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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-QSB

(Mark One)

|  |  |                                                                                   
|- |  | ----------------------------------------------------------------------------------
|x |  | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
|  |  |                                                                                   
|  |  | For the quarterly period ended August 31, 2003                                    

|  |  |                                                                 
|- |  | ----------------------------------------------------------------
|o |  | Transition report under Section 13 or 15(d) of the Exchange Act.
|  |  |                                                                 
|  |  | For the transition period from  to                              

Commission file number: 0-29392

CALAIS RESOURCES, INC.

(Exact name of small business issuer as specified in its charter)


|                                                 |  |                    
|------------------------------------------------ |  | -------------------
|British Columbia
(State or other jurisdiction of |  | (IRS Employer      
|incorporation or organization)                   |  | Identification No.)

8400 East Crescent Parkway, Suite 675
Greenwood Village, CO 80111

(Address of principal executive offices)


(720) 529-9500

(Issuers telephone number)


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

The number of shares outstanding of the registrants Common Stock, no par
value, was 19,677,703 at December 15, 2003.

Transitional Small Business Disclosure Format (check one):
Yes o No x



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TABLE OF CONTENTS



|                                 |                                                                                               |                                                           |  |  |  |  |  | 
|-------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|Part I: Financial Information   
|                                 | Item 1: Interim Consolidated Financial Statements                                            
|                                 |                                                                                               | Interim Consolidated Balance Sheet                       
|                                 |                                                                                               | Interim Consolidated Statements of Operations and Deficit
|                                 |                                                                                               | Interim Consolidated Statements of Cash Flows            
|                                 |                                                                                               | Notes to Interim Consolidated Financial Statements       
|                                 | Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                 | Item 3: Controls and Procedures                                                              
|PART II OTHER INFORMATION       
|                                 | Item 2: Changes in Securities and Small Business Issuer Purchases of Equity Securities       
|                                 | Item 6: Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                      
|INDEX TO EXHIBITS               
|EX-31 Certification Section 302 
|EX-32 Certification Section 1350



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Calais Resources, Inc.

TABLE OF CONTENTS

FORM 10-QSB

|                              |         |                                                                                                                          
|----------------------------- | ------- | -------------------------------------------------------------------------------------------------------------------------
|Part I: Financial Information
|                              | Item 1: | Interim Financial Statements                                                                                             
|                              |         | Interim Consolidated Balance Sheet as of August 31, 2003 (unaudited)                                                     
|                              |         | Interim Consolidated Statements of
Operations and Deficit for
the Three Months Ended August
31, 2003 and 2002 (unaudited)
|                              |         | Interim Consolidated Statements of
Cash Flows for the Three
Months Ended August 31, 2003
and 2002 (unaudited)            
|                              |         | Notes to Interim
Consolidated Financial
Statements (unaudited)                                                           
|                              | Item 2: | Managements Discussion and
Analysis of Financial Condition and
Results of Operations                                    
|                              | Item 3: | Controls and Procedures                                                                                                  
|Part II: Other Information   
|                              | Item 2: | Changes in Securities and Use of Proceeds                                                                                
|                              | Item 6: | Exhibits and Reports on Form 8-K                                                                                         
|Signatures                   

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Part I: Financial Information

In this quarterly report, all references to $ or Cdn$ in the Condensed
Financial Statements and elsewhere herein are references to Canadian dollars,
the principal currency in which our financial statements are maintained.
References to US$ are references to United States dollars. The Government of
Canada permits a floating exchange rate to determine the value of the Canadian
Dollar against the U.S. Dollar (US$).

Our annual report on Form 20-F for the year ended May 31, 2003, contains a
significant amount of information regarding the conversion between Cdn$ and US$
at Item 3.A(3).

The following table sets forth the range of high and low rates of exchange
for the Canadian Dollar to the U.S. Dollar for each month in the last six
months ended November 30, 2003.

For purposes of this table, the rate of exchange means the noon buying
rate in New York City for cable transfers in foreign currencies as certified
for customs purposes by the Federal Reserve Bank of New York. The table sets
forth the number of Canadian Dollars required under that formula to buy one
U.S. Dollar. The average rate means the average of the exchange rates on the
last day of each month during the period. The rate of exchange on October 31,
2003 was Cdn$1.35, meaning that at that date Cdn$1.35 would purchase US$1.00,
or US$.741 would purchase Cdn$1.00.

|                   |  |      |      |     |  |   |      | 
|------------------ |  | ---- | ---- | --- |  | - | ---- | 
|Month ended        |  | High |      | Low
|                   |  |      |      |    
|October 31, 2003   |  | $    | 1.35 |     |  | $ | 1.30 | 
|September 30, 2003 |  | $    | 1.38 |     |  | $ | 1.33 | 
|August 31, 2003    |  | $    | 1.41 |     |  | $ | 1.38 | 
|July 31, 2003      |  | $    | 1.41 |     |  | $ | 1.33 | 
|June 30, 2003      |  | $    | 1.38 |     |  | $ | 1.33 | 
|May 31, 2003       |  | $    | 1.44 |     |  | $ | 1.34 | 

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Item 1: Interim Consolidated Financial Statements

| |  |                                               
| |  | ----------------------------------------------
| |  | Interim Consolidated Financial Statements of  
| |  |                                               
| |  | CALAIS RESOURCES INC.                         
| |  |                                               
| |  | Three months ended August 31, 2003
(Unaudited)

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CALAIS RESOURCES INC.
Interim Consolidated Balance Sheet
(Expressed in Canadian Dollars)

August 31, 2003 and May 31, 2003

|                                             |                                                                     |   |             |             |         |   |            |             |  
|-------------------------------------------- | ------------------------------------------------------------------- | - | ----------- | ----------- | ------- | - | ---------- | ----------- | -
|                                             |                                                                     |   | August 31,  |             | May 31,
|                                             |                                                                     |   | 2003        |             | 2003   
|                                             |                                                                     |   |             |             |        
|                                             |                                                                     |   | (Unaudited) |             |         |   |           
|Assets                                       |                                                                     |   |             |             |         |   |            |            
|Current assets:                              |                                                                     |   |             |             |         |   |            |            
|                                             | Cash and cash equivalents                                           |   | $           | 1,485,296   |         |   | $          |            |  
|                                             | Accounts receivable, net of allowance for
doubtful accounts of $nil |   |             | 3,099       |         |   |            |            |  
|                                             | Deferred and prepaid financing fees (Note
3)                        |   |             | 1,675,312   |         |   |            |            |  
|                                             | Inventory                                                           |   |             | 283,301     |         |   |            | 283,301     |  
|                                             |                                                                     |   |             |             |         |   |            |            
|                                             |                                                                     |   | 3,447,008   |             |         |   | 283,301    |            
|Deferred and prepaid financing fees (Note 3) |                                                                     |   | 6,013,811   |             |         |   |           |            
|Mineral properties (Note 4)                  |                                                                     |   | 13,496,707  |             |         |   | 13,206,552 |            
|Capital assets                               |                                                                     |   | 99,807      |             |         |   | 94,846     |            
|                                             |                                                                     |   |             |             |         |   |            |             |  
|                                             |                                                                     | $ | 23,057,333  |             |         | $ | 13,584,699 |            
|                                             |                                                                     |   |             |             |         |   |            |             |  
|Liabilities and Shareholders Equity         |                                                                     |   |             |             |         |   |            |            
|Current liabilities:                         |                                                                     |   |             |             |         |   |            |            
|                                             | Bank overdraft                                                      |   | $           |            |         |   | $          | 7,586       |  
|                                             | Accounts payable and accrued liabilities                            |   |             | 273,175     |         |   |            | 974,816     |  
|                                             | Advances from shareholder                                           |   |             | 342,746     |         |   |            | 697,573     |  
|                                             | Current portion of bank loans (Note 5)                              |   |             |            |         |   |            | 1,642,200   |  
|                                             | Note payable                                                        |   |             |            |         |   |            | 95,795      |  
|                                             |                                                                     |   |             |             |         |   |            |            
|                                             |                                                                     |   | 615,921     |             |         |   | 3,417,970  |            
|Bank loans (Note 5)                          |                                                                     |   | 6,366,461   |             |         |   |           |            
|Debentures (Note 6)                          |                                                                     |   | 4,610,092   |             |         |   | 4,624,916  |            
|Shareholders equity:                        |                                                                     |   |             |             |         |   |            |            
|                                             | Capital stock (Note 7)                                              |   |             | 29,893,007  |         |   |            | 23,457,480  |  
|                                             | Deficit                                                             |   |             | (18,428,148 | )       |   |            | (17,915,667 | )
|                                             |                                                                     |   |             |             |         |   |            |            
|                                             |                                                                     |   | 11,464,859  |             |         |   | 5,541,813  |            
|                                             |                                                                     |   |             |             |         |   |            |             |  
|                                             |                                                                     | $ | 23,057,333  |             |         | $ | 13,584,699 |            
|                                             |                                                                     |   |             |             |         |   |            |             |  

Approved by the Directors:

/s/ Art Daher_______________ Director

/s/ Thomas Hendricks, _______ Director

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CALAIS RESOURCES INC.
Interim Consolidated Statements of Operations and Deficit
(Expressed in Canadian Dollars)

(Unaudited)

|                                                  |                              |   |              |         |              |   |             |        |  
|------------------------------------------------- | ---------------------------- | - | ------------ | ------- | ------------ | - | ----------- | ------ | -
|                                                  |                              |   | Three months |         | Three months
|                                                  |                              |   | ended        |         | ended       
|                                                  |                              |   | August 31    |         | August 31   
|                                                  |                              |   | 2003         |         | 2002        
|                                                  |                              |   |              |         |             
|Revenue                                           |                              | $ |             |         |              | $ |            |       
|Expenses (income):                                |                              |   |              |         |              |   |             |       
|                                                  | Accounting                   |   |              | 7,222   |              |   |             | 426    |  
|                                                  | Advertising                  |   |              | 5,994   |              |   |             | 273    |  
|                                                  | Amortization                 |   |              | 6,344   |              |   |             |       |  
|                                                  | Bank charges and interest    |   |              | 400,802 |              |   |             | 63,848 |  
|                                                  | Filing fees                  |   |              | 2,419   |              |   |             |       |  
|                                                  | Foreign exchange loss
(gain) |   |              | 41,858  |              |   |             | (986   | )
|                                                  | Freight and postage          |   |              | 1,073   |              |   |             | 1,222  |  
|                                                  | Gain on settlement of debt   |   |              | (23,689 | )            |   |             |       |  
|                                                  | Insurance and licenses       |   |              | 2,839   |              |   |             | 394    |  
|                                                  | Office and miscellaneous     |   |              | 4,242   |              |   |             | 85     |  
|                                                  | Professional fees            |   |              | 52,369  |              |   |             | 15,523 |  
|                                                  | Public relations             |   |              | 278     |              |   |             | 172    |  
|                                                  | Telephone and utilities      |   |              | 7,568   |              |   |             | 6,606  |  
|                                                  | Transfer agent fees          |   |              | 3,414   |              |   |             | 1,189  |  
|                                                  |                              |   |              |         |              |   |             |       
|                                                  |                              |   | 512,733      |         |              |   | 88,752      |       
|                                                  |                              |   |              |         |              |   |             |       
|Loss before the undernoted                        |                              |   | (512,733     | )       |              |   | (88,752     | )     
|Other income:                                     |                              |   |              |         |              |   |             |       
|                                                  | Miscellaneous                |   |              | 252     |              |   |             | 843    |  
|                                                  |                              |   |              |         |              |   |             |       
|Net loss for the period                           |                              |   | (512,481     | )       |              |   | (87,909     | )     
|Deficit, beginning of period                      |                              |   | (17,915,667  | )       |              |   | (17,323,808 | )     
|                                                  |                              |   |              |         |              |   |             |       
|Deficit, end of period                            |                              | $ | (18,428,148  | )       |              | $ | (17,411,717 | )     
|                                                  |                              |   |              |         |              |   |             |       
|Net loss per share, basic and diluted             |                              | $ | (0.04        | )       |              | $ | (0.01       | )     
|                                                  |                              |   |              |         |              |   |             |       
|Weighted average common shares, basic and diluted |                              |   | 11,909,724   |         |              |   | 10,774,218  |       
|                                                  |                              |   |              |         |              |   |             |       

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CALAIS RESOURCES INC.
Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)

