**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-K**

 

**(Mark One)**

**ý****   ANNUAL REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31, 2005**

 

**OR**

 

**o****   TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                                to                                                       .**

 

**Commission file number 0-11226**

 

**GOLDEN CYCLE GOLD CORPORATION**

(Exact name of registrant as specified in itscharter)

 
| **Colorado**                             | ** ** | **84-0630963**      |
|------------------------------------------|------------|---------------------|
| State or other jurisdiction of           |       | (I.R.S. Employer    |
| incorporation or organization)           |       | Identification No.) |
|                                     |       |                |
| **Suite 201, 1515 South Tejon,**    | ** ** | ** **          |
| **Colorado Springs, CO**                 | ** ** | **80906**           |
| (Address of principal executive offices) |       | (Zip Code)          |

 

Registrant’s telephone number, including area code:   **(719) 471-9013**

 

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

 
| **(Title of Each Class)**  | ** ** | **(Name of Each Exchange on which registered)** |
|----------------------------|------------|-------------------------------------------------|
| Common Stock, No Par Value |       | NYSE Arca                                       |

 

Securities Registered Pursuant To Section 12 (b) of theAct:  **None**

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.o  Yes            ý  No

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act.o  Yes            ý  No

 

Indicate by checkmark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.                         ý  Yes            o  No

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K (229.405 of this chapter) is not contained herein,and will not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K                                                ý

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer.  See definition of “Accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer   o        Accelerated filer   o       Non-accelerated filer   ý

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Act).

 

o  Yes                ý  No

 

State the aggregate market value of the voting and non-voting commonequity held by non-affiliates computed by reference to the price at which thecommon equity was last sold, or the average bid and asked price of such commonequity, as of the last business day of the registrant’s most recently completedsecond fiscal quarter:       $17,824,084.

 

The number of shares of the Registrant’s Common Stock outstanding as ofMarch 29, 2006 was 9,744,250.

 

 

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**DOCUMENTS INCORPORATED BY REFERENCE:**

 

Portions of the Definitive Proxy Statement in connection with itsAnnual Meeting to be held in June 2006, are incorporated by reference intoPart III of this Annual Report on Form 10-K.  The Company’s Proxy Statement will be filedwithin 120 days after December 31, 2005.

 

This Annual Report on Form 10-K contains certain forward lookingstatements.  Actual results could differmaterially from those projected in the forward looking statements as a resultof certain factors, described elsewhere herein, including but not limited tofluctuations in the market price of gold and uncertainties regarding theability of the Joint Venture (as defined below) to operate profitably.

 

**PART I**

 

**ITEM 1. BUSINESS**

 

Golden Cycle Gold Corporation was incorporated under the laws of theState of Colorado on May 19, 1972 for the purpose of acquiring anddeveloping the mining properties (the “Mining Properties”) of the Golden CycleCorporation, located in the Cripple Creek Mining District of Colorado.  Unless the context otherwise requires, theterms “Registrant” and “Company” as well as “we”, “us” and “our”, mean GoldenCycle Gold Corporation.

 

The primary business of the Company has been its participation in theCripple Creek & Victor Gold Mining Company (“CC&V”), a jointventure (the “Joint Venture”) with AngloGold Ashanti (Colorado) Corp., formerlyPikes Peak Mining Company, (“AngloGold”). The Joint Venture engages in gold mining activity in the Cripple Creekarea of Colorado.

 

In addition to its Joint Venture activities, the Company incorporatedGolden Cycle

 

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Philippines, Inc. (“GCPI”),a wholly-owned subsidiary, under the laws of the Philippines on November 12,1996.  GCPI entered into an agreementwith Benguet Corporation, a Philippine mining company, providing for theirjoint participation in the exploration, development and production of miningproperties in certain areas of the Philippines. All GCPI exploration work has been placed on a standby basis until aMineral Profits Sharing Agreement (“MPSA”) is awarded to the claim owner of theSagittarius Alpha Realty (“SAR”) claims. See “Golden Cycle Philippines, Inc.” for further informationregarding the proposed activities of GCPI in the Philippines.

 

During January 2002, the Company incorporated Golden Cycle GoldExploration, Inc., a wholly-owned subsidiary, to conduct explorationactivities for the Company.  As of thisdate the Company has not funded Golden Cycle Gold Exploration, Inc.

 

As of December 31, 2005, the Company had 3 employees.

 

Description of Mining Joint Venture

 

The Company’sinterest in the Joint Venture was received in exchange for the Company’s rightsto gold mining properties in the Cripple Creek Mining District ofColorado.  The rights and obligations ofthe parties are covered by an Amended and Restated Joint Venture Agreement (the“Joint Venture Agreement”) dated and effective as of January 1, 1991, betweenAngloGold and the Company.  The JointVenture engages in gold mining activity in the Cripple Creek area of Coloradoand the Company’s participation in the Joint Venture constitutes its primarybusiness activity.  AngloGold serves asthe manager (the “Manager”) of the Joint Venture.  The Joint Venture’s principal miningoperations are conducted at the Cresson mine, where commercial production wascommenced in the first half of 1995.

 

The JointVenture Agreement defines an Initial Phase that will end when (i) theInitial Loans (defined below) have been repaid (ii) a cash reserve hasbeen established to fund accrued reclamation and severance tax obligations,plus an amount approximating nine months of estimated operating costs, plus anamount approximating twelve months of estimated capital costs, and (iii) NetProceeds (defined in the Joint Venture Agreement generally as gross revenuesless costs) in the amount of $58 million have been distributed as follows: 80%to AngloGold and 20% to the Company. After the Initial Phase, the Joint Venture will distribute metal in kindin the proportion of 67% to AngloGold and 33% to the Company.  In addition, the Company will generally beentitled to receive, in each year during the Initial Phase or until the miningof ore by the Joint Venture ceases due to the exhaustion of economicallyrecoverable reserves, whichever occurs first, an annual minimum distribution of$250,000 (a “Minimum Annual Distribution”). The first three Minimum Annual Distributions in 1991, 1992 and 1993 werenot deemed to be a distribution of Net Proceeds to the Company and were notapplied against the Company’s share of any Net Proceeds.  The Minimum Annual Distributions received on January 15,1994 and thereafter constitute an advance on Net Proceeds and will be recoupedagainst future shares of Net Proceeds to the Company.

 

The JointVenture Agreement provides that, during the period from January 1, 1991until the end of the Initial Phase, all funds required for operations and minedevelopment by the Joint Venture will be loaned (the “Initial Loans”) to theJoint Venture by either AngloGold or, if such

 

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loans are available at a lowercost than from AngloGold, financial institutions.  Except for the Minimum Annual Distributions,the Initial Loans and interest thereon must be repaid prior to distributions ofNet Proceeds to the Joint Venturers.  Theaudited Joint Venture financial statements reported that as of December 31,2005, the Joint Venture had $353.6 million in Initial Loans payable toAngloGold.  After the Initial Phase, theJoint Venturers will contribute funds in proportion to their respectivedistributive shares.

 

The Joint Venture recorded net income of $9.5 million for the yearended December 31, 2005 compared to net income of $7.7 million and to anet loss of $0.5 million for the years ended December 31, 2004 and December 31,2003, respectively.  There is noassurance that the Joint Venture will be able to achieve profitability in any subsequentperiod or to sustain profitability for an extended period.  The ability of the Joint Venture to sustainprofitability is dependent upon a number of factors beyond the control of theJoint Venture, including without limitation, the market price of gold, which isvolatile and subject to speculative movement, and the extent of mineralizationin the area controlled by the Joint Venture and the efficiency of its miningoperations.

 

Whether future gold prices and the results of the Joint Venture’s operationswill reach and maintain a level necessary to repay the Initial Loans, completethe Initial Phase, and thereafter generate net income cannot be assured.

 

The Joint Venture completed construction of the required infrastructurefor the Cresson Mine and began mining operations in 1995, with the firstCresson Mine gold pour occurring on February 14, 1995.  In 1996, the Joint Venture completed itsfirst full year of Cresson Mine operations. The development of the East and North Cresson mines began during thesecond quarter of 1999.  The JointVenture began construction of expanded facilities during early 2002, completingthe new truck shop, crushing facility, expanded process facility, and expandedvalley leach facility by September 2003. The last step in the mine expansion, a $15.5 million expansion of thevalley fill leach facility, was completed during the fall of 2004.

