|  

**MANAGEMENT’S DISCUSSION and ANALYSIS        for the Period Ended February 28, 2006** |
|------------------------------------------------------------------------------------------------------|

 

**Scope of management’s financial analysis**

The following analysis should be read in conjunction with the Company’s  consolidated financial statements and the accompanying notes for the periods  ended February 28, 2006 and 2005 and for the period ended May 31, 2004. The  consolidated financial statements have been prepared in accordance with Canadian  generally accepted accounting principles (GAAP). Significant differences in  measurement and disclosure from Canadian generally accepted accounting principles  in the United States, or U.S. GAAP, are set out in Note 18 of our consolidated  financial statements.

**Nature of Activities**

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 will periodically have to raise additional funds  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.

The Company specializes in searching for gold and base metal deposits in almost  unexplored territories of Quebec. Most of its activities take place in the central  part of Quebec, particularly in the James Bay area, which comprises several  Archean greenstone belts known as being very favourable to the presence of economic  gold and base metal deposits. This region differentiates from others by its  accessibility and by the existence of clear agreements ruling the access to  the territory. The Company is among the most active exploration companies in  Quebec with a vast portfolio of properties.

**Selected Consolidated Financial Information**

|                                                                                                                                                                                                                                                                                                                                                                     | **Results        for the periods ended******                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                     | **February 28,**                                                                                                 | **February 28,** | **May 31,** |
|                                                                                                                                                                                                                                                                                                                                                                     | **2006**                                                                                                         | **2005** | **2004** |
|                                                                                                                                                                                                                                                                                                                                                                     | **($)**                                                                                                          | **($)** | **($)** |
| * *                                                                                                                                                                                                                                                                                                                                                                 | *(12 months)*                                                                                                    | *(9 months)* | *(12 months)* |
| Revenues      Interest and others                                                                                                                                                                                                                                                                                                                                        | 1,407,732                                                                                                        | 736,043 | 1,069,245 |
| **Expenses**      Management fees       General exploration costs       Grants, credit on duties refundable for loss and refundable tax credit for      resources       Cost of abandoned or written-off mining properties      Gain on sale of short-term investments      Bad debts       Gain on sale of long-term investments      Gain on sale of mining properties | 2,423,943        474,205        (126,676)        1,124,145        (680,021)        --        --        (429,961) | 1,062, 691        440,498        (149,371)        4,694,495         (423,034)         (10,130)         (7,555)         -- | 1,113,824        342,784        (115,636)        287,077         (374,528)        10,130         --         -- |
|                                                                                                                                                                                                                                                                                                                                                                     | 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**                                                                                                                                                                                                                                                                                                                                                         | (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**                                                                                                                                                                                                                                                                                                           |   

 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**                                                                                                                                                                                                                                                                                            | 0.088                                                                                                            | (0.121) | (0.006) |
| **Basic net earnings (net loss) per        share from discontinued operation**                                                                                                                                                                                                                                                                                           | 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**                                                                                                                                                                                                                                                                                          | 0.086                                                                                                            | (0.121) | (0.006) |
| **Diluted net earnings (net loss) per        share from discontinued operation**                                                                                                                                                                                                                                                                                         | 0.003                                                                                                            | (0.005) | (0.001) |
| **Total diluted net earnings (net loss)        per share**                                                                                                                                                                                                                                                                                                               | 0.089                                                                                                            | (0.126) | (0.007) |

**Other information**

|                            | **As at**        |
|---------------------------------|------------------|
|                            | **February 28,** | **February 28,** | **May 31,** |
|                            | **2006**         | **2005** | **2004** |
|                            | **($)**          | **($)** | **($)** |
| **Total assets**                | 66,014,597       | 28,952,184 | 29,930,204 |
| **Shareholders****'****equity** | 60,968,479       | 28,038,668 | 28,731,417 |

 

Since its incorporation, Virginia Gold Mines (“Virginia”) has not  paid any cash dividends on its outstanding common shares. Any future dividend  payment will depend on the Company’s financial needs to found its exploration  programs and its future financial growth, and any other factor that the board  deem necessary to consider in the circumstances. It is highly unlikely that  any dividends will be paid in the near future.

  Twelve-month period ended February 28, 2006 compared to the nine-month period  ended February 28, 2005

**Exploration Activities**

**Activities Summary**

During the course of the 2005-2006 period, the exploration expenditures of  Virginia amounted to $17,145,964 in comparison with expenditures of $6,788,078  in 2004-2005. This increase is of course due to the intense activity generated  on the Éléonore property, which remained by far the major exploration  project of the Company during the 2005-2006 period with exploration expenditures  totalling $15,188,342. From March 2005 to December 2005, Virginia pursued its  economic evaluation of the Roberto system through an extensive exploration program  that included more than 53,000 metres of diamond drilling, MAG and IP surveys  as well as geological mapping and mechanical stripping. This work program allowed  the confirmation of the Roberto system over 1.9 kilometres laterally and to  a vertical depth of 900 metres. The system remains open in its lateral extensions  and at depth.

In December 2005, the Company announced the signing of a very important agreement  with Goldcorp Inc. (“Goldcorp”) with a view to acquire from Virginia  the Éléonore gold property in a friendly transaction whereby Goldcorp  will acquire, through an approved arrangement plan, all of the issued and outstanding  shares of Virginia. Under the agreement, each Virginia shareholder will receive  0.40 of a Goldcorp common share and 0.50 of a share in a new public exploration  company (“Virginia Mines”) for each share held in Virginia. Virginia  will transfer to Virginia Mines the assets not related to the Éléonore  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 Éléonore property and a sliding scale 2% net  smelter return royalty on the Éléonore property. Following the  transaction, the exploration program resumed gradually in January 2006 on the  property and Virginia ended up supervising the work on behalf of Goldcorp during  the transition period.