(Unaudited)

|                                    |                                               |                                                                                        |           |              |          |              |         |         |        |  
|----------------------------------- | --------------------------------------------- | -------------------------------------------------------------------------------------- | --------- | ------------ | -------- | ------------ | ------- | ------- | ------ | -
|                                    |                                               |                                                                                        |           | Three months |          | Three months
|                                    |                                               |                                                                                        |           | ended        |          | ended       
|                                    |                                               |                                                                                        |           | August 31    |          | August 31   
|                                    |                                               |                                                                                        |           | 2003         |          | 2002        
|                                    |                                               |                                                                                        |           |              |          |             
|Cash flows provided by (used in):   |                                               |                                                                                        |           |              |          |              |         |        
|Operations:                         |                                               |                                                                                        |           |              |          |              |         |        
|                                    | Loss for the period                           |                                                                                        | $         | (512,481     | )        |              | $       | (87,909 | )     
|                                    | Items not involving cash:                     |                                                                                        |           |              |          |              |         |         |       
|                                    |                                               | Accretion interest expense                                                             |           |              | 13,090   |              |         |         | 12,945 |  
|                                    |                                               | Amortization                                                                           |           |              | 6,344    |              |         |         |       |  
|                                    |                                               | Amortization of deferred and prepaid
financing fees                                    |           |              | 339,271  |              |         |         |       |  
|                                    |                                               | Gain on settlement of debt                                                             |           |              | (23,689  | )            |         |         |       |  
|                                    |                                               | Loss on settlement of accounts payable
and accrued liabilities with issuance
of shares |           |              |         |              |         |         | 1,911  |  
|                                    |                                               | Foreign exchange loss (gain)                                                           |           |              | 41,858   |              |         |         | (986   | )
|                                    | Change in non-cash operating working capital: |                                                                                        |           |              |          |              |         |         |       
|                                    |                                               | Restricted cash                                                                        |           |              |         |              |         |         | 67,415 |  
|                                    |                                               | Accounts receivable                                                                    |           |              | (3,099   | )            |         |         |       |  
|                                    |                                               | Prepaids                                                                               |           |              |         |              |         |         | (120   | )
|                                    |                                               | Accounts payable and accrued
liabilities                                               |           |              | (719,810 | )            |         |         | 87,922 |  
|                                    |                                               | Note payable                                                                           |           |              | (95,795  | )            |         |         |       |  
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|                                    |                                               |                                                                                        | (954,311  | )            |          |              | 81,178  |        
|Financing:                          |                                               |                                                                                        |           |              |          |              |         |        
|                                    | Repayment of bank loans                       |                                                                                        |           | (1,642,200   | )        |              |         | (53,140 | )     
|                                    | Bank loan proceeds                            |                                                                                        |           | 4,618,309    |          |              |         |        |       
|                                    | Advances from (to) shareholders               |                                                                                        |           | (354,827     | )        |              |         | 60,071  |       
|                                    | Debentures                                    |                                                                                        |           | (27,914      | )        |              |         |        |       
|                                    | Issue of capital stock                        |                                                                                        |           | 155,285      |          |              |         |        |       
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|                                    |                                               |                                                                                        | 2,748,653 |              |          |              | 6,931   |        
|Investing:                          |                                               |                                                                                        |           |              |          |              |         |        
|                                    | Mineral properties                            |                                                                                        |           | (290,155     | )        |              |         | (63,422 | )     
|                                    | Net additions to capital assets               |                                                                                        |           | (11,305      | )        |              |         |        |       
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|                                    |                                               |                                                                                        | (301,460  | )            |          |              | (63,422 | )      
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|Increase in cash                    |                                               |                                                                                        | 1,492,882 |              |          |              | 24,687  |        
|Bank overdraft, beginning of period |                                               |                                                                                        | (7,586    | )            |          |              | (9,399  | )      
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|Cash, end of period                 |                                               | $                                                                                      | 1,485,296 |              |          | $            | 15,288  |        
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|Supplementary cash flow information |                                               |                                                                                        |           |              |          |              |         |        
|                                    | Interest paid                                 |                                                                                        | $         | 61,351       |          |              | $       | 49,547  |       
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|                                    | Income taxes paid                             |                                                                                        |           |             |          |              |         |        |       
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       
|                                    | Non-cash transaction                          |                                                                                        |           |              |          |              |         |         |       
|                                    | Common shares issued for financing fee        |                                                                                        |           | 6,280,242    |          |              |         |        |       
|                                    |                                               |                                                                                        |           |              |          |              |         |         |       

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CALAIS RESOURCES INC.Notes to Interim Consolidated Financial Statements
Expressed in Canadian DollarsThree months ended August 31, 2003
(Unaudited)



|1. |  | General and future operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Calais Resources Inc. (the
Company) was incorporated under
the laws of the Province of
British Columbia on December 30,
1986. The Company is currently
in the process of exploring and
developing various mineral
properties to determine whether
these properties contain ore
reserves that are economically
recoverable. The recoverability
of the amounts shown for the
mineral properties and related
deferred costs is dependent upon
the existence of economically
recoverable reserves, the ability
of the Company to obtain
necessary financing to complete
their development and upon future
profitable production.                                                                              
|  
|   |  | These interim consolidated
financial statements have been
prepared on a going concern basis
in accordance with Canadian
generally accepted accounting
principles. The going concern
basis of presentation assumes
that the Company will continue in
operation for the foreseeable
future and be able to realize its
assets and discharge its
liabilities and commitments in
the normal course of business.
There is doubt about the
appropriateness of the use of the
going concern assumption because
the Company has experienced
losses and negative cash flow
from operations over a number of
years and the Company has
significant immediate commitments
to spend funds on exploration
(see Note 4(c)).
|  
|   |  | The Company is actively pursuing
various additional options with
potential lenders and investors
which, if accepted, will in
managements view, enable the
Company to achieve its business
plans. No agreements with
potential lenders or investors
have been reached yet and there
can be no assurance that such
agreements will be reached.                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The ability of the Company to
continue as a going concern and
to realize the carrying value of
its assets and discharge its
liabilities when due is dependent
on the successful completion of
the actions taken or planned,
which management believes will
mitigate the adverse conditions
and events which raise doubt
about the validity of the going
concern assumption used in
preparing these financial
statements. As is common with
companies with negative cash
flows and losses, there is no
certainty that these and other
strategies will be sufficient to
permit the Company to continue
beyond August 31, 2004.                                                                              
|  
|   |  | The financial statements do not
reflect adjustments that would be
necessary if the going concern
assumption were not appropriate.
If the going concern basis was
not appropriate for these
financial statements, then
adjustments would be necessary in
the carrying value of assets and
liabilities, the reported
revenues and expenses, and the
balance sheet classifications
used.                                                                                                                                                                                                                                                                                                                   
|  
|2. |  | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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|(a) |  | Basis of consolidation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | These financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Calais
International Inc., Calais Resources Nevada Inc., and
Calais Resources Colorado Inc. All material
inter-company transactions and balances have been
eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(b) |  | Basis of presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The accompanying unaudited financial statements have
been prepared in accordance with the instructions to
Form 10-QSB and Item 310 (b) of Regulation S-B, and,
therefore, do not include all information and footnotes
necessary for a complete presentation of financial
position, results of operations, cash flows, and changes
in stockholders equity in conformity with generally
accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a
fair presentation of the results of operations and
financial position have been included and all such
adjustments are of a normal recurring nature. Readers
of these financial statements should read the annual
audited financial statements of the Company filed on
Form 20-F in conjunction herewith. Operating results
for the three months ended August 31, 2003 are not
necessarily indicative of the results that can be
expected for the year ended May 31, 2004.
|   
|(c) |  | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | The preparation of financial statements in conformity
with generally accepted accounting principles 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 year.
Significant areas requiring the use of management
estimates relate to the determination of the net
recoverable value of assets, including inventory
obsolescence provisions, asset impairment and provisions
for contingencies. Actual results could differ from
those estimates.                                                                                                                                                                                                                                                                                                     
|   
|(d) |  | Cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | Cash equivalents consist of short-term deposits with
terms to maturity of ninety days or less when acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(e) |  | Financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The Companys financial instruments consist of cash,
accounts receivable, accounts payable and accrued
liabilities, note payable, bank loans, debentures and
advances from shareholders. Unless otherwise noted, it
is managements opinion that the Company is not exposed
to significant interest, currency or credit risks
arising from these financial instruments except for
foreign exchange risk on its bank loans (Note 6). The
fair values of these financial instruments approximate
their carrying values, unless otherwise noted.                                                                                                                                                                                                                                                                                                                                                                                                                             

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|(f) |  | Mineral properties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company is engaged in the acquisition, exploration and development of mineral properties. All acquisition, exploration and related direct overhead expenditures are deferred and will be depleted over the estimated life of the property. The estimated life of a property depends on whether the
property contains economically recoverable reserves that can be brought into production. The costs relating to a property abandoned are written off when the decision to abandon is made.
The total amount recorded for mineral properties and deferred exploration expenditures represents costs incurred to date and does not reflect present or future values.
Proceeds from disposition of mineral properties are normally credited to the capitalized costs with no gain or loss being recognized unless the sale is significant to the capitalized property costs. For such significant dispositions, a gain or loss would be recognized.
|   
|(g) |  | Foreign currency:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Monetary items denominated in foreign currency are translated to Canadian dollars at exchange rates in effect at the balance sheet date and non-monetary items are translated at rates of exchange in effect when the assets were acquired or obligations incurred. Revenues and expenses are translated at
rates in effect at the time of the transactions. Foreign exchange gains and losses are included in income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(h) |  | Net loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted average number of common shares and potentially dilutive common shares outstanding during the period. As the Company has a net
loss in the periods ending August 31, 2003 and 2002, basic and diluted net loss per share are the same.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(i) |  | Stock-based compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | The Company has no formal stock-based compensation plans. Prior to June 1, 2002 the Company applied the settlement method for all stock-based compensation awards. Under the settlement method, no compensation expense is recognized for these plans when stock or stock options are issued to employees.
Consideration paid by employees on the exercise of stock options is credited to common shares. For consideration paid to an employee for the repurchase of stock options, the excess of the consideration paid over the carrying amount of the stock option cancelled is charged to retained earnings.                                                                                                                                                                                                                                                                                                                                     

10



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| |  | Effective June 1, 2002, the Company adopted new CICA section 3870, Stock-Based Compensation and Other Stock-Based Payments. This section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and
services. The standard requires the fair value based method of account for certain, but not all, stock based transactions. The standard permits, and the Company has elected, for stock option grants to employees and directors to continue to be accounted for using the settlement method.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The fair value of options granted to employees in the three months ended August 31, 2003 was $1.17 (three months ended August 31, 2002  nil) per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Pro forma net loss and pro forma net loss per share after consideration of fair market value of share options granted is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                                                                                           |  |                 |            |                 |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | --------------- | ---------- | --------------- |  | - | ------- | -
|                                                                                                           |  | Three months    |            | Three months   
|                                                                                                           |  | ended           |            | ended          
|                                                                                                           |  | August 31, 2003 |            | August 31, 2002
|                                                                                                           |  |                 |            |                
|Net loss, as reported                                                                                      |  | $               | (512,481   | )               |  | $ | (87,909 | )
|Add:                                                                                                       |  |                 |            |                 |  |   |         |  
|Stock based compensation expenses included in net loss, net of related tax effects                         |  |                 |           |                 |  |   |        |  
|Deduct:                                                                                                    |  |                 |            |                 |  |   |         |  
|Total stock based compensation expense determined under fair value based method for all awards, net of tax |  |                 | (1,288,200 | )               |  |   |        |  
|                                                                                                           |  |                 |            |                 |  |   |         |  
|Pro forma loss                                                                                             |  | $               | (1,800,681 | )               |  | $ | (87,909 | )
|                                                                                                           |  |                 |            |                 |  |   |         |  
|Pro forma loss per share, basic and diluted                                                                |  | $               | (0.15      | )               |  | $ | (0.01   | )
|                                                                                                           |  |                 |            |                 |  |   |         |  



| |  | Stock based compensation is calculated based upon the following weighted average assumptions:
| |  | ---------------------------------------------------------------------------------------------

|                                |  |                 |      |                 |   |  |   | 
|------------------------------- |  | --------------- | ---- | --------------- | - |  | - | 
|                                |  | Three months    |      | Three months   
|                                |  | ended           |      | ended          
|                                |  | August 31, 2003 |      | August 31, 2002
|                                |  |                 |      |                
|Expected life of options        |  | 4.7 years       |      |                 |  | 
|Expected stock price volatility |  |                 | 298  | %               |   |  |  | 
|Expected dividend yield         |  |                 | 0    | %               |   |  |  | 
|Risk free interest rate         |  |                 | 4.83 | %               |   |  |  | 

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|3. |  | Deferred and prepaid financing fees
|-- |  | -----------------------------------

|                                                              |  |                 |            |              |  |   |   | 
|------------------------------------------------------------- |  | --------------- | ---------- | ------------ |  | - | - | 
|                                                              |  | August 31, 2003 |            | May 31, 2003
|                                                              |  | (Unaudited)     |            |             
|Deferred and prepaid financing fees consist of the following: |  |                 |            |              |  |   |   | 
|Deferred financing fee                                        |  | $               | 6,280,242  |              |  | $ |  | 
|Prepaid interest (Note 5(b))                                  |  |                 | 1,748,152  |              |  |   |  | 
|                                                              |  |                 |            |              |  |   |   | 
|                                                              |  |                 | 8,028,394  |              |  |   |  | 
|                                                              |  |                 |            |              |  |   |   | 
|Less: Accumulated amortization                                |  |                 | (339,271   | )            |  |   |  | 
|                                                              |  |                 |            |              |  |   |   | 
|                                                              |  |                 | 7,689,123  |              |  |   |  | 
|Less: Current portion                                         |  |                 | (1,675,312 | )            |  |   |  | 
|                                                              |  |                 |            |              |  |   |   | 
|                                                              |  | $               | (6,013,811 | )            |  | $ |  | 
|                                                              |  |                 |            |              |  |   |   | 



|   |  | Deferred and prepaid financing fees is being amortized on a straight line basis over two years, the term of the related debt.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------
|  
|4. |  | Mineral Properties                                                                                                           

|                        |  |                 |            |              |  |   |            | 
|----------------------- |  | --------------- | ---------- | ------------ |  | - | ---------- | 
|                        |  | August 31, 2003 |            | May 31, 2003
|                        |  | (Unaudited)     |            |             
|Nevada U.S.A.           |  | $               | 3,526,580  |              |  | $ | 3,449,004  | 
|Colorado, U.S.A.        |  |                 | 9,672,179  |              |  |   | 9,466,230  | 
|Panama, Central America |  |                 | 297,948    |              |  |   | 291,318    | 
|                        |  |                 |            |              |  |   |            | 
|                        |  | $               | 13,496,707 |              |  | $ | 13,206,552 | 
|                        |  |                 |            |              |  |   |            | 