 

2005 Operational Highlights

 

As the Joint Venture’s Manager, AngloGold provides the Company withdetailed information on the activities and operations of the JointVenture.  The following description ofthe Joint Venture’s operation is derived from information made available by theManager, upon whom reliance is placed.

 

Production

 

The 2005 JointVenture gold production was 329,625 troy ounces (100% of the 2005 budget)compared to 329,029 troy ounces of gold (94% of the 2004 budget) producedduring 2004.  CC&V has corrected mostof the previously reported leach pad chemistry problems, and is experiencingimproved recoveries.  CC&V is monitoringand working to improve leach pad chemistry on a daily basis.

 

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Cripple Creek & Victor Gold MiningCompanyMine Production for the years endedDecember 31, 2005, 2004 and 2003

 
| ** ** | ** ** | **Ore crushed**             | ** ** | ** **          | ** ** | **Recoverable**              | ** ** | ** **             | ** ** |
|------------|------------|----------------------------------|------------|---------------------|------------|------------------------------|------------|------------------------|------------|
| ** ** | ** ** | **and placed on**      | ** ** | ** **          | ** ** | **gold placed on** | ** ** | ** **             | ** ** |
| **Year**   | ** ** | **leach facility**          | ** ** | **Ore grade**  | ** ** | **leach facility**      | ** ** | **Gold produced** | ** ** |
| ** ** | ** ** | **(millions of tons)** | ** ** | **(gold opt)** | ** ** | **(troy ounces)**       | ** ** | **(troy ounces)** | ** ** |
| 2005       |       | 21.2                             |       | 0.029               |       | 384,306                      |       | 329,625                |       |
| 2004       |       | 20.3                             |       | 0.024               |       | 355,950                      |       | 329,029                |       |
| 2003       |       | 18.7                             |       | 0.031               |       | 369,218                      |       | 283,886                |       |

 

CC&Vappears to have overcome its truck capacity problems, chiefly through improvedmaintenance.  CC&V mined 52.6 milliontons of material during the year (the expansion plan budgeted rate is 58million tons a year), including 20.1 million tons of ore and 32.5 million tonsof waste.  CC&V also moved 1.3million tons of stockpiled ore to the crusher for a total of 53.9 million tonsmoved.

 

The crushingfacility operated at above plant design capacity (20 million tons/year) duringthe year, crushing 21.2 million tons during the year.  Ore placed on the valley leach facilityaveraged 0.029 troy ounces per ton, containing an estimated 588,227 troy ouncesof gold (an estimated 384,306 recoverable ounces of gold).

 

Revenue and Costs

 

During 2005,the Joint Venture sold approximately 326,454 troy ounces of gold at an averageprice of $445.30 per ounce producing total gold sale revenues of approximately$145.3 million.  The Joint Venture cashproduction costs for 2005 were approximately $232 per troy ounce compared to$218 per troy ounce during 2004 and a budget of $219 per troy ounce.  The main reason for the higher cost per ouncein 2005 compared to the budgeted cost per ounce was the increase in variablecosts, such as diesel fuel.  The JointVenture had total operating costs of $106.9 million, including depreciation,depletion and amortization (DD&A) expenses of $30.1 million, accretionexpense of $1.1 million, and expensed exploration of approximately $17,000 forthe year.  This compares to $104.4million, $29.8 million, $0.9 million and $1.4 million comparatively for theyear ended 2004.

 

 Interest expense on the Initial Loans wasapproximately $29.2 million ($23.8 million in the year 2004).  The Company received the Minimum AnnualDistribution of $250,000 which will be recouped from future shares of NetProceeds to the Company.

 

Ore Reserves and Non-reserve Mineralization

 

The JointVenture focused on development, exploration and engineering feasibility workconcerning future operations.  The mainobjective of CC&V’s continuing exploration program for 2005 was to expandinformation on the gold mineralization in two areas of the Wild HorseExtension, area with particular emphasis on metallurgical data, and to further increasethe drill

 

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information available withinareas which have previously indicated existing mineralization.

 

CC&Vcurrently controls over 85% of the patented claims within the district and 100%of the land within the year-end 2005 ore reserve estimate.  All gold ore reserves and mineral resourcesare stated at 100% ownership basis, although portions of the ore reserves aresubject to third party royalties which vary according to individual agreementswith the underlying property owner.

 

Each yearCC&V models its gold ore reserves to incorporate the results of itsexploration program, new geologic information, revised metallurgicalrecoveries, revised gold price, new geotechnical data, new pit designs, newoperating costs and/or allowances for 2005 depletion.  All ore reserves for 2005 were modeled usinga $400 gold price, an increase from the $375 gold price used to model thereserves shown for 2004.  The cutoffgrade for reserves remained unchanged from 2004 at a recoverable cutoff of0.007 ounces per ton.

 

The year enddistrict wide central drill hole database contains 8,346 drill holes (6% coreand 94% reverse circulation rotary) with a total footage of 4,701,339feet.  Samples are collected from the reversecirculation drills at five foot intervals and split with a rotary, wetsplitter.  Coarse exploration drillsamples are collected as two splits.  Onesplit (analytical sample) is sent for analysis, and the second split is kept asa coarse replicate (metallurgical sample). Individual samples are dried, split into one 300 gram sample, pulverizedto 95% minus 150 mesh, blended and fire assayed (FA) using a one assay-toncharge.  Prior to 1996, all samplesgreater than 0.010 opt FA were also analyzed for cyanide soluble gold using ashake leach method (SL).  Commencing1996, all samples are analyzed using both FA and SL assay methods.  The procedure for collecting drill samples withinand adjacent to the existing reserve pits was modified in 2003 to collectingsamples on ten foot intervals to minimize costs without losing any criticaldata.  In 2005, the central drilldatabase was audited by Barnes Engineering Services, Inc.  Any material errors or other issuesidentified were corrected prior to the start of 2005 ore reserve modeling.

 

Resourceshells were changed to a $475 Lerchs-Grossman envelope around the reserve pitsfor 2005 resource estimates from the $425 price of gold used in 2004 oreresource estimates.  The geostatisticalmodeling procedures used by the Manager in computing the ore reserves have beenreviewed by independent consultants (Independent Mining Consultants, Inc.,Mine Reserve Associates, Inc., Mineral Resource Development Associates, Inc.,and Mine Development Associates, Inc.) over previous years, and conform toindustry standards.  The ore reserves areshown on the table below:

 

Unaudited CC&V Ore Reserve Estimate as of December 31, 2004*

Cripple Creek / Victor District

 
| ** **           | ** ** | **Ore**          | ** ** | **Gold**         | ** ** | **Contained** | ** ** | **Estimated** | ** ** | **Estimated**      | ** ** |
|----------------------|------------|------------------|------------|------------------|------------|---------------|------------|---------------|------------|--------------------|------------|
| ** **           | ** ** | **Tons**         | ** ** | **Ounces**       | ** ** | **Gold**      | ** ** | **Recovery**  | ** ** | **Recoverable**    | ** ** |
| ** **           | ** ** | **(000’s)** | ** ** | **Per Ton** | ** ** | **Ounces**    | ** ** | **(Percent)** | ** ** | **Ounces **** | ** ** |
| Proven               |       | 52,830           |       | 0.031            |       | 1,645,844     |       | 61.54         | %          | 1,012,785          |       |
| Probable             |       | 81,469           |       | 0.027            |       | 2,231,971     |       | 61.01         | %          | 1,361,682          |       |
|                 |       |             |       |             |       |          |       |          |       |               |       |
| Total Reserves, 2004 |       | 134,299          |       | 0.029            |       | 3,877,815     |       | 61.23         | %          | 2,374,467          |       |

 

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Unaudited CC&V Ore Reserve Estimate as of December 31, 2005*

Cripple Creek / Victor District

 
| ** **           | ** ** | **Ore**          | ** ** | **Gold**         | ** ** | **Contained** | ** ** | **Estimated** | ** ** | **Estimated**   | ** ** |
|----------------------|------------|------------------|------------|------------------|------------|---------------|------------|---------------|------------|-----------------|------------|
| ** **           | ** ** | **Tons**         | ** ** | **Ounces**       | ** ** | **Gold**      | ** ** | **Recovery**  | ** ** | **Recoverable** | ** ** |
| ** **           | ** ** | **(000’S)** | ** ** | **Per Ton** | ** ** | **Ounces**    | ** ** | **(Percent)** | ** ** | **Ounces ****   | ** ** |
| Proven               |       | 96,313           |       | 0.025            |       | 2,423,049     |       | 63.13         | %          | 1,529,684       |       |
| Probable             |       | 35,001           |       | 0.025            |       | 880,386       |       | 60.01         | %          | 528,328         |       |
|                 |       |             |       |             |       |          |       |          |       |            |       |
| Total Reserves, 2005 |       | 131,314          |       | 0.025            |       | 3,303,435     |       | 62.30         | %          | 2,058,012       |       |
|                 |       |             |       |             |       |          |       |          |       |            |       |
| Change from 2004     |       | (2,985           | )          |             |       | (574,380      | )          |          |       | (316,455        | )          |

 

*Note:* *The tonnage is shown in short tons.*

 

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*    These gold reserve figureswere estimated based on a $400 per troy ounce gold price for all districtdeposits, and are subject to various royalties. There can be no assurance, however, that the Joint Venture can earn aprofit when the market price of gold equals or exceeds the gold price used inestimating those reserves.