In May 2005, the Company entered into an agreement with Placer Dome (CLA) Limited  Inc. (“Placer Dome”) on the Corvet Est project. Under the agreement,  Placer Dome has the option to acquire a 50% participating interest in the property  in return for $4 million exploration work and cash payments totalling $90,000  over the next five years.

The Company also announced in May 2005 the signing of an agreement with Augyva  Mining Resources (“Augyva”) with regards to the sale by Virginia  of an iron-ore property called Lac Duncan. Under this agreement, Augyva acquires  a 100% interest in the property in return for the issuance to Virginia of 1.5  million shares of Augyva. Virginia also retains diverse royalties.

In October 2005, the Company announced the signing of an agreement with GlobeStar  Mining Corporation (“GlobeStar”) pursuant to which Virginia acquires  TGW Corporation Inc.’s 50% interest in the Poste Lemoyne Ext. property  in consideration of the issuance of 160,000 shares of Virginia to GlobeStar.  GlobeStar retains a 1% Net Smelter Returns (N.S.R.). The Poste Lemoyne Ext.  property is the host to total resources (measured and inferred) of 94,854 oz  at a grade of 14.5 g/t Au (National Instrument 43-101). The resource calculation  was done by Christian D’Amours, geologist.

During the period, Falconbridge Limited withdrew from the agreement signed  in June 2004 by its predecessor Noranda Inc., which was granted the option to  acquire a 50% participating interest in the Coulon property. Consequently, Virginia  solely owns the property.

Virginia was also relatively active on the MegaTEM and Noella projects but  results were deceiving.

Paul Archer, engineer and vice-president of Virginia, reviewed all technical  data contained in the following. Mr. Archer is a qualified person as defined  by National Instrument 43-101.

**Éléonore Property**

The Éléonore project is located in the Lac Ell region, to the  east of the Opinaca Reservoir, approximately 320 km to the north of the town  of Matagami, James Bay. This property consists of 1,230 designated claims totalling  64,431 hectares. Virginia holds these claims 100%. However, the Company announced  in December 2005 the signing of a major agreement with Goldcorp with a view  of acquiring the Éléonore gold property from Virginia in a friendly  transaction.

In June 2001, Virginia initiated a regional reconnaissance program in the Opinaca  reservoir area, which led to the discovery of Au-Cu-Ag showings within the Lac  Ell diorite. Subsequent exploration programs identified new Au-Cu-Ag showings  in the diorite intrusion and also outlined a few Au-As-(Sb) showings in the  sediments to the north, culminating with the discovery of the Roberto zone at  the beginning of the summer of 2004.

This discovery prompted a major geological mapping and mechanical trenching  program with a large excavator and by fall 2004, the Roberto system was exposed  at surface for 250 m laterally with very impressive results, including 19.75  g/t Au over 10 m, 17.63 g/t Au over 7 m and 10.81 g/t Au over 9 m. Several other  trenches were also dug outside of the Roberto mineralized system to verify other  targets on the property, with a few ones returning significant results of up  to 6.35 g/t over 6 m in channel sampling (TR-20). 

A diamond-drill program was also initiated at the end of August 2004 and at  the end of February 2005, 69 holes (ELE-04-01 to ELE-05-69) totalling 17,188  m had been drilled to test the Roberto mineralized system and 28 holes (ELR-04-01  to ELR-05-28) totalling 5,585 m had tested various other geological and geophysical  targets on the property. This drilling program allowed the tracing of the Roberto  system over a minimal strike length of 450 m and to a minimal depth of 350 m.  Drilling produced very encouraging results on a continuous basis, some of the  better intercepts including 18.85 g/t Au over 16 m (ELE-04-02), 14.30 g/t Au  over 20 m (ELE-04-09), 12.69 g/t Au over 19 m (ELE-04-30) and 22.27 g/t Au over  11.05 m (ELE-05-54), 11.07 g/t Au over 9.2 m (ELE-04-16), and 19.62 g/t Au over  11 m (ELE-05-46). Holes that tested other targets in the periphery of the Roberto  system also yielded some interesting results including 34.66 g/t Au over 6.6  m in the Veine zone (ELE-04-34), 9.50 g/t Au over 4 m in hole ELR-04-08 as well  as several large intersections anomalous in gold in the TR-20 area.

Highly encouraged by these results, the Company pursued from March 2005 to  December 2005 the economic evaluation of the Roberto system with a major exploration  program, including more than 53,000 metres of diamond drilling (holes ELE-05-070  to 157 and ELR-05-29 to 76), MAG and IP surveys as well as geological mapping  and mechanical stripping. A geochemical survey (B Horizon) covering a vast portion  of the property was also carried out in September 2005. The Roberto system continued  producing excellent drill results with many large, high-grade intersections  including 22.56 g/t Au over 15 m (ELE-05-151B), 11.23 g/t Au over 10.8 m (ELE-05-150),  20.66 g/t Au over 12.05 m (ELE-05-113), 22.27 g/t Au over 11.05 m (ELE-05-54),  19.24 g/t Au over 13 m (ELE-05-69), 19.64 g/t Au over 11 m (ELE-05-46), 12.87  g/t Au over 11 m (ELE-05-44) and 11.8 g/t Au over 24.2 m (ELE-05-117). The Roberto  system was also traced at surface on the north shore of the Opinaca reservoir,  notably in trenches TR-52 (11.7 g/t Au over 5 m and 22.3 g/t Au over 4 m in  channels) and TR-20 EXT (5.49 g/t Au over 10 m in channel sampling). The exploration  program allowed outlining the Roberto system over 1.9 kilometres laterally and  to a vertical depth of 900 metres. The system remains open in its lateral extensions  and at depth. Furthermore, drilling carried out in the periphery of the Roberto  system established the emergence of new auriferous zones with great potential,  notably the Mayapo zone (7.89 g/t Au / 8 m; 3.04 g/t Au / 20.25 m); the Conglo  zone (6.11 g/t Au / 16 m) and the South zone (4.11 g/t Au / 5.25 m; 3.10 g/t  Au / 4 m).

