---

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

FORM 20-F

(Mark One)

[   ]  REGISTRATION STATEMENT PURSUANT TO SECTION
  12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

**[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934**For the fiscal year ended
**April 30, 2006**

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period
from ____________ to ____________

[   ]  SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring
this shell company report ____________

COMMISSION FILE NUMBER**:000-49919**

KIRKLAND LAKE GOLD INC.(Exact name of Registrant as specified in its charter)

N/A(Translation of Registrants name into
English)

Canada(Jurisdiction of incorporation or
organization)

Highway 66, Kirkland Lake, Ontario, Canada(Address of principal executive offices)

Securities registered or to be registered pursuant to section
12(b) of the Act:

|N/A                   | N/A                                        
|--------------------- | -------------------------------------------
|(Title of each Class) | (Name of each exchange on which registered)

Securities registered or to be registered pursuant to Section
  12(g) of the Act:

**Common Shares**(Title of Class)

Securities for which there is a reporting obligation pursuant
  to Section 15(d) of the Act:

**N/A**(Title of Class)

50,868,138


Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[   ]No [X]

Note  checking the box above will not relieve any registrant
  required to file reports pursuant to Section 13 or 15 (d) of the Securities
  Exchange Act of 1934 from their obligations under those Sections.

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

Indicate by check mark whether the registrant is a large accelerated
  filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated
  filer and large accelerated filer in Rule 12b-2 of the Securities Exchange
  Act of 1934. 
   
  Large Accelerated Filer [   ]Accelerated Filer [X]Non-accelerated
  Filer [   ]

Indicate by check mark which financial statement item the
registrant has elected to follow. Item 17 [X]Item 18 [   ]

If this is an annual report, indicate by check mark if the registrant
  is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act
  of 1934. Yes [   ]No [X]

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TABLE OF CONTENTS

|                                              |                                                       |                                                     | Page No
|--------------------------------------------- | ----------------------------------------------------- | --------------------------------------------------- | -------
|**NOTE REGARDING FORWARD LOOKING STATEMENTS** | iv                                                   
|                                              |                                                       |                                                     |        
|**GLOSSARY OF TERMS USED HEREIN**             | iv                                                   
|                                              |                                                       |                                                     |        
|PART I                                        |                                                       |                                                     | 1      
|ITEM 1                                        | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS | 1                                                  
|                                              |                                                       |                                                     |        
|                                              | A.                                                    | DIRECTORS AND SENIOR MANAGEMENT                     | 1      
|                                              | B.                                                    | ADVISERS                                            | 2      
|                                              | C.                                                    | AUDITOR                                             | 2      
|                                              |                                                       |                                                     |        
|ITEM 2                                        | OFFER STATISTICS AND EXPECTED TIMETABLE               | 2                                                  
|                                              |                                                       |                                                     |        
|ITEM 3                                        | KEY INFORMATION                                       | 2                                                  
|                                              | A.                                                    | SELECTED FINANCIAL DATA                             | 2      
|                                              | B.                                                    | CAPITALIZATION AND INDEBTEDNESS                     | 4      
|                                              | C,                                                    | REASONS FOR THE OFFER AND USE OF PROCEEDS           | 4      
|                                              | D.                                                    | RISK FACTORS                                        | 4      
|                                              |                                                       |                                                     |        
|ITEM 4                                        | INFORMATION ON THE COMPANY                            | 10                                                 
|                                              | A.                                                    | HISTORY AND DEVELOPMENT OF THE COMPANY              | 10     
|                                              | B.                                                    | BUSINESS OVERVIEW                                   | 13     
|                                              | C.                                                    | ORGANIZATIONAL STRUCTURE                            | 15     
|                                              | D.                                                    | PROPERTY, PLANTS AND EQUIPMENT                      | 15     
|                                              |                                                       |                                                     |        
|ITEM 4A                                       | UNRESOLVED STAFF COMMENTS                             | 29                                                 
|                                              |                                                       |                                                     |        
|ITEM 5                                        | OPERATING AND FINANCIAL REVIEW AND PROSPECTS          | 29                                                 
|                                              | A.                                                    | OPERATING RESULTS                                   | 31     
|                                              | B.                                                    | LIQUIDITY AND CAPITAL RESOURCES                     | 33     
|                                              | C.                                                    | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC | 35     
|                                              | D.                                                    | TREND INFORMATION                                   | 35     
|                                              | E.                                                    | OFF-BALANCE SHEET ARRANGEMENTS                      | 35     
|                                              | F.                                                    | TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS       | 36     
|                                              | G.                                                    | SAFE HARBOR                                         | 36     
|                                              |                                                       |                                                     |        
|ITEM 6                                        | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            | 36                                                 
|                                              | A.                                                    | DIRECTORS AND SENIOR MANAGEMENT                     | 36     
|                                              | B.                                                    | COMPENSATION                                        | 40     
|                                              | C.                                                    | BOARD PRACTICES                                     | 41     
|                                              | D.                                                    | EMPLOYEES                                           | 42     
|                                              | E.                                                    | SHARE OWNERSHIP                                     | 42     
|                                              |                                                       |                                                     |        
|ITEM 7                                        | MAJOR SHAREHOLDER AND RELATED PARTY TRANSACTIONS      | 45                                                 
|                                              | A.                                                    | MAJOR SHAREHOLDERS                                  | 45     
|                                              | B.                                                    | RELATED PARTY TRANSACTIONS                          | 45     
|                                              | C.                                                    | INTERESTS OF EXPERTS AND COUNSEL                    | 46     

i

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ITEM
        **8**
      FINANCIAL
        INFORMATION
      46A.
      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
        INFORMATION
      46B.
      SIGNIFICANT CHANGES
      47ITEM
        **9**
      THE OFFER
        AND LISTING
      47A.
      OFFER AND LISTING DETAILS
      47B.
      PLAN OF DISTRIBUTION
      48C.
      MARKETS
      48D.
      SELLING SHAREHOLDERS
      49E.
      DILUTION
      49F.
      EXPENSES OF THE ISSUE
      49ITEM
        **10**
      ADDITIONAL INFORMATION
      49A.
      SHARE CAPITAL
      49B.
      MEMORANDUM AND ARTICLES
        OF ASSOCIATION
      49C.
      MATERIAL CONTRACTS
      49D.
      EXCHANGE CONTROLS
      53E.
      TAXATION
      53F.
      DIVIDENDS AND PAYING AGENTS
      59G.
      STATEMENTS BY EXPERTS
      59H.
      DOCUMENTS ON DISPLAY
      59I.
      SUBSIDIARY INFORMATION
      59ITEM **11**
      QUANTITATIVE AND QUALITATIVEDISCLOSURE ABOUT MARKET RISK
      60ITEM **12**
      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
      60PART II
      
      
      61ITEM **13**
      DEFAULTS, DIVIDEND ARREARAGES
        AND DELINQUENCIES
      61ITEM **14**
      MATERIAL MODIFICATIONS
        TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
      61ITEM **15**
      CONTROLS AND PROCEDURES
      61ITEM **16A**
      AUDIT COMMITTEE FINANCIAL
        EXPERT
      63ITEM **16B**
      CODE OF ETHICS
      64ITEM **16C**
      PRINCIPAL ACCOUNTANT FEES
        AND SERVICES
      64ITEM **16D**
      EXEMPTIONS FROM THE LISTING STANDARDS FOR
        **AUDIT** COMMITTEES
      65ITEM **16E**
      PURCHASES OF EQUITY SECURITIES
        BY THE ISSUER & AFFILIATED PURCHASERS
      66


ii

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|PART III   |                      | 66
|---------- | -------------------- | --
|           |                      |   
|ITEM 17    | FINANCIAL STATEMENTS | 66
|           |                      |   
|ITEM 18    | FINANCIAL STATEMENTS | 67
|           |                      |   
|ITEM 19    | EXHIBITS             | 67
|           |                      |   
|SIGNATURES |                      | 70

iii

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GENERAL

All references herein to the Corporation mean Kirkland
Lake Gold Inc.

The Corporation uses the Canadian dollar as its reporting
currency. All references herein to dollars or $ or
Cdn$ means Canadian dollars, unless otherwise indicated. See Item 3
Key Information  Selected Financial Data  Currency and Exchange Rates for
detailed currency conversion information.

Except as noted, the information set forth herein is as of September
  13,2006.

NOTE REGARDING FORWARD LOOKING STATEMENTS

This document contains statements that constitute
forward-looking statements. Forward looking statements are statements
which include the words believes, anticipates, intends, expects,
estimates, projects and words of similar import, as well as all projections
of future results. Such forward-looking statements involved known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Corporation to be materially different from
any future results, performance or achievements of the Corporation expressed or
implied by such forward-looking statements. Such risks are discussed in Item 3
Risk Factors. The statements contained in Item 4 Business Overview, Item 5
Operating and Financial Review and Prospects and Item 11 Quantitative and
Qualitative Disclosures about Market Risk are inherently subject to a variety
of risks and uncertainties that could cause actual results, performance or
achievements to differ significantly.

The Corporation expressly disclaims any obligation or
undertaking to provide an update or revision to any forward looking statement
contained herein to reflect any change in the Corporations expectations or any
change in events, conditions or circumstances on any which any statement is
based. You should carefully review the cautionary statements and risk factors
contained herein and in other documents that the Corporation files from time to
time with the Securities and Exchange Commission.

GLOSSARY OF TERMS USED HEREIN

Certain terms used herein are defined as follows:

Term
      Definitionadvance royalty
    A form of royalty where the payment is made before the
      commencement of commercial production and which forms a credit against
      future royalty payments once commercial production begins.alkalic
    Containing one of sodium or potassium.alkali-feldspar
    Potassic or sodium feldspar.alluvial
    Relatively recent deposits of sedimentary material laid
      down in river beds, flood plains, lakes, or at the base of mountain
      slopes.Archaean
    An era in geologic time about 3.8 billion to 2.5 billion
      years ago during which the Earths crust solidified.augite
    A mineral consisting of calcium magnesium iron aluminium
      silicate.batholith
    A large mass of igneous rock extending to great depth
      with its upper portion dome-like in shape. It has crystallized below
      surface, but may be exposed as a result of erosion of the overlying rock.
      Smaller masses of igneous rocks are known as bosses or plugs.


iv

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Term
      Definitionbreccia
    Rock consisting of angular fragments in a matrix of
      finer-grained cementing material.Canadian Shield
    A region of Precambrian (greater than 600 million years
      old) rock covering central, eastern and northern Canada and extending
      south into Minnesota and Wisconsin. Large areas of the Canadian Shield
      have been exposed by the erosion of younger rocks overlaying the
      Precambrian rock.cataclasis
    Crushing of rocks.collar
    1) The timbering or concrete around the mouth of a shaft.
      2) The top of a drill hole.conglomerate
    A sedimentary rock consisting of rounded, water-worn
      pebbles or boulders cemented into a solid mass.crosscut
    A horizontal opening driven from a shaft and at right
      angles to the strike of a vein or rock formation.cut (and uncut)
    Assays are cut or reduced to a lower consistent value
      in order to avoid such higher grade assays skewing the average which would
      otherwise produce inconsistent results. If assays are uncut such higher
      grade assays are included.cyanidation
    A milling process, using hydrogen cyanide, to extract
      gold from the host rock.diabase
    A common basic igneous rock usually occurring in dykes or
      sills.diamond drill(ing)
    A rotary type of rock drill in which the cutting is done
      by abrasion rather than percussion. The cutting bit is set with diamonds
      and is attached to the end of long hollow rods through which water or
      other fluid is pumped to the cutting face as a lubricant. The drill cuts a
      core of rock that is recovered in long cylindrical sections, two
      centimetres or more in diameter.doré
    The final saleable product of a gold mine. Usually a bar
      consisting of gold and silver.drift
    A horizontal underground opening that follows along the
      length of a vein or rock formation as opposed to a crosscut which crosses
      the rock formation.dyke
    A long and relatively thin body of igneous rock that,
      while in the molten state, intruded a fissure in older rocks.fault
    A break in the Earths crust caused by tectonic forces
      which have moved the rock on one side with respect to the other; faults
      may extend many kilometres, or be only a few centimetres in length;
      similarly, the movement or displacement along the fault may vary widely.feldspar
    A group of rock-forming minerals.felsic
    The term used to describe light-coloured rocks containing
      feldspar, feldpathoids and silica.fluvial
    Sedimentary material found in river beds.footwall
    The wall or rock on the underside of a vein or ore
      structure.fracture
    A break in the rock, the opening of which affords the
      opportunity for entry of mineral-bearing solutions. A cross fracture is
      a minor break extending at more- or-less right angles to the direction of
      the principal fractures.free-milling [gold]
    Gold is free-milling if it can be extracted from ore
      such that cyanidation can extract approximately 95% of the gold when the
      ore is ground to size 80%,


v

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Term
      Definitionwithout prohibitively high reagent consumption. The
      highest level of free- milling ore is that from which the gold can be
      separated by a gravity process.fuchsite
    A mica with a characteristic (emerald) green colour
      arising from the presence of chrome or vanadium.gangue
    Worthless minerals in an ore deposit.geotechnical
    Using geology and geological engineering.gneiss
    A coarsely crystalline metamorphic rock that looks like
      granite except that the light and dark minerals are segregated into thin
      layers or lenses.granite
    A course-grained (intrusive) ingenious rock consisting of
      quartz, feldspar and mica.granitoid
    Rocks which are in the family of granites.greenstone
    Volcanic rocks forming belts within intrusive or
      sedimentary rocks and which are the source of most metal deposits.hangingwall
    The wall or rock on the upper side of a vein or ore
      deposit.hectare
    A square of 100 metres on each side.igneous
    A type of rock which has been formed from magna, a molten
      substance from the earths core.intrusive
    A body of igneous rock formed by the consolidation of
      magma intruded into other rocks, in contrast to lavas, which are extruded
      upon the surface.komatiitic
    A volcanic rock containing a high concentration of
      magnesium and generally a low concentration of silica.lithofacies
    An association of several sedimentary rocks laid down
      during a common geologic time period.lithological
    The nature and composition of rocks.mafic
    Igneous rocks composed mostly of dark iron and magnesium
      rich minerals.massive
    Solid (without fractures) wide (thick) rock unit.metamorphic
    A type of rock which, through heat and pressure, has been
      changed from igneous or sedimentary rock.meta-sedimentary
    Metamorphosed sedimentary rocks.meta-volcanic
    Metamorphosed volcanic rocks.mill
    1)    A plant in which ore is treated for
      the recovery of valuable metals, or the concentration of
              valuable minerals into a
      smaller volume for shipment to a smelter or refinery.
      2)    A piece of milling equipment consisting of a
      revolving drum, for the fine-grinding of ores
              as a preparation for
      treatment.mineralization
    The concentration of metals and their chemical compounds
      within a body of rock.MNDM
    Ministry of Northern Development and Mines of the
      government of the province of Ontario.modal
    The most frequent value of a set of data.molybdenite
    Molybdenum sulphide (MoS2); which is the main ore in
      which molybdenum is


vi

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Term
      Definitionfound; often found in granitic rocks.net smelter royalty
    A type of royalty based on a percentage of the proceeds,
      net of smelting, refining and transportation costs and penalties, from the
      sale of metals extracted from concentrate and doré by the smelter or
      refinery.non-refractory
    Ore that has high melting point and is resistant to
      milling treatment. Such ore is commonly associated with sulphides.ore
    A mixture of minerals and gangue from which at least one
      metal can be extracted at a profit.ortho-gneisses
    Gneisses (rocks) which have metamorphosed from granites.orthoclase
    Feldspar-potassic.para-gneisses
    Schists (rocks) which have metamorphosed from sedimentary
      rocks.pillowed
    Volcanic rocks that have formed from the bulbous cooling
      of magma when cooled quickly in water.placer
    An alluvial deposit of sand and gravel containing
      valuable metals such as gold, tin, etc.plagioclase
    Feldspar which has had calcium and aluminium substituted
      for sodium and silica.plugs
    A common name for a small offshoot from a larger
      batholith.plunge
    The vertical angle an ore body makes between the
      horizontal plane and the direction along which it extends, longitudinally
      to depth.pluton
    Body of rock exposed after solidification at great depth.polyphase
    Having multiple phases.porphyry
    Any igneous rock in which relatively large, conspicuous
      crystals (called phenocrysts) are set in a fine-grained groundmass.proto-continent
    The earliest crust forming event in the Earths
      geological history and which is a predecessor to the current continent.quartz
    A mineral whose composition is silicon dioxide. A
      crystalline form of silica.raise
    A vertical or inclined underground working that has been
      excavated from the bottom upward.reserve
    National Instrument 43-101 Standards of Disclosure for
      Mineral Projectsof the Canadian Securities Administrators defines a
      Mineral Reserve as the economically mineable part of a Measured or
      Indicated Mineral Resource demonstrated by at least a comprehensive study
      of the viability of a mineral project that has advanced to a stage where
      the mining method, in the case of underground mining, or the pit
      configuration, in the case of an open pit, has been established, and where
      an effective method of mineral processing has been determined. This study
      must include a financial analysis based on reasonable assumptions of
      technical, engineering, operating, and economic factors and evaluation of
      other relevant factors which are sufficient for a person qualified under
      such instrument, acting reasonably, to determine if all or part of the
      Mineral Resource may be classified as a Mineral Reserve. This study must
      include adequate information on mining, processing, metallurgical,
      economic and other relevant factors that demonstrate, at the time of
      reporting, that economic extraction can be justified. A Mineral Reserve
      includes diluting materials and allowances for losses that may occur when
      the material is mined.


vii

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Term
      DefinitionMineral Reserves are sub-divided in order of
      increasing confidence into Probable Mineral Reserves and Proven Mineral
      Reserves. A Probable Mineral Reserve has a lower level of confidence than
      a Proven Mineral Reserve. (1) Probable Mineral Reserve.A
      Probable Mineral Reserve is the economically mineable part of an
      Indicated, and in some circumstances a Measured Mineral Resource
      demonstrated by at least a Preliminary Feasibility Study. This Study must
      include adequate information on mining, processing, metallurgical,
      economic, and other relevant factors that demonstrate, at the time of
      reporting, that economic extraction can be justified. (2)
      Proven Mineral Reserve.A Proven Mineral Reserve is the
      economically mineable part of a Measured Mineral Resource demonstrated by
      at least a Preliminary Feasibility Study. This Study must include adequate
      information on mining, processing, metallurgical, economic, and other
      relevant factors that demonstrate, at the time of reporting, that economic
      extraction is justified. Industry Guide 7 Description of
      Property by Issuers Engaged or to be Engaged in Significant Mining
      Operationsof the Securities and Exchange Commission defines a
      reserve as that part of a mineral deposit which could be economically
      and legally extracted or produced at the time of the reserve
      determination. Reserves consist of: (1) Proven (Measured)
      Reserves.Reserves for which: (a) quantity is computed from dimensions
      revealed in outcrops, trenches, workings or drill holes; grade and/or
      quality are computed from the results of detailed sampling; and (b) the
      sites for inspection, sampling and measurement are spaced so closely and
      the geologic character is so well defined that size, shape, depth and
      mineral content of reserves are well-established. (2) Probable
      (Indicated) Reserves.Reserves for which quantity and grade and/or
      quality are computed from information similar to that used for proven
      (measured) reserves, but the sites for inspection, sampling and
      measurement are farther apart or are otherwise less adequately spaced. The
      degree of assurance, although lower than that for proven (measured)
      reserves, is high enough to assume continuity between points of
      observation. As used herein, reserves are as defined in
      National Instrument 43-101 and do not include resources.resource
    National Instrument 43-101 Standards of Disclosure for
      Mineral Projectsof the Canadian Securities Administrators defines a
      Mineral Resource as a concentration or occurrence of natural, solid,
      inorganic or fossilized organic material in or on the Earths crust in
      such form and quantity and of such a grade or quality that it has
      reasonable prospects for economic extraction. The location, quantity,
      grade, geological characteristics and continuity of a mineral resource are
      known, estimated or interpreted from specific geological evidence and
      knowledge. Mineral Resources are sub-divided, in order of
      increasing geological confidence,


viii

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Term
      Definitioninto Inferred, Indicated and Measured categories. An
      Inferred Mineral Resource has a lower level of confidence than that
      applied to an Indicated Mineral Resource. An Indicated Mineral Resource
      has a higher level of confidence than an Inferred Mineral Resource but has
      a lower level of confidence than a Measured Mineral Resource. (1)
      Inferred Mineral Resource.An Inferred Mineral Resource is that
      part of a Mineral Resource for which quantity and grade or quality can be
      estimated on the basis of geological evidence and limited sampling and
      reasonably assumed, but not verified, geological and grade continuity. The
      estimate is based on limited information and sampling gathered through
      appropriate techniques from locations such as outcrops, trenches, pits,
      workings and drill holes. (2) Indicated Mineral Resource.An Indicated Mineral Resource is that part of a Mineral Resource for
      which quantity, grade or quality, densities, shape and physical
      characteristics can be estimated with a level of confidence sufficient to
      allow the appropriate application of technical and economic parameters, to
      support mine planning and evaluation of the economic viability of the
      deposit. The estimate is based on detailed and reliable exploration and
      testing information gathered through appropriate techniques from locations
      such as outcrops, trenches, pits, workings and drill holes that are spaced
      closely enough for geological and grade continuity to be reasonably
      assumed. (3) Measured Mineral Resource.A Measured Mineral
      Resource is that part of a Mineral Resource for which quantity, grade or
      quality, densities, shape, physical characteristics are so well
      established that they can be estimated with confidence sufficient to allow
      the appropriate application of technical and economic parameters, to
      support production planning and evaluation of the economic viability of
      the deposit. The estimate is based on detailed and reliable exploration,
      sampling and testing information gathered through appropriate techniques
      from locations such as outcrops, trenches, pits, workings and drill holes
      that are spaced closely enough to confirm both geological and grade
      continuity. Industry Guide 7 Description of Property by Issuers
      Engaged or to be Engaged in Significant Mining Operationsof
      the Securities and Exchange Commission does not define or recognize
      resources. As used herein, resources are as defined in
      National Instrument 43-101 and do not include reserves.royalty
    An amount of money paid at regular intervals, or based on
      production, by the lessee or operator of an exploration or mining property
      to the current or former owner of the mineral interests. Generally based
      on a certain amount per ton or a percentage of the total production or
      profits.sedimentary
    A type of rock which has been created by the deposition
      of solids from a liquid.shaft
    A vertical or inclined excavation in rock for the purpose
      of providing access to an ore body. Usually equipped with a hoist at the
      top, which lowers and raises a conveyance for handling workers and
      materials.shear
    The deformation of rocks by lateral movement along
      innumerable parallel


ix

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Term
      Definitionplanes, generally resulting from pressure and producing
      such metamorphic structures as cleavage and schistosity.shoot
    A concentration of mineral values. That part of a vein or
      zone carrying values of ore grade.sill
    An intrusive sheet of igneous rock of roughly uniform
      thickness, generally extending over considerable lateral extent, that has
      been forced between the bedding planes of existing rock.splay
    An offshoot of a fault. A split from a major fault.stope
    An excavation in a mine from which ore is being or has
      been extracted.strike
    The direction, or bearing, from true north of a vein or
      rock formation measured on a horizontal surface.structural
    Pertaining to geologic structure.subprovince
    A part of a shield (such as the Canadian Shield)
      subdivided by common geologic time and rock types. In the Canadian Shield
      some of the major subprovinces are: Abitibi, Opatica and Pontiac.syenite
    An intrusive igneous rock composed chiefly of orthoclase.synclinorium
    A syncline (rocks folded in a U shape) related area.tailings
    Material rejected from a mill after most of the
      recoverable valuable minerals have been extracted.telluride
    A mineral associated with gold that contains tellurium.tholeiitic
    Volcanic rock with higher silica and lower sodium,
      potassium and magnesium content relative to alkaline magma types of
      volcanic rocks and considered to be related to each other by crystal
      fractionation processes (such as basalt or andesite containing augites or
      pigeonite).tonalitic
    Intrusive igneous rock with plagioclase feldspar,
      hornblende (an amphibole mineral), biotite (a platy magnesium-iron mica
      common in igneous rock) and greater than 10% quartz.trondjhemite
    A sodic, siliceous rock containing feldspar and quartz.tuff
    A rock formed of compacted volcanic fragments.turbidite
    Submarine landslides along a continental slope containing
      large masses of sediment.ultramafic
    Igneous rock which are very high in mafic minerals, that
      is, containing virtually no quartz or feldspar and composed essentially of
      iron-magnesium silicates and metallic oxides.uncomformably
    Not having the same direction of stratification due to
      the erosion or folding over of younger rocks.unconformity
    A surface of erosion that separates younger rocks from
      older rocks.uncut (and cut)
    See cut (and uncut).vein
    An occurrence of ore with an irregular development in
      length, width and depth usually from an intrusion of igneous rock.volcanics
    Volcanically formed rocks.winze
    An internal shaft.


x

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PART I

ITEM 1IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

A.            DIRECTORS
AND SENIOR MANAGEMENT

The names, business addresses and functions of the directors
and senior management of the Corporation are:

Name and Business Address
      FunctionD. Harry W. Dobson 
        c/o Rambler Metals & Mining Plc 
        33 St. James's Square 
        London SW1Y 4JS 
        United Kingdom
      Chairman of the Board of DirectorsBrian A. Hinchcliffe 
        c/o Kirkland Lake Gold Mines 
        Highway 66 
        Kirkland Lake, Ontario P2N 3J1 
        Canada
      President, Chief Executive Officer and DirectorRobert G. Rodrigue 
        c/o Kirkland Lake Gold Mines 
        Highway 66 
        Kirkland Lake, Ontario P2N 3J1 
        Canada
      Chief Financial Officer 
        (currently on sick leave)John S. Thomson 
        Millhill House 
        Inchture, Perthshire PH14 9SN 
        United Kingdom
      Executive Vice-President 
        & Acting/Interim Chief Financial OfficerSandra Lee 
        c/o Quest Capital Corp. 
        Suite 300, 570 Granville Street 
        Vancouver, British Columbia V6C 3P1 
        Canada
      Corporate SecretaryMichael W. Sutton 
        c/o Kirkland Lake Gold Mines 
        Highway 66 
        Kirkland Lake, Ontario P2N 3J1 
        Canada
      Chief Geologist & Assistant General ManagerDuncan K. Middlemiss 
        c/o Kirkland Lake Gold Mines 
        Highway 66 
        Kirkland Lake, Ontario P2N 3J1 
        Canada
      Engineering & Production ManagerRaymond A. Belecque 
        c/o Kirkland Lake Gold Mines 
        Highway 66 
        Kirkland Lake, Ontario P2N 3J1 
        Canada
      General Manager


1

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Name and Business Address
      FunctionBrian E. Bayley c/o Quest Capital Corp.
      Suite 300, 570 Granville Street Vancouver, British Columbia V6C
      3P1 Canada
    DirectorS. Paul Kostuik Suite 601, 2288 Bellevue Avenue
      West Vancouver, British Columbia V7V 1C6 Canada
    DirectorGeorge A. Milton Feorus West, Kenmare Kerry,
      Ireland
    Director


B.            ADVISERS

Not Applicable

C.            AUDITOR

The names and addresses of the Corporations auditor for the
three preceding fiscal years and the auditors membership in its governing
professional body are:

Name and Address
    Governing Professional
      BodyPricewaterhouseCoopers LLP 250 Howe Street Vancouver,
      British Columbia V6C 3S7 Canada
    Institute of Chartered Accountants of British
      Columbia


ITEM
2OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3KEY INFORMATION

A.            SELECTED
FINANCIAL DATA

The following table presents selected consolidated financial
data of the Corporation for the five fiscal years ended April 30, 2006, 2005,
2004, 2003 and 2002. This information should be read in conjunction with the
financial statements for the three most recent fiscal years included elsewhere
in this document.

The Corporations 2006, 2005, 2004, 2003 and 2002 annual
  financial statements have been audited by its current independent auditor, PricewaterhouseCoopers
  LLP, Chartered Accountants. The financial statements have been prepared in accordance
  with Canadian Generally Accepted Accounting Principles (Canadian GAAP).
  Note 20 to the 2006 annual financial statements provides a description of the
  principal measurement differences between Canadian GAAP and United States Generally
  Accepted Accounting Principles (US GAAP) as they relate to
  the Corporation and reconciliation to US GAAP of the Corporations financial
  statements.

All information provided herein is in Canadian GAAP (except as
set out in the two tables below).

2

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SUMMARY OF FINANCIAL INFORMATION IN THE CORPORATIONS
FINANCIAL STATEMENTS

Years ended April 30th(Cdn$)2006
      2005
      2004
      2003
      2002OPERATING DATAMining Revenue
      35,122,603
      22,156,105
      9,807,106
      11,704,639
      0Operating Costs
      30,834,472
      36,217,949
      25,045,418
      10,787,637
      0Net Income (Loss)  Canadian GAAP 
        US GAAP
      (6,456,560)
        (6,992,618)
      (28,159,185)
        (28,144,159)
      (22,616,158)
        (22,514,851)
      (4,934,979)
        (4,851,311)
      (2,178,587)
        (2,178,587)Basic and Diluted Earnings (Loss) per
        Common Share(1) 
        Canadian GAAP 
        US GAAP
      (0.13)
        (0.14)
      (0.68)
        (0.68)
      (0.76)
        (0.76)
      (0.25)
        (0.24)
      (0.16)
        (0.16)


As at April 30th(Cdn$)2006
      2005
      2004
      2003
      2002BALANCE SHEET DATAWorking Capital (Deficiency) 
        Canadian GAAP 
        US GAAP
      6,804,669
        6,804,669
      3,976,387
        1,789,387
      3,443,306
        (1,621,735)
      (2,372,658)
        (2,383,536)
      239,522
        239,522Total Assets  Canadian GAAP 
        US GAAP
      60,766,531
        60,766,531
      47,734,561
        47,734,561
      40,530,110
        40,530,110
      21,333,559
        21,333,559
      13,991,298
        13,991,298Total Liabilities  Canadian GAAP 
        US GAAP
      11,784,160
        11,784,160
      12,005,522
        12,005,522
      12,690,473
        12,789,155
      9,611,378
        9,622,256
      7,651,000
        7,651,000Shareholders Equity (Deficiency) 
        Canadian GAAP 
        US GAAP
      48,982,371
        48,982,371
      35,729,039
        35,729,039
      27,839,637
        27,740,955
      11,722,181
        11,711,303
      6,340,298
        6,340,298Common Shares  Number 
        Dollar Amount
      50,868,138
        110,088,761
      45,429,262
        89,070,106
      36,479,606
        51,956,501
      24,076,166
        17,757,582
      17,978,504
        7,177,882Dividends Declared per Common Share
      0
      0
      0
      0
      0


(1) ****The
net loss per Common Share amounts are the same on both a basic and a diluted
basis.

3

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Currency and Exchange Rates

The following table sets out the average of the month-end
exchange rates for one United States dollar (US$), expressed in terms
of one Canadian dollar ($orCdn$), during the following
fiscal years.

Number of Canadian Dollars equal to US $1.00
        Fiscal year Ended April 30th2006
      2005
      2004
      2003
      20021.1769
    1.2640
    1.3439
    1.5335
    1.5698


The following table sets out the highest and lowest exchange
rates for one United States dollar, expressed in terms of one Canadian dollar,
for each month during the previous six months.

US $1.00 Equals
      High (Cdn$)
      Low (Cdn$)2006August
      1.1312
      1.1066July
      1.1415
      1.1112June
      1.1241
      1.1001May
      1.1232
      1.0989April
      1.1718
      1.1203March
      1.1722
      1.1320


The noon rate of exchange on September 12, 2006 for the conversion
  of Canadian dollars into United States dollars was US$ 1.00 = Cdn$ 1.1186.

Exchange rates are based upon the noon buying rate for foreign
currencies posted by the Federal Reserve Bank of New York on its website.

B.            CAPITALIZATION
AND INDEBTEDNESS

Not Applicable.

C.            REASONS
FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

D.            RISK
FACTORS

The securities of the Corporation are highly speculative and
subject to a number of risks. These risks might impede or prevent the
Corporation successfully exploring for and developing further gold resources and
reserves, developing its mining operations and carrying out, on a profitable
basis, its planned mining activities (collectively business
objectives).

A prospective investor should not consider an investment in the
Corporation unless the investor is capable of sustaining an economic loss of the
entire investment.

4

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The risks associated with the Corporations business and
securities include:

The Corporation is experiencing Negative Cash Flow

The success of the Corporations business depends upon the
Corporations ability to develop its cash flow from operations to a point where
it becomes profitable. The Corporation currently has limited revenue from
operations and is experiencing negative operating cash flow. Accordingly, the
Corporation must occasionally rely on additional funds presently available to it
which have been raised through the sale of equity and debt capital. The only
alternatives for the financing of the Corporations business would be the
offering by the Corporation of an interest in its mining properties to be earned
by another party or to obtain project or operating financing from financial
institutions, neither of which is presently intended. If the Corporation cannot
increase its cash flow and become profitable it will be unable to sustain its
business and it will fail to achieve its business objectives.

The notes to the Corporations financial statements also
discuss such issues and should be read in conjunction with the foregoing.

The Corporation has a Very Limited History of Operations

The Corporation has a very limited history of, and is in the
early stages of restarting, production from its mining properties. In restarting
such operations, the Corporation has experienced higher costs and lower revenues
than budgeted and delays which were not expected. The Corporation must also
locate and retain qualified personnel to operate its mining operations which it
is finding to be difficult, but not impossible. Further adverse changes or
continued adverse circumstances in any one of such factors or the failure to
locate and retain such personnel will delay or possibly prevent the Corporation
meeting its business objectives.

The Mining Industry is Speculative and of a Very High Risk
Nature

Mining activities are speculative by their nature and involve a
high degree of risk, which even a combination of experience, knowledge and
careful evaluation may not be able to overcome.

The Corporations drilling activities are an exploratory search
for additional gold deposits. Such exploration is subject to the risk that
little or no mineralization is discovered or that any deposits discovered are
not economic. If this occurs, the Corporations existing gold resources and
reserves may not be sufficient to sustain operations for a lengthy period. This
will have an adverse effect on the Corporations revenues over the
long-term.