 

** Recoverability of contained ounces is based on heap leaching andmetallurgical testing.  Recoverabilityrates vary by ore type.  The recoverableounces shown are an estimate of the ounces of gold which can be economically andlegally recovered based on weight proportion metallurgical averages for alldeposits and do not incorporate potential losses from dilution and miningrecovery.

 

The above estimates are based upon drill data and are a combination of “proven”and “probable” reserves.  Theclassifications of “proven” and “probable” are taken from the Securities andExchange Commission’s Industry Guide 7, which defines the terms as follows.

 

*Proven (Measured) Reserves*.  Reserves for which (a) quantity iscomputed from dimensions revealed in outcrops, trenches, workings or drillholes; grade and/or quality are computed from the results of detailed samplingand (b) the sites for inspection, sampling and measurement are spaced soclosely and the geologic character is so well defined that the size, shape,depth and mineral content of reserves are well established.

 

*Probable (Indicated) Reserves*.  Reserves for which quantity and grade and/orquality are computed from information similar to that used for proven(measured) reserves, but the sites for inspection, sampling, and measurementare farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower thanthat for proven (measured) reserves, is high enough to assume continuitybetween points of observation.

 

The ore reserve figures set forth above are estimates and no assurancecan be given that any particular level of recovery of gold from ore reserveswill in fact be realized.

 

The decreasein the December 31, 2005 ore reserves is primarily a result of miningdepletion during 2005 (an estimated 588,227 contained troy ounces of gold, withan estimated

 

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384,306 recoverable troy ouncesof gold).  Development drilling withindesigned reserve pits and the increased price of gold used in reserve modelingreplaced a small portion (an estimated 67,851 recoverable troy ounces of gold)of the depletion.

 

The focus of the Joint Venture’s 2006 exploration program is to developadditional metallurgical information in mineral resource areas to enable it tochange the classification of a portion of its non-reserve mineral resources tomineral reserve ounces of gold.  Itexpects to achieve this goal through additional infill drilling, geotech andmetallurgical drilling and studies and mining studies.  Further, the Joint Venture is conducting explorationdrilling in additional areas on a widely- spaced drill hole basis with theobjective of defining a mineral resource in the area.

 

Environmental Reclamation

 

CC&V has developed an effective environmental protection andreclamation plan for this high-altitude, semiarid, cold-weather, year-roundleaching environment.  Reclamation hascontinued since 1992 to support post mining land use for wildlife, includingelk.  During 2005 CC&V reclaimedapproximately 7 acres of Ironclad mine mill tails and another 8 acres of bermsand topsoil stockpiles.  Further,CC&V completed its voluntary reclamation of the Portland surface mine.  The Joint Venture has secured financialwarranties of approximately $45 million to insure its success in completing thefinal reclamation of the entire property. Ongoing compliance with federal and state regulations includes seismic,fugitive dust, and noise monitoring for the operation’s meeting applicablestandards for ground and surface water; monitoring rain and snow fall, waterand air emissions.

 

During 2004 and 2005, CC&V undertook a voluntary reclamationproject at the Portland surface mine. The Portland surface mine is located on the southern margin of theCripple Creek Mining District adjacent to the Cresson Project and immediatelynortheast of the town of Victor.  In1986, Texasgulf initiated exploration in the Captain Stopes area just north ofthe Portland #2 shaft and delineated a North-South trending zone ofmineralization over the Hidden Treasure and Captain vein systems.  The resulting Portland surface mine wasstarted and completed in 1988 and disturbed about 20 acres.  From 1988 until 2004, the narrow open pitexhibited steep unsightly highwalls that constituted a potential safetyhazard.  The Portland surface mine wasquite visible from certain vantage points along a nearby county road.  Providing no significant historic value tothe mining district and posing a potential safety hazard and visual blemish,CC&V decided to backfill the surface mine and apply topsoil to there-contoured surface to enhance the re-vegetation efforts.

 

Backfilling of the Portland surface mine began in March, 2004.  Approximately 1.55 million cubic yards ofoverburden and 15,200 cubic yards of topsoil were hauled and placed in the mineto achieve a post-mining topography that complemented the historiclandscape.  Topsoil was spread to anaverage thickness of six inches over the re-contoured Portland backfill.  The topsoil provides enhanced seedbedcharacteristics needed to ensure permanent, self-sustaining re-vegetation.  Finally, CC&V applied approximately 300pounds per acre of inorganic fertilizer and 25 pounds per acre of its currentstandard reclamation seed mix (including native grasses, forbs, andshrubs).  CC&V was recentlyrecognized for the excellence of this project, receiving the “Hard Rock MiningReclamation Award, 2005” from the Colorado Department of Natural

 

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Resources for this project.

 

Employment

 

AngloGold provides the work force required by the Joint Venture, whichhas no employees.  AngloGold employmentrelated to the Joint Venture decreased to 307 at December 31, 2005, from316 at December 31, 2004.  Thedecrease in employment was a result of completing the mine expansion andongoing efforts to safely contain costs.

 

Governmental Regulation

 

Like all mining operations in the United States, the Joint Venture issubject to a multitude of environmental laws and regulations promulgated byfederal, state and local governments including, but not limited to, theComprehensive Environmental Response, Compensation and Liability Act (“CERCLA”);  the Clean Air Act; the Clean Water Act; theHazardous Materials Transportation Act; the Toxic Substances Control Act;Resource Conservation and Recovery Act (“RCRA”) and the Colorado Mined LandReclamation Act.  The Joint Venture’soperations are subject to comprehensive regulation by the United StatesEnvironmental Protection Agency (“EPA”), the United States Mine Safety andHealth Administration and other state and local agencies.  Failure to comply with applicable laws,regulations and permits can result in injunctive action, damages and civil andcriminal penalties.  If the Joint Ventureexpands or changes its existing operations or proposes new operations, it maybe required to obtain additional or amended permits or authorizations.  In particular, CERCLA, commonly called the “SuperfundAct”, contains stringent reporting requirements for the release or disposal ofhazardous substances, with substantial fines for noncompliance.

 

Certain solid and hazardous wastes from mining and mineral processingoperations are temporarily exempt from regulation under RCRA.  The EPA is currently considering thepromulgation of a special set of rules to regulate mining wastes underRCRA, but those may be delayed pending anticipated Congressionalre-authorization and revision of RCRA. The effect of any future regulation on the Joint Venture’s operationscannot be determined until the legislative process is completed and new rules areissued.  However, it is assumed thatregulations may have a significant impact on operations of all mining companiesand increase the costs of those operations.

 

Although the Manager expects that compliance with federal, state and localenvironmental and land use laws and regulations will continue to requiresignificant future outlays of resources, it is not possible to state with anycertainty what impact such compliance may have on the Joint Venture’s futurecapital expenditures or earnings.

 

Distribution of Proceeds and Other Financial Aspects

 

The Joint Venture made payments of the Minimum Annual Distribution of$250,000 to the Company on June 13, 1991, January 15, 1992, and January 15of each subsequent year, to and including January 15, 2006.  Subsequent payments of the same amount arescheduled to be made on January 15th of each year until the conclusion ofthe Initial Phase, as defined in the Joint Venture Agreement, or until thecompletion of mining.  The payments madeon January 15, 1994

 

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and subsequent annual paymentsof $250,000 constitute an advance on Net Proceeds and will be recouped by theManager against future distributions of net proceeds.  After recovery by the Manager of theseadvances, if the Company’s share (20% in the Initial Phase) of Net Proceedsexceeds the applicable Minimum Annual Distribution after recouping any advanceddistributions, the larger amount will be distributed to the Company.  The Joint Venture recorded net income of $9.5million for the year ended December 31, 2005.