In December 2005, the Company announced the conclusion of a major agreement  with Goldcorp with the view to the acquisition from Virginia of the Éléonore  gold deposit in a friendly transaction. After a halt to the activities for the  Holiday Season, work has progressively resumed at the Éléonore  property in January 2006. Work was carried out by Virginia on behalf of Goldcorp  and consisted mainly in drilling but no results were available at the end of  February 2006.**Coulon Property**

The Coulon property is located within NTS 23L/11, 23L/12, 23L/13, 23L/14, 23M/03  and 23M/04, in the Caniapiscau area, in the James Bay region. The property consists  of 1,186 claims covering a surface area of 58,638 hectares (approximately 586  km2). The camp is centred at UTM coordinates (NAD 27, zone 19) 356290 E 6057960  N, around 15 km north of Fontanges Airport. The property is held 100% by Virginia  since Falconbridge Limited withdrawn from the agreement signed on June 15, 2004,  whereby Noranda Inc. (predecessor to Falconbridge) was granted the option to  acquire an undivided 50% interest in the property in consideration of exploration  expenditures totalling $8 million in the next seven years and payments totalling  $250,000.

The Coulon project comes from a regional reconnaissance survey carried out  by Virginia in the summer of 2003 that had outlined many new interesting polymetallic  showings within the Coulon and Pitaval Archean volcanic belts. Subsequent work  including airborne and ground Mag-EM surveys as well as a drilling campaign  in the summer of 2004 had led to the discovery of very significant volcanogenic  sulphide lenses within the DOM and DOM NORD areas. 

The exploration campaign carried out in the summer of 2004 consisted of eight  (8) holes (CN-04-18 to 25) as well as many surface work programs. Work conducted  in the DOM NORD area exposed two sulphide lenses within a volcanic sequence  more than 500 m thick. Best drill results obtained in the summer of 2004 included  12.65% Zn, 1.54 % Pb, 1.36% Cu, 125.31 g/t Ag and 0.3 g/t Au over 4.7 m (CN-04-23)  in lens 08 and 2.91% Zn, 0.13% Pb, 1.12% Cu, 34.25 g/t Ag and 0.29 g/t Au over  21.8 m (CN-04-25) in lens 09-25.

A similar volcanic sequence was also defined in the DOM area. A massive sulphide  lens (16-17), discovered in drilling in the winter of 2004 was exposed by stripping  at surface in the course of summer 2004 and returned values of 4.87% Zn, 0.38%  Pb, 1.01% Cu and 57.1 g/t Ag over 15.6 m in channel sampling. Holes CN-04-18  to 21 tested the extension of lens 16-17 to a vertical depth of 75 m but no  significant mineralization was intercepted. Despite the lack of mineralization  at a depth of 75 m, this favourable contact is still very promising since DEEP-EM  anomalies were detected at depth towards the south.

Work conducted in the summer of 2004 has also permitted the tracing of the  lateral extensions of the fertile volcanic sequence over a distance of more  than 12 km. Some new mineralized showings with values anomalous in base metals  have already been discovered by prospecting and many airborne EM conductors  remain unexplained within this favourable sequence.

A new exploration program was carried out in the winter of 2005, including  DEEP-EM and MAX-MIN surveys to cover the extensions of the fertile volcanic  belt, and drilling consisting of 11 holes (CN-05-26 to CN-05-36) totalling 3,359.4  metres to test in detail the DOM and DOM NORD sectors and many other targets.  Five of these holes were drilled in the DOM NORD area. Hole CN-05-26 intersected  the north extension of lens 09-25 and returned values of 2.1% Zn, 0.47% Cu,  0.52% Pb and 7.4 g/t Ag over 11.6 metres along the hole. Hole CN-05-29 intersected  at depth the extension of lens 08 with a sulphide zone grading 1.33% Zn, 0.6%  Cu, 0.87% Pb and 27.6 g/t Ag over 4.5 metres. The other three holes drilled  in the DOM NORD area did not crosscut significant values.  Hole CN-05-32 was drilled to test a DEEP-EM anomaly underneath the Jessica showing,  located southwest of the DOM area along the same stratigraphic horizon. No sulphide  mineralization was outlined but a large interval of intense alteration and pyrite-pyrrhotite  stringers with values anomalous in metals (zinc, lead, silver) was intersected  over 50 metres.

Five other holes of the winter 2005 program tested other targets on the property  but no significant results were obtained.

The Company is to develop a new partnership on the Coulon property, and as  the case may be, a new exploration program will be undertaken on the property.

**Corvet Est Property**

The Corvet Est property is located in the James Bay region, Province of Quebec,  Canada, 53 km south of LG-4 Airport. The project is situated in the southwest  portion of NTS 33H/05 at scale 1:50 000. The property consists of 723 map-designated,  adjacent claims totalling 37,092 hectares. These claims are held 100% by Virginia  but under the terms of the agreement dated May 6, 2005, Placer Dome has the  option to acquire an undivided 50% interest in the Corvet Est and Lac Eade properties  in return for exploration expenditures totalling $4 million over five years  and cash payments amounting to $90,000. These two properties have been put together  under the Corvest Est property.

Prospecting and regional reconnaissance conducted in the summers of 2002 and  2003 and subsequent drilling carried out in the winter of 2004 led to the discovery  by Virginia of two important auriferous structures called Contact Zone and Marco  Zone. The Marco Zone, followed laterally over about 220 m and to a depth of  130 m, yielded very interesting results in drilling, including intersections  of 5.12 g/t Au over 13.4 m and 10.21 g/t Au over 3.0 m. The Contact Zone, selectively  tested over a lateral distance of 2.3 km, also yielded good intersections, including  10.29 g/t Au (cut) over 4.75 m and 5.49 g/t Au (cut) over 6.0 m. 

