****

 We have audited the balance sheets of**Virginia Gold Mines Inc.**(an  exploration company) as at February 28,  2006 and 2005 and the statements of earnings, deficit and cash flows for the  twelve-month period ended February  28, 2006, the nine-month period ended February 28, 2005 and the twelve-month  period ended May 31, 2004.  These financial statements are the responsibility of the company's management.  Our responsibility is to express  an opinion on these financial statements based on our audits.

  We conducted our audits in accordance with Canadian generally accepted auditing  standards. Those standards  require that we plan and perform an audit to obtain reasonable assurance whether  the financial statements are free  of material misstatement. An audit includes examining, on a test basis, evidence  supporting the amounts and  disclosures in the financial statements. An audit also includes assessing the  accounting principles used and  significant estimates made by management, as well as evaluating the overall  financial statement presentation.  In our opinion, these financial statements present fairly, in all material respects,  the financial position of the  company as at February 28, 2006 and 2005 and the results of its operations and  its cash flows for the twelvemonth  period ended February 28, 2006, the nine-month period ended February 28, 2005  and the twelve-month  period ended May 31, 2004 in accordance with Canadian generally accepted accounting  principles.

**Chartered Accountants**  Quebec, Quebec, Canada  May 5, 2006

**Comments by the Auditors for U.S. Readers on Canada-U.S. Reporting Difference**  In the United States, reporting standards for auditors require the addition  of an explanatory paragraph (following  the opinion paragraph) when the financial statements are affected by conditions  and events that cast substantial  doubt on the company's ability to continue as a going concern, such as those  described in note 1 to the financial  statements. Our report to the shareholders dated May 5, 2006 is expressed in  accordance with Canadian reporting  standards which do not permit a reference to such events and conditions in the  auditors' report when these are  adequately disclosed in the financial statements.

**Chartered Accountants**  Quebec, Quebec, Canada  May 5, 2006

 

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers  LLP and the other member firms of PricewaterhouseCoopers  International Limited, each of which is a separate and independent legal entity.

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Consolidated Balance Sheets**  (expressed in Canadian dollars)

|                                                                                                                                 | **As at        February 28,** |
|--------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|
|                                                                                                                                 | **2006**                      | **2005** |
|                                                                                                                                 | $                             | $ |
|                                                                                                                                 |                          |   |
| **ASSETS**                                                                                                                           |                          |   |
| ** **                                                                                                                           |                          |   |
| **Current assets**                                                                                                                   |                          |   |
| Cash and cash equivalents (Note 4)                                                                                                   | 10,455,911                    | 7,318,302 |
| Short-term investments (Note 5)                                                                                                      | 21,129,909                    | 8,196,733 |
| Amounts receivable (Note 6)                                                                                                          | 8,902,156                     | 5,082,525 |
| Prepaid expenses (Note 7)                                                                                                            | 85,863                        | 64,111 |
| Current assets of discontinued operation        (Note 3a)                                                                            | 1,233,825                     | - |
| Future income tax assets (Note 14)                                                                                                   | 5,886,318                     | - |
|                                                                                                                                 | 47,693,982                    | 20,661,671 |
|                                                                                                                                 |                          |   |
| **Deposit on exploration costs**                                                                                                     | -                             | 49,430 |
| **Long-term investment** (Note        8)                                                                                             | -                             | 13,585 |
| **Property, plant and equipment**        , at cost less accumulated depreciation of $15,283 ($12,790 as at February        28, 2005) | 11,217                        | 17,470 |
| **Mining properties** (Note        9)                                                                                                | 6,567,312                     | 5,272,731 |
| **Intangible asset** , at cost        less accumulated amortization of $4,091        ($2,846 as at February 28, 2005)                | 2,907                         | 4,152 |
| **Deferred charges** (Note 2)                                                                                                        | 341,722                       | - |
| **Long-term assets of discontinued        operation** (Note 3a)                                                                      | 11,397,457                    | 2,933,145 |
| ** **                                                                                                                           | 66,014,597                    | 28,952,184 |
| ** **                                                                                                                           |                          |   |
| **LIABILITIES**                                                                                                                      |                          |   |
| ** **                                                                                                                           |                          |   |
| **Current liabilities**                                                                                                              |                          |   |
| Accounts payable and accrued liabilities                                                                                             |                          |   |
| Related companies                                                                                                                    | 94,033                        | 207,227 |
| Others                                                                                                                               | 430,051                       | 706,289 |
| Current liabilities of discontinued operation        (Note 3a)                                                                       | 4,435,716                     | - |
|                                                                                                                                 | 4,959,800                     | 913,516 |
| **Long-term liabilities of discontinued        operation** (Note 3a)                                                                 | 86,318                        | - |
|                                                                                                                                 | 5,046,118                     | 913,516 |
| **SHAREHOLDERS' EQUITY**                                                                                                             |                          |   |
| ** **                                                                                                                           |                          |   |
| **Share capital** (Note 10a)                                                                                                         | 85,471,959                    | 56,253,306 |
| Authorized                                                                                                                           |                          |   |
| Unlimited number of common shares, voting        and participating, without par value                                                |                          |   |
| Issued and fully paid                                                                                                                |                          |   |
| 48,156,570 common shares (38,959,078 as at        February 28, 2005)                                                                 |                          |   |
| **Warrants** (Note 10b)                                                                                                              | 446,117                       | 554,380 |
| **Stock options** (Note 11a)                                                                                                         | -                             | 460,466 |
| **Unit options** (Note 11b)                                                                                                          | 101,178                       | - |
| **Contributed surplus** (Note        11a)                                                                                            | 1,274                         | 1,274 |
| **Deficit**                                                                                                                          | (25,052,049)                  | (29,230,758) |
| ** **                                                                                                                           | 60,968,479                    | 28,038,668 |
| ** **                                                                                                                           | 66,014,597                    | 28,952,184 |

**Nature of operations and going concern** (Note 1)**Subsequent events** (Note 17)

The accompanying notes are an integral part of these consolidated financial  statements.**Approved by the Board**, (s) André Gaumond , Director  (s) André Lemire , Director

  Page 1

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Consolidated Statements of Deficit**  (expressed in Canadian dollars)

|                                     | **Periods Ended February 28,** | ** ****Period        Ended May 31,** |
|------------------------------------------|--------------------------------|-------------------------------------------|
|                                     | **2006**                       | **2005**                                  | **2004** |
|                                     | **$**                          | $****                                     | $**** |
|                                     | (12 months)                    | (9 months)                                | (12 months) |
|                                     | ** **                     | ** **                                | ** ** |
| **Balance - Beginning of period**        | 29,230,758                     | 24,525,543                                | 24,246,595 |
| ** **                               |                           |                                      |   |
| Cancellation of stock options (Note 11a) | -                              | -                                         | 53,734 |
|                                     |                           |                                      |   |
| Net loss (net earnings) for the period   | (4,178,709)                    | 4,705,215                                 | 225,214 |
|                                     |                           |                                      |   |
| **Balance - End of period**              | 25,052,049                     | 29,230,758                                | 24,525,543 |

The accompanying notes are an integral part of these consolidated  financial statements.

 Page 2

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Consolidated Statements of Earnings**  (expressed in Canadian dollars)

|                                                                                        | ******Periods        Ended February 28,** | ** ****Period        Ended May 31,** |
|---------------------------------------------------------------------------------------------|-------------------------------------------|-------------------------------------------|
|                                                                                        | **2006**                                  | **2005**                                  | **2004** |
|                                                                                        | **$**                                     | **$**                                     | **$** |
|                                                                                        | (12 months)                               | (9 months)                                | (12 months) |
|                                                                                        |                                      |                                      |   |
| **Revenues**                                                                                |                                      |                                      |   |
| Dividends                                                                                   | 389,409                                   | 259,998                                   | 309,796 |
| Interest                                                                                    | 911,724                                   | 328,165                                   | 641,986 |
| Fees                                                                                        | 106,599                                   | 147,880                                   | 117,463 |
|                                                                                        | 1,407,732                                 | 736,043                                   | 1,069,245 |
|                                                                                        |                                      |                                      |   |
| **Expenses**                                                                                |                                      |                                      |   |
| Professional and maintenance fees                                                           | 449,157                                   | 347,301                                   | 230,422 |
| Management fees                                                                             | 53,812                                    | 101,536                                   | 185,272 |
| Rent and office expenses                                                                    | 658,763                                   | 400,955                                   | 482,345 |
| Employee benefits - stock options                                                           | 975,472                                   | 6,210                                     | 2,453 |
| Advertising and exhibitions                                                                 | 173,626                                   | 137,365                                   | 117,313 |
| Travelling                                                                                  | 107,398                                   | 64,952                                    | 92,385 |
| Depreciation of property, plant and equipment                                               | 4,470                                     | 3,268                                     | 2,567 |
| Amortization of intangible asset                                                            | 1,245                                     | 1,104                                     | 1,067 |
| General exploration costs                                                                   | 474,205                                   | 440,498                                   | 342,784 |
| Grants, credit on duties refundable for loss        and refundable tax credit for resources |   

 (126,676)                       |   

 (149,371)                       |   

 (115,636) |
| Cost of mining properties abandoned or written        off                                   | 1,124,145                                 | 4,694,495                                 | 287,077 |
| Bad debts (recovered)                                                                       | -                                         | (10,130)                                  | 10,130 |
| Gain on sale of short-term investments                                                      | (680,021)                                 | (423,034)                                 | (374,528) |
| Gain on sale of long-term investments                                                       | -                                         | (7,555)                                   | - |
| Gain on sale of mining properties                                                           | (429,961)                                 | -                                         | - |
|                                                                                        | 2,785,635                                 | 5,607,594                                 | 1,263,651 |
|                                                                                        |                                      |                                      |   |
| **Loss before income taxes and discontinued        operation**                              | (1,377,903)                               | (4,871,551)                               | (194,406) |
| ** **                                                                                  |                                      |                                      |   |
| **Income taxes** (Note 14)                                                                  | (5,405,455)                               | (332,076)                                 | - |
| ** **                                                                                  |                                      |                                      |   |
| **Net earnings (net loss) from continuing        operations**                               | 4,027,552                                 | (4,539,475)                               | (194,406) |
| ** **                                                                                  |                                      |                                      |   |
| **Net earnings (net loss) from discontinued        operation** (Note 3b)               | 151,157                                   | (165,740)                                 | (30,808) |
| ** **                                                                                  |                                      |                                      |   |
| **Net earnings (net loss) for the period**                                                  | 4,178,709                                 | (4,705,215)                               | (225,214) |
| ** **                                                                                  |                                      |                                      |   |
| **Basic net earnings (net loss) per        share from continuing operations** (Note 15)     | 0.088                                     | (0.121)                                   | (0.006) |
| ** **                                                                                  |                                      |                                      |   |
| **Basic net earnings (net loss) per        share from discontinued operation** (Note 15)    | 0.003                                     | (0.005)                                   | (0.001) |
| ** **                                                                                  |                                      |                                      |   |
| **Total basic net earnings (net loss)        per share**                                    | 0.091                                     | (0.126)                                   | (0.007) |
| ** **                                                                                  |                                      |                                      |   |
| **Diluted net earnings (net loss) per        share from continuing operations** (Note 15)   | 0.086                                     | (0.121)                                   | (0.006) |
| ** **                                                                                  |                                      |                                      |   |
| **Diluted net earnings (net loss) per        share from discontinued operation** (Note 15)  | 0.003                                     | (0.005)                                   | (0.001) |
| ** **                                                                                  |                                      |                                      |   |
| **Total diluted net earnings (net loss)        per share**                                  | 0.089                                     | (0.126)                                   | (0.007) |

Going concern (note 1)  The accompanying notes are an integral part of these consolidated financial  statements.