 

The Company accounts for its investment in the Joint Venture on theequity method.  Joint Venturedistributions in excess of the investment carrying value are recorded asincome.  During 1992, the Company’s shareof Joint Venture losses exceeded the remaining carrying value of the investmentand, accordingly, the investment was reduced to zero.  The Company does not record its share ofJoint Venture losses incurred subsequent to the reduction of its investmentbalance to zero.  The Company believesthat its liability for loss is limited to its loss of its equity in the JointVenture.  To the extent the Joint Ventureis subsequently profitable, the Company will not record its share of equityincome until the cumulative amount of previously unrecorded Joint Venturelosses has been recouped.

 

As a result ofthe reduction of the Joint Venture investment carrying value to zero during1992, the Company has not recorded its share of the Joint Venture net incomefor the 2005 period, $1,892,000, nor its share of the Joint Venture’s netincome of $1,538,400 for the 2004 period or its share of the Joint Venture’snet loss of $93,800 for the 2003 period. The Company will not record its share of any future Joint Venture netincome unless and until the balance of the Company’s accumulated unrecordedlosses from the Joint Venture ($15,588,000 as of December 31, 2005) arerecovered.

 

**GOLDEN CYCLE PHILIPPINES, INC. (GCPI)**

 

GCPI and itsexploration activities were placed into a standby status in January 1999for the reasons stated below.

 

GCPI Background

 

In January 1997,GCPI signed a comprehensive exploration agreement (the “BGA Agreement”) withBenguet Corporation (“Benguet”), which provided that all costs andparticipation will be shared 50/50 by the parties.  In October 1997, the two companiessigned the First Supplemental Agreement to the BGA Agreement, which added 1,050acres of mineral claims held by Benguet to the BGA.  Under the terms of this supplementalagreement, GCPI will earn a 50% interest in these claims in exchange forfunding the first $250,000 (about 10 million Philippine pesos) of explorationwork.  The claim area lies immediatelysouth of the historic Masara and Hijo gold mines in the Philippines and justnorth of Benguet’s Kingking copper/gold deposit.

 

First Supplemental Agreement to the BGA

 

Phase I of theexploration effort on the five Sagittarius Alpha Realty (“SAR”) claims wascompleted in May 1998.  This effortconsisted of geological mapping, grid soil sampling and analysis, and streamsediment and water analysis.  This workindicates the presence of sizable

 

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areas interpreted to beanomalous gold concentrations.  Thesemust be further tested through trenching, tunneling and drilling to properlyevaluate the gold potential.  The PhaseII exploration could not be carried out as the old leased claims have not as ofthis date been awarded a Mineral Production Sharing Agreement (“MPSA”) asrequired by the 1995 Philippine Mining Law. Thus, all work on this project hasbeen placed on a standby basis until the MPSA is awarded to Benguet, as claimowner.  Benguet has not applied for anMPSA as of March 2006.  The Companyexpects to expend approximately $6,000 during 2006 to maintain GCPI on astandby status.

 

**OTHER OPPORTUNITIES**

 

During 2001, the Company acquired two claim groups in Nevada: the TableTop and the Illipah gold prospects. During first quarter of 2002, the Company incorporated a wholly ownedsubsidiary, Golden Cycle Gold Exploration, Inc. (“GCX”), to independentlydirect the exploration efforts for these claim groups.  As of this report, the Company has not yetfunded GCX.  Finally, the Company has anon-going exploration program in southwest Colorado.

 

**Table Top**

 

To drive to the Table Top claims from Winnemucca, Nevada, travel northon US Highway 95 for approximately one mile. Turn west, to the left, on Highway 49 towards Jungo, NV, a ghost town.  At approximately 4 miles turn left towards anindustrial plant and proceed to the railroad tracks.  Turn right on the road that parallels therailroad and travel approximately 6 miles. At a culvert under the railroad tracks, turn right to the project area,see adjacent map.

 

 

The Table Top claim group consists of 38 wholly owned Federal mineralclaims, controlled by the Bureau of Land Management (“BLM”), and lies withinthe Basin and Range province of north-central Nevada, which over the past fortyyears has become one of the world’s premier gold producing regions.  The Table Top claims are subject to anExploration Right with Option to Purchase agreement requiring the Company topay the annual assessment fees to the BLM and

 

11

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Humboldt County and fivepercent of all expenditures on the property up to a maximum amount of $500,000to Mr. Wendt, from whom the claims were originally purchased.  At present, the Company has paid Mr. Wendtapproximately $7,000.  The Table Topproperty can be interpreted to lie within the “Midas” gold bearing zonestriking northeast across Nevada, and also as a part of a north-south trendcontaining the Sleeper Mine, Sandman, Florida Canyon, Rochester and ReliefCanyon.  The property is located tenmiles west of Winnemucca, Nevada.

 

The Table Top claims cover a brecciated and silicified sediment that ispoorly exposed and has only been unsystematically explored and partially drilltested in the past.  The key goldmineralized feature on the property is a hydrothermal breccia, which containsanomalous gold, arsenic, antimony and mercury. Goldfields Mining Corporation first staked the Table Top property in1986 while conducting surface exploration for an open pit type operation.  A limited rock chip sampling and reversecirculation drilling program indicated the presence of a gold mineralizedsystem.

 

The Table Top claims do not have a readily available source of power,contain no known mineral reserve or resource, and are exploratory innature.  The Company’s intendedexploration target will be the discovery of a high grade mineralized gold veinsystem at depth, to be developed by a phased exploration program.  The Company does not anticipate additionalexploration activity on this property during 2006.

 

**Illipah**

 

The Company’sIllipah project area can be reached by car from Ely, Nevada.  From Ely travel west on US Highway 50 forapproximately 33 miles.  You will passthe turnoff for Illipah Reservoir to your left. Continue west on US Highway 50 for another 5 miles.  Turn right, to the north on a gravelroad.  There is a stop sign at thisintersection.  Travel north for 6 milesto the project site, see adjacent map.

 

****

 

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This gold project is situated in eastern Nevada at the southernextension of the Carlin Trend that contains the largest accumulation of golddeposits in North America.  The Companycontrols 191 unpatented Federal BLM lode mining claims (approximately 3,800acres) over a six-mile strike length that contains favorable stratigraphic andstructural environments for the discovery of a significant gold deposit.  The property is subject to advance royaltypayments and a 2% Net Smelter Return (“NSR”) royalty on all mineralproduction.  An NSR is a royalty, usuallya percent, of smelter production less certain allowable costs such as smeltingand transportation to the smelter.  TheNSR royalty is reduced to 1% if $2,000,000 in advance royalties is paid.

 

Past production from the immediate area of Illipah is 37,000 ounces ofgold from an open pit mined in the late 1980’s and early 1990’s.  The ore was processed using heap leachtechnology.  This gold mineralization isenvisioned as a surface gold anomaly that indicates there is a strongpossibility of high-grade gold mineralization at depth near favorablestratigraphic contacts and structures. The geological similarities between Illipah and Newmont’s Rain Deposit(the “Rain Deposit”) located 65 miles north-northwest are striking.  The Rain Deposit originally was mined as anopen-pit, but is currently being mined underground.  The reported resource potential is 2 millionounces of gold and the average grade 0.40 oz/troy Au.  An underground target similar to the RainDeposit is the concept being tested by the Golden Cycle exploration program.

 

The Illipah claims contain no known mineral reserve or resource and areexploratory in nature.  Past explorationon the property largely focused on its near surface mineral potential, thoughsome deeper exploration drilling was completed by two companies.  The recommended drill program for Illipahconsisted of eight reverse circulation drill holes angled perpendicular to theenvisioned structures.  The holes wereplanned to test the favorable stratigraphic horizons and structuralintersections at depth beneath gold anomalies on the surface.  The target depths of the holes ranged from800 to 1,500 feet.  The Company is usinggenerator power for its current exploration program.  Power is available just outside the property’sboundary should the Company elect to pay the cost to bring it on to theproperty for future operations.