The Corporations mining activities are subject to a number of
factors beyond its control including intense industry competition and changes in
economic conditions, including some operating costs (such as electrical power).
Its operations are subject to all the hazards normally incidental to
exploration, development and production of gold, any of which could result in
work stoppages, damage to or loss of property and equipment and possible
environmental damage.

An adverse change in any one of such factors, hazards and risks
would have a material adverse effect on the Corporation, its business and
results of operations. This might result in the Corporation not meeting its
business objectives.

5

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The Corporation is Dependent on Various Key Personnel

The Corporations success is dependent upon the performance of
key personnel working full-time in management, supervisory and administrative
capacities or as consultants, namely, Brian A. Hinchcliffe (President and Chief
Executive Officer), Robert G. Rodrigue (Chief Financial Officer  currently on
sick leave), John S. Thomson (Executive Vice-President and Acting/Interim Chief
Financial Officer), Michael W. Sutton (Chief Geologist and Assistant General
Manager), Duncan K. Middlemiss (Engineering & Production Manager) and
Raymond A. Belecque (General Manager). The Corporation does not maintain life
insurance for such personnel. The loss of the services of senior management or
key personnel could have a material and adverse effect on the Corporation, its
business and results of operations.

The Corporation might have Labour Difficulties

Factors such as work slowdowns or stoppages caused by the
attempted unionization of operations and difficulties in recruiting qualified
miners and hiring and training new miners could materially adversely affect the
Corporations business. This would have a negative affect on the Corporations
business and results of operation which might result in the Corporation not
meeting its business objectives.

The Corporations Activities might suffer Losses from or
Liabilities for Risks which are not Insurable

Hazards such as unusual or unexpected geological formations and
other conditions are involved in mineral exploration and development. The
Corporation may become subject to liability for pollution, cave-ins or hazards
against which it cannot insure or against which it may elect not to insure. The
payment of such liabilities would have a material, adverse effect on the
Corporations financial position and results of operation.

Although the Corporation maintains liability insurance in an
amount which it considers adequate, the nature of these risks is such that
liabilities might exceed policy limits, the liabilities and hazards might not be
insurable against, or the Corporation might not elect to insure itself against
such liabilities due to high premium costs or other reasons, in which event the
Corporation could incur significant costs that could have a materially adverse
effect upon its financial condition and results of operation.

There is Uncertainty of the Nature and Amount of the
Corporations Gold Resources and Reserves

While the Corporation has carried out, and will carry out on an
annual basis, estimates of its mineral resources and reserves and has had such
estimates independently reviewed, this should not be construed as a guarantee
that such estimates are accurate. Furthermore, the historical gold production
from the Corporations mining properties is no assurance they will contain
deposits of gold greater than those currently estimated to exist by the
Corporation. If such estimates prove to be materially overstated, that would
have a material and adverse effect on the Corporations business and results of
operations as the Corporation would be unable to maintain its mining operations
for the length of time presently contemplated.

The Corporation will Experience Uncertainty in Marketing the
Gold which it has Mined

The Corporations revenues are mainly derived from the mining
and sale of gold. The price of gold fluctuates and is affected by numerous
factors beyond the Corporations control including international economic and
political trends, expectations of inflation, currency exchange fluctuations,
interest rates, global or regional consumptive patterns, speculative activities
and increased production due to new mine developments and improved mining and
production methods.

6

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The Corporations Activities will be subject to Fluctuating
Foreign Currency Exchange Rates

The Corporation sells the gold it produces, raises its equity
and maintains its accounts in Canadian dollars. Because the world gold market is
principally priced in English pounds and United States dollars, a substantial
increase in the value of the Canadian dollar against either of those currencies
would adversely affect the Corporations revenue and net income, if any. The
Corporation does not engage in any hedging or other transactions to protect
itself against such currency fluctuations.

There is Uncertainty of the Title to the Corporations
Mining Claims and Leases

While the Corporation has carried out reviews of title to its
mining claims and leases, this should not be construed as a guarantee that title
to such interests will not be challenged or impugned. The mining claims and
leases may be subject to prior unregistered agreements or transfers or native
land claims, and title may be affected by undetected defects. The existence
thereof would have a material and adverse effect on the Corporation, its
business and results of operations.

The Corporations Activities are subject to

Extensive Governmental Regulation and Permitting
Requirements

Exploration, development and mining of minerals are subject to
extensive federal, provincial and local laws and regulations governing
acquisition of the mining interests, prospecting, development, mining,
production, exports, taxes, labour standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters. These laws and regulations are administered by various
governmental authorities including:

(a) the federal government of
Canada ****-
Canada Customs and Revenue Agency
(taxation) ****-
Canadian Environmental Assessment Agency, Environment Canada (environmental
protection) ****-
Natural Resources Canada (land use and conservation)

(b) the government of
Ontario ****-
MNDM (mineral tenure, development and
use) ****-
Ministry of Natural Resources (land use and
conservation)****
- Ministry of the Environment (environmental
protection) ****-
Ministry of Finance
(taxation) ****-
Ministry of Labour (labour rights and relations)

(c) the town of Kirkland Lake,
Ontario ****-
tax
assessment ****-
building
permitting ****-
business licensing

In addition, the current and future operations of the
Corporation, from exploration through development activities and production,
require permits, licences and approvals from some of these governmental
authorities. The Corporation has obtained all government licenses, permits and
approvals necessary for the operation of its business to date, however,
additional licenses, permits and approvals may be required. The failure to
obtain any licenses, permits or approvals that may be required or the revocation
of existing ones would have a material and adverse effect on the Corporation,
its business and results of operations.

Failure to comply with applicable laws, regulations and permits
may result in enforcement actions thereunder, including orders issued by
regulatory or judicial authorities requiring the Corporations operations to
cease or be curtailed, and may include corrective measures requiring capital
expenditures,

7

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installation of additional equipment or remedial actions. The
Corporation may be required to compensate those suffering loss or damage by
reason of its mineral exploration activities and may have civil or criminal
fines or penalties imposed for violations of such laws, regulations and permits.
Any such events could have a material and adverse effect on the Corporation and
its business and could result in the Corporation not meeting its business
objectives.

Amendments to current laws, regulations and permits governing
operations and activities of mining companies, or more stringent implementation
thereof, could have a material adverse impact on the Corporation and cause
increases in capital expenditures or production costs or reduced levels of
production at producing properties or require abandonment or delays in
development of its mining properties.

The Corporations Activities are Subject to Extensive
Environmental Protection Requirements

All phases of the Corporations operations are subject to
environmental regulation. Environmental legislation is evolving in a manner
which will require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees. Future changes in environmental
regulation could adversely affect the Corporations operations by increasing
costs and reducing profitability.

The Corporation has posted, in accordance with mine closure
plans filed with the MNDM, bonds totalling $2,043,435 to secure the costs of
rehabilitating the Macassa Mine and the non-operating Lake Shore Mine. Failure
to comply with the Corporations mine closure plans would result in the loss of
some or all of such bonds. In addition, it is possible that such bonds are
insufficient to secure all of the reclamation costs for which the Corporation
will be liable.

There is a Limited Market for the Corporations Securities
in the United States of America

The Corporations securities are not listed on any stock
exchange in the United States of America and there is only a limited
over-the-counter market in the United States for the Common Shares. Accordingly,
investors might need to rely on Canadian equity markets to trade in the
Corporations securities. Such markets might not have the liquidity found in
markets in the United States resulting in investors being unable to dispose of
the Corporations securities.

The Common Shares have only recently ceased to be a Penny
Stock

The Securities and Exchange Commission has adopted rules (the
Penny Stock Rules) that regulate broker-dealer practices
in connection with transactions in penny stocks. Penny stocks are equity
securities with a price of less than US$ 5.00 (other than securities registered
on certain national securities exchanges or quoted on the NASDAQ system,
provided that current prices and volume information with respect to transactions
in such securities is provided by the exchange or system).

The Penny Stock Rules require a broker-dealer, prior to
effecting a transaction in a penny stock not otherwise exempt from such rules,
to deliver a standardized risk disclosure document prepared by the Securities
and Exchange Commission that provides information about penny stocks and the
nature and level of risks in the penny stock market. In particular the statement
must contain:

|(a) | a description of the nature and level of risk in the
      market for penny stocks in both public offerings and secondary
    trading;                                                                                           
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                  
|(b) | a description of the broker-dealers duties to
        the customer and of the rights and remedies available to the customer
        with respect to a violation to such duties or other requirements of securities
        laws;

8

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|(c) | a brief, clear, narrative description of a dealer market,
        including bid and ask prices for penny stocks and the significance of
        the spread between the bid and ask price;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                          
|(d) | a toll-free telephone number for inquiries on disciplinary
        actions;                                                                                                              
|    |                                                                                                                                                                                          
|(e) | the definitions of significant terms in the disclosure
        document or in the conduct of trading in penny stocks; and                                                                
|    |                                                                                                                                                                                          
|(f) | such other information and be in such form, including
        language, type, size and format, as the Commission shall require by rule
        or regulation.                            

The broker-dealer must obtain from the customer a written
acknowledgement of receipt of the standardized disclosure document.

The broker-dealer also must provide the customer with:

|(a) | the inside bid and offer quotations for the penny stock,
      or other bid and offer price information for the penny stock if inside bid
      and offer quotations are not available;
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                        
|(b) | the compensation of the broker-dealer and its
      salespersons in the transaction;                                                                                                   
|    |                                                                                                                                                                                        
|(c) | the number of Common Shares to which such bid and ask
      prices apply, or other comparable information relating to the depth and
      liquidity of the market for such stock; and  
|    |                                                                                                                                                                                        
|(d) | a monthly account statements showing the market value of
      each penny stock held in the customers account.                                                                        

In addition, the Penny Stock Rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
acknowledgment of the receipt of a risk disclosure statement, a written
agreement to transactions involving penny stocks, and a signed and dated copy of
a written suitability statement.

At the present market prices the Common Shares have recently
ceased to fall within the definition of a penny stock. Should the market price
for the Common Shares fall under US$ 5.00 the Common Shares will again be a
penny stock and United States broker-dealers trading in the Common Shares will
be subject to the Penny Stock Rules. Rather than complying with those rules,
some broker-dealers will refuse to attempt to sell penny stock and, as a result,
shareholders and their broker-dealers in the United States might find it more
difficult to sell Common Shares in the United States.

Investors might experience Difficulty in Enforcing Foreign
Judgments Against the Corporation

The Corporation is incorporated under the federal laws of Canada
  and a majority of the Corporations directors and officers are residents
  of Canada. Consequently, it may be difficult for United States investors to
  effect service of process within the United States upon the Corporation or upon
  those directors or officers who are not residents of the United States, or to
  enforce, inside or outside of the United States, any judgements of United States
  courts predicated upon civil liabilities under the United States Securities
  Exchange Act of 1934, as amended. A judgement of a U.S. court predicated
  solely upon such civil liabilities may not be enforceable in Canada by a Canadian
  court if the U.S. court in which the judgement was obtained is determined by
  the Canadian court not to have had jurisdiction in the matter. Furthermore,
  an original action might not be able to be brought successfully in Canada against
  any of such persons or the Corporation predicated solely upon such civil
  liabilities.

9

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The Corporation does not Pay Dividends

Investors cannot expect to receive a dividend on their
investment in the foreseeable future, if at all. Accordingly, it is likely
investors will not receive any return on their investment in the Corporations
securities other than possible capital gains.

ITEM
4INFORMATION
ON THE COMPANY

A.            HISTORY
AND DEVELOPMENT OF THE COMPANY

Name, Incorporation and Offices

The Corporation was incorporated under the Company Act
(British Columbia) on June 29, 1983 under the name Goldpac Investments Ltd..
Effective April 22, 1988, the Corporation and Tectono Resources Ltd. amalgamated
to become Goldpac Investments Ltd..

On July 27, 1988, the Corporation was continued under the
Canada Business Corporations Act, thereby changing from a provincially to
a Canadian federally incorporated company, at which time the authorized capital
was changed to an unlimited number of shares.

The Corporation changed its name from Goldpac Investments
Ltd. to Brimstone Gold Corp. on May 19, 1994 and its outstanding shares were
consolidated on the basis of one share for each five shares then
outstanding.

On October 21, 1999, the Corporation changed its name from
Brimstone Gold Corp. to Foxpoint Resources Ltd. and its outstanding Common
Shares were consolidated on the basis of one new common share (Common
Shares) for every 15 shares then outstanding.

The Corporation changed its name from Foxpoint Resources Ltd.
to Kirkland Lake Gold Inc. on October 25, 2002 to reflect the nature and
location of the Corporations business.

The Corporations head office is located at the minesite on
Highway 66 near Kirkland Lake, Ontario, Canada. Its telephone number is (705)
567-5208. The Corporations registered office is located at Suite 1880, 1055
West Georgia Street, Vancouver, British Columbia V6E 3P3, Canada.

History

The Corporation commenced operations in 1983. Over the next 18
years the Corporation explored properties in British Columbia, the Northwest
Territories, Montana and Idaho. Eventually, the Corporation abandoned, and
wrote-off the total acquisition and exploration expenditures of, these
properties.

Acquisition of Kirkland Lake Mining Assets

On December 14, 2001 the Corporation acquired various mining
assets located in and around Kirkland Lake, Ontario from Kinross Gold
Corporation (Kinross). These assets included a recently closed gold
underground gold mine, the Macassa Mine, the mill constructed on the mine
property and four contiguous properties known as the Lake Shore,
Wright-Hargreaves, Teck-Hughes and Kirkland Lake properties and their
respective, formerly producing, underground gold mines (such five mines being
collectively called the Mine Complex).

10

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The consideration paid to Kinross consisted of payments
totalling Cdn$5 million, the assumption of all environmental rehabilitation
costs of the mining properties, including mine closure bonds, and the
replacement of existing environmental bonds totalling Cdn$ 2,043,435 posted by
Kinross and a net smelter royalty payable to Kinross on the production of gold
from the properties. The royalty is payable on a sliding scale commencing at US$
300 per ounce of gold as follows:

Average Price Per Ounce of Gold Bullion
      Sold
      Amount of
      RoyaltyLess than US$ 300
    0%Equal to or greater than US$ 300 but less than US$ 400
    2%Equal to or greater than US$ 400 but less than US$ 500
    3%Equal to or greater than US$ 500
    4%


The royalty is paid quarterly until the Corporation has paid a
total of Cdn$ 15 million in royalties. The Corporation shall have the right to
terminate the royalty at any time by paying the balance of the Cdn$ 15 million.
As of April 30, 2006, a total of Cdn$ 2,204,204 had been paid or was payable to
Kinross in respect of royalties.

Kinross is a publicly traded company based in Toronto, Ontario
the shares of which trade on the New York and Toronto Stock Exchanges. None of
the insiders of Kinross are insiders of the Corporation.

Plans for the Mine Properties and Assets

It is the Corporations intention to develop the five historic
gold mining properties which it acquired from Kinross in a comprehensive
fashion. Until their acquisition by the Corporation the five properties were
developed and operated independently. This analysis will be supplemented by
additional exploration carried out by the Corporation, including significant
above and below ground drilling. In that regard, the Corporation has been and
will continue to review, compile and reconcile results from exploration,
drilling, operations and mineral resource and reserve calculations.

The Corporation hopes that the exploration will result in an
increase in the mineral resources and reserves contained in the five properties
which will enable it to become a medium cost gold producing company.

Exploration of the Kirkland Lake Mining Properties

Following completion of an 18 month data compilation program in
October 2003 the Corporation began an exploration and drilling program in a
search for new, and extensions of existing, mineralized structures on its
properties. The program is to be carried out over a period of approximately
three years and scheduled for completion in fiscal 2007. It includes both
surface and underground drilling at an estimated cost of approximately $21
million. In addition, the Corporation is studying the expenditure of
approximately $2 million on re-commissioning Shaft No. 5 on the Lake Shore
Property, including hoist repairs, shaft and drift rehabilitation and a new
headframe, and on other development programs.

This program has been and is being primarily funded, in stages
over its three year life, from private and public financings through the sale of
equity and debt securities of the Corporation supplemented by cash flow from
operations.

11

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Development of the Kirkland Lake Mining Assets

To date, the Corporation completed dewatering of the Mine
Complex (to the intended depth of below the 5725-foot level), rehabilitated the
5720-foot loading pocket of the Macassa Mine, acquired mining equipment
including scoop trams and custom designed mobile drilling equipment, and
developed a hydraulic paste filling system to support production from Shaft No.
2 of the Mine Complex.

Production

On May 14, 2002 the Corporation restarted gold production from
the Mine Complex by processing tailings from the Lake Shore property at a rate
of 880 tons per day and an estimated head grade of 0.12 ounces of gold per ton.
Gold recovery was in excess of 75%.

Subsequently, the Corporation began mining operations.
Initially, it mined surface deposits, which were accessible through open pit
operations. In December 2002 and January 2003 the Corporation was able to change
its mining operations to underground mining as its dewatering program progressed
although some modest surface mining operations were continued to be carried out.

As a result of the successful completion of the dewatering program,
  underground mining can now be carried out from the 2475-foot, 3400-foot, 3835-foot,
  4250-foot, 4500-foot, 4750-foot, 4900-foot, 5025-foot, 5150-foot, 5300-foot,
  5450-foot, 5600-foot and 5720-foot levels of the Macassa Mine. The underground
  production is hoisted to surface by the No. 2 and 3 Shafts of the Mine Complex.

Gold from most of the properties is predominately quartz vein
hosted. It is fine grained, free gold, usually accompanied by 1 to 3% pyrite and
sometimes associated with molybdenite and tellurides of lead, gold, gold-silver,
silver, nickel and mercury. The gold is non-refractory and free-milling and
responds well to cyanidation. Recoveries are in the range of 95 to 97%.

The ore recently discovered to the south of the properties is
predominately sulphide hosted gold zones. The gold recoveries are similar to the
quartz vein hosted ore.

Personnel

During the summer of 2003, the union which claimed to represent
former workers at the Mine withdrew that claim. As a result, the Corporations
workforce is not unionized.

In the Corporations 2004 fiscal year it completed the
transition from a contractor-based workforce to an employee-based workforce. The
Corporations goal is to operate with a minimal use of outside contractors,
however, there has been an ongoing shortage of skilled miners.

The mine is currently operating two shifts a day for five days
a week with select, priority development work being carried out for two shifts a
day for seven days a week.

Capital Expenditures and Divestitures

During the three fiscal years ended April 30, 2006, 2005 and
  2004 the Corporation invested $9,441,173 on the purchase of property, plant
  and equipment, $10,535,000 on the purchase of short term investments and $25,638,025
  on the development of its mining properties.

The Corporation currently has undertaken a variety of capital
  programs at the Mine Complex totalling $37.7 million over the next five fiscal
  years (2007 through 2011). These programs include various development activities
  (such as re-commissioning of Shafts No. 2 and 5 of the Mine Complex) and purchase
  of mining equipment. These programs are being financed through a combination
  of cash flow from operations, cash proceeds from equity financings and the exercise
  of warrants and stock options.

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All of the foregoing expenditures have been on the
Corporations mining properties in Kirkland Lake, Ontario, Canada.

The Corporation did not have any material capital divestitures
during the foregoing periods.

Takeover Offers

Since the commencement of the Corporations 2004 fiscal year it
has neither received any public takeover offers for its Common Shares from third
parties nor made any such offers.

B.            BUSINESS
OVERVIEW

Nature

The Corporation is a natural resource company engaged in the
  acquisition, exploration and development of and production (mining and milling
  of gold ore) from mineral resource properties in Canada.

Principal Markets

The Corporation has received only limited revenue since
commencing production at its current operations on its Kirkland Lake mining
properties. Such revenue was from, and it anticipates its markets will continue
to be, the North American gold bullion markets.

Seasonality of the Corporations Business

The Corporations business is not seasonal.

Sources and Availability of Raw Materials

Other than water and electrical power  both of which are
readily available and of which only electrical power experiences any material
price volatility  the Corporation does not require any raw materials with which
to carry out its business.

Marketing Channels

The Corporation markets the gold bullion produced from the Mine
  Complex through direct sales to the gold bullion banking industry, principally
  to Johnson Matthey Plc. of London, England, a multinational specialty chemical
  and precious metals company.

Patents and Licenses; Industrial Commercial and Financial
Contracts; and New Manufacturing Processes

In conducting its business operations, the Corporation is not
dependent on any patented or licensed processes, technology, industrial,
commercial or financial contracts or new manufacturing processes.

Competitive Conditions

Competition in the mineral exploration and production industry
is intense. The Corporation competes with other mining companies, many of which
have greater financial resources and technical facilities, for the acquisition
and development of, and production from, mineral concessions, claims, leases and
other interests, as well as for the recruitment and retention of qualified
employees and consultants.

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Government Regulation

Exploration, development and mining of minerals are subject to
extensive federal, provincial and local laws and regulations governing
acquisition of the mining interests, prospecting, development, mining,
production, exports, taxes, labour standards, occupational health, waste
disposal, land use, toxic substances and environmental protection (further
described in the next risk factor), mine safety and other matters. These laws
and regulations are administered by various governmental authorities including:

| |  | the federal government of Canada  
| |  | ----------------------------------
| |  | o                                 
| |  | o                                 
| |  | o                                 
| |  |                                   
| |  | the government of Ontario         
| |  | o                                 
| |  | o                                 
| |  | o                                 
| |  | o                                 
| |  | o                                 
| |  |                                   
| |  | the town of Kirkland Lake, Ontario
| |  | o                                 
| |  | o                                 
| |  | o                                 

The Corporation estimates that the annual costs of complying
with such laws and regulations are as follows:

Description
      Amount (Cdn$)Provincial Land Taxes
    7,600Regional Land Taxes
    1,300Municipal Property Taxes
    637,600Federal Taxes
    59,000Environmental Protection
    115,000Mine and Mill Worker Safety
    300,000Total
    1,120,500


In addition, the current and future operations of the
Corporation, from exploration through development activities and production,
require permits, licences and approvals from some of these governmental
authorities. The Corporation has obtained all government licenses, permits and
approvals necessary for the operation of its business to date, however,
additional licenses, permits and approvals may be required.

The principal legislation governing the Corporations
operations is the Mining Act (Ontario) which governs the acquisition and
maintenance of mineral rights, development of mines, commercial production from
mines and procedures for mine closure in the province of Ontario. The Act is
administered by the MNDM. The Corporations operations are subject to such
legislation and to overview by the MNDM.

Mineral rights are acquired when a licensed prospector stakes
an unpatented mining claim on the ground.

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Assessment work, which may include sampling, trenching,
drilling, blasting, geological and geophysical surveying and feasibility
studies, must be performed and reported annually to the MNDM to maintain an
unpatented mining claim in good standing and prevent its forfeiture. Patented
mining claims were based on a staked area of ground which was subsequently
surveyed. They are no longer granted. Existing patented mining claims do not
require any assessment work to be carried out but do require annual payments to
be made to the MNDM in order to be kept in good standing and prevent its
forfeiture.

If exploration of an unpatented mining claim warrants it, the
claim holder may then enter into a 21 year renewable mining lease over the
ground covered by the claim. Mining claims must be leased before mineral
extraction for production commences. The mining lease is maintained by paying an
annual rent per hectare.

The Mining Actprovides a one-window approach to
permitting and licensing. Before beginning mine development, environmental
studies must be carried out, the public must be notified, public hearings held,
and the mine development and closure plans must be approved. The closure plans
require posting of reclamation bonds to ensure sufficient funds are available to
carry out the closure plans. As well, the Act encouraged companies to conduct
progressive rehabilitation during the life of the mine.

In addition all phases of the Corporations operations are
subject to environmental regulation by various levels of government including
regional, provincial and federal authorities. Environmental legislation is
evolving in a manner which will require stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors and employees.

C.ORGANIZATIONAL
STRUCTURE

The Corporation does not have any subsidiaries.

D.            PROPERTY,
PLANTS AND EQUIPMENT

The Corporations headquarters are located at the site of the
Mine Complex, near Kirkland Lake, Ontario, Canada.

The Corporations material tangible fixed assets (property,
plant and equipment) are also located at the Mine Complex. All of its mining
properties are located around the Mine Complex. These assets and properties are
described below.

Fixed Assets  Property, Plant and Equipment

The Mine Complex facilities consist of a mill and paste plant,
offices, laboratory, warehouse and mechanical and electrical shops.

The processing plant at the Mine Complex has been in place in
its present configuration since 1988. The mill is a conventional carbon-in-pulp
processing facility, which has been modified by the addition of a thickener,
ball mill and tower mill to process tailings from the Lake Shore Property.

The plants rated capacity is 1,450 tons per day, however, it
can process up to a combined 625 tons per day of ore and 1,200 tons per day of
tailings. The mill capacity exceeds the 600 tons per day mining rate presently
contemplated by the Corporations engineering department.

The Mine Complex has two shafts, both of which are operational.
  Production Shaft No.2 reaches a depth of 4,625 feet and is equipped with a hoist
  having a capacity of 800 tons per day. Production Shaft No. 3 was sunk in 1984
  one mile west of Shaft No. 3 to a depth of 7,050 feet. It is equipped with a
  hoist having a capacity of 1,800 tons per day.

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Mining Properties Description and Location

The Corporations Kirkland Lake mining properties consist
  of 224 patented (surveyed) and unpatented (staked and not surveyed) mining claims
  and crown leases, located near Kirkland Lake, Ontario, Canada. From west to
  east, the past producing properties include the Macassa (which now includes
  the Tegren Property west of the original Macassa Property), Kirkland Lake, Teck-Hughes,
  Lake Shore and Wright-Hargreaves Properties. The properties are in eastern Teck
  Township and western Lebel Township in the district of Timiskaming, Ontario
  and consist of:

Interest
      Number of Claims / Leases
      Area (acres)Patented claims
    174
    7,892.3Staked claims
    45
    3,240.0Crown leases
    5
    543.5Total
    --
    11,675.8


To maintain these mining interests in good standing with the
authorities from which these interests were granted, the following annual
minimum levels of exploration must be carried out, taxes paid to the MNDM and
the town of Kirkland Lake, Ontario and advance royalties paid to various royalty
holders:

Nature
      Amount (Cdn$)Exploration
      32,400 (1)Municipal taxes
      637,600Miscellaneous taxes
      8,900Advance royalties
      13,000 (2)Total:
      $ 691,900


|(1) | The unpatented (staked) claims will not require these
      exploration expenditures to be incurred until 2009 since previous
      exploration expenditures on the claims can be carried forward and applied
      to keep them in good standing until then.                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) | An advance royalty of Cdn$ 10,000 per year is also
      payable on the Macassa Property when the Mine is in production from the
      claims held by the royalty holder, Newmont Mining Corporation of Canada
      Limited (a public company the shares of which trade on the Toronto Stock
      Exchange). There was no production from the Macassa Property in the 2004
      or 2006 fiscal years, however there was some production in the 2005 fiscal
      year.

In addition there is a net smelter royalty payable to Kinross
as described under Item 4 History and Development of the Company  History 
Acquisition of Kirkland Lake Mining Assets.

Some of the mining interests are also subject to a royalty
payable to previous owners. The royalties differ depending on which claim they
were granted and range from net smelter royalties of 1% to 2%, production
royalties of $ 0.10, $ 0.25, $ 1.50, $ 3.00 or $ 4.00 (all in Canadian dollars)
per ton of ore mined or net profits royalties of 2% to 5% while some claims have
a royalty of 1% of gross proceeds from production or a net profit royalty of
20%.

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Reclamation Bonds and Permits

As part of the permitting process for the development and
commercial operation of the Macassa Mine and Lake Shore Mine, Kinross prepared,
and had approved by the MNDM, closure plans for both the Macassa Mine and the
Lake Shore Mine. Financial bonds totalling $2,043,435 for the Macassa Mine
($1,481,795) and the Lake Shore Mine ($561,640) were posted by Kinross with the
MNDM. Upon acquisition of the properties from Kinross the Corporation assumed
responsibility for these bonds and reimbursed Kinross for them. The other three
properties, the Kirkland Lake, Teck-Hughes and Wright-Hargreaves Properties,
will require geotechnical investigations and possible closure remediation to
meet the MNDMs approval. This Asset Retirement Obligation had decreased to
$1,845,780 as at April 30, 2006.

In order to perform diamond drilling underground in the Mine
Complex a dewatering program has been carried out. This required a Permit to
Take Water to be obtained under the Water Resources Act (Ontario). This
permit allows the Corporation to pump up to 13,104,000 litres per day from the
Mine.

Accessibility, Climate, Local Resources and Physiography

The town of Kirkland Lake, Ontario (approximate population
8,800) and its immediate surroundings are located within the Canadian Shield and
are surrounded by several lakes and swamps. The local vertical relief is limited
with Kirkland Lake sitting at 310 metres above mean sea level. The immediate
area is dominated by temperate boreal forest.

The annual precipitation in the area is 300 centimetres of snow
in the winter and 59 centimetres of rain in the summer. The average temperature
ranges from minus 22.8 degrees Celsius in the winter to 23.6 degrees Celsius in
the summer.

Kirkland Lake and the Corporations five mining properties are
accessible by paved highways. The properties are located approximately 125
kilometres southeast of Timmins, Ontario which has an all-weather, jet capable
airport with frequent scheduled service. Kirkland Lake is serviced by rail and
motor coach and has a small airport without scheduled service. It is a modern
town with most of the amenities usually expected in larger centres. There is an
available workforce in the area and the entire infrastructure required for a
full mining operation. Electrical power for the Corporations mining operations
is readily available from the Ontario provincial power authority.

History

In mid-1995 Kinross acquired the Macassa Mine, Lake Shore Mine
and the mining properties on which they were situated and the Wright-Hargreaves
mining property from Barrick Gold Corporation (Barrick), a publicly
traded company based in Toronto, Ontario the shares of which are traded on the
Toronto, New York, London and Paris Stock Exchanges. Barrick had acquired these
mines and properties as part of its take-over of Lac Minerals Ltd. in September,
1994. Kinross acquired the Kirkland Lake and Teck-Hughes mining properties in
1998.

All five of the mining properties acquired by the Corporation
and the formerly producing mines developed thereon are located along a
continuous stretch known as the Main Break and related subsidiary zones. The
first of the five to enter production was the Teck-Hughes Mine in 1917, followed
by the Lake Shore (1918), Kirkland Lake (1919), Wright-Hargreaves (1921) and
Macassa (1933).

The five former mining properties acquired by the Corporation
had the following operating profiles at the time of acquisition:

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Mine
      Period of Operation
      Gold Produced
      (Ounces)Macassa
    1933  1999
    3,525,389Lake Shore
    1918  1965
    8,602,791(1)Teck-Hughes
    1917  1968
    3,709,007(1)Kirkland Lake
    1919  1960
    1,172,955Wright-Hargreaves
    1921  1965
    4,821,296(1)


(1) ****Includes
production during 1984 through 1988 when owned by Lac Minerals Ltd.

Macassa Mine

Overview

The Macassa Mine was in continuous production from 1933 until
operations were suspended in June 1999. The mine was the last of the five major
gold mines to cease production. On May 14, 2002 the Corporation restarted mining
operations at the mine.

History

The original mine was developed on 11 mining claims by Macassa
Mines Ltd. that organized in 1926 and obtained the assets of United Kirkland
Gold Mines Ltd. in 1933. In 1962 it combined with Bicroft Uranium Mines Ltd. and
Renable Mines Ltd. to become Macassa Gold Mines Ltd. An amalgamation in November
1970 with Willroy Mines Ltd. and Willecho Mines Ltd. created Little Long Lac
Gold Mines, located in Toronto. Upper Canada Mine Ltd. optioned the mining
rights from 1970 to 1976. In December 1982, the amalgamation of several
corporations, including Little Long Lac Gold Mines, created Lac Minerals Ltd. It
was during this period that the Tegren Property was added to the original
Macassa Property. In September 1994, Barrick successfully took over Lac Minerals
Ltd., and Kinross acquired it from Barrick in May 1995.

The first shaft sunk on the property was the 500 foot Elliot
shaft developed in the Main Break Zone in the late 1920s. Mining was
unsuccessful and operations halted. In 1931, development westward onto Macassa
ground from the 2475-foot level of the Kirkland Lake Mine discovered ore on the
Main Break for 700 feet along strike and in subsidiary hangingwall veins. These
underground workings were connected with the 3100 foot long No. 1 shaft, and
later by two winzes to greater depths. The No. 1 winze connected the 3000-foot
to 4625-foot levels and the No. 2 winze the 4625-foot to 6875-foot levels. The
No. 2 shaft was sunk from surface to a depth of 4625 feet about 1000 feet
southwest of the No. 1 shaft. In 1986, the No. 3 Shaft was sunk from surface (in
what had been the Tegren Property) to the 7050-foot level and then to a final
level of 7225 feet. Until the mid 1990s this was the deepest single-lift shaft
in the Western Hemisphere. The No. 3 Shaft was the most recent access shaft, and
gave access to 21 levels from the 3800-foot to the 7050-foot level until 1997.
As a result of a rock burst on April 12, 1997, only the zones above the
5150-foot level remained active. Exploration development was underway on the
3800-foot level when production was halted in 1999. Rehabilitation of levels
down to the 5700-foot level was in progress prior to closure.

The first mill on the property began operation in October 1933
at a capacity of 200 tons per day. The milling rate was increased to 425 tons
per day in 1949 and to 500 to 525 tons per day in 1956. In August 1988 a new
mill was built which could process 500 to 600 tons of rock and 750 tons of
tailings per day. By 1996, modifications had increased capacity to 900 tons of
rock per day and 1,000 tons of tailings per

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day. When closed in 1999, mill capacity was near 1,500 tons of
rock per day. Based on a 2,000 ton per day processing rate the tailings
impoundment area of the mill has a capacity greater than 10 years. All of the
appropriate permits for processing ore through the mill are in place.

Current Operations

See Current and Proposed Exploration and Development
following.