  Page 3

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Consolidated Statements of Cash Flows**  (expressed in Canadian dollars)

|                                                                                     | ******Periods        Ended February 28,** | ** ****Period        Ended May 31,** |
|------------------------------------------------------------------------------------------|-------------------------------------------|-------------------------------------------|
|                                                                                     | **2006**                                  | **2005**                                  | **2004** |
|                                                                                     | $****                                     | **$**                                     | **$** |
|                                                                                     | (12 months)                               | (9 months)                                | (12 months) |
|                                                                                     |                                      |                                      |   |
| **Cash flows from operating activities****from continuing operations**                   |                                      |                                      |   |
| Net earnings (net loss) from continuing operations        for the period                 | 4,027,552                                 | (4,539,475)                               | (194,406) |
| Items not affecting cash and cash equivalents                                            |                                      |                                      |   |
| Cost of mining properties abandoned or written        off                                | 1,124,145                                 | 4,694,495                                 | 287,077 |
| Depreciation of property, plant and equipment                                            | 4,470                                     | 3,268                                     | 2,567 |
| Amortization of intangible asset                                                         | 1,245                                     | 1,104                                     | 1,067 |
| Stock-based compensation costs                                                           | 341,068                                   | 312,494                                   | 158,099 |
| Gain on sale of short-term investments                                                   | (680,021)                                 | (423,034)                                 | (374,528) |
| Gain on sale of mining properties                                                        | (429,961)                                 | -                                         | - |
| Gain on sale of long-term investments                                                    | -                                         | (7,555)                                   | - |
| Loss on sale of property, plant and equipment                                            | 483                                       | -                                         | - |
| Future income taxes                                                                      | (5,405,455)                               | (332,076)                                 | - |
|                                                                                          | (1,016,474)                               | (290,779)                                 | (120,124) |
| Net change in non-cash working capital items        (Note 12a)                           | 252,991                                   | (834,148)                                 | (51,549) |
|                                                                                     |                                      |                                      |   |
|                                                                                     | (763,483)                                 | (1,124,927)                               | (171,673) |
| **Cash flows from operating activities        from****discontinued operation** (note 3d) | (581,859)                                 | (165,740)                                 | (30,808) |
| ** **                                                                               | (1,345,342)                               | (1,290,667)                               | (202,481) |
| **Cash flows from financing activities        from****continuing operations**            |                                           |                                           |  |
| Issuance of share capital (Note 12b)                                                     | 28,821,013                                | 4,476,676                                 | 8,599,397 |
| Share issue expenses (Note 12b)                                                          | (1,300,019)                               | (444,628)                                 | (626,136) |
| Cancellation of stock options                                                            | -                                         | -                                         | (53,734) |
|                                                                                     | 27,520,994                                | 4,032,048                                 | 7,919,527 |
| **Cash flows from financing activities        from****discontinued operation** (note 3d) | 3,000,000                                 | -                                         | - |
| ** **                                                                               | 30,520,994                                | 4,032,048                                 | 7,919,527 |
| **Cash flows from investing activities        from****continuing operations**            |                                           |                                           |   |
| Variation in short-term investments (Note        12b)                                    | (11,805,485)                              | 4,855,844                                 | (2,216,842) |
| Variation in deposit on exploration costs                                                | 49,430                                    | 100,570                                   | (150,000) |
| Variation in long-term investments                                                       | -                                         | 34,973                                    | - |
| Acquisition of mining properties (Note 12b)                                              | (5,866,656)                               | (2,614,739)                               | (1,804,110) |
| Grants cashed                                                                            | -                                         | 40,000                                    | 22,500 |
| Additions to property, plant and equipment                                               | -                                         | (8,062)                                   | (9,759) |
| Proceeds from disposal of property, plant        and equipment                           | 1,300                                     | -                                         | - |
| Deferred charges                                                                         | (341,722)                                 | -                                         | - |
| Acquisition of an intangible asset                                                       | -                                         | (700)                                     | (1,798) |
|                                                                                     | (17,963,133)                              | 2,407,886                                 | (4,160,009) |
| **Cash flows from investing activities        from****discontinued operation** (note 3d) | (8,074,910)                               | (2,459,869)                               | (368,679) |
| ** **                                                                               | (26,038,043)                              | (51,983)                                  | (4,528,688) |
| **Increase in cash and cash equivalents**                                                | 3,137,609                                 | 2,689,398                                 | 3,188,358 |
|                                                                                     |                                      |                                      |   |
| **Cash and cash equivalents - Beginning        of period**                               | 7,318,302                                 | 4,628,904                                 | 1,440,546 |
| **Cash and cash equivalents - End of        period**                                     | 10,455,911                                | 7,318,302                                 | 4,628,904 |
| ** **                                                                               |                                      |                                      |   |
| **Additional information**                                                               |                                      |                                      |   |
| Interest cashed                                                                          | 745,499                                   | 453,838                                   | 816,072 |
| Income taxes paid                                                                        | -                                         | 1,970                                     | 15,931 |

 

The accompanying notes are an integral part of these consolidated financial  statements.

  Page 4

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements****February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**1 Incorporation, nature of operations and going concern**

The company, incorporated under the Canada Business Corporations Act, is in  the business of acquiring and exploring mining properties. It has not yet determined  whether its properties contain ore reserves that are economically recoverable.  The recoverability of the amounts shown for mining properties is dependent upon  the existence of economically recoverable ore reserves, the ability of the company  to obtain necessary financing to complete the exploration and development of  its properties, and upon future profitable production or proceeds from the disposal  of properties.

The company must secure sufficient funding for meeting its existing commitments  for exploration and development programs and general and administration costs.

Management is periodically seeking additional forms of financing through the  issuance of new equity instruments, the exercise of outstanding common share  warrants and stock options to continue its operations, and while it has been  successful in doing so in the past, there can be no assurance it will be able  to do so in the future. Without such funding being available, the company may  be unable to continue its operations, and the amounts realized for the assets  could be less than the amounts reflected in these financial statements.

Although management has taken steps to verify title to mining properties in  which the company has an interest, in accordance with industry standards for  the current stage of exploration of such properties, these procedures do not  guarantee the company’s title. Property title may be subject to unregistered  prior agreements and non-compliant with regulatory requirements.

These consolidated financial statements have been prepared in accordance with  Canadian generally accepted accounting principles applicable to a going concern.  The application of generally accepted accounting principles on a going concern  basis may be inappropriate, since there is a doubt as to the validity of the  going concern assumption.

These consolidated financial statements do not reflect the adjustments to the  carrying values of assets and liabilities, the reported amounts of revenues  and expenses and the classification of balance sheet items were the going concern  assumption inappropriate, and these adjustments could be material. Management  did not take these adjustments into account as it believes in the validity of  the going concern assumption.

**2 Summary of significant accounting policies**

**Basis of consolidation**

The consolidated financial statements include the accounts of the company and  its wholly-owned subsidiary, Virginia Mines Inc., which was incorporated on  November 30, 2005. This subsidiary is a non-operating company as at February  28, 2006.

**Basis of presentation**

These financial statements have been prepared in accordance with Canadian generally  accepted accounting principles. These principles conform, in all material respects,  with United States generally accepted accounting principles, except as described  in note 18. The significant accounting policies, which have been consistently  applied, are summarized as follows.

**Use of estimates**

The preparation of financial statements in conformity with Canadian generally  accepted accounting principles requires management to make estimates and assumptions  that affect the amounts of assets and liabilities reported in the financial  statements. Those estimates and assumptions also affect the disclosure of contingencies  at the date of the financial statements and the reported amounts of revenues  and expenses for the reporting periods. Significant estimates include the carrying  amount of mining properties, the credit on duties refundable for loss, the refundable  tax credit for resources and certain accrued liabilities. Actual results could  differ from those estimates.

**Cash and cash equivalents**

Cash and cash equivalents consist of cash on hand, exploration funds, balances  with banks and highly liquid short-term investments with original maturities  of three months or less at the acquisition date.

Exploration funds consist of cash, term deposits and short-term investments  and represent the unexpended proceeds of financings under the terms of which  the company must spend the amounts on the exploration of mining properties.

 

Page 5

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**Short-term investments**

Short-term investments are valued at the lower of cost and market value.

**Long-term investment**

The long-term investment is recorded at cost. When the decline in value of  an investment is permanent, the investment in written down to its net realizable  value.

**Property, plant and equipment and depreciation**

Property, plant and equipment are recorded at cost less accumulated depreciation,  and are depreciated using the declining balance method at the rates of 20% for  office equipment and 30% for field equipment.

**Mining properties**

The company records its interests in mining properties and areas of geological  interest at cost less option payments received and other recoveries. Exploration  costs related to these interests and projects are capitalized on the basis of  specific claim blocks or areas of geological interest until the mining properties  to which they relate are placed into production, sold or abandoned. Management  reviews for impairment the carrying amount of mining properties on a regular  basis. These costs will be amortized over the estimated useful life of mining  properties following commencement of production or written off if the mining  properties are sold or projects are abandoned. General exploration costs not  related to specific mining properties are expensed as incurred.

**Intangible asset**

The intangible asset, which consists of Web site development expenses, is recorded  at cost less accumulated amortization, and is amortized using the declining  balance method at a rate of 30%.

**Deferred charges**

Deferred charges consist of expenses incurred with respect to the arrangement  entered into on March 31, 2006 between the company, Goldcorp Inc. and Virginia  Mines Inc.

**Credit on duties refundable for loss and refundable tax credit for  resources**

The company is entitled to a credit on duties refundable for loss under the  Mining Duties Act. This credit on duties refundable for loss on mining exploration  expenses incurred in the province of Quebec at a rate of 12% has been applied  against the costs incurred.

Furthermore, the company is entitled to a refundable tax credit for resources  for mining companies on qualified expenditures incurred after March 29, 2001.  The refundable tax credit for resources may reach 45% of qualified expenditures  incurred before June 12, 2003, 33.75% before March 30, 2004 and 38.75% thereafter.  This tax credit has been applied against the costs incurred. 

**Share capital**

Shares issued for non-monetary consideration are generally recorded at the  quoted market price of the shares over a reasonable period of time before and  after the agreement to issue the shares was announced.

Shares issued pursuant to flow-through financing agreements are recorded at  their fair value. Upon the acquisition of mining properties, the carrying value  may exceed the tax basis since the company renounces the deductions in favour  of the investors concerned.

Share issue expenses and future income taxes arising from the difference between  the carrying value and the tax basis of exploration costs are applied against  share capital.

**Government grants**

Government grants are recorded as revenue when the company has reasonable assurance  that it has complied and will continue to comply with all the conditions related  to the grant. Grants related to working capital are included in earnings when  the related expenses are incurred. Grants related to exploration costs are deducted  from the related mining properties.