 

During 2005, the Company spent approximately $300,000 on explorationdrilling on the Illipah claim group located in White Pine County, Nevada.  The snow and generally muddy conditionslimited access to the property and drilling sites during March, April and May 2005.  The drilling program got started in early June 2005and immediately encountered difficult drilling characteristics with numerousvoids limiting or eliminating sample recovery. None of the drill holes were completed to target depth.  The exploration drilling recommenced in September 2005with another drilling contractor. Several of the drill holes were completed to target depth.  However all of the drill holes driftedexcessively to near vertical and the targets at depth were not tested.  Although several intercepts of goldmineralization were encountered and three of the drill holes crossed zones ofboth Pilot shale and Devil’s Gate limestone and zones of massive sulfides, nosignificant zones of mineralization were identified.  Management is further evaluating the geology,incorporating the new drill information, to determine if further explorationdrilling is warranted.  To date, theCompany has not attempted to quantify the costs associated with a potentialfollow up exploration program.

 

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**Colorado**

 

The Company’scontinuing exploration effort in the Company’s home state of Colorado waslargely placed on hold during 2005 while the Company focused on its explorationpriority, the Illipah exploration project. The Company has developed a geologic concept indicating the possibilityof an exploration target which meets the Company’s criterion in southwestColorado.  During 2006, the Company plansto complete a regional study of the target area, including satellite imagerywhich it began in 2004, with the objective of narrowing the target area.

 

**ITEM 1A.  RISK FACTORS**

 

An investment in our securities involves risks and uncertainties.  These risks and uncertainties could cause ouractual results to differ materially from our historical results or the resultscontemplated by any forward-looking statement contained in this Annual Reporton Form 10-K or that we make in other filings with the Securities andExchange Commission (“SEC”) under the Securities Exchange Act of 1934 or inother public statements.  You shouldconsider the following factors carefully, in addition to the other informationcontained in this Form 10-K, before deciding to purchase, sell or hold oursecurities.

 

**Risks Relating to Our Company and Industry**

 

***The exploration of mineral properties ishighly speculative in nature and is frequently unproductive. We cannot becertain that our acquisition, exploration, and development activities will becommercially successful.***

 

Other than our interest in CC&V, we do not have any properties withcurrent or planned gold production. Exploration for minerals is highlyspeculative. Most exploration projects do not result in the discovery ofmineable deposits of ore. Moreover, any mineralization discovery may not be ofsufficient quantity or quality to be mined profitably. We use the evaluationwork of professional geologists, geophysicists, and engineers for estimates indetermining whether to commence or continue mining. These estimates generallyrely on scientific and economic assumptions, which may not be correct. As aresult of these uncertainties, we may expend substantial amounts of funds onexploration or mining projects that may ultimately result in failure to locategold minerals sufficient to justify commercial mining operations.

 

***Due to the nature of mining activities, weface risks of delays and increased costs resulting from environmental, technical,and geological factors****.*

 

Mining activities are subject to substantial operating hazards,including weather, environmental conditions, unforeseen technical difficulties,unusual or unexpected geological formations, equipment breakdowns ormalfunctions and work interruptions. There may also be limited availability of water, which is essential tomilling operations. The occurrence of any of these events could delay orinterrupt production, increase production costs, or result in liability for us.Our results of operation could therefore be adversely affected as well.

 

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***We face strongcompetition in our industry and may not be able to compete effectively.***

 

Our industry consists ofnumerous companies which compete in the acquisition and development of miningproperties. Many of these companies are significantly larger than us orCC&V. They may also enjoy access to more capital resources than we do. Ourcompetitors may be able to engage in more exploration activities, acquirerights to more properties with potential quantities of gold, and more easilyobtain the funds necessary to conduct production activities. Accordingly, wemay not be able to compete effectively with these companies.

 

***The mining andmineral processing industries are subject to extensive governmental regulationswhich can impose significant costs and burdens.***

 

Our mining activities, including those of CC&V, are subject toextensive federal, state, and local regulations governing air and waterquality, mine reclamation, solid and hazardous waste handling and disposal, andoccupational safety. Although we are not aware of any circumstances which wouldcause CC&V or any of our other properties to be in violation of any ofthese regulations, there can be no assurance that we and CC&V will be ableto be in compliance with such regulations in the future. Factors that may leadto our inability to comply with regulations include, for example, futurechanges in regulations, increased cost of compliance, and our financialcondition in the future. Failure to comply with the regulations can result ininjunctive action, damages, and civil and criminal penalties, all of whichcould adversely affect our business.

 

In addition, as of December 31,2005, CC&V had posted a bond of approximately $45 million with the ColoradoMined Land Reclamation Board to secure reclamation of mining disturbancesarising from the CC&V Joint Venture’s mining activities, and will likely berequired to post additional sums to accommodate further mining at the Cressonsite.

 

Further, on November 27,2000 and on November 30, 2001, the Sierra Club and Mineral Policy Centerfiled two lawsuits against CC&V, AngloGold (and one of its affiliates) andthe Company (the Defendants), alleging various past and ongoing violations ofthe federal Clean Water Act at the Cresson Project near Victor, Colorado.  (See Item 3, Legal Proceedings, foradditional information).

 

***We are subject torisks related to our Philippine activities.***

 

We have entered into an agreement with a Philippine mining company,Benquet Corporation. The operating agreement stipulates that our Philippinesubsidiary, Golden Cycle Philippines, Inc., would manage the exploration,development and/or mining of certain designated properties in the Philippines.We have never before engaged in mining activities in the Philippines. Moreover,since our inception in 1972, we have never served as manager of any miningproject in the United States or any foreign country. Consequently, we will, in connectionwith activities in the Philippines, be subject to the risks and uncertaintiesinherent in any new business enterprise, such as the ability to hire and retainqualified personnel and to raise sufficient capital.  Further, we may also be subject to certainrisks of doing business in foreign countries, such as political instability,unfamiliarity with local laws, and currency exchange risk.  Currently all the activities of thePhilippines subsidiary are on hold pending approval of a Mineral ProductionSharing Agreement by the Philippine government. If opportunities to economically pursue activities in the Philippinesare available, and if we elect to pursue them, additional capital may berequired.  There is no assurance that wewill be able to obtain the additional capital, if required, or that suchcapital would be available to us on terms which would be acceptable.

 

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***We are dependenton the efforts of key personnel and may be harmed if we are unable to retainthese individuals.***

 

The success of our business depends, in large part, upon the skills andefforts of a small group of key personnel, including R. Herbert Hampton, ourPresident, Chief Executive Officer, and Treasurer. If we are not successful inretaining such key personnel, or attracting similarly qualified individuals,our business may be harmed. We do not maintain “key man” life insurance on anyof our key personnel.  Therefore, theloss of our key personnel could adversely impact our ability to execute ourbusiness plan, which may adversely affect our results of operations.

 

***We could be deemed an “investmentcompany” under the Investment Company Act of 1940.  This would impose significant restrictions onus and would be likely to have a material adverse impact on our financialcondition and results of operations.***

 

Our principal assets include our equity interest and participation inthe Joint Venture.  Our interest in theJoint Venture could be deemed an “investment security” for purposes of theInvestment Company Act.  In the eventthat such interest is determined to have a value that comprises 40% or more ofour total assets, we could be deemed to be an investment company under theInvestment Company Act, unless an exemption from registration were available orwe were to obtain an order of the SEC excluding or exempting us fromregistration under the Investment Company Act.

 

If anything were to happen which would cause us to be deemed aninvestment company, the Investment Company Act would impose significantrestrictions on us, including severe limitations on our ability to borrowmoney, to issue additional capital stock and to transact business withaffiliates.  In addition, because ouroperations are very different from those of the typical registered investmentcompany, regulation under the Investment Company Act could affect us in otherways that are extremely difficult to predict. In sum, if we were deemed to be an investment company it could becomeimpractical for us to continue our business as currently conducted and ourfinancial condition and results of operations could suffer materially.

 

**RisksRelating to the Cripple Creek****Joint Venture**

 

***Because we relyon CC&V for substantially all of our revenues and cash flow, our businesswill be harmed if CC&V’s operation is negatively impacted.***

 

Our participation in CC&V constitutes our primary business. Goldproduction at CC&V accounted for all of our total gold production in fiscalyears ended December 31, 2005 and December 31, 2004. Substantiallyall of our revenues and cash flow are derived from this gold production. Ourresults of operations, cash flow, and financial condition could be materiallyadversely affected if production at the Cresson mine is disrupted due to laborinterruptions, technical problems, or environmental factors, such as seismicevents, or other unforeseeable events.

