASB has also issued SFAS No. 155 Accounting
        for Certain Hybrid Financial Instruments and SFAS No. 156 Accounting
        for Servicing of Financial Assets, but they will not have any relationship
        to the operations of the Company. Therefore a description and its impact
        for each on the Companys operations and financial position have
        not been disclosed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-8

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | o)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | p)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|3. | Property and Equipment                                        

| |                    |  |        |  |  |              |  |  | March 31,    |  |  | June 30,     | 
| | ------------------ |  | ------ |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                    |  |        |  |  |              |  |  | 2006         |  |  | 2005         | 
| |                    |  |        |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                    |  | Cost   |  |  | Depreciation |  |  | Value        |  |  | Value        | 
| |                    |  | $      |  |  | $            |  |  | $            |  |  | $            | 
| |                    |  |        |  |  |              |  |  |              |  |  |              | 
| |                    |  |        |  |  |              |  |  |              |  |  |              | 
| | Computer equipment |  | 6,229  |  |  | 3,565        |  |  | 2,664        |  |  | 4,221        | 
| | Office furniture   |  | 6,570  |  |  | 831          |  |  | 5,739        |  |  |             | 
| |                    |  |        |  |  |              |  |  |              |  |  |              | 
| |                    |  | 12,799 |  |  | 4,396        |  |  | 8,403        |  |  | 4,221        | 

|4. | Mineral Properties
|-- | ------------------
|   |                   
|   | a)                
|   |                   
|   | b)                

F-9

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|5. | Related Party Transactions/Balances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | Convertible Debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | In accordance with EITF 98-5 Accounting
        for Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios,, the Company has recognized the
        intrinsic value of the beneficial conversion option of $180,183 as additional
        paid-in capital and interest expense in fiscal 2005. The Company will
        record the fair value of the warrants upon conversion of the convertible
        debentures in accordance with EITF 00-27 Application of Issue
        No. 98-5 to Certain Convertible Instruments.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-10

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|6. | Convertible Debentures (continued)
|-- | ----------------------------------
|   |                                   
|   | e)                                

|7. | Common Stock
|-- | ------------
|   |             
|   | a)          
|   |             
|   | b)          
|   |             
|   | c)          
|   |             
|   | d)          
|   |             
|   | e)          
|   |             
|   | f)          

|8. | Commitments and Contingencies
|-- | -----------------------------
|   |                              
|   | a)                           
|   |                              
|   | b)                           
|   |                              
|   | c)                           
|   |                              
|   | d)                           

F-11

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|8. | Commitments and Contingencies (continued)
|-- | -----------------------------------------
|   |                                          
|   | e)                                       
|   |                                          
|   | f)                                       
|   |                                          
|   | g)                                       
|   |                                          
|   | h)                                       
|   |                                          
|   |                                          

|9. | Subsequent Events
|-- | -----------------
|   |                  
|   | a)               
|   |                  
|   | b)               
|   |                  
|   | c)               

F-12

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|10. | Restatement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company has restated its financial statements as
        at March 31, 2006 and for the periods ended March 31, 2006. The financial
        statements have been restated to reflect the classification of the unrealized
        loss on investment securities as other-than-temporary. Accordingly, the
        unrealized loss is recognized in earnings during the period rather than
        as a separate component of stockholders equity. The effect of the
        restatement is to increase net loss by $1,825 for the three month and
        $335,817 for the nine month periods ended March 31, 2006, and $335,817
        from January 21, 2000 (date of inception) to March 31, 2006. Net loss
        per share was unchanged except for the nine month period ended March 31,
        2006, which increased by $0.01 per share to $0.05 per share.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | a)      Balance Sheet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                                        |  | As At March 31, 2006 |  
| | ------------------------------------------------------ |  | -------------------- | -
| |                                                        |  | As Reported          |  
| |                                                        |  | $                    |  
| | Stockholders Equity (Deficit)                         |  |                      |  
| | Accumulated other comprehensive loss                   |  | (335,817             | )
| | Deficit accumulated during the
      exploration stage |  | (8,607,865           | )

| | b) | Statements of Operations
| | -- | ------------------------

| |                                          |  | Accumulated from January 21, 2000     |  
| | ---------------------------------------- |  | ------------------------------------- | -
| |                                          |  | (Date of Inception) to March 31, 2006 |  
| |                                          |  | As Reported                           |  
| |                                          |  | $                                     |  
| | Other Expenses                           |  |                                       |  
| | Unrealized loss on investment securities |  |                                      |  
| | Net loss                                 |  | (8,607,865                            | )
| | Unrealized loss on investment securities |  | (335,817                              | )
| | Comprehensive loss                       |  | (8,943,682                            | )

| |                                          |  | For the Three Months Ended March 31, 2006 |  
| | ---------------------------------------- |  | ----------------------------------------- | -
| |                                          |  | As Reported                               |  
| |                                          |  | $                                         |  
| | Other Expenses                           |  |                                           |  
| | Unrealized loss on investment securities |  |                                          |  
| | Net loss                                 |  | (1,110,265                                | )
| | Unrealized loss on investment securities |  | (1,825                                    | )
| | Comprehensive loss                       |  | (1,112,090                                | )
| | Net Loss Per Share  Basic and Diluted   |  | (0.02                                     | )

F-13

---

Aberdene Mines Limited 
  (An Exploration Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars) 
  (unaudited)

|10. | Restatement (continued)
      b)      Statements of Operations
        (continued)
|--- | ----------------------------------------------------------------------------------

| |                                                |  | For the Nine Months Ended March 31, 2006 |  
| | ---------------------------------------------- |  | ---------------------------------------- | -
| |                                                |  | As Reported                              |  
| |                                                |  | $                                        |  
| | Other Expenses                                 |  |                                          |  
| | Unrealized loss on investment
      securities |  |                                         |  
| | Net loss                                       |  | (2,617,312                               | )
| | Unrealized loss on investment securities       |  | 101,895                                  |  
| | Comprehensive loss                             |  | (2,515,417                               | )
| | Net Loss Per Share  Basic and Diluted         |  | (0.04                                    | )

| | c) | Statement of Cash Flows
| | -- | -----------------------

| |                                                |  | For the Nine Months Ended March 31, 2006 |  
| | ---------------------------------------------- |  | ---------------------------------------- | -
| |                                                |  | As Reported                              |  
| |                                                |  | $                                        |  
| | Operating Activities                           |  |                                          |  
| | Net loss for the period                        |  | (2,617,312                               | )
| | Unrealized loss on investment
      securities |  |                                         |  