 

Page 6 

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**Income taxes**

The company provides for income taxes using the liability method. Under this  method, future income tax assets and liabilities are determined based on deductible  or taxable temporary differences between financial statement values and tax  values of assets and liabilities using enacted or substantively enacted income  tax rates expected to be in effect for the period in which the differences are  expected to reverse.

The company establishes a valuation allowance against future income tax assets  if, based on available information, it is more likely than not that some or  all of the future income tax assets will not be realized.

**Basic and diluted earnings per share**

Basic earnings per share are calculated using the weighted average number of  participating shares outstanding during the period.

Diluted earnings per share are calculated using the weighted average number  of participating shares outstanding during the period, plus the effects of dilutive  potential participating shares outstanding during the period. The calculation  of diluted earnings per share is made using the treasury stock method, as if  all dilutive potential shares had been issued at the later of the beginning  of the year or the date of issuance, as the case may be, and as if the funds  obtained thereby had been used to purchase participating shares of the company  at the average quoted market value of the participating shares during the period.

**Stock-based compensation plan**

The company has established a stock-based compensation plan, which is described  in Note 11. Any consideration received from plan members upon the exercise of  stock options is credited to share capital. The company accounts for compensation  costs for all forms of stock-based compensation awarded to employees and non-employees,  including stock options, using a fair value based method.

**New accounting standards**

In January 2005, the CICA issued four new accounting standards relating to  financial instruments: Section 3855, “Financial Instruments — Recognition  and measurement”, Section 3865, “Hedges”, Section 1530, “Comprehensive  Income”, and Section 3251, “Equity”.

Section 3855 expands on Section 3860, “Financial Instruments —  Disclosure and Presentation”, by prescribing when a financial instrument  is to be recognized on the balance sheet and at what amount. It also specifies  how financial instrument gains and losses are to be presented.

Section 3865 provides alternative treatments to Section 3855 for entities that  choose to designate qualifying transactions as hedges for accounting purposes.  It replaces and expands on Accounting Guideline 13, “Hedging Relationships”,  and the hedging guidance in Section 1650, “Foreign Currency Translation”,  by specifying how hedge accounting is applied and what disclosures are necessary  when it is applied.

Section 1530, “Comprehensive Income”, introduces a new requirement  to temporarily present certain gains and losses outside net income.

Accordingly, Section 3250, “Surplus” has been revised as Section  3251, “Equity”.

Sections 1530, 3251, 3855 and 3865 apply to fiscal years beginning on or after  October 1, 2006. The company is currently analyzing the impact of these new  standards.

 Page 7

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**3 Discontinued operation**

During the fourth quarter of 2006, management decided to dispose of the Eleonore  mining property. At a special shareholders' meeting held on March 24, 2006,  a majority of the company's shareholders voted in favour of the plan of arrangement.  The transaction was completed on March 31, 2006 (see Note 17 on subsequent events).

(a) The assets and liabilities of the discontinued operation shown on the balance  sheets are as follows:

|                                                                                     | **As at February 28,** |
|------------------------------------------------------------------------------------------|------------------------|
|                                                                                     | **2006**               | **2005** |
|                                                                                     | $                      | $ |
|                                                                                     |                   |   |
| **Assets**                                                                               |                   |   |
| Current assets                                                                           |                   |   |
| Refundable tax credit for resources                                                      | 879,493                | - |
| Credit on duties refundable for loss                                                     | 166,820                | - |
| Other accounts receivable                                                                | 187,512                | - |
|                                                                                     |                   |   |
| Current assets of discontinued operation                                                 | 1,233,825              | - |
|                                                                                     |                   |   |
| Long-term assets of discontinued operation                                               |                   |   |
| Mining property                                                                          | 11,397,457             | 2,933,145 |
|                                                                                     |                   |   |
| **Total assets of discontinued operation**                                               | 12,631,282             | 2,933,145 |
|                                                                                     |                   |   |
| **Liabilities**                                                                          |                   |   |
| Current liabilities                                                                      |                   |   |
| Advances from Goldcorp Inc., non-interest-bearing,        and with no terms of repayment | 3,000,000              | - |
| Other accounts payable and accrued liabilities                                           | 1,435,716              | - |
|                                                                                     |                   |   |
|                                                                                     | 4,435,716              | - |
|                                                                                     |                   |   |
| Long-term liabilities                                                                    |                   |   |
| Future income taxes                                                                      | 86,318                 | - |
|                                                                                     |                   |   |
| **Total liabilities of discontinued        operation**                                   | 4,522,034              | - |

 

|                                                             | ******Periods        Ended February 28,** | ** ****Period ended        May 31,** |
|------------------------------------------------------------------|-------------------------------------------|-------------------------------------------|
|                                                             | **2006**                                  | **2005**                                  | **2004** |
|                                                             | **$**                                     | **$**                                     | **$** |
|                                                             | (12 months)                               | (9 months)                                | (12 months) |
|                                                             |                                      |                                      |   |
| Operating loss before income taxes                               | (394,348)                                 | (165,740)                                 | (30,808) |
|                                                             |                                      |                                      |   |
| Income tax recovery (note 3f)                                    | 545,505                                   | -                                         | - |
|                                                             |                                      |                                      |   |
| Net operating earnings (loss) from        discontinued operation | 151,157                                   | (165,740)                                 | (30,808) |

 

Page 8

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

  (c) The mining property disposed has varied as follows during the reporting  periods:

|                                                                                        | **Periods        Ended February 28,** |
|---------------------------------------------------------------------------------------------|---------------------------------------|
|                                                                                        | **2006**                              | **2005** |
|                                                                                        | $                                     | $ |
|                                                                                        | (12 months)                           | (9 months) |
| ** **                                                                                  |                                  |   |
| Mining property - Beginning of period                                                       | 160,994                               | 45,800 |
|                                                                                        |                                  |   |
| Costs incurred (claims and permits)                                                         | 31,130                                | 115,194 |
|                                                                                        |                                  |   |
| Mining property - End of period                                                             | 192,124                               | 160,994 |
|                                                                                        |                                  |   |
| Exploration costs - Beginning of period                                                     | 2,772,151                             | 427,476 |
|                                                                                        |                                  |   |
| Costs incurred during the period                                                            |                                  |   |
|                                                                                        |                                  |   |
| Analysis                                                                                    | 795,975                               | 246,494 |
| Drilling                                                                                    | 7,059,936                             | 1,935,325 |
| Geophysics                                                                                  | 248,629                               | 53,304 |
| Geology                                                                                     | 2,003,366                             | 777,781 |
| Stripping                                                                                   | 206,531                               | 130,877 |
| Transport                                                                                   | 2,380,411                             | 753,913 |
| Blasting                                                                                    | -                                     | 1,500 |
| Professional fees                                                                           | 2,192,219                             | 739,050 |
| Accommodation                                                                               | 301,275                               | 122,518 |
|                                                                                        | 15,188,342                            | 4,760,762 |
|                                                                                        |                                  |   |
| Credit on duties refundable for loss and        refundable tax credit         for resources | (6,755,160)                           | (2,416,087) |
|                                                                                        |                                  |   |
| Exploration costs - End of period                                                           | 11,205,333                            | 2,772,151 |
|                                                                                        |                                  |   |
| **Total mining property disposed**                                                          | 11,397,457                            | 2,933,145 |

(d) Cash and cash equivalents used by discontinued operation are as follows:

|                                                                                         | ******Periods        Ended February 28,** | ** ****Period Ended May 31,** |
|----------------------------------------------------------------------------------------------|-------------------------------------------|---------------------------------------------------|
|                                                                                         | **2006**                                  | **2005**                                          | **2004** |
|                                                                                         | **$**                                     | **$**                                             | **$** |
|                                                                                         | (12 months)                               | (9 months)                                        | (12 months) |
|                                                                                         |                                      |                                              |   |
| **Cash flows from operating activities**                                                     |                                      |                                              |   |
| Net earnings (net loss) from discontinued        operation                                   | 151,157                                   | (165,740)                                         | (30,808) |
| Future income taxes not affecting cash and        cash equivalents                           |   

 (545,505)                       |   

 -                                       |   

 - |
|                                                                                         | (394,348)                                 | (165,740)                                         | (30,808) |
| Change in non-cash working capital items                                                     |                                      |                                              |   |
| Amounts receivable                                                                           | (187,511)                                 | -                                                 | - |
|                                                                                         | (581,859)                                 | (165,740)                                         | (30,808) |
|                                                                                         |                                      |                                              |   |
| **Cash flows from financing activities**                                                     |                                      |                                              |   |
| Advances from Goldcorp Inc., non-interest-bearing,        and with no terms of repayment**** | 3,000,000                                 | -                                                 | - |
| ** **                                                                                   |                                      |                                              |   |
| **Cash flows from investing activities**                                                     |                                      |                                              |   |
| Acquisition of a mining property (note 3c)                                                   | (8,074,910)                               | (2,459,869)                                       | (368,679) |
|                                                                                         |                                      |                                              |   |
| **Cash and cash equivalents used by        discontinued operation**                          | (5,656,769)                               | (2,625,609)                                       | (399,487) |

Page 9

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

(e) Items not affecting cash and cash equivalents related to financing and  investing activities

|                                                                                                                                                                   | ** ****Periods        Ended February 28,** | **Period Ended May 31,** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|--------------------------|
|                                                                                                                                                                   | **2006**                                        | **2005**                 | **2004** |
|                                                                                                                                                                   | **$**                                           | **$**                    | **$** |
|                                                                                                                                                                   | (12 months)                                     | (9 months)               | (12 months) |
|                                                                                                                                                                   |                                            |                     |   |
| Credit on duties refundable        for loss and refundable tax credit receivable with respect to exploration        costs applied against the mining property disposed | 1,046,314                                       | -                        | - |
| Acquisition of a mining property        included in accounts payable and accrued liabilities                                                                           | 1,435,716                                       | -                        | - |

(f) The reconciliation of the income tax recovery from discontinued operation,  calculated using the combined federal and Quebec provincial statutory tax rate,  to the income tax recovery presented in the financial statements is detailed  as follows:

|                                                                                                         | ** ****Periods        Ended February 28,** | ** ****Period        Ended May 31,** |
|--------------------------------------------------------------------------------------------------------------|-------------------------------------------------|-------------------------------------------|
|                                                                                                         | **2006**                                        | **2005**                                  | **2004** |
|                                                                                                         | **$**                                           | **$**                                     | **$** |
|                                                                                                         | (12 months)                                     | (9 months)                                | (12 months) |
|                                                                                                         |                                            |                                      |   |
| Loss before income taxes from discontinued        operation                                                  | (394,348)                                       | (165,740)                                 | (30,808) |
|                                                                                                         |                                            |                                      |   |
| Combined federal and provincial income tax        rate of 34.85% in 2006 (35.74% in 2005 and 36.58% in 2004) | (137,000)                                       | (59,000)                                  | (11,000) |
| Non-taxable credit on duties refundable for        loss                                                      | (301,000)                                       | (204,000)                                 | (27,000) |
| Change in enacted tax rates                                                                                  | 5,000                                           | -                                         | - |
| Tax benefit not recognized previously                                                                        | (209,000)                                       | -                                         | - |
| Non-deductible expenses                                                                                      | 67,000                                          | 49,000                                    | 10,000 |
| Others                                                                                                       | 29,495                                          | 32,200                                    | 2,300 |
| Change in valuation allowance                                                                                | -                                               | 181,800                                   | 25,700 |
| Income tax recovery                                                                                          | (545,505)                                       | -                                         | - |
|                                                                                                         |                                            |                                      |   |
|                                                                                                         |                                            |                                      |   |
| The income tax recovery is detailed as follows:                                                              |                                            |                                      |   |
| Current income taxes                                                                                         | -                                               | -                                         | - |
| Future income taxes                                                                                          | (545,505)                                       | -                                         | - |

The future income tax liability in the amount of $86,318 is the excess of the  carrying amount of the disposed mining property over its tax value.