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|    |  | Title to mining properties
involves certain inherent risks due to the difficulties of
determining the validity of certain claims as well as the potential
for problems arising from the frequently ambiguous conveyancing
history characteristics of many mining properties. The Company has investigated
title to all of its mineral properties and, to the best of its knowledge, title to all
of its properties are in good standing, except for the Nevada properties as described below. All of the properties in which the Company has committed to earn an interest are located outside Canada. The Company is
therefore relying on title opinions by legal counsel who are basing such opinions on the laws of the respective country.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) |  | Nevada, U.S.A.:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | In December 1994, the Company acquired a 51% interest in certain patented and unpatented claims located in Nevada from a company controlled by directors for $1,176,000 US plus a 5% net smelter royalty.
The Company can also acquire a 100% interest in a further 89 claims in this property under this
agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The Company entered into an agreement and settlement dated September 7, 2000 with Nevada Manhattan Mining Incorporated to settle and purchase Nevada Manhattan Mining Incorporateds 24.5% interest in the property. The Company agreed and has made the four annual payments of US $75,000 each for a total
of US $300,000 under this agreement. During the term of the agreement
the Company has agreed to pay Nevada Manhattan Mining Incorporated a
2% net smelter return royalty.The Company can purchase the entire Nevada
Manhattan Mining Incorporated interest and royalty at any time over a thirty-year period
for US $7,500,000, which would include production royalties.
The Company also holds a 100% interest in 42 unpatented claims in the Manhattan Mining
district by staking.
The Company is in the process of investigating its title
to the above properties. After a preliminary review of the title information,
it appears that title of the above claims are owned by companies controlled by
directors of the Company or other individuals, although it appears that, based on
agreements these titles should be conveyed to the Company. The Company has
commenced discussions in an effort to resolve the situation, the results of which
are undeterminable at this time. Adjustments, if any, to the properties will be
recorded when title to the properties have been resolved.
|   
|(b) |  | Colorado, U.S.A.:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Included in the Colorado properties is a 100% working interest in the Consolidated Caribou-Cross-Comstock-Panadora district mine area which the Company acquired in 1997 for US $4,000,000 in stock, cash and final property payments. After acquisition of 100% working interest the seller retains a 2% net
smelter royalty interest in the property. The Company has the right to buy back half of the net smelter royalty (1%) for US $750,000. During 2000, the Company acquired 100% ownership of 10 patented claims that are continuations of the historic Boulder County and Cardinal vein systems. The Colorado
properties contain a well-documented mineral resource of 424,500 ounces of gold and 11,725,000 ounces of silver.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(c) |  | Panama, Central America:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

13



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|   |  | The Company owns hard rock mining concessions to 61,000 acres (24,686 hectares) in the eastern Veraguas District of Panama in Central America. The acquisition was made through a five-year agreement with Panama Mining of Golden Cycle Incorporated, the seller. The Company issued 100,000 shares of stock
to the seller. The Company is obligated to pay the seller a 2% net smelter return on any hard rock mineral production. The Company can purchase the concessions from the seller at any time up to August 31, 2004 for US $2,500,000 (the early purchase). Upon completion of the early purchase the 2% net
smelter return is reduced to 0.5%. The Company is obligated to pay the annual taxes and holding fees.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company is also obligated to pay the seller a 6% gross royalty (GSR) on all placer gold mining production to a maximum GSR fee of US $5,000,000. Upon the total payment under the GSR reaching US $5,000,000, the GSR percentage is reduced to 1% for the balance of the life of placer production.                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | The Company acquired additional hard rock mining concessions of 13,590 acres (5,500 hectares) in the above-mentioned location in 2003. The acquisition was made through a new ten-year agreement with the seller, which replaces or amends the above-mentioned five-year agreement. Under this new agreement,
the Company issued an additional 100,000 shares of stock, paid US $10,000 in cash and assumed US $15,750 of payables from the seller. The Company is also required to spend US $500,000 on exploration by February 28, 2004, under the terms of this new agreement.                                                                                                                                               
|  
|   |  | The company has spent approximately US $100,000 on this project under the terms of the new agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|5. |  | Bank loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |  |  | The loan balances are as follows:
| |  |  | ---------------------------------

|                                              |  |             |           |        |  |   |            |  
|--------------------------------------------- |  | ----------- | --------- | ------ |  | - | ---------- | -
|                                              |  | August 31   |           | May 31
|                                              |  | 2003        |           | 2003  
|                                              |  |             |           |       
|                                              |  | (Unaudited) |           |        |  |  
|Peak National Bank, US $1,200,000 loan        |  | $           |          |        |  | $ | 1,642,200  |  
|Broadway Mortgage LLC, US $4,500,000 mortgage |  |             | 6,366,461 |        |  |   |           |  
|                                              |  |             |           |        |  |   |            |  
|                                              |  |             | 6,366,461 |        |  |   | 1,642,200  |  
|Less: current portion                         |  |             |          |        |  |   | (1,642,200 | )
|                                              |  |             |           |        |  |   |            |  
|                                              |  | $           | 6,366,461 |        |  | $ |           |  
|                                              |  |             |           |        |  |   |            |  



|(a) |  | Peak National Bank:                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Loan payable with interest only payments at 10.5% per annum. Principal of US $1,200,000 due in full on December 16, 2002; secured by deed of trust over mineral properties. At May 31, 2003 the Company was in default with respect to this loan and, as a result, the interest
rate on the loan was increased to 24% per annum.

14



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|    |  | During the period the Company reached an agreement with the bank, and paid all arrears interest and a US $120,000 principal repayment. As a result of this agreement the due date of the loan was extended to December 16, 2003 and the interest rate reduced to 10.5% from 24%.
During August 2003, the balance outstanding on the loan of US $1,080,000 plus accrued interest was repaid in full.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Broadway Mortgage LLC:                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | In August 2003, the Company obtained US $4,500,000 in financing by way of a first mortgage on the Colorado, U.S.A. mineral properties. The total amount includes two years prepaid interest at a rate of 12.9% per annum or approximately US $1,161,000 providing net cash funding
to the Company of approximately US $3,339,000.                                                                  
|   
|    |  | The net cash proceeds of US $3,339,000
were used as follows:                                                                                                                                                                                                                                                                                                                                       

|                                             |  |     |           | 
|-------------------------------------------- |  | --- | --------- | 
|Repayment of remaining bank loan (Note 5(a)) |  | $US | 1,080,000 | 
|Repayment of interim mortgage (Note 8)       |  |     | 588,000   | 
|Repayment of trade payables                  |  |     | 700,000   | 
|Working capital                              |  |     | 876,000   | 
|Financing costs                              |  |     | 95,000    | 
|                                             |  |     |           | 
|                                             |  | $US | 3,339,000 | 
|                                             |  |     |           | 



|   |  | As consideration for this financing, the Company also issued 8,181,818 shares of stock valued at the fair value of common shares on the date of agreement requiring the issuance of vested common shares of US $0.55 per share for a total financing fee of US $4,500,000 (or $6,280,242). 1,500,000 of these
shares are to be placed in escrow by the lender and are to be used to satisfy the debt if and when the Companys average share price reaches US $3.00 per share. The loan, if not repaid from the sale of escrowed shares, is due in full on July 31, 2005.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|6. |  | Debentures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                                                                                                            |  |             |           |        |  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --------- | ------ |  | - | --------- | -
|                                                                                                                                                            |  | August 31   |           | May 31
|                                                                                                                                                            |  | 2003        |           | 2003  
|                                                                                                                                                            |  |             |           |       
|                                                                                                                                                            |  | (Unaudited) |           |        |  |  
|Debentures payable, without interest, due May 2011, convertible to common shares at an conversion price of $1.23 per share at holders discretion; unsecured |  | $           | 5,069,191 |        |  | $ | 5,097,105 |  
|Less: Cumulative accretion remaining                                                                                                                        |  |             | (459,099  | )      |  |   | (472,189  | )
|                                                                                                                                                            |  |             |           |        |  |   |           |  
|                                                                                                                                                            |  | $           | 4,610,092 |        |  | $ | 4,624,916 |  
|                                                                                                                                                            |  |             |           |        |  |   |           |  

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|   |  | Accretion expense to the face value of the debt of $13,090 (August 31, 2002  $12,945) has been included in interest and bank charges for the period.                                                                                                                                  
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | All debentures are held by companies or persons related to a shareholder and director. It is not practicable to determine the fair value of the debentures and advances from shareholders due to their related party nature and the absence of a secondary market for such instruments.
|  
|7. |  | Share capital:                                                                                                                                                                                                                                                                         



| | (a) |  | Authorized:100,000,000 Common shares without par value
| | --- |  | ------------------------------------------------------
|
| | (b) |  | Issued and outstanding shares:                        

|                                     |  |           |            |        |  |   |            | 
|------------------------------------ |  | --------- | ---------- | ------ |  | - | ---------- | 
|                                     |  | Number    |            |        |  |  
|                                     |  | of shares |            | Amount
|                                     |  |           |            |       
|Balance, May 31, 2003                |  |           | 11,193,385 |        |  | $ | 23,457,480 | 
|Issued on exercise of warrants       |  |           | 62,500     |        |  |   | 69,785     | 
|Issued on exercise of options        |  |           | 190,000    |        |  |   | 85,500     | 
|Issued for financing fee (Note 4(b)) |  |           | 8,181,818  |        |  |   | 6,280,242  | 
|                                     |  |           |            |        |  |   |            | 
|Balance, August 31, 2003             |  |           | 19,627,703 |        |  | $ | 29,893,007 | 
|                                     |  |           |            |        |  |   |            | 



|    |  | Included in issued and outstanding capital stock are 150,000 contingently cancelable shares that are held in escrow and may not be traded without regulatory approval and 1,500,000 shares held in escrow to repay bank loans (Note 5(b)).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(c) |  | Stock options:                                                                                                                                                                                                                            

|                                     |  |        |           |           |  |                  |       |  
|------------------------------------ |  | ------ | --------- | --------- |  | ---------------- | ----- | -
|                                     |  |        |           |           |  | Weighted average
|                                     |  |        |           |           |  | exercise price  
|Date                                 |  | Number |           | per share
|                                     |  |        |           |          
|Issued and outstanding, May 31, 2003 |  |        | 981,500   |           |  | $CDN             | 0.54  |  
|Exercised in the period              |  |        | (190,000  | )         |  | CDN              | (0.45 | )
|Expired in the period                |  |        | (60,000   | )         |  | CDN              | (0.77 | )
|Issued in the period                 |  |        |           |           |  |                  |       |  
|- to a director                      |  |        | 100,000   |           |  | $US              | 0.32  |  
|- to an employee                     |  |        | 500,000   |           |  | $US              | 3.00  |  
|- to an employee                     |  |        | 500,000   |           |  | $US              | 5.00  |  
|                                     |  |        |           |           |  |                  |       |  
|Balance, August 31, 2003             |  |        | 1,831,500 |           |  | $CDN             | 3.27  |  
|                                     |  |        |           |           |  |                  |       |  



| |  | Options outstanding at August 31, 2003 are as follows:
| |  | ------------------------------------------------------

16



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|                              |  |        |           |           |  |             |      |                |  |               |  |          |  |          |  | 
|----------------------------- |  | ------ | --------- | --------- |  | ----------- | ---- | -------------- |  | ------------- |  | -------- |  | -------- |  | 
|                              |  |        |           |           |  | Exercise    |      |                |  |               |  | Weighted
|                              |  |        |           |           |  | price       |      |                |  |               |  | average 
|                              |  | Number |           | per share |  | Expiry date |      | remaining life
|                              |  |        |           |           |  |             |      |               
|Director and employee options |  |        | 499,000   |           |  | $CDN        | 0.45 |                |  | October 2003  |  | 0.2years
|Director options              |  |        | 82,500    |           |  | $CDN        | 1.26 |                |  | November 2004 |  | 1.3years
|Director and employee options |  |        | 150,000   |           |  | $CDN        | 0.45 |                |  | August 2005   |  | 2.0years
|Director options              |  |        | 100,000   |           |  | $US         | 0.32 |                |  | August 2008   |  | 4.9years
|Employee options              |  |        | 500,000   |           |  | $US         | 3.00 |                |  | August 2013   |  | 9.9years
|Employee options              |  |        | 500,000   |           |  | $US         | 5.00 |                |  | August 2013   |  | 9.9years
|                              |  |        |           |           |  |             |      |                |  |               |  |          |  |         
|                              |  |        | 1,831,500 |           |  |             |      |                |  |               |  |          |  | 5.8years
|                              |  |        |           |           |  |             |      |                |  |               |  |          |  |         



|    |  | All outstanding options are exercisable when issued.
|--- |  | ----------------------------------------------------
|   
|(d) |  | Warrants:                                           

|                                     |  |        |         |           |  |                  |  | 
|------------------------------------ |  | ------ | ------- | --------- |  | ---------------- |  | 
|                                     |  |        |         |           |  | Weighted average
|                                     |  |        |         |           |  | exercise price  
|                                     |  | Number |         | per share
|                                     |  |        |         |          
|Issued and outstanding, May 31, 2003 |  |        | 548,803 |           |  | US $0.81        
|Exercised in the period              |  |        | (62,500 | )         |  | US $0.80        
|                                     |  |        |         |           |  |                 
|Balance, August 31, 2003             |  |        | 486,303 |           |  | US $0.81        
|                                     |  |        |         |           |  |                 



| |  | Warrants outstanding at August  31, 2003 are as follows:
| |  | --------------------------------------------------------

|       |         |         |  |           |  |                |  |           |  |  |  | 
|------ | ------- | ------- |  | --------- |  | -------------- |  | --------- |  |  |  | 
|       |         |         |  | Exercise  |  |                |  | Weighted 
|       |         |         |  | price per |  | Expiry         |  | average  
|Number |         | warrant |  | date      |  | remaining life
|       |         |         |  |           |  |               
|       | 486,303 |         |  | US $0.81  |  | October 2004   |  | 1.2 years
|       |         |         |  |           |  |                |  |           |  | 



|8. |  | Related party transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company paid a director $nil
(August 31, 2002  -$3,000) for office rent.                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | This transaction is in the normal course of operations and is measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.                                                                                                                                                                                                                                                                      
|  
|   |  | During the period a director obtained a personal mortgage in the amount of $587,680 and lent the funds to the company in order to assist the company to meet certain obligations (the interim mortgage). Prepaid interest and fees of US $87,680 were withheld, providing net cash funding of US $500,000 to
the Company. The interim mortgage was repaid by the Company during the period upon receipt of the bank loan proceeds described in Note 5(b).