F-14

---

ITEM
2.           MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS

Certain statements contained in this Form 10-QSB constitute
"forward-looking statements". These statements, identified by words such as
plan, "anticipate", "believe", "estimate", "should", "expect" and similar
expressions include our expectations and objectives regarding our future
financial position, operating results and business strategy. These statements
reflect the current views of management with respect to future events and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and
uncertainties include those set forth under this Item 2. "Management's
Discussion and Analysis or Plan of Operation" and elsewhere in this Form 10-QSB.
We do not intend to update the forward-looking information to reflect actual
results or changes in the factors affecting such forward-looking information. We
advise you to carefully review the reports and documents we file from time to
time with the Securities and Exchange Commission (the SEC), particularly our
annual reports on Form 10-KSB, our quarterly reports on Form 10-QSB and our
current reports on Form 8-K.

INTRODUCTION

We were incorporated on January 21, 2000 under the laws of the
State of Nevada. We are an exploration stage company engaged in the acquisition,
exploration and development of mineral properties. We currently own the rights
to acquire a 100% interest in two major claim blocks comprising a total of 1,003
mineral claims, representing approximately 20,560 acres located in Mineral
County, Nevada (the New York Canyon Project). We refer to the first block of
claims as the "Copper Queen Claims", and the second contiguous block of claims
as the "Longshot Ridge Claims". At present, we do not own any mineral claims
directly.

We have not earned any revenues to date and do not anticipate
earning revenues until such time as we enter into commercial production of our
mineral properties. We are presently in the exploration stage of our business
and we can provide no assurance that commercially viable mineral deposits exist
on our claims or that we will discover commercially exploitable levels of
mineral resources on our properties, or if such deposits are discovered, that we
will enter into further substantial exploration programs. Our primary
operational activities have been focused on analysis and exploratory drilling on
the New York Canyon Project over which we have an option to acquire or the right
to explore the mineral claims within the New York Canyon Project area. The
agreements pursuant to which we acquired our interests in the New York Canyon
Project provide that we must make a series of cash payments and issue certain
shares over certain time periods, expend certain minimum amounts on the
exploration of the properties or contribute our share of ongoing expenditures.
If we fail to make such payments or expenditures in a timely fashion, we may
lose our interest in those properties.

Recent Corporate Developments

Since the last fiscal quarter ended December 31, 2005, we
experienced the following significant corporate developments:

| | 1. | In April, 2006 we signed an engagement letter with a
      Canadian underwriter to act as a placement agent on a best efforts basis
      in connection with a proposed syndicated private placement to non-US
      residents for gross proceeds of up to US$6,000,000 (the Canadian
      Offering), with an over-allotment option of up to 15% of the number of
      units offered at closing. The Canadian Offering is expected to consist of
      up to 10,000,000 units (each a Unit) at a price of US$0.60 per Unit,
      with each Unit consisting of one common share and one share purchase
      warrant exercisable for a period of up to 18 months at a price of $0.90
      following the closing of the Canadian Offering. Pursuant to the terms of
      the engagement letter the agent will receive a cash commission of 8% of
      the gross proceeds of the sale of
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

---

| |    | the Units issued pursuant to the Canadian Offering and
      Unit purchase warrants equal to 10% of the Units issued pursuant to the
      Canadian Offering. The engagement letter is subject to each of the
      parties satisfactory completion of due diligence and the entry into
      definitive agreements between the parties. There is no assurance that the
      proposed Canadian Offering will be completed. Also, in April, 2006 we
      entered into an engagement letter with another Canadian underwriter
      pursuant to which the agent has agreed to act as sponsor for our proposed
      application for a listing on the Toronto Stock Exchange and acquired the
      right to participate in up to 25% of the syndicate for the Canadian
      Offering. The engagement letter is subject to each of the parties
      satisfactory completion of due diligence and the entry into definitive
      agreements between the parties.                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 2. | In April, 2006 we signed an engagement letter with a US
      underwriter to act as placement agent on a best efforts basis in
      connection with a proposed private placement of our securities to US
      residents for gross proceeds of up to US$6,000,000 (the US Offering).
      The US Offering is expected to consist of up to 10,000,000 units (each a
      Unit) at a price of US$0.60 per Unit, with each Unit consisting of one
      common share and one share purchase warrant exercisable for a period of up
      to 18 months at a price of $0.90 following the closing of the US Offering.
      Pursuant to the terms of the engagement letter the US agent will receive a
      cash commission of 8% of the gross proceeds of the sale of the Units
      pursuant to the US Offering and Unit purchase warrants equal to 10% of the
      Units issued pursuant to the US Offering. The engagement letter for the US
      Offering is subject to each of the parties satisfactory completion of due
      diligence. There is no assurance that the proposed US Offering will be
      completed.                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3. | During the quarter ended March 31, 2006, the majority of
      the exploration activities for the Company concentrated on data
      compilation, program planning and logistics and mobilization mobilization
      of crews, contractors and survey equipment for of the New York Canyon
      project. Historic data for the Longshot Ridge area was compiled into
      electronic format and formed the basis for geological modeling of the
      deposit. This information was used for planning of the drill program and
      development of a 3D model of the mineralized system. An additional 560
      claims were located in January, bringing the total number of claims under
      option to 1,003 covering approximately 20,560 acres. Contracts for
      drilling, analyses, metallurgical testing and geophysics surveys were
      arranged and field personnel hired to undertake the planned work program.
      A 117 line kilometer ground magnetics survey was completed during March.
      Equipment and crew were mobilized to the project site at the end of March,
      with drilling commencing April 3. Drilling, grid work, geophysical surveys
      and permitting were ongoing during April and are expected to continue
      throughout our fourth quarter. See Plan of Operation, below.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 4. | On April 5, 2006, the Board of Directors of the Company
      adopted our 2006 Stock Incentive Plan (the "Plan"). Under the terms of the
      Plan, options to purchase up to 10,000,000 shares of our common stock that
      may be granted to our employees, officers, directors, and eligible
      consultants of Searchlight. The Plan provides that the option price be the
      fair market value of the stock at the date of grant as determined by the
      Board of Directors. Options granted become exercisable and expire as
      determined by the Board of Directors. The maximum aggregate number of
      shares of our common stock that may be optioned and sold under the Plan
      will be increased effective the first day of each of our fiscal quarters,
      beginning with the fiscal quarter commencing April 1, 2006, by an amount
      equal to the lesser of: (i) 15% of the total increase in the number of
      shares of common Stock outstanding during the previous fiscal quarter; or
      (ii) a lesser number of shares of common stock as may be determined by the
      board of the Company.                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5. | On March 22, 2006 we entered into a mineral processing
      and research agreement (the Research Agreement) with Nevada Sunrise LLC
      (Nevada Sunrise), and Intor Resources Corporation pursuant to which we
      assumed the responsibility for managing the
exploration                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