Lake Shore Mine

Overview

The Lake Shore Mine is located in the centre of the Kirkland
Lake camp bounded to the west by the Teck-Hughes mine and to the east by the
Wright-Hargreaves mine. Lake Shore was by far the largest gold producer of the
five former producing mines producing 8,499,195 ounces at a grade of 0.51 ounces
per tonin continuous production from 1918 to 1965. This is almost twice
the total number of ounces produced from the neighbouring second highest
producer, Wright-Hargreaves, and represents 36% of the total ounces produced
from the entire camp. From 1984 to 1988 an additional 103,592 ounces were
subsequently recovered from pillars by Lac Minerals Ltd. for a total of
8,602,791 ounces of gold recovered.

Gold was discovered on the property in 1911. From 1914 to 1918
the No. 1 Shaft was developed to 400 feet on the South (No. 1) Vein Zone and
7,464 feet of underground development on levels at 100, 200, 300, and 400 feet
was carried out. A 65 ton mill was installed and milling began in 1918. All work
was carried out by Lake Shore Gold Mines Limited.

History

From 1919 to 1965 the mine was eventually serviced by four
surface shafts and three internal shafts. The original No. 1 Shaft and its
extension were both inactive during the latter years of operations. The No. 4
Shaft, collared at 4325-foot level, took the workings to a depth of 8,150 feet.
Underground development was carried out on 57 levels and, during the life of the
mine, totalled 279,238 feet of drifting, 108,317 feet of crosscutting, and
154,547 feet of raising. Milling capacity was gradually increased to a maximum
of 2,400 tons per day and production was continuous until the mine closed in
July 1965. Ore from the Wright-Hargreaves Mine was treated at the Lake Shore
Mill from 1957 until the closure of that mill in March 1965.

High-grade ore material on the bottom levels was being mined
when the mine closed. Diamond drilling below these levels indicated that the ore
continues and that the Main Break shows no signs of weakening at depth.
Relatively low tonnage of ore at deeper levels and difficulties in mining at
these extreme depths proved deepening of the mine workings to be uneconomical
with the fixed gold prices in the 1960s.

The Main Break and related sub-parallel structures strike
continuously across the Lake Shore Property but are offset by significant
post-ore faulting along the Lake Shore fault at the east end of the property.
The North, or No. 2 vein, is the most productive and extensive structure at Lake
Shore. This structure is continuous from surface down to the 8075-foot level and
has been traced by diamond drilling for 800 feet below this level. Between the
1200 and 4000-foot levels the Main Break branches into several faults.

Mining on the North (No. 2) vein was extensive throughout the
mine. Of these zones, the area containing mixed syenite porphyry and augite
syenite west of the shaft area from surface to the 5450-foot level was most
productive. Occasionally sub-parallel veins were mined separately from this
vein, but in places the veins are closely spaced and have been stoped together
across widths up to 70 feet. Stoping was nearly continuous on the North vein
from surface to the 5400-foot level where veining weakened considerably

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and stopped at the 6325-foot level. Another ore shoot continues
below this from the 7575-foot level to the 8075-foot level, the bottom level of
the mine. This ore shoot was traced by diamond drilling down to 8,500-foot level
and showed no signs of weakening. The North vein on the 8075-foot level was
mined over an 807 foot strike length at an average stoping width of 7.6 feet and
an average grade of 0.677 ounces per ton.

Current Operations

The mine has been decommissioned. Accordingly, any ore
recovered therefrom will have to be accessed from a ramp driven down into the
property by previous owners or by a recommissioning of the No. 5 Shaft.

Kirkland Lake Mine

Overview

The Kirkland Lake Mine is near the western end of the five
mines bounded to the west by the Macassa Mine and to the east by the Teck-Hughes
Mine. A total of 1,172,955 ounces of gold at an average grade of 0.37 ounces per
tonwas mined between 1919 and 1960.

History

The first reported discovery on the property was in 1911. In
1912 the Main Break was discovered. In 1913 a two-compartment shaft (Kirkland
Lake No. 1) was sunk to 80 feet by Kirkland Gold Mines Limited. The No. 1 shaft
was deepened in 1915 to 200 feet and a level was established at 175 feet by
Beaver Consolidated Mines Limited (under option from Kirkland Lake Gold Mines
Limited).

From 1916 to 1918 Kirkland Lake Gold Mining Company Limited
(controlled by Beaver Consolidated Mines Limited) deepened the No. 1 shaft to
700 feet and sank another shaft (the No. 2 main shaft) to 500 feet with levels
at 300, 400 and 500 feet. A 150 ton per day mill was installed and production
began in 1918.

In the early years of the mine, most gold production came from
workings on the Main Break. In 1937 significant production started from the No.
5 vein. The No. 5 vein was a south dipping hangingwall vein structure which was
mined as a continuous sheet of ore from the 3475-foot level to the 3875-foot
level along a strike length of 1,200 feet. This vein rolls into the Main Break
along a line gently plunging to the west.

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Current Operations

The mine has been decommissioned. Accordingly, any ore recovered
  therefrom will have to be accessed from existing operations in the Macassa Mine
  and on the Lake Shore Property. Alternatively, the Corporation could undertake
  new surface mining operations or drive a ramp down into the Property to access
  the ore. Also see Current and Proposed Exploration and Development
  following.

Teck-Hughes Mine

Overview

The Teck-Hughes Mine is bounded on the west by the Kirkland
Lake Mine and Lake Shore Mine to the east. The mine began production in 1917 and
had produced 3,688,664 ounces of gold at a recovered grade of 0.38 ounces per
ton when it ceased operating in 1968. In the latter years of operation the mine
relied heavily on lower grade slough ore which had caved from the hangingwalls
of open stopes. From 1984 to 1988 Lac Minerals Ltd. mined the east boundary
pillar area of the Mine which adjoins the Lake Shore Mine, as well as some ore
available within the Teck-Hughes Mine accessible from the Lake Shore Ramp. It
recovered a further 20,343 ounces for a total of 3,709,007 ounces of gold
recovered.

History

In 1911 three claims, which were to form the most important
part of the mine, were staked and three neighbouring claims were staked. In 1912
gold was discovered on one of the neighbouring claims. Prospecting and surface
trenching was carried out by Teck-Hughes Gold Mines Limited and a 35 foot shaft
was sunk.

In 1913 the No. 1 Shaft was sunk to 212 feet and 203 feet of
drifting was carried out on the 200-foot level. The No. 2 Shaft was sunk to a
depth of 75 feet with 500 feet of lateral development on the 75-foot level by
Teck-Hughes Gold Mines Limited. From 1914 to 1915 the No. 3 Shaft was sunk to
124 feet and an 85 foot winze was developed from the second level. A total of
1,360 feet of lateral development in the No. 1 and No. 3 Shafts were carried out
by Nipissing Mining Company (under option from Teck-Hughes Gold Mines Limited).

From 1915 to 1917 the underground workings were dewatered and
the No. 3 Shaft was deepened to 400 feet with a winze to 600 feet, and 1,804
feet of lateral development was carried out. In 1917, a 50 ton mill was
installed and milling began. This work was completed by Teck-Hughes Gold Mines
Limited.

As with the other four mines, the most important structure at
the Teck-Hughes mine is the Main Break. This structure and the veins related to
it yielded most of the gold in the mine. The mineralized structure was mined as
the No. 3 vein from surface to the 6105-foot level, the deepest level at the
mine. Longitudinal sections reveal that stoping on the No. 3 vein was almost
continuous from surface to near the 3000-foot level. Diamond drilling defined
the Main Break down to 6650 feet, however, there was insufficient ore to warrant
development below the 6105-foot level. Grade and production both decreased below
3,000 feet. This decrease in ore with depth has been suggested to be directly
related to a decrease in the proportion of augite syenite to syenite porphyry
with depth.

Current Operations

The mine has been decommissioned. Accordingly, any ore
recovered therefrom will have to be accessed from existing operations in the
Macassa Mine and on the Lake Shore Property. Alternatively, the Corporation
could undertake new surface mining operations or drive a ramp down into the
Property to access the ore. Also see Current and Proposed Exploration and
Development following.

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Wright-Hargreaves Mine

Overview

The Wright-Hargreaves Mine is located to the east of the Lake
Shore Mine in the eastern portion of the five properties. It ranks second to the
Lake Shore Mine in terms of gold production and grade, having produced 4,817,680
ounces of gold at a grade of 0.49 ounces per ton. From 1984 to 1988 Lac Minerals
Ltd. produced an additional 3,616 ounces of gold from the Mine for a total of
4,821,296 ounces of gold.

History

This was the first discovery of gold in the Kirkland Lake
Mining Camp, made in 1911. In 1913 a shaft (Wright-Hargreaves No. 1) was sunk to
85 feet with 110 feet of drifting on the 75-foot level. From 1916 to 1921 the
No. 1 shaft was deepened to 400 feet, No. 2 Shaft to 320 feet, No. 3 Shaft to
425 feet, and a total of 3,900 feet of lateral development took place. In 1921 a
mill was constructed and milling started at 175 tons per day.

The mine was developed down to the 8200-foot level, the deepest
development in the Kirkland Lake Mining Camp. Diamond drilling below the
8200-foot level revealed several high-grade intersections persisting several
hundred feet below the level. However, the cost to develop these intersections
at such deep levels proved to be too high, and mining was not continued.

The Main Break is the most prominent structure crossing the
Wright-Hargreaves Property. This structure has been traced as a consistently
strong fault, down to the 8100-foot level, and by diamond drilling below that
level. A significant amount of ore was mined from this structure, however, most
of the tonnage came from the North vein. The North vein branches off the Main
Break to the north just to the west of the property boundary with Lake Shore.
Stoping on the North vein was extensive to about the 4500-foot level and
development was to the 6600-foot level. Below this level mining was concentrated
along ore-bearing fractures of the North vein zone known as the North Heading
Vein, North vein, and North D Vein. These veins are typically steeply dipping to
the south.

Another significant mineralized structure is the South
vein-fault which branches off the south side of the Kirkland Lake fault in the
western portion of the mine. As with many of the other mines in the camp there
are also numerous veins which branch or splay off the main structures and form
along tension fractures in the wedge of ground between major faults.

Most of the ore mined at Wright-Hargreaves was found within
syenite porphyry with veins north of the Main Break below the 6600-foot level
mainly in tuff, greywacke, conglomerate and granite porphyry located in the
footwall of the main syenite porphyry plug. The Main Break is located within
syenite porphyry throughout the mine. The north veins below the 6600-foot level
are much less continuous than veins in the upper levels hosted by syenite
porphyry.

Current Operations

The mine has been decommissioned. Accordingly, any ore
recovered therefrom will have to be accessed from existing operations in the
Macassa Mine and on the Lake Shore Property. Alternatively, the Corporation
could undertake new surface mining operations or utilize the existing ramp to
access the ore. Also see Current and Proposed Exploration and Development
following.

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Geological Setting

The Abitibi Greenstone Belt

The Corporations Kirkland Lake Mining Properties are located
in the 2.75 to 2.67 billion year old Abitibi greenstone belt, which is the
worlds largest greenstone belt covering an area of roughly 85,000 square
kilometres in north-eastern Ontario and north-western Québec. The Abitibi belt
is part of the larger Abitibi Subprovince  a granite-greenstone-gneiss terrain
that is located within the south-eastern portion of the Archaean Superior
Province. The Abitibi Subprovince is bound in the north by para- and
ortho-gneisses of the Opatica Subprovince, to the west by the Kapuskasing
Structural Zone, to the east by the faulting and cataclasis of the Grenville
Front Tectonic Zone, to the south-west by unconformably overlying sediments of
the Huronian Supergroup and Keweenawan volcanics and sediments, and to the
south-east by fault contact with Archaean metasediments of the Pontiac
Subprovince.

Although outcrop in the Abitibi greenstone belt is limited by a
till and clay cover, locally over 100 feet thick, exposure in the Corporations
Kirkland Lake Mining Properties is quite good, leading to the first discovery of
gold in a surface outcrop in 1911. Surface mapping in the Abitibi Subprovince
has been supplemented by geophysical surveys showing broad regional negative
magnetic and positive gravity expressions in areas where the surface geology
consists of greenstone belts and tonalitic plutons, and similar broad regional
positive magnetic and negative gravity anomalies in areas of granitic plutons.

Volcanic rocks were formed between 2.75 and 2.70 billion years.
The volcanic rocks are komatiitic, tholeiitic, and calc-alkaline. Between 2.70
and 2.68 billion years, turbidite dominated assemblages of sedimentary rock
formed. This was followed locally by formations of alkaline meta-volcanic rocks
and associated alluvial fluvial metasedimentary rocks between 2.68 and 2.67
billion years. Three main divisions of granitoid intrusive rocks exist.
Tonalite-trondjhemite-granodiorite batholiths reached their intrusive peak
between 2.74 to 2.69 billion years, smaller granodiorite intrusives formed
between 2.70 to 2.68 billion years, and syenite stocks formed between 2.69 to
2.67 billion years.

The Kirkland Lake Mining Properties

To the north and south of the Corporations Kirkland Lake
Mining Properties are massive and pillowed mafic volcanic rocks which have been
subdivided into the Blake River and Kinojevis Groups. To the north the volcanic
rocks of the Blake River Group are profoundly unconformably overlain by the
alkalic volcanic and sedimentary rocks known as the Timiskaming Group.

Numerous alkaline sills intrude the Timiskaming sediments. They
consist of alkali-feldspar syenite, augite syenite as well as quartz-monzonite
porphyry. In general terms, these units are known as feldspar porphyry (or
syenite porphyry) as it is difficult to estimate modal percentages of primary
plagioclase and alkali feldspar in the ground mass.

A series of alkali-feldspar syenite and quartz-monzonite
(feldspar porphyry) plutons with differing phases of composition intrude the
central and south limb of the synclinorium. The Otto and Murdock Creek Stocks
are examples. Another pluton, the Lebel Stock, is entirely syenitic and may be
the core intrusive of the alkaline volcanic rock assemblage.

There are a number of key structural features within the
Corporations Kirkland Lake Mining Properties. The major regional zone of
accommodation is known as the Larder Lake Break or more regionally the
Cadillac-Larder Lake Break and has been traced for over 300 kilometres along
strike. This complex structural feature has been traced to the east through the
Larder Lake-Virginiatown area (Kerr-Addison Mine) and into Québec through
Rouyn-Noranda, Cadillac, Val dOr and terminates near Louvicourt at the
Grenville Front. The Larder Lake Break continues westward under Huronian
sediments and appears in the Matachewan area some 50 kilometres away. The Larder
Lake Break is a broad zone of intense shearing

23

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and polyphase ductile deformation which represents the zone of
structural accommodation between the proto-continent to the south and the main
mass of volcanics to the north. One of the more colourful lithofacies in the
Timiskaming assemblage of rocks and situated partly in the Larder Lake Break is
a zone of extremely altered ultramafic volcanic rocks and associated massive and
bedded carbonate up to several hundred feet thick and locally sufficiently rich
in gold to constitute ore (such as the Kerr-Addison Mine). Characteristic green
fuchsite is often associated and is mined locally in the Kirkland Lake area as a
decorative stone in large panels. The Larder Lake Break generally strikes near
east-west and dips subvertically. Folding is polyphase but is homogeneously
distributed, creating all scales of interference patterns locally within the
Timiskaming. In the Kirkland Lake area, known plunges are mostly steep and to
the west south west at about 60 degrees. The thickest part of the syenite sill,
with which most of the significant gold mineralization is associated, plunges
the same way.

Mineralization

All of the properties are contiguous and very similar in nature
to the Macassa Property.

Mineralization of the Macassa Property is intimately associated
with the Main Break and the '04 Break which generally strike to the northeast
and dip steeply to the south. The Main Break and various related branches play
host to most of the gold mineralization in the camp in quartz-rich zones
adjacent to the faults and in related hangingwall and footwall quartz veins. At
the east end of the camp there are an increasing number of branches and splays
off the strong main branch. These faults act to dissipate and lessen overall
fault displacement which, based on pre-ore lithological relationships, is of a
reverse nature (south side up). The overall displacement is rotational and has
been calculated to be near 1,500 feet at the west end of the camp, and near 350
feet at the east end. To the west end of the camp, a fault sub-parallel to the
Main Break, known as the '04 Break, hosts most of the ore at the Mine Complex.
At least some movement on the Main Break post-dates the Matachewan diabase dyke
swarm.

Recent exploration by the Corporation has discovered
mineralized structures trending from oblique to near perpendicular to the Main
Break and the '04 Break.

A series of later cross-faults have displaced the various
lithological structures and mineralization in Kirkland Lake. The two most
significant of these late faults are the Amikougami Creek Fault and the Lake
Shore Fault. Both faults strike near north-south and are sub-vertical. The
vertical displacement of these faults is not well known.

The area surrounding the Mine Complex is underlain by
sedimentary and volcanic rocks of the Archaean Timiskaming Group. These rocks
are several kilometres thick and trend to the east. They flank and are nearly
parallel to the strike of the Larder Lake Break. They unconformably overlie
pre-Timiskaming, pillowed and massive, volcanic rocks belonging to the Abitibi
Supergroup which include the Blake River Group volcanics and the predominantly
tholeiitic Kinojevis Group. Although these pre-Timiskaming volcanics are
ubiquitous in the surrounding district, they have not been encountered in any of
the workings at the Mine Complex.

Intruded into the Timiskaming sedimentary and volcanic rocks is
a composite syenitic sill that is broadly centred on the town of Kirkland Lake.
The long axis of the stock is roughly parallel to the strike of the Timiskaming
rocks and dips steeply to the south. The three main components of the syenitic
stock and related dykes are augite syenite, felsic syenite, and syenite
porphyry. These intrusive rocks are host to an important part of the ore at the
Mine Complex.

The youngest rocks at Macassa, other than mineralization, are a
few Matachewan diabase dykes.

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Mineral Reserve & Resource Estimates

The following tables set out the reserve and resource estimates
for the Macassa Property as at April 30, 2006 made by Glenn R. Clark, P.Eng. of
Glenn R. Clark & Associates Limited. The estimates are contained in his
report dated July 18, 2006 entitled Review of Resources and Reserves, Macassa
Mine, Kirkland Lake, Ontario.

The estimates are reported in accordance with National
Instrument 43-101 Standards of Disclosure for Mineral Projects of the
Canadian Securities Administrators. Glenn R. Clark is a qualified person for
the purposes of the National Instrument. Note that the reserves are classified
separately and are not part of the resources.

The reserves were estimated to be:

Proven & Probable
      Reserves
      Tons (of ore)
      Grade (ounces of gold per
      ton)
      Ounces (of gold)Proven
    1,164,000
    0.44
    512,160Probable
    1,147,000
    0.50
    573,500Total
    2,311,000
    0.47
    1,085,660


The measured and indicated resources were estimated to be:

Measured & Indicated
      Resources
      Tons (of ore)
      Grade (ounces of gold per
      ton)
      Ounces (of gold)Measured
    911,000
    0.36
    327,960Indicated
    1,055,000
    0.35
    369,250Total
    1,965,000
    0.35
    697,210


> Cautionary Note to U.S. Investors concerning 
>       estimates of Measured and Indicated Resources
>     The foregoing table uses the terms measured resources
>       and indicated resources. The Corporation advises U.S. investors
>       that while those terms are recognized and required by Canadian regulations
>       (under National Instrument 43-101 Standards of Disclosure for Mineral
>       Projects), the U.S. Securities and Exchange Commission does not recognize
>       them. U.S. investors are cautioned not to assume that any part or all
>       of mineral deposits in these categories will ever be converted into reserves.

The inferred resources were estimated to be:

Inferred Resources
      Tons 
        (of ore)
      Grade 
        (ounces per ton)
      Ounces 
        (of gold)Total
    1,050,000
    0.50
    525,000


> Cautionary Note to U.S. Investors concerning estimates
>       of Inferred Resources
>     The foregoing table uses the term inferred resources.
>       The Corporation advises U.S. investors that while this term is recognized
>       and required by Canadian regulations (under National Instrument 43-101 Standards
>       of Disclosure for Mineral Projects), the U.S. Securities and Exchange
>       Commission does not recognize it. Inferred resources have a
>       great amount of uncertainty as to their existence, and great uncertainty
>       as to their economic and legal feasibility. It cannot be assumed that all
>       or any part of an Inferred Mineral Resource will ever be upgraded to a higher
>       category. Under Canadian rules, estimates of Inferred Mineral Resources
>       may not form the basis of feasibility or other economic studies. U.S.
>       investors are cautioned not to assume that part or all of an inferred mineral
>       resource exists, or is economically or legally mineable.

25

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The reserves and resources are estimated using the polygonal
method. All intersections are calculated out to a 5.0 foot minimum horizontal
mining width.

Dilution is added to reserves at varying rates depending on
mining method, and the width of the ore. Dilution in the reserve estimate
overall averages 28% at 0.02 ounces of gold per ton. All higher grade assays are
cut to 3.50 ounces of gold per ton. The cut-off grade used was either 0.25 or
0.30 ounces of gold per ton over the horizontal mining width depending on the
location and economics of the ore block.

The area of influence of the proven and measured categories is
30 feet from development chip samples while the area of influence of the
probable and indicated categories is 50 feet of radius from a known sample point
(drill holes) and of the inferred resources is another 50 feet of influence. A
94% tonnage recovery is used. Continuity of the veins appears very good.

The assumptions used include a price of US$ 490 per ounce of
gold and an exchange rate of Cdn$ 1.19 equals US$ 1.00 resulting in a price of
Cdn$ 584.41 per ounce of gold.

The Corporation is not aware of any metallurgical,
environmental, permitting, legal, title, taxation, socio-political, marketing or
other issue that may materially affect its estimate of mineral resources and
reserves.

Current and Proposed Exploration and Development

Overview

In November 2003 the Corporation began a three year exploration
program at an estimated cost of Cdn$ 21 million. The exploration has
significantly increased the resources and reserves (see Mineral Reserve &
Resource Estimates above) and resulted in the discovery of a completely new
mineralized trend  north-south, rather than the classic east-west of the
Kirkland Lake Camp  beyond the original goals of the exploration program. This
new mineralized trend has opened substantial areas for new resources to be
added. Not only is it a different style of mineralization (wide sulphide system)
but it is running north-south instead of the east-west nature of the
mineralization from which previous mining companies have mined approximately 24
million ounces of gold over the last 90 years. Included in this mineralization
is the D Zone, which was discovered in 2003, and it too is north-south trending.
At least 14 other mineralized zones have been discovered in the south of the
properties.

The Corporation has completed a number of developments to the
Mine Complex, Mill and surrounding properties, namely:

- Rehabilitation work was completed on 11 levels of the Macassa Mine.
- Shaft No. 2 of the Mine Complex was re-commissioned.
- An ore and waste handling device at the 4250-foot level of the Macassa Mine
  was installed in Shaft No. 2. That and improvements to the headframe have
  enabled, for the first time, ore and waste to be hoisted from the Shaft No. 2.
  Historically, Shaft No. 2 was primarily used for just lowering materials and
  as an emergency egress, but now this shaft will be used for production
  purposes.
- The microseismic system was also expanded to just below the 5725-foot level
  of the Macassa Mine thereby giving rock mechanics monitoring to the lower
  extents of the mine.

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- The paste fill underground distribution system was expanded to the
  5300-foot level allowing mining to be carried out on all levels down to that
  level.
- Established a new level, the 3400-foot level, from which more than 100,000
  tones of high grade ore can be accessed. Due to favourable exploration results
  above this level, the Corporation is studying whether a level should be
  established at the 3000-foot horizon to access additional ore that it has
  discovered.

Some of these developments are described below in greater
detail.

Exploration Strategy

The strategy of the original three-year exploration program
initiated in November 2003 was to drill large mineralized structures  using a
25% success ratio for the total area  on 500 to 1,000 foot centres to identify
areas that would have the potential to host gold ore. Where such mineralization
was located, additional drilling would be required to be carried out on 200 foot
centres to establish gold resources and on 30 to 100 foot centres to establish
gold reserves.

Newly-discovered mineralized zones found through this program
(namely the LK, Lower D, Upper D and ABM zones) substantially increase the
potential for the Corporation to expand its ore resources and reserves. At the
same time, deeper drill holes than originally planned are required, and
discovery of the new zones has shifted the original program substantially. Some
originally-targeted zones are achieving less than the 25% success rate
historically attained. These include the '05/Narrows at surface, South Break at
surface, and Main Break at surface. Other zones are achieving higher success
rates than planned, such as the Lower D, New South, #6, LK and ABM.

Positive results continue to be obtained from the previously
discovered D and '05 Zones and the recently discovered Lower D (discovered in
November 2003), ABM (discovered in October 2004), '05, and LK (discovered in
August 2004) Zones. Up to 14 new mineralized zones has been discovered to the
south of the mining workings as a result of this exploration.

Shaft and Ramp Rehabilitation

The Corporation has re-commissioned Shafts No. 2 and 3 of the
Mine Complex and the Lake Shore/Teck-Hughes/Wright-Hargreaves Ramp. Such shafts
and ramp are now available for use in the Corporations drilling programs and
for production.

Dewatering

The previous owner of the Mine Complex allowed it to flood
after the Macassa Mine ceased production. To dewater the mine, the Corporation
has installed pumping equipment. As at June 30, 2006 dewatering of the No. 3
Shaft had extended to approximately 76 feet below the 5725-foot level. This
enabled the Corporation to rehabilitate the 5150-foot and 5300-foot levels and
make operational the loading pockets located on the 5150-foot and 5725-foot
levels.

The goal of the dewatering program to the mines lower workings
at the 5725-foot level was achieved in April, 2005. Rehabilitation of the
loading pocket located at this level has been completed. Concurrently an
underground exploration and development drilling program is being carried out
for the purpose of adding to reserves.

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Data Analysis

In April 2002, the Corporation commenced an 18 month program of
data compilation on its gold properties and, in the summer of 2003, engaged a
team of exploration consultants to work with its geologists to study and make
recommendations based upon the results. This compilation has resulted in the
data entry of 18,500 drill holes. Mine openings were digitized for all five
mines, along the more than 200 miles of levels. The data compilation process
enabled the team to delineate a host of highly prospective targets that were not
drilled or well understood in the past.

Drilling Exploration

2006 Fiscal Year

In the Corporations 2006 fiscal year, it carried out 9,950
feet of surface exploration drilling and 103,050 feet of underground exploration
drilling. On average, four drilling machines were employed each month.

During the year, the focus of the program changed from drilling
widely-spaced holes to closely spaced holes at 100 to 200 feet centers. The
purpose of the change was to define new gold reserves and resources from
mineralization identified during the exploration drilling completed over the two
previous years.

In July, 2005 the Corporation intersected a significant new
discovery, the New South Zone, to the south of the '04 Break and Main Break
system in the area between the No. 2 and No. 3 Shafts. The drilling returned
assays of 2.3 ounces (uncut) of gold per ton over 90.4 feet and 1.43 ounces
(uncut) of gold per ton over 124.5 feet. To follow-up on this discovery a 2,500
feet long exploration crosscut from No. 3 Shaft at the 5300-foot level was
begun. From this crosscut a drift will be constructed to serve as both a
drilling platform and facilitate obtaining a bulk sample.

2007 Fiscal Year

The Corporations exploration strategy for 2007 will continue
to focus in building reserves and resources from the new discoveries as well as
expand known mineralization. The focus will remain on underground drilling, with
possible surface drilling should the need arise. Structural studies (to be
carried out by consultants) and underground geophysical surveying (to be carried
out by the Corporation) are planned to delineate the extension and geometry of
the newly discovered mineralized zones. This work is aimed at uncovering the
genesis, spatial localization and extensions of the new discoveries.

The Corporation intends that drilling will intensify on the
newly discovered mineralized zones to the south of the existing mine workings.
Drilling of the Main Break and other structures in the central and eastern
portions of the mining properties has been undertaken. The drilling of the Main
Break and other structures in the easternmost portion of Macassa and Kirkland
Lake properties is allowing the exploration of the central and eastern portions
of the properties. An exploration strategy for the No. 5 Shaft has been designed
and will be implemented upon re-commissioning of the Shaft.

The Corporations exploration strategy for fiscal 2007 is to
also explore the main ore horizon in the western portion of the properties. This
exploration will be carried out on a joint venture basis with other mining
companies based on agreements made during 2005, including the Queenston Joint
Venture described below.

Queenston Joint Venture

The Corporation and Queenston Mining Inc. have entered into a
Joint Venture Agreement dated December 8, 2005 to explore the Kirkland Lake West
Property owned by Newmont Mining Company of Canada Limited. The property adjoins
the western boundary of the Corporations Macassa Property and

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the Corporation believes it contains the western extension of
the Main-'04 Break (east-west) ore horizon. The properties are separated by a
late north-south cross-fault.

A previous Joint Venture Agreement between the Corporation and
Queenston dated November 12, 2004, created a 50%-50% joint venture on the Gracie
West property, located on the western boundary of the Kirkland Lake West
Property.

Security of Samples

To ensure the validity and integrity of samples taken by the
Corporation it re-assays pulps and takes second cuts on rejects at a second
recognized lab. As well, blank (non-mineralized) core samples are inserted
within core samples from mineralized zones to check contamination. The core is
regularly quartered and sent out to check for replicability. Core is handled by
one person only, after being split and bagged securely.

Quality Control

The results of the Corporations exploration programs have been
reviewed, verified (including sampling, analytical and test data) and compiled
by the Corporations geological staff. Furthermore, the Corporation has
implemented a quality control program to ensure sampling and analysis of all
exploration work is conducted in accordance with the best possible practices.
The drill core is sawn in half with half of the core samples shipped to the
Swastika Laboratories in Swastika, Ontario for analysis. The other half of the
core is retained for future assay verification. Gold analysis is conducted by
fire assay using atomic absorption or gravimetric finish. The laboratory
re-assays at least 10% of all samples and additional checks may be run on
anomalous values. Blank cores are added in the midst of mineralized zones.
Quarter coring has been undertaken for replication purposes. Pulps and rejects
are routinely sent to a second assay lab.

ITEM 4AUNRESOLVED
  STAFF COMMENTS

Not applicable.

ITEM
5OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following should be read in conjunction with the
Corporations financial statements, forming a part of this document, including
Note 20 to the 2006 annual financial statements which provides a reconciliation
between US GAAP and Canadian GAAP for significant measurement differences.

Critical Accounting Policies

The Corporations most significant accounting policies are as
follows:

- Revenue is recognized on transfer of title to the purchasers of the
  Corporations gold bullion sold in the spot market. This occurs when the gold
  is received by the purchasers. Adjustments to accounts receivable, if any,
  between the date of title transfer and the settlement date are recorded when
  determinable.
- Doré bars and gold in process are recorded in inventory at the lower of
  average production cost and net realizable value.
- Exploration expenditures and near term ore development costs are expensed
  as incurred.

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- Property acquisition costs and longer term development costs incurred to
  expand ore reserves are deferred and depleted on a units-of-production basis
  over proven and probable reserves. The capitalized costs are reviewed
  annually, or more frequently if changes in circumstances warrant, to consider
  whether the carrying value can be recovered from estimated undiscounted future
  cash flows. If the carrying value is considered not recoverable on this basis,
  the Corporation will write down the carrying value to the estimated net
  recoverable amount, calculated on non-discounted basis.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP
requires the Corporations management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the fiscal year. The most
critical accounting policies, upon which the Corporations financial statements
depend, are those requiring estimates of proven and probable reserves,
recoverable ounces therefrom and assumptions of operating costs and future gold
prices. Such estimates and assumptions affect the potential impairment of
long-lived assets and the rate at which depletion and amortization are charged
to earnings. In addition, management must estimate costs associated with mine
reclamation and closure costs.

The Corporation utilizes the following key estimates in the
preparation of its financial statements:

Mining Properties and Deferred Exploration Costs

The Corporation expenses exploration expenditures and near-term
ore development costs as incurred. Property acquisition costs, and longer term
development costs incurred to expand ore reserves are deferred and depleted on a
units-of-production basis over proven and probable reserves which are accessible
by the Corporation. Managements estimate of gold price, recoverable proven and
probable reserves, operating, capital and reclamation costs are subject to risks
and uncertainties affecting the recoverability of the Corporations investment
in mining properties. The Corporation assesses capitalized costs for
recoverability on an annual basis or more frequently if circumstances warrant.
When the carrying value is less than its net recoverable value as determined on
an undiscounted basis, an impairment loss is recognized to the extent that its
fair value, measured as the discounted cash flows over the life of the asset is
below the assets carrying value.

Mineral Reserves

The process of estimating quantities of gold reserves is
complex, requiring significant decisions in the evaluation of all available
geological, geophysical, engineering and economic data. The data for a given ore
body may also change substantially over time as a result of numerous factors,
including, but not limited to, additional development activity, production
history and the continual reassessment of the viability of ore bodies under
various economic conditions. A material revision to existing reserve estimates
could occur because of, among other things: revisions to geological data or
assumptions; a change in the assumed gold prices; and the results of drilling
and exploration activities.

If estimates of reserves prove to be inaccurate, or a mining
plan changes due to reductions in the price of gold or otherwise, resulting in a
reduction in the reserves expected to be recovered, The Corporation could be
required to write-down the recorded value of its plant and equipment and mine
development costs, or to increase the amount of future depreciation, depletion
and amortization expense, both of which would adversely affect the Corporations
earnings and net assets.

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Closure Costs

The Corporation has an obligation to reclaim its properties
after the minerals have been mined from the site, and has estimated the costs
necessary to comply with existing reclamation standards. These estimated costs
are recorded as a liability at their fair values in the periods in which they
occur. If the estimate of reclamation costs proves to be inaccurate, The
Corporation could be required to increase the provision for site closure and
reclamation costs, which would increase the amount of future reclamation expense
per ounce, resulting in a reduction in the Corporations earnings and net
assets.

Changes in Accounting Policies

The Corporation did not adopt any new accounting policies in
its 2006 fiscal year.

A.            OPERATING
RESULTS

Results of Operation

The Corporation incurred a loss for the year ended April 30,
2006 of $6,456,560or $0.13 per share, which compares with a loss of
$28,159,185or $0.68 per share reported for fiscal 2005. Gold revenues
were 58.5% higher at $35,122,603, (2005- $22,156,105), with 63% of the increase
due to gold price increases and 37% due to increased production.