17



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|9.  |  | Contingency:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company is negotiating with a shareholder and director of the Company for claims of past wages, salary remuneration and expenses in the approximate amount of US $544,700 ($745,400 Cdn). Included in advances from shareholders
is $343,400 Cdn provided for this claim. The claim is under negotiation, the outcome of which is undeterminable. Accordingly, no additional provision has been recorded. Additional amounts, if any, will be recorded in the period
the claim is settled.
|   
|10. |  | Reconciliation with United States Generally Accepted Accounting Principles:                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | Generally accepted accounting principles (GAAP) and practices in the United States of America (U.S. GAAP) differ in certain respects from Canadian GAAP. Differences which may materially affect these consolidated financial
statements are:                                                                                                                                                                                                                                             



| | (a) |  | Mineral property exploration and development expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets in the U.S. requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the Company is to estimate the future cash flows
expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the
asset, an impairment loss is measured, equal to the excess of the carrying amount over the fair value of the assets. United States Securities and Exchange Commission staff have indicated that their
interpretation of SFAS 144 requires mineral property exploration and development costs to be expensed as incurred until commercially minable deposits are determined to exist within a particular property as
cash flows cannot be reasonably estimated prior to such determination.
Accordingly, for all periods presented, the Company has expensed exploration and development costs incurred for U.S. GAAP purposes. Once proved and probable reserves are established, capitalization of
related costs would commence. This is significantly different from the accounting policy under Canadian GAAP, as detailed in the mineral properties significant accounting policy note.
|
| |     |  | Under U.S. GAAP, additional exploration costs for mineral properties that would be written off are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                          |  |             |         |        |  |   |         | 
|----------------------------------------- |  | ----------- | ------- | ------ |  | - | ------- | 
|                                          |  | August 31   |         | May 31
|                                          |  | 2003        |         | 2003  
|                                          |  |             |         |       
|                                          |  | (Unaudited) |         |        |  |  
|Mineral exploration and development costs |  | $           | 290,155 |        |  | $ | 496,681 | 
|                                          |  |             |         |        |  |   |         | 

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| | (b) |  | Stock-based compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Statement of Financial Accounting Standards No. 123 (SFAS 123) requires that stock-based compensation be accounted for based on a fair value methodology, although it allows the effects to be disclosed in
the notes to the financial statements rather than in the statement of operations for employee awards. SFAS 123 allows an entity to continue to measure compensation costs for employee stock-based compensation
plans using the intrinsic value based method of accounting as prescribed by APB Opinion No. 25 (APB 25) and related interpretations. The Company has elected to measure compensation cost for those employee
plans using APB 25. As such, compensation expense under fixed plans is recorded only if the market value of the underlying stock at the date of granting exceeds the exercise price. If the exercise price of
a fixed option award is reduced, the award is accounted for as a variable award from the date of modification to the final measurement date upon which the award is exercised, is forfeited, or expires
unexercised. Compensation cost is adjusted in subsequent periods up to the measurement date for changes in the quoted market price. The Company follows the settlement method under Canadian GAAP and as a
result no compensation expense is recognized for employee awards.
Compensation expense (recovery) recognized for employee fixed and variable awards after applying the intrinsic value method and the fair value of non-employee awards for the period ended August 31, 2003 would
be $1,150,835 (August 31, 2002  $408,391) under U.S. GAAP.
Pro forma net loss and pro forma net loss per share after consideration of fair market value of share options granted under US GAAP is as follows:

|                                                                                                                    |  |                 |            |                 |  |   |          |  
|------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---------- | --------------- |  | - | -------- | -
|                                                                                                                    |  | Three months    |            | Three months   
|                                                                                                                    |  | ended           |            | ended          
|                                                                                                                    |  | August 31, 2003 |            | August 31, 2002
|Net loss under US GAAP                                                                                              |  | $               | (1,940,381 | )               |  | $ | (546,777 | )
|Add:                                                                                                                |  |                 |            |                 |  |   |          |  
|Stock based employee compensation expense included in net loss, net of related tax effects                          |  |                 | 1,150,835  |                 |  |   | 408,391  |  
|Deduct:                                                                                                             |  |                 |            |                 |  |   |          |  
|Total stock based employee compensation expense determined under fair value based method for all awards, net of
tax |  |                 | (1,288,200 | )               |  |   |         |  
|                                                                                                                    |  |                 |            |                 |  |   |          |  
|Pro forma loss under US GAAP                                                                                        |  | $               | (2,077,746 | )               |  | $ | (138,386 | )
|                                                                                                                    |  |                 |            |                 |  |   |          |  
|Pro forma loss per share, basic and diluted                                                                         |  | $               | (0.17      | )               |  | $ | (0.01    | )
|                                                                                                                    |  |                 |            |                 |  |   |          |  



| |  | Stock based compensation is calculated based upon the following weighted average assumptions:
| |  | ---------------------------------------------------------------------------------------------

|                                |  |                 |       |                 |   |  |   | 
|------------------------------- |  | --------------- | ----- | --------------- | - |  | - | 
|                                |  | Three months    |       | Three months   
|                                |  | ended           |       | ended          
|                                |  | August 31, 2003 |       | August 31, 2002
|                                |  |                 |       |                
|Expected life of options        |  | 4.7             | years |                 |  | 
|Expected stock price volatility |  |                 | 298   | %               |   |  |  | 
|Expected dividend yield         |  |                 | 0     | %               |   |  |  | 
|Risk free interest rate         |  |                 | 4.83  | %               |   |  |  | 

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| | (c) |  | The Company has 150,000 common shares held in escrow. The release of the shares is contingent on certain conditions. Compensation under U.S. GAAP, if any, is recognized when the contingency is resolved and
the shares are released from escrow based upon value of the shares as they become releasable. As at August 31, 2003, no shares are releasable from escrow. No similar compensation expense would be recognized
under Canadian GAAP.
The Company has 1,500,000 common shares held in escrow related to the financing described in Note 5(b). The release of these shares will not result in compensation under US or Canadian GAAP.
Under Canadian and U.S. GAAP, the 150,000 escrowed shares have been excluded from the weighted average number of common shares outstanding for purposes of the loss per share calculation.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (d) |  | Fair value conversion option:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | Under Canadian GAAP a fair value conversion option is recorded for all convertible debentures. Under U.S. GAAP, a beneficial conversion option is only recorded if the option is in the money at the date of
the transaction. No beneficial conversion option exists with respect to the Companys outstanding indebtedness at August 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (e) |  | Under Canadian GAAP, future tax assets and liabilities are recorded at substantially enacted tax rates. Under U.S. GAAP, deferred tax assets and liabilities are recorded at enacted tax rates. Recording
Canadian deferred tax assets and liabilities at enacted tax rates would not change recorded net assets or shareholders equity under U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (f) |  | Under Canadian GAAP, accounting for asset retirement obligations is not effective until year ends commencing on or after January 1, 2004. Under US GAAP, accounting for asset retirement obligations became
effective for the Company in the current period. The Company has determined that its financial statements are not materially impacted by adopting the standards for asset retirement obligations under US GAAP
and there would be no material difference if Canadian GAAP was early adopted.                                                                                                                                                                                                                                                                                                                                   
|
| | (g) |  | The following table presents the consolidated balance sheet, statement of operations and deficit, and cash flows under U.S. GAAP:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     |  | Balance Sheet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                             |  |             |             |        |  |   |             |  
|---------------------------------------------------------------------------- |  | ----------- | ----------- | ------ |  | - | ----------- | -
|                                                                             |  | August 31   |             | May 31
|                                                                             |  | 2003        |             | 2003  
|                                                                             |  |             |             |       
|                                                                             |  | (Unaudited) |             |        |  |  
|Total assets under Canadian GAAP                                             |  | $           | 23,057,333  |        |  | $ | 13,584,699  |  
|Adjustments to mineral property exploration and
development expenditures (a) |  |             | (13,496,707 | )      |  |   | (13,206,552 | )
|                                                                             |  |             |             |        |  |   |             |  
|Total assets under U.S. GAAP                                                 |  | $           | 9,560,626   |        |  | $ | 378,147     |  
|                                                                             |  |             |             |        |  |   |             |  
|Total liabilities under Canadian GAAP                                        |  | $           | 11,592,474  |        |  | $ | 8,042,886   |  
|Canadian GAAP - fair value conversion option (d)                             |  |             | 459,099     |        |  |   | 472,189     |  
|                                                                             |  |             |             |        |  |   |             |  
|Total liabilities under U.S. GAAP                                            |  |             | 12,051,573  |        |  |   | 8,515,075   |  

20



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|                                                         |  |             |             |        |  |   |             |  
|-------------------------------------------------------- |  | ----------- | ----------- | ------ |  | - | ----------- | -
|                                                         |  | August 31   |             | May 31
|                                                         |  | 2003        |             | 2003  
|                                                         |  |             |             |       
|                                                         |  | (Unaudited) |             |        |  |  
|Share capital, Canadian GAAP                             |  |             | 29,893,007  |        |  |   | 23,457,480  |  
|Gain on sale of subsidiary                               |  |             | (430,000    | )      |  |   | (430,000    | )
|Stock-based compensation (b)                             |  |             | 1,415,667   |        |  |   | 264,832     |  
|Fair value conversion option (d)                         |  |             | (575,173    | )      |  |   | (575,173    | )
|                                                         |  |             |             |        |  |   |             |  
|Share capital, U.S. GAAP                                 |  |             | 30,303,501  |        |  |   | 22,717,139  |  
|Accumulated deficit, U.S. GAAP                           |  |             | (32,794,448 | )      |  |   | (30,854,067 | )
|                                                         |  |             |             |        |  |   |             |  
|Shareholders deficiency, U.S. GAAP                      |  |             | (2,490,947  | )      |  |   | (8,136,928  | )
|                                                         |  |             |             |        |  |   |             |  
|Shareholders deficiency and liabilities under U.S. GAAP |  | $           | 9,560,626   |        |  | $ | 378,147     |  
|                                                         |  |             |             |        |  |   |             |  



| |  | Statement of Operations and Deficit
| |  | -----------------------------------

|                                                    |                                                           |   |                |             |              |   |              |            |   |   |             |          |  
|--------------------------------------------------- | --------------------------------------------------------- | - | -------------- | ----------- | ------------ | - | ------------ | ---------- | - | - | ----------- | -------- | -
|                                                    |                                                           |   | Cumulative     |             | Three months |   | Three months
|                                                    |                                                           |   | from inception |             | ended        |   | ended       
|                                                    |                                                           |   | to August 31,  |             | August 31,   |   | August 31   
|                                                    |                                                           |   | 2003           |             | 2003         |   | 2002        
|                                                    |                                                           |   |                |             |              |   |             
|Net loss under Canadian GAAP                        |                                                           | $ | (18,428,148    | )           |              | $ | (512,481     | )          |   | $ | (87,909     | )       
|Adjustments:                                        |                                                           |   |                |             |              |   |              |            |   |   |             |         
|                                                    | Mineral property exploration
and development expenditures |   |                | (13,496,707 | )            |   |              | (290,155   | ) |   |             | (63,422  | )
|                                                    | Gain on sale of subsidiary                                |   |                | 430,000     |              |   |              |           |   |   |             |         |  
|                                                    | Stock-based compensation                                  |   |                | (1,415,667  | )            |   |              | (1,150,835 | ) |   |             | (408,391 | )
|Fair value conversion option                        |                                                           |   | 116,074        |             |              |   | 13,090       |            |   |   | 12,945      |         
|                                                    |                                                           |   |                |             |              |   |              |            |   |   |             |         
|Net loss, being comprehensive loss, under U.S. GAAP |                                                           |   | (32,794,448    | )           |              |   | (1,940,381   | )          |   |   | (546,777    | )       
|Accumulated opening deficit under U.S. GAAP         |                                                           |   |               |             |              |   | (30,854,067  | )          |   |   | (29,861,471 | )       
|                                                    |                                                           |   |                |             |              |   |              |            |   |   |             |         
|Ending deficit, U.S. GAAP                           |                                                           | $ | (32,794,448    | )           |              | $ | (32,794,448  | )          |   | $ | (30,408,248 | )       
|                                                    |                                                           |   |                |             |              |   |              |            |   |   |             |         
|Net loss per share, basic and diluted, U.S. GAAP    |                                                           |   |                |             |              | $ | (0.16        | )          |   | $ | (0.05       | )       
|                                                    |                                                           |   |                |             |              |   |              |            |   |   |             |         



|(g) |  | Statement of cash flows:                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | For Canadian GAAP, cash flows relating to mineral property exploration and development expenditures are reported as investing activities. For U.S. GAAP purposes, these costs would be characterized as operating activities. Under
U.S. GAAP financing activities would include financing through the Companys bank overdraft. Accordingly, the effect of these differences on the statements of cash flows are summarized as follows:

|                                                          |  |           |            |           |  |   |         |  
|--------------------------------------------------------- |  | --------- | ---------- | --------- |  | - | ------- | -
|                                                          |  | Three     |            | Three    
|                                                          |  | months    |            | months   
|                                                          |  | ended     |            | ended    
|                                                          |  | August 31 |            | August 31
|                                                          |  | 2003      |            | 2002     
|                                                          |  |           |            |          
|Cash provided by (used in) operations under Canadian GAAP |  | $         | (954,311   | )         |  | $ | 81,178  |  
|Adjustment for mineral exploration costs                  |  |           | (290,155   | )         |  |   | (63,422 | )
|                                                          |  |           |            |           |  |   |         |  
|Cash provided by (used in) operations under U.S. GAAP     |  |           | (1,244,466 | )         |  |   | 17,756  |  