5

---

| |     | program on the New York Canyon Property and engaged
      Nevada Sunrise for the purpose of developing a recovery process for
      copper. Pursuant to the terms of the Research Agreement, we retained
      Nevada Sunrise to develop an economic alkaline hydrometallurgical process
      for recovery of copper and other valuable minerals from the Longshot Ridge
      resource on the New York Canyon property, in consideration of which we
      agreed to: (i) pay Nevada Sunrise $100,000 on execution of the agreement,
      (ii) pay $50,000 by June 1, 2006; (iii) pay $50,000 by July 1, 2006, and
      (iv) pay $50,000 by August 1, 2006. Under the terms of the agreement
      Nevada Sunrise must provide a proof of concept report regarding the
      results of its research by no later than January 31, 2007. If Nevada
      Sunrise reports the feasibility of the process in the report, the Company
      will be granted a non-exclusive license to employ the process in
      consideration of which it will grant Nevada Sunrise the option to purchase
      1,000,000 shares of the common stock of the Company at a price of $1 per
      share.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 6.  | On March 3, 2006, our board of directors appointed Mr.
      Bryan Wilson as a member of our board of directors. Mr. Wilson has been
      engaged in the fields of mining exploration and development for 18 years
      and financial services for 12 years. He has held positions as project
      geologist/manager for Shell Canada; consultant and financial advisor for
      Scotia McLeod; mining analyst for C.M. Oliver; and corporate finance
      specialist for Dominick & Dominick and Thames Capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 7.  | On February 27, 2006, we received a geological report
      from our consulting geologists Geoffrey Goodall, and Mel Klohn. The report
      confirmed that all exploration to date demonstrated significant zones of
      copper mineralization on the New York Canyon Project property. The report
      recommends a two-phase exploration program to advance the New York Canyon
      Project property with a budget of approximately $3,650,000 for Phase I and
      $3,000,000 for Phase II.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 8.  | On February 22, 2006, our board of directors appointed
      Mr. John Carlesso as a member of our board of directors. Mr. Carlesso is a
      senior executive with over 15 years of international business and
      financial markets experience. He is currently the president of Apogee
      Minerals Ltd., a Canadian mining company developing advanced silver-zinc
      projects in South America. Mr. Carlesso has held the position of vice
      president, corporate development with Desert Sun Mining Corp, a gold
      mining company. Prior to this, Mr. Carlesso provided capital markets,
      corporate finance, and strategic marketing advice to growth-oriented
      companies across a broad range of sectors. Mr. Carlesso holds a Bachelor
      of Economics degree from the University of Western Ontario.                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 9.  | On February 10, 2006, we raised gross proceeds of
      $1,790,000 in connection with a private placement pursuant to which we
      issued 4,475,000 units at a price of $0.40 per unit. Each unit consisted
      of one common share and one common stock purchase warrant. Each warrant
      entitles the holder to acquire one share of our common stock for $0.50 per
      share for two years following closing. See Item 2. Unregistered Sales Of
      Equity Securities And Use Of Proceeds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 10. | We entered into a consulting agreement with Geoffrey
      Goodall dated February 1, 2006 (the Goodall Consultant Agreement).
      Pursuant to the terms of the Goodall Consultant Agreement, Mr. Goodall
      will act as Chief Geologist/Exploration Manager and will oversee the
      evaluation and development of the New York Canyon project. In
      consideration of his consultant services, we agreed to pay to Mr. Goodall
      $12,000 per month and granted to Mr. Goodall 1,000,000 incentive stock
      options. The options were issued on April 5, 2005 to Mr. Goodall pursuant
      to the 2006 Nonqualified Stock Option Plan at an exercise price of $0.50
      per share for a period of eighteen months. We also agreed to reimburse Mr.
      Goodall for all disbursements reasonably incurred by him for the purpose
      of providing the consulting services to us.                                                                                                                                                                                                                                                                                  

6

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| | 11. | We entered into a consulting agreement with Linda Erdman
      dated February 1, 2006 (the Erdman Consultant Agreement). Pursuant to
      the terms of the Erdman Consultant Agreement, Ms. Erdman will act as
      Database Manager and oversee the data collection procedures on the New
      York Canyon project. In consideration of her consultant services, we
      agreed to pay Ms. Erdman $5,000 per month and granted to Ms. Erdman
      100,000 incentive stock options. The options were issued on April 5, 2006
      pursuant to the 2006 Nonqualified Stock Option Plan at an exercise price
      of $0.50 per share for a period of eighteen months. We also agreed to
      reimburse Ms. Erdman for all disbursements reasonably incurred by her for
      the purpose of providing the consulting services to us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 12. | We entered into a consulting agreement with Robert Young
      dated February 1, 2006 pursuant to which Mr. Young agreed to present and
      disseminate certain information regarding the Company in consideration of
      which we agreed to pay Mr. Young a fee of $3,000 CDN per month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 13. | We entered into a consulting agreement with Mark Reynolds
      dated January 19, 2006 (the Reynolds Consultant Agreement). Pursuant to
      the terms of the Reynolds Consultant Agreement, Mr. Reynolds will provide
      us with the following services: (a) assist with hiring and co-ordination
      of geological consultants for the Company; (b) assist the Company in
      establishing materials handling procedures; (c) assist the Company in
      establishing audit and compensation committees and finding appropriate
      members for its committees; (d) assist the President in developing and
      implementing the Companys business plans; (e) assist the Company in
      retaining and liaisoning with professional advisors in North America in
      connection with compliance with the Companys reporting requirements under
      the Securities Exchange Act of 1934; and (f) general administrative
      services as directed by the Company. In consideration of his consultant
      services, we agreed to pay Mr. Reynolds $10,000 US per month and granted
      to Mr. Reynolds 1,200,000 incentive stock options. The options were issued
      on April 5, 2006 pursuant to the 2006 Nonqualified Stock Option Plan at an
      exercise price of $0.50 US per share for a period of five years. We will
      also reimburse Mr. Reynolds for all disbursements reasonably incurred by
      him for the purpose of providing the consulting services to us.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 14. | On January 6, 2006, our board of directors appointed Mr.
      Kurt Bordian as our Chief Financial Officer replacing Mr. Cameron Reynolds
      who will remain as our director. Mr. Bordian is a Certified General
      Accountant in Canada, and holds a Bachelor of Commerce degree (Hons) from
      the University of Manitoba. Mr. Bordian has worked primarily in the
      mineral exploration and oil and gas industries over the past 10 years, and
      has held the position of controller with three public companies exploring
      and operating in Ghana, Tunisia and Canada. We also entered into a
      consulting agreement with Mr. Kurt Bordian dated January 6, 2006, to serve
      as our Chief Financial Officer. The terms of the agreement include $7,490
      paid upon the execution of the agreement, $3,745 per month beginning on
      February 1, 2006, and the option to acquire up to 500,000 shares of common
      stock at an exercise price of $0.50 per share for two years. The agreement
      is for a term of one year. We will also reimburse Mr. Bordian for all
      disbursements reasonably incurred by him for the purpose of providing the
      consulting services to us.                                                                                                                                                                                                                                                                           