 

In addition, AngloGold has the ability to reduce CC&V’s goldproduction, even without our consent. AngloGold, as the manager of the CC&V Joint Venture, develops,revises and implements budget and plans for the Joint Venture.  As the 67% majority shareholder in the JointVenture, AngloGold can adopt or change any plan or budget for the JointVenture.  We cannot assure you thatAngloGold will not reduce CC&V’s planned gold production in the futurewhich

 

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will materially and adverselyaffect our profitability.

 

***CC&V issubstantially dependent on AngloGold for its operating funds and may not beable to continue operations if such funds are no longer available.***

 

The exploration and development of CC&V’s properties are governedby the terms of the Joint Venture agreement, which grants operationalresponsibility and management authority in the Joint Venture to AngloGold. IfAngloGold, whose proportionate share of the Joint Venture’s costs is muchlarger than ours, is not in a position to furnish (or otherwise chooses not tofurnish) any operating funds required by the Joint Venture, it is unlikely thatthe Joint Venture would continue in operation. Because CC&V constitutes ourprimary operating asset, such an event would adversely affect our results ofoperations and financial condition. Should AngloGold withdraw from the CC&V Joint Venture, our primarysource of annual operating revenues would cease and, unless we find a new JointVenture partner, our ability to continue as a going concern would be severelyimpaired.  It is uncertain that we wouldbe able to find a new Joint Venture partner, or that terms satisfactory to uscould be negotiated with the new partner.

 

***CC&V has hada history of losses until recently, and because its profitability depends onthe price of gold, it may incur losses in the future.***

 

During fiscal years ended December 31, 2005 and 2004, the CC&VJoint Venture recorded net income of $9.460 million and $7.692 million,respectively.  However, in previousyears, CC&V incurred substantial losses during each year of operationexcept 1996.  During the fiscal yearended December 31, 2003, the Joint Venture recorded net loss of $0.469million.  There is no assurance thatCC&V will be able to achieve profitability in any subsequent period or tosustain profitability for an extended period. The ability of CC&V tooperate on a profitable basis depends, to a large degree, on the market pricefor gold. The market price of gold is volatile, subject to speculative movementand is affected by numerous factors beyond our control, includinginternational, economic and political conditions, levels of supply and demand,the inventory levels maintained by gold producers and others and, to a lesserdegree, inventory carrying costs (primarily interest charges) and internationalexchange rates. Whether gold prices will maintain a level that will enableCC&V to operate profitability on a continuing basis cannot be assured.

 

***It is unlikelythat we will receive net proceeds from CC&V in the foreseeable future.***

 

Based on the amount of the Initial Loans payable by CC&V toAngloGold ($353,589,000 as of December 31, 2005) which must be repaidprior to the distribution of any net proceeds to us, and the amount of incomewhich the Joint Venture can reasonably be expected to generate over the nextseveral years, we believe that, absent a significant and sustained increase inthe price of gold and an improvement in the efficiency of the operations of theJoint Venture, it is unlikely that we will receive more than the minimum annualdistributions from CC&V for the foreseeable future based on the currentterms of the Joint Venture agreement. Therefore, even if CC&V achievesprofitability for a sustained period, it is unlikely that this would have anyimpact on our cash flow for the foreseeable future.

 

***The Company is consideringfinancing its proportionate share of the CC&V Joint Venture Initial Loan***

 

We are considering financing the 33% of the CC&V debt attributableto our 33% equity

 

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share in the JointVenture.  This alternative would requireraising equity and/or debt to finance our proportional share of the debt.  There is no assurance the Company could raisethese funds, or, if possible, obtain acceptable terms on the financing.  If this alternative is executed at some pointin the future, current shareholders could be significantly diluted.  Furthermore, if a portion of the financingwere comprised of debt with a required repayment schedule, it is possible thatinterest and principal repayments from CC&V may be insufficient in a givenperiod to enable us to pay the required debt service obligation.

 

***CC&V’s goldore reserve figures are estimated based on a number of assumptions and mayyield less gold under actual production conditions than the Joint Venturecurrently estimates.***

 

CC&V has prepared goldore reserve estimates in accordance with industry practice and SEC IndustryGuide Number 7. Ore reserve estimates are based on prepared mining plans;however actual reserves and/or production may vary from the estimates.  Key assumptions used in the estimation mayprove to be inaccurate (such as future gold prices, gold recovery rates,cut-off grades and operating costs). Reserve estimates require revision basedon actual experience or new information. Experience may require changes oradjustments to the mining plans in a way which adversely impacts the orereserve estimates. Future gold prices may decline, operating costs mayincrease, gold recoveries may decrease to a point which would make mining oflower grade mineralization uneconomical.

 

**RisksRelating to the Market**

 

***Our stock pricehas been and could continue to be volatile.***

 

The market price of ourCommon Stock has been subject to significant fluctuations. The securitiesmarkets have experienced, and are likely to experience in the future,significant price and volume fluctuations which could negatively affect themarket price of our Common Stock without regard to our actual operatingperformance. In addition, the trading price of our Common Stock could besubject to significant fluctuations in response to:

 

•      actual or anticipated variations in ourquarterly operating results;

•      public announcements by us or other industryparticipants;

•      factors affecting the gold market;

•      changes in national or regional economicconditions; and

•      general market conditions.

 

**ITEM 1B.  UNRESOLVED SEC STAFFCOMMENTS**

 

None.

 

**ITEM 2.  PROPERTIES**

 

**MINING, OIL AND GAS RIGHTS**

 

Mining Properties

 

The Joint Venture mining properties consist of owned, leased andoptioned mining claims and other land covering more than 4,800 acres ofpatented mining claims in and around the

 

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Cripple Creek Mining Districtof Teller County, Colorado and include most of the principal formerly-producingmines of the Cripple Creek district.  Themajority of the above acreage was contributed by the Company to the JointVenture.  Subsequently, the Joint Venturehas purchased, leased and optioned additional acreage, and continues to do soas opportunity arises to complete the consolidation of the district.

 

The Joint Venture mining properties are situated on the west flank ofPikes Peak, about 20 air miles west of Colorado Springs and 65 air miles southof Denver.  The area is accessible bypaved highway and supplied by requisite utilities.  The elevation of the properties averages slightlyover 10,000 feet above sea level.  Snowaccumulations are generally light and do not materially interfere with accessto the property.

 

To a great extent, the Joint Venture mining properties lie within theboundary of a geological entity known as a caldera or “volcanic subsidencebasin” (the “Basin”).  The Basin is ofrudimentary elliptical outline, with its long axis trending in a northwesterlydirection.  It has a length of about 4-1/2miles and a width of about 2-1/2 miles, covering some 5,000 acres at the groundsurface.  The area of the Basin graduallynarrows with depth.  The bulk of thehistorical Cripple Creek gold production was from the underground mines withinthe Basin, with the major mines located in the southern portion of the Basin.

 

****

 

To drive to the mine from Colorado Springs, Colorado, travel west onEast Pikes Peak Avenue toward North Nevada Avenue / I-25 BR / US-87 / US-85 forless than 1 mile. Turn left onto S. Nevada Avenue / I-25 BR S / US-87 S / US-85S at a half mile. Turn right onto E Cimarron Street for 3 miles. E CimarronStreet becomes US-24 W for 22 miles. Turn left onto CO-67 for 18.7 miles. Turn left onto CO-67 / S 2ND ST.Continue to follow CO-67 for 5 miles. Stay straight to go onto Victor Avenuefor less than 1 mile. Turn right onto 2nd Street into Victor, CO.

 

The dominantgeologic feature of the Cripple Creek & Victor Mining District is a 32-28

 

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Ma diatreme-intrusive complexhosted in Precambrian rocks located between the towns of Cripple Creek andVictor, Colorado.  The diatreme-intrusivecomplex is 6.4 km long, 3.2 km wide and consists of diatremal breccia that hasbeen intruded by stocks, dikes and discordant breccias.  Diatremal breccia lithologies include brecciascomposed exclusively of volcanic, Precambrian or sedimentary material to anycombination of the three.  Earlyintrusions are predominantly within the alkaline phonolite-phonotephritepetrographic series and were followed by later lamprophyres.  All rocks have undergone a long history orstructural and hydrothermal activity. Gold mineralization occurs in all rock types as disseminated and/orstructurally-controlled orebodies.  Primaryore minerals include microscopic native gold and gold tellurides.  Silver is present but is economicallyunimportant.