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|                                                                    |  |           |           |           |  |   |         |  
|------------------------------------------------------------------- |  | --------- | --------- | --------- |  | - | ------- | -
|                                                                    |  | Three     |           | Three    
|                                                                    |  | months    |           | months   
|                                                                    |  | ended     |           | ended    
|                                                                    |  | August 31 |           | August 31
|                                                                    |  | 2003      |           | 2002     
|                                                                    |  |           |           |          
|Cash provided by (used in) investing activities under Canadian GAAP |  |           | (301,460  | )         |  |   | (63,422 | )
|Adjustment for mineral exploration costs                            |  |           | 290,155   |           |  |   | 63,422  |  
|                                                                    |  |           |           |           |  |   |         |  
|Cash provided by (used in) investing activities under U.S. GAAP     |  |           | (11,305   | )         |  |   |        |  
|Financing activities under Canadian GAAP                            |  |           | 2,748,653 |           |  |   | 6,931   |  
|Decrease in bank overdraft                                          |  |           | (7,586    | )         |  |   | (9,399  | )
|                                                                    |  |           |           |           |  |   |         |  
|Financing activities under U.S. GAAP                                |  |           | 2,741,067 |           |  |   | (2,468  | )
|                                                                    |  |           |           |           |  |   |         |  
|Increase in cash under Canadian GAAP                                |  |           | 1,492,296 |           |  |   | 24,687  |  
|Additional bank overdraft repayment                                 |  |           | (7,586    | )         |  |   | (9,399  | )
|                                                                    |  |           |           |           |  |   |         |  
|Increase in cash under U.S. GAAP                                    |  |           | 1,485,296 |           |  |   | 15,288  |  
|Cash, beginning of period, U.S. GAAP                                |  |           |          |           |  |   |        |  
|                                                                    |  |           |           |           |  |   |         |  
|Cash, end of period, U.S. GAAP                                      |  | $         | 1,485,296 |           |  | $ | 15,288  |  
|                                                                    |  |           |           |           |  |   |         |  



| | (h) |  | Development stage enterprise:                                                                                                                               
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company meets the definition of a Development stage enterprises under FAS No. 7. The following additional disclosures would be required under U.S. GAAP.
|
| |     |  | Consolidated statements of operations and deficit (U.S. GAAP)                                                                                               

|                                                           |  |                    |             |  
|---------------------------------------------------------- |  | ------------------ | ----------- | -
|                                                           |  | Cumulative        
|                                                           |  | from inception    
|                                                           |  | Dec 30, 1986      
|                                                           |  | to August 31, 2003
|                                                           |  |                   
|Operating, exploration and administrative expenses         |  | $                  | (24,750,233 | )
|Loss on disposition of subsidiary                          |  |                    | (12,107,072 | )
|Other income                                               |  |                    | 4,062,857   |  
|                                                           |  |                    |             |  
|Net loss for the period since inception to August 31, 2003 |  | $                  | (32,794,448 | )
|                                                           |  |                    |             |  



| |  |  | Consolidated statements of cash flows:
| |  |  | --------------------------------------

|                                                   |  |                    |             |  
|-------------------------------------------------- |  | ------------------ | ----------- | -
|                                                   |  | Cumulative        
|                                                   |  | from inception    
|                                                   |  | Dec 30, 1986      
|                                                   |  | to August 31, 2003
|                                                   |  |                   
|Operating activities                               |  | $                  | (11,430,431 | )
|Financing activities                               |  |                    | 18,654,199  |  
|Investing activities                               |  |                    | (5,738,472  | )
|                                                   |  |                    |             |  
|Net cash inflows from inception to August 31, 2003 |  | $                  | 1,485,296   |  
|                                                   |  |                    |             |  

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| |  | Additional shareholders equity disclosures required under FAS No. 7 would include:
| |  | -----------------------------------------------------------------------------------

|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |   | 
|------------------------------------- | --------------------------------- |  | ------------- | --------- | ------ | - | --------------- | ------- | ----------- | - | ---------- | - | 
|                                      |                                   |  |               |           |        |   |                 |         |             |   | Deficit   
|                                      |                                   |  | Common shares |           |        |   |                 |         | accumulated
|                                      |                                   |  | Number        |           | Amount |   | since inception
|                                      |                                   |  |               |           |        |   |                
|Balance at inception                  |                                   |  |              |           |        | $ |                |         |             |   |            |  
|                                      | Issued for cash:                  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | December 1986                     |  |               | 1         |        |   |                 | 1       |             |   |            |   | 
|                                      | January 1987                      |  |               | 80,000    |        |   |                 | 100,000 |             |   |            |   | 
|                                      | April 1987                        |  |               | 150,000   |        |   |                 | 7,500   |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             | $ | (108,647   | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  
|Balance, May 31, 1987                 |                                   |  | 230,001       |           |        |   | 107,501         |         |             |   | (108,647   | )
|                                      | Issued for cash:                  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | September 1987                    |  |               | 11,600    |        |   |                 | 14,500  |             |   |            |   | 
|                                      | March 1988                        |  |               | 100,000   |        |   |                 | 150,000 |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             |   | (42,412    | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  
|Balance, May 31, 1988                 |                                   |  | 341,601       |           |        |   | 272,001         |         |             |   | (151,059   | )
|                                      | Issued for cash:                  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | August 1988                       |  |               | 31,000    |        |   |                 | 54,250  |             |   |            |   | 
|                                      | Issued upon exercise of warrants: |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | August 1988                       |  |               | 20,000    |        |   |                 | 40,000  |             |   |            |   | 
|                                      | March 1989                        |  |               | 5,000     |        |   |                 | 10,000  |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             |   | (185,968   | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  
|Balance, May 31, 1989                 |                                   |  | 397,601       |           |        |   | 376,251         |         |             |   | (337,027   | )
|                                      | Issued for cash:                  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | July 1989                         |  |               | 40,000    |        |   |                 | 136,000 |             |   |            |   | 
|                                      | Issued upon exercise of options:  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | August 1989                       |  |               | 20,000    |        |   |                 | 75,000  |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             |   | (54,515    | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  
|Balance, May 31, 1990                 |                                   |  | 457,601       |           |        |   | 587,251         |         |             |   | (391,542   | )
|                                      | Acquisition of Cinsonix Limited:  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | July 1989                         |  |               | 1,000,000 |        |   |                 | 750,000 |             |   |            |   | 
|                                      | Issued for finders fee           |  |               | 30,000    |        |   |                 | 90,000  |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             |   | (1,179,904 | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  
|Balance, May 31, 1991                 |                                   |  | 1,487,601     |           |        |   | 1,427,251       |         |             |   | (1,571,446 | )
|                                      | Issued for mineral properties:    |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | April 1992                        |  |               | 50,000    |        |   |                 | 20,000  |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             |   | (71,702    | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  
|Balance, May 31, 1992                 |                                   |  | 1,537,601     |           |        |   | 1,447,251       |         |             |   | (1,643,148 | )
|                                      | Issued for cash:                  |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | July 1992                         |  |               | 1,000,000 |        |   |                 | 150,000 |             |   |            |   | 
|                                      | March 1993                        |  |               | 600,000   |        |   |                 | 132,000 |             |   |            |   | 
|                                      | Issued for debt settlement:       |  |               |           |        |   |                 |         |             |   |            |   | 
|                                      | August 1992                       |  |               | 115,468   |        |   |                 | 23,094  |             |   |            |   | 
|                                      | Issued for finders fee           |  |               | 30,000    |        |   |                 | 26,100  |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                   |  |              |           |        |   |                |         |             |   | (118,136   | )
|                                      |                                   |  |               |           |        |   |                 |         |             |   |            |  

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|                                      |                                         |  |               |           |        |   |                 |           |             |   |            |   | 
|------------------------------------- | --------------------------------------- |  | ------------- | --------- | ------ | - | --------------- | --------- | ----------- | - | ---------- | - | 
|                                      |                                         |  |               |           |        |   |                 |           |             |   | Deficit   
|                                      |                                         |  | Common shares |           |        |   |                 |           | accumulated
|                                      |                                         |  | Number        |           | Amount |   | since inception
|                                      |                                         |  |               |           |        |   |                
|Balance, May 31, 1993                 |                                         |  | 3,283,069     |           |        | $ | 1,778,445       |           |             | $ | (1,761,284 | )
|                                      | Issued for mineral properties Oct. 1993 |  |               | 50,000    |        |   |                 | 30,500    |             |   |            |   | 
|                                      | Issued for exercise of warrants:        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | June 1993                               |  |               | 1,000,000 |        |   |                 | 150,000   |             |   |            |   | 
|                                      | September 1993                          |  |               | 145,000   |        |   |                 | 31,900    |             |   |            |   | 
|                                      | Issued for cash:                        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | January 1994                            |  |               | 170,000   |        |   |                 | 102,000   |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                         |  |              |           |        |   |                |           |             |   | (329,175   | )
|                                      |                                         |  |               |           |        |   |                 |           |             |   |            |  
|Balance, May 31, 1994                 |                                         |  | 4,648,069     |           |        |   | 2,092,845       |           |             |   | (2,090,459 | )
|                                      | Issued for cash:                        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | November 1994                           |  |               | 200,000   |        |   |                 | 150,000   |             |   |            |   | 
|                                      | Issued for exercise of warrants:        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | October 1994                            |  |               | 205,000   |        |   |                 | 55,000    |             |   |            |   | 
|                                      | December 1994                           |  |               | 40,000    |        |   |                 | 10,400    |             |   |            |   | 
|                                      | January 1995                            |  |               | 215,000   |        |   |                 | 55,900    |             |   |            |   | 
|                                      | May 1995                                |  |               | 3,000     |        |   |                 | 2,250     |             |   |            |   | 
|                                      | Disposition of Cinsonix Limited         |  |               | (905,209  | )      |   |                 | (430,001  | )           |   |            |   | 
|Net loss for the year under U.S. GAAP |                                         |  |              |           |        |   |                |           |             |   | (231,833   | )
|                                      |                                         |  |               |           |        |   |                 |           |             |   |            |  
|Balance, May 31, 1995                 |                                         |  | 4,405,860     |           |        |   | 1,936,394       |           |             |   | (2,322,292 | )
|                                      | Issued for cash:                        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | June 1995                               |  |               | 700,000   |        |   |                 | 700,000   |             |   |            |   | 
|                                      | December 1995                           |  |               | 209,200   |        |   |                 | 796,142   |             |   |            |   | 
|                                      | April 1996                              |  |               | 285,750   |        |   |                 | 1,091,565 |             |   |            |   | 
|                                      | May 1996                                |  |               | 359,300   |        |   |                 | 1,372,526 |             |   |            |   | 
|                                      | Issued for mineral properties:          |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | June 1995                               |  |               | 100,000   |        |   |                 | 300,000   |             |   |            |   | 
|                                      | Issued upon exercise of warrants:       |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | June 1995                               |  |               | 81,500    |        |   |                 | 61,125    |             |   |            |   | 
|                                      | August 1995                             |  |               | 141,500   |        |   |                 | 97,635    |             |   |            |   | 
|                                      | September 1995                          |  |               | 8,000     |        |   |                 | 6,800     |             |   |            |   | 
|                                      | October 1995                            |  |               | 73,500    |        |   |                 | 66,215    |             |   |            |   | 
|                                      | November 1995                           |  |               | 300,000   |        |   |                 | 300,000   |             |   |            |   | 
|                                      | April 1996                              |  |               | 43,500    |        |   |                 | 36,975    |             |   |            |   | 
|                                      | May 1996                                |  |               | 36,500    |        |   |                 | 31,025    |             |   |            |   | 
|                                      | Issued for finders fee:                |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | May 1996                                |  |               | 4,364     |        |   |                 |          |             |   |            |   | 
|Net loss for the year under U.S. GAAP |                                         |  |              |           |        |   |                |           |             |   | (2,149,041 | )
|                                      |                                         |  |               |           |        |   |                 |           |             |   |            |  
|Balance, May 31, 1996                 |                                         |  | 6,748,974     |           |        |   | 6,796,402       |           |             |   | (4,471,333 | )
|                                      | Issued for cash:                        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | September 1996                          |  |               | 199,820   |        |   |                 | 2,038,163 |             |   |            |   | 
|                                      | Issued for finders fee:                |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | September 1996                          |  |               | 5,962     |        |   |                 |           |             |   |            |   | 
|                                      | Issued upon exercise of options:        |  |               |           |        |   |                 |           |             |   |            |   | 
|                                      | August 1996                             |  |               | 10,000    |        |   |                 | 13,000    |             |   |            |   | 
|                                      | September 1996                          |  |               | 3,000     |        |   |                 | 3,900     |             |   |            |   | 
|                                      | December 1996                           |  |               | 1,000     |        |   |                 | 1,300     |             |   |            |   | 
|                                      | January 1997                            |  |               | 1,000     |        |   |                 | 1,300     |             |   |            |   | 
|                                      | February 1997                           |  |               | 7,000     |        |   |                 | 16,520    |             |   |            |   | 
|                                      | March 1997                              |  |               | 500       |        |   |                 | 650       |             |   |            |   | 
|                                      | April 1997                              |  |               | 75,900    |        |   |                 | 98,670    |             |   |            |   | 
|                                      | May 1997                                |  |               | 81,000    |        |   |                 | 105,300   |             |   |            |   | 
|                                      | Issued upon exercise of warrants:       |  |               |           |        |   |                 |           |             |   |            |   | 