PLAN OF OPERATION

The following discussion and analysis summarizes our plan of
operation for the next 12 months, our results of operations for the nine months
ended March 31, 2006 and changes in our financial condition from June 30, 2005.
This discussion should be read in conjunction with the Managements Discussion
and Analysis or Plan of Operation included in our Annual Report on Form 10-KSB
for the year ended June 30, 2005.

7

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Our plan of operation for the next twelve months is to continue
our initial exploration activities under all of the options and lease of the New
York Canyon Project in Nevada.

2006 Exploration Program

On February 27, 2006, we received a geological report from our
consulting geologists Geoffrey Goodall, P.Geo. and Mel Klohn, P.Geo. The report
recommended a two-phase exploration program on the New York Canyon Project
property, as follows:

Phase
      Exploration Program
      Status
      CostPhase I
    Further drilling at Longshot
      Ridge, Champion and Copper Queen mineralized zones to delineate the extent
      of the copper mineralization; extensive metallurgical testwork to identify
      a beneficial metallurgical procedure for copper oxide extraction; and
      initiate environmental base line studies for permitting advanced
      exploration.
    Commenced during January, 2006.
      Initial activities to be completed by October, 2006, but some work such as
      environmental studies and data compilation will be ongoing
    $3,650,000Phase II
    Infill and condemnation drilling
      in conjunction with a scoping study leading to a pre-feasibility study.
    Subject to favorable results of
      Phase I.
    $3,000,000TOTAL
    $6,650,000


Mineral Exploration Activities on the New York Canyon
Project during the Quarter

In March 2006, we commenced the beginning stages of our
expanded 2006 program on the New York Canyon Project in accordance with the
planned two phase exploration program we received in February, 2006. Historic
data for the Longshot Ridge area was compiled into electronic format and formed
the basis for geological modeling of the deposit. This information was used for
planning of the drill program and development of a 3D model of the mineralized
system. An additional 560 claims were located in January, bringing the total
number of claims under option to 1,003 covering approximately 20,560 acres.
Contracts for drilling, analyses, metallurgical testing and geophysics surveys
were arranged and field personnel hired to undertake the planned work
program.

During the quarter ended March 31, 2006, the majority of
exploration activities for the Company concentrated on data compilation, program
planning and logistics and mobilization of the New York Canyon project. We
contracted Drift Exploration Drilling Inc. (Drift Exploration) of High River,
Alberta to conduct an initial 20,000 feet of reverse circulation (RC) drilling
using a track mounted rig. Drift Exploration conducted more than 10,000 feet of
drilling on the New York Canyon Project in 2005 and has knowledgeable and
skilled personnel to undertake the 2006 program. The rig has been mobilized to
the New York Canyon Project property and drilling has commenced. Drill progress
was slow due to several equipment breakdowns with hydraulic hoses, pumps and
truck repairs. A total of 4,110 feet was completed in 13 holes, for an average
of 205 feet per operating day. Drilling was conducted on sites permitted by
Nevada Sunrise/Intor during the 2005 drill campaign. The majority of these sites
are peripheral to the main zone of mineralization at Longshot Ridge to test the
lateral extent of mineralization. Copper oxide was noted in most of the drill
holes, but less than described in previous holes in the core of the mineralized
area.

In addition, we contracted Leroy Kay Drilling of Yerington,
Nevada to provide core drilling services at the New York Canyon Project in 2006.
Mr. Kay has provided drilling services to us for the past two years and began
core drilling operations at New York Canyon in early May, 2006. Drill core will
allow thorough

8

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geological modelling of both the Longshot Ridge Claims copper
oxide skarn system and the Copper Queen Claims copper-molybdenum porphyry
mineralized area. Core samples will be used for metallurgical testing in order
to identify a beneficial copper extraction technique in the oxide mineralized
zones. Equipment and crew were mobilized to the project site at the end of
March, with drilling commencing April 3. Drilling, grid work, geophysical
surveys and permitting were ongoing during April and will continue throughout
our fourth quarter in fiscal 2006.

A 117 line kilometer magnetic survey also has been completed by
McGee Geophysics of Reno, Nevada in April of 2006. This data will provide
valuable information for designing an approximate 50 line kilometre induced
polarization (IP) geophysical survey targeted at defining zones of sulphide
mineralization peripheral to the Copper Queen Claims zone. Further, we
contracted Zonge Engineering Ltd. of Tucson, Arizona to conduct the IP survey
which was commenced during our fourth quarter in fiscal 2006 and is presently
1/3 complete as of the date of this quarterly report. Wright Geophysics of
Spring Valley, Nevada is the geophysical consultants to the New York Canyon
Project and will provide interpretation of the data.

