**Virginia Gold Mines Inc.**  (an exploration company)

 Financial Statements**February 28, 2005 and May 31, 2004 and 2003**(expressed in Canadian dollars)

----

Page 1

 

 We have audited the balance sheets of **Virginia Gold Mines Inc.** (an exploration company) as at February 28, 2005 and May 31, 2004 and the statements of earnings, deficit and cash flows for the nine-month period ended February 28, 2005 and the twelve-month periods ended May 31, 2004 and 2003, respectively. 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, 2005 and May 31, 2004 and the results of its operations and its cash flows for the nine-month period ended February 28, 2005 and the twelve-month periods ended May 31, 2004 and 2003, respectively in accordance with Canadian generally accepted accounting principles. 

 Quebec, Quebec, Canada 

 April 15, 2005 

**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 April 15, 2005 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 

 April 15, 2005 

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.  

----

Page 2

**Virginia Gold Mines Inc.**  (an exploration company)   Balance Sheets

----

(expressed in Canadian dollars)

|                                                                                                                            |  | **As at        February 28,        2005        $** |  | **As at        May 31,        2004        $** |
|----------------------------------------------------------------------------------------------------------------------------|--|---------------------------------------------------------|--|-----------------------------------------------|
| **Assets**                                                                                                                 |  |                                                         |  |                                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Current assets**                                                                                                         |  |                                                         |  |                                               |
| Cash and cash equivalents                                                                                                  |  | 7 116 483                                          |  | -                                        |
| Short-term investments (note 3)                                                                                            |  | 8 196 733                                          |  | 12 519 509                               |
| Income taxes recoverable                                                                                                   |  | -                                                  |  | 13 694                                   |
| Amounts receivable (note 4)                                                                                                |  | 5 082 525                                          |  | 2 909 434                                |
| Prepaid expenses (note 5)                                                                                                  |  | 64 111                                             |  | 52 968                                   |
|                                                                                                                            |  |                                                         |  |                                               |
|                                                                                                                            |  | 20 459 852                                         |  | 15 495 605                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Deposit on exploration costs**                                                                                           |  | 49 430                                             |  | 150 000                                  |
| **Exploration funds** (note        2)                                                                                      |  | 201 819                                            |  | 4 628 904                                |
| **Long-term investment**        (note 6)                                                                                   |  | 13 585                                             |  | 151 037                                  |
| **Office equipment**, at        cost less accumulated depreciation of $12 790 (May 31, 2004 - $9 522)            |  | 17 470                                             |  | 12 676                                   |
| **Mining properties** (note        7)                                                                                      |  | 8 205 876                                          |  | 9 487 426                                |
| **Website development expenses**,        at cost less accumulated amortization of $2 846 (May 31, 2004 - $1 742) |  | 4 152                                              |  | 4 556                                    |
|                                                                                                                            |  |                                                         |  |                                               |
|                                                                                                                            |  | 28 952 184                                         |  | 29 930 204                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Liabilities**                                                                                                            |  |                                                         |  |                                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Current liabilities**                                                                                                    |  |                                                         |  |                                               |
| Accounts payable and accrued liabilities                                                                                   |  |                                                         |  |                                               |
| Related companies                                                                                                          |  | 207 227                                            |  | 133 160                                  |
| Others                                                                                                                     |  | 706 289                                            |  | 1 065 627                                |
|                                                                                                                            |  |                                                         |  |                                               |
|                                                                                                                            |  | 913 516                                            |  | 1 198 787                                |
|                                                                                                                            |  |                                                         |  |                                               |
| **Shareholders' Equity**                                                                                                   |  |                                                         |  |                                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Share capital** (notes        8 and 9)                                                                                   |  |                                                         |  |                                               |
| Authorized                                                                                                                 |  |                                                         |  |                                               |
| Unlimited number of common shares, voting        and participating, with no par value                                      |  |                                                         |  |                                               |
| Issued and fully paid                                                                                                      |  |                                                         |  |                                               |
| 38 959 078 common shares (May 31, 2004        - 36 638 915)                                                                |  | 56 253 306                                         |  | 52 159 266                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Warrants******        (note 8)                                                                                           |  | 554 380                                            |  | 883 255                                  |
|                                                                                                                       |  |                                                         |  |                                               |
| **Stock options** (note 9)                                                                                                 |  | 460 466                                            |  | 214 439                                  |
| **Contributed surplus** (note        9)                                                                                    |  | 1 274                                              |  | -                                             |
|                                                                                                                       |  |                                                         |  |                                               |
| **Deficit**                                                                                                                |  | (29 230 758)                                            |  | (24 525 543)                                  |
| ****                                                                                                                       |  |                                                         |  |                                               |
| ****                                                                                                                       |  | 28 038 668                                         |  | 28 731 417                               |
|                                                                                                                            |  |                                                         |  |                                               |
|                                                                                                                            |  | 28 952 184                                         |  | 29 930 204                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Nature of activities and going        concern** (note 1)                                                                 |  |                                                         |  |                                               |
|                                                                                                                            |  |                                                         |  |                                               |
| **Subsequent event** (note        16)                                                                                      |  |                                                         |  |                                               |

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

**Approved by the Board of Directors** , (s) André Gaumond , director (s) Paul Archer , director

----

Page 3

**Virginia Gold Mines Inc**.  (an exploration company)   Statements of Deficit 

----

(expressed in Canadian dollars) 

|                                        |  | **Year ended        February 28,** | **Years ended May 31,**              |
|----------------------------------------|--|----------------------------------------------|--------------------------------------|
|                                        |  |                                              |                                      |  |
|                                        |  | **2005        $        (9 months)**          | **2004        $        (12 months)** | **2003        $        (12 months)** |
|                                        |  |                                              |                                      |  |
| **Deficit - Beginning of year**        |  | 24 525 543                                   | 24 246 595                           | 22 706 207 |
|                                        |  |                                              |                                      |  |
| Cancellation of stock options (note 9) |  | -                                            | 53 734                               | - |
|                                        |  |                                              |                                      |  |
| Net loss for the year                  |  | 4 705 215                                    | 225 214                              | 1 540 388 |
|                                        |  |                                              |                                      |  |
| Deficit - End of year                  |  | 29 230 758                                   | 24 525 543                           | 24 246 595 |
|                                        |  |                                              |                                      |  |
|                                        |  |                                              |                                      |  |

----

Page 4

**Virginia Gold Mines Inc.**  (an exploration company)   Statements of Earnings

----

(expressed in Canadian dollars) 

|                                                                                                       |  | **Year ended        February 28,** | **Years ended May 31,**              |
|-------------------------------------------------------------------------------------------------------|--|----------------------------------------------|--------------------------------------|
|                                                                                                       |  |                                              |                                      |  |
|                                                                                                       |  |                                         |                                 |   |
|                                                                                                       |  | **2005        $        (9 months)**          | **2004        $        (12 months)** | **2003        $        (12 months)** |
|                                                                                                       |  |                                              |                                      |  |
| **Revenues**                                                                                          |  |                                              |                                      |  |
| Dividends                                                                                             |  | 259 998                                 | 309 796                         | 326 146  |
| Interest                                                                                              |  | 328 165                                 | 641 986                         | 520 078  |
| Fees                                                                                                  |  | 147 880                                 | 117 463                         | 186 923  |
|                                                                                                       |  |                                              |                                      |  |
|                                                                                                       |  | 736 043                                 | 1 069 245                       | 1 033 147  |
|                                                                                                       |  |                                              |                                      |  |
| **Expenses**                                                                                          |  |                                              |                                      |  |
| Professional and maintenance fees                                                                     |  | 347 301                                 | 230 422                         | 165 598  |
| Management fees                                                                                       |  | 251 859                                 | 216 080                         | 144 792  |
| Rent and office expenses                                                                              |  | 416 493                                 | 484 798                         | 512 214  |
| Advertising and exhibitions                                                                           |  | 142 931                                 | 117 313                         | 128 180  |
| Tax credit related to communications                                                                  |  | -                                            | -                                    | (40 000) |
| Travelling                                                                                            |  | 64 952                                  | 92 385                          | 93 956  |
| Part XII.6 tax                                                                                        |  | 523                                     | -                                    | - |
| Depreciation of office equipment                                                                      |  | 3 268                                   | 2 567                           | 1 487  |
| Amortization of Website development expenses                                                          |  | 1 104                                   | 1 067                           | 675  |
| General exploration costs                                                                             |  | 440 498                                 | 342 784                         | 216 999  |
| Grants, credit on duties refundable for        losses and refundable tax credit relating to resources |  | (149 371)                                    | (115 636)                            | (102 421) |
| Cost of mining properties abandoned                                                                   |  | 4 694 495                               | 287 077                         | 1 179 571  |
| Loss (gain) on sale of short-term investments                                                         |  | (423 034)                                    | (374 528)                            | 5 388  |
| Bad debts                                                                                             |  | (10 130)                                     | 10 130                          | - |
| Gain on sale of long-term investments                                                                 |  | (7 555)                                      | -                                    | - |
| Gain on sale of mining properties                                                                     |  | -                                            | -                                    | (21 726) |
| Write-down of short-term investments                                                                  |  | -                                            | -                                    | 267 060  |
|                                                                                                       |  |                                              |                                      |  |
|                                                                                                       |  | 5 773 334                               | 1 294 459                       | 2 551 773  |
|                                                                                                       |  |                                              |                                      |  |
| **Loss before taxes**                                                                                 |  | (5 037 291)                                  | (225 214)                            | (1 518 626) |
|                                                                                                       |  |                                              |                                      |  |
| **Income taxes** (note 12)                                                                            |  | (332 076)                                    | -                                    | 21 762  |
|                                                                                                       |  |                                              |                                      |  |
|                                                                                                       |  |                                              |                                      |  |
| **Net loss for the year**                                                                             |  | (4 705 215)                                  | (225 214)                            | (1 540 388) |
|                                                                                                       |  |                                              |                                      |  |
| **Basic and diluted net loss per        share** (note 13)                                             |  | (0.126)                                      | (0.007)                              | (0.052) |