During fiscal 2006, negative operating cash flow decreased
significantly to $4,804,198 (2005- negative $25,849,127), due to a substantial
increase in gold revenues and reduction in operating and exploration expenses,
as efforts to increase production and become cash flow positive showed through
into the results. The $13 million generated in incremental gold revenues
together with reductions in operating costs ($5.4 million), exploration ($3.1
million) and lower general and administrative expenses ($0.7 million),
substantially explain this improvement between years. The substantial
improvement in operating cash flow, total year over year spending including
operating costs, capital and royalties was unchanged at $46.8 million.

Operating Expenses

Operating costs reduced to $30,834,472, (2005- $36,217,949).
This decrease was a function of volume and improved productivity from the
considerable investments made in training, modernizing and upgrading
infrastructure and equipment. Approximately 60% of current operating costs
relate to labour.

An aggressive exploration drill program was undertaken in the
  Corporations 2005 fiscal year, primarily funded by flow-through
  investments made by Canadian investors which entitle the investors to certain
  tax write-offs. The exploration program continued in fiscal 2006 with annual
  exploration expenditures of $5,024,637 (2005- $8,127,896). A total of $3.25
  million was spent on drilling (2005- $7.23 million), with $1.92 million in exploration
  drilling (2005- $5.7 million), $1.33 million in definition drilling (2005- $1.53
  million) with the remainder spent on exploration development and rehabilitation
  (2005- $1.3 million). The Corporation was required to spend $2.5 million raised
  in a flow-through exploration financing by December 31, 2006. By
  April 30, 2006 a total of $700,000 had been spent on qualifying expenditures.

Fiscal 2006 experienced lower diamond drilling costs that
reached $1.33 million (2005- $1.53 million), with 92,820 feet (108,700 feet
fiscal 2005) of definition drilling carried out. A total of 113,000 feet of
exploration drilling was completed. The average cost was $15.79 per foot.

Looking at other expenses, the Corporation incurred in fiscal
2006 a total of $3,853,109 (2005- $2,354,335) in amortization and depletion of
asset costs and $64,736 (2005 - $1,258,250) on interest and bank charges and
amortization of finance charges. The increase in amortization and depletion of
asset

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costs is substantially due to the high level of underground
development being undertaken by the Corporation during fiscal year. The decrease
in interest and bank charges and amortization of finance charges is due to the
reduction in convertible loan financing between fiscal years.

For the year ended April 30, 2006, general and administrative
expenses (including share based compensation) were $1,801,086, which is
significantly lower compared to $2,672,513 reported for the prior year as a
result of cost reduction initiatives and one-off costs of $366,680 incurred for
the assimilation and distribution of a publication featuring the Corporation,
and $116,356 paid in conjunction with the AIM admission process included in the
prior year figures.

Restricted Cash

Under U.S. GAAP, funds raised from the issue of flow-through
shares which have not yet been disbursed on qualifying exploration expenditures
would be disclosed as restricted cash and excluded from current assets.
Accordingly, cash and cash equivalents under U.S. GAAP would be reduced by Cdn$
1,800,000 at April 30, 2006 (2005  $2,187,000) and restricted cash would be
presented outside of current assets on the balance sheet.

Capital Expenses

The cash flow invested in the Corporations activities stood at
$14,585,798 for fiscal 2006, (2005-$9,914,741), with 16% of this amount for new
mining equipment and 84% in underground development expenditures as the
Corporation strives to reach profitability. Most of this increase resulted from
an additional $5.2 million of mine development costs incurred during the year.

Production and Costs

Production for fiscal year 2006 was 58,314 ounces of gold,
which fell short of the Corporations estimated production of 90,000 ounces,
however this production exceeded fiscal 2005 by 27% or 12,450 ounces.

Gold sales during the 2006 fiscal year were 59,630 troy ounces
with an average price of Cdn$ 587 per ounce as underground production from No. 3
Shaft continues to ramp up with the Corporations own mining force. This
compares with gold sales of 41,900 ounces with an average sales price of Cdn$
528 per ounce during the prior year. Again, this reflects the increase in gold
prices and productivity during the year.

During fiscal 2006, 252,433 tons of rock were hoisted from
underground operations, of which 156,688 tons was milled as ore. During fiscal
2005, the total hoisted tons were 236,088 tons from underground, of which
136,774 tons were milled as ore. This represents a 7% increase in hoisted tons
and 14.5% increase in ore tons milled. Furthermore, 29,195 feet (in fiscal 2005,
22,250 feet) of lateral and vertical stope development was completed, an
increase of 31%. The waste/ore ratio mined continued to be very high in fiscal
2006 as a result of continuing high levels of development work but this is
expected to improve during fiscal 2007 and thereafter due to the development
having been completed for the Upper D-Zone.

32

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B.            LIQUIDITY
AND CAPITAL RESOURCES

During the years ended April 30, 2006, 2005 and 2004, the
Corporation incurred losses of $6.5 million, $28.2 million and $22.6 million
respectively. The funds required to continue operations and exploration
activities during this period have been financed primarily from the issue of
equity securities and, to a small extent, convertible debt instruments.

During fiscal 2006 the Corporation raised equity of almost $20
million on a net basis to fund its operations and exploration. Subsequent to
year end, the Corporation raised a further $16.5 million in May 2006 by way of
private placement to fund working capital and further development activities.

The Corporations cash position at the end of April 2006 was
$9,411,925 and it had a working capital surplus was $6,804,669. Management
estimates that these funds, together with cash flow from targeted operations,
will be sufficient to meet the Corporations obligations and capital expenditure
plans for the coming fiscal year. However, differences will occur between actual
results and those targeted by management, and those differences may be material.
It is possible that the operations will not generate sufficient cash flow for
the Corporation to continue in the normal course without funding being provided
from outside sources.

Going Concern

Management has been successful in obtaining sufficient funding
for its operating and capital and exploration requirements in the past and
believes that it will be able to do so in the future, if necessary. There is,
however, no assurance that such funding will be available to the Corporation, or
that it will be available on terms which are acceptable to management. If this
occurs, the Corporation may not be able to continue as a going concern.

The Corporations financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary, should the
Corporation be unable to continue as a going concern.

The Corporations history of operating losses from mining
operations indicate at April 30, 2006, that the recorded costs for mineral
properties and related fixed assets may not be recoverable. Using a constant
gold price of CDN$584 per ounce and operating costs similar to historical costs
incurred over the past year, management estimates that annual production of
approximately between 75,000 to 85,000 ounces in fiscal 2007 and for each year
thereafter would be required to cover costs of operations, exploration costs and
projected capital expenditures required for mining and development operations.
To date, the Corporation has not been successful in achieving this rate of
production. To recover these costs and the carrying values of mineral properties
and other mining assets, over the life of the mine will require an increase in
tonnage of ore processed and ounces of gold produced annually, a reduction in
the workforce and associated mining costs through the curtailment of certain
development projects, or both.

Subsequent Events

On May 24 and 25, 2006 and June 2, 2006 the Corporation
completed the sale, by way of private placement, of an aggregate of 1,793,500
units at a price of $9.20 each for gross proceeds of $16,500,200. Each unit
consisted of one Common Share and one-half of a Common Share purchase warrant.
Each whole warrant entitles the placee to purchase a further Common Share for
$10.50 for a period of 12 months from the respective closings. Finders were paid
an aggregate of $990,000 (6%) in cash fees in connection with the placement.

33

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Outlook

Capital expenditure commitments in fiscal 2007 are
approximately $9.6 million. These funds will be used for the development of
newly-discovered ore and the purchase of capital equipment. The Corporation
expects that such funds will be provided from operating revenue and proceeds
from its recent financing and exercise of warrants and options.

The Corporation believes its current working capital is
sufficient for its present purposes. However, differences will occur between
actual results and those targeted by management, and those differences may be
material. It is possible that the operations will not generate sufficient cash
flow for the Corporation to continue in the normal course without funding being
provided from outside sources.

The Corporation continues seeking ways to raise production
levels and to improve efficiencies by providing consistent investment in
training, exploration, and equipment. Production forecasts for fiscal 2007
indicate annual gold production of between 75,000 and 85,000 ounces.

Substantial costs and management time will be used during
fiscal 2007 to improve operational systems, controls and processes. These
initiatives will enable management to identify further opportunities to improve
productivity and reduce operating costs.

Management believes that the requisite increase in production
can be achieved due to operating improvements which are expected to result from
the following:

- The attainment over the past year of the mine dewatering to lower horizons,
  providing physical access to previously unavailable levels for both improved
  production planning and higher volume production;
- The availability, commencing in August 2005, of an ore loading pocket at
  the 5725-foot level which has increased hoisting volume and permits enhanced
  access to large ore blocks on lower levels;
- The ongoing miner training program underway with the objective of enhancing
  the mining skills of the companys workforce, improving worker retention and
  therefore improving production volumes;
- The expanded use of long-hole stoping mining method which will increase
  production and reduce costs;
- The addition of new equipment allowing for more mechanization in operations
  and resulting in higher production volumes at lower cost per ton than
  previously experienced.
- The increase in available working areas due to new exploration discoveries
  (for example, D Zone)

There is significant uncertainty associated with the ability of
the Corporation to achieve the increase in production or reduction in costs
necessary to recover the carrying value of the mineral property and related
assets. Gold price or Canadian to U.S. dollar exchange rate movements, the
success of the Corporation in realizing the benefit of the production
improvements noted above, changes in the costs of labour and other costs or
unforeseen production difficulties all would have an impact on the ability of
the Corporation to achieve its goals from operations. The amount of working
capital currently available for use by the Corporation could mean that a minor
adverse development could have a significant impact on the Corporations
operations and ability to recover costs.

34

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C.           
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Not Applicable

D.TREND
INFORMATION

The Corporation commenced production at its mining properties
during May 2002 and has gradually increased its gold production ever since.
Recent increases in the price of gold, together with increased gold production
and consistent cost controls in the 2006 fiscal year, have assisted with the
Corporations drive to profitability.

Continuation of the Corporations mining operations is
dependent on there being a sufficient quantity and an economic grade of ore to
be processed  which is dependent on the price of gold and the Corporations
efficiency in controlling mining and, in particular, labour costs. If the price
of gold drops significantly, and the costs are not sufficiently controlled, it
is possible that the mining properties would become uneconomical to operate
(which would have an adverse effect on the Corporations ability to raise funds
in the equity markets required to sustain operations until profitability is
attained).

The Corporations management considers its biggest challenge to
be meeting the Corporations gold production target for fiscal 2007 and
thereafter. The Corporation has increased its workforce to meet its production
requirements and, while it has made considerable progress in its efforts to
recruit experienced miners, additional progress must be made.

Provided the Corporation has adequate funding and the price of
gold remains favourable, the Corporation plans to develop the five gold
properties into a medium cost and productive gold mine.

To the Corporations knowledge, there are not, during the
current financial year, any known trends, uncertainties (other than the price of
gold), demands, commitments or events that are reasonably likely to have a
material effect on the revenues, income from continuing operations,
profitability, liquidity or capital resources, or that would cause reported
financial information not necessarily to be indicative of future operating
results or financial condition.

E.OFF-BALANCE
SHEET ARRANGEMENTS

The Corporation does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on its financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.

For the purposes of the foregoing, the term off-balance sheet
arrangement means any transaction, agreement or other contractual arrangement
to which an entity unconsolidated with the Corporation is a party, under which
it has:

|(a) | Any obligation under a guarantee contract that has any of
      the characteristics identified in paragraph 3 of the United States
      Financial Accounting Standards Board (FASB) Interpretation No.
      45, Guarantors Accounting and Disclosure Requirements for Guarantees,
      Including Indirect Guarantees of Indebtedness of Others(November
      2002) (FIN 45), as may be modified or supplemented, excluding the
      types of guarantee contracts described in paragraphs 6 and 7 of FIN
    45;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b) | A retained or contingent interest in assets transferred
      to an unconsolidated entity or similar arrangement that serves as credit,
      liquidity or market risk support to such entity for such
  assets;                                                                                                                                                                                                                                                                                                         

35

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|(c) | Any obligation under a derivative instrument that is both
      indexed to the Common Shares and classified in stockholders equity, or
      not reflected, in the Corporations statement of financial position;
    or                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(d) | Any obligation, including a contingent obligation,
      arising out of a variable interest (as referenced in FASB Interpretation
      No. 46, Consolidation of Variable Interest Entities(January 2003),
      as may be modified or supplemented) in an unconsolidated entity that is
      held by, and material to, the Corporation, where such entity provides
      financing, liquidity, market risk or credit risk support to, or engages in
      leasing, hedging or research and development services with, the
      Corporation.

F.TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS

As of the Corporations fiscal year ended April 30, 2006, the
Corporations known contractual obligations identified in the following table
are:

Payments Due by PeriodContractual Obligations
      Total
      Less than 1 year
      1- 3 years
      3 -5 years
      More than 5 yearsLong-Term Debt Obligations
      $1,845,780
      
      
      
      $1,845,780 (1)Capital (Finance) Lease  Obligations
      
      
      
      
      Operating Lease Obligations
      
      
      
      
      Purchase Obligations
      $26,500
      
      
      $26,500
      Other Long-Term Liabilities  reflected on the Corporations
        
        Balance Sheet under Canadian 
        GAAP
      $59,000
      
      
      
      Total
      $1,931,280
      
      
      $26,500
      $1,845,780


|(1) | This amount represents funds posted for reclamation bonds
      in connection with the acquisition of the Macassa and Lake Shore Mines.
      See Item 4 History and Development of the Company  History  Current
      Operations  Acquisition of Kirkland Lake Mining
Assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

G.SAFE HARBOR

The safe harbour provided in Section 27A of the Securities
  Act and Section 21E of the Exchange Act applies to forward-looking
  information provided pursuant to sections E Off-Balance Sheet Arrangements
  and F Tabular Disclosure of Contractual Obligations of this Item.

ITEM
6DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.DIRECTORS AND SENIOR MANAGEMENT

All of the directors of the Corporation are elected annually by
the shareholders and hold office until the next annual meeting of shareholders
or until their successors are duly elected and qualified, unless they sooner
resign or cease to be directors in accordance with the Corporations By-Laws.
The Corporations last regular annual meeting was held on October 6, 2005. The
Corporations officers are appointed by and serve at the pleasure of the Board
of Directors.

36

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As at the date hereof, the following persons were the officers,
directors and senior management of the Corporation:

Name(1)
      Position with the
      Corporation
      SinceDOBSON, D. Harry W.
    Chairman of the Board of
      Directors
    October 11, 2001HINCHCLIFFE, Brian A.
    President, Chief Executive
      Officer and Director
    February 26, 2001RODRIGUE, Robert G. (2)
    Chief Financial Officer
    March 14, 2005THOMSON, John S.
    Executive Vice-President &
      Acting/Interim Chief Financial Officer
    May 19, 2006LEE, Sandra
    Corporate Secretary
    February 27, 1995SUTTON, Michael W. (3)
    Chief Geologist & Assistant
      General Manager
    February 1, 2002MIDDLEMISS, Duncan K. (3)
    Engineering & Production
      Manager
    September, 9,2002BELECQUE, Raymond A.
    General Manager
    January 1, 2002BAYLEY, Brian E. (4)
    Director
    October 15, 1998KOSTUIK, S. Paul (4)
    Director
    February 26, 2001MILTON, George A. (4)
    Director
    December 1, 2003


|(1) | None of such persons has any family relationship with any
      other and none were elected as a director or appointed as an officer as a
      result of an arrangement or understanding with a major shareholder,
      customer, supplier or any other party.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                 
|(2) | Robert G. Rodrigue, the Corporations former Controller,
      became the Corporations former Chief Financial Officer on March 14, 2005.
      He is currently on sick leave and has been temporarily replaced by John S.
      Thomson.                       
|    |                                                                                                                                                                                                                                                                 
|(3) | The Corporation relies upon Michael Sutton and Duncan
      Middlemiss to review and approve all technical information contained in
      its written disclosure.                                                                                               
|    |                                                                                                                                                                                                                                                                 
|(4) | Member of the Audit Committee and Compensation Committee.                                                                                                                                                                                                       

The following is biographical information on each of the
persons listed above:

D. HARRY W. DOBSON has served as a director and the Chairman
  of the Board of Directors since October 11, 2001. In addition to his activities
  with the Corporation Mr. Dobson engages in various merchant banking and venture
  capital activities in North America and Europe. Mr. Dobson was formerly Deputy
  Chairman of Lytton Minerals Limited (publicly traded diamond exploration company).
  He is the founder and former Chairman of American Pacific Mining Company Inc.
  (publicly traded mining company). Mr. Dobson also holds the following principal
  directorships of other publicly traded companies:

Issuer
      BusinessBelvedere Resources Ltd.
    Gold, copper & base metal explorationBorders and Southern Petroleum Plc
    Petroleum explorationBrazauro Resources Corp.
    Gold explorationMountain Province Diamonds Inc.
    Diamond explorationOvoca Resources Plc
    Platinum, gold & zinc exploration


37

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Issuer
      BusinessRambler Metals & Mining Plc
    Copper & gold explorationSuroco Energy Inc.
    Petroleum & natural gas explorationWestern Uranium Corp.
    Uraniu exploration


BRIAN A. HINCHCLIFFE has served as President and Chief
Executive Officer since February 26, 2001 and as a director since February 26,
2001. Mr. Hinchcliffe was formerly President of Jordex Resources Inc. (publicly
traded mining company). Prior to that, he was the President of American Pacific
Mining Company Inc. (publicly traded mining company). Mr. Hinchcliffe also holds
the following principal directorships of other publicly traded companies:

Issuer
      BusinessRambler Metals & Mining Plc
    Copper & gold explorationRupert Resources Ltd.
    Gold explorationSuroco Energy Inc.
    Petroleum & natural gas exploration


ROBERT G. RODRIGUE has served as Chief Financial Officer
since March 14, 2005 and prior thereto he was the Corporations controller since
December 29, 2003. Mr. Rodrigue served most recently as senior controller at a
major oil production project in Alberta. Prior to that, he served in senior
management accounting positions at a number of large underground and open-pit
mining operations for more than 25 years. Mr. Rodrigue does not have any
business activities outside the Corporation.

JOHN S. THOMSON has served as Executive Vice-President
since May 19, 2006 and while Robert G. Rodrigue is on sick leave, as
Acting/Interim Chief Financial Officer since July 26, 2006. Mr. Thomson is a
Chartered Accountant from Scotland who has also studied at INSEAD (a graduate
business school based in Fontainebleau, near Paris). He has worked
internationally in a variety of senior roles for companies including PepsiCo.
Most recently, Mr. Thomson has built up and continues to maintain a successful
consulting business providing advice to institutional shareholders and
management teams in the media, minerals and technology sectors. He is a director
(non-executive) of Parragon Publishing Ltd, a successful international publisher
with operations in Europe, India, the UK and USA and was formerly the Managing
Director of Vianet Group Plc., a publicly traded technology company based in the
United Kingdom. Mr. Thomsons business activities outside the Corporation
consist of providing consulting services described above.

SANDRA LEE has served as Corporate Secretary since
February 27, 1995. Ms. Lee is a certified legal assistant and is currently
Corporate Secretary of Quest Capital Corp. (a publicly traded merchant banking
company) and Quest Management Corp. (a management company wholly-owned by Quest
Capital Corp.). Previously, she was Assistant Corporate Secretary and Corporate
Secretary of Quest Oil & Gas Inc. (publicly traded oil and gas company) from
May, 1995 to April, 1997 and before that she worked as a legal assistant for a
number of large law firms in the areas of corporate and securities laws. She is
the corporate secretary of a number of publicly traded companies, including the
following principal companies:

Issuer
      BusinessGreystar Resources Ltd.
    Gold explorationMidway Gold Corp.
    Gold explorationQuest Capital Corp.
    Merchant banking


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MICHAEL W. SUTTON has served as Chief Geologist since
February 1, 2002 and as Assistant General Manager since November 2003.
Previously he was employed at the Macassa Mine as a Geologist for over eight
years and as Chief Geologist since 1997 by Kinross Gold Corporation. Mr. Sutton
does not have any business activities outside the Corporation other than
prospecting.

DUNCAN K. MIDDLEMISS has served as Engineering &
Production Manager since November 2004 and, prior thereto, as Chief Mine
Engineer since September 9, 2002. Previously he was employed by Barrick Gold
Corp. as Chief Mine Engineer. Mr. Middlemiss does not have any business
activities outside the Corporation

RAYMOND A. BELECQUE has served as General Manager since
January 1, 2002. Previously he was employed as Operations Superintendent and
Mill Superintendent for the Macassa Mine by Kinross Gold Corporation. Mr.
Belecque has over 30 years of experience working at the mine site. Mr. Belecque
does not have any business activities outside the Corporation.

BRIAN E. BAYLEY has served as a director since October
15, 1998. Mr. Bayley is the President and Chief Executive Officer of Quest
Capital Corp. and President of Quest Management Corp. Mr. Bayley is an officer
and director of a number of public companies and holds the following principal
directorships of other publicly traded companies:

Issuer
      BusinessAmerican Natural Energy Corp.
    Petroleum and natural gas productionGreystar Resources Ltd.
    Gold explorationMidway Gold Corp.
    Gold explorationPetroFalcon Corporation
    Petroleum and natural gas productionQuest Capital Corp.
    Merchant bankingTransAtlantic Petroleum Corp.
    Petroleum and natural gas production


Previously, Mr. Bayley was the Vice-President, Corporate
Administration from September, 1986 to October, 1990, the President and Chief
Executive Officer from October, 1990 to October, 1996, a director from November,
1990 to April, 1997 and the Corporate Secretary from October, 1996 to April,
1997 of Quest Oil & Gas Inc.

S. PAUL KOSTUIK has served as a director since February
26, 2001. Mr. Kostuik is a Professional Engineer and a self-employed mining
consultant. He was formerly Chairman and Chief Executive Officer of Jordex
Resources Inc. and formerly President of Quintette Coal Ltd. (privately held
senior coal mining company). Mr. Kostuik is not a director of any other publicly
traded company.

GEORGE A. MILTON has served as a director since December
1, 2003. Mr. Milton is a retired stock broker. He was formerly a Vice-President
of Richardson Greenshield of Canada Ltd. (a stock brokerage company) from 1996
to April 1, 1998, a Director of Moss Lawson & Co. Limited (a stock brokerage
company) from 1993 to 1995 and prior thereto a stock broker with, and eventually
becoming a director of, Midland Walwyn Ltd. (a stock brokerage company) for 31
years. Mr. Milton does not hold any other directorship in any publicly traded
companies.

39

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B.COMPENSATION

Compensation Summary

The following table sets forth details of the compensation paid
  during, or payable in respect of, the Corporations fiscal year ended April
  30, 2006 to its directors, officers and senior management:

Name
      Position
      Salary or Fee(Cdn$)
      Bonus (Cdn$)
      Benefits & Other Compensation(1) (Cdn$)DOBSON, D. Harry W.
      Chair of the Board of Directors
      0
      0
      0HINCHCLIFFE, Brian A.
      President, CEO & Director
      $311,284 (2)
      0
      0RODRIGUE, Robert G.
      Chief Financial Officer
      105,286
      0
      0LEE, Sandra
      Secretary
      0
      0
      0SUTTON, Michael W.
      Chief Geologist & Asst. Gen. Mgr
      93,838
      0
      0MIDDLEMISS, Duncan K.
      Engineering & Production Manager
      105,692
      0
      0BELECQUE, Raymond A.
      General Manager
      124,276
      0
      0BAYLEY, Brian E.
      Director
      12,000(3)
      0
      0KOSTUIK, S. Paul
      Director
      22,000(3)
      0
      0MILTON, George A.
      Director
      12,000(3)
      0
      0SINCLAIR, A. Murray
      Director (4)
      0
      0
      0


|(1) | Senior management did not receive any benefits from
        the Corporation other than health, dental and similar benefits on the
        same basis as paid to other employees. See Share Ownership 
        Options to Purchase Securities from the Corporation or Subsidiary
        below for particulars of stock options granted to directors and officers.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(2) | Includes payments to adjust for a shortfall in payments
        of salary in fiscal 2005.                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(3) | The fees paid to directors for fiscal 2006 will be paid in fiscal 2007.                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(4) | A. Murray Sinclair resigned as a director on May 10,
        2005.                                                                                                                                                                                                                                                                                                  

Agreements with Senior Officers

Other than employment agreements entered into in the ordinary
  course of business, the Corporation has entered into a consulting agreement
  dated March 15, 2001 with Brian A. Hinchcliffe, the Corporations President
  and Chief Executive Office its Chief Executive Officer pursuant to which provides
  the services of a chief executive officer for the Corporation at a remuneration
  of US$ 120,000 per year. In consideration of Mr. Hinchcliffe entering into the
  agreement the Corporation paid Mr. Hinchcliffe a bonus of US$ 30,000. Effective
  March 1, 2004 the remuneration under the agreement was increased from US$ 120,000
  to US$ 225,000 per year. In addition, bonuses and stock options may be paid
  or granted in the discretion of the Board of Directors. The agreement may be
  terminated upon two months notice.

Remuneration of Directors

The Chairman of the Board of Directors does not receive any
  fee for acting as its chairman, however, each independent director receives
  an annual fee of $12,000 for acting as a director of the Corporation. In addition
  to the foregoing fee, the Chairman of the Audit Committee of the Board of Directors
  receives an annual fee of $10,000 and each member of the Committee receives
  an annual fee of $5,000. The Chairman of the Compensation Committee of the Board
  of Directors also receives an annual fee of $6,000 and each member of the Committee
  also receives an annual fee of $2,000.

The Board of Directors separately remunerates any director
  undertaking services on behalf of the Corporation other than services ordinarily
  required of a director.

Directors are reimbursed for reasonable travel and other out-of-pocket
  expenses incurred in connection with attendance at meetings of the Board of
  Directors.

Pension, Retirement & Similar Benefits

The Corporation does not have any pension or retirement plans
nor does it provide any similar benefits to its directors, officers and senior
management.No amounts were set aside or accrued by the Corporation
during fiscal 2006 to provide pension, retirement or similar benefits for
directors, officers and senior management of the Corporation.

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Administration Agreement

Pursuant to an agreement dated as of February 1, 1997 between
the Corporation and Quest Management Corp. (Management) of Suite 300,
570 Granville Street, Vancouver, British Columbia the Corporation pays $3,500
per month to Management in consideration of Management providing office space
and certain services, including reception, secretarial, accounting and corporate
records services, to the Corporation. These services include those of the
Corporations corporate secretary.

Management is a wholly-owned subsidiary of Quest Capital Corp.
  (Capital), the shares of which trade on the Toronto and American
  Stock Exchanges and the AIM market of the London Stock Exchange. Brian E. Bayley,
  the President and Chief Executive Officer and a director of Capital, is a director
  of the Corporation and Sandra Lee, the Corporate Secretary of Capital, is the
  Corporate Secretary of the Corporation.

C.BOARD
PRACTICES

Directors, Officers and Term of Office

Members of the Board of Directors are elected by the
Corporations shareholders to represent the interests of all shareholders. The
Board of Directors meets periodically to review significant developments
affecting the Corporation and to act on matters requiring Board approval.
Directors hold office until they resign or the next Annual Meeting, whichever is
earlier. The Board of Directors may appoint a director to fill a vacancy at any
time in accordance with the By-Laws of the Corporation.

Officers are appointed from time to time by the Board of
Directors. The Board, in its discretion, may remove any officer of the
Corporation, otherwise each officer shall hold office until their successor is
appointed or they resign, whichever is earlier.

Senior management employees are retained by the Corporations
Senior Officers from time to time. The Senior Officers, in their discretion, may
remove any senior management employees of the Corporation, otherwise each
officer shall hold office until their successor is appointed or they resign,
whichever is earlier.

Service Contracts with Directors

The Corporation does not have any service contracts with directors
  providing for payment of benefits upon termination of employment.

Board Committees

The Board of Directors of the Corporation has created an Audit
  Committee and a Compensation Committee.

Audit Committee

The Audit Committee is responsible for reviewing the Corporations
  annual and quarterly interim financial statements before they are reviewed and
  approved by the Board, the Corporations financial reporting procedures
  and internal controls and the performance of the Corporations auditor.
  Such reviews are carried out with the assistance of the Corporations auditor,
  as required, and the Corporations senior financial management.

41

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Members of the Audit Committee may be appointed any time by the
  Board of Directors. The Board, in its discretion, may change the membership
  and fill vacancies in the committee, otherwise members shall serve until their
  successor is appointed or until their earlier resignation. The Audit Committee
  consists of Brian E. Bayley, George A. Milton and S. Paul Kostuik (Chairman).

Compensation Committee

The Compensation Committee is responsible for the review of
  all compensation (including stock options) paid by the Corporation to the directors
  and senior management of the Corporation and any subsidiaries, to report to
  the Board of Directors on the results of those reviews and to make recommendations
  to the Board for adjustments to such compensation.

The policy used by the Committee in determining compensation
  is that the compensation should (i) reflect the Corporation’s current
  state of development, (ii) reflect the Corporation’s performance, (iii)
  reflect individual performance, (iv) in respect of the executives, align their
  interests with those of the shareholders, and (v) assist the Corporation in
  retaining key individuals. The main elements of the executive compensation consists
  of base remuneration which is supplemented by incentive bonuses to reward executives
  for delivering value to the Corporation’s shareholders through measurable
  increases in the value of the Common Shares, asset base, revenue and income.

Members of the Compensation Committee may be appointed any
  time by the Board of Directors. The Board, in its discretion, may change the
  membership and fill vacancies in the committee, otherwise members shall serve
  until their successor is appointed or until their earlier resignation. The Compensation
  Committee consists of Brian E. Bayley, George A. Milton (Chairman) and S. Paul
  Kostuik.

D.EMPLOYEES

All of the Corporations employees work at the Corporations
  Mine Complex in Kirkland Lake, Ontario in the following areas:

|Area                                                  | Number of Employees (by area)
      as at April 30
|----------------------------------------------------- | --------------------------------------------------
|2006                                                  | 2005                                              
|Full-time                                             | Part-time                                         
|Administration                                        | 54                                                
|Maintenance (1)                                       | 31                                                
|Production 
      - Underground 
      - Above Ground | 112 
      45                                     

|(1) | Some maintenance is carried out for the Corporation by
      independent contractors.                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                 
|(2) | Some underground production was carried out for the
      Corporation by independent contractors in fiscal 2003, however, commencing
      part way through fiscal 2004 the Corporation began carrying out
      underground production using its own employees.

The Corporations employees voted to decertify as a union in
fiscal 2003. During the summer of 2003, the union which claimed to represent
former workers at the Mine withdrew its claim.

E.SHARE
OWNERSHIP

Share Ownership

The following table sets out the Common Shares beneficially held
  by the directors, officers and senior management of the Corporation:

Name
      Position withthe Corporation
      Number &Percentageof OutstandingCommon SharesOwned as atAugust 15, 2006(1)DOBSON, D. Harry W.
    Chairman of the Board of
      Directors
    3,390,000 (6.4%)HINCHCLIFFE, Brian A.
    President, Chief Executive
      Officer & Director
    1,138,000 (2.1%)RODRIGUE, Robert G.
    Chief Financial Officer
    0THOMSON, John S.
    Executive Vice-President &
      Acting/Interim Chief Financial Officer
    0LEE, Sandra
    Corporate Secretary
    0


42

---

Name
      Position
      with the Corporation
      Number & Percentage
      of Outstanding Common Shares Owned as at
      August 31, 2006(1)SUTTON, Michael W.
    Chief Geologist & Assistant
      General Manager
    0MIDDLEMISS, Duncan K.
    Engineering & Production
      Manager
    0BELECQUE, Raymond A.
    General Manager
    0BAYLEY, Brian E.
    Director
    9,700 (0.02%)KOSTUIK, S. Paul
    Director
    33,500 (0.06%)MILTON, George A.
    Director
    1,058,795 (2.0%)


|(1) | A total of 52,871,888 Common Shares were issued and outstanding
        as at August 31, 2006. Numbers shown do not include Common Shares issuable
        upon exercise of options or warrants. See Options to Purchase Securities
        from the Corporation or Subsidiary below.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

None of the persons set out in the foregoing table have
different voting rights than other shareholders.

Options to Purchase Securities from the Corporation or
Subsidiary

The Corporation may grant, pursuant to its stock option plan,
stock options to directors, officers and employees of and consultants to the
Corporation or a subsidiary or to employees of a company providing management
services to the Corporation in consideration of them providing their services to
the Corporation or subsidiary. The options enable such persons to purchase
Common Shares at a price fixed pursuant to the rules of the Exchange.

The number of Common Shares subject to each option is
determined by the Corporations Board of Directors within the guidelines
established by the plan and the rules of the Toronto Stock Exchange. The options
can have a term of up to 10 years, but it is the Corporations policy to grant
options for a term of no more than five years.

The option agreements must provide that the option can only be
exercised by the optionee and only so long as the optionee shall continue in the
capacity as a director, officer or employee of or consultant to the Corporation
or subsidiary or as an employee of the management company and during a period of
not more than 90 days after ceasing to be a director, officer, employee or
consultant (30 days if employed in an investor relations capacity) or, if the
optionee dies, one year from the date of the optionees death. The options are
exercisable by the optionee giving the Corporation notice and payment of the
exercise price for the number of Common Shares to be acquired. The agreements
further provide that disinterested shareholder approval will be obtained prior
to the reduction of the exercise price of options granted to insiders. Other
than stock options there are no arrangements with the Corporations employees to
allow them to participate in the Corporations capital.