 

From the inception of production in 1891 until the suspension ofoperations in 1960, the Cripple Creek Mining District was the major gold miningdistrict in the United States.  It isestimated that approximately 21 million ounces of gold were produced in thisperiod, principally from mines later contributed to the Joint Venture by GoldenCycle Gold Corporation.  The JointVenture, including a number of Joint Venture partners, has added about 2.8million troy ounces of gold production to this total during the period 1985through 2005.  The Joint Venture miningproperties include most of the principal formerly producing mines in theCripple Creek district, including the Ajax, Cresson, Portland, Independence,Vindicator and Golden Cycle.  Because ofthe age of many of the mines and the fact that mining operations throughout theBasin declined and were suspended more than thirty years ago, the existing mineshafts and workings are unsuitable for current operation without substantialrehabilitation.  The Joint Venture is notcurrently and does not anticipate, operating underground.

 

Oil and Gas Mineral Rights

 

The oil and gas properties of the Company are comprised ofapproximately 7,300 acres of mineral rights in the Penrose Area of FremontCounty, Colorado.  There is no evidenceof successful oil and gas development nearby, with the exception of theFlorence, Colorado area.  Florence was thesite of the first producing wells in Colorado in the 1860’s and the area isstill producing on a limited scale today. Several years ago, interest was shown in leasing very large acreages ofstate land about 50 to70 miles east of the Company’s land.  No development of that area is visible atthis time, nor is it expected in the forseeable future.  The oil and gas properties have no carryingvalue for balance sheet purposes.

 

**ITEM 3.  LEGAL PROCEEDINGS**

 

Two federal Clean Water Act cases against an active mining enterprisenear Cripple Creek and Victor, in Teller County, Colorado, initiated by privateorganizations against the owner and operator thereof, in which the Company hasbeen actively engaged for more than five years, were tried in the United StatesDistrict Court for the District of Colorado beginning February 13,2006.  The trial ended with the filing ofproposed findings of fact and closing written arguments on March 6, 2006.

 

a.     Thefirst ten Causes of Action in the first of these two cases, Civil Action No. 00-MK-2325,allege unpermitted discharges of pollutants into Fourmile Creek and from theRoosevelt Tunnel into Cripple Creek, and discharges of pollutants exceedingpermitted

 

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amounts from the Carlton Tunnel and Arequa Gulch outfalls; the eleventhand twelfth causes of action in that case concern a discharge permit issued bythe Colorado Water Quality Control Division in 1996 for an outfall in ArequaGulch.  Plaintiffs assert, and thedefendants deny, that there are, among other things, any ongoing violations ofthe federal Act.

 

b.     Thesecond of these two cases, Civil Action No. 01-MK-2307, relates to seepsasserted to be point-source discharges of Cresson Project drainage from theMoffat Tunnel Cribbing Wall and the Squaw Gulch Pond to Cripple Creek and atributary thereto in Squaw Gulch.

 

Management has contested both of those cases, and is coordinating itsown efforts with those of the owner and operator, Cripple Creek &Victor Gold Company (“CC&V”), and the majority owners thereof, AngloGoldNorth America, Inc., and AngloGold (Colorado) Corp., now AngloGold AshantiNorth America, Inc., and AngloGold Ashanti (Colorado) Corp.,respectively.  The Company is neither theowner nor operator and its interest is limited to its minority interest inCC&V.  The likelihood of an unfavorableoutcome to the Company cannot be evaluated, and no estimate can be made of theamount or range of potential loss, if any, which might result either to theCompany or to its interest in CC&V, because the case is now pendingdecision by the Court, and as observed by the Judge, the winners can expect thelosers to appeal.  It is too early toevaluate what might happen on any such appeal.

 

The Company expended approximately $12,000 and $17,000 during the years2005 and 2004, respectively, defending against these suits.

 

**ITEM 4.  SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS**

 

The Company did not submit any matters to a vote of security holdersduring the fourth quarter of 2005.

 

**PART II**

 

**ITEM 5.  MARKET FOR REGISTRANT’SCOMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES**

 

Market Information

 

The Company’sCommon Stock has been listed and traded on the Pacific Exchange since 1987(except during the period from July 6, 1994 to August 30, 1994), andfrom July 1, 1983 until June 30, 1992 was quoted on NASDAQ.  As of March 6, 2006 the Company’slisting was moved to the NYSE-Arca.  TheCompany’s trading symbol is GCGC on the NYSE-Arca Exchange.  The following table shows the high and lowbid price per share on the Pacific Exchange, or the Over the Counter market,for each calendar quarter since January 1, 2004.  All stock prices for periods in 2004 prior tothe five for one stock split in July 2004 have been adjusted to reflectthe split.

 

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| **Price Range For:**        | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|---------------------------------------|------------|----------|------------|---------|------------|
| Quarter ended December 31, 2005  |       | $        | 4.10       |    | $          | 3.25 |   |
| Quarter ended September 30, 2005 |       | 3.55     |       | 2.00    |       |
| Quarter ended June 30, 2005      |       | 3.30     |       | 1.90    |       |
| Quarter ended March 31, 2005     |       | 3.12     |       | 2.00    |       |
|                                  |       |     |       |    |       |
| Quarter ended December 31, 2004  |       | 2.98     |       | 2.10    |       |
| Quarter ended September 30, 2004 |       | 2.60     |       | 0.51    |       |
| Quarter ended June 30, 2004      |       | 3.52     |       | 2.00    |       |
| Quarter ended March 31, 2004     |       | 3.15     |       | 2.90    |       |
|                                       |            |          |            |         |            |  |  |

 

Bid prices are between dealers and do not include mark-ups, markdowns,or commissions, nor do they necessarily represent actual transactions.

 

Holders of the Company’s Common Stock

 

The number of holders of record of the Company’s Common Stock as of March 27,2005 was 797.  The number of beneficialowners for whom shares are held in “street name” as of March 27, 2005 isbelieved to be more than 500.

 

Dividends

 

The Company has not paid any dividends. The Company effected a five-for-one stock split effective July 2004following shareholder approval of an increase in the authorized shares of theCompany’s Common Stock from 3.5 million to 100 million at the 2004 annualmeeting of shareholders.  The Companydoes not have plans to pay any dividends.

 

Equity Compensation Plans

 

The following table shows information for all equity compensationplans:

 
| ** **                                                  | ** ** | ** **                                 | ** ** | ** **                        | ** ** | **Number of Securities**    | ** ** |
|-------------------------------------------------------------|------------|--------------------------------------------|------------|-----------------------------------|------------|---------------------------------------|------------|
| ** **                                                  | ** ** | ** **                                 | ** ** | ** **                        | ** ** | **Remaining Available for** | ** ** |
| ** **                                                  | ** ** | ** **                                 | ** ** | ** **                        | ** ** | **Future Issuance Under**   | ** ** |
| ** **                                                  | ** ** | **Number of Securities to** | ** ** | **Weighted-Average**              | ** ** | **Equity Compensation**          | ** ** |
| ** **                                                  | ** ** | **be Issued Upon Exercise** | ** ** | **Exercise Price of**   | ** ** | **Plans (Excluding**             | ** ** |
| ** **                                                  | ** ** | **of Outstanding Options**       | ** ** | **Outstanding Options,**     | ** ** | **Securities Reflected in** | ** ** |
| **Plan Category**                                      | ** ** | **Warrants and Rights**          | ** ** | **Warrants and Rights** | ** ** | **the First Column)**       | ** ** |
|                                                        |       |                                       |       |                              |       |                                  |       |
| Equity Compensation Plans Approved by Security  Holders     |       | 385,000                                    |       | $                                 | 2.13       |                                  | 225,000    |   |
|                                                        |       |                                       |       |                              |       |                                  |       |
| Equity Compensation Plans Not Approved by Security  Holders |       | —                                     |       | —                            |       | —                                |       |
| Total                                                       |       | 385,000                                    |       | $                                 | 2.13       |                                  | 225,000    |   |

 

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There were no sales ofunregistered securities or stock repurchases by the Company during the yearended December 31, 2005.