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

----

Page 5

**Virginia Gold Mines Inc.**  (an exploration company)   Statements of Cash Flows 

----

(expressed in Canadian dollars) 

|                                                                                        | **Year ended        February 28,** | **Years ended May 31,**                   |
|----------------------------------------------------------------------------------------|----------------------------------------------|-------------------------------------------|
|                                                                                        |                                              |                                           |
|                                                                                   |                                         |                                      |
| **2005        $        (9 months)**                                               | **2004        $        (12 months)**    | **2003        $        (12 months)** |
|                                                                                        |                                         |                                      |   |
| **Cash flows from operating activities**Net loss for the year                          | (4 705 215)                        | (225 214)                            | (1 540 388) |
| Items not affecting cash and cash equivalents                                          |                                              |                                           |  |
| Cost of mining properties abandoned                                                    | 4 694 495                     | 287 077                              | 1 179 571  |
| Depreciation of office equipment                                                       | 3 268                                   | 2 567                                | 1 487  |
| Amortization of Website development expenses                                           | 1 104                                   | 1 067                                | 675  |
| Gain on sale of mining properties                                                      | -                                       | -                                    | (21 726) |
| Loss (gain) on sale of short-term investments                                          | (423 034)                                    | (374 528)                                 | 5 388  |
| Gain on sale of long-term investments                                                  | (7 555)                                      | -                                    | -  |
| Stock options                                                                          | 312 494                                 | 158 099                              | 65 540  |
| Write-down of short-term investments                                                   | -                                       | -                                    | 267 060  |
| Future income taxes                                                                    | (332 076)                                    | -                                    | -  |
|                                                                                        | (456 519)                                    | (150 932)                                 | (42 393) |
|                                                                                        |                                              |                                           |  |
| Net change in non-cash working capital items (note 10a)                                | (37 334)                                     | 1 214 187                            | 1 852 924  |
|                                                                                        |                                              |                                           |  |
|                                                                                        | (493 853)                                    | 1 063 255                  | 1 810 531  |
|                                                                                        |                                         |                                      |   |
| **Cash flows from financing activities**                                               |                                              |                                           |  |
| Cancellation of stock options                                                          | -                                       | (53 734)                                  | -  |
| Increase in share capital issued for cash, net of share issue expenses      (note 10b) | 4 032 048                               | 7 973 261                            | 2 150 018  |
|                                                                                        |                                              |                                           |  |
|                                                                                        | 4 032 048                               | 7 919 527                            | 2 150 018  |
|                                                                                        |                                         |                                      |   |
| **Cash flows from investing activities**                                               |                                         |                                      |   |
| Change in short-term investments (note 10b)                                            | 4 855 844                               | (2 216 842)                               | (1 478 822) |
| Change in deposit on exploration costs                                                 | 100 570                                 | (150 000)                                 | -  |
| Change in exploration funds                                                            | 4 427 085                               | (4 386 045)                               | 686 639  |
| Proceeds from sale of long-term investments                                            |  34 973                            | -                                    | -  |
| Additions to office equipment                                                          | (8 062)                                      | (9 759)                                   | (595) |
| Increase in mining properties (note 10b)                                               | (5 871 422)                        | (3 438 525)                               | (2 429 198) |
| Option payments                                                                        | 40 000                                  | -                                    | 20 000  |
| Grants received                                                                        | -                                       | 22 500                               | 20 405  |
| Website development expenses                                                           | (700)                                        | (1 798)                                   | (4 500) |
|                                                                                        | 3 578 288                               | (10 180 469)                              | (3 186 071) |
| **Net change in cash and cash equivalents**                                            | 7 116 483                               | (1 197 687)                               | 774 478  |
|                                                                                        |                                         |                                      |   |
| **Cash and cash equivalents - Beginning of year**                                      | -                                       | 1 197 687                            | 423 209  |
|                                                                                        |                                              |                                           |  |
| **Cash and cash equivalents - End of year**                                            | 7 116 483                               | -                                    | 1 197 687  |
|                                                                                        |                                              |                                           |  |
| **Additional information**                                                             |                                              |                                           |  |
| Interest received                                                                      | 453 838                                 | 816 072                              | 826 249  |
| Income taxes paid                                                                      | 1 970                                   | 15 931                               | 8 524  |

----

Page 6

**Virginia Gold Mines Inc.**(an exploration company)Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

**1. Incorporation, nature of activities 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 cost of mining properties is dependent upon the existence of economically recoverable ore reserves, the ability of the company to obtain the necessary financing to continue the exploration and the development of its properties, and upon the start-up of commercial production or the proceeds from the disposal of properties. The company will periodically have to raise additional funds to continue 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. 

 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-compliant with regulatory requirements. 

 On June 21, 2004, the board of directors of the company approved the change of its year-end from May 31 to February 28.

**2. Summary of significant accounting policies**

**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 17. 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 that affect the amounts of assets and liabilities reported in the financial statements. Those estimates 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 losses, the refundable tax credit related to 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 and balances with banks and term deposits with original maturities of three months or less at the acquisition date.

----

Page 7 

**Virginia Gold Mines Inc.**  (an exploration company)  Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

**Short-term investments**

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

**Exploration funds**

 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 is committed to spending the amounts on the exploration or acquisition of mining properties.

**Long-term investment**

 Long-term investment is recorded at cost. When the decline in value of an investment is other than temporary, the investment is written down to its net realizable value.

**Office equipment**

 Office equipment is depreciated using the declining balance method at the rates of 20% and 30%.

**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 and development costs relating 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 the beginning 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.

**Website development expenses**

 Website development expenses are recorded at cost and are amortized using the declining balance method at a rate of 30%.

**Credit on duties refundable for losses and refundable tax credit relating to resources**

 The company is entitled to a credit on duties refundable for losses under the Mining Duties Act. This refundable credit on duties on expenses related to mining activities incurred in Quebec is recorded against the costs incurred.

----

Page 8

**Virginia Gold Mines Inc.**(an exploration company)Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

 Furthermore, the company is entitled to a refundable tax credit relating to resources for mining sector companies on eligible expenditures incurred after March 29, 2001. The refundable tax credit relating to resources may reach 45% of eligible expenditures incurred before June 12, 2003, 33.75% before March 30, 2004 and 38.75% thereafter. This tax credit is recorded 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 is announced.

 Flow-through shares are issued in consideration of the proceeds received, which represents their fair value. Upon the acquisition of mining properties, the carrying amount may exceed the tax basis since the company renounces the deduction in favour of the investors concerned. 

 Future income taxes arising from the difference between the carrying amount and the tax basis are recorded as a reduction of share capital.

**Government grants**

 Government grants are recorded as income when the company has reasonable assurance that it has complied and will continue to comply with all 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 of tax allocation. Under this method, future income tax assets and liabilities are determined based on deductible or taxable temporary differences between the carrying amount and the tax basis of assets and liabilities using enacted or substantively enacted income tax rates expected to apply in the year when 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 year.

Diluted earnings per share are calculated using the weighted average number    of participating shares outstanding during the year, plus the effects of dilutive    potential participating shares outstanding during the year. 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 of 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    year. 

----

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

**New accounting standards**

 In July 2003, the Canadian Institute of Chartered Accountants ("CICA")    issued Sections 1100 and 1400, "Generally Accepted Accounting Principles"    and "General Standards of Financial Statement Presentation". These new sections    define generally accepted accounting principles (GAAP), establish the relative    authority of various types of CICA Accounting Standards Board pronouncements    and clarify the role of industry practice in setting GAAP. The adoption of    these new standards by the company, on June 1, 2004, had no impact on the    financial statements.