**4 Cash and cash equivalents**

|                      | **As at        February 28,** |
|---------------------------|-------------------------------|
|                      | **2006**                      | **2005** |
|                      | $                             | $ |
|                      |                          |   |
| Cash and cash equivalents | 10,455,911                    | 7,116,483 |
| Exploration funds         | -                             | 201,819 |
|                      | 10,455,911                    | 7,318,302 |

 

Page 10

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**5 Short-term investments**

|                                                                                                                                                                                                                                                                                 | **As at February 28,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|
|                                                                                                                                                                                                                                                                                 | **2006**               | **2005** |
|                                                                                                                                                                                                                                                                                 | $                      | $ |
|                                                                                                                                                                                                                                                                                 |                   |   |
| Investments in public companies (quoted market        value: $6,387,600;         $4,385,794 as at February 28, 2005)                                                                                                                                                                 | 4,883,109              | 3,146,900 |
| Bonds and other securities, bearing interest        at annual rates ranging from 3.41% to 12.75% (from 2.3% to 12.75% as at        February 28, 2005), maturing between March 2005 and April 2016 (quoted        market value: $16,324,229; $5,279,132 as at February 28, 2005) | 16,246,800             | 5,049,833 |
|                                                                                                                                                                                                                                                                                 | 21,129,909             | 8,196,733 |

**6 Amounts receivable**

|                                                                                                                       | **As at        February 28,** |
|----------------------------------------------------------------------------------------------------------------------------|-------------------------------|
|                                                                                                                       | **2006**                      | **2005** |
|                                                                                                                       | $                             | $ |
|                                                                                                                       |                          |   |
| Refundable tax credit for resources                                                                                        | 5,698,499                     | 2,563,874 |
| Credit on duties refundable for loss                                                                                       | 1,914,727                     | 1,314,670 |
| Interest receivable                                                                                                        | 229,593                       | 63,371 |
| Amounts receivable under agreements with        mining exploration companies                                               | 54,353                        | 541,215 |
| Commodity taxes receivable                                                                                                 | 324,262                       | 359,039 |
| Loans to service providers related to the        exercise of stock options, non-interest-bearing, cashed on April 25, 2006 | 664,291                       | - |
| Others                                                                                                                     | 16,431                        | 240,356 |
|                                                                                                                       | 8,902,156                     | 5,082,525 |

 

**7 Prepaid expenses**

|               | **As at        February 28,** |
|--------------------|-------------------------------|
|               | **2006**                      | **2005** |
|               | $                             | $ |
|               |                          |   |
| Investor relations | 11,360                        | 24,358 |
| Permits            | -                             | 10,764 |
| Others             | 74,503                        | 28,989 |
|               | 85,863                        | 64,111 |

**8 Long-term investment**

|                                                                                                                                                  |                                | **As at        February 28,** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|-------------------------------|
|                                                                                                                                                  | **Interest**                        | **2006**                      | **2005** |
|                                                                                                                                                  | **%**                               | $                             | $ |
|                                                                                                                                                  |                                |                          |   |
| Azimut Exploration Inc., a public mining        exploration company, at carrying value (quoted market value:         $42,500 as at February 28, 2005) | - 

 (0.79 as at February 28, 2005) | -                             | 13,585 |

Page 11

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**9 Mining properties**

|               | ******#        Claims****# permits** | ******Undivided        interest****%** | ******Balance        as at March 1, 2005****$** | ******Costs        incurred****$** | **Option        payments, mining properties abandoned, written off or sold, credit on        duties refundable for loss and refundable tax credit for resources****$** | ******Balance        as at February 28, 2006****$** |
|--------------------|--------------------------------------|----------------------------------------|-------------------------------------------------|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
|               |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Corvet Est (c)     | 723                                  |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property    |                                 | 100                                    | 55,401                                          | -                                  | (25,000)                                                                                                                                                               | 30,401                                              |
| Exploration costs  |                                 |                                   | 950,271                                         | 751                                | 86,707                                                                                                                                                                 | 1,037,729                                           |
|               |                                 |                                   | 1,005,672                                       | 751                                | 61,707                                                                                                                                                                 | 1,068,130                                           |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Coulon             | 1,186                                |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property    |                                 | 100                                    | 109,429                                         | 79,573                             | (25,930)                                                                                                                                                               | 163,072                                             |
| Exploration costs  |                                 |                                   | 688,477                                         | 35,865                             | (116,103)                                                                                                                                                              | 608,239                                             |
|               |                                 |                                   | 797,906                                         | 115,438                            | (142,033)                                                                                                                                                              | 771,311                                             |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Auclair            | 240                                  |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property    |                                 | 100                                    | 239,138                                         | 12,268                             | -                                                                                                                                                                      | 251,406                                             |
| Exploration costs  |                                 |                                   | 146,567                                         | 2,921                              | (1,344)                                                                                                                                                                | 148,144                                             |
|               |                                 |                                   | 385,705                                         | 15,189                             | (1,344)                                                                                                                                                                | 399,550                                             |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Lac Gayot          | 75                                   |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property    | 4                                    | 50                                     | 38,731                                          | 8,929                              | -                                                                                                                                                                      | 47,660                                              |
| Exploration costs  |                                 |                                   | 682,471                                         | 9,248                              | 9,078                                                                                                                                                                  | 701,067                                             |
|               |                                 |                                   | 721,472                                         | 18,177                             | 9,078                                                                                                                                                                  | 748,727                                             |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Poste Lemoyne Ext. | 211                                  |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property    |                                 | 100                                    | 15,455                                          | 1,058,750                          | -                                                                                                                                                                      | 1,074,205                                           |
| Exploration costs  |                                 |                                   | 417,258                                         | 5,858                              | 6,570                                                                                                                                                                  | 429,686                                             |
|               |                                 |                                   | 432,713                                         | 1,064,608                          | 6,570                                                                                                                                                                  | 1,503,891                                           |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Lac Noëlla    | 20                                   |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property    | 1                                    | 100                                    | 36,833                                          | 9,900                              | (36,833)                                                                                                                                                               | 9,900                                               |
| Exploration costs  |                                 |                                   | 317,619                                         | 368,879                            | (678,594)                                                                                                                                                              | 7,904                                               |
|               |                                 |                                   | 354,452                                         | 378,779                            | (715,427)                                                                                                                                                              | 17,804                                              |
|               |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| (forward)          |                                 |                                   | 3,697,920                                       | 1,592,942                          | (781,449)                                                                                                                                                              | 4,509,413                                           |

Page 12

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

|              | ******#        Claims****# permits** | ******Undivided        interest****%** | ******Balance        as at March 1, 2005****$** | ******Costs        incurred****$** | **Option        payments, mining properties abandoned, written off or sold, credit on        duties refundable for loss and refundable tax credit for resources****$** | ******Balance        as at February 28, 2006****$** |
|-------------------|--------------------------------------|----------------------------------------|-------------------------------------------------|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
|              |
|              |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| (brought forward) |                                 |                                   | 3,697,920                                       | 1,592,942                          | (781,449)                                                                                                                                                              | 4,509,413                                           |
|              |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Megatem           | 882                                  |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property   |                                 | 45                                     | 23,768                                          | -                                  | -                                                                                                                                                                      | 23,768                                              |
| Exploration costs |                                 |                                   | 696,962                                         | 350,887                            | (128,721)                                                                                                                                                              | 919,128                                             |
|              |                                 |                                   | 720,730                                         | 350,887                            | (128,721)                                                                                                                                                              | 942,896                                             |
|              |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Megatem III       | 463                                  |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property   |                                 | 49                                     | -                                               | -                                  | -                                                                                                                                                                      | -                                                   |
| Exploration costs |                                 |                                   | 207,097                                         | -                                  | -                                                                                                                                                                      | 207,097                                             |
|              |                                 |                                   | 207,097                                         | -                                  | -                                                                                                                                                                      | 207,097                                             |
|              |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Others (d)        |                                 |                                   |                                            |                               |                                                                                                                                                                   |                                                |
| Mining property   |                                 |                                   | 317,457                                         | 262,495                            | (144,628)                                                                                                                                                              | 435,324                                             |
| Exploration costs |                                 |                                   | 329,527                                         | 709,008                            | (565,953)                                                                                                                                                              | 472,582                                             |
|              |                                 |                                   | 646,984                                         | 971,503                            | (701,581)                                                                                                                                                              | 907,906                                             |
|              |                                 |                                   | 5,272,731                                       | 2,915,332                          | (1,620,751)                                                                                                                                                            | 6,567,312                                           |

Page 13

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

|                    | **# Claims****# permits****** | ******Undivided        interest****%** | ******Balance        as at June 1, 2004****$** | ******Costs        incurred****$** | **Option        payments, mining properties abandoned, written off or sold, credit on        duties refundable for loss and refundable tax credit for resources**

**$** | ******Balance        as at February 28, 2005****$** |
|-------------------------|-------------------------------|----------------------------------------|------------------------------------------------|------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
|                         |
| Corvet Est ( Lake Eade) | 473                           |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Mining property         |                          | 100                                    | 49,705                                         | 5,808                              | (112)                                                                                                                                                                    | 55,401                                              |
| Exploration costs       |                          |                                   | 345,728                                        | 1,246,392                          | (641,849)                                                                                                                                                                | 950,271                                             |
|                    |                          |                                   | 395,433                                        | 1,252,200                          | (641,861)                                                                                                                                                                | 1,005,672                                           |
|                    |                          |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Auclair                 | 218                           |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Mining property         |                          | 100                                    | 246,212                                        | 14,571                             | (21,645)                                                                                                                                                                 | 239,138                                             |
| Exploration costs       |                          |                                   | 159,798                                        | 72                                 | (13,303)                                                                                                                                                                 | 146,567                                             |
|                    |                          |                                   | 406,010                                        | 14,643                             | (34,948)                                                                                                                                                                 | 385,705                                             |
|                    |                          |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Coulon (b)              | 1,505                         |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Mining property         |                          | 100                                    | 139,429                                        | -                                  | (30,000)                                                                                                                                                                 | 109,429                                             |
| Exploration costs       |                          |                                   | 686,119                                        | 4,194                              | (1,836)                                                                                                                                                                  | 688,477                                             |
|                    |                          |                                   | 825,548                                        | 4,194                              | (31,836)                                                                                                                                                                 | 797,906                                             |
|                    |                          |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Lac Gayot               | 75                            |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Mining property         | 4                             | 50                                     | 29,536                                         | 12,253                             | (3,058)                                                                                                                                                                  | 38,731                                              |
| Exploration costs       |                          |                                   | 732,937                                        | 7,418                              | (57,611)                                                                                                                                                                 | 682,741                                             |
|                    |                          |                                   | 762,473                                        | 19,668                             | (60,669)                                                                                                                                                                 | 721,472                                             |
|                    |                          |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Poste Lemoyne Ext.      | 113                           |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| Mining property         |                          | 50                                     | 14,240                                         | 1,215                              | -                                                                                                                                                                        | 15,455                                              |
| Exploration costs       |                          |                                   | 414,705                                        | 5,184                              | (2,631)                                                                                                                                                                  | 417,258                                             |
|                    |                          |                                   | 428,945                                        | 6,399                              | (2,631)                                                                                                                                                                  | 432,713                                             |
|                    |                          |                                   |                                           |                               |                                                                                                                                                                     |                                                |
| (forward)               |                          |                                   | 2,818,409                                      | 1,297,104                          | (772,045)                                                                                                                                                                | 3,343,468                                           |