In the summer and fall of 2004, Virginia completed a new exploration program  including basic prospecting, geological mapping, mechanical trenching, selective  geochemical sampling and channel sampling, line cutting (35.8 km), MAG surveys  (38.4 km) and induced polarisation (16.5 km) as well as a drilling program of  sixteen (16) holes (CE-04-22 to 37) totalling 3,186 m. Eight (8) additional  holes (CE-04-22 to 25, 31, 32, 33 and 36) tested the Marco Zone between levels  -125 and -200 m. All holes intersected the auriferous structure and many sub-economic  to economic intersections were obtained. Best results were 2.10 g/t Au over  46 m, including 4.5 g/t Au over 10 m (CE-04-23) and 6.81 g/t Au (cut) over 4.8  m (CE-04-22). Three new holes (CE-04-34, 35 and 37) tested the lateral extensions  of the Marco Zone and some interesting intersections were obtained: 2.6 g/t  Au over 5 m, 2.56 g/t Au over 3 m and 3.53 g/t Au over 4 m (CE-04-34) and 4.99  g/t Au over 2 m (CE-04-35). Furthermore, five (5) holes (CE-04-26 to 30) were  drilled in the Contact Zone to test the extensions of the good intersections  obtained in the winter of 2004. Basically, the new holes intersected thinner  intervals with grades varying from 1.01 to 11.81 g/t Au.

  In the fall of 2004, copper and molybdenum mineralizations were exposed at surface  in the north part of the property. Best values obtained in selected samples  reached 4.21% Mo, 1.57% Cu, 55 g/t Ag and 0.20 g/t Au. The best intersection  in channel graded 1.06% Mo, 0.24% Cu, 23.5 g/t Ag and 72 ppb Au over 1 m. 

There is no exploration program planned on the property in the winter of 2005  but work should resume in the summer of 2005, including geological, geochemical  and geophysical (Mag) surveys as well as diamond drilling.

**Result of Operations from continuing operations**

The Company realized net earnings of $4,027,552 for the current period compared  to a net loss of $4,539,475 for the precedent comparative period. Interest income  and dividends increased following the increase in investments.

The Company receives fees for its role as operator of projects in its different  partnerships. The decrease of $41,281 is explained mainly by the abandonment  of the agreement of the partnership with Noranda Inc. on the Coulon project  as well as the cessation of work, with our partner Billiton Resources Canada  Inc., on the Lac Gayot project. The increase of $101,856 in professional and  maintenance fees is explained mainly by the fair value allotted to the stock  options granted in July 2005. The decrease in management fees is due to the  discontinued operation part. The increase in « Rent and office expenses  » is mainly due, during the current period, to the expenses of administrative  and professional services, to the expenses relating to the annual report rising  from a marked increase in the number of shareholders and to an increase in the  press releases published. The exercice of all outstanding stock options during  the current period has generated an impressive increase of the expense «  Employee benefits - stock options ». The Company increased its advertising  budget for the current period, increasing advertising, exhibitions and travelling  expenses. During the period the Company wrote off from the books the Lac Fagnant,  Lac Bonfait, Baie Payne, Chutes des Passes, Duquet, Kogaluk, Guyer Sud and Lac  Noëlla properties while preserving the rights on its claims. The sale of  the Dubuisson, Lac Duncan and Malartic properties generated a benefit of $429,816.  In November 2005, the Company abandoned a little more than 20% of its Coulon  property.

The future income tax assets were accounted for due to the fact that the Company  will realize an important fiscal gain in relation with the arrangement. This  item is not recurrent.

Nine-month period ended February 28, 2005 compared to the twelve-month period  ended May 31, 2004

**Exploration Activities**

**Activities Summary**

During the course of the 2004-2005 period, the exploration expenditures of  Virginia amounted to $6,788,078 in comparison with expenditures of $4,736,917  in 2003-2004. This increase is of course due to the intense activity generated  by the discovery of the Roberto zone on the Éléonore property,  which obviously became in 2004-2005 the key project of the Company, with exploration  expenses totalling $4,760,762 in comparison to $616,160 in 2003-2004. This considerable  investment allowed carrying out a major exploration program including geological  mapping, sampling and mechanical stripping, geological surveys as well as an  important diamond-drilling program to test the extensions of the Roberto and  Roberto Est zones and many other exploration targets. 

In June 2004, Virginia signed an important agreement with Noranda Inc. on its  Coulon project. Under the terms of the agreement, Noranda has the option to  acquire a 50% interest in the property in return for $8 million in exploration  work during the next seven years and payments totalling $250,000. An exploration  campaign, conducted in the summer of 2004, yielded very interesting results  and another drilling program is planned for the winter of 2005. Noranda already  invested nearly $1.3 million in exploration work on this project.

Virginia was also very much active on its Corvet Est property in 2004-2005,  with exploration expenditures totalling $1,246,392 ($666,432 in 2003-2004),  mainly for an exploration program carried out in the summer of 2004. Despite  of very interesting results, Virginia has since slowed down its work on this  project to concentrate mainly on its Éléonore Project. Work should  resume in the summer of 2005 on the Corvet Est project.

Virginia was also relatively active on the MegaTEM project with expenses of  $210,848 ($510,255 in 2003-2004).

Paul Archer, engineer and vice-president of Virginia, reviewed all technical  data contained in the following. Mr. Archer is a qualified person as defined  by National Instrument 43-101.

**Éléonore Property**

The Éléonore project is located in the Lac Ell region, to the  east of the Opinaca Reservoir, approximately 320 km to the north of the town  of Matagami, James Bay. This property consists of 1,130 designated claims totalling  59,124 hectares. Virginia holds these claims 100%.

In June 2001, Virginia initiated a regional reconnaissance program in the Opinaca  reservoir area, which led to the discovery of Au-Cu-Ag showings within the Lac  Ell diorite. Subsequent exploration programs identified new Au-Cu-Ag showings  in the diorite intrusion and also outlined a few Au-As-(Sb) showings in the  sediments to the north, culminating with the discovery of the Roberto zone at  the beginning of the summer of 2004.