 In September 2003, the CICA amended Section 3870, "Stock-Based Compensation    and Other Stock-Based Payments", which is effective for fiscal years beginning    on or after January 1, 2004. These amendments require that compensation costs    arising from all types of stock-based payments granted to directors, executives,    employees and non-employees, including stock options, be accounted for in    the financial statements using the fair value-based method. The company has    implemented these amendments prospectively since June 1, 2003. For the year    ended May 31, 2003 the company was required to provide pro-forma disclosures    relating to the loss and loss per share as if stock-based compensation costs    had been recognized in the financial statements for options granted using    the fair value-based method (note 9).

 In March 2004, the Emerging Issues Committee ("EIC") of the CICA issued    EIC-146, "Flow-through Shares". This abstract deals with the date of recognition,    by the issuer of flow-through shares, of the future income tax liabilities    arising from the renouncement of tax deductions and the accounting method    used to record the credit when previously unrecognized future income tax assets    are recorded as a result of recognizing the above-mentioned future income    tax liabilities.

 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 in the financial    statements.

 Section 3865 provides alternative treatments to Section 3855 for entities    which choose to designate qualifying transaction 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 to become Section 3251,    "Equity".

 Sections 1530, 3251, 3855 and 3865 apply to years beginning on or after    October 1, 2006. The company will adopt these new standards on March 1, 2007,    and has not yet determined their impact on its financial statements.

----

Page 10

**Virginia Gold Mines Inc**.     (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

**3. Short-term investments**
|                                                                                                                                                                                                                                 |  | **As at****February 28,****2005****$** | **As at****May 31,****2004****$** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------------------------------------------------|-----------------------------------|
|                                                                                                                                                                                                                                 |  |                                                  |                                   |
| Investments in public          companies (quoted value: $4 385 794; May 31, 2004 - $3 306 739)                                                                                                                                  |  | 3 146 900                                        | 2 939 646                         |
| Bonds and other securities,          bearing interest at annual rates ranging from 2.3% to 12.75%, maturing          between March 2005 and April 2016 (quoted value: $5 279 132; May 31,          2004 - $9 626 974) |  | 5 049 833                                        | 9 579 863                         |
|                                                                                                                                                                                                                                 |  |                                                  |                                   |
|                                                                                                                                                                                                                                 |  | 8 196 733                                        | 12 519 509                        |

**4. Amounts receivable**
|                                                                                |  | **As at****February 28,****2005****$** | **As at****May 31,****2004****$** |
|--------------------------------------------------------------------------------|--|----------------------------------------|-----------------------------------|
|                                                                                |  |                                        |                                   |
| Refundable tax credit          relating to resources                           |  | 2 563 874                              | 1 487 023                         |
| Credit on duties refundable          for losses                                |  | 1 314 670                              | 862 079                           |
| Interest receivable                                                            |  | 63 371                                 | 171 044                           |
| Amounts receivable under          agreements with mining exploration companies |  | 541 215                                | 74 850                            |
| Commodity taxes receivable                                                     |  | 359 039                                | 298 878                           |
| Others                                                                         |  | 240 356                                | 15 560                            |
|                                                                                |  |                                        |                                   |
|                                                                                |  | 5 082 525                              | 2 909 434                         |

**5. Prepaid expenses**
|                                                        |  | **As at****February 28,****2005****$** | **As at****May 31,****2004****$** |
|--------------------------------------------------------|--|----------------------------------------|-----------------------------------|
|                                                        |  |                                        |                                   |
| Prepaid expenses regarding investor          relations |  | 24 358                                 | 14 279                            |
| Permits                                                |  | 10 764                                 | 11 046                            |
| Others                                                 |  | 28 989                                 | 27 643                            |
|                                                        |  |                                        |                                   |
|                                                        |  | 64 111                                 | 52 968                            |

----

Page 11

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

**6. Long-term investment**
|                                                                                                                                                                 |  

**Interest****%** |                                          | **As at****February 28,****2005****$** | **As at****May 31,****2004****$** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|------------------------------------------|----------------------------------------|-----------------------------------|
|                                                                                                                                                                 |                           |                                          |                                        |                                   |  |
| Azimut Exploration Inc., a public mining          exploration company, at carrying amount (quoted value of $42 500;          May 31, 2004 - $299 397) |                           | 0.79 (May 31, 2004          - 9.04) |                                        | 13 585                            | 151 037 |

 

**7. Mining properties**
|                                                   |  | **Undivided interest****%** | **Balance as at June          1, 2004****$** | **Costs incurred****$** | **Option payments,          mining properties abandoned or sold, credit on duties refundable for          losses, refundable tax credit relating          to resources****and grants****$** | **Balance as at February          28, 2005****$** |
|---------------------------------------------------|--|-----------------------------|----------------------------------------------|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------|
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
| Lac Eade (383 claims)                        |  | 100                         |                                              |                         |                                                                                                                                                                                             |                                                   |
| Mining property                                   |  |                             | 40 530                                       | 4 233                   | -                                                                                                                                                                                           | 44 763                                            |
| Exploration costs                                 |  |                             | 973                                          | 116 159                 | (58 951)                                                                                                                                                                                    | 58 181                                            |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
|                                                   |  |                             | 41 503                                       | 120 392                 | (58 951)                                                                                                                                                                                    | 102 944                                           |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
| Auclair (218 claims)                              |  | 100                         |                                              |                         |                                                                                                                                                                                             |                                                   |
| Mining property                                   |  |                             | 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                                           |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
| Corvet Est (90 claims)                       |  | 100                         |                                              |                         |                                                                                                                                                                                             |                                                   |
| Mining property                                   |  |                             | 9 175                                        | 1 575                   | (112)                                                                                                                                                                                       | 10 638                                            |
| Exploration costs                                 |  |                             | 344 755                                      | 1 130 233               | (582 898)                                                                                                                                                                                   | 892 090                                           |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
|                                                   |  |                             | 353 930                                      | 1 131 808               | (583 010)                                                                                                                                                                                   | 902 728                                           |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
| Coulon (1 505 claims) (b)                         |  | 100                         |                                              |                         |                                                                                                                                                                                             |                                                   |
| Mining property                                   |  |                             | 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 (4 permits          and 75 claims) |  | 50                          |                                              |                         |                                                                                                                                                                                             |                                                   |
| Mining property                                   |  |                             | 29 536                                       | 12 253                  | (3 058)                                                                                                                                                                                     | 38 731                                            |
| Exploration costs                                 |  |                             | 732 937                                      | 7 415                   | (57 611)                                                                                                                                                                                    | 682 741                                           |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
|                                                   |  |                             | 762 473                                      | 19 668                  | (60 669)                                                                                                                                                                                    | 721 472                                           |
|                                                   |  |                             |                                              |                         |                                                                                                                                                                                             |                                                   |
| (forward)                                         |  |                             | 2 389 464                                    | 1 290 705               | (769 414)                                                                                                                                                                                   | 2 910 755                                         |

----

Page 12

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 
|                                                        |  | **Undivided interest****%** |  | **Balance as at June          1, 2004********$** |  | **Costs incurred****$** | **Option          payments, mining properties abandoned or sold, credit on duties refundable          for losses, refundable tax credit relating to resources and grants****$** |             | **Balance as at February          28, 2005****$** |
|--------------------------------------------------------|--|-----------------------------|--|--------------------------------------------------|--|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|---------------------------------------------------|
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| (brought forward)                                      |  |                             |  | 2 389 464                                        |  | 1 290 705               |                                                                                                                                                                                 | (769 414)   |                                                   | 2 910 755 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Poste Lemoyne Extension          (113 claims)          |  | 50                          |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Mining property                                        |  |                             |  | 14 240                                           |  | 1 215                   |                                                                                                                                                                                 | -           |                                                   | 15 455 |
| Exploration costs                                      |  |                             |  | 414 705                                          |  | 5 184                   |                                                                                                                                                                                 | (2 631)     |                                                   | 417 258 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
|                                                        |  |                             |  | 428 945                                          |  | 6 399                   |                                                                                                                                                                                 | (2 631)     |                                                   | 432 713 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Lac Noëlla (1 permit          and 20 claims) |  | 100                         |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Mining property                                        |  |                             |  | 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 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Éléonore (1 130 claims)                  |  | 100                         |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Mining property                                        |  |                             |  | 45 800                                           |  | 115 194                 |                                                                                                                                                                                 | -           |                                                   | 160 994 |
| Exploration costs                                      |  |                             |  | 427 476                                          |  | 4 760 762               |                                                                                                                                                                                 | (2 416 087) |                                                   | 2 772 151 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
|                                                        |  |                             |  | 473 276                                          |  | 4 875 956               |                                                                                                                                                                                 | (2 416 087) |                                                   | 2 933 145 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Megatem (882 claims)                                   |  | 45                          |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Mining property                                        |  |                             |  | 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 claims)                               |  | 49                          |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Mining property                                        |  |                             |  | -                                                |  | -                       |                                                                                                                                                                                 | -           |                                                   | - |
| Exploration costs                                      |  |                             |  | 223 200                                          |  | -                       |                                                                                                                                                                                 | (16 103)    |                                                   | 207 097 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
|                                                        |  |                             |  | 223 200                                          |  | -                       |                                                                                                                                                                                 | (16 103)    |                                                   | 207 097 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Others (a)                                             |  | -                           |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
| Mining properties                                      |  |                             |  | 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 |
|                                                        |  |                             |  |                                                  |  |                         |                                                                                                                                                                                 |             |                                                   |  |
|                                                        |  |                             |  | 9 487 426                                        |  | 6 665 343               |                                                                                                                                                                                 | (7 946 893) |                                                   | 8 205 876 |