Mineral Exploration Activities on the Jaycor Claims during
the Quarter

On July 21, 2004, we entered into a lease agreement with Jaycor
Mining, Inc. (Jaycor). Under the terms of the lease, we were granted rights to
explore and develop eighteen patented mineral claims to the full extent
permitted by applicable mining regulations. These rights were granted as a lease
for an initial term of 15 years, and are renewable for a further 15 years. The
claims cover a geographic area of approximately 361 acres, located within the
vicinity of our New York Canyon Project. As consideration for the Lease, we are
required to pay Jaycor the following amounts prior to the commencement of any
future production activities: (i) $25,000 on execution of the Lease (amounts
have been paid); (ii) $1,000 monthly commencing on July 21, 2005, (amounts have
been paid as of the date of this quarterly report); $2,000 monthly commencing on
July 21, 2006; and $3,000 monthly commencing on July 21, 2007, and continuing
for as long as the Lease is in effect.

All of these payments are considered to be minimum advance
royalty payments. Should production commence in the future, of which there can
be no assurance, these minimum payments would be credited against any actual
future royalty payments. If actual royalties payable from production exceed
$9,000 per quarter, these minimum payments would cease. If actual royalty
payments are less than $9,000 quarterly, we would be required to pay the
difference between the actual and the minimum payments. In addition to the
minimum payments, we issued 10,000 shares of our common stock to Jaycor in 2005
and have issued a further 15,000 common shares to Jaycor in 2006 pursuant to the
terms of the agreement.

The claims under the lease are subject to an overriding Royalty
Deed granted to a third party by Jaycor. Upon commencement of production, we are
required to pay the third party a net smelter returns royalty of 1.75%, up to a
maximum of $2,000,000. In addition, we have also agreed to pay the private
company a net smelter return royalty of 0.5% until such time as the third party
has been paid $2,000,000, at which time the royalty payable to the private
company will then increase to 1.5% . The 1.5% rate payable to subject to a
maximum of $2,000,000, at which time the ongoing royalty will be reduced to 0.5%
for as long as the lease is in effect.

Since entering into a lease agreement with Jaycor Mining, Inc.
the Company has completed two work programs on the Mayflower claim that forms
part of the lease. In 2004, a single drill core labelled 04-3, was completed to
a depth of 433 feet. In 2005, 10 reverse circulation drill holes were completed
for a total of 3,710 feet. Additional work on the patent claims includes
geological mapping and surface sampling. Proposed work on the Jaycor patented
claims for 2006 includes approximately 5,000 feet of RC drilling in 10 holes and
2,000 feet of core drilling in 5 holes.

9

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Cash Requirements over the next Twelve Months

ITEM AND ACTIVITY
      Budget To June 30, 2006
      12 Month Total BudgetLAND
        STATUS2006 - 2007 claim maintenance fees
      125,000
      375,375Month Payments - Patents
      10,500
      42,000PERMITTINGRoad and drill site work
      45,000
      50,000Archaeological and biological surveys
      20,000
      20,000Water quality monitoring
      10,000
      23,000Drill Permitting & Bonding, POO in fall
      35,000
      115,000Reclamation
      -
      20,000DRILL PROGRAM (includes assays & supervision)Compile data for engineering evaluation
      25,000
      75,000Drilling RC
      558,000
      1,488,000Drilling Core
      244,000
      488,000METALLURGICAL PROGRAMInvestigation into acid costs, sites, transport, etcPreliminary metallurgical work
      105,000
      155,000Preliminary alternative leach studies
      200,000
      300,000ENGINEERING & REPORTINGEngineering 43-101 Report
      5,000
      20,000Pit Planning, Modeling, Scoping study
      -
      65,000GEOPHYSICAL SURVEYSIP - 40 line miles @ $1,750/mi
      70,000
      70,000airborne radiometric survey - 750 lin km @ $85/km
      -
      65,000GEOLOGICAL MAPPING AND INVESTIGATIONSmapping and sampling
      30,000
      60,000Contingency 10%
      138,250
      323,638Nevada Sunrise Management fee 10%
      162,075
      375,5011,782,825
      4,130,514


As at March 31, 2006, we had cash in the amount of $1,323,285.
As such, we currently do not have sufficient cash resources to meet budgeted
expenditures of approximately $4,062,754 and our ongoing general, administrative
and operating expenses which are estimated to be $480,000 during the next twelve
months. Our existing cash balances are not sufficient to fund our exploration
program and carry out our normal operations into the next fiscal year, and we
will require additional financing. We anticipate that, to the extent that we
require additional funds to support our operations or the expansion of our
business, we may sell additional equity or issue debt. Any sale of additional
equity securities will result in dilution to our stockholders. There can be no
assurance that additional financing, if required, will be available to us or on
acceptable terms.

We have not had revenues since inception. We are currently in
the process of identifying sources of additional financing. However, there is no
assurance we will be successful in raising the necessary funding or on terms
that are acceptable to us. Since inception, we have been dependent on investment
capital and debt financing from third parties as our primary source of
liquidity. We anticipate continuing to rely on equity sales of shares of our
common stock and loans in order to continue to fund our business operations.
Issuances of additional shares will result in further dilution of our existing
shareholders. See Future Financings, below.

10

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RESULTS OF OPERATIONS

Three Months Ended March 31
    
    Nine Months Ended March 31Percentage
    
    
    
    PercentageIncrease /
    
    
    
    Increase /2006
    2005
    (Decrease)
    
    2006
    2005
    (Decrease)Revenue
    $-
    $-
    n/a
    
    $-
    $-
    n/aOperating Expenses
    (1,114,252)
    (316,147)
    252.4%
    
    (2,519,761)
    (2,020,718)
    24.7%Net Loss
    $(1,112,090)
    $(519,851)
    113.9%
    
    $(2,953,129)
    $(2,695,987)
    9.5%


Revenues

We have not earned any revenues to date and do not anticipate
earning revenues until such time as we enter into commercial production of our
mineral properties. There can be no assurance that we will be successful in
discovering commercial quantities or that we can commercially produce metals or
minerals. We are presently an exploration stage company engaged in the search
for mineral reserves. We can provide no assurances that we will be able to
discover any commercially exploitable levels of mineral resources on our
property, or, even if such resources are discovered, that we will be able to
enter into commercial production of our mineral property.

Expenses

We incurred the following expenses for the three and nine month
periods ended March 31, 2006:

Three Months Ended March 31,
    
    Nine Months Ended March 31,Percentage
    
    
    
    Percentage2006
    2005
    Inc. / (Dec.)
    