Prospecting and manual stripping initiated on the Roberto zone yielded very  encouraging results from preliminary sampling: up to 80.70 g/t Au in grab samples  and 4.29 g/t Au over 12 m, including 6.16 g/t Au over 5 m in channel sampling.  Further stripping and channel sampling of the showing returned very impressive  results, including 19.75 g/t Au over 10 m, 17.63 g/t Au over 7 m and 10.81 g/t  Au over 9 m. This prompted a major geological mapping and mechanical trenching  program with a large excavator in order to follow the extensions of the Roberto  mineralization at surface as well as to test several other interesting targets  on the property. By fall 2004, the Roberto system was exposed at surface for  250 m laterally and consisted of two parallel zones, namely the Roberto and  Roberto Est zones, both yielding consistent economical results in channel sampling.

Several other trenches were also dug outside of the Roberto mineralized system  to verify other targets on the property, with a few ones returning significant  results of up to 6.35 g/t / 6 m in channel sampling. 

A diamond-drill program was also initiated at the end of August 2004 to test  the extensions of the Roberto system and some other targets on the property.  The program started with one drill rig but as more and more encouraging drill  results were generated, two other drills were added to accelerate the program.  At the end of February 2005, 69 holes (ELE-04-01 to ELE-05-69) totalling 17,188  m had been drilled to test the Roberto mineralized system and 28 holes (ELR-04-01  to ELR-05-28) totalling 5,585 m had tested various other geological and geophysical  targets on the property, with the last one (ELR-05-28) intersecting the extension  of Roberto to the north while testing an IP conductor. This drilling program  allowed the tracing of the Roberto system over a minimal strike length of 450  m and to a minimal depth of 350 m, with the mineralization remaining totally  open laterally and at depth. Drilling produced very encouraging results on a  continuous basis, some of the better intercepts including 18.85 g/t Au over  16 m (ELE-04-02), 14.30 g/t Au over 20 m (ELE-04-09), 12.69 g/t Au over 19 m  (ELE-04-30) and 22.27 g/t Au over 11.05 m (ELE-05-54) in the Roberto zone and  11.07 g/t Au over 9.2 m (ELE-04-16), 19.62 g/t Au over 11.0 m (ELE-05-46) and  5.71 g/t Au over 25.1 m (ELE-05-53) in the Roberto Est zone. Some other zones  were also intersected while drilling the Roberto system, the most significant  ones being the Mid-Roberto, which graded up to 20.9 g/t Au over 8.1 m (ELE-04-25)  and the Veine zone, which returned up to 34.66 g/t Au over 6.6 m (ELE-04-34).  Drill testing of various targets elsewhere on the property also generated some  interesting results. The most significant ones came from shallow drilling underneath  TR-03-20, that produced large intersections anomalous in gold, with local narrow  higher grade values: 1.05 g/t Au over 31 m and 0.65 g/t Au over 88 m (ELR-04-04),  9.49 g/t Au over 3 m and 0.87 g/t Au over 58 m (ELR-04-05), 32.18 g/t Au over  1 m (ELR-04-06), 1.18 g/t Au over 37 m (ELR-04-07), 2.66 g/t Au over 5 m, 0.45  g/t Au over 10 m and 80.54 g/t Au over 1 m (ELR-04-13), 1.56 g/t Au over 12  m (ELR-04-14), and 5.31 g/t Au over 3 m as well as 1.31 g/t Au over 17 m (ELR-04-18).  Drilling underneath TR-03-10 (2.42 g/t Au over 5.25 m in channel) also produced  significant results with 9.50 g/t Au over 4 m in hole ELR-04-08.

A large IP survey was initiated in January 2005 and was still in progress at  the end of February 2005. This survey, totalling more than 150 km of lines,  will cover a large portion of the contact zone between the Ell lake diorite  and the favourable sedimentary sequence.

The Company will pursue actively its exploration program during the next fiscal  year. Diamond drilling will continue throughout the year and geological mapping  and trenching will be carried out during the summer field season. An exploration  budget of around $15 million has been allotted to the Éléonore  project for the next fiscal year.

**Coulon Property**

The Coulon property is located within NTS 23L/11, 23L/12, 23L/13, 23L/14, 23M/03  and 23M/04, in the Caniapiscau area, in the James Bay region. The property consists  of 1,505 claims covering a surface area of 73,991 hectares (approximately 740  km2). The camp is centred at UTM coordinates (NAD 27, zone 19) 356290 E 6057960  N, around 15 km north of Fontanges Airport. The property is held 100% by Virginia  Gold Mines Inc. but according to an agreement signed on June 15, 2004, Noranda  Inc. was granted the option to acquire an undivided 50% interest in the property  in return for exploration expenditures totalling $8 million during the next  seven years and payments totalling $250,000.

The Coulon project comes from a regional reconnaissance survey carried out  by Virginia in the summer of 2003, which outlined many interesting, polymetallic  showings within the Coulon and Pitaval Archean volcanic belts. Subsequent work  including airborne Mag-EM and ground geophysics surveys and a drill program  carried out in the winter of 2004 led to the discovery of very significant volcanogenic-sulphide  lenses in the DOM and DOM NORD areas.

The exploration program carried out in the summer of 2004 included eight (8)  holes (CN-04-18 to 25) as well as several surface work. Word conducted in the  DOM NORD area outlined to date two sulphide lenses within a volcanic sequence  of more than 500 m thick. Best drill results obtained in the summer of 2004  include 12.65% Zn, 1.54% Pb, 1.36% Cu, 125.31 g/t Ag and 0.3 g/t Au over 4.7  m (CN-04-23) in lens 08; and 2.91% Zn, 0.13% Pb, 1.12% Cu, 34.25 g/t Ag and  0.29 g/t Au over 21.8 m (CN-04-25) in lens 09-25. 