----

Page 13

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 
| ****                                                  |  | **Undivided interest                    %** |  | **Balance as at          June 1, 2003********$** |  | **Costs incurred********$** | **Option          payments, mining properties abandoned or sold, credit on duties refundable          for losses, refundable tax credit relating to resources and grants********$** |           | **Balance as at          May 31, 2004********$** |
|-------------------------------------------------------|--|---------------------------------------------|--|--------------------------------------------------|--|-----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-------------------------------------------------------|
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Chute-des-Passes (438 claims)                         |  | 50                                          |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Mining property                                       |  |                                             |  | 106 751                                          |  | 788                         |                                                                                                                                                                                     | (8 400)   |                                                       | 99 139 |
| Exploration costs                                     |  |                                             |  | 280 176                                          |  | 62 007                      |                                                                                                                                                                                     | (52 324)  |                                                       | 289 859 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
|                                                       |  |                                             |  | 386 927                                          |  | 62 795                      |                                                                                                                                                                                     | (60 724)  |                                                       | 388 998 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| La Grande Sud (1 permit          and 172 claims) |  | 100                                         |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Mining property                                       |  |                                             |  | 585 968                                          |  | -                           |                                                                                                                                                                                     | (3 750)   |                                                       | 582 218 |
| Exploration costs                                     |  |                                             |  | 2 973 916                                        |  | 3 082                       |                                                                                                                                                                                     | (20 597)  |                                                       | 2 956 401 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
|                                                       |  |                                             |  | 3 559 884                                        |  | 3 082                       |                                                                                                                                                                                     | (24 347)  |                                                       | 3 538 619 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Auclair (220 claims)                                  |  | 100                                         |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Mining property                                       |  |                                             |  | 250 389                                          |  | 9 274                       |                                                                                                                                                                                     | (13 451)  |                                                       | 246 212 |
| Exploration costs                                     |  |                                             |  | 168 502                                          |  | 50                          |                                                                                                                                                                                     | (8 754)   |                                                       | 159 798 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
|                                                       |  |                                             |  | 418 891                                          |  | 9 324                       |                                                                                                                                                                                     | (22 205)  |                                                       | 406 010 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Corvet Est (88 claims)                           |  | 100                                         |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Mining property                                       |  |                                             |  | 1 300                                            |  | 7 875                       |                                                                                                                                                                                     | -         |                                                       | 9 175 |
| Exploration costs                                     |  |                                             |  | -                                                |  | 666 432                     |                                                                                                                                                                                     | (321 677) |                                                       | 344 755 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
|                                                       |  |                                             |  | 1 300                                            |  | 674 307                     |                                                                                                                                                                                     | (321 677) |                                                       | 353 930 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Coulon (1 008 claims)                                 |  | 100                                         |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Mining property                                       |  |                                             |  | -                                                |  | 139 429                     |                                                                                                                                                                                     | -         |                                                       | 139 429 |
| Exploration costs                                     |  |                                             |  | -                                                |  | 1 294 938                   |                                                                                                                                                                                     | (608 819) |                                                       | 686 119 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
|                                                       |  |                                             |  | -                                                |  | 1 434 367                   |                                                                                                                                                                                     | (608 819) |                                                       | 825 548 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Lac Gayot (4 permits          and 109 claims)    |  | 50                                          |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
| Mining property                                       |  |                                             |  | 29 536                                           |  | -                           |                                                                                                                                                                                     | -         |                                                       | 29 536 |
| Exploration costs                                     |  |                                             |  | 567 200                                          |  | 321 265                     |                                                                                                                                                                                     | (155 528) |                                                       | 732 937 |
|                                                       |  |                                             |  |                                                  |  |                             |                                                                                                                                                                                     |           |                                                       |  |
|                                                       |  |                                             |  | 596 736                                          |  | 321 265                     |                                                                                                                                                                                     | (155 528) |                                                       | 762 473 |
|                                               |  |    |  |           |  |           |  |             |  |           |
|-----------------------------------------------|--|----|--|-----------|--|-----------|--|-------------|--|-----------|
| Poste Lemoyne Extension          (113 claims) |  | 50 |  |           |  |           |  |             |  |           |
| Mining property                               |  |    |  | 8 132     |  | 6 108     |  | -           |  | 14 240    |
| Exploration costs                             |  |    |  | 276 292   |  | 221 657   |  | (83 244)    |  | 414 705   |
|                                               |  |    |  |           |  |           |  |             |  |           |
|                                               |  |    |  | 284 424   |  | 227 765   |  | (83 244)    |  | 428 945   |
|                                               |  |    |  |           |  |           |  |             |  |           |
| (forward)                                     |  |    |  | 5 248 162 |  | 2 732 905 |  | (1 276 544) |  | 6 704 523 |

 

----

Page 14

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 
| ****                                                   |        | **Undivided interest                    %** |        | **Balance as at          June 1, 2003           $** |        | **Costs incurred          $** | **Option payments,          mining properties abandoned or sold, credit on duties refundable for          losses, refundable tax credit relating to resources and grants           $** | **Balance as at          May 31, 2004          $** |
|--------------------------------------------------------|--------|---------------------------------------------|--------|-----------------------------------------------------|--------|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| (brought forward)                                      |        |                                             |        | 5 248 162                                           |        | 2 732 905                     | (1 276 544)                                                                                                                                                                  | 6 704 523                                               |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Lac Noëlla (1 permit          and 40 claims) |        | 100                                         |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Mining property                                        |        |                                             |        | 52 757                                              |        | 9 450                         | -                                                                                                                                                                                      | 62 207                                                  |
| Exploration costs                                      |        |                                             |        | 423 153                                             |        | 300 009                       | (100 340)                                                                                                                                                                              | 622 822                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
|                                                        |        |                                             |        | 475 910                                             |        | 309 459                       | (100 340)                                                                                                                                                                              | 685 029                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Éléonore (337 claims)                    |        | 100                                         |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Mining property                                        |        |                                             |        | 14 930                                              |        | 30 870                        | -                                                                                                                                                                                      | 45 800                                                  |
| Exploration costs                                      |        |                                             |        | 89 667                                              |        | 616 160                       | (278 351)                                                                                                                                                                              | 427 476                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
|                                                        |        |                                             |        | 104 597                                             |        | 647 030                       | (278 351)                                                                                                                                                                              | 473 276                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Megatem (1 157 claims)                                 |        | 45                                          |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Mining property                                        |        |                                             |        | 31 192                                              |        | -                             | -                                                                                                                                                                                      | 31 192                                                  |
| Exploration costs                                      |        |                                             |        | 537 258                                             |        | 510 255                       | (244 615)                                                                                                                                                                              | 802 898                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
|                                                        |        |                                             |        | 568 450                                             |        | 510 255                       | (244 615)                                                                                                                                                                              | 834 090                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Megatem III (499 claims)                               |        | 49                                          |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Mining property                                        |        |                                             |        | -                                                   |        | -                             | -                                                                                                                                                                                      | -                                                       |
| Exploration costs                                      |        |                                             |        | 223 200                                             |        | -                             | -                                                                                                                                                                                      | 223 200                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
|                                                        |        |                                             |        | 223 200                                             |        | -                             | -                                                                                                                                                                                      | 223 200                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Others                                                 |        | -                                           |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
| Mining properties                                      |   |                                        |   | 195 522                                             |   | 69 523                        | (34 679)                                                                                                                                                                               | 230 366                                                 |
| Exploration costs                                      |        |                                             |        | 482 512                                             |        | 55 495                        | (201 065)                                                                                                                                                                              | 336 942                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
|                                                        |        |                                             |        | 678 034                                             |        | 125 018                       | (235 744)                                                                                                                                                                              | 567 308                                                 |
|                                                        |        |                                             |        |                                                     |        |                               |                                                                                                                                                                                        |                                                         |
|                                                        |        |                                             |        | 7 298 353                                           |        | 4 324 667                     | (2 135 594)                                                                                                                                                                  | 9 487 426                                               |

----

Page 15

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars) 