The following table sets out the names of the directors,
officers and senior management of the Corporation to whom stock options have
been granted and the number of Common Shares subject to such stock options:

43

---

Name
      Number of Common Shares under Options
        Granted in 2006 Fiscal year
      Number of Common Shares under Options Outstanding at
      Price
        Exercise (Cdn$)
      Expiration DateApril 30,
        2006
      August 31,
        2006Officers:DOBSON, D. Harry W. 
        Chairman of the Board
      0
      100,000
      0
      1.35
      October 3, 2006HINCHCLIFFE, Brian A. 
        President & CEO
      0
      0
      0
      
      RODRIGUE, Robert G. 
        Chief Financial Officer
      0
      17,500
      17,500
      4.70
      September 24, 2009THOMSON, John S. (1)
        Executive Vice-President  & Acting/Interim CFO
      
      
      0
      
      LEE, Sandra 
        Secretary
      0
      0
      0
      
      Directors:BAYLEY, Brian E.
      0
      50,000
      50,000
      1.35
      October 3, 2006KOSTUIK, S. Paul
      0
      0
      0
      
      MILTON, George A.
      0
      100,000
      100,000
      3.95
      November 26, 2008SINCLAIR, A. Murray (2)
      0
      0
      0
      
      Senior Management:SUTTON, Michael W. 
        Chief Geologist  & Assistant General Manager
      0
        0
      25,000 
        20,000
      20,000 
        20,000
      1.35 
        2.20
      October 3, 2006 
        January 10, 2008MIDDLEMISS, Duncan K. 
        Engineering & Production Manager
      0
        0
      15,000 
        5,000
      0 
        5,000
      2.20 
        4.70
      January 10, 2008 
        September 24, 2009BELECQUE, Raymond A. 
        General Manager
      0
      0
      0
      
      


|(1) | John S. Thomson was appointed Executive Vice-President on
      May 19, 2006.                                     
|--- | ------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                   
|(2) | A. Murray Sinclair resigned as a director on May 10, 2005
      and his option terminated 90 days after that date.

44

---

ITEM
7MAJOR
SHAREHOLDER AND RELATED PARTY TRANSACTIONS

A.MAJOR SHAREHOLDERS

The Corporation is currently a publicly-held company, with its
Common Shares held by residents of Canada, the United States of America and
other countries. To the best of its knowledge, the Corporation is not
controlled, directly or indirectly, by another company, any government or any
natural or legal persons, severally or jointly, and no person, company or other
entity owns, directly or indirectly, or controls more than 5% of the Common
Shares, the only class of securities with voting rights, except for those listed
below:

Name and Relationship to Corporation
      Number of Shares Beneficially
      Owned(1) as at August 31, 2006
      Percentage of Class(2)DOBSON, D. Harry W. Chairman of the Board of Directors
    3,390,000
    6.4%


|(1) | Shares Beneficially Owned includes Common Shares
      issuable pursuant to the exercise of warrants or stock options held by the
      named party.                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                       
|(2) | Based on 52,871,888 Common Shares issued and outstanding
        at August 31, 2006 plus Common Shares issuable pursuant to the exercise
        of warrants or stock options held by the named party.
|    |                                                                                                                                                                                                       
|(3) | There has not been any significant change in the number
      of Common Shares owned in the past three years.                                                                                         

The Corporations major shareholders do not have different
voting rights from other shareholders of the Corporation.

To the Corporations knowledge, it is not directly or
indirectly owned or controlled by any other companies, any foreign government or
any other natural or legal persons, severally or jointly. There are no
arrangements known to the Corporation which, at a subsequent date, may result in
a change in control of the Corporation.

B.RELATED
PARTY TRANSACTIONS

Except as disclosed herein and in note 14 of the Corporations
2005 and 2006 annual financial statements, the Corporation has not, during those
fiscal years and thereafter up to the date of this Annual Report, and does not
presently propose to:

|(1) | enter into any transactions which are material to the
      Corporation or a related party, or any transactions unusual in their
      nature or conditions, involving goods, services or tangible or intangible
      assets to which the Corporation was a party, with any of the persons named
      below; or
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                  
|(2) | make any loans or guarantees to or for the benefit of any
      of the persons named below.                                                                                                                                                                                                                      

For the purposes of the foregoing, such persons are:

|(1) | enterprises directly or indirectly through one or more
      intermediaries, controlling, controlled by or under common control with
      the Corporation;                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                   
|(2) | associates of the Corporation (unconsolidated enterprises
      in which the Corporation has significant influence or which has
      significant influence over the Corporation) including shareholders
      beneficially owning 10% or more of the outstanding Common
  Shares;

45

---

|(3) | individuals owning, directly or indirectly, Common Shares
      that gives them significant influence over the Corporation and close
      members of any such individuals families;                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | key management personnel (persons having authority in
      responsibility for planning, directing and controlling the activities of
      the Corporation including directors and senior management and close
      members of any such individuals family); or                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                       
|(5) | enterprises in which a substantial voting interest is
      owned, directly or indirectly, by any person described in (c) or (d) or
      over which such a person is able to exercise significant influence,
      including enterprises owned by directors or major shareholders of the
      Corporation and enterprises that have a member of key management in common
      with the Corporation.

For the purposes hereof:

|close members of an individuals family
        are those that may be expected to influence, or be influenced by, that
        person in their dealings with the Corporation; and                                                                                                                                                                                           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                              
|significant influence over an enterprise
        is the power to participate in the financial and operating policy decisions
        of the enterprise but is less than control over those policies. Shareholders
        beneficially owning a 10% interest in the voting power of the Corporation
        are presumed to have a significant influence on the Corporation.

C.INTERESTS
OF EXPERTS AND COUNSEL

Not Applicable

ITEM 8FINANCIAL
  INFORMATION

A.CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

The Corporations audited annual financial statements for the
years ending April 30, 2006, 2005 and 2004 are contained and incorporated
herein. See Item 17 Financial Statements.

Export Sales

Almost 100% of the gold produced from the Corporations
operations are sold into the North American gold bullion markets.

Legal and Arbitration Proceedings

The Corporation is not involved in any legal or arbitration
proceedings which may have or have had in the recent past, a significant effect
on the Corporations financial position or profitability except as described
below.

On May 8, 2006 four charges were laid against the Corporation
  under the Provincial Offences Act(Ontario) in the Ontario Court of Justice
  by the Ontario Ministry of Labour for four alleged violations of the Occupational
  Health and Safety Act (Ontario). The charges are in connection with the
  falling death of an employee in December, 2005. The Corporation entered an appearance
  to the proceedings on June 13, 2006 and will next appear in court in November,
  2006 at which time it must enter a plea. If the charges proceed to trial and
  the Corporation is found guilty, the Corporation could be subject to fines not

46

---

exceeding Cdn$ 500,000 per charge. The Corporation intends to
vigorously defend itself against these charges and believes that its conduct was
in compliance with the Act and that it has a good work safety environment.

Dividends

The Corporation has not paid any dividends on any of its Common
Shares since incorporation. The Corporation does not presently have any
intention of paying dividends. Its future dividend policy will be determined by
its Board of Directors on the basis of earnings, financial requirements and
other relevant factors.

B.SIGNIFICANT
CHANGES

The Corporation does not have any significant changes to report
since the date of the financial statements included herein except as disclosed
herein.

ITEM
9THE
OFFER AND LISTING

A.OFFER
AND LISTING DETAILS

The Corporation has only one class of shares authorized, namely,
  the Common Shares. The Common Shares do not have a nominal or par value. There
  are an unlimited number of Common Shares authorized. As of August 31, 2006 a
  total of 52,871,888 Common Shares were issued and outstanding.

All Common Shares are initially issued registered in the name
of the shareholder or its nominee. There are no restrictions on the
transferability of the Common Shares imposed by the Corporations constating
documents. The register of Common Share is maintained by and the Common Shares
can be transferred at the offices of Pacific Corporate Trust Company in
Vancouver, British Columbia and Toronto, Ontario.

The following is a summary, on an annual basis, of the high and
low prices of the Common Shares on the Corporations principal trading market,
the Toronto Stock Exchange (since March 20, 2003) and TSX Venture Exchange (up
to March 19, 2003), during the Corporations last five fiscal years:

Fiscal year
      High (Cdn$)
      Low (Cdn$)2006
    8.97
    3.402005
    7.04
    3.352004
    4.98
    2.442003
    3.10
    1.502002
    2.10
    0.73


The following is a summary, on a fiscal quarter basis, of the
high and low prices of the Common Shares on the Corporations principal trading
market, the Toronto Stock Exchange, during the Corporations two most recent
fiscal years and any subsequent financial quarter.

47

---

Fiscal Quarter
      High (Cdn$)
      Low (Cdn$)20071stQuarter
    9.50
    5.3620064thQuarter
    8.97
    4.953rdQuarter
    5.60
    3.552ndQuarter
    4.45
    3.401stQuarter
    4.74
    3.6020054thQuarter
    5.31
    3.793rdQuarter
    7.04
    4.652ndQuarter
    6.65
    3.451stQuarter
    4.49
    3.35


The following is a summary, on a monthly basis, of the high and
low prices of the Common Shares on the Corporations principal trading market,
the Toronto Stock Exchange, during the past six months:

Month
      High (Cdn$)
      Low (Cdn$)2006August
      7.40
      6.01July
      7.90
      6.53June
      8.20
      5.61May
      9.50
      7.60April
      8.97
      6.77March
      7.45
      5.90


B.PLAN
OF DISTRIBUTION

Not Applicable

C.MARKETS

The Common Shares have traded on the Toronto Stock Exchange
since March 20, 2003. Prior thereto, they traded on the TSX Venture Exchange 
initially on the Vancouver Stock Exchange and then on the Canadian Venture
Exchange (which was formed by the merger of the Vancouver Stock Exchange and the
Alberta Stock Exchange on November 26, 1999 and which changed its name to the
TSX Venture Exchange on May 1, 2002) in Canada. The Common Shares first became
publicly traded on December 10, 1984.

48

---

On July 1, 2004 the Common Shares were also listed on the AIM
Market of the London Stock Exchange.

Other than described above, the Common Shares are not and have
not been listed or quoted on any other exchange or regulated markets.

D.SELLING
SHAREHOLDERS

Not Applicable

E.DILUTION

Not Applicable

F.EXPENSES
OF THE ISSUE

Not Applicable

ITEM
10ADDITIONAL INFORMATION

A.SHARE
CAPITAL

Not applicable.

B.MEMORANDUM
AND ARTICLES OF ASSOCIATION

The description of the Corporations Articles of Incorporation
and By-Laws and the laws applicable thereto are incorporated herein by reference
from the Corporations Registration Statement on Form 20-F dated June 28, 2002
and filed with the Securities and Exchange Commission on July 1, 2002.

C.MATERIAL
CONTRACTS

The Corporation has entered into the following material contracts,
  other than contracts entered into in the ordinary course of business, in the
  two previous fiscal years and thereafter up to the date of this Annual Report:

|1. | Loan Agreements dated May 22, 2002 with RAB Europe Fund
      Ltd. ($2,187,500) of George Town, Cayman Islands and RAB Europe Partners
      L.P. ($312,500) of Dover, Delaware in respect of one year loans made to
      the Corporation on June 11, 2002 totalling $2.5 million and bearing
      interest at 10% per year. The outstanding principal was convertible by the
      lenders into Common Shares at the rate of Cdn$ 4.00 per share and the
      accrued interest was convertible by the lenders into Common Shares at that
      rate equal to the higher of Cdn$ 4.00 per share or the prevailing trading
      price at the time of conversion. The terms of the loans could be extended
      by one year by the issuance of 125,000 Common Shares. The loan from RAB
      Europe Fund Ltd. was extended by one year by the issuance of 109,375
      Common Shares. The loan to RAB Europe Partners L.P. was repaid on the
      original maturity date. As a bonus for making the loans, the lenders were
      issued a total of 125,000 Common Shares at a deemed price of Cdn$ 256,250.
      The Corporation paid a finders fee of Cdn$ 25,000 in connection with this
      placement.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | Investor Relations Agreement dated May 30, 2002 with
        DSK Consulting Ltd. of Calgary, Alberta in respect of the supply of investor
        relation services to the Corporation for an initial one year term (subsequently
        renewed) at a remuneration of $3,000 per month and a stock option to purchase
        35,000 Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

49

---

|3.  | Agency Agreement dated June 21, 2002 pursuant to which
        Fahnestock Canada Inc. (now called Fort House Inc.) of Toronto, Ontario
        acted as the Corporations agent in connection with a private placement
        of 1 million Common Shares at $2.35 per share and in consideration of
        which received a 6.5% cash commission of $152,750 and a compensation option
        to purchase 100,000 Common Shares at a price of $2.35 per share until
        June 21, 2004.                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.  | Subscription Agreements dated June 21, 2002 with four
        placees in respect of a private placement of 1 million Common Shares completed
        on June 21, 2002 for proceeds of $2.35 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|5.  | Agency Agreement dated December 30, 2002 pursuant to
        which Octagon Capital Corporation and Fahnestock Canada Inc. of Toronto,
        Ontario acted as the Corporations agents in connection with a private
        placement of 2.625 million Common Shares at $1.80 per share and in consideration
        of which received 8% cash commissions totalling $378,000 and compensation
        options to purchase an aggregate of 393,750 Common Shares at a price of
        $2.05 per share until June 30, 2004.                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|6.  | Subscription Agreements dated December 30, 2002 with
        various placees in respect of a private placement of 2.625 million Common
        Shares completed on December 30, 2002 for proceeds of $4.725 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|7.  | Listing Agreement dated March 5, 2003 with the Toronto
        Stock Exchange in respect of the listing of the Common Shares on the Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|8.  | Publicity Agreement dated March 27, 2003 with Jefferson
        Financial, LLC of Jefferson, Louisiana in connection with the publication
        of a newsletter in respect of the Corporation at a cost of US$250,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|9.  | Loan Agreement dated June 10, 2003 with CBG Compagnie
        Bancaire Genève of Geneva, Switzerland in respect of an 18 month
        loan of Cdn$ 1 million made to the Corporation on August 11, 2003 with
        interest at 10% per year payable every 18 months. The outstanding principal
        was convertible by the lender into Common Shares at the rate of Cdn$ 4.00
        per share and the accrued interest was convertible by the lender into
        Common Shares at that rate equal to the higher of Cdn$ 4.00 per share
        or the 10 day weighted volume average trading price at the time of conversion.
        As a bonus for making the loan, the lender was issued 75,000 Common Shares
        at a deemed price of Cdn$ 300,000. The Corporation paid a finders
        fee of Cdn$ 50,000 in connection with this placement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10. | Subscription Agreements dated August 8, 2003 and August
        26, 2003 with 13 placees in respect of a private placement of 3.755 million
        units (each unit consisting of one Common Share and one-half of one Common
        Share purchase warrant, each whole warrant entitling the holder to purchase
        one Common Share for a period of 24 months at a price of $3.00 per share)
        completed on August 8, 2003 and August 26, 2003 for proceeds of $9.763
        million.                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|11. | Agency Agreement dated November 14, 2003 pursuant to
        which Fort House Inc. and Octagon Capital Corporation of Toronto, Ontario
        acted as the Corporations agents in connection with a private placement
        of 1.925 million flow-through Common Shares (which entitle
        the investors to certain tax benefits under applicable Canadian tax legislation)
        at $4.00 per share and in consideration of which received 5% cash commissions
        totalling $385,000 and warrants to purchase an aggregate of 96,250 Common
        Shares at a price of $3.60 per share until November 14, 2005.                                                                                                                                                                                                                               

50

---

|12. | Subscription Agreements dated November 14, 2003 with
      various placees in respect of the private placement of the 1.925 million
      flow-through Common Shares completed on November 14, 2003 for proceeds
      of $7.7 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|13. | Agency Agreement dated December 1, 2003 pursuant to which
      Fort House Inc. and Octagon Capital Corporation of Toronto, Ontario acted
      as the Corporations agents in connection with a private placement of 2.2
      million units at $3.90 per unit (each unit consisting of one Common Share
      and one-half of one Common Share purchase warrant, each whole warrant
      entitling the holder to purchase a Common Share for $4.40 until June 1,
      2005) and in consideration of which received 5% cash commissions totalling
      $283,584 on that portion of the placement sold by them.                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|14. | Subscription Agreements dated December 1, 2003 with eight
      placees in respect of the private placement of 2.2 million units completed
      on December 1, 2003 for proceeds of $8.58 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|15. | Subscription Agreements dated April 29, 2004 with 24
      placees in respect of a private placement of 2,174,129 units (each unit
      consisting of one Common Share and one-half of one Common Share purchase
      warrant, each whole warrant entitling the holder to purchase one Common
      Share until July 29, 2005 at a price of $5.20 per share) completed on
      April 29, 2004 for proceeds of $10 million.                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|16. | Loan Agreement dated June 2, 2004 with Middlemarch
      Partners Limited of London, England in respect of a six month loan of
      $2,406,250 made to the Corporation on June 2, 2004 with interest at the
      rate of 10% per year. The outstanding principal was convertible by the
      lender into Common Shares at the rate of $4.40 per share and the accrued
      interest was convertible by the lender into Common Shares at that rate
      equal to $4.40 per share or such higher rate required by the Toronto Stock
      Exchange. As a bonus for making the loan, the lender was issued 60,156
      Common Shares. The lender converted the loan on December 10, 2004 into
      546,875 Common Shares and was paid the accrued interest of
    $120,312.50.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|17. | Nominated Advisor and Broker Agreement dated June 24,
      2004 with the Canaccord Capital (Europe) Limited in respect of the
      provision of nominated advisor services to the Corporation in connection
      with its listing of the Common Shares on, and the Corporations
      obligations to, the AIM Market of the London Stock Exchange Plc. The
      Agreement may be terminated on three months notice by either
  party.                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|18. | Agency Agreement dated July 29, 2004 pursuant to which
      Canaccord Capital (Europe) Limited of London, England acted as the
      Corporations agent in connection with a private placement of 3,987,730
      Common Shares at £1.63 (approximately Cdn$ 4.00) per share and in
      consideration of which received a cash commission of £390,000
      (approximately Cdn$ 957,055) (6%) and was issued warrants to purchase
      199,386 Common Shares at a price of £1.63 (approximately Cdn$ 4.00) per
      share until January 30, 2006.                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|19. | Subscription Agreements dated July 29, 2004 with nine
      placees in respect of the private placement of the 3,987,730 Common Shares
      completed on July 29, 2004 for proceeds of £6.5 million (approximately
      Cdn$ 15,950,920).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|20. | Agency Agreement dated November 16, 2004 pursuant to
      which Canaccord Capital (Europe) Limited of London, England acted as the
      Corporations agent in connection with a private placement of 1,950,292
      Common Shares at £2.70 (approximately Cdn$ 6.03) per share and in
      consideration of which received a 6% cash commission of £315,947
      (approximately Cdn$ 705,616).                                                                                                                                                                                                                                                                                                                                                                              

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|21. | Subscription Agreements dated November 16, 2004 with
      seven placees in respect of the private placement of the 1,950,292 Common
      Shares completed on November 16, 2004 for proceeds of £5,265,788
      (approximately Cdn$ 11,705,752).                                                                                                                                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|22. | Agency Agreement dated December 22, 2004 pursuant to
      which Canaccord Capital Corporation of Toronto, Ontario acted as the
      Corporations agent in connection with a private placement completed on
      December 22, 2004 of 500,000 flow-through Common Shares (which entitle
      the investors to certain tax benefits under applicable Canadian tax
      legislation) at $6.00 per share and in consideration of which received a
      6% cash commission of $180,000.                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|23. | Subscription Agreements dated December 22, 2004 with 31
      placees in respect of the private placement of the 500,000 flow-through
      Common Shares completed on December 22, 2004 for proceeds of
      $3,000,000.                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|24. | Subscription Agreements dated August 25, 2005 with one
      placee in respect of a private placement of 1,250,000 units (each unit
      consisting of one Common Share and one-half of one Common Share purchase
      warrant, each whole warrant entitling the holder to purchase one Common
      Share for $4.60 until May 25, 2006) completed on August 25, 2006 for
      proceeds of $5 million. A 4% finders fee of $200,000 was paid in
      connection with the placement.                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|25. | Subscription Agreement dated September 26, 2005 with one
      placee in respect of a private placement of 1 million units (each unit
      consisting of one Common Share and one-half of one Common Share purchase
      warrant, each whole warrant entitling the holder to purchase one Common
      Share for $4.60 until June 28, 2006) completed on September 26, 2005 for
      proceeds of $4 million. A 5% finders fee of $200,000 was paid in
      connection with the placement.                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|26. | Subscription Agreements dated October 12 and 14, 2005
      with six placees in respect of a private placement of 555,500
      flow-through Common Shares (which entitle the investors to certain tax
      benefits under applicable Canadian tax legislation) completed on October
      12 and 14, 2005 for proceeds of $2,499,750. A 5% finders fee of $125,000
      was paid in connection with the placement.                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|27. | Subscription Agreements dated May 24 and 25, 2006 and
      June 2, 2006 with placee in respect of a private placement of 1,793,500
      units (each unit consisting of one Common Share and one-half of one Common
      Share purchase warrant, each whole warrant entitling the holder to
      purchase one Common Share for $10.50 for a period of 12 months) completed
      on September 26, 2005 for proceeds of $4 million. A 6% finders fee of
      $990,000 was paid in connection with the placement.                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|28. | Broker Agreements dated June 1, 2006 with Mirabaud
      Securities Limited and Ocean Equities Ltd. of London, England pursuant to
      the Corporation appointed Mirabaud and Ocean Equities as its brokers in
      the United Kingdom in connection with the Corporations public equity
      market issues in the United Kingdom and its obligations to, and trading of
      the Common Shares on, the AIM Market of the London Stock Exchange Plc. The
      Agreements may be terminated on three months notice by either
  party.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|29. | Various Stock Option Agreements with directors, officers,
      employees and consultants pursuant to which such persons are entitled to
      purchase Common Shares. See Item 6 Directors, Senior Management and
      Employees  Share Ownership  Options to Purchase Securities from the
      Corporation or Subsidiary for particulars.                                                                                                                                                                                          

See also Item 6 Compensation  Agreements with Senior
Officers for terms of contracts entered into with officers of the
Corporation.

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D.EXCHANGE
CONTROLS

There are no governmental laws, decrees or regulations in
Canada which may affect the import or export of capital or the remittance of
interest, dividends or other payments to non-resident holders of the Common
Shares other than a 5% to 15% withholding tax on dividends paid to United States
residents pursuant to Article X of the reciprocal tax treaty between Canada and
the United States. See Taxation below.

E.TAXATION

Canadian Federal Income Tax Consequences

The following is a general summary of all material Canadian
federal income tax considerations generally applicable to a holder of the Common
Shares who is not a resident of Canada for the purposes of the Income Tax
Act (Canada) (the Act). The discussion does not address individual
consequences to persons subject to special provisions of federal income tax law.

The summary is based on the current provisions of the Act and
the regulations thereunder and the Corporations understanding of the current
administrative practices published by, and press announcements released by
Canada Customs and Revenue Agency and the Department of Finance. This summary
takes into account proposals to amend the Act announced prior to the date hereof
(although no assurances can be given that such changes will be enacted in the
form presented or at all), but does not otherwise take into account or
anticipate any other changes in law, whether by judicial, governmental or
legislative action or decision nor does it take into account any provincial,
territorial, local or foreign tax considerations. Accordingly, holders and
prospective holders of the Common Shares are urged to consult their own tax
advisors about the federal, provincial, territorial, local and foreign tax
consequences of purchasing, owning and disposing of such Common Shares.

The Act provides in subsection 212(2) that dividends and other
distributions which are deemed to be dividends and which are paid or credited or
are deemed to be paid or credited by a Canadian resident company to a
non-resident of Canada shall be subject to non-resident withholding tax equal to
25 percent of the gross amount of the dividend or deemed dividend.

Subsections 2(3) and 115(1) of the Act provide that a
non-resident person is subject to tax in Canada at the rates generally
applicable to residents of Canada on any taxable capital gain arising on the
disposition of the common shares of a company which are listed on a prescribed
stock exchange if such non-resident, together with persons with whom he does not
deal at arms length, owned 25 percent or more of the issued shares of any class
of the capital stock of the company at any time in the five years immediately
preceding the date of disposition of the shares. Subsections 2(3) and 115(1)
also provide that a non-resident person is subject to tax in Canada on taxable
capital gains arising on the disposition of shares that constitute capital
property used in carrying on a business in Canada. The taxable portion of a
capital gain is equal to one-half of the amount by which the proceeds of
disposition of such shares, net of any reasonable costs associated with the
disposition, exceeds the adjusted cost base to the holder of the shares.

Provisions in the Act relating to dividend and deemed dividend
payments and gains realized by nonresidents of Canada who are residents of the
United States are subject to the Canada-United States Income Tax Convention
(1980), as amended (the 1980 Convention).

Article X of the 1980 Convention provides that for 1997 and
subsequent taxation years pursuant to the Third Protocol to the 1980 Convention
the rate of Canadian non-resident withholding tax on dividends

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paid to a U.S. company that beneficially owns at least 10% of
the voting stock of the Corporation shall not exceed 5% of the dividends.
Otherwise, and except in the case of dividends received by a resident of the
United States who carries on business in Canada through a Canadian permanent
establishment and the shares in respect of which the dividends are paid are
effectively connected with that permanent establishment, the rate of
non-resident withholding shall not exceed 15 percent of the dividend. Where the
dividends are received by a United States person carrying on business in Canada
through a Canadian permanent establishment and the shares in respect of which
the dividends are paid are effectively connected with that permanent
establishment the dividends are generally subject to Canadian tax as business
profits, generally without limitation under the 1980 Convention.

Article XIII of the 1980 Convention provides that gains
realized by a United States resident on the disposition of shares of a Canadian
company may not generally be taxed in Canada unless the value of those shares is
derived principally from real property situated in Canada or the shares form
part of the business property of a permanent establishment which the United
States shareholder has or had in Canada within the 12 month period preceding the
date of disposition. Canada also retains the right to tax gains on property
owned at the time of departure from Canada if it is sold by a person who was
resident in Canada for 120 months in any 20 consecutive years preceding the sale
and who was a resident in Canada at any time in the 10 years preceding sale.

United States Federal Income Tax Consequences

The following is a general discussion of all material United
States federal income tax consequences, under current law, generally applicable
to a U.S. Holder (as hereinafter defined) of shares of the Corporation. This
discussion does not address individual consequences to persons subject to
special provisions of federal income tax law, such as those described below as
excluded from the definition of a U.S. Holder. In addition, this discussion does
not cover any state, local or foreign tax consequences. (See Canadian Federal
Tax Consequences).

The following discussion is based upon the sections of the
Internal Revenue Code of 1986, as amended (the Code), Treasury
Regulations, published Internal Revenue Service (IRS) rulings,
published administrative positions of the IRS and court decisions that are
currently applicable, any or all of which could be materially and adversely
changed, possibly on a retroactive basis, at any time. This discussion does not
consider the potential effects, both adverse and beneficial, of any recently
proposed legislation which, if enacted, could be applied, possibly on a
retroactive basis, at any time. This discussion is for general information only
and it is not intended to be, nor should it be construed to be, legal or tax
advise to any holder or prospective holder of Common Shares and no opinion or
representation with respect to the United States federal income tax consequences
to any such holder or prospective holder is made. Accordingly, holders and
prospective holders of Common Shares are urged to consult their own tax advisors
about the federal, state, local, and foreign tax consequences of purchasing,
owning and disposing of Common Shares.

U.S. Holders

As used herein, a U.S. Holder means a holder of Common
Shares who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof or a trust whose income is
taxable in the United States irrespective of source. This summary does not
address the tax consequences to, and U.S. Holder does not include, persons
subject to specific provisions of federal income tax law, such as tax-exempt
organizations, qualified retirement plans, individual retirement accounts and
other tax-deferred accounts, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
non-resident alien individuals, persons or entities that have a functional
currency other than the U.S. dollar, shareholders who hold Common Shares as
part of a straddle, hedging or a conversion transaction, and shareholders who
acquired their Common Shares through the exercise of employee stock

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options or otherwise as compensation for services. This summary
is limited to U.S. Holders who own Common Shares as capital assets. This summary
does not address the consequences to a person or entity holding an interest in a
Common Share or the consequences to a person of the ownership, exercise or
disposition of any options, warrants or other rights to acquire Common Shares.

Distribution on Common Shares

U.S. Holders receiving dividend distributions (including
constructive dividends) with respect to Common Shares are required to include in
gross income for United States federal income tax purposes the gross amount of
such distributions equal to the U.S. dollar value of such dividends on the date
of receipt (based on the exchange rate on such date) to the extent that the
Corporation has current or accumulated earnings and profits, without reduction
for any Canadian income tax withheld from such distributions. Such Canadian tax
withheld may be credited, subject to certain limitations, against the U.S.
Holders federal income tax liability or, alternatively, may be deducted in
computing the U.S. Holders federal taxable income by those who itemize
deductions. (See more detailed discussion at Foreign Tax Credit below). To the
extent that distributions exceed current or accumulated earnings and profits of
the Corporation, they will be treated first as a return of capital up to the
U.S. Holders adjusted basis in the Common Shares and thereafter as gain from
the sale or exchange of the Common Shares. Preferential tax rates for long-term
capital gains are applicable to a U.S. Holder which is an individual, estate or
trust. There are currently no preferential tax rates for long-term capital gains
for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is
not converted by the recipient into U.S. dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, to the extent that there are no expenses associated with the transaction
that meet the requirement for deductibility as a trade or business expense
(other than travel expenses in connection with a business trip) or as an expense
for the production of income.

Dividends paid on the Common Shares will not generally be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations. A U.S. Holder which is a
corporation may, under certain circumstances, be entitled to a 70% deduction of
the United States source portion of dividends received from the Corporation
(unless the Corporation qualifies as a foreign personal holding company or a
passive foreign investment company, as defined below) if such U.S. Holder owns
Common Shares representing at least 10% of the voting power and value of the
Corporation. The availability of this deduction is subject to several complex
limitations which are beyond the scope of this discussion.

Dividends paid on the Common Shares and the proceeds of a sale
of the Common Shares, in the U.S. through a U.S., or U.S. related, paying agent
(including a broker) will be subject to U.S. information reporting requirements
and may also be subject to the 28% U.S. backup withholding tax, unless the
paying agent is furnished with a duly completed and signed Form W-9. Any amounts
withheld under the U.S. backup withholding tax rules will be allowed as a refund
or a credit against the U.S. Holders U.S. federal income tax liability,
provided the required information is furnished to the IRS.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions)
Canadian income tax with respect to the ownership of Common Shares may be
entitled, at the option of the U.S. Holder, to either receive a deduction or a
tax credit for such foreign tax paid or withheld. Generally, it will be more
advantageous to claim a credit because a credit reduces United States federal
income taxes on a dollar-for-dollar basis, while a deduction merely reduces the
taxpayers income subject to tax. This election is made on a year-

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by-year basis and applies to all foreign taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations which apply to the credit, among which is the general
limitation that the credit cannot exceed the proportionate shareholding of the
U.S. Holders United States income tax liability that the U.S. Holders foreign
sources income bears to his or its worldwide taxable income. In the
determination of the application of this limitation, the various items of income
and deduction must be classified into foreign and domestic sources. Complex
rules govern this classification process. In addition, this limitation is
calculated separately with respect to specific classes of income such as
passive income, high withholding tax interest, financial services income,
shipping income, and certain other classifications of income. Dividends
distributed by the Corporation will generally constitute passive income or, in
the case of certain U.S. Holders, financial services income for these
purposes. The availability of the foreign tax credit and the application of the
limitations on the credit are fact specific, and U.S. Holders of Common Shares
should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares

A U.S. Holder will recognize gain or loss upon the sale of
Common Shares equal to the difference, if any, between (i) the amount of cash
plus the fair market value of any property received, and (ii) the shareholders
tax basis in the Common Shares. Preferential tax rates apply to long-term
capital gains of U.S. Holders who are individuals, estates or trusts. This gain
or loss will be capital gain or loss if the Common Shares are a capital asset in
the hands of the U.S. Holder, which will be long-term capital gain or loss if
the Common Shares are held for more than one year. Lower long-term capital gain
rates will apply if the U.S. Holder is an individual, estate or trust and such
U.S. Holder has held the Common Shares for more than 12 months. Deductions for
net capital loss may be carried over to be used in later tax years until such
net capital loss is thereby exhausted. For U.S. Holders that are corporations
(other than corporations subject to Subchapter S of the Code), an unused net
capital loss may be carried back three years and carried forward five years from
the loss year to be offset against capital gains until such net capital loss is
thereby exhausted.

Other Considerations

In the following circumstances, the above sections of this
discussion may not describe the United States federal income tax consequences
resulting from the holding and disposition of Common Shares:

Passive Foreign Investment Company

Certain United States income tax legislation contains rules
governing passive foreign investment companies (PFIC) which can have
significant tax effects on U.S. Holders of foreign corporations. These rules do
not apply to non-U.S. Holders. Section 1296 of the Code defines a PFIC as a
corporation that is not formed in the United States and, for any taxable year,
either (i) 75% or more of its gross income is passive income, which includes
interest, dividends and certain rents and royalties or (ii) the average
percentage, by fair market value (or, if the Corporation is a controlled foreign
corporation or makes an election, adjusted tax basis) of its assets that produce
or are held for the production of passive income is 50% or more. The
Corporation does not believe that it is a PFIC. Each U.S. Holder of the
Corporation is urged to consult a tax advisor with respect to how the PFIC rules
affect their tax situation.

A U.S. Holder who holds stock in a foreign corporation during
  any year in which such corporation qualifies as a PFIC is subject to United
  States federal income taxation under one of two alternative tax regimes at the
  election of each such U.S. Holder. The following is a discussion of such two
  alternative tax regimes applied to such U.S. Holders of the Corporation. In
  addition, special rules apply if a foreign corporation qualifies as both a PFIC
  and a controlled foreign corporation (as defined below) and a U.S.
  Holder owns, directly or indirectly, ten percent (10%) or more of the total
  combined voting power of classes of Common Shares of such foreign corporation
  (See more detailed discussion at Controlled Foreign Corporation
  below).