A similar volcanic sequence was also outlined in the DOM sector. Massive sulphide  lens 16-17, discovered by drilling in the winter of 2004, was exposed by surface  stripping in the summer of 2004. It graded 4.87% Zn, 0.38% Pb, 1.01% Cu and  57.1 g/t Ag over 15.6 m in channel. Holes CN-04-18 to 21 tested the extension  of lens 16-17 to a vertical depth of 75 m but no significant mineralization  was developed. Despite the absence of mineralization to a depth of 75 m, this  favourable contact remains very promising because of the presence of Deep-EM  anomalies that were detected at depth to the south.

Summer 2004 work program allowed tracing of the lateral extensions of the fertile  volcanic sequence over a distance of more than 12 km. Prospecting led to the  discovery of new mineralized showings with values anomalous in base metal and  many EM conductors remain unexplained within this favourable sequence.

A new exploration program should begin in the winter of 2005 and will consist  of Deep-EM et Max-min surveys to cover the extensions of the fertile volcanic  sequence besides a drill program aiming at testing in more detail the DOM and  DOM NORD as well as many other targets.

**Corvet Est Property**

The Corvet Est property is located in the James Bay region, Province of Quebec,  Canada, 53 km south of LG-4 Airport. The project is situated in the southwest  portion of NTS 33H/05 at scale 1:50 000. The property consists of 90 map-designated,  adjacent claims totalling 4,632 hectares. These claims are held 100% by Virginia.

Prospecting and regional reconnaissance conducted in the summers of 2002 and  2003 and subsequent drilling carried out in the winter of 2004 led to the discovery  by Virginia of two important auriferous structures called Contact Zone and Marco  Zone. The Marco zone, followed laterally over about 220 m and to a depth of  130 m, yielded very interesting results in drilling, including intersections  of 5.12 g/t Au over 13.4 m and 10.21 g/t Au over 3.0 m. The Contact Zone, selectively  tested over a lateral distance of 2.3 km, also yielded good intersections, including  10.29 g/t Au (cut) over 4.75 m and 5.49 g/t Au (cut) over 6.0 m. 

In the summer and fall of 2004, Virginia completed a new exploration program  including basic prospecting, geological mapping, mechanical trenching, selective  geochemical sampling and channel sampling, line cutting (35.8 km), MAG surveys  (38.4 km) and induced polarisation (16.5 km) as well as a drilling program of  sixteen (16) holes (CE-04-22 to 37) totalling 3,186 m. Eight (8) additional  holes (CE-04-22 to 25, 31, 32, 33 and 36) tested the Marco zone between levels  -125 and -200 m. All holes intersected the auriferous structure and many sub-economic  to economic intersections were obtained. Best results were 2.10 g/t Au over  46.0 m, including 4.50 g/t Au over 10 m (CE-04-23) and 6.81 g/t Au (cut) over  4.8 m (CE-04-22). Three new holes (CE-04-34, 35 and 37) tested the lateral extensions  of the Marco Zone and some interesting intersections were obtained: 2.60 g/t  Au over 5 m, 2.56 g/t Au over 3 m and 3.53 g/t Au over 4 m (CE-04-34) and 4.99  g/t Au over 2 m (CE-04-35). Furthermore, five (5) holes (CE-04-26 to 30) were  drilled in the Contact zone to test the extensions of the good intersections  obtained in the winter of 2004. Basically, the new holes intersected thinner  intervals with grades varying from 1.01 to 11.81 g/t Au.

In the fall of 2004, copper and molybdenum mineralizations were exposed at  surface in the north part of the property. Best values obtained in selected  samples reached 4.21% Mo, 1.57% Cu, 55 g/t Ag and 0.20 g/t Au. The best intersection  in channel graded 1.06% Mo, 0.24% Cu, 23.5 g/t Ag and 72 ppb Au over 1 m. 

There is no exploration program envisaged on the property during the winter  2005 but work should begin again during the summer 2005, including geological  surveys, geochemical and geophysical surveys (Mag) as well as a diamond drilling  programs.

**Lac Eade Property**

The Lac Eade project is located in the James Bay territory, 380 km north of  Chibougamau, 240 km east of Radisson, and 50 km southwest of the LG-4 complex,  in NTS sheets 33G/07, 33G/08, 33H/04 and 33H/05. The property consists of 383  claims covering a surface area of 19 603 hectares (100% held by Virginia) and  is free of all liens and obligations.

Following Virginia’s work on the Corvet Est, Poste Lemoyne and Poste  Lemoyne Extension properties, it turned out that the Lac Eade area is the host  to a very interesting metallogenic potential. As a result, a geological reconnaissance  program was initiated in the summer-fall of 2004 and consisted of geological  traverses, trenching, channel sampling and mapping as well as prospecting using  a Beep-Mat in order to find new mineralized showings. During this program, 4  new gold showings (grading between 1.36 and 5.18 g/t Au) and a copper showing  were discovered.

There is no exploration program planned on the property for the winter of 2005  but work should resume in the summer of 2005. Work should consist of a detailed  MAG-EM airborne survey as well as additional prospecting and mapping. Line cutting  grid as well as additional prospecting and mapping is planned in the areas of  showings having a geophysical signature.

**MegaTEM and MegaTEM III Project**

The MegaTEM project stemmed from a strategic alliance allowing Virginia and  Noranda Inc. to carry out significant airborne geophysical surveys, using the  new MegaTEM technology. This technology, developed by Noranda and Fugro Airborne  Surveys, the largest supplier of airborne geophysical services worldwide, allows  the detection of polymetallic deposits deeper (up to a depth of 250 m) than  any other known airborne methods.