**Statements of deferred exploration costs**
|                                                                                                 |  | **Year ended          February 28,          2005          $          (9 months)** | **Year ended May          31,          2004          $          (12 months)** |
|-------------------------------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|
|                                                                                                 |  |                                                                                             |                                                                               |
|                                                                                            |  |                                                                                        |                                                                          |
| **Balance - Beginning of year**                                                                 |  | 9 487 426                                                                              | 7 298 353                                                                |
|                                                                                                 |  |                                                                                             |                                                                               |
|                                                                                            |  |                                                                                             |                                                                               |
| Expenses incurred during the year                                                               |  |                                                                                             |                                                                               |
| Claims and permits                                                                              |  | 317 763                                                                                | 273 318                                                                  |
| Analyses                                                                                        |  | 302 718                                                                                | 132 666                                                                  |
| Drilling                                                                                        |  | 2 407 872                                                                              | 1 227 765                                                                |
| Geophysics                                                                                      |  | 207 857                                                                                | 624 565                                                                  |
| Geology                                                                                         |  | 993 279                                                                                | 322 840                                                                  |
| Airborne surveys                                                                                |  | -                                                                                      | 291 049                                                                  |
| Stripping                                                                                       |  | 212 094                                                                                | 65 779                                                                   |
| Transport                                                                                       |  | 1 081 235                                                                              | 751 811                                                                  |
| Blasting                                                                                        |  | 2 486                                                                                  | 141 606                                                                  |
| Salaries                                                                                        |  | 984 167                                                                                | 421 372                                                                  |
| Accommodation                                                                                   |  | 155 872                                                                                | 71 896                                                                   |
|                                                                                                 |  |                                                                                             |                                                                               |
|                                                                                                 |  | 6 665 343                                                                              | 4 324 667                                                                |
|                                                                                                 |  |                                                                                             |                                                                               |
| Option payments                                                                                 |  | (40 000)                                                                                    | -                                                                             |
| Grants                                                                                          |  | -                                                                                           | (22 500)                                                                      |
| Mining properties abandoned and sold                                                            |  | (4 694 495)                                                                                 | (287 077)                                                                     |
| Credit on duties refundable for losses          and refundable tax credit relating to resources |  | (3 212 398)                                                                                 | (1 826 017)                                                                   |
|                                                                                                 |  |                                                                                             |                                                                               |
|                                                                                                 |  | (7 946 893)                                                                                 | (2 135 594)                                                                   |
|                                                                                                 |  |                                                                                             |                                                                               |
| **Balance - End of year**                                                                       |  | 8 205 876                                                                              | 9 487 426                                                                |

----

Page 16

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)
**8. Share capital **
 a) Change in issued and fully paid share capital

 
|                                   | **As at February 28,** | **As at May 31,**          |
|-----------------------------------|------------------------|----------------------------|
|                                   |                        |                            |  |  |  |  |
|                                   | **2005**               | **2004**                   | **2003** |
|                                   |                        |                            |  |  |  |  |
|                                   | **Number**             | **Amount**                 | **Number** | **Amount** | **Number** | **Amount** |
|                                   | **$**                  |                            | **$** |  | **$** |
|                                   |                        |                            |  |  |  |  |
|                              |                   |                       |   |   |   |   |
| Balance - Beginning of year       | 36 638 915   | 52 159 266  | 30 701 686 | 45 060 060  | 28 724 619 | 42 910 042  |
|                                   |                        |                            |  |  |  |  |
| Private placements *              | 400 333           | 1 501 249   | 5 388 000 | 7 346 538  | 1 538 146 | 1 910 025  |
| Stock options exercised **        | 839 632                | 692 764               | 382 562 | 276 597  | 438 921 | 283 363  |
| Warrants exercised ***            | 1 080 198              | 2 344 655   | 166 667 | 250 000 | - | - |
|                                   |                        |                            |  |  |  |  |
|                                   | 38 959 078   | 56 697 934  | 36 638 915 | 52 933 195  | 30 701 686 | 45 103 430  |
|                                   |                        |                            |  |  |  |  |
| Share issue expenses for the year | -                      | (444 628)                  | - | (773 929) | - | (43 370) |
|                                   |                        |                            |  |  |  |  |
| Balance - End of year             | 38 959 078             | 56 253 306  | 36 638 915 | 52 159 266  | 30 701 686 | 45 060 060  |

 

 

 * Private placements have been presented net of the fair value of warrants    amounting to nil (May 31, 2004 - $735 462). 

 ** Including the fair value of stock options of $63 193 (May 31, 2004    - $9 200) which have been accounted for in stock options in 2003 and 2004.  

 *** Including the fair value of warrants of $341 859 (May 31, 2004    - nil) which have been accounted for in warrants in 2004. 

----

Page 17

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

 b) Change in warrants
|                                                            |        | **As at February 28,**    | **As at May 31,**                                   |
|------------------------------------------------------------|--------|---------------------------|-----------------------------------------------------|
|                                                            |        |                           |                                                     |  |  |  |  |
|                                                            |        | **2005**                  | **2004**                                            | **2003** |
|                                                            |        | **Number**                | **Weighted        average exercise price        $** | **Number** | **Weighted        average exercise price        $** | **Number** | **Weighted        average exercise price        $** |
|                                                       |   |                      |
|                                                            |        |                           |                                                     |  |  |  |  |
| Outstanding - Beginning        of year           |        | 3 198 066  | 1.93                                                | 1 037 180  | 1.66 | 83 333 | 1.95 |
| Granted *                                                  |        | 24 000               | 3.75                                                | 3 044 220  | 1.94 | 1 037 180  | 1.66 |
| Exercised                                                  |        | (1 080 198)     | 1.85                                                | (166 667) | 1.50 | - | - |
| Matured                                                    |        | (153 846)                 | 1.60                                                | (716 667) | 1.71 | (83 333) | 1.95 |
|                                                            |        |                           |                                                     |  |  |  |  |
| Outstanding and exercisable -        End of year |        | 1 988 022                 | 2.01                                                | 3 198 066 | 1.93 | 1 037 180  | 1.66 |

* These warrants were granted under private placements to common shareholders    and to agents as remuneration. They have been recorded at their fair value    of $12 984 (May 31, 2004 - $883 255), determined using the Black-Scholes option    valuation model. 

 The following table summarizes the expiry date of outstanding warrants:
    -  1 929 000 warrants at $2.00 expire in May 2005;
    -  35 022 warrants at $1.50 expire in May 2005;
    -  24 000 warrants at $3.75 expire in November 2005.

**9. 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 (maximum of 5% of the number of common    shares outstanding in favour of one person) may be granted.

 Options granted expire after a maximum of ten years after the grant date.    There is no vesting period.

----

Page 18

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

 The following tables present changes in stock options since June 1, 2002,    and summarize information relating to fixed stock options outstanding and    exercisable.
|                                                    | **As at February 28,**    | **As at May 31,** |
|----------------------------------------------------|---------------------------|-------------------|
|                                                    |                           |                   |  |
|                                                    | **2005**                  | **2004**          | **2003** |
|                                                    |                           |                   |  |  |  |  |  |  |
|                                                    | **Number**                |                   | **Weighted          average exercise price          $** | **Number** |  | **Weighted          average exercise price          $** | **Number** | **Weighted          average exercise price          $** |
|                                               |                      |              |
|                                                    |                           |                   |  |  |  |  |  |  |
| Outstanding - Beginning          of year | 2 749 941  |                   | 0.77 | 3 977 682  |  | 0.72 | 4 294 782  | 1.54  |
| Decrease in exercise          price *         | -                         |                   | - | - |  | - | - | (0.80) |
| Exercised                                          | (839 632)                 |                   | 0.75 | (382 562) |  | 0.69 | (438 921) | 0.65  |
| Granted                                            | 304 000              |                   | 2.54 | 254 500  |  | 1.16 | 229 000  | 0.88  |
| Matured or cancelled                               | (1 000)                   | ***               | 3.62 | (1 099 679) | ** | 0.71 | (107 179) | 2.18  |
|                                                    |                           |                   |  |  |  |  |  |  |
| Outstanding and exercisable - end of          year | 2 213 309  |                   | 1.02 | 2 749 941  |  | 0.77 | 3 977 682  | 0.72  |

* During the twelve-month year ended May 31, 2003, the exercise price    of certain options previously granted to officers, directors and suppliers    has been reduced to $0.71. 