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A U.S. Holder who elects in a timely manner to treat the
Corporation as a QEF (an Electing U.S. Holder) will be subject,
under Section 1293 of the Code, to current federal income tax for any taxable
year in which the Corporation qualifies as a PFIC on his pro rata share
of the Corporations (i) net capital gain (the excess of net long-term capital
gain over net short-term capital loss), which will be taxed as long-term capital
gain to the Electing U.S. Holder and (ii) ordinary earnings (the excess of
earnings and profits over net capital gain), which will be taxed as ordinary
income to the Electing U.S. Holder, in each case, for the shareholders taxable
year in which (or with which) the Corporations taxable year ends, regardless of
whether such amounts are actually distributed.

The effective QEF election also allows the Electing U.S. Holder
to (i) generally treat any gain realized on the disposition of their Common
Shares (or deemed to be realized on the pledge of their Common Shares) as
capital gain; (ii) treat his share of the Corporations net capital gain, if
any, as long-term capital gain instead of ordinary income; and (iii) either
avoid interest charges resulting from PFIC status altogether, or make an annual
election, subject to certain limitations, to defer payment of current taxes on
his share of the Corporations annual realized net capital gain and ordinary
earnings subject, however, to an interest charge. If the Electing U.S. Holder is
not a corporation, such an interest charge would be treated as personal
interest that is not deductible.

The procedure a U.S. Holder must comply with in making an
effective QEF election will depend on whether the year of the election is the
first year in the U.S. Holders holding period in which the Corporation is a
PFIC. If the U.S. Holder makes a QEF election in such first year, i.e., a timely
QEF election, then the U.S. Holder may make the QEF election by simply filing
the appropriate documents at the time the U.S. Holder files his tax return for
such first year. If, however, the Corporation qualified as a PFIC in a prior
year, then in addition to filing documents, the U.S. Holder must elect to
recognize (i) under the rules of Section 1291 of the Code (discussed below), any
gain that he would otherwise recognize if the U.S. Holder sold his stock on the
qualification date or (ii) if the Corporation is a controlled foreign
corporation, the U.S. Holders pro rata share of the Corporations
post-1986 earnings and profits as of the qualification date. The qualification
date is the first day of the Corporations first tax year in which the
Corporation qualified as a qualified electing fund with respect to such U.S.
Holder. The elections to recognize such gain or earnings and profits can only be
made if such U.S. Holders holding period for the Common Shares includes the
qualification date. By electing to recognize such gain or earnings and profits,
the U.S. Holder will be deemed to have made a timely QEF election. A U.S. Holder
who made elections to recognize gain or earnings and profits after May 1, 1992
and before January 27, 1997 may, under certain circumstances, elect to change
such U.S. Holders qualification date to the first day of the first QEF year.
U.S. Holders are urged to consult a tax advisor regarding the availability of
and procedure for electing to recognize gain or earnings and profits under the
foregoing rules. In addition, special rules apply if a foreign corporation
qualifies as both a PFIC and a controlled foreign corporation (as defined
below) and a U.S. Holder owns, directly or indirectly, ten percent (10%) or more
of the total combined voting power of classes of shares of such foreign
corporation (See more detailed discussion at Controlled Foreign Corporation
below).

If the Corporation no longer qualifies as a PFIC in a
subsequent year, a timely QEF election will remain in effect, although not
applicable, during those years that the Corporation is not a PFIC. Therefore, if
the Corporation re-qualifies as a PFIC, the QEF election previously made is
still valid, and the U.S. Holder is required to satisfy the requirements of that
election. Furthermore, a QEF election remains in effect with respect to a U.S.
Holder, although dormant, after a U.S. Holder disposes of its entire interest in
the Corporation. Upon the U.S. Holders reacquisition of an interest in the
Corporation, the QEF election will apply to the newly acquired stock of the
Corporation.

Effective for tax years of U.S. Holders beginning after
December 31, 1997, U.S. Holders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC, may

57

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annually elect to mark such stock to the market (a
mark-to-market election). If such an election is made, such U.S. Holder
will not be subject to the special taxation rules of Section 1291 described
below for the taxable year for which the mark-to-market election is made. A U.S.
Holder who makes such an election will include in income for the taxable year
for which the election was made in an amount equal to the excess, if any, of the
fair market value of the Common Shares as of the close of such tax year over
such U.S. Holders adjusted basis in such Common Shares. In addition, the U.S.
Holder is allowed a deduction for the lesser of (i) the excess, if any, of such
U.S. Holders adjusted tax basis in the Common Shares over the fair market value
of such Common Shares as of the close of the tax year, or (ii) the excess, if
any, of (A) the mark-to-market gains for the Common Shares in the Corporation
included by such U.S. Holder for prior tax years, including any amount which
would have been included for any prior tax year but for Section 1291 interest on
tax deferral rules discussed below with respect to Non-Electing U.S. Holders,
over (B) the mark-to-market losses for Common Shares that were allowed as
deductions for prior tax years. U.S. Holders adjusted tax basis in the Common
Shares will be increased to reflect the amount included or deducted as a result
of a mark-to-market election. A mark-to-market election only applies to the
taxable year in which the election was made. A separate election must be made by
a U.S. Holder for each subsequent taxable year. Because the Internal Revenue
Service has not established procedures for making a mark-to-market election,
U.S. Holders should consult their tax advisor regarding the manner of making
such an election.

If a U.S. Holder does not make a timely QEF election during a
year in which it holds (or is deemed to have held) the Common Shares in question
and the Corporation is a PFIC (a Non-electing U.S. Holder), then
special taxation rules under Section 1291 of the Code will apply to (i) gains
realized on the disposition (or deemed to be realized by reasons of a pledge) of
his Common Shares and (ii) certain excess distributions, as specifically
defined, by the Corporation.

A Non-electing U.S. Holder generally would be required to pro
rate all gains realized on the disposition of his Common Shares and all excess
distribution of his Common Shares and all excess distributions over the entire
holding period for the Corporation. All gains or excess distributions allocated
to prior years of the U.S. Holder (other than years prior to the first taxable
year of the Corporation during such U.S. Holders holding period and beginning
after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax
rate for each such prior year applicable to ordinary income. The Non-electing
U.S. Holder also would be liable for interest on the foregoing tax liability for
each such prior year calculated as if such liability had been due with respect
to each such prior year. A Non-electing U.S. Holder that is not a corporation
must treat this interest charge as personal interest which, as discussed
above, is wholly non-deductible. The balance of the gain of the excess
distribution will be treated as ordinary income in the year of the disposition
or distribution, and no interest charge will be incurred with respect to such
balance.

If the Corporation is a PFIC for any taxable year during which
a Non-electing U.S. Holder holds Common Shares, then the Corporation will
continue to be treated as a PFIC with respect to such Common Shares, even if it
is no longer definitionally a PFIC. A Non-electing U.S. Holder may terminate
this deemed PFIC status by electing to recognize a gain (which will be taxed
under the rules discussed above for Non-electing U.S. Holders) as if such Common
Shares had been sold on the last day of the last taxable year for which it was a
PFIC.

Under Section 1291(f) of the Code, the IRS has issued proposed
regulations that, subject to certain exceptions, would treat as taxable certain
transfers of PFIC stock by Non-Electing U.S. Holders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death. Generally, in such cases the basis of the Corporation
Common Shares in the hands of the transferee and the basis of any property
received in the exchange for those Common Shares would be increased by the
amount of gain recognized. An Electing U.S. Holder would not be taxed on certain
transfers of PFIC stock, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. The transferees basis in this case
will depend on the manner of the transfer. In a transfer at death, for example,
the transferees basis is equal to (i) the fair market value of the Electing
U.S. Holders

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Common Shares, less (ii) the excess of the fair market value of
the Electing U.S. Holders Common Shares reduced by the U.S. Holders adjusted
basis in these Common Shares at death. The specific tax effect to the U.S.
Holder and the transferee may vary based on the manner in which the Common
Shares are transferred. Each U.S. Holder of the Corporation is urged to consult
a tax advisor with respect to how the PFIC rules affect their tax situation.

Certain special, generally adverse, rules will apply with
respect to Common Shares while the Corporation is a PFIC whether or not it is
treated as a QEF. For example under Section 1298(b)(6) of the Code, a U.S.
Holder who uses PFIC stock as security for a loan (including a margin loan)
will, except as may be provided in regulations, be treated as having made a
taxable disposition of such Common Shares.

Controlled Foreign Corporation

If more than 50% of the voting power of all classes of Common
Shares or the total value of the Common Shares is owned, directly or indirectly,
by citizens or residents of the United States, United States domestic
partnerships and corporations or estates or trusts other than foreign estates or
trusts, each of whom own 10% or more of the total combined voting power of all
classes of Common Shares (a US 10% Shareholder), the Corporation will
be a controlled foreign corporation under Subpart F of the Code. This
classification would create many complex results one of which is the inclusion
of certain income of a CFC which is subject to current U.S. tax. The United
States generally taxes a US 10% Shareholder of a CFC currently on their pro
rata Common Shares of the Subpart F income of the CFC. Such U.S.
shareholders are generally treated as having received a current distribution out
of the CFCs Subpart F income and are also subject to current U.S. tax on their
pro rata Common Shares of the CFCs earnings invested in U.S. property. The
foreign tax credit described above may reduce the U.S. tax on these amounts. In
addition, under Section 1248 of the Code, gain from the sale or exchange of
Common Shares by a U.S. Holder of Common Shares who is or was a United States
10% Shareholder at any time during the five-year period ending with the sale or
exchange is treated as dividend income to the extent of earnings and profits of
the Corporation attributable to the Common Shares sold or exchanged. If a
foreign corporation is both a PFIC and a CFC, the foreign corporation generally
will not be treated as a PFIC with respect to United States shareholders of the
CFC. This rule generally will be effective for taxable years of US 10%
Shareholders beginning after 1997 and for taxable years of foreign corporations
ending with or within such taxable years of US 10% Shareholders. Special rules
apply to United States shareholders subject to the special taxation rules under
Section 1291 discussed above with respect to a PFIC. Because of the complexity
of Subpart F, and because it is not clear that Subpart F would apply to U.S.
Holders of Common Shares, a more detailed review of these rules is outside of
the scope of this discussion.

F.DIVIDENDS
AND PAYING AGENTS

Not applicable.

G.STATEMENTS
BY EXPERTS

Not applicable.

H.DOCUMENTS
ON DISPLAY

The documents concerning the Corporation referred to herein may
be viewed at Suite 1880, 1055 West Georgia Street, Vancouver, British Columbia,
Canada during normal business hours.

I.SUBSIDIARY
INFORMATION

Not required.

59

---

ITEM
11            QUANTITATIVE
AND
QUALITATIVEDISCLOSURE ABOUT MARKET RISK

The only form of significant market risk that applies to the
Corporation is gold price fluctuation. The Corporations gold sales and purchase
transactions are denominated in Canadian dollars, therefore, there is little
market risk from currency exchange fluctuations and that which does exist is
essentially a part of the gold price fluctuations. The Corporation does not have
any hedging or similar program for the management of its exposure to gold price
fluctuations.

Changes in the market prices of gold are due to numerous
factors such as demand, global mine production levels, forward selling by
producers, central bank sales and purchases by investors. Inherent in the gold
price risk is a component of exchange rate risk affected by factors such as
supply and demand for Canadian and United States currencies and economic
conditions in each country. In fiscal 2006 the gold prices ranged from Cdn$ 487
to Cdn$ 720. For the purpose of the sensitivities presented in the table below,
the Corporation assumed that gold is valued at Cdn$ 590 per ounce.

The following table shows the estimated impact on income per
share of a 10% change in assumed metal prices and exchange rates. A 10% change
in each variable was considered in isolation while holding all other assumptions
constant.

A 10% Change in
    Would have an
      Impact on Earnings per Share ofGold price
    $0.07


ITEM
12DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

60

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PART II

ITEM
13DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has not been:

|(1) | a material default in the payment of principal, interest,
      a sinking or purchase fund instalment, or
|--- | ---------------------------------------------------------------------------------------------------------
|    |                                                                                                          
|(2) | any other material default not cured within 30
    days,                                                 

relating to the Corporations indebtedness where the amount of
the indebtedness exceeds 5% of its total assets on a consolidated basis.

ITEM
14            MATERIAL
MODIFICATIONS TO
THERIGHTS
  OF SECURITY HOLDERS AND USE OF PROCEEDS

Neither the Corporation nor anyone else has modified
materially:

|(1) | the instruments defining the rights of holders of any
      class of its registered securities; or                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                            
|(2) | qualified the rights evidenced by any class of its
      registered securities by issuing or modifying any other class of
      securities.

Neither the Corporation nor anyone else has withdrawn or
substituted a material amount of the assets securing any class of the
Corporations securities.

Neither the trustees nor pay agents for any registered
securities have changed during the last financial year.

ITEM
15CONTROLS
AND PROCEDURES

Disclosure controls and procedures

Disclosure controls and procedures are controls and other
procedures designed to ensure that information required to be disclosed in the
Corporations reports filed or submitted under the United States Securities
Exchange Act of 1934 (the Exchange Act) is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. These include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in the Corporations reports filed under the Exchange Act is
accumulated and communicated to management, including the Corporations Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.

The Corporation has evaluated the effectiveness of the design
and operation of its disclosure controls and procedures as of April 30, 2006,
being the date of the Corporations fiscal year end for which year this Annual
Report has been prepared. This evaluation was carried out under the supervision
and with the participation of the Corporations Chief Executive Officer and
Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that as of the end of that fiscal year the
Corporations disclosure controls and procedures were not effective since they
did not result in the Corporations Annual Reports on Form 20-F for fiscal 2004
and 2005 being filed with the SEC within the time periods specified in the SECs
rules and forms. The 2004 and 2005 Annual Report filings have now been made and
this Annual Report for fiscal 2006 has been filed within such time

61

---

periods. The Corporation has confirmed its intention to ensure
all future filings are made within the relevant time periods and that the
prescribed controls and procedures will be in place by the end of fiscal
2007.

The design of any system of control is based in part on certain
assumptions about the likelihood of future events and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote. A control system, no matter how
well conceived or operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Furthermore, despite the
Corporations Chief Executive Officer and Chief Financial Officer belief that
the Corporations disclosure controls and procedures provide a reasonable level
of assurance that they are effective, they do not expect that the disclosure
controls and procedures or internal control over financial reporting will
prevent all errors or fraud.

Managements Annual Report on Internal Control over Financial
Reporting

Not applicable.

Attestation Report

Not applicable.

Changes in Internal Control over Financial Reporting

During the Corporations fiscal year ended April 30, 2006,
there were no changes in its internal control over financial reporting that have
materially affected, or are reasonably likely to affect, the Corporations
internal control over financial reporting.

The term internal control over financial reporting is defined
as a process designed by, or under the supervision of, the registrant's
principal executive and principal financial officers, or persons performing
similar functions, and effected by the registrant's board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:

|(1) | pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the Corporation;                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures of the Corporation are being made only in
      accordance with authorizations of management and directors of the
      registrant; and
|    |                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      registrant's assets that could have a material effect on the financial
      statements.                                                                                                                                               

62

---

ITEM 16AAUDIT COMMITTEE FINANCIAL EXPERT

The Corporations Board of Directors has determined that
  the Corporation does not have an audit committee financial expert
  in its Audit Committee and has not sought out and attracted a person with the
  qualifications of an audit committee financial expert to sit on its Board of
  Directors and be a member of its Audit Committee. Nevertheless, the Board is
  of the view that the members of the Audit Committee have collective experience
  sufficient to meet many of the requirements of an audit committee financial
  expert. The members have served as directors and officers of numerous
  publicly traded companies in the same business as the Corporation during which
  time they have overlooked the preparation, audit and evaluation of financial
  statements.

For the purposes hereof an audit committee financial expert
is a person having the following attributes:

|(1) | An understanding of generally accepted accounting
      principles and financial statements;                                                                                                                                                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | The ability to assess the general application of such
      principles in connection with the accounting for estimates, accruals and
      reserves;                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                
|(4) | Experience preparing, auditing, analyzing or evaluating
      financial statements that present a breadth and level of complexity of
      accounting issues that are generally comparable to the breadth and
      complexity of issues that can reasonably be expected to be raised by the
      Corporations financial statements, or experience actively supervising one
      or more persons engaged in such activities;
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                
|(5) | An understanding of internal controls and procedures for
      financial reporting; and                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                
|(6) | An understanding of audit committee
  functions.                                                                                                                                                                                                                                                                                                                                                                               

And that person must have acquired such attributes through any
one or more of the following:

|(1) | Education and experience as a principal financial
      officer, principal accounting officer, controller, public accountant or
      auditor or experience in one or more positions that involve the
      performance of similar functions;
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                              
|(2) | Experience actively supervising a principal financial
      officer, principal accounting officer, controller, public accountant,
      auditor or person performing similar functions;                                                      
|    |                                                                                                                                                                                                                                              
|(3) | Experience overseeing or assessing the performance of
      companies or public accountants with respect to the preparation, auditing
      or evaluation of financial statements; or                                                        
|    |                                                                                                                                                                                                                                              
|(4) | Other relevant experience, as described
  above.                                                                                                                                                                                             

The SEC has indicated that the designation of an individual as
an audit committee financial expert does not make that person an expert for
any purpose, impose any duties, obligations or liability on that person greater
than those imposed on the other members of the audit committee and board of
directors who do not carry this designation or affect the duties, obligations or
liability of any other member of the audit committee.

63

---

ITEM 16BCODE OF ETHICS

The Corporation has adopted a Code of Ethics that applies to
its chief executive officer, chief financial officer, principal accounting
officer or controller, or persons performing similar functions as well as its
Board of Directors and senior officers. A copy of the Code is attached to the
Corporations 2004 Annual Report as an Exhibit.

There has not been any amendment to a provision of the Code of
Ethics that applies to the Corporations chief executive officer, chief
financial officer, principal accounting officer or controller, or persons
performing similar functions during the Corporations fiscal year for which this
Annual Report is filed. Furthermore, the Corporation has not granted a waiver,
including an implicit waiver (through failing to take action within a reasonable
period of time), from a provision of its Code of Ethics to any of such persons
during such fiscal year.

The term code of ethics means written standards that are
reasonably designed to deter wrongdoing and to promote:

|(1) | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                          
|(2) | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that the Corporation files with, or
      submits to, the SEC and in other public communications made by the
      registrant;
|    |                                                                                                                                                                                                                          
|(3) | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                               
|    |                                                                                                                                                                                                                          
|(4) | the prompt internal reporting of violations of the code
      to an appropriate person or persons identified in the code; and                                                                                            
|    |                                                                                                                                                                                                                          
|(5) | accountability for adherence to the
  code.                                                                                                                                                                              

ITEM 16CPRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed to the Corporation by its principal
  accountant (auditor), PricewaterhouseCoopers LLP, for each of the last two fiscal
  years for various services are as follows:

Audit Fees

For the audit of the Corporations annual financial statements
or services that are normally provided by the auditor in connection with
statutory and regulatory filings or engagements for those fiscal years were:

2006:
      $147,309
      2005:
      $109,413


Audit-Related Fees

For assurance and related services reasonably related to the
performance of the audit or review of the Corporations financial statements and
are not reported under the heading Audit Fees above were:

2006:
      $0
      2005:
      $0


64

---

Tax Fees

For tax compliance, tax advice, and tax planning were:

2006:
      $11,000
      2005:
      $12,254


The services provided were in connection with the filing of the
Corporations annual tax returns.

All Other Fees

For all other services were:

2005:
      $0
      2004:
      $0


Fee Pre-Approval Policies of the Audit Committee

As required under Regulation S-X, the independence of the
Corporations principal accountant (auditor), PricewaterhouseCoopers LLP, is
maintained by the Audit Committee reviewing and pre-approving all audit-related
services, and any non-audit services, to be provided by, and the estimated fees
and other compensation related thereto to be paid to (or establishing a limit
for such fees and compensation), the principal accountant. One or more
independent members of the Committee may give such pre-approval to the principal
accountant to perform non-audit services if notice of such pre-approval is
subsequently presented to the Audit Committees next scheduled meeting for
ratification and is ratified by the Committee.

In accordance with these procedures, the Audit Committee
approved all of the services described above in this Item.

During the 2006 fiscal year the Corporation did not rely on the
exemption in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X in respect of
the non-audit services rendered by the Corporations principal accountant
(auditor). That section exempts the Corporations principal accountant (auditor)
from the requirement to be independent of the Corporation and not provide any
non-audit services for the Corporation if the total fees paid to the principal
accountant for the non-audit related services does not exceed 5% of the
principal accountants fees to the Corporation for the fiscal year, such
services were not recognized by the Corporation to be non-audit related at the
time the principal accountant was retained to perform them and such services
were promptly brought to the attention of, and approved by, the Audit Committee
before the completion of the audit for that fiscal year.

To the best of the Corporations knowledge, the percentage of
hours expended on the principal accountants (auditor) engagement to audit the
Corporations financial statements for the 2006 fiscal year which was
attributable to work performed by persons other than the principal accountants
(auditor) full-time permanent employees was less than 50%.

ITEM 16DEXEMPTIONS
  FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

The Common Shares are not listed on a national securities
  exchange in the United States of America, therefore, it is not necessary
  for the Corporation to rely on the exemption from the listing standards of such
  an exchange for its Audit Committee.

65

---

ITEM 16EPURCHASES OF EQUITY SECURITIES BY THE
ISSUER&
AFFILIATED PURCHASERS

During the 2004 fiscal year there were not any purchases made
  by or on behalf of the Corporation or any affiliated purchaser of
  the Corporations equity securities.

PART III

ITEM
17FINANCIAL STATEMENTS

The following financial statements for the years ended April
30, 2006, 2005 and 2004 are included herein.

Number
      Description
      Page No.(i)
      Independent Auditors
        Report of PricewaterhouseCoopers LLP, Chartered Accountants, dated August
        1, 2006
      FA2(ii)
      Consolidated Balance Sheets
        as at April 30, 2006 and 2005
      FA3(iii)
      Consolidated Statements
        of Operations and Deficit for the years ended April 30, 2006, 2005, and
        2004
      FA4(iv)
      Consolidated Statements
        of Cash Flow for the years ended April 30, 2006, 2005, and 2004
      FA5(vi)
      Notes to Consolidated Financial
        Statements
      FA6


The Corporations consolidated financial statements for
  the year ended April 30, 2006 are reported on by the Corporations auditor,
  PricewaterhouseCoopers LLP, Chartered Accountants. The financial statements
  were prepared in accordance with Canadian GAAP and are presented in Canadian
  dollars. The significant measurement differences between United States and Canadian
  GAAP are set forth in Note 20 of the annual financial statements.

66

---

Kirkland Lake Gold Inc.

Financial StatementsApril 30, 2006 and 2005(expressed in Canadian dollars)

---

Independent Auditors Report

To the Shareholders of 
  Kirkland Lake Gold Inc.

We have audited the balance sheets of Kirkland Lake Gold Inc.
  as at April 30, 2006 and 2005 and the statements of operations and deficit and
  cash flows for each of the years in the three-year period ended April 30, 2006.
  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 and standards of the Public Company Accounting Oversight
  Board (United States). 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 April 30,
  2006 and 2005 and the results of its operations and its cash flows for each
  of the years in the three-year period ended April 30, 2006 in accordance with
  Canadian generally accepted accounting principles.

(signed) PricewaterhouseCoopers LLP

Chartered Accountants

Vancouver, B.C., Canada 
  August 1, 2006



Comments by Auditor 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. United States reporting
  standards for auditors also require an explanatory paragraph when there are
  changes in accounting principles that have a material effect on the comparability
  of the Companys financial statements, such as the changes described in
  note 2 to the financial statements. Our report to the shareholders dated August
  1, 2006 is expressed in accordance with Canadian reporting standards which do
  not permit a reference to such events and conditions in the auditors report
  when these are adequately disclosed in the financial statements.

(signed) PricewaterhouseCoopers LLP

Chartered Accountants

Vancouver, B.C., Canada 
  August 1, 2006

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Balance Sheets                     
|As at April 30,
      2006 and 2005
|                                   
|(expressed in Canadian dollars)    

|                                                   |  | 2006        |   |  | 2005        |  
|-------------------------------------------------- |  | ----------- | - |  | ----------- | -
|                                                   |  | $           |   |  | $           |  
|Assets                                             |  |             |   |  |             |  
|Current assets                                     |  |             |   |  |             |  
|Cash and cash equivalents (note 19)                |  | 9,411,925   |   |  | 8,632,547   |  
|Accounts receivable                                |  | 2,729,475   |   |  | 780,158     |  
|Inventories (note 4)                               |  | 4,295,899   |   |  | 4,176,844   |  
|Prepaid expenses and deposits                      |  | 70,250      |   |  | 227,277     |  
|                                                   |  | 16,507,549  |   |  | 13,816,826  |  
|Security deposits(note 3)                          |  | 725,000     |   |  | 725,000     |  
|Mineral properties(note 5)                         |  | 29,986,447  |   |  | 20,227,298  |  
|Property, plant and equipment(note 6)              |  | 11,504,100  |   |  | 10,922,002  |  
|Mine closure bonds(note 8)                         |  | 2,043,435   |   |  | 2,043,435   |  
|                                                   |  | 60,766,531  |   |  | 47,734,561  |  
|Liabilities                                        |  |             |   |  |             |  
|Current liabilities                                |  |             |   |  |             |  
|Accounts payable and accrued liabilities           |  | 9,702,880   |   |  | 9,840,439   |  
|Contingencies(note 17)                             |  | 150,000     |   |  | -           |  
|Other liabilities                                  |  | 85,500      |   |  | 54,500      |  
|Asset retirement obligation(note 8)                |  | 1,845,780   |   |  | 2,110,583   |  
|                                                   |  | 11,784,160  |   |  | 12,005,522  |  
|Shareholders Equity                               |  |             |   |  |             |  
|Capital stock(note 9)                              |  |             |   |  |             |  
|Authorized                                         |  |             |   |  |             |  
|Unlimited
      common shares without par value    |  |             |   |  |             |  
|Issued                                             |  |             |   |  |             |  
|50,868,138
      (2005 - 45,429,262) common shares |  | 110,088,761 |   |  | 89,070,106  |  
|Options(note 10)                                   |  | 1,079,766   |   |  | 1,184,062   |  
|Warrants(note 11)                                  |  | -           |   |  | 3,841,480   |  
|Contributed surplus(note 12)                       |  | 2,797,768   |   |  | 160,755     |  
|Deficit                                            |  | (64,983,924 | ) |  | (58,527,364 | )
|                                                   |  | 48,982,371  |   |  | 35,729,039  |  
|                                                   |  | 60,766,531  |   |  | 47,734,561  |  

Operations, going concern and measurement uncertainty(note
  1)

Approved by the Board of Directors

|(signed) Brian E.
      Bayley | Director |  | (signed) Brian A. Hinchcliffe | Director
|------------------------------ | -------- |  | ----------------------------- | --------

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

---

|Kirkland Lake Gold Inc.                                  
|---------------------------------------------------------
|Statements of Operations and Deficit                     
|For the years ended
      April 30, 2006, 2005 and 2004  
|                                                         
|(expressed in Canadian dollars, except per share amounts)

|                                                      |  | 2006        |   |  | 2005        |   |  | 2004        |  
|----------------------------------------------------- |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                      |  | $           |   |  | $           |   |  | $           |  
|Revenue                                               |  |             |   |  |             |   |  |             |  
|Mining revenue                                        |  | 35,122,603  |   |  | 22,156,105  |   |  | 9,807,106   |  
|                                                      |  |             |   |  |             |   |  |             |  
|Expenses                                              |  |             |   |  |             |   |  |             |  
|Operating costs                                       |  | 30,834,472  |   |  | 36,217,949  |   |  | 25,045,418  |  
|Stock-based compensation/or operational personnel     |  | 116,206     |   |  | 175,279     |   |  | -           |  
|Amortization and depletion                            |  | 3,853,109   |   |  | 2,354,335   |   |  | 1,229,508   |  
|Royalties                                             |  | 1,341,286   |   |  | 677,132     |   |  | 280,105     |  
|                                                      |  |             |   |  |             |   |  |             |  
|                                                      |  | 36,145,073  |   |  | 39,424,695  |   |  | 26,555,031  |  
|                                                      |  |             |   |  |             |   |  |             |  
|                                                      |  | (1,022,470  | ) |  | (17,268,590 | ) |  | (16,747,925 | )
|                                                      |  |             |   |  |             |   |  |             |  
|Other expenses                                        |  |             |   |  |             |   |  |             |  
|General and administrative                            |  | 1,551,852   |   |  | 2,219,775   |   |  | 1,808,263   |  
|Stock-based compensation for administrative personnel |  | 249,234     |   |  | 452,738     |   |  | 81,515      |  
|Exploration                                           |  | 5,024,637   |   |  | 8,127,896   |   |  | 3,124,589   |  
|Amortization of finance charges                       |  | -           |   |  | 866,755     |   |  | 520,472     |  
|Interest and bank charges                             |  | 64,736      |   |  | 391,495     |   |  | 419,807     |  
|Foreign exchange loss                                 |  | 12,784      |   |  | 11,601      |   |  | 642         |  
|Interest and other income                             |  | (644,235    | ) |  | (174,545    | ) |  | (87,055     | )
|                                                      |  |             |   |  |             |   |  |             |  
|                                                      |  | 6,259,008   |   |  | 11,895,715  |   |  | 5,868,233   |  
|                                                      |  |             |   |  |             |   |  |             |  
|Loss before future income tax recovery                |  | (7,281,478  | ) |  | (29,164,305 | ) |  | (22,616,158 | )
|                                                      |  |             |   |  |             |   |  |             |  
|Future income tax recovery(note 15)                   |  | (824,918    | ) |  | (1,005,120  | ) |  | -           |  
|                                                      |  |             |   |  |             |   |  |             |  
|Loss for the year                                     |  | (6,456,560  | ) |  | (28,159,185 | ) |  | (22,616,158 | )
|                                                      |  |             |   |  |             |   |  |             |  
|Deficit - Beginning of year                           |  | (58,527,364 | ) |  | (29,560,929 | ) |  | (6,944,771  | )
|                                                      |  |             |   |  |             |   |  |             |  
|Adoption of accounting standard(note
      2)         |  | -           |   |  | (807,250    | ) |  | -           |  
|                                                      |  |             |   |  |             |   |  |             |  
|Deficit - End of year- as restated                    |  | (64,983,924 | ) |  | (58,527,364 | ) |  | (29,560,929 | )
|                                                      |  |             |   |  |             |   |  |             |  
|Basic and diluted loss per share                      |  | (0.13       | ) |  | (0.68       | ) |  | (0.76       | )
|                                                      |  |             |   |  |             |   |  |             |  
|Weighted average number of shares outstanding         |  | 48,118,378  |   |  | 41,611,019  |   |  | 29,693,146  |  

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

---

|Kirkland Lake Gold Inc.                                
|-------------------------------------------------------
|Statements of Cash Flows                               
|For the years ended
      April 30, 2006, 2005 and 2004
|                                                       
|(expressed in Canadian dollars)                        

|                                                       |  | 2006        |   |  | 2005        |   |  | 2004        |  
|------------------------------------------------------ |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                       |  | $           |   |  | $           |   |  | $           |  
|                                                       |  |             |   |  |             |   |  |             |  
|Cash flows from operating activities                   |  |             |   |  |             |   |  |             |  
|Loss for the year                                      |  | (6,456,560  | ) |  | (28,159,185 | ) |  | (22,616,158 | )
|Items
      not affecting cash                         |  |             |   |  |             |   |  |             |  
|Future income tax recovery                             |  | (824,918    | ) |  | (1,005,120  | ) |  | -           |  
|Amortization and depletion                             |  | 3,853,109   |   |  | 2,354,335   |   |  | 1,229,508   |  
|Accretion of interest and amortization of              |  |             |   |  |             |   |  |             |  
|finance charges                                        |  | -           |   |  | 894,633     |   |  | 694,930     |  
|Contingencies                                          |  | 150,000     |   |  | -           |   |  | -           |  
|Stock-based compensation                               |  | 365,440     |   |  | 628,017     |   |  | 81,515      |  
|Accretion of asset retirement obligation               |  | 126,635     |   |  | -           |   |  | -           |  
|                                                       |  |             |   |  |             |   |  |             |  
|                                                       |  | (2,786,294  | ) |  | (25,287,320 | ) |  | (20,610,205 | )
|Changes in non-cash working capital items              |  |             |   |  |             |   |  |             |  
|Accounts receivable                                    |  | (1,949,317  | ) |  | (345,152    | ) |  | (121,838    | )
|Inventories                                            |  | (119,055    | ) |  | (2,649,291  | ) |  | (944,263    | )
|Prepaid expenses
      and deposits                    |  | 157,027     |   |  | 95,917      |   |  | 121,026     |  
|Accounts
      payable and accrued liabilities         |  | (137,559    | ) |  | 2,366,219   |   |  | 4,009,748   |  
|Other liabilities                                      |  | 31,000      |   |  | (29,500     | ) |  | -           |  
|                                                       |  |             |   |  |             |   |  |             |  
|                                                       |  | (4,804,198  | ) |  | (25,849,127 | ) |  | (17,545,532 | )
|                                                       |  |             |   |  |             |   |  |             |  
|Cash flows from financing activities                   |  |             |   |  |             |   |  |             |  
|Net proceeds from issuance of capital stock            |  | 20,169,374  |   |  | 32,457,074  |   |  | 37,715,175  |  
|Proceeds from issuance of convertible loans            |  | -           |   |  | 2,406,250   |   |  | 1,000,000   |  
|Repayment of notes payable and convertible
      loans |  | -           |   |  | (2,187,500  | ) |  | (2,000,000  | )
|                                                       |  |             |   |  |             |   |  |             |  
|                                                       |  | 20,169,374  |   |  | 32,675,824  |   |  | 36,715,175  |  
|                                                       |  |             |   |  |             |   |  |             |  
|Cash flows from investing activities                   |  |             |   |  |             |   |  |             |  
|Purchase of property, plant and equipment              |  | (2,326,920  | ) |  | (2,275,181  | ) |  | (4,839,072  | )
|Purchase of short-term investments                     |  | -           |   |  | (10,535,000 | ) |  | -           |  
|Proceeds from sale of investment                       |  | -           |   |  | 10,000,000  |   |  | -           |  
|Additions to mineral properties                        |  | (12,258,878 | ) |  | (7,104,560  | ) |  | (6,274,587  | )
|                                                       |  |             |   |  |             |   |  |             |  
|                                                       |  | (14,585,798 | ) |  | (9,914,741  | ) |  | (11,113,659 | )
|                                                       |  |             |   |  |             |   |  |             |  
|Increase (decrease) in cash and                        |  |             |   |  |             |   |  |             |  
|cash equivalents                                       |  | 779,378     |   |  | (3,088,044  | ) |  | 8,055,984   |  
|                                                       |  |             |   |  |             |   |  |             |  
|Cash and cash equivalents -                            |  |             |   |  |             |   |  |             |  
|Beginning
      of year                                |  | 8,632,547   |   |  | 11,720,591  |   |  | 3,664,607   |  
|                                                       |  |             |   |  |             |   |  |             |  
|Cash and cash equivalents - End of year                |  | 9,411,925   |   |  | 8,632,547   |   |  | 11,720,591  |  
|                                                       |  |             |   |  |             |   |  |             |  
|Supplemental cash flow information(note
      19)      |  |             |   |  |             |   |  |             |  