    2006
    2005
    Inc. / (Dec.)Operating Expenses:Depreciation
    $1,018
    $249
    308.8%
    
    $2,388
    $751
    218.0%Foreign exchange (loss)
    (14,499)
    7,624
    (290.2)%
    
    10,082
    (52,940)
    119.0%gainGeneral and
    244,944
    127,987
    91.4%
    
    716,689
    553,998
    29.4%administrativeMineral property costs
    882,789
    187,911
    369.8%
    
    1,790,602
    1,465,969
    22.1%Other Expenses:Interest on convertible
    $6,976
    $4,498
    55.1%
    
    $20,182
    $7,135
    182.9%debenturesLoss on sale of
    -
    191,582
    (100.0)%
    
    88,332
    240,171
    (63.2)%investment securitiesGain on settlement of
    (10,963)
    -
    100%
    
    (10,963)
    -
    100%debtUnrealized loss on
    1,825
    -
    100%
    
    335,817
    -
    100%investment securitiesTotal Expenses
    $1,112,090
    $519,851
    113.9%
    
    $2,953,129
    $2,695,987
    9.5%


The increase in operating expenditures for 2006 as compared
with 2005 is primarily attributable to increased costs associated with general
and administrative expenditures and increased mineral

11

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property expenses. We anticipate that the expenses will
continue to increase due to our ongoing planned exploration activities,
specifically our 2006 exploratory drilling program in the New York Canyon
Project.

During the quarter ended March 31, 2006, we sold nil- Langley
Park shares, and at March 31, 2006 had a balance of 1,027,974 Langley Park
shares worth $247,722. In addition, during the fiscal quarter ended March 31,
2006, we recognized interest on convertible debentures in the amount of $6,976,
compared to $4,498 during the comparable period in 2005. As a result of the
foregoing, net loss increased to $2,953,129 for the nine months ended March 31,
2006 compared to $2,215,084 for the comparable period in 2005. This equated to a
$0.05 loss per common share versus $0.04 for March 31, 2005. We anticipate that
we will continue to incur significant losses for the next several years due to
our planned exploration activities.

LIQUIDITY AND CAPITAL RESOURCES

|Working Capital           |                         |                        |                      
|------------------------- | ----------------------- | ---------------------- | ---------------------
|                          |                         |                        | Percentage           
|                          | At
      March 31, 2006 | At
      June 30, 2005 | Increase / (Decrease)
|Current Assets            | $1,677,772              | $352,975               | 375.3%               
|Current Liabilities       | (676,185)               | (173,966)              | 288.7%               
|Working Capital (Deficit) | $1,001,587              | $179,009               | 459.5%               

|Cash Flows                                           |                   |                  
|---------------------------------------------------- | ----------------- | -----------------
|                                                     | Nine Months Ended | Nine Months Ended
|                                                     | March 31, 2006    | March 31, 2005   
|Cash Flows used in Operating
      Activities        | $(1,575,816)      | $(888,327)       
|Cash Flows from Financing Activities                 | 3,263,732         | 484,999          
|Cash Flows from (used in)
      Investing Activities | (413,447)         | 306,851          
|Net Increase (decrease) in Cash During Period        | $1,274,469        | $(96,477)        

The increase in our working capital of $1,001,587 as at March
31, 2006 from working capital of $179,009 as at our year ended June 30, 2005 was
primarily a result of three private placements on February 10, 2006, September
14, 2005, and August 31, 2005 respectively. We used $1,575,816 of cash for our
operations and $6,570 for the purchase of equipment during the nine months ended
March 31, 2006. For the nine months ended, $1,495,852 of the cash used for
operations was utilized for our fiscal 2006 exploratory drilling programs. As a
result of all of the above noted, our cash balances increased by a net amount of
$1,274,469 during the nine months ended March 31, 2006.

At March 31, 2006 there were $284,999 of unsecured convertible
debentures outstanding. The debentures are convertible at the option of the
holder during a two year period from the date of issuance into our units, which
consist of one common share and one share purchase warrant. The holder must
convert all of the principal and accrued interest on the debentures. The
interest rate is the Bank of America prime rate plus 2.5% per annum. We are
required to pay accrued interest annually on January 31st. We also held $247,722
of marketable securities (the balance of Langley Park shares described herein)
as at March 31, 2006 (June 30, 2005 - $294,077).

During the quarter ended March 31, 2006, we raised gross
proceeds of $1,703,900 (net of the payment of a 7.5% finders fee) with a
private placement to which we issued 4,475,000 units at a price of $0.40 per
unit. Each unit consists of one common share and one common stock purchase
warrant. Each warrant entitles the holder to acquire one share of our common
stock for $0.50 per share for two years.

12

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In August, 2005 and September, 2005, we completed two private
placements of 6,500,000 common shares. We raised $1,572,500 (net of the payment
of a 7.5% cash finder's fee) through the August, 2005 and September, 2005
private placements. We do not have sufficient cash resources to complete our
current exploration program and fund our operations for the next 12 months. As
such, we will need additional financing to complete our current exploration
program. There can be no assurance that the required financing can be obtained.
If we are unable to obtain additional funds, we will not be able to complete our
exploration program and our option agreements will be terminated.

Future Financings

Our plan of operation calls for significant expenses in
connection with the exploration of the New York Canyon Project and requires us
to obtain additional financing. We recorded a net operating loss before income
taxes of $2,953,129 for the nine months ended March 31, 2006 and have an
accumulated deficit of $8,943,682 since inception. As at the date of this
Quarterly Report we had cash of $1,323,285 and, for the next twelve months,
management anticipates that the minimum cash requirements to fund our proposed
exploration program and our continued operations will be $4,610,514. Accordingly
we do not have sufficient funds to meet our planned expenditures over the next
twelve months and will need to seek additional financing to meet our planned
expenditures.

Obtaining additional financing would be subject to a number of
factors, including the market prices for the mineral property and gold. These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us. Since our inception, we have used our common stock to raise
money for our operations and for our property acquisitions. We have not attained
profitable operations and are dependent upon obtaining financing to pursue our
plan of operation. For these reasons, our independent auditors believe there
exists a substantial doubt about our ability to continue as a going concern.

OFF-BALANCE SHEET ARRANGEMENTS

None.