 ** During the twelve-month year 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 recorded in deficit. 

 *** During the nine-month year ended February 28, 2005, 1 000 stock options    were cancelled. The fair value of $1 274 was recorded in contributed surplus.  
| **Exercise price** |  |  |  | **Options outstanding          and exercisable as at February 28, 2005** |  | **Weighted average          remaining contractual life          (years)** |  | **Weighted average          exercise price          $** |
|--------------------|--|--|--|-------------------------------------------------------------------------------|--|---------------------------------------------------------------------------|--|---------------------------------------------------------|
|                    |  |  |  |                                                                               |  |                                                                           |  |                                                         |
| $0.43 to $0.90     |  |  |  | 1 811 809                                                                     |  | 3.96                                                                      |  | 0.74                                                    |
| $1.23 to $1.42     |  |  |  | 235 500                                                                       |  | 8.27                                                                      |  | 1.33                                                    |
| $3.62              |  |  |  | 166 000                                                                       |  | 9.88                                                                      |  | 3.62                                                    |
|                    |  |  |  | 2 213 309                                                                     |  |                                                                           |  | 1.02                                                    |

----

Page 19

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**Accounting for the stock-based compensation plan**

 The fair value of stock options, granted during the nine-month year ended    February 28, 2005 and the twelve-month years ended May 31, 2004    and 2003, was estimated using the Black-Scholes option valuation model with    the following assumptions:
|                                |  | **Year ended**        |  |                         |                      |
|--------------------------------|--|-----------------------|--|-------------------------|----------------------|
|                                |  | **February 28,** |  | **Years ended May 31,** |                      |
|                                |  |                       |  |                         |                      |
|                                |  | **2005**              |  | **2004**                | **2003**             |  |
|                                |  | **$**                 |  | **$**                   | **$**                |  |
|                                |  | **(9 months)**   |  | **(12 months)**    | **(12 months)** |  |
|                                |  |                       |  |                         |                      |  |
| Risk-free interest rate        |  | 3.98%                 |  | 3.98%                   | 4.14%                |  |
| Expected volatility            |  | 56.5%                 |  | 54%                     | 55%                  |  |
| Dividend yield                 |  | Nil                   |  | Nil                     | Nil                  |  |
| Weighted average expected life |  | 51 months        |  | 66 months          | 60 months       |  |

The weighted average fair value of each option granted amounts to $1.03    (May 31, 2004 - $0.62; May 31, 2003 - $0.43).

 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 and directors    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 single 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 amounts to $312    494 (May 31, 2004 - $158 099; May 31, 2003 - $102 340) including an amount    of $312 494 (May 31, 2004 -$158 099; May 31, 2003 - $65 540), representing    the fair value of options granted, which was recorded in the statements of    earnings under "Professional fees" and "General exploration costs", and in    shareholders' equity under "Stock options".

 For the year ended May 31, 2003, if the fair value-based method had been    used to account for stock-based compensation costs related to stock options    granted to key employees, officers and directors, the loss and related loss    per share would have been as follows:
|                                                     |           |  |
|-----------------------------------------------------|-----------|--|
|                                                     | $         |  |
| Pro-forma loss for the year                         | 1 577 188 |  |
| Pro-forma basic and diluted loss per          share | 0.057     |  |

----

Page 20

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**10. Statements of cash flow**
> 
 a) Net change in non-cash working capital items 

**Year ended February 28,**

**Years ended May 31,**
   
**2005            $             (9 months)**

**2004            $             (12 months)**

**2003            $             (12 months)**

 Income taxes recoverable 
13 694  (13 694)3 340  
 Amounts receivable 
1 039 307  1 644 794  2 128 767  Prepaid expenses (11 143)(19 362)4 234  Accounts payable and            accrued liabilities (1 079 192)(397 551)(283 417)(37 334)1 214 187  1 852 924  
 b) Items not affecting cash and cash equivalents related to financing      and investing activities 

> 
**Year ended February 28,**

**Years ended May 31,**

**2005            $             (9 months)**

**2004            $            (12 months)**

**2003            $             (12 months)**
Long-term investments            transferred to short-term investments 
 110 034 

 20 143 

 828 087 
Credit on duties refundable            for losses and refundable tax credit receivable related to exploration            costs accounted for against mining properties 
 3 212 398          

 1 826 017 

 1 505 807 
Amount receivable in            consideration of the sale of a mining property 
 - 

 - 

 24 000 
Acquisition of mining            properties included in accounts payable and accrued liabilities 
 793 921 

 886 142 

 372 281 
Stock options exercised            and included in share capital 
 65 193 

 9 200 

 - 
Stock options cancelled            and included in contributed surplus 
 1 274 

 - 

 - 
Warrants exercised            and included in share capital 
 341 859 

 - 

 - 
Warrants granted and            included in share capital 
 12 984 

 - 

 - 
Share issue expenses            arising from the renouncement of tax deductions and included in share            capital 
 332 076 

 - 

 - 

----

**Virginia Gold Mines Inc**.     (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**11. Related party transactions**

 The company entered into the following transactions with companies owned    by a director and an executive officer:
|                                                    | **Year ended February 28,**         | **Years ended May 31,**                        |
|----------------------------------------------------|-----------------------------------------------|------------------------------------------------|
|                                                    |                                               |                                                |  |
|                                                    | **2005          $           (9 months)** | **2004          $           (12 months)** | **2003          $           (12 months)** |
|                                                    |                                               |                                                |  |
| Expenses capitalized          in mining properties | 322 886                                       | 277 428                                        | 285 711 |
| Additions to land equipment                        | 315                                           | -                                              | - |
| Additions to office equipment                      | -                                             | 4 000                                          | - |
| Management fees                                    | 251 859                                       | 216 080                                        | 144 792 |
| Rent and office expenses                           | 369 603                                       | 478 150                                        | 470 836 |
| Professional fees                                  | 3 500                                         | 2 500                                          | 2 500 |
| General exploration costs                          | 119 350                                       | 119 780                                        | 78 320 |
|                                                    |                                               |                                                |  |
|                                                    | 1 067 513                           | 1 097 938                            | 982 159 |

These transactions were entered into the normal course of operations and    measured at the exchange amount, which represents the amount of consideration    established and agreed by the related parties.

----

Page 22

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)
**12. Income taxes **
 The reconciliation of the income tax expense, calculated using the combined    federal and Quebec provincial statutory tax rate to the income tax expense    presented in the financial statements, is detailed as follows:
|                                                                                                                         | **Year ended February 28,**         | **Years ended May 31,**                        |
|-------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|------------------------------------------------|
|                                                                                                                         |                                               |                                                |  |
|                                                                                                                         |                                          |                                           |   |
|                                                                                                                         | **2005          $           (9 months)** | **2004          $           (12 months)** | **2003          $           (12 months)** |
|                                                                                                                         |                                               |                                                |  |
| Loss before taxes                                                                                                       | (5 037 291)                                   | (225 214)                                      | (1 518 626) |
|                                                                                                                    |                                               |                                                |  |
| Combined federal and          provincial income taxes at 35.74% (May 31, 2004 - 36.58%; May 31, 2003          - 35.16%) | (1 800 000)                                   | (82 000)                                       | (534 000) |
| Large corporation tax                                                                                                   | -                                             | -                                              | 21 762  |
| Tax benefit not recognised          previously                                                                          | (332 076)                                     | -                                              | - |
| Non-deductible stock-based          compensation                                                                        | 112 000                                  | 58 000                                    | 23 000  |
| Expiry of operating losses          carried forward                                                                     | 285 000                                  | 317 000                                   | 277 000  |
| Share issue expenses          not affecting earnings                                                                    | (59 000)                                      | (53 000)                                       | (8 000) |
| Non-taxable portion of          capital gain                                                                            | (92 000)                                      | (91 000)                                       | (32 000) |
| Others                                                                                                                  | (52 000)                                      | (12 000)                                       | 3 000  |
| Change in valuation allowance                                                                                           | 1 606 000                                | (137 000)                                      | 271 000  |
|                                                                                                                         |                                               |                                                |  |
| Income taxes                                                                                                            | (332 076)                                     | -                                              | 21 762  |

 

The income tax expense is detailed as follows: 
| Current taxes | -         | - | 21 762 |
|---------------|-----------|---|--------|
| Future taxes  | (332 076) | - | -      |

>  

----

Page 23

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

 The company is entitled to the following tax benefits, which were not accounted    for in the financial statements as at February 28, 2005, except for future    income tax assets of $332 076 recorded against future income tax liabilities    in the same amount.

 As at February 28, 2005, and as at May 31, 2004 and 2003, the company    has accumulated, for federal and provincial income tax purposes, non-capital    losses which can be applied against future years' taxable income and will    expire as follows:
|      |  | **Year ended          February 28,** |  | **Years ended May 31,**                       |
|------|--|------------------------------------------------|--|-----------------------------------------------|
|      |  |                                                |  |                                               |  |  |
|      |  |                                           |  |                                          |  |   |
|      |  | **2005          $           (9 months)**  |  | **2004          $          (12 months)** |  | **2003          $          (12 months)** |
|      |  |                                                |  |                                               |  |  |
| 2015 |  | 218 000                                        |  | -                                             |  | - |
| 2011 |  | 173 000                                        |  | 173 000                                       |  | - |
| 2010 |  | 129 000                                        |  | 129 000                                       |  | 129 000 |
| 2007 |  | 204 000                                        |  | 204 000                                       |  | 204 000 |
| 2006 |  | 364 000                                        |  | 364 000                                       |  | 364 000 |
| 2005 |  | -                                              |  | 798 000                                       |  | 798 000 |
| 2004 |  | -                                              |  | -                                             |  | 868 000 |
|      |  |                                                |  |                                               |  |  |
|      |  | 1 088 000                                      |  | 1 668 000                                     |  | 2 363 000 |

The tax basis of mining properties exceeds the carrying amount by approximately    $11 697 000 at the federal level (May 31, 2004 - $7 653 000,    May 31, 2003 - $6 660 000) and $19 241 000 at the provincial    level (May 31, 2004 - $14 862 000; May 31, 2003 - $14 290 000).    The difference between the tax basis and the amounts capitalized in the financial    statements mainly results from the renouncement by the company in favour of    investors of the deductions related to exploration costs paid through flow-through    share financings, the non-taxable mining duties tax credit, as well as the    accounting write-offs of mining properties. 