Page 14

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

|              | ******#        Claims****# permits** | ******Undivided        interest****%** | **B****alance        as at June 1, 2004****$** | ******Costs        incurred****$** | **Option        payments, mining properties abandoned, written off or sold, credit on        duties refundable for loss and refundable tax credit for resources****$** | ******Balance        as at February 28, 2005****$** |
|-------------------|--------------------------------------|----------------------------------------|------------------------------------------------|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
|              |
|              |                                 |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| (brought forward) |                                 |                                   | 2,818,409                                      | 1,297,104                          | (772,045)                                                                                                                                                              | 3,343,468                                           |
|              |                                 |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Lac Noëlla   | 20                                   |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Mining property   | 1                                    | 100                                    | 62,207                                         | 10,658                             | (36,032)                                                                                                                                                               | 36,833                                              |
| Exploration costs |                                 |                                   | 622,822                                        | 84,594                             | (389,797)                                                                                                                                                              | 317,619                                             |
|              |                                 |                                   | 685,029                                        | 95,252                             | (425,829)                                                                                                                                                              | 354,452                                             |
|              |                                 |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Megatem           | 882                                  |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Mining property   |                                 | 45                                     | 31,192                                         | -                                  | (7,424)                                                                                                                                                                | 23,768                                              |
| Exploration costs |                                 |                                   | 802,898                                        | 210,848                            | (316,784)                                                                                                                                                              | 696,962                                             |
|              |                                 |                                   | 834,090                                        | 210,848                            | (324,208)                                                                                                                                                              | 720,730                                             |
|              |                                 |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Megatem III       | 463                                  |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Mining property   |                                 | 49                                     | -                                              | -                                  | -                                                                                                                                                                      | -                                                   |
| Exploration costs |                                 |                                   | 223,200                                        | -                                  | (16,103)                                                                                                                                                               | 207,097                                             |
|              |                                 |                                   | 223,200                                        | -                                  | (16,103)                                                                                                                                                               | 207,097                                             |
|              |                                 |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Others (a)        |                                 |                                   |                                           |                               |                                                                                                                                                                   |                                                |
| Mining property   |                                 |                                   | 871,193                                        | 158,064                            | (711,800)                                                                                                                                                              | 317,457                                             |
| Exploration costs |                                 |                                   | 3,582,229                                      | 28,119                             | (3,280,821)                                                                                                                                                            | 329,527                                             |
|              |                                 |                                   | 4,453,422                                      | 186,183                            | (3,992,621)                                                                                                                                                            | 646,984                                             |
|              |                                 |                                   | 9,014,150                                      | 1,789,387                          | (5,530,806)                                                                                                                                                            | 5,272,731                                           |

Page 15

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**Change in mining properties**

|                                                                                        | **Periods        Ended February 28,** |
|---------------------------------------------------------------------------------------------|---------------------------------------|
|                                                                                        | **2006**                              | **2005** |
|                                                                                        | $                                     | $ |
|                                                                                        | (12 months)                           | (9 months) |
| ** **                                                                                  |                                  |   |
| Balance - Beginning of period                                                               | 5,272,731                             | 9,014,150 |
|                                                                                        |                                  |   |
| Costs incurred during the period                                                            |                                  |   |
|                                                                                        |                                  |   |
| Claims and permits                                                                          | 1,431,915                             | 202,569 |
| Analysis                                                                                    | 99,794                                | 56,224 |
| Drilling                                                                                    | 406,742                               | 472,547 |
| Geophysics                                                                                  | 106,761                               | 154,553 |
| Geology                                                                                     | 193,970                               | 215,498 |
| Stripping                                                                                   | -                                     | 81,217 |
| Transport                                                                                   | 317,010                               | 327,322 |
| Blasting                                                                                    | 39,577                                | 986 |
| Professional fees                                                                           | 290,542                               | 245,117 |
| Accommodation                                                                               | 29,021                                | 33,354 |
|                                                                                        | 2,915,332                             | 1,789,387 |
|                                                                                        |                                  |   |
| Option payments                                                                             | (35,000)                              | (40,000) |
| Mining properties abandoned, written off        or sold                                     | (1,130,042)                           | (4,694,495) |
| Credit on duties refundable for loss and        refundable tax credit         for resources | (455,709)                             | (796,311) |
|                                                                                        | (1,620,751)                           | (5,530,806) |
|                                                                                        |                                  |   |
| Balance - End of period                                                                     | 6,567,312                             | 5,272,731 |

a) On October 9, 1996, Soquem Inc. (SOQUEM) granted the company the option  to acquire a 50% interest in the Kogaluk property in consideration of $1,000,000  in exploration work to be carried out no later than October 9, 2005. The agreement  terminated on October 9, 2005.

  b) On June 15, 2004, the company granted Noranda inc. the option to acquire  a 50% interest in the Coulon property in consideration of the following: (i)  a cash consideration of $30,000 upon signing of the agreement and cash payments  of $50,000, $50,000, $50,000 and $70,000 no later than June 1, 2005, 2006, 2007  and 2008, respectively; (ii) the carrying-out of exploration work totalling  $1,000,000 per year no later than June 1, 2005, 2006, 2007, 2008 and 2009, respectively,  and totalling $1,500,000 per year no later than June 1, 2010 and 2011, respectively.  In May 2006, Noranda inc. abandoned this option.

  (c) On May 6, 2005, the company granted Placer Dome (CLA) Limited the option  to acquire a 50% interest in the Corvet Est property for a consideration consisting  of $90,000 in cash and exploration work totalling $4,000,000 to be carried out  no later than May 6, 2010. As at February 28, 2006, Placer Dome (CLA) Limited  had made a cash payment of $25,000 and had spent $628,485 on exploration work.

(d) On December 9, 2005, the company granted Exploration Matamec Inc. the option  to acquire a 50% interest in the La Grande Est property for a consideration  consisting of $50,000 in cash and exploration work totalling $600,000 to be  carried out no later than October 31, 2008. As at February 28, 2006, Exploration  Matamec Inc. had made a cash payment of $10,000 and had not carried out any  exploration work.

 Page 16

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**10 Share capital**

**(a) Change in issued and fully paid share capital**

|                                | **Periods        Ended February 28,** | **Period Ended May 31,** |
|-------------------------------------|---------------------------------------|--------------------------|
|                                |                                  | **2006**                 |   | **2005** |   | **2004** |
|                                |                                  | (12 months)              |   | (9 months) |   | (12 months) |
|                                | **Number**                            | **Amount**               | **Number** | **Amount** | **Number** | **Amount** |
|                                |                                  | **$**                    |   | **$** |   | **$** |
| Balance - Beginning of period       | 38,959,078                            | 56,253,306               | 36,638,915 | 52,159,266 | 30,701,686 | 45,060,060 |
| Stock options exercised             | 2,426,309                             | 4,519,684                | 839,632 | 692,764 | 382,562 | 276,597 |
| Warrants exercised                  | 2,156,096                             | 5,648,018                | 1,080,198 | 2,344,655 | 166,667 | 250,000 |
| Unit options exercised              | 140,070                               | 631,386                  | -- | -- | -- | -- |
| Unit options - warrants exercised   | 35,017                                | 280,117                  | -- | -- | -- | -- |
| Acquisition of a mining property    | 160,000                               | 1,040,000                | -- | -- | -- | -- |
| Private placements*                 | 4,280,000                             | 18,826,110               | 400,333 | 1,501,249 | 5,388,000 | 7,346,538 |
|                                | 48,156,570                            | 87,198,621               | 38,959,078 | 56,697,934 | 36,638,915 | 52,933,195 |
| Share issue expenses for the period | --                                    | (1,726,662)              | -- | (444,628) | -- | (773,929) |
| Balance - End of period             | 48,156,570                            | 85,471,959               | 38,959,078 | 56,253,306 | 36,638,915 | 52,159,266 |
|                                |                                  |                     |   |   |   |   |

* Private placements are presented net of the fair value of warrants amounting  to $524,389 (nil in 2005 – $735,462 in 2004).

Page 17

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**(b) Warrants**

The following tables present the warrant activity since June 1, 2003 and summarize  information about outstanding warrants:

|                                  | **Twelve-Month Period        Ended February 28, 2006** |
|---------------------------------------|--------------------------------------------------------|
|                                  | ** ****Number**                                   | ** ****Carrying****value** | **Weighted****average****exercise price** |
|                                  | ** **                                             | **$** | **$** |
|                                  |                                                   |   |   |
| Outstanding as at March 1, 2005       | 1,988,022                                              | 554,380 | 2.01 |
| Granted*                              | 1,003,499                                              | 550,771 | 5.40 |
| Exercised                             | (2,156,096)                                            | (659,034) | 2.31 |
| Outstanding as at February 28, 2006** | 835,425                                                | 446,117 | 5.40 |

 

|                                | **Nine-Month        Period Ended February 28, 2005** |
|-------------------------------------|------------------------------------------------------|
|                                | ** ****Number**                                 | ** ****Carrying        v****alue** | **Weighted****average****exercise price** |
|                                | ** **                                           | **$** | **$** |
|                                |                                                 |   |   |
| Outstanding as at June 1, 2004      | 3,198,066                                            | 883,255 | 1.93 |
| Granted*                            | 24,000                                               | 12,984 | 3.75 |
| Exercised                           | (1,080,198)                                          | (341,859) | 1.85 |
| Matured                             | (153,846)                                            | - | 1.60 |
| Outstanding as at February 28, 2005 | 1,988,022                                            | 554,380 | 2.01 |

 

|                           | **Twelve-Month        Period Ended May 31, 2004** |
|--------------------------------|---------------------------------------------------|
|                           | ** ****Number**                              | ** ****Carrying****value** | **Weighted****average****exercise price** |
|                           | ** **                                        | **$** | **$** |
|                           |                                              |   |   |
| Outstanding as at June 1, 2003 | 1,037,180                                         | - | 1.66 |
| Granted*                       | 3,044,220                                         | 883,255 | 1.94 |
| Exercised                      | (166,667)                                         | - | 1.50 |
| Matured                        | (716,667)                                         | - | 1.71 |
| Outstanding as at May 31, 2004 | 3,198,066                                         | 883,255 | 1.93 |

* These warrants were granted in connection with private placements to common  shareholders and to agents as share issue expenses.