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

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|1 | Operations, going concern and measurement
        uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | Kirkland Lake Gold Inc. (the Company) owns
        gold mining and milling operations in Kirkland Lake, Canada, which were
        inactive when acquired in December 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | Going concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | These financial statements have been prepared
        using Canadian generally accepted accounting principles applicable to
        a going concern, which contemplates the realization of assets and settlements
        of liabilities in the normal course of business as they come due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | For the years ended April 30, 2006, 2005 and
        2004, the Company reported losses of $6,456,560, $28,159,185 and $22,616,158,
        respectively, an accumulated deficit of $64,983,294 (2005 - $58,527,364)
        at that date. In addition to its ongoing working capital requirements,
        the Company needs to obtain new cash resources required for operating
        activities, including exploration costs. The funds required to continue
        operations and exploration activities during this period have been financed
        primarily from the issue of equity or convertible debt instruments.                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | The Companys ability to continue as
        a going concern is dependent upon the gold price, its ability to fund
        its development and exploration programs, manage and generate positive
        cash flows from operations. These financial statements do not reflect
        the adjustments to carrying values of assets and liabilities and the reported
        expenses and balance sheet classifications that would be necessary should
        the going concern assumption be inappropriate, and these adjustments could
        be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | Measurement uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | The Companys history of operating losses
        from mining operations indicate at April 30, 2006, that the recorded costs
        for mineral properties and related fixed assets may not be recoverable.
        Management estimates, using a constant gold price of $584 per ounce and
        operating costs similar to historical costs incurred over the past year,
        that annual production of approximately between 75,000 and 85,000 ounces
        in fiscal 2007 and for each year thereafter. To date the Company has not
        been successful in achieving this rate of production. To recover these
        costs, and the carrying values of mineral properties and other mining
        assets, over the life of the mine will require a significant increase
        in tonnage of ore processed and ounces of gold produced annually to the
        above levels, a reduction in the workforce and associated mining costs
        through the curtailment of certain development projects, or both.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | Management believes that the requisite increase
        in production can be achieved due to operating improvements which are
        expected to result from the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

(1)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | • | The ongoing staff training program underway with the
        objective of enhancing the mining skills of the Companys workforce,
        improving worker retention and therefore improving production volumes;     
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                      
| | • | The availability, commencing in August 2005, of an
        ore loading pocket at the 5700 foot level which will increase hoisting
        volume and permit enhanced access to large ore blocks on lower levels;     
| |   |                                                                                                                                                                                                                      
| | • | The expanded use of long-hole stoping production
        methodology which will increase production and reduce costs;                                                                                                
| |   |                                                                                                                                                                                                                      
| | • | The reduction of development waste rock quantities
        mined in proportion to development and production ore quantities, resulting
        in increased volumes and improved grades of ore available for milling;
| |   |                                                                                                                                                                                                                      
| | • | The addition of new equipment allowing for more mechanization
        in operations and resulting in higher production volumes at lower cost
        per ton than previously experienced.                            

|  | There is significant uncertainty associated with the
        ability of the Company to achieve the increase in production or reduction
        in costs necessary to recover the carrying value of the mineral property
        and related assets. Gold price or Canadian/U.S. dollar exchange rate movements,
        the success of the Company in realizing the benefit of the production
        improvements noted above, changes in the costs of labour and the other
        costs or unforeseen production difficulties all would have an impact on
        the ability of the Company to achieve its goals from operations. The amount
        of working capital currently available for use by the Company could mean
        that a minor adverse development could have a significant impact on the
        Companys operations and ability to recover costs.                                                                                                                                                     
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  | As at April 30, 2006, management has determined that
        the value recorded for mineral property and fixed assets is not impaired,
        based on the operations improvements set out above, the mines updated
        reserves and resource model, the number of high quality underground exploration
        targets identified and currently being explored within the Kirkland Lake
        mineral property and available public information about prices achieved
        for purchase transactions involving other mineral properties. Although
        no impairment was determined at this time, near term adverse changes in
        gold prices, a continued increase in the Canadian versus the U.S. dollar,
        not attaining the effects of the operations improvements noted above or
        the lack of success of ongoing exploration programs in locating additional
        reserves could result in the determination that the assets are impaired
        and such impairment could be material.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2 | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  | Generally accepted accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  | These financial statements are prepared in accordance
        with generally accepted accounting principals (GAAP) in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

(2)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

Stock-based compensation

Effective May 1 2004, the Company adopted
  the Canadian Institute of Chartered Accountants (CICA) amendments to Section
  3870. The standard sets out a fair value approach that is required for all stock-based
  transactions. Prior to May 1, 2004, the Company used the intrinsic value-based
  method to account for its employee stock incentive plan, and therefore no compensation
  expense had been recognized under the plan for stock options issued to employees
  and directors. This change in policy has been applied retroactively without
  restatement of prior periods as allowed under the section.

Stock-based compensation on options is
  recorded as an expense over the period the options vest, based on the fair value
  estimated based on the Black-Scholes option pricing method.

The change in accounting policy resulted
  in a cumulative increase of $807,250 to the opening deficit at May 1, 2004 and
  increases of $132,009, $54,030 and $621,211 to share capital, contributed surplus,
  and options respectively.

Asset retirement obligation

On May 1, 2004 the Company retroactively
  adopted the new CICA accounting standard, Section 3110 for Asset Retirement
  Obligations. Operating under this Section, future obligations to retire
  an asset or property are recognized and recorded as a liability at fair value
  as at the time the asset is acquired or the event occurs giving rise to such
  an obligation. At each reporting period, asset retirement obligations are increased
  to reflect the interest element (accretion expense) considered in the initial
  fair value of the measurement of the liabilities. In addition, an asset retirement
  cost is added to the carrying amount of the related asset and depreciated over
  the life of the asset. The capitalized asset retirement cost is amortized on
  the same basis as the related asset and along with the accretion expense, before
  arriving at net income.

Use of estimates

The preparation of financial statements
  in conformity with Canadian generally accepted accounting principles requires
  management to make estimates and assumptions that affect the reported amounts
  of assets and liabilities and the disclosure of contingent assets and liabilities
  at the date of the financial statements and the reported amounts of revenues
  and expenses during the year. Areas, significant to the Companys business,
  where managements judgment is applied are mineral reserves and resource,
  stock-based compensation, contingent liabilities, gold inventory in circuit,
  environmental, impairment test and closure obligations. By their nature such
  estimates are subject to measurement uncertainty. Actual results could differ
  from these estimates, and these estimates may be subject to change in the future.

Cash and cash equivalents

Cash and cash equivalents include cash
  and short-term investments with an initial maturity of 90 days or less at the
  date of acquisition.

(3)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

Inventories

Dore bars, gold in process and the surface
  ore stockpile are recorded at the lower of average production cost and net realizable
  value. Production costs include all direct costs plus fixed costs associated
  with the mine site. The Company uses a rolling period average cost to value
  the inventory of gold on hand. Mine operating supplies are valued at average
  cost less allowance for obsolescence.

Mineral properties and deferred exploration
  costs

The Company expenses exploration expenditures
  and near term ore development costs as incurred. Property acquisition costs
  and longer term development costs incurred to expand ore reserves are deferred
  and depleted on a units-of -production basis over proven and probable reserves
  which are currently accessible by the Company. Managements estimate of
  gold price, recoverable proven and probable reserves, operating capital and
  reclamation costs are subject to risk and uncertainties affecting the recoverability
  of the Companys investment in mineral properties. Although management
  has made its best estimate of these factors, it is possible that changes could
  occur in the near term, which could adversely affect the future net cash flows
  to be generated from the property. The Company assesses capitalized costs for
  recoverability on an annual basis or more frequently if changes in circumstances
  suggest that impairment is possible. Where information is available and conditions
  suggest impairment, estimated future net cash flows are calculated using estimated
  future prices, reserves and operating, capital and reclamation costs on an undiscounted
  basis. If the net carrying value of the property exceeds the estimated future
  net cash flows, the property will be written down to the present value of the
  discounted net cash flows.

Property, plant and equipment

Property, plant and equipment costs are
  recorded at cost and amortized on a straight line basis over the following terms:

Computer equipment
      3 yearsVehicles
      5 yearsMine and mill equipment
      10 yearsBuildings
      10 years


Revenue recognition

The Company sells its gold bullion in
  the spot market. Revenue is recognized on title transfer of the gold to purchasers
  which occurs when the gold is received by the purchaser. Adjustments to accounts
  receivable, if any, between the date of title transfer and the settlement date
  are recorded when determined.

(4)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|  | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | The Company generally seeks to sell its gold in Canadian
        dollars. To the extent these transactions are denominated in foreign currencies,
        they are translated into their Canadian dollar equivalents at exchange
        rates prevailing at the transaction date. Gains and losses arising from
        restatement of foreign currency monetary assets and liabilities and transactions
        are included in the statements of operations and deficit.                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | The Company uses the liability method of accounting
        for future income taxes. Under this method of tax allocation, future income
        tax assets and liabilities are determined based on the differences between
        the financial reporting and tax basis of assets and liabilities and are
        measured using the substantively enacted tax rates and laws that are expected
        to be in effect in the periods in which the future income tax assets or
        liabilities are expected to be settled or realized. A valuation allowance
        is provided to the extent that it is more likely than not that future
        income tax assets will not be realized.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | Flow-through shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | The Company from time-to-time issues flow-through shares
        to finance a portion of its Canadian exploration program. Pursuant to
        the terms of flow-through share agreements, the tax deductions associated
        with the expenditures are renounced to the subscribers. To recognize the
        foregone tax benefits, share capital is reduced and a future income tax
        liability is recognized as the related expenditures are renounced. This
        future income tax liability is then reduced by the recognition of previously
        unrecorded future income tax assets on unused taxes losses.                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | Loss per common share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | Loss per share is calculated using the weighted average
        number of common shares issued and outstanding during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | The Company follows the treasury stock method in the
        calculation of diluted earnings per share. As the Company is incurring
        losses, basic and diluted loss per share are the same.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3 | Security deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | The Companys security deposits include $225,000
        held as collateral to provide a letter of credit to the Independent Electricity
        Market Operator as security for payment in connection with ongoing electricity
        usage, and $500,000 as a security deposit at the Royal Bank of Canada
        to cover payroll electronic file transfers.                                                                                                                                                                                                                                                                                                                               

(5)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|4 | Inventories
|- | -----------

| |                         |  | 2006      |  |  | 2005      | 
| | ----------------------- |  | --------- |  |  | --------- | 
| |                         |  | $         |  |  | $         | 
| |                         |  |           |  |  |           | 
| | Mine operating supplies |  | 1,147,502 |  |  | 979,647   | 
| | Gold in process         |  | 2,657,417 |  |  | 2,164,540 | 
| | Dore bars               |  | -         |  |  | 858,825   | 
| | Surface stockpile       |  | 490,980   |  |  | 173,832   | 
| |                         |  |           |  |  |           | 
| |                         |  | 4,295,899 |  |  | 4,176,844 | 

|5 | Mineral properties                                                                                                       
|- | -------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                          
|  | The Companys mineral properties comprise five
        contiguous mining properties in and around Kirkland Lake, Ontario.

| |                                      |  | 2006       |   |  | 2005       |  
| | ------------------------------------ |  | ---------- | - |  | ---------- | -
| |                                      |  | $          |   |  | $          |  
| | Balance - Beginning of year          |  | 20,227,298 |   |  | 14,118,836 |  
| | Rehabilitation and development costs |  | 11,867,437 |   |  | 7,104,561  |  
| | Depletion                            |  | (2,108,288 | ) |  | (996,099   | )
| | Balance - End of year                |  | 29,986,447 |   |  | 20,227,298 |  

| |                             |  |            |  |  |              |  |  | 2006       | 
| | --------------------------- |  | ---------- |  |  | ------------ |  |  | ---------- | 
| |                             |  |            |  |  |              |  |  |            | 
| |                             |  |            |  |  | Accumulated  |  |  |            | 
| |                             |  | Cost       |  |  | amortization |  |  | Net        | 
| |                             |  | $          |  |  | $            |  |  | $          | 
| |                             |  |            |  |  |              |  |  |            | 
| | Acquisition allocation      |  | 795,648    |  |  | 106,713      |  |  | 688,935    | 
| | Underground development     |  | 29,370,151 |  |  | 2,853,998    |  |  | 26,516,153 | 
| | Underground pumping         |  | 2,050,942  |  |  | 266,276      |  |  | 1,784,666  | 
| | Mill and surface facilities |  | 149,731    |  |  | 20,114       |  |  | 129,617    | 
| | Lakeshore property          |  | 1,000,411  |  |  | 133,335      |  |  | 867,076    | 
| |                             |  |            |  |  |              |  |  |            | 
| |                             |  | 33,366,883 |  |  | 3,380,436    |  |  | 29,986,447 | 

(6)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| |                             |  |            |  |  |              |  |  | 2005       | 
| | --------------------------- |  | ---------- |  |  | ------------ |  |  | ---------- | 
| |                             |  |            |  |  |              |  |  |            | 
| |                             |  |            |  |  | Accumulated  |  |  |            | 
| |                             |  | Cost       |  |  | amortization |  |  | Net        | 
| |                             |  | $          |  |  | $            |  |  | $          | 
| |                             |  |            |  |  |              |  |  |            | 
| | Acquisition allocation      |  | 795,648    |  |  | 56,978       |  |  | 738,670    | 
| | Underground development     |  | 17,503,074 |  |  | 984,763      |  |  | 16,518,311 | 
| | Underground pumping         |  | 2,050,942  |  |  | 144,458      |  |  | 1,906,484  | 
| | Mill and surface facilities |  | 149,371    |  |  | 10,680       |  |  | 138,691    | 
| | Lakeshore property          |  | 1,000,411  |  |  | 75,269       |  |  | 925,142    | 
| |                             |  |            |  |  |              |  |  |            | 
| |                             |  | 21,499,446 |  |  | 1,272,148    |  |  | 20,227,298 | 

|6 | Property, plant and equipment
|- | -----------------------------

| |                         |  |            |  |  |              |  |  | 2006       | 
| | ----------------------- |  | ---------- |  |  | ------------ |  |  | ---------- | 
| |                         |  |            |  |  |              |  |  |            | 
| |                         |  |            |  |  | Accumulated  |  |  |            | 
| |                         |  | Cost       |  |  | amortization |  |  | Net        | 
| |                         |  | $          |  |  | $            |  |  | $          | 
| |                         |  |            |  |  |              |  |  |            | 
| | Computer equipment      |  | 433,471    |  |  | 298,532      |  |  | 134,939    | 
| | Mine and mill equipment |  | 15,227,406 |  |  | 4,438,354    |  |  | 10,789,052 | 
| | Vehicles                |  | 115,957    |  |  | 56,132       |  |  | 59,825     | 
| | Buildings               |  | 688,926    |  |  | 168,642      |  |  | 520,284    | 
| |                         |  |            |  |  |              |  |  |            | 
| |                         |  | 16,465,760 |  |  | 4,961,660    |  |  | 11,504,100 | 

| |                         |  |            |  |  |              |  |  | 2005       | 
| | ----------------------- |  | ---------- |  |  | ------------ |  |  | ---------- | 
| |                         |  |            |  |  |              |  |  |            | 
| |                         |  |            |  |  | Accumulated  |  |  |            | 
| |                         |  | **Cost**   |  |  | amortization |  |  | Net        | 
| |                         |  | $          |  |  | $            |  |  | $          | 
| |                         |  |            |  |  |              |  |  |            | 
| | Computer equipment      |  | 388,152    |  |  | 160,954      |  |  | 227,198    | 
| | Mine and mill equipment |  | 13,076,107 |  |  | 2,912,673    |  |  | 10,163,434 | 
| | Vehicles                |  | 82,759     |  |  | 36,847       |  |  | 45,912     | 
| | Buildings               |  | 591,822    |  |  | 106,364      |  |  | 485,458    | 
| |                         |  |            |  |  |              |  |  |            | 
| |                         |  | 14,138,840 |  |  | 3,216,838    |  |  | 10,922,002 | 

(7)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|7 | Convertible loans
|- | -----------------
|  |                  
|  | a)               
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  | b)               
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  
|  |                  

(8)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | c) | On June 11, 2002, the Company completed a loan financing
        of $2,500,000. The loans had a term of one year, which was extended for
        one year at the Companys option and bore interest at a rate of 10%
        per year.                                                                                                                                                                                                                                                                                    
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The principal amount of the loans were convertible at
        the lenders option into special warrants at the rate of $4.00 per
        special warrant and the accrued interest is convertible into special warrants
        at the rate equal to the higher of $4.00 per special warrant or the then
        market price of the Companys shares. Each special warrant, including
        those issued as a bonus, was exercisable, without further consideration,
        to acquire one common share of the Company.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company determined the value of the equity conversion
        feature of the convertible loans was $94,546 using the Black-Scholes option
        pricing model. The remainder of the $2,405,454 had been classified as
        debt.                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The lenders received an aggregate of 125,000 special
        warrants exercisable at deemed value of $2.05 for 10 years, as a bonus
        for making the loans, which were recorded as finance charges at an estimated
        fair value of $218,266. The special warrants were converted into common
        shares on February 21, 2003.                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | During the year ended April 30, 2003, the Company repaid
        one of the convertible loans with a face value of $312,500. As a result
        of the redemption $11,818 of the value of the equity conversion feature
        of the convertible loans was transferred to contributed surplus leaving
        a balance of $82,728 as the equity component of the convertible loans.                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | On December 5, 2003, the remaining lender received 109,375
        common shares, at a fair value of $4.78 per share to extend the maturity
        date of the $2,187,500 remaining to June 11, 2004. The fair value of the
        shares has been recorded as finance charges of $522,813 and was amortized
        over the remaining term of the loan.                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | On June 11, 2004, the remaining balance of $2,187,500
        was repaid.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | d) | A summary of deferred finance charges incurred and amortization
        during the period is shown below.                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                             |  | 2006 |  |  | 2005     |  
| | --------------------------- |  | ---- |  |  | -------- | -
| |                             |  | $    |  |  | $        |  
| |                             |  |      |  |  |          |  
| | Balance - Beginning of year |  | -    |  |  | 233,591  |  
| |                             |  |      |  |  |          |  
| | Finance charges incurred    |  | -    |  |  | 216,019  |  
| | Less: Amortization          |  | -    |  |  | (449,610 | )
| |                             |  |      |  |  |          |  
| | Balance - End of year       |  | -    |  |  | -        |  

(9)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|8 | Asset retirement obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  | The Company has assumed responsibility for the reclamation
        and site restoration plans originally filed with the Ontario Ministry
        of Northern Development and Mining (MNDM) in connection with the all the
        Kirkland Lake properties. The estimated total costs of reclamation and
        site restoration at April 30, 2006 are $2,711,670 and financial assurance
        has been provided to the MNDM by way of mine closure bonds in the amount
        of $2,043,435.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  | A reconciliation for asset retirement obligations is
        as follows:                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                                |  | 2006      |   |  | 2005      | 
| | ---------------------------------------------- |  | --------- | - |  | --------- | 
| |                                                |  | $         |   |  | $         | 
| |                                                |  |           |   |  |           | 
| | Balance - Beginning of year                    |  | 2,110,583 |   |  | 2,043,435 | 
| |                                                |  |           |   |  |           | 
| | Accretion                                      |  | 126,635   |   |  | -         | 
| | Revision to the timing of estimate mining life |  | (391,438  | ) |  | -         | 
| | Revision in estimate cash flows                |  | -         |   |  | 67,148    | 
| |                                                |  |           |   |  |           | 
| | Balance - End of year                          |  | 1,845,780 |   |  | 2,110,583 | 

During the year, the Company reviewed
  total proven and probable reserves which resulted in the extension of the remaining
  life of the mine and consequently extension of the cash flow projection and
  reduction of the asset retirement obligations and mineral properties.

There were no liabilities incurred or
  settled during 2006 and 2005.

The provision for asset retirement obligations
  is based on the following key assumptions:

| | • | The total undiscounted cash flow as at April 30, 2006
        is $2,711,670.                        
| | - | ----------------------------------------------------------------------------------------------------
| |   |                                                                                                     
| | • | The expected settlement will be in 2016.                                                            
| |   |                                                                                                     
| | • | A credit adjusted risk free rate at which the estimated
        payments have been discounted of 6%.
| |   |                                                                                                     
| | • | An inflation rate of 2%.                                                                            

(10)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|9 | Capital stock
|- | -------------

| |                                      |  | Number     |  |  |             |  
| | ------------------------------------ |  | ---------- |  |  | ----------- | -
| |                                      |  | of shares  |  |  | Amount      |  
| |                                      |  |            |  |  | $           |  
| |                                      |  |            |  |  |             |  
| | Balance - April 30, 2003             |  | 24,076,166 |  |  | 17,757,582  |  
| |                                      |  |            |  |  |             |  
| | Exercise of options                  |  | 605,950    |  |  | 931,246     |  
| | Exercise of warrants                 |  | 1,558,986  |  |  | 3,268,701   |  
| | Private placements                   |  | 10,054,129 |  |  | 36,043,993  |  
| | Convertible loan                     |  | 184,375    |  |  | 747,813     |  
| | Share issuance costs                 |  | -          |  |  | (2,052,186  | )
| | Share proceeds allocated to warrants |  | -          |  |  | (4,740,648  | )
| |                                      |  |            |  |  |             |  
| | Balance - April 30, 2004             |  | 36,479,606 |  |  | 51,956,501  |  
| |                                      |  |            |  |  |             |  
| | Exercise of options                  |  | 362,051    |  |  | 1,108,398   |  
| | Exercise of warrants                 |  | 1,298,568  |  |  | 5,328,575   |  
| | Private placements                   |  | 6,438,022  |  |  | 30,605,689  |  
| | Convertible loan                     |  | 851,015    |  |  | 4,157,724   |  
| | Share issuance costs                 |  | -          |  |  | (2,843,594  | )
| | Share proceeds allocated to warrants |  | -          |  |  | (238,067    | )
| | Renunciation of flow-through shares  |  | -          |  |  | (1,005,120  | )
| |                                      |  |            |  |  |             |  
| | Balance - April 30, 2005             |  | 45,429,262 |  |  | 89,070,106  |  
| |                                      |  |            |  |  |             |  
| | Exercise of options                  |  | 459,875    |  |  | 1,414,804   |  
| | Exercise of warrants                 |  | 2,173,501  |  |  | 10,118,918  |  
| | Private placements                   |  | 2,805,500  |  |  | 11,499,750  |  
| | Share issuance costs                 |  | -          |  |  | (672,340    | )
| | Share proceeds allocated to warrants |  | -          |  |  | (517,559    | )
| | Renunciation of flow-through shares  |  | -          |  |  | (824,918    | )
| |                                      |  |            |  |  |             |  
| | Balance - April 30, 2006             |  | 50,868,138 |  |  | 110,088,761 |  

| | a) | On August 8, 2003, the Company closed the first of two
        tranches of a private placement of 3,755,000 units. In the first tranche,
        the Company sold 3,554,000 units at $2.60 per unit to raise gross proceeds
        of $9,240,400. On August 26, 2003, the Company closed the second tranche
        and sold 201,000 units at $2.60 per unit to raise gross proceeds of $522,600.
        Each unit consisted of one common share and one half of a share purchase
        warrant. Each whole warrant entitled the holder to purchase a further
        common share for a period of two years (expiring August 8 and August 26,
        2005) at a price of $3.00 per share. The Company incurred commissions,
        fees and legal costs totalling $538,080 in connection with this placement.
        The share purchase warrants issued as part of this placement have been
        recorded at a fair value of $2,150,084. 38,000 of these warrants expired
        on August 8. 2005 and the remaining were exercised during the warrants
        life.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(11)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | b) | On August 11, 2003, the Company issued 75,000 common
        shares at a fair value of $3.00 per common share, as a bonus on the $1,000,000
        convertible loan financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | c) | On November 14, 2003, the Company completed a flow through
        private placement, raising $7,700,000 through the sale of 1,925,000 shares
        at $4.00 per share. A fee of 5% of the proceeds raised was paid to the
        agents. The Company also issued agents compensation warrants to purchase
        96,250 shares, which were exercisable for a period of 24 months (86,250
        warrants expired on November 14, 2005 and the remaining were exercised)
        at a price of $3.60 per share. The Company incurred commissions, fees
        and legal costs totalling $430,499 in connection with this placement.
        The compensation warrants issued as part of this placement have been recorded
        at fair value of $158,788. At April 30, 2004, the Company has a commitment
        to incur $5,163,723 of eligible flow through expenditures.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | d) | On December 1, 2003, the Company completed a private
        placement of 2,200,000 units at a price of $3.90 per unit for gross proceeds
        of $8,580,000. Each unit consisted of one common share and one half of
        a share purchase warrant. Each whole warrant was exercisable for a period
        of 18 months (5,019,000 expired on June 1, 2005 and the remaining were
        exercised) at a price of $4.40 per share. The Company incurred commissions,
        fees and legal costs totalling $406,819 in connection with this placement.
        The share purchase warrants issued as part of this placement have been
        recorded at fair value of $1,659,959.                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | e) | On December 5, 2003, the Company issued 109,375 common
        shares, at a fair value of $4.78 per common share, to extend the maturity
        date of the $2,187,500 note payable to June 11, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | f) | On April 29, 2004, the Company completed a private placement
        of 2,174,129 units at a price of $4.60 per unit for gross proceeds of
        $10,000,993. Each unit consisted of one common share and one half of a
        share purchase warrant. Each whole warrant entitled the holder to purchase
        a further common share for a period of 15 months (1,032,714 expired on
        July 29, 2005 and the remaining were exercised) at a price of $5.20 per
        share. The Company incurred commissions, fees and legal costs totalling
        $475,000 in connection with this placement. The share purchase warrants
        issued as part of this placement have been recorded at a fair value of
        $930,606.                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | g) | On June 10, 2004, the Company issued 54,140 common shares
        at a fair value of $3.99 per common share, as a bonus on the $2,406,250
        convertible loan financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | h) | On July 29, 2004, the Company closed a brokered private
        placement of 3,987,730 shares at a price of $4.00 per share for gross
        proceeds of $15,950,920. The agent also received 199,386 warrants exercisable
        at $4.00 as compensation for the placement. The warrants were fully exercised
        on January 23, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | i) | On November 16, 2004, the Company completed a placement
        of 1,950,292 common shares at a price of $6.00 per share for gross proceeds
        of $11,701,752.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | j) | On December 10, 2004, a promissory note, in the amount
        of $2,406,250 was converted into 546,875 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | k) | On December 22, 2004, the Company completed a sale by
        private placement of 500,000 flow-through common shares at a price of
        $6.00 per share for gross proceeds of $3,000,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

(12)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | l) | On February 11, 2005, a promissory note, in the amount
        of $1,000,000 was converted into 250,000 common shares of the Company.                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                      
| | m) | On August 25, 2005 the Company completed a sale by private
        placement of 1,250,000 common shares at a price of $4.00 per share for
        gross proceeds of $5,000,000. Each unit consisted of one common share
        and one-half of a share purchase warrant. Each whole warrant is exercisable
        until May 25, 2006 at a price of $4.60 per share.
| |    |                                                                                                                                                                                                                                                                                                                                                                      
| | n) | On September 26, 2005 the Company completed a sale by
        private placement of 1,000,000 units at a price of $4.00 per unit for
        gross proceeds of $4,000,000. Each unit consisted of one common share
        and one-half of a share purchase warrant. Each whole warrant is exercisable
        until June 28, 2006 at a price of $4.60 per share.     
| |    |                                                                                                                                                                                                                                                                                                                                                                      
| | o) | On October 12 and 14, 2005 the Company completed a sale
        by private placement of 555,500 flow through shares at a price
        of $4.50 per share for gross proceeds of $2,499,750.                                                                                                                                                                        

|10 | Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company has adopted a stock option plan. The plan
        allows the Company to grant options to directors, officers and employees
        of and consultants to the Company and its subsidiaries or employees of
        a corporation providing management services to the Company. The aggregate
        number of shares which may be subject to issuance pursuant to options
        granted under this plan is 3,500,000 shares.                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The plan provides that the exercise price of an option
        granted under the plan shall not be less than the market price at the
        time of granting the option. Options have a maximum term of 10 years and
        terminate on the 90th day after the optionee ceased to be any of a director,
        officer, consultant or employee; on the 30th day after the optionee ceased
        to be an employee or consultant if the optionee was engaged in providing
        investor relations services for the Company; or the earlier of the 90th
        day and the third month after the optionee ceased to be an employee or
        officer if the optionee is subject to the tax laws of the United States
        of America.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Notwithstanding the fact that options can have a maximum
        term of 10 years, it is presently the policy of the Company to issue options
        for terms of five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

(13)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

The change in stock options issued during
  the years ended April 30 is as follows:

2006
      
      
      
      
      
      2005
      
      
      
      
      
      2004Weighted
      
      
      
      
      
      Weighted
      
      
      
      
      
      Weightedaverage
      
      
      
      
      
      average
      
      
      
      
      
      averageNumber
      
      
      exercise
      
      
      Number
      
      
      exercise
      
      
      Number
      
      
      exerciseof shares
      
      
      price
      
      
      of shares
      
      
      price
      
      
      of shares
      
      
      price$
      
      
      
      
      
      $
      
      
      
      
      
      $Options outstanding -Beginning of year
      
      1,203,999
      
      
      2.58
      
      
      1,426,550
      
      
      2.16
      
      
      1,735,000
      
      
      1.65Granted
      
      -
      
      
      -
      
      
      250,000
      
      
      4.70
      
      
      327,500
      
      
      3.60Exercised
      
      (459,875
      )
      
      2.08
      
      
      (362,051
      )
      
      2.06
      
      
      (605,950
      )
      
      1.50Forfeited
      
      (7,000
      )
      
      4.70
      
      
      (110,500
      )
      
      3.67
      
      
      (30,000
      )
      
      2.78Options outstanding -End of year
      
      737,124
      
      
      2.87
      
      
      1,203,999
      
      
      2.58
      
      
      1,426,550
      
      
      1.65Options exercisable - End of year
      
      632,624
      
      
      2.57
      
      
      857,749
      
      
      1.88
      
      
      846,550
      
      
      1.59


The following table summarizes information
  about stock options outstanding and exercisable at April 30, 2006:

| |             |  |             |  |  |             |  |  | Outstanding |  |  | Exercisable | 
| | ----------- |  | ----------- |  |  | ----------- |  |  | ----------- |  |  | ----------- | 
| |             |  |             |  |  |             |  |  | options     |  |  | options     | 
| |             |  |             |  |  |             |  |  | weighted    |  |  | weighted    | 
| |             |  |             |  |  |             |  |  | average     |  |  | average     | 
| | Exercise    |  | Options     |  |  | Options     |  |  | remaining   |  |  | remaining   | 
| | price       |  | outstanding |  |  | exercisable |  |  | life        |  |  | life        | 
| | $           |  |             |  |  |             |  |  | (years)     |  |  | (years)     | 
| |             |  |             |  |  |             |  |  |             |  |  |             | 
| | 1.35        |  | 225,000     |  |  | 225,000     |  |  | 0.43        |  |  | 0.43        | 
| | 1.60        |  | 2,624       |  |  | 2,624       |  |  | 0.95        |  |  | 0.95        | 
| | 2.45        |  | 35,000      |  |  | 35,000      |  |  | 1.10        |  |  | 1.10        | 
| | 2.20        |  | 133,250     |  |  | 133,250     |  |  | 1.70        |  |  | 1.70        | 
| | 2.80        |  | 35,000      |  |  | 35,000      |  |  | 2.29        |  |  | 2.29        | 
| | 3.95        |  | 146,250     |  |  | 146,250     |  |  | 2.58        |  |  | 2.58        | 
| | 4.70        |  | 160,000     |  |  | 55,500      |  |  | 3.41        |  |  | 3.41        | 
| |             |  |             |  |  |             |  |  |             |  |  |             | 
| | 1.35 - 4.70 |  | 737,124     |  |  | 632,624     |  |  | 1.85        |  |  | 1.60        | 

The fair value of each option at the
  date of grant was estimated using the Black-Scholes option-pricing method with
  the following assumptions:

| |                                 | 2006    | 2005    | 2004   
| | ------------------------------- | ------- | ------- | -------
| |                                 |         |         |        
| | Expected life of options        | 5 years | 5 years | 5 years
| | Risk-free interest rate         | 3 - 4%  | 3 - 4%  | 3 - 4% 
| | Expected stock price volatility | 50%     | 70%     | 70%    
| | Expected dividend yield         | -       | -       | -      

(14)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

Option pricing models require the input
  of highly subjective assumptions including the expected price volatility. Changes
  in the subjective input assumptions can materially affect the fair value estimate,
  and therefore, the existing models do not necessarily provide a reliable measure
  of the fair value of the Companys stock options.