CRITICAL ACCOUNTING POLICIES

We have identified certain accounting policies, described
below, that are the most important to the portrayal of our current financial
condition and results of operations.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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. Actual results could differ from those
estimates.

Investment Securities

We report investments in debt and marketable equity securities
at fair value based on quoted market prices or, if quoted prices are not
available, discounted expected cash flows using market rates commensurate with
credit quality and maturity of the investment. All investment securities are
designated as available for sale with unrealized gains and losses included in
stockholders' equity. Unrealized losses that are other than temporary are
recognized in earnings. Realized gains and losses are accounted for on the
specific identification method.

13

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We periodically review these investments for
other-than-temporary declines in fair value based on the specific identification
method and writes down investments to their fair value when an
other-than-temporary decline has occurred. When determining whether a decline is
other-than-temporary, the Company examines (i) the length of time and the extent
to which the fair value of an investment has been lower than its carrying value:
(ii) the financial condition and near-term prospects of the investee, including
any specific events that may influence the operations of the investee such as
changes in technology that may impair the earnings potential of the investee:
and (iii) our intent and ability to retain its investment in the investee for a
sufficient period of time to allow for any anticipated recovery in market value.
We generally believe that an other-than-temporary decline has occurred when the
fair value of the investment is below the carrying value for one year, absent of
evidence to the contrary.

Foreign Currency Translation

Our functional and reporting currency is the United States
dollar. Monetary assets and liabilities denominated in foreign currencies are
translated to United States dollars in accordance with SFAS No. 52 "Foreign
Currency Translation" using the exchange rate prevailing at the balance sheet
date. Gains and losses arising on translation or settlement of foreign currency
denominated transactions or balances are included in the determination of
income. Foreign currency transactions are primarily undertaken in Canadian
dollars. We have not, to the date of these financials statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.

Mineral Property Costs

The Company has been in the exploration stage since its
inception on January 21, 2000, and has not yet realized any revenues from its
planned operations. It is primarily engaged in the acquisition and exploration
of mining properties. Mineral property exploration costs are expensed as
incurred. Mineral property acquisition costs are initially capitalized when
incurred using the guidance in EITF 04-02, Whether Mineral Rights Are
Tangible or Intangible Assets. We assess the carrying costs for impairment
under SFAS 144, Accounting for Impairment or Disposal of Long Lived Assets at
each fiscal quarter end. When it has been determined that a mineral property can
be economically developed as a result of establishing proven and probable
reserves, the costs then incurred to develop such property, are capitalized.
Such costs will be amortized using the units-of-production method over the
estimated life of the probable reserve. If mineral properties are subsequently
abandoned or impaired, any capitalized costs will be charged to operations.

Stock-based Compensation

Prior to January 1, 2006, we accounted for stock-based awards
under the recognition and measurement provisions of Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock Issued to Employees using the
intrinsic value method of accounting, under which compensation expense was only
recognized if the exercise price of our employee stock options was less than the
market price of the underlying common stock on the date of grant. Effective
January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123R Share Based Payments, using the modified prospective transition method.
Under that transition method, compensation cost is recognized for all
share-based payments granted prior to, but not yet vested as of January 1, 2006,
based on the grant date fair value estimated in accordance with the original
provisions of SFAS No. 123, and compensation cost for all share-based payments
granted subsequent to January 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS 123R. Results for prior
periods have not been restated. There was no change to our income from
operations for the period ended March 31, 2006, than if it had continued to
account for share-based compensation under APB No. 25.

All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the
equity instrument issued, whichever is more reliably measurable. Equity
instruments issued to

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employees and the cost of the services received as
consideration are measured and recognized based on the fair value of the equity
instruments issued.

RISKS AND UNCERTAINTIES

If we do not obtain additional financing, our business will
fail

Our current operating funds are inadequate to complete our
planned exploration of the New York Canyon Project. Our business plan calls for
significant expenses in connection with the exploration and development of those
mineral claims. As a result, we will require additional financing to complete
our exploration and development plans. We will also require additional financing
if the costs of exploration are greater than anticipated and to sustain our
business operations if we are not successful in earning revenues once
exploration is complete.

We have entered into engagement letters with three underwriters
in connection with a proposed private placement to raise gross proceeds of
$12,000,000. The financing is subject to customary due diligence conditions and
the entry into formal agreements. There is no assurance that we will be able to
complete the financing. Obtaining additional financing would be subject to a
number of factors, the known material factors being market prices for gold and
silver, investor acceptance of our mineral claims, and investor sentiment. These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.

If we complete a financing through the sale of additional
shares of our common stock, shareholders will experience dilution

The most likely source of future financing presently available
to us is through the issuance of our common stock. Any sale of share capital
will result in dilution to existing shareholders. The only other anticipated
alternative for the financing of further exploration would be the offering by us
of an interest in our properties to be earned by another party or parties
carrying out further exploration thereof, which is not presently
contemplated.

In order to maintain our rights to the New York Canyon
Project, we will be required to make annual filings with federal and state
regulatory agencies and/or be required to complete assessment work on the New
York Canyon Project

In order to maintain our rights to the New York Canyon Project,
we will be required to make annual filings with federal and state regulatory
authorities. Currently the amount of these fees is nominal; however, these
maintenance fees are subject to adjustment. In addition, we may be required by
federal and/or state legislation or regulations to complete minimum annual
amounts of mineral exploration work on the New York Canyon Project. A failure by
us to meet the annual maintenance requirements under federal and state laws
could cause our rights to the New York Canyon Project to lapse.

Because we have not commenced business operations, we face a
high risk of business failure

We were incorporated on January 21, 2000 and to date have been
involved primarily in organizational activities, the acquisition of mineral
claims and the exploration and development on these claims. We have not earned
any revenues as of the date of this Quarterly Report. Potential investors should
be aware of the difficulties normally encountered by new mineral exploration
companies and the high rate of failure of such enterprises. The likelihood of
success must be considered in light of the problems, expenses, difficulties,
complications and delays encountered in connection with the exploration of the
mineral properties that we plan to undertake. These potential problems include,
but are not limited to, unanticipated problems relating to exploration, and
additional costs and expenses that may exceed current estimates.