** These warrants expire September 11, 2006.

Page 18

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

The fair value of warrants granted has been estimated using the Black-Scholes  model with the following assumptions: 

|                                            | ** ****Periods        Ended February 28,** | **Period Ended****May        31,** |
|-------------------------------------------------|-------------------------------------------------|------------------------------------|
|                                            | **2006**                                        | **2005**                           | **2004** |
|                                            | ** **                                      | ** **                         | ** ** |
|                                            |                                            |                               |   |
| Risk-free interest rate                         | 2.90%                                           | 2.94%                              | 3.17% |
| Expected volatility                             | 55%                                             | 51%                                | 55% |
| Dividend yield                                  | Zero                                            | Zero                               | Zero |
| Weighted average expected life                  | 12 months                                       | 12 months                          | 18 months |
| Weighted average fair value of warrants granted | $0.549                                          | $0.541                             | $0.290 |

**11 Stock options, unit options and warrants**

**(a) Stock option plan**

The company established a stock option plan under which certain key employees,  officers, directors and suppliers may be granted stock options of the company.  A maximum of 6,480,842 stock options may be granted (maximum of 5% of the number  of common shares outstanding in favour of one person).

Options vest immediately and are exercisable over a maximum period of 10 years  following the grant date.

The following tables present the stock option activity since June 1, 2003 and  summarize information about fixed stock options outstanding and exercisable  as at February 28, 2006.

|                                                        | **Twelve-Month Period        Ended February 28, 2006** |
|-------------------------------------------------------------|--------------------------------------------------------|
|                                                        | ******Number**                                         | ******Carrying****value** | **Weighted****average****exercise price** |
|                                                        | ** **                                             | **$** | **$** |
|                                                        |                                                   |   |   |
| Outstanding and exercisable as at March 1,        2005      | 2,213,390                                              | 460,466 | 1.02 |
| Granted                                                     | 213,000                                                | 341,068 | 6.91 |
| Exercised                                                   | (2,426,309)                                            | (801,534) | 1.53 |
| Outstanding and exercisable as at         February 28, 2006 | -                                                      | - | - |

 

|                                                        | **Nine-Month Period        Ended February 28, 2005** |
|-------------------------------------------------------------|------------------------------------------------------|
|                                                        | ** ****Number**                                 | ** ****Carrying****value** | **Weighted****average****exercise price** |
|                                                        | ** **                                           | **$** | **$** |
|                                                        |                                                 |   |   |
| Outstanding and exercisable as at June 1,        2004       | 2,749,941                                            | 214,439 | 0.77 |
| Granted                                                     | 304,000                                              | 312,494 | 2.54 |
| Exercised                                                   | (839,632)                                            | (65,193) | 0.75 |
| Cancelled*                                                  | (1,000)                                              | (1,274) | 3.62 |
| Outstanding and exercisable as at         February 28, 2005 | 2,213,309                                            | 460,466 | 1.02 |

* During the nine-month period ended February 28, 2005, 1,000 stock options  were cancelled. The fair value of stock options in the amount of $1,274 has  been reflected in the contributed surplus.

Page 19

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

|                                                  | **Twelve-Month Period        Ended May 31, 2004** |
|-------------------------------------------------------|---------------------------------------------------|
|                                                  | ** ****Number**                              | ** ****Carrying****value** | **Weighted****average****exercise price** |
|                                                  | ** **                                        | **$** | **$** |
|                                                  |                                              |   |   |
| Outstanding and exercisable as at June 1,        2003 | 3,977,682                                         | 65,540 | 0.72 |
| Granted                                               | 254,500                                           | 158,099 | 1.16 |
| Exercised                                             | (382,562)                                         | (9,200) | 0.69 |
| Matured or cancelled**                                | (1,099,679)                                       | - | 0.71 |
| Outstanding and exercisable as at May 31,        2004 | 2,749,941                                         | 214,439 | 0.77 |

  ** During the twelve-month period ended May 31, 2004, the company cancelled  1,074,679 stock options for a cash consideration of $53,734 (unit price of $0.05),  which has been reflected in the deficit.

The fair value of stock options granted has been estimated using the Black-Scholes  model with the following assumptions:

|                                           | ** ****Periods        Ended February 28,** | **Period Ended****May        31,** |
|------------------------------------------------|-------------------------------------------------|------------------------------------|
|                                           | **2006**                                        | **2005**                           | **2004** |
|                                           | ** **                                      | ** **                         | ** ** |
|                                           |                                            |                               |   |
| Risk-free interest rate                        | 2.95%                                           | 3.98%                              | 3.98% |
| Expected volatility                            | 57%                                             | 56.5%                              | 54% |
| Dividend yield                                 | Zero                                            | Zero                               | Zero |
| Weighted average expected life                 | 12 months                                       | 51 months                          | 66 months |
| Weighted average fair value of options granted | $1.601                                          | $1.030                             | $0.620 |

The Black-Scholes option valuation model was developed for use in estimating  the fair value of traded options which have no vesting restrictions and are  fully transferable. In addition, option valuation models require the input of  highly subjective assumptions, including the expected stock price volatility.  Because the stock options granted to key employees, officers, directors and  suppliers have characteristics significantly different from those of traded  options, and because changes in subjective assumptions can materially affect  the estimated fair value, management believes that the existing models do not  necessarily provide an accurate measure of the fair value of stock options granted  to key employees, officers and directors.

The fair value of stock options granted during the year has been included in  the statements of earnings under captions “Professional fees” and  “General exploration costs”, and in Shareholders’ Equity under  caption “Stock options”.

Page 20

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**(b) Unit options**

The following table presents the unit option activity since March 1, 2005 and  summarizes information about unit options outstanding and exercisable as at  February 28, 2006.

|                                                          | ******Number** | ******Carrying****value** | **Weighted****average****exercise price** |
|---------------------------------------------------------------|----------------|---------------------------|-------------------------------------------|
|                                                          | ** **     | **$**                     | **$**                                     |
|                                                          |           |                      |                                      |
| Outstanding and exercisable as at March 1,        2005        | -              | -                         | -                                         |
| Granted*                                                      | 235,800        | 249,301                   | 4.10                                      |
| Exercised                                                     | (140,070)      | (148,123)                 | 4.10                                      |
| Outstanding and exercisable as at         February 28, 2006** | 95,730         | 101,178                   | 4.10                                      |

* Each unit option entitles its holder, upon exercise, to one common share  and one-quarter of one warrant (Note 11c).

** On March 8, 2006, the unit options outstanding as at February 28, 2006 were  exercised.

The following table summarizes information about unit options exercisable as  at February 28, 2006.

|   | **Exercise****price** | ** ****Number** | **Weighted****average****remaining****contractual****life** | **Weighted****average****exercise****price** |
|--------|-----------------------|----------------------|-------------------------------------------------------------|----------------------------------------------|
|   | **$**                 |                 | **(years)**                                                 | **$**                                        |
|   |                  |                 |                                                        |                                         |
|   | 4.10                  | 95,730               | 0.027                                                       | 4.10                                         |

The fair value of unit options granted to agents during the year in connection  with private placements has been as share issue expenses.

The fair value of unit options granted has been estimated using the Black-Scholes  model with the following assumptions:

|                                                       |      |
|------------------------------------------------------------|-----------|
| Risk-free interest rate                                    | 2.77%     |
| Expected volatility                                        | 56%       |
| Dividend yield                                             | Zero      |
| Weighted average expected life                             | 12 months |
| Weighted average fair value of unit options        granted | $1.057    |

**(c) Warrants**

The following table present the warrant activity since March 1, 2005 and summarizes  information about warrants outstanding and exercisable as at February 28, 2006.

|                                                        | ** ****Number** | ** ****Carrying****value** | **Weighted****average****exercise price** |
|-------------------------------------------------------------|----------------------|---------------------------------|-------------------------------------------|
|                                                        | ** **           | **$**                           | **$**                                     |
|                                                        |                 |                            |                                      |
| Outstanding and exercisable as at March 1,        2005      | -                    | -                               | -                                         |
| Further to the exercise of unit options                     | 35,017               | 91,024                          | 5.40                                      |
| Exercised                                                   | (35,017)             | (91,024)                        | 5.40                                      |
| Outstanding and exercisable as at         February 28, 2006 |        

 -     |        

 -                |        

 -                          |

Page 21

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**12 Cash flows**

(a) Net change in non-cash working capital items

|                                     | ** ****Periods        Ended February 28,** | ** ****Period Ended        May 31,** |
|------------------------------------------|-------------------------------------------------|-------------------------------------------|
|                                     | **2006**                                        | **2005**                                  | **2004** |
|                                     | **$**                                           | **$**                                     | **$** |
|                                     | (12 months)                                     | (9 months)                                | (12 months) |
|                                     |                                            |                                      |   |
| Income taxes recoverable                 | -                                               | 13,694                                    | (13,694) |
| Amounts receivable                       | (84,949)                                        | (643,649)                                 | 6,777 |
| Prepaid expenses                         | (21,752)                                        | (11,143)                                  | (19,362) |
| Accounts payable and accrued liabilities | 359,692                                         | (193,050)                                 | (25,270) |
|                                     | 252,991                                         | (834,148)                                 | (51,549) |

(b) Items not affecting cash and cash equivalents related to financing and  investing activities

|                                                                                                                                                        | ******Periods        Ended February 28,** | ** ****Period        Ended May 31,** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|-------------------------------------------|
|                                                                                                                                                        | **2006**                                  | **2005**                                  | **2004** |
|                                                                                                                                                        | **$**                                     | **$**                                     | **$** |
|                                                                                                                                                        | (12 months)                               | (9 months)                                | (12 months) |
|                                                                                                                                                        |                                      |                                      |   |
| Long-term investments transferred to short-term        investments                                                                                          | 13,585                                    | 110,034                                   | 20,143 |
| Credit on duties refundable for loss and        refundable tax credit receivable with respect to exploration costs applied        against mining properties | 7,613,226                                 | 3,878,544                                 | 2,349,102 |
| Acquisition of mining properties included        in accounts payable and accrued liabilities                                                                | 44,797                                    | 793,921                                   | 886,142 |
| Stock options exercised and included in share        capital                                                                                                | 801,534                                   | 65,303                                    | 9,200 |
| Warrants exercised and included in share        capital                                                                                                     | 659,034                                   | 341,859                                   | - |
| Warrants granted and included in share capital                                                                                                              | 524,389                                   | 12,984                                    | - |
| Warrants granted and included in issue expenses                                                                                                             | 26,382                                    | -                                         | - |
| Unit options granted and included in issue        expenses                                                                                                  | 249,301                                   | -                                         | - |
| Unit options exercised and included in share        capital                                                                                                 | 148,123                                   | -                                         | - |
| Mining properties sold in consideration of        short-term investments                                                                                    | 434,085                                   | -                                         | - |
| Mining property purchased in consideration        of the issuance of shares                                                                                 | 1,040,000                                 | -                                         | - |
| Future income taxes applied against issue        expenses                                                                                                   | 150,960                                   | -                                         | - |

Page 22

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**13 Related party transactions**

The company entered into the following transactions with companies owned by  directors:

|                                      | ** ****Periods        Ended February 28,** | ** ****Period        Ended May 31,** |
|-------------------------------------------|-------------------------------------------------|-------------------------------------------|
|                                      | **2006**                                        | **2005**                                  | **2004** |
|                                      | **$**                                           | **$**                                     | **$** |
|                                      | (12 months)                                     | (9 months)                                | (12 months) |
|                                      |                                            |                                      |   |
| Expenses capitalized in mining properties | 390,139                                         | 322,866                                   | 277,428 |
| Additions to office equipment             | -                                               | -                                         | 4,000 |
| Management fees                           | 300,000                                         | 251,859                                   | 216,080 |
| Rent and office expenses                  | 628,922                                         | 369,918                                   | 478,150 |
| Professional fees                         | -                                               | 3,500                                     | 2,500 |
| General exploration costs                 | 82,175                                          | 119,350                                   | 119,780 |
|                                      | 1,401,236                                       | 1,067,513                                 | 1,097,938 |

  These transactions are in the normal course of operations and are measured at  the exchange amount, which is the amount of consideration established and agreed  to by the related parties.