The value ascribed to unexercised options
  recorded as a component of shareholders equity is as follows:

| |                                               |  | 2006      |   |  | 2005      |   |  | 2004    |  
| | --------------------------------------------- |  | --------- | - |  | --------- | - |  | ------- | -
| |                                               |  | $         |   |  | $         |   |  | $       |  
| |                                               |  |           |   |  |           |   |  |         |  
| | Balance - Beginning of year                   |  | 1,184,062 |   |  | 170,451   |   |  | 112,362 |  
| |                                               |  |           |   |  |           |   |  |         |  
| | Adjustment on adoption of accounting standard |  | -         |   |  | 807,250   |   |  | -       |  
| | Fair value of options granted                 |  | -         |   |  | (132,009  | ) |  | -       |  
| | Exercise of options                           |  | -         |   |  | (54,030   | ) |  | -       |  
| |                                               |  |           |   |  |           |   |  |         |  
| | Adjustment after change in accounting policy  |  | 1,184,062 |   |  | 791,662   |   |  | 112,362 |  
| |                                               |  |           |   |  |           |   |  |         |  
| | Accretion of options granted                  |  | 365,440   |   |  | 721,983   |   |  | 81,515  |  
| | Exercise of options                           |  | (456,217  | ) |  | (229,640  | ) |  | (23,426 | )
| | Options forfeited                             |  | (13,519   | ) |  | (99,943   | ) |  | -       |  
| |                                               |  |           |   |  |           |   |  |         |  
| | Balance - End of year                         |  | 1,079,766 |   |  | 1,184,062 |   |  | 170,451 |  

|11 | Warrants                                           
|-- | ---------------------------------------------------
|   |                                                    
|   | The changes in warrants outstanding are as follows:

2006
      
      
      
      
      
      2005
      
      
      
      
      
      2004Weighted
      
      
      
      
      
      Weighted
      
      
      
      
      
      Weightedaverage
      
      
      
      
      
      average
      
      
      
      
      
      averageNumber
      
      
      exercise
      
      
      Number
      
      
      exercise
      
      
      Number
      
      
      exerciseof shares
      
      
      price
      
      
      of shares
      
      
      price
      
      
      of shares
      
      
      price$
      
      
      
      
      
      $
      
      
      
      
      
      $Warrants outstanding - Beginningof year
      
      3,224,465
      
      
      3.88
      
      
      4,323,647
      
      
      3.88
      
      
      1,721,823
      
      
      1.63Granted
      
      1,125,000
      
      
      4.00
      
      
      199,386
      
      
      4.00
      
      
      4,160,810
      
      
      3.96Exercised
      
      (2,173,501
      )
      
      3.04
      
      
      (1,298,568
      )
      
      3.04
      
      
      (1,558,986
      )
      
      1.70Expiry
      
      (2,175,964
      )
      
      4.70
      
      
      -
      
      
      -
      
      
      -
      
      
      -Warrants outstanding - Endof year
      
      -
      
      
      -
      
      
      3,224,465
      
      
      4.22
      
      
      4,323,647
      
      
      1.63


(15)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

The value ascribed to unexercised warrants
  recorded as a component of equity is as follows:

| |                                     |  | 2006       |   |  | 2005       |   |  | 2004      |  
| | ----------------------------------- |  | ---------- | - |  | ---------- | - |  | --------- | -
| |                                     |  | $          |   |  | $          |   |  | $         |  
| |                                     |  |            |   |  |            |   |  |           |  
| | Balance - Beginning of year         |  | 3,841,480  |   |  | 4,983,765  |   |  | 696,270   |  
| |                                     |  |            |   |  |            |   |  |           |  
| | Unit proceeds allocated to warrants |  | -          |   |  | -          |   |  | 4,740,649 |  
| | Agents warrants issued in private   |  |            |   |  |            |   |  |           |  
| | placements                          |  | 517,559    |   |  | 238,070    |   |  | 158,788   |  
| | Exercise of warrants                |  | (1,735,548 | ) |  | (1,380,355 | ) |  | (611,942  | )
| | Expiry of warrants                  |  | (2,623,491 | ) |  | -          |   |  | -         |  
| |                                     |  |            |   |  |            |   |  |           |  
| | Balance - End of year               |  | -          |   |  | 3,841,480  |   |  | 4,983,765 |  

|12 | Contributed surplus
|-- | -------------------

| |                                      |  | 2006      |  |  | 2005    | 
| | ------------------------------------ |  | --------- |  |  | ------- | 
| |                                      |  | $         |  |  | $       | 
| |                                      |  |           |  |  |         | 
| | Balance - Beginning of year          |  | 160,755   |  |  | 72,040  | 
| |                                      |  |           |  |  |         | 
| | Forfeited options                    |  | 13,519    |  |  | 5,987   | 
| | Forfeited warrants                   |  | 2,623,494 |  |  |         | 
| | Equity component of convertible loan |  | -         |  |  | 82,728  | 
| |                                      |  |           |  |  |         | 
| | Balance - End of year                |  | 2,797,768 |  |  | 160,755 | 

|13 | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Companys financial instruments consist of
        cash and cash equivalents, security deposits, accounts receivable, and
        accounts payable and accrued liabilities. At April 30, 2006, the carrying
        values of these instruments approximate their fair values based on the
        nature of these instruments. Unless otherwise noted, it is managements
        opinion that the Company is not exposed to significant interest, currency
        or credit risks arising from these financial instruments.

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|14 | Related party transactions                                                
|-- | --------------------------------------------------------------------------
|   |                                                                           
|   | The following related party transactions occurred during
        the year:

| | a) | The Company paid office facilities and administration
        services in the amount of $42,000 (2005 - $54,500) to a company related
        by directors in common.                                                                 
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                       
| | b) | At April 30, 2006, accounts payable included $3,786
        (2005 - $3,500) owing to companies with directors in common. Amounts due
        to related parties are non-interest bearing and have no fixed terms of
        repayment.

|   | These transactions were in the normal course of operations
        and were measured at the exchange value which represented the amount of
        consideration established and agreed to by the related parties.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                   
|15 | Income taxes                                                                                                                                                                                                      

| | a) | Income taxes expenses vary from the amount that would
        be computed by applying the combined federal (25%) and provincial income
        tax rate (12%) totalling 33% (2005 - 36.12%; 2004 - 36.40%) to loss before
        income tax recovery as follows:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                      |  | 2006       |   |  | 2005        |   |  | 2004        |  
| | ------------------------------------ |  | ---------- | - |  | ----------- | - |  | ----------- | -
| |                                      |  | $          |   |  | $           |   |  | $           |  
| |                                      |  |            |   |  |             |   |  |             |  
| | Loss before income taxes recovery    |  | (7,281,478 | ) |  | (29,164,305 | ) |  | (22,616,158 | )
| |                                      |  |            |   |  |             |   |  |             |  
| | Expected income taxes recovery       |  | (2,333,917 | ) |  | (10,534,147 | ) |  | (8,232,282  | )
| | Income tax benefit not recognized    |  | 1,131,466  |   |  | 7,633,773   |   |  | 6,603,085   |  
| | Resource allowance and               |  |            |   |  |             |   |  |             |  
| | non-deductible items                 |  | 1,202,451  |   |  | 2,900,374   |   |  | 1,629,197   |  
| | Benefit of tax assets not previously |  |            |   |  |             |   |  |             |  
| | recognized                           |  | (824,918   | ) |  | (1,005,120  | ) |  | -           |  
| |                                      |  |            |   |  |             |   |  |             |  
| |                                      |  | (824,918   | ) |  | (1,005,120  | ) |  | -           |  

(17)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | b) | Future income taxes reflect the net tax effects of non-capital
        loss carry-forwards and temporary differences between the carrying amounts
        of assets and liabilities for financial reporting purposes and the amounts
        used for income tax purposes. The significant components of the Companys
        future tax assets are as follows:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                        |  | 2006        |   |  | 2005        |   |  | 2004        |  
| | -------------------------------------- |  | ----------- | - |  | ----------- | - |  | ----------- | -
| |                                        |  | $           |   |  | $           |   |  | $           |  
| |                                        |  |             |   |  |             |   |  |             |  
| | Future income and resources tax assets |  |             |   |  |             |   |  |             |  
| | Net operating loss carry-forwards      |  | 13,849,819  |   |  | 15,227,725  |   |  | 7,365,758   |  
| | Mineral
      properties               |  | -           |   |  | -           |   |  | 1,646,470   |  
| | Asset retirement obligation            |  | 609,107     |   |  | 762,343     |   |  | 743,810     |  
| | Property,
      plant and equipment    |  | 1,827,660   |   |  | 1,118,820   |   |  | 762,848     |  
| | Share issuance costs                   |  | 1,056,289   |   |  | 1,456,121   |   |  | 1,001,596   |  
| |                                        |  |             |   |  |             |   |  |             |  
| |                                        |  | 17,342,875  |   |  | 18,565,009  |   |  | 11,520,482  |  
| | Less: Valuation allowance              |  | (16,373,617 | ) |  | (17,559,889 | ) |  | (11,520,482 | )
| |                                        |  |             |   |  |             |   |  |             |  
| | Net future tax assets                  |  | 969,258     |   |  | 1,005,120   |   |  | -           |  
| |                                        |  |             |   |  |             |   |  |             |  
| | Future income and resources tax        |  |             |   |  |             |   |  |             |  
| | liabilities                            |  |             |   |  |             |   |  |             |  
| | Mineral properties                     |  | (969,258    | ) |  | (1,005,120  | ) |  | -           |  
| |                                        |  |             |   |  |             |   |  |             |  
| | Net future tax asset                   |  | -           |   |  | -           |   |  | -           |  

| | c) | The Company has non-capital losses for federal and Ontario
        tax purposes, which may be carried forward and applied against taxable
        income in future years. These losses expire during the following years:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      |  | Federal    |  |  | Ontario    | 
| | ---- |  | ---------- |  |  | ---------- | 
| |      |  | $          |  |  | $          | 
| |      |  |            |  |  |            | 
| | 2007 |  | 123,249    |  |  | 432,921    | 
| | 2008 |  | 412,780    |  |  | 650,755    | 
| | 2009 |  | 916,624    |  |  | 916,551    | 
| | 2010 |  | 4,150,879  |  |  | 4,150,879  | 
| | 2014 |  | 17,920,438 |  |  | 17,112,638 | 
| | 2015 |  | 18,207,964 |  |  | 16,728,289 | 
| | 2016 |  | 999,443    |  |  | 643,206    | 
| |      |  |            |  |  |            | 
| |      |  | 42,731,377 |  |  | 40,635,239 | 

(18)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|16 | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | A net smelter royalty is payable on a sliding scale
        commencing at 2% if the price of gold sold is equal to or greater than
        US$300 per ounce and increasing to 4% if the price of gold sold is equal
        to or greater than US$500 per ounce. The royalty amount due is payable
        quarterly commencing on the third month anniversary of the commencement
        of commercial production from any of the properties and terminates upon
        a maximum aggregate payment of $15 million. During the year ended April
        30, 2006, royalties under this agreement amounted to $1,266,618 (2005
        - $642,396).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|17 | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | On May 8, 2006 four charges were laid against the Company
        under the Provincial Offences Act (Ontario) in the Ontario Court of Justice
        by the Ontario Ministry of Labour for four alleged violations of the Occupational
        Health and Safety Act (Ontario). The charges are in connection with the
        death of an employee in December, 2005. The Company entered an appearance
        to the proceedings on June 13, 2006 and will next appear in court on September
        5, 2006 at which time it must enter a plea. If the charges proceed to
        trial and the Company is found guilty, the Company could be subject to
        fines not exceeding $500,000 per charge. The Company intends to vigorously
        defend itself against these charges and believes that its conduct was
        in compliance with the Act and that it has a good work safety environment.
        Based on managements assessment based on advice from its defence
        counsel, the Company accrued $150,000 as a contingent liability, which
        has been included and reported within operating costs for the current
        fiscal year. Future events may require a change to this provision.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|18 | Segmented information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company has one operating segment consisting of
        a mining and milling operation located in Kirkland Lake, Canada. During
        the years ended April 30, 2006, 2005 and 2004 all of the Companys
        capital assets, revenues earned and operations were in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

(19)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

|19 | Supplemental cash flow information                                                                                                         
|-- | -------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                            
|   | Cash and cash equivalents comprise cash on deposit with
        Canadian chartered banks.                                                  
|   |                                                                                                                                            
|   | During the years ended April 30, 2006, 2005 and 2004,
        the Company conducted non-cash financing and investing activities as follows:

| |                                             |  | 2006      |  |  | 2005      |  |  | 2004    | 
| | ------------------------------------------- |  | --------- |  |  | --------- |  |  | ------- | 
| |                                             |  | $         |  |  | $         |  |  | $       | 
| |                                             |  |           |  |  |           |  |  |         | 
| | Warrants issued as share issuance costs     |  | -         |  |  | 238,067   |  |  | 158,788 | 
| | Warrants/common shares issued as finance    |  |           |  |  |           |  |  |         | 
| | charges
      for loan                      |  | -         |  |  | 216,019   |  |  | 747,813 | 
| | Value assigned to options/warrant exercised |  | 2,191,765 |  |  | 1,741,992 |  |  | 635,367 | 
| | Issuance of shares to settle debt           |  | -         |  |  | 3,941,705 |  |  | -       | 

|20 | Material differences between Canadian and United
        States GAAP                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                
|   | The financial statements of the Company have been prepared
        in accordance with Canadian GAAP, which differs in some respects from
        U.S. GAAP. The significant measurement differences between GAAP in Canada
        and the United States and their effect on these financial statements are
        as follows:

| |                                            |  | 2006       |   |  | 2005        |   |  | 2004        |  
| | ------------------------------------------ |  | ---------- | - |  | ----------- | - |  | ----------- | -
| |                                            |  | $          |   |  | $           |   |  | $           |  
| |                                            |  |            |   |  |             |   |  |             |  
| | Loss for the year                          |  |            |   |  |             |   |  |             |  
| | Loss for the year following Canadian GAAP  |  | (6,456,560 | ) |  | (28,159,185 | ) |  | (22,616,158 | )
| | Accretion of convertible loan (a)          |  | -          |   |  | 445,026     |   |  | 101,307     |  
| | Future income tax recovery (d)             |  | (536,058   | ) |  | (430,000    | ) |  | -           |  
| |                                            |  |            |   |  |             |   |  |             |  
| | Loss for the year following U.S. GAAP      |  | (6,992,618 | ) |  | (28,144,159 | ) |  | (22,514,851 | )
| |                                            |  |            |   |  |             |   |  |             |  
| | Basic and diluted loss per share following |  |            |   |  |             |   |  |             |  
| | U.S.
      GAAP                            |  | (0.14      | ) |  | (0.68       | ) |  | (0.76       | )
| |                                            |  |            |   |  |             |   |  |             |  
| | Convertible loans                          |  |            |   |  |             |   |  |             |  
| | Convertible loans following Canadian GAAP  |  | -          |   |  | -           |   |  | 3,088,818   |  
| | Equity component of convertible loan (a)   |  | -          |   |  | -           |   |  | 283,657     |  
| | Accretion of convertible loan (a)          |  | -          |   |  | -           |   |  | (184,975    | )
| |                                            |  |            |   |  |             |   |  |             |  
| | Convertible loans following U.S. GAAP      |  | -          |   |  | -           |   |  | 3,187,500   |  

(20)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| |                                                |  | 2006       |   |  | 2005       |   |  | 2004       |  
| | ---------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
| |                                                |  | $          |   |  | $          |   |  | $          |  
| |                                                |  |            |   |  |            |   |  |            |  
| | Shareholders Equity                           |  |            |   |  |            |   |  |            |  
| | Shareholders equity following                 |  |            |   |  |            |   |  |            |  
| | Canadian
      GAAP                            |  | 48,982,371 |   |  | 35,729,039 |   |  | 27,839,637 |  
| | Equity component of convertible loan (a)       |  | -          |   |  | (630,001   | ) |  | (283,657   | )
| | Accretion of convertible loan (a)              |  | -          |   |  | 630,001    |   |  | 184,975    |  
| | Flow through shares (d)                        |  | 536,058    |   |  | 430,000    |   |  | -          |  
| | Future income tax (d)                          |  | (536,058   | ) |  | (430,000   | ) |  | -          |  
| |                                                |  |            |   |  |            |   |  |            |  
| | Shareholders equity following U.S. GAAP       |  | 48,982,371 |   |  | 35,729,039 |   |  | 27,740,955 |  
| |                                                |  |            |   |  |            |   |  |            |  
| | Cash Flows                                     |  |            |   |  |            |   |  |            |  
| | Cash and cash equivalents - End of year        |  |            |   |  |            |   |  |            |  
| | following
      Canadian GAAP                  |  | 9,411,925  |   |  | 8,632,547  |   |  | 11,720,591 |  
| | Restricted cash - Flow-through shares          |  | (1,800,000 | ) |  | (2,187,000 | ) |  | (5,163,723 | )
| |                                                |  |            |   |  |            |   |  |            |  
| | Cash and cash equivalents - End of year        |  |            |   |  |            |   |  |            |  
| | following
      U.S. GAAP                      |  | 7,611,925  |   |  | 6,445,547  |   |  | 6,556,868  |  
| |                                                |  |            |   |  |            |   |  |            |  
| | Cash flows from investing activities -         |  |            |   |  |            |   |  |            |  
| | Following Canadian
      GAAP                  |  | 14,585,798 |   |  | 9,914,741  |   |  | 11,113,659 |  
| | Flow-through shares not disbursed              |  |            |   |  |            |   |  |            |  
| | during the
      year (e)                      |  | (1,800,000 | ) |  | (2,187,000 | ) |  | (5,163,723 | )
| | Flow through realized from previous            |  |            |   |  |            |   |  |            |  
| | year (e)                                       |  | 2,187,000  |   |  | 5,163,723  |   |  | -          |  
| |                                                |  |            |   |  |            |   |  |            |  
| | Cash flows from investing activities following |  |            |   |  |            |   |  |            |  
| | U.S.
      GAAP                                |  | 14,972,798 |   |  | 12,891,464 |   |  | 5,949,936  |  

| | a) | Convertible loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | On June 11, 2002, August 11, 2003, and June 10, 2004
        the Company issued convertible loans (note 7). Under Canadian GAAP, the
        fair value of the equity conversion feature is valued and recorded as
        a component of shareholders equity and the carrying amount of the
        loans are accreted over the term to maturity through a charge to interest
        expense. Under U.S. GAAP, the full face value of the convertible loans
        is classified as a liability and any accretion charges under Canadian
        GAAP are reversed.                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Effective May 1, 2003 the Company adopted the new accounting
        standard for asset retirement obligations FAS 143. The standard requires
        that the fair value of a liability for an asset retirement obligation
        be recognized in the period in which it is incurred if a reasonable estimate
        of fair value can be made. The associated asset retirement costs are capitalized
        as part of the carrying amount of the long lived asset. The adoption of
        this standard did not have any impact on the Companys financial
        position or results.

(21)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | c) | Stock based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | For U.S. GAAP purposes, the Company accounted for stock-based
        employee compensation arrangements using the intrinsic value method prescribed
        in Accounting Principles Board (APB) Opinion No. 25, Accounting
        for Stock Issued to Employees until April 30, 2004. Under this method,
        the stock options granted at exercise prices at or above the quoted market
        value of the Companys common shares at the date of the grant, there
        is no compensation cost recognized by the Company for options granted
        to employees.                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | In December 2004, the FASB issued SFAS 123R Accounting
        for Stock-based Compensation. This statement superseded APB 25 and
        eliminated the option to use the intrinsic value method for valuing stock-based
        compensation. It is applicable to transactions in which an entity exchanges
        its equity instruments for goods and services. FAS 123R requires that
        the fair value of such equity instruments is recorded as an expense as
        services are performed.                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | During fiscal 2005, for U.S. GAAP purposes, the Company
        adopted the fair value based method of accounting for stock-based compensation
        on a modified prospective basis in accordance with FAS 148. This application
        is consistent with the application of CICA 3870 under Canadian GAAP. Accordingly,
        effective May 1, 2004, there is no difference on accounting for stock-based
        compensation under Canadian and U.S. GAAP.                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | d) | Flow-through Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company received a premium to market on the issuance
        of $288,860 (2005 - $575,000) which was recorded in share capital under
        Canadian GAAP. For U.S. GAAP purposes, SFAS 109, Accounting for
        Income Taxes, the proceeds should be allocated between the offering
        of the shares and the sale of tax benefits when the shares are offered.
        The allocation is made based on the difference between the quoted price
        of the shares and the amount the investor pays for the flow-through shares.
        A future tax liability is recognized for the premium paid by the investors.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | In 2006, for Canadian GAAP purposes, the Company recorded
        a future income tax recovery of $824,918 (2005 - $1,005,120) and a corresponding
        reduction of share capital in respect of flow-through share financing.
        Under U.S. GAAP, the renunciation and recognition of unrecognized future
        tax assets result in offsetting charges and recoveries that do not impact
        earnings.                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | e) | Restricted Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Under U.S. GAAP, funds raised from the issuance of flow-through
        shares, which have not yet been disbursed on qualifying exploration expenditures,
        would be disclosed as restricted cash and excluded from current assets.
        Accordingly, cash and cash equivalents under U.S. GAAP would be reduced
        by $1,800,000 at April 30, 2006 (2005 - $2,187,000; 2004 - $5,163,723)
        and restricted cash would be presented outside of current assets on the
        balance sheet.                                                                                                                       

(22)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

| | f) | Impact of Recently Issued Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In January 2003, the Financial Accounting Standards
        Board or FASB issued Interpretation No. 46, consolidation
        of Variable Interest Entities, and an Interpretation of Accounting Research
        Bulletin No. 51 (FIN 46). FIN 46 establishes accounting guidance
        for consolidation of variable interest entities by the primary beneficiary.
        FIN 46 applies to any business enterprise, public or private, that has
        a controlling interest, contractual relationship with a variable interest
        entity. In December 2003, the FASB issued Interpretation No. 46R (FIN
        46R) which supersedes FIN 46 and is effective for all Variable Interest
        Entities (VIEs) created after February 1, 2003 at the end
        of the first interim or annual reporting period ending after March 15,
        2004. The Company has determined that it has no VIEs.                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In March 2004, the Emerging Issues Task Force issued
        EITF 04-02, Whether Mineral Rights are Tangible or Intangible Assets (EITF
        04-02). The Task Force reached a consensus that mineral rights are
        tangible assets. In April 2004, the FASB issued FASB Staff Positions (FSPs)
        FAS 141-1 and FAS 142-1, Interaction of FASB Statement No. 141, Business
        Communications (SFAS 141), and No. 142, Goodwill and Other
        Tangible Assets (SFAS 142), and EITF Issue No. 04-02, Whether
        Mineral Rights are Tangible or Intangible Assets. The FSPs amend SFAS
        141 and 142 to conform them to the Task Force Consensus. The FSPs are
        effective for the first reporting period beginning after April 29, 2004,
        but earlier adoption is permitted. The Company has adopted these provisions
        effective May 1, 2004 with no impact on the financial statements.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In March 2004, the EITF issued EITF 04-03, Mining Assets
        Impairment and Business Combinations. EITF 04-03 requires mining companies
        to consider cash flows to the economic value of mining assets (including
        mineral properties and rights) beyond those assets proven and probable
        reserves, as well as anticipated market price fluctuations, when assigning
        value in a business combination in accordance with SFAS 141 and when testing
        the mining assets for impairment in accordance with SFAS 144. The consensus
        is effective for reporting periods beginning after March 31, 2004 but
        earlier adoption is permitted. Effective May 1, 2004 the Company adopted
        EITF 04-03.                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In December 2004, the FASB issued SFAS 153, Exchange
        of Non-Monetary Assets - an amendment of APB 129. This statement
        amends APB 129, which is based on the principle that exchanges of non-monetary
        assets should be measured at the fair value of the assets exchanged with
        certain exceptions. SFAS 153 eliminates the exception for non-monetary
        exceptions of similar productive assets and replaces it with a general
        exception for exchanges of non-monetary assets that do not have commercial
        substance. A non-monetary exchange has commercial substance if the future
        cash flows of the entity are expected to change significantly as a result
        of the exchange. This statement is effective for non-monetary asset exchanges
        occurring in the fiscal periods beginning on or after June 15, 2005.                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In April 2005, the AcSB issued CICA 3865, Hedges, which
        is applicable when a company chooses to designate a hedging relationship
        for accounting purposes. It builds on the existing Accounting Guideline
        AcG-13 Hedging Relationships, and Section 1650 Foreign
        Currency Translation, by specifying how hedge accounting is applied
        and what disclosures are necessary when it is applied.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

(23)

---

|Kirkland Lake Gold Inc.            
|-----------------------------------
|Notes to Financial Statements      
|April 30, 2006,
      2005 and 2004
|                                   
|(expressed in Canadian dollars)    

New Accounting Pronouncements in
  Canada

Financial instruments other than trade
  receivables, trade payables, and certain other financial liabilities including
  long term debt must be recorded at fair value, not historical cost. If a financial
  instrument is measured at fair value, changes in its fair value are recognized
  in operations in the period in which they occur except for investments, and
  possible certain other assets, designated as being available for sale
  securities, where changes in the fair value are recorded directly in shareholders
  equity in a special account called other comprehensive income until
  the asset disappears or is impaired. At that time, the gains and losses are
  transferred to the operations statement. The result of applying this standard
  is that income from these investments will be reported in the statement of operations
  as if the asset were accounted for at historical cost.

These new Canadian standards are effective
  for fiscal years starting on or after October 1, 2006 and can be adopted earlier
  but only at the beginning of a fiscal year and only if the Company has not already
  issued interim financial statements that cover part of the year.

In June 2005, the AcSB issued CICA 3831,
  Non-monetary Transactions, replacing the former CICA 3830, Non-monetary Transactions.
  This statement will be effective for fiscal periods beginning after January
  1, 2006. Earlier application is permitted for non-monetary asset exchanges executed
  in periods beginning on or after July 1, 2005. Retroactive application is prohibited.
  This new Canadian standard is, in all material respects, consistent with the
  new U.S. standard described above.

In April 2005, the AcSB issued CICA
  1530, Comprehensive Income, which introduces new rules for the reporting and
  display of comprehensive income. Comprehensive income, which is currently reported
  under U.S. GAAP, is the change in shareholders equity of an enterprise
  during a reporting period from transactions and other events and circumstances
  from nonowner sources. It includes all changes in equity during a period except
  those resulting from investments by owners and distributions to owners. These
  items include holding gains and losses on certain investments, gain and losses
  on certain derivative instruments and foreign currency gains and losses related
  to self-sustaining foreign operations (cumulative translation adjustment).

|21 | Subsequent event                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                
|   | On May 24 and 25, 2006 and June 2, 2006, the Company
        completed private placement of 1,793,500 units at a price of $9.20 per
        unit totalling $16,500,200. Each unit consisted of one common share and
        one-half of a share purchase warrant. Each warrant is exercisable for
        a period of 12 months at a price of $10.50 per share.

(24)

---

ITEM 18FINANCIAL STATEMENTS

The Corporation has elected to provide financial statements pursuant
  to Item 17.

ITEM 19EXHIBITS

The following exhibits are included herein:

Number
    Description
    Page No.1.01
    Certificate of Continuance dated July 27, 1988
    Note (1)1.02
    Articles of Continuance dated July 14, 1988
    Note (1)1.03
    Certificate of Amendment dated May 19, 1994 together with
      Articles of Amendment dated April 22, 1994
    Note (1)1.04
    Certificate of Amendment dated October 1, 1996 together
      with Articles of Amendment dated September 24, 1996
    Note (1)1.05
    Certificate of Amendment dated November 26, 1996 together
      with Articles of Amendment dated November 18, 1996
    Note (1)1.06
    Certificate of Amendment dated October 21, 1999 together
      with Articles of Amendment dated September 27, 1999
    Note (1)1.07
    By-laws dated July 27, 1988
    Note (1)2
    Not applicable
    3
    Not applicable
    4(a).01
    Loan Agreements dated May 22, 2002 with RAB Europe Fund
      Ltd. and RAB Europe Partners L.P. in respect of loans totalling $2.5
      million
    Note (1)4(a).02
    Investor Relations Agreement dated May 30, 2002 with DSK
      Consulting Ltd.
    Note (1)4(a).03
    Agency Agreement dated June 21, 2002 with Fahnestock
      Canada Inc. with respect to a private placement of 1 million Common Shares
    Note (1)4(a).04
    Subscription Agreement in the form executed on June 21,
      2002 with respect to a private placement of 1 million Common Shares
    Note (1)4(a).05
    Agency Agreement dated December 30, 2002 with Octagon
      Capital Corporation and Fahnestock Canada Inc. with respect to a private
      placement of 2.625 million Common Shares
    Note (2)4(a).06
    Subscription Agreement in the form executed on December
      30, 2002 with respect to a private placement of 2.625 million Common
      Shares
    Note (2)4(a).07
    Listing Agreement dated March 5, 2003 with the Toronto
      Stock Exchange
    Note (3)4(a).08
    Publicity Agreement dated March 27, 2003 with Jefferson
      Financial, LLC
    Note (2)4(a).09
    Loan Agreement dated June 10, 2003 with CBG Compagnie
      Bancaire Genève in respect of loan for $1 million
    Note (2)4(a).10
    Subscription Agreement in the form executed on August 8,
      2003 and August 26, 2003 with respect to a private placement of 3.755
      million Units
    Note (2)4(a).11
    Agency Agreement dated November 14, 2003 with Fort House
      Inc. and Octagon Capital Corporation with respect to a private placement
      of 1.925 million flow-through Common Shares
    Note (2)4(a).12
    Subscription Agreement in the form executed on November
      14, 2003 with respect to a private placement of 1.925 million
      flow-through Common Shares
    Note (2)4(a).13
    Agency Agreement dated December 1, 2003 with Fort House
      Inc. and Octagon Capital Corporation with respect to a private placement
      of 2.2 million Units
    Note (2)


67

---

Number
    Description
    Page No.4(a).14
    Subscription Agreement in the form executed on December
      1, 2003 with respect to a private placement of 2.2 million Units
    Note (2)4(a).15
    Subscription Agreement in the form executed on April 29,
      2004 with respect to a private placement of 2,174,129 Units
    Note (3)4(a).16
    Loan Agreement dated June 2, 2004 with Middlemarch
      Partners Limited in respect of loan for $2,406,250
    Note (3)4(a).17
    Nominated Advisor and Broker Agreement dated June 24,
      2004 with Canaccord Capital (Europe) Limited
    Note (3)4(a).18
    Agency Agreement dated July 29, 2004 with Canaccord
      Capital (Europe) Limited with respect to a private placement of 3,987,730
      Common Shares
    Note (3)4(a).19
    Subscription Agreement in the form executed on July 29,
      2004 with respect to a private placement of 3,987,730 Common Shares
    Note (3)4(a).20
    Agency Agreement dated November 16, 2004 with Canaccord
      Capital (Europe) Limited with respect to a private placement of 1,950,292
      Common Shares
    Note (3)4(a).21
    Subscription Agreement in the form executed on November
      16, 2004 with respect to a private placement of 1,950,292 Common Shares
    Note (3)4(a).22
    Agency Agreement dated December 22, 2004 with Canaccord
      Capital (Europe) Limited with respect to a private placement of 500,000
      flow-through Common Shares
    Note (3)4(a).23
    Subscription Agreement in the form executed on December
      22, 2004 with respect to a private placement of 500,000 flow-through
      Common Shares
    Note (3)4(a).24
    Subscription Agreement in the form executed on August 25,
      2005 with respect to a private placement of 1,250,000 Units
    Note (3)4(a).25
    Subscription Agreement in the form executed on September
      26, 2005 with respect to a private placement of 1 million units
    Note (3)4(a).26
    Subscription Agreement in the form executed on October 12
      and 14, 2005 with respect to a private placement of 555,500 flow-through
      Common Shares
    Note (3)4(a).27
    Subscription Agreement in the form executed on May 24 and
      25 and June 2, 2006 with respect to a private placement of 1,793,500 Units
    Note (3)4(a).28
    Broker Agreements dated June 1, 2006 with Mirabaud
      Securities Limited and Ocean Equities Ltd.
    Note (3)4(c).01
    Consulting Agreement dated March 15, 2001 with the
      Corporations President and Chief Executive Officer
    Note (1)4(c).02
    Form of Stock Option Agreement
    Note (1)5
    Not applicable
    6
    Not applicable
    7
    Not applicable
    8
    Not applicable
    9
    Not applicable
    10
    Not applicable
    11
    Code of Ethics dated June 30, 2005
    Note (3)


68

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Number
      Description
      Page No.12.01
      Certification
          of the Chief Executive Officer of the Corporation pursuant to Rule 13a-14(a)
          of the Securities Exchange Act of 1934
      EX0112.02
      Certification
          of the Chief Financial Officer of the Corporation pursuant to Rule 13a-
          14(a) of the Securities Exchange Act of 1934
      EX0213.01
      Certification
          of the Chief Executive Officer of the Corporation pursuant to Rule 13a-
          14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter
          63 of Title 18 of the United States Code
      EX0313.02
      Certification
          of the Chief Financial Officer of the Corporation pursuant to Rule 13a-
          14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter
          63 of Title 18 of the United States Code
      EX0414
      Not applicable
      15
      Not applicable
      


|(1) | Incorporated herein by reference from the Corporations
      Registration Statement on Form 20-F dated June 28, 2002 and filed with the
      Securities and Exchange Commission on July 1, 2002.             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                
|(2) | Incorporated herein by reference from the Corporations
      2003 Annual Report (amended) on Form 20-F dated January 14, 2004 and filed
      with the Securities and Exchange Commission on February 3, 2004.
|    |                                                                                                                                                                                                                
|(3) | Incorporated herein by reference from the Corporations
      2004 Annual Report on Form 20-F dated June 30, 2006 and filed with the
      Securities and Exchange Commission on August 15,
2006.              

69

---

SIGNATURES

The Corporation hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.

Date: September 13, 2006

| | **KIRKLAND LAKE GOLD INC.**
| | ---------------------------
| |                            
| |                            
| |                            
| | Per:                       
| |                            
| |                            

70

---