 The undepreciated capital cost of property, plant and equipment for federal    and provincial income tax purposes exceeds the net carrying amount by $61 000    (May 31, 2004 - $57 000; May 31, 2003 - $55 000). Furthermore, for    the current year, the tax basis of short-term investments is equivalent to    the carrying amount; as at May 31, 2003, the tax basis of short-term    investments exceeded the carrying amount by approximately $276 000.

 The tax basis of the long-term investment exceeds the carrying amount by    approximately $176 000 as at February 28, 2005, $190 000 as    at May 31, 2004, and $214 000 as at May 31, 2003.

 The unamortized balance, for income tax purposes, of share issue expenses    amounts to $485 000 (May 31, 2004 - $537 000; May 31, 2003    - $55 000) and will be deductible over the next four years.

----

Page 24

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)**13. Loss per share**

 For the nine-month year ended February 28, 2005, and the twelve-month    years ended May 31, 2004 and 2003, there was no difference between diluted    and basic loss per share since the dilutive effect of stock options and warrants    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 (February 28,    2005 - 37 389 773; May 31, 2004 - 33 784 997; May 31,    2003 - 29 886 356).
|                                                                                                                                                                           |  | **Year ended February 28,** |  | **Years ended May 31,**            |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---------------------------------------|--|------------------------------------|
|                                                                                                                                                                           |  |                                       |  |                                    |  |  |
|                                                                                                                                                                           |  |                                  |  |                               |  |   |
|                                                                                                                                                                           |  | **2005          (9 months)**     |  | **2004          (12 months)** |  | **2003          (12 months)** |
|                                                                                                                                                                           |  |                                       |  |                                    |  |  |
| Basic weighted average          number of shares outstanding                                                                                                              |  | 37 389 773                  |  | 33 784 997               |  | 29 886 356 |
| Stock options                                                                                                                                                             |  | 1 620 869                             |  | 1 243 648                          |  | 1 433 397 |
| Warrants                                                                                                                                                                  |  | 407 371                               |  | -                                  |  | - |
|                                                                                                                                                                           |  |                                       |  |                                    |  |  |
| Diluted weighted average          number of shares outstanding                                                                                                            |  | 39 418 013                            |  | 35 028 645                         |  | 31 319 753 |
|                                                                                                                                                                           |  |                                       |  |                                    |  |  |
| 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                            |  | 2 000 |
| Warrants                                                                                                                                                                  |  | 24 000                                |  | 3 198 066                          |  | 1 037 180 |

 

**14. Commitments**

 The company's aggregate commitments, under a long-term operating lease agreement    with a company held by a director, amount to $39 522 in 2006 and $19 776 in    2007.

**15. Financial instruments**

**Fair value**

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

 The fair value of short-term investments, determined based on quoted values,    amounts to $9 664 926 and $12 933 713 as at February 28,    2005 and May 31, 2004, respectively. The fair value of exploration funds,    determined based on quoted values, amounts to $201 819 and $4 664 221    as at February 28, 2005 and May 31, 2004, respectively.

----

Page 25

**Virginia Gold Mines Inc**.     (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**Interest rate risk**

 As at February 28, 2005 and May 31, 2004, the company's exposure to    interest rate risk is summarized as follows:
| Cash and cash equivalents                |  | Variable interest rate      |  |  |
|------------------------------------------|--|-----------------------------|--|--|
| Short-term investments                   |  | As described in note 3 |  |  |
| Amounts receivable                       |  | Non-interest bearing        |  |  |
| Exploration funds                        |  | Variable interest rate      |  |  |
| Accounts payable and accrued liabilities |  | Non-interest bearing        |  |  |
**16. Subsequent event**
 On March 10, 2005, the company issued 3 930 000 units of its share    capital at a price of $4.10 per unit. Each unit consists in one common share    and one-quarter of a warrant. Each whole warrant gives the right to the holders    to purchase one common share of the company at a price of $5.40 until September 11,    2006. The company paid the agents a cash commission of $996 780. In addition,    the agents may purchase 235 800 additional units priced at $4.10 per unit.

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

 The 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    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 each balance sheet date    being reflected in other comprehensive loss on a net-of-tax basis. 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.

----

Page 26

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**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 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 eligible 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 eligible 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 eligible expenditures are    incurred, 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.

**New accounting standard**

 In December 2004, the Statement of Financial Accounting Standards    ("SFAS") 153, "Exchanges of Nonmonetary Assets" was issued. This standard    is an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions"    and requires that all exchanges of non-monetary assets be accounted for at    fair value, except for exchanges of non-monetary assets which do not have    a commercial substance. An exchange is considered to have a commercial substance    when the future cash flows of an entity are expected to change significantly    as a result of the exchange. FAS 153 applies to exchanges of non-monetary    assets occurring in fiscal periods beginning after June 15, 2005. The    company does not expect that this new standard will have a significant impact    on its financial statements.

----

Page 27

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**Reconciliation of net loss to conform with U.S. GAAP**
|                                                                                                                           | **Year ended February 28,**        | **Years ended May 31,**                       |
|---------------------------------------------------------------------------------------------------------------------------|----------------------------------------------|-----------------------------------------------|
|                                                                                                                           |                                              |                                               |  |
|                                                                                                                           |                                         |                                          |   |
|                                                                                                                           | **2005          $          (9 months)** | **2004          $          (12 months)** | **2003          $          (12 months)** |
|                                                                                                                           |                                              |                                               |  |
| Net loss for the year          in accordance with Canadian GAAP                                                           | 4 705 215                               | 225 214                                  | 1 540 388  |
| Mining properties                                                                                                         | (1 281 550)                                  | 2 189 073                                | 73 422  |
| Stock options granted          to non-employees and re-pricing                                                            | 2 096 155                               | 83 370                                   | 479 125  |
| Tax effect of flow-through          shares                                                                                | 82 076                                  | -                                             | - |
|                                                                                                                           |                                              |                                               |  |
| Net loss for the year          in accordance with U.S. GAAP                                                               | 5 601 896                               | 2 497 657                                | 2 092 935  |
| Other comprehensive loss                                                                                                  |                                              |                                               |  |
| Realized and unrealized          (gains) losses on short-term investments and exploration funds                           | (1 038 672)                                  | (320 908)                                     | 124 018  |
| Unrealized (gains) losses          on long-term investment                                                                | 119 445                                 | (189 741)                                     | (181 930) |
|                                                                                                                           |                                              |                                               |  |
| Comprehensive loss                                                                                                        | 4 682 669                               | 1 987 008                                | 2 035 023  |
|                                                                                                                           |                                              |                                               |  |
|                                                                                                                           |                                              |                                               |  |
| Basic and diluted net          loss in accordance with U.S. GAAP                                                          | 0.150                                   | 0.074                                    | 0.070  |
|                                                                                                                           |                                              |                                               |  |
| Basic and diluted weighted          average number of shares issued and outstanding in accordance with U.S.          GAAP | 37 389 773                              | 33 784 997                               | 29 886 356  |

 