**14 Income taxes**

The reconciliation of the income tax recovery, calculated using the combined  federal and Quebec provincial statutory tax rate, to the income tax recovery  presented in the financial statements is detailed as follows:

|                                                                                                      | ** ****Periods        Ended February 28,** | ** ****Period Ended        May 31,** |
|-----------------------------------------------------------------------------------------------------------|-------------------------------------------------|-------------------------------------------|
|                                                                                                      | **2006**                                        | **2005**                                  | **2004** |
|                                                                                                      | **$**                                           | **$**                                     | **$** |
|                                                                                                      | (12 months)                                     | (9 months)                                | (12 months) |
|                                                                                                      |                                            |                                      |   |
| Loss before income taxes                                                                                  | (1,377,903)                                     | (4,871,551)                               | (225,214) |
|                                                                                                      |                                            |                                      |   |
| Combined federal and provincial income tax        rate of 34.85% in 2006 (35.74% in 2005; 36.58% in 2004) | (480,000)                                       | (1,741,000)                               | (71,000) |
| Non-taxable credit on duties refundable for        loss                                                   | (133,000)                                       | 5,000                                     | (128,000) |
| Tax benefit not recognized previously                                                                     | (4,528,000)                                     | (332,076)                                 | - |
| Non-deductible stock-based compensation                                                                   | 79,000                                          | 112,000                                   | 58,000 |
| Expiry of operating losses carried forward                                                                | 127,000                                         | 285,000                                   | 317,000 |
| Share issue expenses not affecting earnings                                                               | -                                               | (59,000)                                  | (53,000) |
| Non-taxable portion of capital gain                                                                       | (90,000)                                        | (92,000)                                  | (91,000) |
| Change in enacted tax rates                                                                               | (484,000)                                       | -                                         | - |
| Others                                                                                                    | 103,545                                         | (134,000)                                 | (24,400) |
| Change in valuation allowance                                                                             | -                                               | 1,624,000                                 | (7,600) |
|                                                                                                      |                                            |                                      |   |
| Income tax recovery                                                                                       | (5,405,455)                                     | (332,076)                                 | - |
|                                                                                                      |                                            |                                      |   |
|                                                                                                      |                                            |                                      |   |
| The income tax recovery is detailed as follows:                                                           |                                            |                                      |   |
| Current income taxes                                                                                      | -                                               | -                                         | - |
| Future income taxes                                                                                       | (5,405,455)                                     | (332,076)                                 | - |

Page 23

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

The significant components of future income tax assets and liabilities are  detailed as follows: 

|                          | **As at        February 28,** |
|-------------------------------|-------------------------------|
|                          | **2006**                      | **2005** |
|                          | $                             | $ |
|                          |                          |   |
| Future income tax assets      |                          |   |
| Mining properties             | 4,532,318                     | 4,144,000 |
| Losses carried forward        | 855,000                       | 424,000 |
| Share issue expenses          | 560,000                       | 150,000 |
| Others                        | 11,000                        | 19,000 |
|                          | 5,958,318                     | 4,737,000 |
| Valuation allowance           | -                             | (4,737,000) |
|                          | 5,958,318                     | - |
|                          |                          |   |
| Future income tax liabilities |                          |   |
| Deferred charges              | 72,000                        | - |
|                          |                          |   |
| Net future income tax assets  | 5,886,318                     | - |

Page 24

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**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**15 Earnings per share**

For the nine-month period ended February 28, 2005, and the twelve-month period  ended May 31, 2004, there was no difference between basic and diluted loss per  share since the dilutive effect of stock options, warrants and unit options  was not included in the calculation; otherwise, the effect would have been anti-dilutive.  Accordingly, the diluted loss per share for those years was calculated using  the basic weighted average number of shares outstanding (45,531,808 in 2006;  37,389,773 in 2005; 33,784,997 in 2004).

  

|                                                                                                                                                                  | ** ****Periods        Ended February 28,** | ** ****Period Ended        May 31,** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|-------------------------------------------|
|                                                                                                                                                                  | **2006**                                        | **2005**                                  | **2004** |
|                                                                                                                                                                  | **$**                                           | **$**                                     | **$** |
|                                                                                                                                                                  | (12 months)                                     | (9 months)                                | (12 months) |
|                                                                                                                                                                  |                                            |                                      |   |
| Basic weighted average number of shares outstanding                                                                                                                   | 45,531,808                                      | 37,389,773                                | 33,784,997 |
| Stock options                                                                                                                                                         | 1,007,757                                       | 1,620,869                                 | 1,243,648 |
| Unit options                                                                                                                                                          | 102,976                                         | -                                         | - |
| Warrants                                                                                                                                                              | 431,081                                         | 407,371                                   | - |
|                                                                                                                                                                  |                                            |                                      |   |
| Diluted weighted average number of shares        outstanding                                                                                                          |   

 47,073,622                            |   

 39,418,013                      |   

 35,028,645 |
|                                                                                                                                                                  |                                            |                                      |   |
| Items excluded from the calculation of diluted        loss per share because the exercise price was greater than the average        quoted value of the common shares |                                            |                                      |   |
| Stock options                                                                                                                                                         | -                                               | 166,000                                   | 129,500 |
| Warrants                                                                                                                                                              | -                                               | 24,000                                    | 3,198,066 |

**16 Financial instruments**

**Fair value**

Cash and cash equivalents, amounts receivable and accounts payable and accrued  liabilities are financial instruments whose fair value approximates their carrying  value due to their short-term maturity or the current market rates.

The fair value of short-term investments, determined based on quoted market  values, amounts to $22,711,829 and $9,664,926 as at February 28, 2006 and 2005,  respectively.

**Interest rate risk**

As at February 28, 2006 and 2005, the company’s exposure to interest  rate risk is summarized as follows:

> Cash and cash equivalentsVariable interest rateShort-term investmentsAs described in Note 5Amounts receivableNon-interest-bearing Accounts payable and accrued liabilitiesNon-interest-bearing

**17 Subsequent events**

(a) On March 24, 2006, the shareholders of the company approved a plan of arrangement  (effective March 31, 2006) involving Goldcorp Inc. (“Goldcorp”),  the company and Virginia Mines Inc. (“Virginia Mines”), a wholly-owned  subsidiary of the company. Further to this plan of arrangement, the following  events occurred:

The company transferred to Virginia Mines the assets not related to the Eleonore  property at fair market value for a consideration consisting of the issuance  of shares by Virginia Mines and the assumption by Virginia Mines of the liabilities  not related to the Eleonore property.

Page 25

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

Virginia Mines acquired from the company a production royalty on the Eleonore  property for a consideration consisting of a cash payment of $16,099,000 and  the issuance of 400 common shares of its share capital.

The company then subscribed for common shares of Virginia Mines for a cash  consideration of $16,099,000.

The stated capital of the company was reduced by an amount equal to the sum  of:

(i) the fair market value of the shares of Virginia Mines issued to the company  as part of the consideration for the transfer of the assets not related to the  Eleonore property and the acquisition of the production royalty;

(ii) $16,099,000 less the total of the fair market value of all the company’s  shares retained by the company further to the exercise of the right to dissent  by shareholders of the company.

The reduction of the stated capital of the company’s shares was paid  in kind through a distribution of the shares of Virginia Mines to the shareholders  of the company. Each shareholder of the company received 0,5 share of Virginia  Mines for each share of the company.

In addition, each shareholder of the company exchanged his shares at a ratio  of 0.4 share of Goldcorp for one share of the company.

The company’s warrants outstanding as at March 31, 2006 ceased to be  exercisable for shares of the company. Each warrant now entitles its holder  to receive, upon the exercise in accordance with its terms, the number of shares  of Goldcorp and Virginia Mines that the holder would have received under the  plan of arrangement if, immediately before the effective time, such holder had  been the registered holder of the number of shares of the company he would have  been entitled to upon exercise.

(b) These transactions between the company and Virginia Mines will be recorded  at the carrying value since they were entered into by related parties.

(c) Virginia Mines will continue the operations of the company, except for  the Eleonore property.

**18 United States generally accepted accounting principles (U.S. GAAP)**

The consolidated financial statements have been prepared in accordance with  Canadian generally accepted accounting principles (GAAP) which differ, in certain  respects, from U.S. GAAP.

Additional disclosures required under U.S. GAAP have been provided in the consolidated  financial statements and notes. In addition, the following summarizes the principal  differences between Canadian and U.S. GAAP and other required disclosures under  U.S. GAAP.

**Mining properties**

Under U.S. GAAP, the acquisition cost of mining properties and exploration  costs incurred are expensed in the year in which they are incurred.

**Short-term investments**

Under U.S. GAAP, short-term investments would be classified as “available  for sale” securities. Consequently, these securities would be carried  at fair value, with any unrealized holding gains or losses at balance sheet  date being reflected in other comprehensive loss, net of income taxes. Under  Canadian GAAP, short-term investments are carried at the lower of cost and market  value. Gains or losses are determined under the specific identification method  for term deposits and the average cost method for shares.

**Stock-based compensation plan**

Until May 31, 2003, the company accounted for the costs related to its stock-based  compensation plan using the intrinsic value method in accordance with APB 25.  No expense was recognized for stock options as they were granted at the market  price on the grant date, therefore having no intrinsic value. On June 1, 2003,  the company adopted Statement of Financial Accounting Standard (“SFAS”)  123 and applied prospectively its transitional provisions. SFAS 123 requires  all stock-based compensation awards, including stock options, to be accounted  for at fair value. Under the transitional provisions, all new awards granted  to employees on or after June 1, 2003 are accounted for at fair value. Awards  outstanding as at May 31, 2003, if not subsequently modified, continue to be  accounted for under APB 25. The fair value of awards is determined using the  Black-Scholes option valuation model with compensation costs recognized in 

Page 26

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

earnings over the required period of service. The company provides additional  pro-forma disclosures as required under SFAS 123 for stock options granted before  the adoption of this standard.

**Flow-through shares**

Canadian tax legislation allows a company to issue flow-through shares when  the company agrees to incur qualifying expenditures in accordance with the Income  Tax Act and to renounce the related tax deductions in favour of investors who  acquire these shares.

In accordance with Canadian GAAP, upon issuance of flow-through shares, funds  received are recorded as share capital. When qualifying expenditures are renounced,  share capital is reduced by the amount of the tax benefits renounced in favour  of investors, calculated using the effective tax rate of the company for the  period.