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|                                      |                                      |  |               |         |        |  |                 |           |             |  |             |   | 
|------------------------------------- | ------------------------------------ |  | ------------- | ------- | ------ |  | --------------- | --------- | ----------- |  | ----------- | - | 
|                                      |                                      |  |               |         |        |  |                 |           |             |  | Deficit    
|                                      |                                      |  | Common shares |         |        |  |                 |           | accumulated
|                                      |                                      |  | Number        |         | Amount |  | since inception
|                                      |                                      |  |               |         |        |  |                
|                                      | June 1996                            |  |               | 27,500  |        |  |                 | 23,375    |             |  |             |   | 
|                                      | February 1997                        |  |               | 285,750 |        |  |                 | 1,428,750 |             |  |             |   | 
|                                      | March 1997                           |  |               | 222,700 |        |  |                 | 1,113,500 |             |  |             |   | 
|Net loss for the year under U.S. GAAP |                                      |  |              |         |        |  |                |           |             |  | (2,928,560  | )
|                                      |                                      |  |               |         |        |  |                 |           |             |  |             |  
|Balance, May 31, 1997                 |                                      |  | 7,670,106     |         |        |  | 11,640,830      |           |             |  | (7,399,893  | )
|                                      | Issued for October 1997              |  |               | 537,200 |        |  |                 | 2,686,000 |             |  |             |   | 
|                                      | Issued upon exercise of options:     |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | July 1997                            |  |               | 1,400   |        |  |                 | 1,820     |             |  |             |   | 
|                                      | August 1997                          |  |               | 1,000   |        |  |                 | 1,300     |             |  |             |   | 
|                                      | September 1997                       |  |               | 7,000   |        |  |                 | 9,100     |             |  |             |   | 
|                                      | October 1997                         |  |               | 39,562  |        |  |                 | 61,823    |             |  |             |   | 
|                                      | May 1998                             |  |               | 207,000 |        |  |                 | 60,030    |             |  |             |   | 
|                                      | Issued for mineral properties:       |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | February 1998                        |  |               | 11,250  |        |  |                 | 97,538    |             |  |             |   | 
|                                      | March 1998                           |  |               | 619,000 |        |  |                 | 3,683,050 |             |  |             |   | 
|Net loss for the year under U.S. GAAP |                                      |  |              |         |        |  |                |           |             |  | (10,779,708 | )
|                                      |                                      |  |               |         |        |  |                 |           |             |  |             |  
|Balance, May 31, 1998                 |                                      |  | 9,093,518     |         |        |  | 18,241,491      |           |             |  | (18,179,601 | )
|                                      | Returned to Treasury:                |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | July 1998                            |  |               | (22,039 | )      |  |                 |          |             |  |             |   | 
|                                      | Issued upon exercise of options:     |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | March 1999                           |  |               | 25,000  |        |  |                 | 33,500    |             |  |             |   | 
|                                      | Issued for debt settlement:          |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | January 1999                         |  |               | 180,125 |        |  |                 | 270,188   |             |  |             |   | 
|                                      | Issued for mineral properties:       |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | November 1998                        |  |               | 80,364  |        |  |                 | 478,166   |             |  |             |   | 
|                                      | March 1999                           |  |               | 288,750 |        |  |                 | 2,503,462 |             |  |             |   | 
|                                      | March 1999                           |  |               | 10,000  |        |  |                 | 59,500    |             |  |             |   | 
|Net loss for the year under U.S. GAAP |                                      |  |              |         |        |  |                |           |             |  | (7,158,555  | )
|                                      |                                      |  |               |         |        |  |                 |           |             |  |             |  
|Balance, May 31, 1999                 |                                      |  | 9,655,718     |         |        |  | 21,586,307      |           |             |  | (25,338,156 | )
|Net loss for the year under U.S. GAAP |                                      |  |              |         |        |  |                |           |             |  | (2,275,487  | )
|                                      |                                      |  |               |         |        |  |                 |           |             |  |             |  
|Balance, May 31, 2000                 |                                      |  | 9,655,718     |         |        |  | 21,586,307      |           |             |  | (27,613,643 | )
|                                      | Issued under settlement of services: |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | August 2000                          |  |               | 100,000 |        |  |                 | 45,000    |             |  |             |   | 
|                                      | Issued under exercise of options:    |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | January 2001                         |  |               | 100,000 |        |  |                 | 15,000    |             |  |             |   | 
|                                      | Stock-based compensation             |  |               |        |        |  |                 | 183,079   |             |  |             |   | 
|Net loss for the year under U.S. GAAP |                                      |  |              |         |        |  |                |           |             |  | (1,063,927  | )
|                                      |                                      |  |               |         |        |  |                 |           |             |  |             |  
|Balance, May 31, 2001                 |                                      |  | 9,855,718     |         |        |  | 21,829,386      |           |             |  | (28,677,570 | )
|                                      | Issued for debt settlement:          |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | October 2001                         |  |               | 250,000 |        |  |                 | 75,000    |             |  |             |   | 
|                                      | Issued under settlement of services: |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | October 2001                         |  |               | 471,000 |        |  |                 | 141,300   |             |  |             |   | 
|                                      | Issued for mineral properties:       |  |               |         |        |  |                 |           |             |  |             |   | 
|                                      | October 2001                         |  |               | 100,000 |        |  |                 | 30,000    |             |  |             |   | 
|                                      | Stock-based compensation             |  |               |        |        |  |                 | 125,917   |             |  |             |   | 

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|                                      |                                               |  |               |           |        |   |                 |           |             |   |             |   | 
|------------------------------------- | --------------------------------------------- |  | ------------- | --------- | ------ | - | --------------- | --------- | ----------- | - | ----------- | - | 
|                                      |                                               |  |               |           |        |   |                 |           |             |   | Deficit    
|                                      |                                               |  | Common shares |           |        |   |                 |           | accumulated
|                                      |                                               |  | Number        |           | Amount |   | since inception
|                                      |                                               |  |               |           |        |   |                
|Net loss for the year under U.S. GAAP |                                               |  |              |           |        |   |                |           |             |   | (1,183,901  | )
|                                      |                                               |  |               |           |        |   |                 |           |             |   |             |  
|Balance, May 31, 2002                 |                                               |  | 10,676,718    |           |        |   | 22,201,603      |           |             |   | (29,861,471 | )
|                                      | Issued for debt settlement:                   |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | June 2002 and August 2002                     |  |               | 67,500    |        |   |                 | 38,800    |             |   |             |   | 
|                                      | Issued under settlement of services:          |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | October 2002 and January 2003                 |  |               | 261,667   |        |   |                 | 143,234   |             |   |             |   | 
|                                      | Issued for mineral properties:                |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | February 2003                                 |  |               | 100,000   |        |   |                 | 82,000    |             |   |             |   | 
|                                      | Issued under exercise of options:             |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | January 2003                                  |  |               | 25,000    |        |   |                 | 11,250    |             |   |             |   | 
|                                      | Issued for cash
October 2002                  |  |               | 62,500    |        |   |                 | 78,771    |             |   |             |   | 
|                                      | Warrants issued under settlement of services: |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | October 2002                                  |  |               |          |        |   |                 | 205,645   |             |   |             |   | 
|Stock based compensation              |                                               |  |              |           |        |   | (44,164         | )         |             |   |             |  
|Net loss for the year under U.S. GAAP |                                               |  |              |           |        |   |                |           |             |   | (992,596    | )
|                                      |                                               |  |               |           |        |   |                 |           |             |   |             |  
|Balance, May 31, 2003                 |                                               |  | 11,193,385    |           |        |   | 22,717,139      |           |             |   | (30,854,067 | )
|                                      | Issued under exercise of warrants:            |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | August 2003                                   |  |               | 62,500    |        |   |                 | 69,785    |             |   |             |   | 
|                                      | Issued under exercise of options:             |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | July 2003 and August 2003                     |  |               | 190,000   |        |   |                 | 85,500    |             |   |             |   | 
|                                      | Issued for financing:                         |  |               |           |        |   |                 |           |             |   |             |   | 
|                                      | August 2003                                   |  |               | 8,181,818 |        |   |                 | 6,280,242 |             |   |             |   | 
|Stock based compensation              |                                               |  |              |           |        |   | 1,150,835       |           |             |   |             |  
|Net loss for period under U.S. GAAP   |                                               |  |              |           |        |   |                |           |             |   | (1,940,381  | )
|                                      |                                               |  |               |           |        |   |                 |           |             |   |             |  
|Balance, August 31, 2003              |                                               |  | 19,627,703    |           |        | $ | 30,303,501      |           |             | $ | (32,794,448 | )
|                                      |                                               |  |               |           |        |   |                 |           |             |   |             |  



| |  | All of the above transactions have been included on a post-consolidation basis.
| |  | -------------------------------------------------------------------------------

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Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Report on Form 10-QSB (including in this
managements discussion and analysis and elsewhere herein) that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding our expectations, hopes, intentions or
strategies regarding the future. We have based these forward-looking statements
largely on our current expectations and projections about future events and
financial trends affecting our business. These forward-looking statements are
subject to risks, uncertainties and assumptions including, among other things,
the factors discussed in our annual report on Form 20-F for the year ended May
31, 2003 under ITEM #3, Key Information, Risk Factors and factors described
in documents that we may furnish from time to time to the Securities and
Exchange Commission.

The words believe, may, will, estimate, continue, anticipate,
intend, expect, and similar words are intended to identify forward-looking
statements. In light of these risks and uncertainties, the forward-looking
information, events and circumstances discussed in this report might not occur.
Our actual results and performance could differ substantially from those
anticipated in our forward-looking statements.

All forward-looking statements included in this document are based on
information available to us on the date hereof, and we undertake no obligation
to update any such forward-looking statements. It is important to note that
our actual results could differ materially from those in such forward-looking
statements.

General Discussion

Our consolidated financial statements have been prepared in accordance
with generally accepted accounting principles as applied in Canada. There are
several differences in determining expenses and net loss between Canadian GAAP
and US GAAP. Revenues remain the same at nil under both Canadian and US GAAP.

|                   |  |                                  |            |                                   |  |      |          |      |  |      |          |   |  |      |         |  
|------------------ |  | -------------------------------- | ---------- | --------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | ---- | ------- | -
|                   |  | US GAAP, quarter ended August 31 |            | Cdn GAAP, quarter ended August 31
|                   |  |                                  |            |                                  
|                   |  | 2003                             |            | 2002                              |  | 2003 |          | 2002
|                   |  |                                  |            |                                   |  |      |          |     
|Revenues           |  | Cdn$                             | 0          |                                   |  | Cdn$ | 0        |      |  | Cdn$ | 0        |   |  | Cdn$ | 0       |  
|Net Loss           |  | Cdn$                             | (1,940,381 | )                                 |  | Cdn$ | (546,777 | )    |  | Cdn$ | (512,481 | ) |  | Cdn$ | (87,909 | )
|Net Loss per share |  | Cdn$                             | (0.16      | )                                 |  | Cdn$ | (0.05    | )    |  | Cdn$ | (0.04    | ) |  | Cdn$ | (0.01   | )

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|                               |  |                 |            |                 |  |                 |            |              |  |      |            |  |  |      |            | 
|------------------------------ |  | --------------- | ---------- | --------------- |  | --------------- | ---------- | ------------ |  | ---- | ---------- |  |  | ---- | ---------- | 
|                               |  | US GAAP, as at  |            | Cdn GAAP, as at
|                               |  |                 |            |                
|                               |  | August 31, 2003 |            | May 31, 2003    |  | August 31, 2003 |            | May 31, 2003
|                               |  |                 |            |                 |  |                 |            |             
|Total Assets                   |  | Cdn$            | 9,560,626  |                 |  | Cdn$            | 378,147    |              |  | Cdn$ | 23,057,333 |  |  | Cdn$ | 13,584,699 | 
|Total Liabilities              |  | Cdn$            | 12,051,573 |                 |  | Cdn$            | 8,515,075  |              |  | Cdn$ | 11,592,474 |  |  | Cdn$ | 8,042,886  | 
|Shareholders
Equity (Deficit) |  | Cdn$            | (2,490,947 | )               |  | Cdn$            | (8,136,928 | )            |  | Cdn$ | 11,464,859 |  |  | Cdn$ | 5,541,813  | 

The primary reasons for the increase in loss under US GAAP over Canadian
GAAP is due to the following:



| |  |  | exploration and development expenditures are capitalized under
Canadian GAAP, but expensed under US GAAP. This resulted in expenses
under US GAAP (but not under Canadian GAAP) of Cdn$290,155 during the
first quarter of fiscal 2004 as compared to expenses of Cdn$63,422 in
the same period of fiscal 2003.                                           
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | stock based compensation to employees for variable and fixed based
plans are recognized under US GAAP, but not under Canadian GAAP. This
resulted in expenses under US GAAP (but not under Canadian GAAP) of
Cdn$1,150,835 during the first quarter of fiscal 2004 as compared to
expenses of Cdn$408,391 in the same period of fiscal 2003.              
|
| |  |  | the fair value of the debenture conversion option is being expensed
under Canadian GAAP. No beneficial conversion option is recognized
under US GAAP. This resulted in expenses under Canadian GAAP (but not
under US GAAP) of Cdn$13,090 during the first quarter of fiscal 2004 as
compared to expenses of Cdn$12,945 in the same period of fiscal 2003.

These differences are explained in much greater detail in note 9 to the
consolidated financial statements attached to this report.

Summary

We are in the business of acquiring and exploring mineral properties with
the aim of participating in the development of them to a stage where they can
be exploited at a profit. At that stage, our operations would to some extent
be dependent on the world market prices of any mineral produced. We do not
have any properties with mineral reserves or with any material production of
minerals. Operations on our properties are exploratory searches for
commercially producible deposits.

Nearly all of our activities are directed to exploration and development
programs. Yearly and quarterly variations in individual property expenditures
generally reflect increases or decreases

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in specific exploration and
development costs based on previous results and our decisions regarding the
allocation of exploration expenditures between projects.