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Because we anticipate our operating expenses will increase
prior to our earning revenues, we may never achieve profitability

Prior to completion of our exploration stage, we anticipate
that we will incur increased operating expenses without realizing any revenues.
We therefore expect to incur significant losses into the foreseeable future. We
recognize that if we are unable to generate significant revenues from the
exploration of our mineral claims and the production of minerals thereon, if
any, we will not be able to earn profits or continue operations. There is no
history upon which to base any assumption as to the likelihood that we will
prove successful, and we may not be able to ever generate any operating revenues
or achieve profitable operations. If we are unsuccessful in addressing these
risks, our business will most likely fail.

Because of the speculative nature of exploration of mining
properties, there is substantial risk that no commercially exploitable minerals
will be found and our business will fail

The search for valuable minerals as a business is extremely
risky. We may not find commercially exploitable reserves of gold or silver on
our mineral claims. Exploration for minerals is a speculative venture,
necessarily involving substantial risk. The expenditures to be made by us in the
upcoming exploration of the mineral claims may not result in the discovery of
commercial quantities of ore. Problems such as unusual or unexpected formations
and other conditions are involved in mineral exploration and often result in
unsuccessful exploration efforts. In such a case, we would be unable to complete
our business plan.

Because of the inherent dangers involved in mineral
exploration, there is a risk that we may incur liability or damages if and when
we conduct mineral exploration activities

The search for valuable minerals involves numerous hazards. As
a result, if and when we conduct exploration activities we may become subject to
liability for such hazards, including pollution, cave-ins and other hazards
against which we cannot insure or against which we may elect not to insure. The
payment of such liabilities may have a material adverse effect on our financial
position.

Even if we discover commercial reserves of precious metals
on our optioned mineral claims, we may not be able to successfully obtain
commercial production

Our optioned mineral claims do not contain any known bodies of
ore. If our exploration programs are successful in discovering ore of commercial
tonnage and grade, we will require additional funds in order to place those
mineral claims into commercial production. At this time, there is a risk that we
will not be able to obtain such financing as and when needed.

Because we are an exploration stage company, our business
has a high risk of failure

As noted in the financial statements that are included with
this Quarterly Report, we are an exploration stage company that has incurred net
losses since inception, we have not attained profitable operations and we are
dependent upon obtaining adequate financing to complete our exploration
activities. These conditions, as indicated in our audit report on our annual
report on Form 10-KSB, raise substantial doubt as to our ability to continue as
a going concern. The success of our business operations will depend upon our
ability to obtain further financing to complete our planned exploration program
and to attain profitable operations. If we are not able to complete a successful
exploration program and attain sustainable profitable operations, then our
business will fail.

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If we are unable to hire and retain key personnel, we may
not be able to implement our business plan

Our success is dependent upon the performance of key personnel
working full-time in management, supervisory and administrative capacities or as
consultants. This is particularly true in highly technical businesses such as
mineral exploration. These individuals are in high demand and we may not be able
to attract the personnel we need. The loss of the services of senior management
or key personnel could have a material and adverse effect on us, our business
and results of operations. Failure to hire key personnel when needed, or on
acceptable terms, would have a significant negative effect on our business.

As we undertake exploration of our optioned mineral claims,
we will be subject to compliance with government regulations that may increase
the anticipated cost of our exploration program

There are several government regulations that materially
restrict the exploration of minerals. We may be required to obtain work permits,
post bonds and perform remediation work for any physical disturbance to the land
in order to comply with these laws. While our planned exploration program
budgets for regulatory compliance, there is a risk that new regulations could
increase our costs of doing business and prevent us from carrying out our
exploration program.

If the results of our geological exploration program indicate
commercially exploitable reserves, and we decide to pursue commercial production
of our mineral claims, we may be subject to an environmental review process
under environmental assessment legislation. Compliance with an environmental
review process may be costly and may delay commercial production. Furthermore,
there is the possibility that we would not be able to proceed with commercial
production upon completion of the environmental review process if government
authorities did not approve our mine or if the costs of compliance with
government regulation adversely affected the commercial viability of the
proposed mine.

Because our stock is a penny stock, stockholders will be
more limited in their ability to sell their stock.

The SEC has adopted rules that regulate broker-dealer practices
in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00, other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or quotation system.

Because our securities constitute "penny stocks" within the
meaning of the rules, the rules apply to us and to our securities. The rules may
further affect the ability of owners of shares to sell our securities in any
market that might develop for them. As long as the trading price of our common
stock is less than $5.00 per share, the common stock will be subject to Rule
15g-9 under the Exchange Act. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock, to deliver a standardized risk
disclosure document prepared by the SEC, that:

| | 1. | contains a description of the nature and level of risk in
      the market for penny stocks in both public offerings and secondary
      trading;                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                          
| | 2. | contains a description of the broker's or dealer's duties
      to the customer and of the rights and remedies available to the customer
      with respect to a violation to such duties or other requirements of
      securities laws;
| |    |                                                                                                                                                                                                                                          
| | 3. | contains a brief, clear, narrative description of a
      dealer market, including bid and ask prices for penny stocks and the
      significance of the spread between the bid and ask price;                                           
| |    |                                                                                                                                                                                                                                          
| | 4. | contains a toll-free telephone number for inquiries on
      disciplinary actions;                                                                                                                                                       

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| | 5. | defines significant terms in the disclosure document or
      in the conduct of trading in penny stocks; and                                               
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                            
| | 6. | contains such other information and is in such form,
      including language, type, size and format, as the SEC shall require by
      rule or regulation.

The broker-dealer also must provide, prior to effecting any
transaction in a penny stock, the customer with: (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and its
salesperson in the transaction; (c) the number of shares to which such bid and
ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (d) a monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that, prior to a transaction in a penny
stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our stock.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|       |                  |  |     | CANYON COPPER CORP.                       
|------ | ---------------- |  | --- | ------------------------------------------
|       |                  |  |     |                                           
|       |                  |  |     |                                           
|Dated: | January 25, 2007 |  | By: | /s/ Anthony Harvey                        
|       |                  |  |     |                                           
|       |                  |  |     | Anthony Harvey                            
|       |                  |  |     | Chairman and Chief Executive
      Officer
|       |                  |  |     | (Principal Executive Officer)             
|       |                  |  |     |                                           
|       |                  |  |     |                                           
|Dated: | January 25, 2007 |  | By: | /s/ Kurt Bordian                          
|       |                  |  |     |                                           
|       |                  |  |     | Kurt Bordian                              
|       |                  |  |     | Chief Financial Officer                   
|       |                  |  |     | (Principal Financial Officer)             

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