Under U.S. GAAP, the premium or discount related to the price of flow-through  shares, if any, is accounted for separately. When the company renounces to qualifying  expenditures, the related premium or discount is recognized through a reversal  of the tax provision, and future income tax liabilities are adjusted by the  same amount through a charge to income. In addition, under U.S. GAAP, amounts  received upon the issuance of flow-through shares and not spent on exploration  costs are presented separately as exploration funds. Exploration funds must  be excluded from cash in the statement of cash flows and presented in financing  activities.

**Income taxes**

Under Canadian GAAP, the tax recovery resulting from the carry-forward of a  loss recognized in a year subsequent to the year in which the loss was incurred  is presented as a component of earnings before discontinued operations, regardless  of the classification of the loss in the previous year.

Under U.S. GAAP, the subsequent recognition of the tax effect of items related  to share capital must be recognized in the same manner as the transaction that  created them.

**New accounting standards**

In March 2005, the Emerging Issues Task Force of the Financial Accounting Standards  Board (“EITF”) 04-6, Accounting for Stripping Costs Incurred During  Production in the Mining Industry, was issued. Under this standard, stripping  costs incurred during the production phase of a mine are variable production  costs that should be included in the cost of inventory produced during the period  in which the stripping costs are incurred. EITF 04-6 is effective for periods  beginning after December 15, 2005. The company has not yet determined the impact  of this new standard.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections  — a replacement of APB No. 20 and FASB No. 3. This statement replaces  APB 20, Accounting Changes and SFAS 3, Reporting Accounting Changes in Interim  Financial Statements, and changes the requirements for the accounting for and  reporting of changes in accounting policies. This statement applies to all voluntary  changes in accounting policies. It also applies to changes required by an accounting  pronouncement in the unusual instance that the pronouncement does not include  specific transitional provisions. This statement generally requires that a company  accounts for the adoption of a new accounting principle by applying such principle  to prior periods as if it had always been used. This statement is effective  for accounting changes and corrections of errors made in fiscal years ended  after December 15, 2005.

Page 27

----

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**Reconciliation of net loss (net earnings) to conform with U.S. GAAP**

The following table presents the significant adjustments to net loss (net earnings)  and net loss (net earnings) per share from continuing operations to conform  with U.S. GAAP.

  

|                                                                                                      | ******Periods        Ended February 28,**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** ****Period        Ended May 31,** |
|-----------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|
|                                                                                                      | **2006**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **2005**                                  | **2004** |
|                                                                                                      | **$**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | **$**                                     | **$** |
|                                                                                                      | (12 months)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | (9 months)                                | (12 months) |
|                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                      |   |
| Net loss (net earnings) from continuing operations        for the period in accordance with Canadian GAAP | (4,027,552)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 4,539,475                                 | 194,406 |
| Mining properties                                                                                         | 1,294,581                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | (3,741,419)                               | 1,820,394 |
| Repricing of stock options                                                                                | (2,529,009)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 2,096,155                                 | 83,370 |
| Tax effect of flow-through shares                                                                         | 129,264                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 82,706                                    | - |
| Income taxes                                                                                              | 556,259                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | -                                         | - |
|                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                      |   |
| Net loss (net earnings) from continuing operations        for the year in accordance with U.S. GAAP       | (4,576,457) 

2,976,287 

2,098,170 

  

  

  

  

 Net loss (net earnings) from discontinued        operation for the period in accordance with Canadian GAAP 

(151,157) 

165,740

30,808

 Mining properties 

        8,464,312 

        2,459,869 

        368,679 

  

  

  

  

 Net loss from discontinued operation for        the year in accordance with U.S. GAAP 

8,313,155      

2,625,609      

399,487      

 Net loss for the year in accordance with        U.S. GAAP 

3,736,698 

5,601,896

2,496,657

 Other comprehensive loss 

  

  

  

 Unrealized gains on short-term investments      

 (113,727) 

 (1,038,672) 

 (320,908) 

 Unrealized (gains) losses on long-term investments      

 - 

 119,445 

 (189,741) 

 Long-term investment transferred to short-term        investments 

28,915 

- 

- 

 Comprehensive loss 

        3,651,886 

        4,682,669 

        1,987,008 

  

  

  

  

 Basic net loss (net earnings) from continuing        operations per share in accordance with U.S. GAAP (Note 15) 

(0,101) 

0,080 

0,062 

  

  

  

  

 Basic net loss form discontinued operation        per share in accordance with U.S GAAP (Note 15) 

0,183 

0,070 

0,012 

  

  

  

  

 Total basic net loss per share in accordance        with U.S. GAAP 

0,082 

0,150 

0,074 

  

  

  

  

 Diluted net loss (net earnings) from continuing        operations per share in accordance with U.S. GAAP (Note 15) 

(0,097) 

0,080 

0,062 

  

  

  

  

 Diluted net loss from discontinued operation        per share in accordance with U.S GAAP (Note 15) 

0,183 

0,070 

0,012 

  

  

  

  

 Total diluted net loss per share in accordance        with U.S. GAAP 

0,086 

0,150 

0,074 

  

  

  

  

Page 28

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

As a result of the above adjustments to net loss, differences with respect  to shareholders' equity under U.S. GAAP are as follows: 

  

**As at February 28,**

  

**2006**

**2005**

  

 $ 

 $ 

  

  

  

 Share capital 

  

  

 Share capital in accordance with Canadian        GAAP 

 85,471,959 

 56,253,306 

 Stock options 

 - 

 460,466 

 Unit options 

 101,178 

 - 

 Warrants 

 446,117 

 554,380 

 Stock-based compensation costs 

 1,200,092 

 3,729,101 

 Tax effect of flow-through shares 

 211,340 

 31,826 

 Income tax recovery 

 556,259 

 - 

  

  

  

 Share capital in accordance with U.S. GAAP      

 87,986,945 

 61,029,079 

  

  

  

 Contributed surplus 

  

  

 Contributed surplus in accordance with Canadian        GAAP 

 1,274 

 1,274 

 Stock options cancelled 

 703,756 

 703,756 

  

  

  

 Contributed surplus in accordance with U.S.        GAAP 

 705,030 

 705,030 

  

  

  

 Accumulated deficit 

  

  

 Deficit in accordance with Canadian GAAP      

 25,052,049 

 29,230,758 

 Mining properties 

 17,964,769 

 8,205,876 

 Stock-based compensation costs 

 1,903,848 

 4,432,857 

 Tax effect of flow-through shares 

 211,340 

 82,076 

 Income tax recovery 

 556,259 

 - 

  

  

  

 Deficit in accordance with U.S. GAAP 

 45,688,265 

 41,951,567 

  

  

  

 Other accumulated comprehensive income 

  

  

 Unrealized gains on short-term investments        and exploration funds 

  

  

 Balance - Beginning of period 

 1,468,193 

 429,521 

 Unrealized gains arising during the period      

 113,727 

 1,038,672 

  

  

  

 Balance - End of period 

 1,581,920 

 1,468,193 

  

  

  

 Unrealized gains on long-term investments      

  

  

 Balance - Beginning of period 

 28,915 

 148,360 

 Unrealized losses incurred during the period      

 - 

 (119,445) 

 Long-term investment transferred to short-term        investments 

 (28,915) 

 - 

  

  

  

 Balance - End of period 

 - 

 28,915 

  

  

  

 Other accumulated comprehensive income 

 1,581,920 

 1,497,108 

Page 29

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**Balance sheets**

  

**As at February 28,**

  

**2006**

**2005**

  

 $ 

 $ 

  

  

  

 Current assets 

  

  

 Cash and cash equivalents 

 10,455,911 

 7,116,483 

 Exploration funds 

 - 

 201,819 

 Short-term investments 

 22,711,829 

 9,664,926 

 Amounts receivable 

 8,902,156 

 5,082,525 

 Prepaid expenses 

 85,863 

 64,111 

 Current assets of discontinued operation      

 1,233,825 

 - 

 Future income tax assets 

        5,886,318 

        - 

  

 49,275,902 

 22,129,864 

  

  

  

 Deposit on exploration costs 

 - 

 49,430 

 Long-term investments 

 - 

 42,500 

 Property, plant and equipment 

 11,217 

 17,470 

 Intangible assets 

 2,907 

 4,152 

 Deferred charges 

        341,722 

        - 

** **

        49,631,748 

        22,243,416 

** **

  

  

 Current liabilities 

  

  

 Accounts payable and accrued liabilities      

  

  

 Related companies 

 94,033 

 207,227 

 Others 

 430,051 

 756,539 

 Current liabilities of discontinued operation      

        4,435,716 

        - 

  

 4,959,800 

 936,766 

 Long-term liabilities of discontinued operation      

        86,318 

        - 

  

        5,046,318 

        963,766 

  

  

  

 Shareholders' Equity 

  

  

 Share capital 

 87,986,945 

 61,029,079 

 Contributed surplus 

 705,030 

 705,030 

 Deficit 

 (45,688,265) 

 (41,951,567) 

 Other accumulated comprehensive income 

        1,581,920 

        1,497,108 

** **

        44,585,630 

        21,279,650 

** **

        49,631,748 

        22,243,416 

Page 30

**VIRGINIA GOLD MINES INC.**  (an exploration company)**Notes to Consolidated Financial Statements  February 28, 2006 and 2005 and May 31, 2004**  (expressed in Canadian dollars)

**Statements of cash flows**

  

** ****Periods        Ended February 28,**

** ****Period Ended        May 31,**

  

**2006**

**2005**

**2004**

  

**$**

**$**

**$**

  

 (12 months) 

 (9 months) 

 (12 months) 

  

  

  

  

 Operating activities 

 (6,630,139) 

 (3,699,666) 

 (1,953,283) 

 Financing activities 

 27,722,813 

 8,459,133 

 3,533,482 

 Investing activities 

 (12,096,477) 

 4,982,625 

 (2,378,399) 

  

  

  

  

 Increase (decrease) in cash and cash equivalents      

 8,996,197 

 9,742,092 

 (798,200) 

  

  

  

  

 Cash and cash equivalents used by discontinued        operation 

 (5,656,769) 

 (2,625,609) 

 (399,487) 

  

  

  

  

 Cash and cash equivalents - Beginning of        period 

7,116,483 

 - 

1,197,687 

  

  

  

  

 Cash and cash equivalents - End of period      

10,455,911 

7,116,483 

- 

**Statements of earnings**

  

** ****Periods        Ended February 28,**

** ****Period Ended        May 31,**

  

**2006**

**2005**

**2004**

  

**$**

**$**

**$**

  

 (12 months) 

 (9 months) 

 (12 months) 

  

  

  

  

 Revenues 

 1,407,732 

 736,043 

 1,069,245 

 Expenses 

 (1,551,207) 

 (3,962,330) 

 (3,167,415) 

  

  

  

  

 Loss before income taxes and discontinued        operation 

 (143,475) 

 (3,226,287) 

 (2,098,170) 

  

  

  

  

 Income tax recovery 

 (4,719,932) 

 (250,000) 

 - 

  

  

  

  

 Net earnings (net loss) from continuing operations      

 4,576,457 

 (2,976,287) 

 (2,098,170) 

  

  

  

  

 Net loss from discontinued operation 

 (8,313,155) 

 (2,625,609) 

 (399,487) 

  

  

  

  

 Net loss for the period in accordance with        U.S. GAAP 

(3,736,698) 

(5,601,896) 

(2,497,657) 

Page 31 |