Results of Operations

The following table sets forth, for the periods indicated, statement of
operations data. The table and the discussion below should be read in
conjunction with the interim consolidated financial statements and the notes
thereto appearing elsewhere in this report.

|                     |  |                               |            |                     |  |      |            |      |  |  |            |   |  |  |            |  
|-------------------- |  | ----------------------------- | ---------- | ------------------- |  | ---- | ---------- | ---- |  |  | ---------- | - |  |  | ---------- | -
|                     |  | Three Months Ended August 31,
|                     |  |                              
|                     |  | 2003                          |            | 2002                |  | 2003 |            | 2002
|                     |  |                               |            |                     |  |      |            |     
|                     |  | US GAAP, Cdn$                 |            | Canadian GAAP, Cdn$
|                     |  |                               |            |                    
|Operating revenues   |  |                               | 0          |                     |  |      | 0          |      |  |  | 0          |   |  |  | 0          |  
|Operating (expenses) |  |                               | (1,940,633 | )                   |  |      | (547,620   | )    |  |  | (512,733   | ) |  |  | (88,752    | )
|Other income         |  |                               | 252        |                     |  |      | 843        |      |  |  | 252        |   |  |  | 843        |  
|Net (loss)           |  |                               | (1,940,381 | )                   |  |      | (546,777   | )    |  |  | (512,481   | ) |  |  | (87,909    | )
|Net (loss) per share |  |                               | (0.16      | )                   |  |      | (0.05      | )    |  |  | (0.04      | ) |  |  | (0.01      | )
|Weighted avg shares  |  |                               | 11,909,724 |                     |  |      | 10,774,218 |      |  |  | 11,909,724 |   |  |  | 10,774,218 |  

Revenues

We have not received any operating revenues and we do not expect to
receive any operating revenues until, if ever, we produce minerals for sale
from any of our properties or we enter into business arrangements with third
parties by which those third parties pay us a management or other fee. At the
present time we are not anticipating any mineral production during the
remaining months of our 2004 fiscal year (which ends May 31, 2004) or any other
operating revenues.

We do receive revenues from funds on deposit (interest) and foreign
currency gains (or losses) which result from changes in the exchange rate
between the Canadian dollar and the United States dollar. We do not expect
these sources of revenues to be significant.

Operating Expenses

Our operating expenses increased significantly during the quarter ended
August 31, 2003 as compared to the same quarter of the previous year. The
principal reason for the increase in expenses derived from the fact that we
increased our operations as a result of funds made available to us in August
2003.

During the first quarter, however, our most significant expense increase
were bank charges and interest, which amounted to Cdn$400,802 for the quarter
ended August 31, 2003 as compared to Cdn$63,848 during the same quarter of the
prior year. These costs increased more than six times because we had to
finance our operations during fiscal 2003 and the first two months of fiscal
2004 through the use of debt, in part with high-interest rate credit cards. In
addition, our loan from Peak National Bank was in default, and the default
interest rate on that loan was 24% per annum.

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While we had to finance our operations with debt during fiscal 2003 as
well, the total amount of debt outstanding (and therefore the interest charges)
were significantly greater during the first quarter of fiscal 2004 as compared
to the prior year.

Many of our other expenses increased during the first quarter of fiscal
2004 because we were more active during that period:



| |  |  | refinancing our loan with Peak National Bank;                                        
| | - |  | -------------------------------------------------------------------------------------
|
| |  |  | general financing costs;                                                             
|
| |  |  | commencing drilling operations; and                                                  
|
| |  |  | opening a corporate office in the Denver, Colorado area and hiring additional staff..

In addition, under US GAAP, we recognized significant additional expenses
that were not recognized under Canadian GAAP, which lead to significantly
greater operating losses and net losses under US GAAP than under Canadian GAAP.
These included:



| |  |  | Cdn$290,155 expense recognized under US GAAP (but not Canadian
GAAP) for mineral property exploration and development expenditures.
These expenses were capitalized under Canadian GAAP. During the first
quarter of our 2003 fiscal year, we recognized an expense of Cdn$63,422
under US GAAP in this category, reflecting significantly less mineral
exploration and development activity.                                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Cdn$1,150,835 expense recognized under US GAAP (but not Canadian
GAAP) for stock-based compensation expense relating to options repriced
during 2002. We follow the settlement method under Canadian GAAP and,
as a result, do not record an expense when we award equity compensation
to our directors and employees. During the first quarter of our 2003
fiscal year, we recognized an expense of Cdn$408,391 under US GAAP in
this category, reflecting significantly less equity based compensation
during that period.

Mineral exploration and development expenditures increased during the
first quarter, and will increase further in our second quarter, because we have
more funds available as a result of the funds made available by the August
financing.

Our professional fees increased by more than triple during the first
quarter of fiscal 2004 as compared to the same period of fiscal 2003 because of
increased indirect costs in connection with the June refinancing of debt, the
August financing, and the need to prepare to comply with our reporting
obligations in the United States. We anticipate that our professional fees
will further increase because of our increased activity and because we are now
subject to increased filing obligations with the United States Securities and
Exchange Commission inasmuch as we are no longer considered to be a foreign
private issuer under the Securities Exchange Act of 1934, as amended.

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Net Loss

As a result of our nominal revenues and increasing expenses as described
above, we expect to continue to recognize net losses for the foreseeable
future.

Liquidity and Capital Resources

The following table sets forth, as at the dates indicated, balance sheet
and cash flow data. The table and the discussion below should be read in
conjunction with the condensed consolidated financial statements and the notes
thereto appearing elsewhere in this report.

|                               |  |               |            |                     |  |           |            |           |  |  |            |  |  |  |            |  
|------------------------------ |  | ------------- | ---------- | ------------------- |  | --------- | ---------- | --------- |  |  | ---------- |  |  |  | ---------- | -
|                               |  | As at        
|                               |  |              
|                               |  | 8/31/2003     |            | 5/31/2003           |  | 8/31/2003 |            | 5/31/2003
|                               |  |               |            |                     |  |           |            |          
|                               |  | US GAAP, Cdn$ |            | Canadian GAAP, Cdn$
|                               |  |               |            |                    
|Total assets                   |  |               | 9,560,626  |                     |  |           | 378,147    |           |  |  | 23,057,233 |  |  |  | 13,584,699 |  
|Total liabilities              |  |               | 12,051,573 |                     |  |           | 8,515,075  |           |  |  | 11,592,474 |  |  |  | 8,042,866  |  
|Working capital (deficit)      |  |               | 2,831,087  |                     |  |           | (3,134,669 | )         |  |  | 2,831,087  |  |  |  | (3,134,669 | )
|Shareholders Equity
(Deficit) |  |               | (2,490,947 | )                   |  |           | (8,136,928 | )         |  |  | 11,464,859 |  |  |  | 5,541,813  |  

|                                |  |                                       |            |                     |  |      |        |      |  |  |           |   |  |  |         |  
|------------------------------- |  | ------------------------------------- | ---------- | ------------------- |  | ---- | ------ | ---- |  |  | --------- | - |  |  | ------- | -
|                                |  | For the three months ended August 31,
|                                |  |                                      
|                                |  | 2003                                  |            | 2002                |  | 2003 |        | 2002
|                                |  |                                       |            |                     |  |      |        |     
|                                |  | US GAAP, Cdn$                         |            | Canadian GAAP, Cdn$
|                                |  |                                       |            |                    
|Cash flow provided by
(used in) |  |                                       |            |                     |  |      |        |      |  |  |           |   |  |  |         |  
|Operations                      |  |                                       | (1,244,466 | )                   |  |      | 17,756 |      |  |  | (954,311  | ) |  |  | 81,178  |  
|Financing                       |  |                                       | 2,741,067  |                     |  |      | (2,468 | )    |  |  | 2,748,653 |   |  |  | 6,931   |  
|Investing                       |  |                                       | (11,305    | )                   |  |      | 0      |      |  |  | (301,460  | ) |  |  | (63,422 | )
|Increase in cash during
period  |  |                                       | 1,485,296  |                     |  |      | 15,288 |      |  |  | 1,492,296 |   |  |  | 24,687  |  

Working Capital

Our working capital and liquidity increased significantly during the three
months ended August 31, 2003 due to the financing completed in August 2003. At
August 31, 2003, our working capital (current assets less current liabilities)
was significantly greater than at our last fiscal year end entirely due to the
completion of the August financing.

On August 1, 2003, we completed a financing with the Broadway Mortgage
Group (Broadway) who loaned US$4,500,000 to us and took a security interest
in the Caribou property to collateralize our repayment obligation. We also
issued 8,181,818 shares of our common stock to Broadway as a loan origination
fee valued at US$0.55 per share. Matt Witt, formerly associated with Broadway
and one of the persons who acquired a portion of Broadways interest, is now
our chief financial officer and was appointed to that position as a result of
the transaction. Broadway agreed that if our common stock price exceeded
US$3.00 per share, Broadway would sell up to

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1,500,000 shares of the original
8,181,818 shares for our benefit to repay the loan in full. Broadway will only
be able to sell the shares to the extent that a registration statement for the
sale is effective or an exemption from registration is available. The
US$4,500,000 loan to us (bearing interest at
12.9% and due July 31, 2005 or upon the sale of 1,500,000 shares of common
stock by Broadway if the stock price reaches US$3.00) was used for the
following:

|                                                                               |  |               
|------------------------------------------------------------------------------ |  | --------------
|Prepayment of two-years interest to the lender                                 |  | US$1,161,000  
|Repayment of remaining amounts due to bank                                     |  | US$1,080,000  
|Repayment of interim mortgage due to Thomas S. Hendricks for
funds he advanced |  | US$   587,680 
|Repayment of trade payables                                                    |  | US$   700,000 
|Repayment of accrued compensation                                              |  | US$   223,822 
|Financing costs                                                                |  | US$     95,000

As a result, following the financing and the use of proceeds as described
above, we had US$652,498 remaining for working capital, which we have and plan
to continue to use for exploration of our Caribou and Panamanian properties and
for general and administrative purposes.

To secure the loan, we pledged our entire interest in the Caribou
properties as collateral. There are no financial covenants with respect to the
loan.

In general, we expect that our working capital will decrease over time as
we continue to use our capital and cash flows from revenues for operations,
mineral exploration and development, and other expenses. We expect that our
subsequent quarters in fiscal 2004 will show greater decreases in our available
working capital because of our increased rate of expenditure due to increased
mineral exploration and development activity and general and administrative
operations anticipated as described above under Results of Operations.

We will continually monitor our working capital situation and may have to
seek additional financing from accredited investors or others in the near
future so that we will be able to maintain our planned operating activities.
We have not commenced any definitive discussions with prospective financing
sources, however, and there can be no assurance that financing will be
available when needed, on reasonable terms, if at all.

The Company is actively pursuing various additional options with
potential lenders and investors which, if accepted, will in managements view,
enable the Company to achieve its business plans. No agreements with
potential lenders or investors have been reached yet and there can be no
assurance that such agreements will be reached.

The ability of the Company to continue as a going concern and to realize
the carrying value of its assets and discharge its liabilities when due is
dependent on the successful completion of the actions taken or planned, which
management believes will mitigate the adverse conditions and events which
raise doubt about the validity of the going concern assumption used in
preparing these financial statements. As is common with companies with
negative cash flows and losses,

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there is no certainty that these and other
strategies will be sufficient to permit the Company to continue beyond August
31, 2004.

The financial statements do not reflect adjustments that would be
necessary if the going concern assumption were not appropriate. If the
going concern basis was not appropriate for these financial statements, then
adjustments would be necessary in the carrying value of assets and liabilities,
the reported revenues and expenses, and the balance sheet classifications used.

Capital Resources

Under Canadian GAAP, we capitalize substantially all of our mineral
exploration and development expenditures. Under Statement of Financial
Accounting Standards No. 144 (SFAS 144; Accounting for the Impairment or
Disposal of Long-Lived Assets) adopted in the United States, we are required
to review all of our long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In performing the review for recoverability, we must estimate
the future cash flows expected to result from the use of the asset and its
eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, we must measure an impairment loss equal to the excess of the
carrying amount over the fair value of the assets.

Furthermore, the staff of the United States Securities and Exchange
Commission staff have indicated that their interpretation of SFAS 144 requires
that all mineral property exploration and development costs be expensed as
incurred until commercially minable deposits are determined to exist within a
particular property as cash flows cannot be reasonably estimated prior to such
determination.

Accordingly, the principal difference between US GAAP and Canadian GAAP is
that we have expensed all of our mineral exploration and development
expenditures under US GAAP while we have capitalized them under Canadian GAAP.
Whereas our balance sheet under Canadian GAAP reflects a book value of our
mineral properties at August 31, 2003 of Cdn$13,496,707 (Cdn$13,206,552 at May
31, 2003), the book value of those same assets under US GAAP at those dates is
Cdn$0.

The other principal component of capital resources as reflected on our
balance sheet is our current assets. These increased significantly under both
US GAAP and Canadian GAAP (since there were no adjustments) due entirely to the
financing completed in August 2003 as described above.

Cash Flows

Under Canadian GAAP, cash flows relating to mineral property exploration
and development expenditures are reported as investing activities. These
expenditures amounted to Cdn$290,155 for the quarter ended August 31, 2003 as
compared to Cdn$63,422 for the same quarter of our prior fiscal year. For U.S.
GAAP purposes, these costs are characterized as operating activities.

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In addition, under U.S. GAAP financing activities would include financing
through the Companys bank overdraft which is not included under Canadian GAAP.

In summary, however, our use of cash in operating activities increased
significantly under both Canadian and US GAAP during the quarter ended August
31, 2003 as compared to the same period of the prior year. Our increased
operations during that period were financed by the funds made available by the
August financing discussed above. The August financing also accounts for the
significant increase in cash flow from financing activities during the quarter
ended August 31, 2003, as compared to the same period of the prior year.

Critical Accounting Policies

In addition to SFAS 144 (discussed above), the material accounting
policies that we believe are the most critical to an investors understanding
of our financial results and condition and require complex management judgment
have been expanded and are discussed below.