Upon the signature of two agreements executed in June and December 2001, Noranda  subscribed for two private placements in Virginia, resulting in an investment  by Noranda of $1.45 million at a price of $1.50 per common share. The net proceeds  allowed the completion of six MegaTEM airborne surveys, covering 5,570 km2 in  northern Quebec. Through these private placements Noranda was also granted the  right to earn a 55% interest in any targets generated by this work program.  Noranda has since transferred (December 2001) its interest in these two agreements  to its affiliate Novicourt Inc. (60% owned by Noranda). In August 2002 a third  agreement was signed between Virginia and Novicourt and four new airborne surveys,  covering a surface area of 3 493 km2, were carried out based on a ratio of 51%  for Novicourt and 49% for Virginia. Noranda remains the operator of the project  and retains the right to buy back 35% of Novicourt’s interest on any major  discovery (>10 million tonnes) resulting from these strategic alliances.

Ten different regions of Abitibi were flown with the MegaTEM system. Six of  them were done in the scope of the JV-1 agreement and the four others under  the terms of the JV-2 agreement. Further to these surveys many properties were  acquired to protect the best targets. At the end of February 2005, agreements  from the MegaTEM JV-1 consisted of 882 claims for a total of 32,424 hectares  while the agreements from the MegaTEM JV-2 consisted of 463 claims totalling  18,938 hectares.

Between June 2004 and February 2005, 30 location grids totalling close to 300  km of lines were cut on the different properties in order to cover targeted  MegaTEM anomalies. These grids were then covered by ground geophysics including  mag and electromagnetic surveys (Max-Min type on 3 grids) and large-loop time-domain  electromagnetic surveys (TDEM or DeepEM on 27 grids). In the same period, 23  holes totalling 6,873 m were drilled on many selected MegaTEM anomalies. Around  1,187 samples were collected in these holes, of which 251 were sent for rock  assays and 936 for economic assays. All these holes were the object of a down-hole  electromagnetic survey (PulseEM). The most significant results came from Selbaie  West, most particularly in the Ruisseau Puiseaux area. This interesting area  was delimited by a detailed compilation of this region that is situated to the  south of the old Selbaie mine. Favourable rocks highly altered and often mineralized  in copper and zinc were identified over more than 4.0 km. Very limited drilling  is reported along this horizon covered by more than 20 m of overburden. Mineralizations  intersected in the past are weakly magnetic and not conductive. Two 800 m-spaced  holes, PUI-05-01 and PUI-05-02, were recently drilled in this horizon. PUI-05-01  intersected highly altered rocks and a zone mineralized grading 0.45% Cu over  21.8 m including 1.1% Cu over 3.8 m. PUI-05-02 also intersected altered rocks  but less mineralization with a result of 0.19% Cu over 22 m. This sector has  great potential for the discovery of a sulphide deposit of volcanogenic origin.  In whole, the other anomalies tested in 2004-2005 were explained by the presence  of barren conductive sulphides (Po-Py).

Numerous MegaTEM targets have now been drilled in several places in Abitibi.  Most of them were explained by the presence of barren conductive mineralization.  However, areas with high potential of discovery were identified south of the  Selbaie mine (the Ruisseau Puiseaux area), west of the Estrades mine (the Casa-Berardi  area), east of Chicobi high-temperature rhyolites (West-Amos area) and east  of the Vendôme mineral deposit (Courville sector). In 2005, these areas  will be the object of a follow-up consisting of ground geophysics, prospecting  and drilling.

**Result of Operations from continuing operations**

The current period covers nine months compared to twelve months for the previous  period. The Company suffered a net loss of $4,539,475 for the current period  compared to $194,406 for the corresponding period of the previous fiscal year.  Interest income has decreased close to 49%. This gap is due to a substantial  decrease in interest rates. 

The Company also receives fees for its role as operator of projects in its  different partnerships. The increase of $30,417 is mainly due to the addition  of the agreement with Noranda Inc. on the Coulon project and the cessation of  work, with our partner Billiton Resources Canada Inc., on the Lac Gayot project.  The increase in professional and maintenance fees is due to the accounting of  fair value of stock options granted to suppliers in 2005, the creation of the  Shareholder Rights Plan and public relation fees by an American firm during  the second quarter. Maintenance costs have increased by $14,415 due to a substantial  raise in the number of shareholders and a significant increase in trades of  the Company’s stock on the market. The increase of management fees is  due to a greater assumption of exploration work by the Company. The decrease  in rent and office expenses is due mainly, during the comparative period, to  the accounting of the fair value of stock options granted to directors, officers  and employees. The Company increased its advertising budget for the current  period, increasing advertising, exhibitions and travelling expenses. During  the period ended February 28, 2005, the Company has partially abandoned the  following projects: Apple, Noëlla, Chutes des Passes, Sagar, Guyer Sud,  Lac Gayot, Sakami Extension, Corvet Est, Auclair, Payne Bay, Grenville, LG3.5,  MegaTEM and MegaTEM III. The La Grande Sud property was written off in the books  while preserving the rights on its claims.

**Quarterly Information**

The information presented below details the total revenues, overall net earnings  (net loss), and the net earnings (net loss) per participating share from continuing  operations of the last eight quarters.

| Quarter ended                                                                                                                            | Total revenues                                                                                                   | Net profit****(net loss)                                                                                                      | Net profit (net loss) per share                                                                            |
|------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|
| Basic                                                                                                                                    | Diluted                                                                                                          |
| 2006-02-28        2005-11-30        2005-08-31        2005-05-31        2005-02-28        2004-11-30        2004-08-31        2004-05-31 | 367,139        368,035        320,066        352,492        218,282        194,359        323,402        103,718 | 4,849,054        (168,263)        (987,374)        334,135        (3,927,736)        (345,901)        (265,838)        24,382 | 0.107        (0.004)        (0.022)        0.007        (0.105)        (0.009)        (0.007)        0.001 | 0.103        (0.003)        (0.022)        0.007        (0.105)        (0.009)        (0.007)        0.001 |