----

Page 28

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(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,          2005          $** | **As at          May 31,          2004          $** |
|---------------------------------------------------------------------------|----------------------------------------------------------|-----------------------------------------------------|
| Share capital                                                             |                                                          |                                                     |
| Share capital in accordance with Canadian GAAP                            | 56 253 306                                          | 52 159 266                                     |
| Stock options                                                             | 460 466                                             | 214 439                                        |
| Warrants                                                                  | 554 380                                             | 883 255                                        |
| Stock option plan costs                                                   | 3 729 101                                           | 1 632 946                                      |
| Tax effect of flow-through shares                                         | 31 826                                              | -                                                   |
|                                                                           |                                                          |                                                     |
| Share capital in accordance with U.S. GAAP                                | 61 029 079                                          | 54 889 906                                     |
|                                                                           |                                                          |                                                     |
| Contributed surplus                                                       |                                                          |                                                     |
| Contributed surplus in accordance with Canadian          GAAP             | 1 274                                               | -                                                   |
| Cancelled stock options                                                   | 703 756                                             | 703 756                                        |
|                                                                           |                                                          |                                                     |
| Contributed surplus in accordance with U.S. GAAP                          | 705 030                                             | 703 756                                        |
|                                                                           |                                                          |                                                     |
| Accumulated deficit                                                       |                                                          |                                                     |
| Deficit in accordance with Canadian GAAP                                  | 29 230 758                                          | 24 525 543                                     |
| Mining properties                                                         | 8 205 876                                           | 9 487 426                                      |
| Stock option plan costs                                                   | 4 432 857                                           | 2 336 702                                      |
| Tax effect of flow-through shares                                         | 82 076                                              | -                                                   |
|                                                                           |                                                          |                                                     |
| Deficit in accordance with U.S. GAAP                                      | 41 951 567                                          | 36 349 671                                     |
|                                                                           |                                                          |                                                     |
| Other accumulated comprehensive income                                    |                                                          |                                                     |
| Unrealized gains on short-term investments and exploration          funds |                                                          |                                                     |
| Balance - Beginning of year                                               | 429 521                                             | 108 613                                        |
| Unrealized gains arising during the year                                  | 1 038 672                                           | 320 908                                        |
|                                                                           |                                                          |                                                     |
| Balance - End of year                                                     | 1 468 193                                           | 429 521                                        |
|                                                                           |                                                          |                                                     |
| Unrealized gains on long-term investment                                  |                                                          |                                                     |
| Balance - Beginning of year                                               | 148 360                                             | (41 381)                                            |
| Unrealized gains (losses) arising during          the year                | (119 445)                                                | 189 741                                        |
|                                                                           |                                                          |                                                     |
| Balance - End of year                                                     | 28 915                                              | 148 360                                        |
|                                                                           |                                                          |                                                     |
| Other accumulated comprehensive income                                    | 1 497 108                                           | 577 881                                        |

 

----

Page 29

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)
| **Balance sheets**                       |                                                     |                                                |
|------------------------------------------|----------------------------------------------------------|-----------------------------------------------------|
| ****                                     | **As at          February 28,          2005          $** | **As at          May 31,          2004          $** |
|                                          |                                                          |                                                     |
|                                          |                                                          |                                                     |
| Current assets                           |                                                          |                                                     |
| Cash and cash equivalents                | 7 116 483                                           | -                                              |
| Short-term investments                   | 9 664 926                                           | 12 933 713                                     |
| Income taxes recoverable                 | -                                                   | 13 694                                         |
| Amounts receivable                       | 5 082 525                                           | 2 909 434                                      |
| Prepaid expenses                         | 64 111                                              | 52 968                                         |
|                                          |                                                          |                                                     |
|                                          | 21 928 045                                          | 15 909 809                                     |
|                                          |                                                          |                                                     |
| Deposits on exploration costs            | 49 430                                              | 150 000                                        |
| Exploration funds                        | 201 819                                             | 4 644 221                                      |
| Long-term investment                     | 42 500                                              | 299 397                                        |
| Office equipment                         | 17 470                                              | 12 676                                         |
| Website development expenses             | 4 152                                               | 4 556                                          |
|                                          |                                                          |                                                     |
|                                          | 22 243 416                                          | 21 020 659                                     |
|                                          |                                                          |                                                     |
| Current liabilities                      |                                                          |                                                     |
| Accounts payable and accrued liabilities |                                                          |                                                     |
| Related companies                        | 207 227                                             | 133 160                                        |
| Others                                   | 756 539                                             | 1 065 627                                      |
|                                          |                                                          |                                                     |
|                                          | 963 766                                             | 1 198 787                                      |
| Shareholders' Equity                     |                                                          |                                                     |
| Share capital                            | 61 029 079                                          | 54 889 906                                     |
| Contributed surplus                      | 705 030                                             | 703 756                                        |
| Deficit                                  | (41 951 567)                                             | (36 349 671)                                        |
| Other accumulated comprehensive income   | 1 497 108                                           | 577 881                                        |
|                                          |                                                          |                                                     |
|                                          | 21 279 650                                          | 19 821 872                                     |
|                                          |                                                          |                                                     |
|                                          | 22 243 416                                          | 21 020 659                                     |

----

Page 30 

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**Statements of cash flows**
|                                                           | **Year ended February 28,**        | **Years ended May 31,**                       |
|-----------------------------------------------------------|----------------------------------------------|-----------------------------------------------|
|                                                           |                                              |                                               |  |
|                                                           |                                         |                                          |   |
|                                                           | **2005          $          (9 months)** | **2004          $          (12 months)** | **2003          $          (12 months)** |
|                                                           |                                              |                                               |  |
|                                                      |                                         |                                          |   |
| Operating activities                                      | (6 325 275)                                  | (2 352 770)                                   | (578 262) |
| Financing activities                                      | 4 032 048                               | 7 919 527                                | 2 150 018  |
| Investing activities                                      | 9 409 710                               | (6 764 444)                                   | (797 278) |
|                                                           |                                              |                                               |  |
|                                                      |                                              |                                               |  |
| Increase (decrease) in cash and cash          equivalents | 7 116 483                               | (1 197 687)                                   | 774 478  |
|                                                           |                                              |                                               |  |
| Cash and cash equivalents          - Beginning of year    | -                                       | 1 197 687                                | 423 209  |
|                                                           |                                              |                                               |  |
| Cash and cash equivalents          - End of year          | 7 116 483                               | -                                             | 1 197 687  |

**Statements of earnings**
|                                                             | **Year ended February 28,**        | **Years ended May 31,**                       |
|-------------------------------------------------------------|----------------------------------------------|-----------------------------------------------|
|                                                             |                                              |                                               |  |
|                                                             |                                         |                                          |   |
|                                                             | **2005          $          (9 months)** | **2004          $          (12 months)** | **2003          $          (12 months)** |
|                                                             |                                              |                                               |  |
|                                                        |                                              |                                               |  |
| Revenues                                                    | 736 043                                 | 1 069 245                                | 1 033 147  |
| Expenses                                                    | 6 587 939                               | 3 566 902                                | 3 104 320  |
|                                                             |                                              |                                               |  |
| Loss for the year before income taxes                       | (5 851 896)                                  | (2 497 657)                                   | (2 071 173) |
|                                                             |                                              |                                               |  |
| Income taxes                                                | (250 000)                                    | -                                             | 21 762  |
|                                                             |                                              |                                               |  |
| Net loss for the year          in accordance with U.S. GAAP | (5 601 896)                                  | (2 497 657)                                   | (2 092 935) |

----

Page 31

**Virginia Gold Mines Inc.**    (an exploration company)    Notes to Financial Statements**February 28, 2005 and May 31, 2004 and 2003**

----

(expressed in Canadian dollars)

**Accounting for stock-based compensation**

 Since June 1, 2003, the company has accounted for stock-based compensation    expenses under U.S. GAAP using the fair value-based method. Prior to June 1,    2003, the company had elected to measure compensation cost related to stock    option awards using the intrinsic value method. Under SFAS 123, "Accounting    for Stock-Based Compensation", the company is required to make pro-forma disclosures    of net loss and net loss per share as if the fair value method had been used.

 The fair value of options granted was estimated using the Black-Scholes    option valuation model and the following assumptions: a risk-free interest    rate of 3.98% (May 31, 2004 - 3.98%; May 31, 2003 - 4.14%), an expected    volatility of 56.5% (May 31, 2004 - 54%; May 31, 2003 - 55%), dividends    of nil and an expected life of four years. The weighted average fair value    of options granted during the nine-month year ended February 28, 2005    and the twelve-month years ended May 31, 2004 and 2003 was $1.03, $0.62    and $0.43, respectively.

 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 and directors    of the company 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 single measure of the fair value of    stock options granted to key employees, officers and directors.

 If the fair value-based method had been used to account for stock-based    compensation costs related to stock options granted to key employees, officers    and directors, the pro-forma net loss for the year and related pro-forma net    loss per share in accordance with U.S. GAAP would have been as follows:
|                                                                                               | **Year ended February 28,**        | **Years ended May 31,**                       |
|-----------------------------------------------------------------------------------------------|----------------------------------------------|-----------------------------------------------|
|                                                                                               |                                              |                                               |  |
|                                                                                               |                                         |                                          |   |
|                                                                                               | **2005          $          (9 months)** | **2004          $          (12 months)** | **2003          $          (12 months)** |
|                                                                                               |                                              |                                               |  |
|                                                                                          |                                              |                                               |  |
| Net loss for the year          in accordance with U.S. GAAP                                   | 5 601 896                          | 2 497 657                                     | 2 092 935 |
| Adjustment related to          stock options granted to key employees, officers and directors | -                                            | -                                             | 277 759 |
|                                                                                               |                                              |                                               |  |
| Pro-forma net loss for          the year                                                      | 5 601 896                                    | 2 497 657                                     | 2 370 694 |
|                                                                                               |                                              |                                               |  |
| Basic and diluted pro-forma          net loss per share                                       | 0.150                                        | 0.074                                         | 0.079 |