The Companys discussion and analysis of its financial condition and
results of operations, including the discussion on liquidity and capital
resources, are based on its consolidated financial statements that have been
prepared in accordance with Canadian generally accepted accounting principles.
The preparation of these financial statements requires management to make
estimates and judgments that affect reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, management re-evaluates its estimates and
judgments, particularly those related to the determination of the impairment of
long-lived assets. Management bases its estimates and judgments on historical
experience, contractual arrangements and commitments and on various other
assumptions that it believes are reasonable in the circumstances. Changes in
these estimates and judgments will impact the amounts recognized in the
consolidated financial statements, and the impact may be material. Management
believes the following critical accounting policies require more significant
estimates and judgments in the preparation of the consolidated financial
statements.

The consolidated financial statements have been prepared on the going
concern basis, which assumes the realization of assets and liquidation of
liabilities in the normal course of operations. If the Company was not to
continue as a going concern, it would likely not be able to realize on its
assets at values comparable to the carrying value or the fair value estimates
reflected in the balances set out in the preparation of the consolidated
financial statements. As described elsewhere in this report, at August 31,
2003, there were certain conditions that currently exist which raise
substantial doubt about the validity of this assumption. The Company
anticipates the need to raise additional private placement debt or equity funds
or through joint venture arrangements to accomplish its budgeted expenditures.
These private placements are not assured. Failure to raise additional funds may
result in the Company being unable to complete its planned programs, to comply
with its obligations relating to its Panamanian properties, curtailing
operations or writing down its assets.

For Canadian GAAP purposes, the Company capitalizes exploration costs
incurred. The recoverability of the capitalized costs includes considerations
primarily of managements exploration, development and holding plans and
expectations with respect to the property, potential mineralization, costs to
recovery, commodity prices and the potential for third party agreements on
development. Certain of these factors are beyond the Companys control. Other
factors, such as managements plans

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and expectations, while supporting
continued capitalization at this time may change and that change may be
material to the financial statements.

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The provisions of SFAS No.
143 are effective for fiscal years beginning after June 15, 2002. The adoption
of this statement did not have a material impact on our financial position or
results of operations.

In April 2002 the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. FASB No. 4 required all gains or losses from the retirement of
debt to be classified as extraordinary items net of income taxes. The standard
requires that gains and losses from the retirement of debt be classified as
ordinary items unless they are unusual or infrequent or meet the specific
criteria for treatment as an extraordinary item. This statement is effective
January 1, 2003. The adoption of this statement did not have a material effect
on our financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities. This Statement requires recognition of a liability for a cost
associated with an exit or disposal activity when the liability is incurred, as
opposed to when the entity commits to an exit plan. This statement is to be
applied prospectively to exit or disposal activities initiated after December
31, 2002. As we have had no exit or disposal activities subsequent to December
31, 2002, the adoption of this statement has had no impact on our consolidated
financial statements.

In December 2002, the FASB approved Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123. This amends Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123) to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. This Statement also amends the disclosure requirements
to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. It is effective for
financial statements for fiscal years ending after December 15, 2002. We will
continue to account for stock based compensation using the methods detailed in
the stock-based compensation accounting policy note to the consolidated
financial statements.

The provisions of FASB Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity, are
effective for financial instruments entered into or modified after May 31,
2003, and otherwise are effective at the beginning of the first interim period
beginning after June 15, 2003. This Statement is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments created before May 15, 2003 and still existing at the
beginning of the interim period of adoption. Restatement is not permitted.
This Statement may impact Calais if the existing convertible debentures are
modified.

FASB Interpretation No. 46, Consolidation of Variable Interest Entities,
as amended, applies for certain entities in the first fiscal year or interim
period ending after December 15, 2003 and for all other entities in the first
fiscal year or interim period ending after December 15, 2004 to

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enterprises
that hold a variable interest in variable interest entities created before
February 1, 2003. We do not expect a material change as a result of adopting
this Interpretation.




Item 3: Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934,
within the 90 days prior to the filing date of this report, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures. This evaluation was carried out under the supervision
and with the participation of our principal executive officer as well as our
principal financial officer, who concluded that our disclosure controls and
procedures are effective. There have been no significant changes in our
internal controls or in other factors, which could significantly affect
internal controls subsequent to the date we carried out our evaluation.

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




PART II
OTHER INFORMATION

Item 1: Legal Proceedings

None.




Item 2: Changes in Securities and Small Business Issuer Purchases of Equity Securities

(a) The instruments defining the rights of the holders of any class of
registered securities have not been materially modified.

(b) The rights evidenced by any class of registered securities have not
been materially limited or qualified by the issuance or modification of any
other class of securities.

(c) The following sets forth the information required by Item 701 of
Regulation S-B:

August 2003 financing

On August 1, 2003, we completed a financing with a lender (Broadway) who
loaned US$4,500,000 to us and took a security interest in the Caribou property
to collateralize our repayment obligation. We also issued 8,181,818 shares of
our common stock to the lender as a loan origination fee valued at US$0.55 per
share.

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(i) The transaction was effective August 1, 2003.

(ii) No underwriters were involved in the transaction. The only entity who
received securities from us in this transaction was Broadway who distributed
the securities to six accredited investors.

(iii) The securities were not sold for cash. The securities were issued to
Broadway as a financing fee in connection with their making the US$4,500,000
loan.

(iv) The issuance of the shares was accomplished pursuant to the
exemptions from registration contained in Sections 4(2) and 4(6) of the
Securities Act of 1933. We did not engage in any public advertising or general
solicitation in connection with this transaction. We provided Broadway and the
accredited investors with disclosure of all aspects of our business as they
requested. Based on our investigation, we believe that Broadway and the
accredited investors obtained all information regarding Calais Resources they
requested, received answers to all questions they posed, and otherwise
understood the risks of accepting our securities in exchange for services to be
provided.

(v) There are no conversion rights or exchange rights associated with the
shares.

(vi) We received no proceeds from the issuance of the shares and,
therefore, we have no use of proceeds.

Option Exercises

On August 29, 2003, Thomas S. Hendricks, president and chairman of the
board of directors of Calais Resources, exercised an option to acquire 100,000
shares of common stock for the payment of Cdn$45,000 (Cdn$0.45 per share). On
October 24, 2003, Arthur Daher, secretary and a member of the board of
directors of Calais Resources, exercised an option to acquire 50,000 shares of
common stock for the payment of Cdn$22,500 (Cdn$0.45 per share). In both
cases, the options had been outstanding for more than two years.

(i) The transactions were effective August 29, 2003 (in the case of Mr.
Hendricks) and October 24, 2003 (in the case of Mr. Daher).

(ii) No underwriters were involved in the transaction.

(iii) The securities were sold for cash payment of the option exercise
price (in both cases, Cdn$0.45 per share).

(iv) The issuance of the shares was accomplished pursuant to the
exemptions from registration contained in Sections 4(2) and 4(6) of the
Securities Act of 1933 inasmuch as both of the persons acquiring shares
pursuant to option exercise were executive officers and directors of Calais
Resources. We did not engage in any public advertising or general solicitation
in connection with this transaction.

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(v) There are no conversion rights or exchange rights associated with the
shares.

(vi) We received Cdn$67,500 from the issuance of the shares and the funds
were used for working capital purposes.

During the first quarter, three holders exercised options to acquire
90,000 shares of common stock for the payment of Cdn$0.45 per share. In all
cases, the options had been outstanding for more than two years.

(i) The transactions were effective in August 2003.

(ii) No underwriters were involved in the transaction.

(iii) The securities were sold for cash payment of the option exercise
price (in all cases, Cdn$0.45 per share).

(iv) The issuance of the shares was accomplished pursuant to the
exemptions from registration contained in Sections 4(2) and 4(6) of the
Securities Act of 1933 inasmuch as both of the persons acquiring shares
pursuant to option exercise were executive officers and directors of Calais
Resources. We did not engage in any public advertising or general solicitation
in connection with this transaction.

(v) There are no conversion rights or exchange rights associated with the
shares.

(vi) We received Cdn$40,500 from the issuance of the shares and the funds
were used for working capital purposes.

Option Grants

On August 11, 2003, we granted an option to purchase 1,000,000 shares of
our common stock to Matthew C. Witt in connection with his agreement to become
Calais Resources chief financial officer. Of these options, 500,000 are
exercisable at US$3.00 per share, and the remaining are exercisable at US$5.00
per share, in both cases through August 11, 2013, subject to Mr. Witt entering
into an appropriate option agreement. The following sets forth the information
required by Item 701 in connection with that transaction:

(i) The transaction was effective August 11, 2003. We issued options to
acquire 1,000,000 shares of common stock.

(ii) No underwriters were involved in the transaction. The only entity who
received securities from us in this transaction was Mr. Witt.

(iii) The securities were not sold for cash. The securities were issued to
Mr. Witt as part of the consideration for him becoming employed by Calais
Resources as its chief financial officer.

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(iv) The issuance of the shares was accomplished pursuant to the
exemptions from registration contained in Sections 4(2) and 4(6) of the
Securities Act of 1933. We did not engage in any public advertising or general solicitation in connection with this
transaction. Mr. Witt was one of the accredited investors involved in the
August financing discussed above, and we believe that he obtained all
information regarding Calais Resources that he requested, received answers to
all questions he posed, and otherwise understood the risks of accepting our
securities in exchange for services to be provided.

(v) There are no conversion rights or exchange rights associated with the
option. The option is exercisable to purchase shares of our common stock until
August 11, 2013 at US$3.00 per share (for 500,000 shares) and US$5.00 per share
(for 500,000 shares).

(vi) We received no proceeds from the issuance of these options and,
therefore, we have no use of proceeds.

(d) No information is required pursuant to Rule 463 adopted under the
Securities Act of 1933.

(e) We did not make any repurchases of any securities during the period
included in this report. Consequently there is no disclosure required under
Item 703 of Regulation S-B.

Effective August 11, 2003, we granted an option to purchase 100,000 shares
of our common stock to Robert Akright, vice president of the Company,
exercisable through August 11, 2013 at US$.32 per share, subject to Mr. Akright
entering into an appropriate option agreement. The following sets forth the
information required by Item 701 in connection with that transaction:

(i) The transaction was effective August 11, 2003. We issued options to
acquire 100,000 shares of common stock.

(ii) No underwriters were involved in the transaction. The only entity who
received securities from us in this transaction was Mr. Akright.

(iii) The securities were not sold for cash. The securities were issued to
Mr. Akright as part of the consideration for his continuing employment as
Calais vice president.

(iv) The issuance of the shares was accomplished pursuant to the
exemptions from registration contained in Sections 4(2) and 4(6) of the
Securities Act of 1933. We did not engage in any public advertising or general
solicitation in connection with this transaction. Mr. Akright has been vice
president of the Company for more than the past three years, and at the time of
the grant was a director of the Company. We believe that he obtained all
information regarding Calais Resources that he requested, received answers to
all questions he posed, and otherwise understood the risks of accepting our
securities in exchange for services to be provided.

(v) There are no conversion rights or exchange rights associated with the
option. The option is exercisable to purchase shares of our common stock until
August 11, 2013 at US$.32 per share.

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(vi) We received no proceeds from the issuance of these options and,
therefore, we have no use of proceeds.

(d) No information is required pursuant to Rule 463 adopted under the
Securities Act of 1933.

(e) We did not make any repurchases of any securities during the period
included in this report. Consequently there is no disclosure required under
Item 703 of Regulation S-B.

Item 3: Defaults Upon Senior Securities

(a) There has been no default upon senior securities except the default on
amounts due to Peak National Bank, which default was cured in June 2003. We
repaid the loan in full (US$1,080,000 at May 31, 2003) with funds received from
the August 2003 financing.

(b) There are no arrearages in the payment of any dividends; nor has there
been any other material delinquency with respect to any class of preferred
stock which is registered or which ranks prior to any class of registered
securities, or with respect to any class of preferred stock of any significant
subsidiary.

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

No matter was submitted to a vote of security holders during the quarter
ended August 31, 2003. Our annual general meeting of shareholders was held on
Thursday, December 18, 2003 at which meeting Thomas S. Hendricks, Melvin
Martin, and Art Daher were re-elected as directors of the Company, and the
shareholders approved the appointment of KPMG as the Companys independent
accountants.

Item 5: Other Information

Our management have continued to evaluate title to its mining properties
in Nevada and has continued discussions with the parties who precede the
Company in title to those properties. While our documentary review has not
added any clarity to the issues discussed in the Form 20-F, based on
discussions with our predecessors in title, we continue to believe that we will
ultimately be able to acquire good title to the properties.




Item 6: Exhibits and Reports on Form 8-K



|(a) |  | Exhibits.                                               
|--- |  | --------------------------------------------------------
|   
|    |  | 31. Certification pursuant to Sarbanes-Oxley Section 302
|   
|    |  | 32. Certification pursuant to 18 U.S.C. Section 1350    
|   
|(b) |  | Reports on Form 8-K                                     

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We did not file any reports on Form 8-K during the period covered by this
quarterly report on Form 10-QSB.

On October 27, 2003 we filed a report on Form 8-K reporting an event under
Items 7 (exhibits) and 12 (results of operation or financial condition) which
included copies of our Canadian GAAP financial statements mailed to our
security holders and filed with Canadian regulatory authorities as required by
Canadian law.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized, in the City of Greenwood Village,
County of Arapahoe, State of Colorado, on the 19th day of December, 2003.

CALAIS RESOURCES, INC.
(Registrant)

By
    
    /s/ Thomas S. HendricksThomas S. Hendricks,President, Chief Executive Officer and Director


By
    
    /s/ Matthew C. WittMatthew C. Witt,Chief Accounting Officer and Chief Financial Officer


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INDEX TO EXHIBITS

| |  |                                                         
| |  | --------------------------------------------------------
|
| |  | 31. Certification pursuant to Sarbanes-Oxley Section 302
|
| |  | 32. Certification pursuant to 18 U.S.C. Section 1350    
|
| |  |