  The information presented below details the total revenues, overall net earnings  (net loss), and the net earnings (net loss) per participating share from discontinuing  operations of the last eight quarters.

| Quarter ended                                                                                                                            | Total revenues                                                           | Net profit****(net loss)                                                                                               | Net profit (net loss) per share                                                                           |
|------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
| Basic                                                                                                                                    | Diluted                                                                  |
| 2006-02-28        2005-11-30        2005-08-31        2005-05-31        2005-02-28        2004-11-30        2004-08-31        2004-05-31 | --        --        --        --        --        --        --        -- | 540,795        (79,023)        (183,398)        (127,217)        (54,693)        (91,776)        (19,271)        (982) | 0.012        (0.002)        (0.004)        (0.003)        (0.001)        (0.003)        (0.001)        -- | 0.012        (0.002)        (0.004)        (0.003)        (0.001)        (0.003)        (0.001)        -- |

**Liquidity and Capital Resources from continuing operations**

During the twelve-month period ended February 28, 2006, negative cash flows  from operating activities amounted to $763,483 compared with negative cash flows  of $1,124,927 during the corresponding nine-month period ended February 28,  2005. The decrease is primarily due to the increase in amounts receivable. For  the nine-month period ended February 28, 2005 and the twelve-month period ended  May 31, 2004, the decrease in cash flows from operating activities is explained  by an increase in working capital requirements, which is mainly due to a decrease  in accounts payable and accrued liabilities and to an increase in accounts receivable.  Cash flows from financing activities include the issuance of privates placements  and the exercise of stock options and warrants. The funds raised from the privates  placements amounted to $19.3M for the twelve-month period ended February 28,  2006, $1.5M for the nine-month period ended February 28, 2005 and $7.3M for  the twelve-month period ended May 31, 2004. The exercise of stock options and  warrants had the effect of increasing cash flows from financing activities by  $8,7M for the twelve-month period ended February 28, 2006, by $3M for the nine-month  period ended February 28, 2005 and by $0.5M for the twelve-month period ended  May 31, 2004.

The Company’ investing activities consist primarily of the increase of  mining properties and exploration costs and purchase and sale of short-term  investments. The increase of mining properties and exploration costs required  disbursements of $5.9M for the twelve-month period ended February 28, 2006,  $2.6M for the nine-month period ended February 28, 2005 and $1.8M for the twelve-month  period ended May 31, 2004. During the twelve-month periods ended February 28,  2006 and May 31, 2004, the net variations in short-term investments were $11.8M  and $2.2M respectively. For the nine-month period ended February 28, 2005, transactions  related to short-term investments generated cash of $4.8M.

In management’s opinion, the working capital as at February 28, 2006  is sufficient to support the Company’s normal operating requirements on  an ongoing basis.

**Contractual obligations**

| Contractual obligations | Payments due per period |
|-------------------------|-------------------------|
| Total                   | Less than 1 year        | 1-3 years |
| Lease                   | $22,422                 | $22,422 | $0 |

**Off-Balance Sheet Arrangements**

The Company has no off-balance sheet arrangements.

**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.

**Mining Properties Accounting Values**

At the end of each quarter, exploration works done on mining properties are  reviewed to evaluate their potential. Following this analysis, write-offs are  done if needed.

**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.

**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.

**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.

**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 of the consolidated financial statements. 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.

**Changes in Accounting Policies**

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 years beginning on or after October  1, 2006. The Company is currently analysing the impact of these new standards.

**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 to current market rates.

The fair value of short-term investments, determined based on market value,  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 equivalents        - Short-term investments        - Amounts receivable        - Accounts payable and accrued liabilities | Variable interest rate        As described in Note 5 of the consolidated financial statements        Non-interest bearing        Non-interest bearing |
|-------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

**Disclosure of Outstanding Share Data**

The Company can issue an unlimited number of common shares, without par value.  As at March 31, 2006, the effective date of arrangement involving Goldcorp,  the Company and Virginia Mines, a wholly-owned subsidiary of the Company, 48,275,625  shares are issued and outstanding. Since March 31, 2006, the Company is a 100%  subsidiary of Goldcorp.

As at March 31, 2006, no stocks options are outstanding. 

As at March 31, 2006, 833,900 warrants are outstanding. Their exercise price  is $5.40 and their expiration date is September 2006.

As at March 31, 2006, 22,133 warrants related to unit options are outstanding.  Their exercise price is $5.40, and their expiration date is September 2006.

**Risk and Uncertainties**

**Financial risk**

The Company is considered to be in the exploration stage, that it is dependent  on obtaining regular financing in order to continue exploration. Despite previous  success in acquiring this financing, there is no guarantee of obtaining any  future financing.

**Risk on the uncertainty of title**

Although the Company has taken steps to verify title to mining properties in  which it 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-compliance with regulatory requirements.

**Environmental risk**

The Company is subject to various environmental incidents that can occur during  exploration work. The Company maintains an environmental management system including  operational plans and practices.

**Disclosure controls and procedures**

For the period ended February 28, 2006, a review has been performed under the  supervision and with the collaboration of the company's management, including  the President and Chief Executive Officer and the Chief Financial Officer, on  the effectiveness of the Company's disclosure controls and procedures. Based  on that review, the President and Chief Executive Officer and the Chief Financial  Officer concluded that the design and operation of these controls and procedures  were effective as at February 28, 2006 and were performed so as to provide reasonable  assurance that material information related to the Company and its subsidiaries  has been adequately disclosed.

**Additional Information and Continuous Disclosure**

This Management’s Discussion and Analysis has been prepared as at May  29, 2006. Additional information on the Company is available through regular  filings of press releases, financial statements and its annual information form  on SEDAR (www.sedar.com).

| (s) André Gaumond        President and CEO | (s) Gaétan Mercier      Chief Financial Officer and Secretary |
|---------------------------------------------------|----------------------------------------------------------------------|