 

**ITEM 6.  SELECTED FINANCIAL DATA**

 
| ** **                                | ** ** | **2005**  | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** | **2001**  | ** ** |
|-------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Revenues (1)                              |       | $         | 250,000    |      | $          | 250,000   |       | $         | 250,000    |      | $          | 250,000 |   | $ | 250,000 |   |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Other income                              |       | 61,000    |       | 30,000    |       | 581,000   |       | 30,000    |       | 86,000    |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Expenses                                  |       | 913,000   |       | 602,000   |       | 607,000   |       | 503,000   |       | 430,000   |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Share of Mining  Joint Venture Losses (2) |       | —    |       | —    |       | —    |       | —    |       | —    |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Net income  (Loss)                        |       | (602,000  | )          | (322,000  | )          | 224,000   |       | (223,000  | )          | (94,000   | )          |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Net income  (Loss) Per Share              |       | (0.06     | )          | (0.03     | )          | 0.02      |       | (0.02     | )          | 0.00      |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Total Assets                              |       | 1,125,000 |       | 1,647,000 |       | 1,872,000 |       | 1,417,000 |       | 1,649,000 |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Long term  obligations                    |       | —    |       | —    |       | —    |       | —    |       | —    |       |
|                                           |            |           |            |           |            |           |            |           |            |           |            |  |  |  |  |  |

 

----

(1)  Revenues arecomprised of the Minimum Annual Distribution. See Management’s Discussion and Analysis below, and Notes to theconsolidated financial statements for a description of the accounting for theMinimum Annual Distribution.

 

(2)  The JointVenture recorded net income of $9.5 million for the year ended December 31,2005, net income of $7.7 million for the year ended December 31, 2004, andnet loss of $0.5 million for the year ended December 31, 2003.  The Company has not recorded its share of theJoint Venture net income for the 2005 period ($1,892,000), nor its share of theJoint Venture’s net income for the 2004 period ($1,538,400), or its share ofthe Joint Venture’s net loss for the 2003 period ($93,800) because its JointVenture investment balance was reduced to zero in 1992.  The Company will not record its share of anyfuture Joint Venture net income until and unless the balance of the Company’saccumulated unrecorded losses from the Joint Venture ($15,588,000 as of December 31,2005) are recovered.  See Management’sDiscussion and Analysis below, and Notes to the consolidated financialstatements.

 

**ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

Overview

 

Our financial statementsconsolidate the operations of our wholly-owned subsidiary, Golden CyclePhilippines, Inc., with those of Golden Cycle Gold Corporation.  Golden Cycle Philippines, Inc. has minimalcosts and assets and Golden Cycle Gold Exploration, Inc. had no operationsor assets during the year ended December 31, 2005.

 

23

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Currently, our primarymining investment and source of cash flows is our 33% interest in the CC&V JointVenture.  The Joint Venture engages ingold mining activity in the Cripple Creek area of Colorado.  The Company’s Joint Venture co-venturer isAngloGold.  In addition to our interestin the Joint Venture, we own three gold mineral prospects which we are notactively exploring at present.

 

Our rights andobligations relating to our Joint Venture interest are governed by the JointVenture Agreement.  The Joint Venture iscurrently, and for the foreseeable future will be, operating in the InitialPhase, as defined in the Joint Venture Agreement.  In accordance with the Joint VentureAgreement, AngloGold manages the Joint Venture and is required to finance alloperations and capital expenditures during the Initial Phase.  See “Description of Mining Joint Venture”above.

 

Liquidity and CapitalResources

 

Our working capital was$1,053,000 at December 31, 2005 compared to $1,558,000 at December 31,2004.  Cash used in operations was$639,000 in 2005 compared to $333,000 during 2004.  The increase in cash used in operationsduring 2005 was primarily due to the increased exploration expenses associatedwith the Illipah drilling program ($255,000) and increased legal costs withingeneral and administrative expenses ($90,000) during the 2005 period.  Working capital decreased by approximately$505,000 at December 31, 2005 compared to December 31, 2004 primarilydue to net losses in the 2005 period partially offset by approximately $93,000in proceeds from the exercise of stock options during the year.

 

During 2005, the Companybudgeted approximately $259,000 for the initial exploration program for itsIllipah gold exploration project, expending approximately $300,000 on theproject.  The $41,000 cost overrun on theproject was due to the weather difficulties experienced in March thru May 2005and the inability of the first drilling contractor to complete the drillingprogram.  The Company is incorporatingthe new drill information into its models and further evaluating the geologicmodels and information to determine if further exploration drilling iswarranted.

 

The Company completed thesale of certain Johnson Ditch Water Right it owned in Fremont County, Coloradoto the City of Cripple Creek on December 31, 2003, for $679,098 in theform of a receivable which resulted in a $546,418 gain.  The total revenue to the Company from sale ofthis ‘Water Right’ was $991,598, which amount includes the $312,500 which wasreceived by the Company when a portion of the sale to the City of Cripple Creekclosed on December 31, 1996.  TheCompany received payment in full from the City of Cripple Creek on January 7,2004.  The Company does not have anyfurther Water Rights.

 

We believe that theCompany’s working capital, augmented by the Minimum Annual Distribution fromthe Joint Venture, is adequate to support operations at the current level forthe coming year, barring unforeseen events. We anticipate that our Philippine subsidiary will hold all work on astandby basis until the MPSA is awarded to the claim owner.  If opportunities to economically pursue orexpand Philippine, Nevada, Colorado operations, or any other opportunitydiscussed above (see Item 1, Other Opportunities) are available, and we electto pursue them, additional working capital may also be required.  It is possible that the Company will elect to

 

24

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continue the Illipahexploration program which will require additional capital.  There is no assurance that we will be able toobtain such additional capital, if required, or that such capital would beavailable to the Company on terms that would be acceptable.  Furthermore, if we were to commence suchoperations, it is not presently known when or if a positive cash flow could bederived from the operations.  The Companyis considering financing its portion of CC&V’s initial loan ($353.6 millionat December 31, 2005).  To financeits portion of CC&V’s initial loan the Company would have to raise additionalcapital in some form of debt and/or equity issue.  There is no assurance the Company could raisethese funds, or, if possible, obtain acceptable terms on the financing. Suchfinancing would likely result in a substantial dilution of the Company’scurrent equity holders.

 

Results of Operations

 

2005 vs 2004

 

We recorded net loss of$602,025 for the year ended December 31, 2005 compared to a net loss of$322,582 for the year ended December 31, 2004.  The increase in net loss during the 2005period was primarily due to increased exploration expenses associated with theIllipah exploration drilling program of approximately $255,000 and increasedadministrative costs, specifically legal fees. The cost of compliance with the provisions of the Sarbanes-Oxley Act of2002 continues to significantly increase the Company’s administrative costs,particularly its legal expenses. Compliance costs will further increase in 2006 to complete the requiredinternal control reviews.

 

2004 vs 2003

 

We recorded net loss of$322,582 for the year ended December 31, 2004 compared to a net profit forthe year ended December 31, 2003 of approximately $224,135.  The difference between the net loss in 2004compared to the net profit in 2003 was primarily the absence of the gain on theone time sale of Water Rights in 2003 (see above).  During 2004, the cost of compliance with theprovisions of the Sarbanes-Oxley Act of 2002 significantly increased theCompany’s administrative costs, particularly its legal expenses.

 

We account for ourinvestment in the Joint Venture on the equity method.  Joint Venture distributions in excess of theinvestment carrying value are recorded as revenue, as we are not required tofinance the Joint Venture’s operating losses or capital expenditures.  Correspondingly, we have not recorded ourshare of Joint Venture income or losses incurred subsequent to the reduction ofthe Company’s Joint Venture investment balance to zero in 1992.  We will not record our share of equity incomeuntil the cumulative amount of previously unrecorded Joint Venture losses hasbeen recouped.  As of December 31,2005, the Company’s accumulated unrecorded losses from the Joint Venture are$15,588,000.  At the current prevailingprice of gold we do not expect distributions from the Joint Venture in excessof the Minimum Annual Distribution ($250,000 per year) for several years.

 

The Joint Venturerecorded net income for the year ended December 31, 2005 of approximately$9.5 million compared to net income of $7.7 million for the year ended December 31,2004, and net loss of $0.5 million for the year ended December 31,2003.  The primary reason for the JointVenture’s improved performance in both 2005 and 2004 over the previous years’

 

25

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performance was theincrease in the prevailing price for gold bullion during each year.

 

Tabular Disclosure ofContractual Obligations

 

The following tablesummarizes the Company’s current contractual obligations.

 
| ** **                       | ** ** | ** ** | ** ** | **Payment due by period** | ** ** |
|----------------------------------|------------|------------|------------|------------------------------------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Less than**                       | ** ** | **1-3** | ** ** | **3-5** | ** ** | **More than** | ** ** |
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **1 year**                          | ** ** | **years** | ** ** | **years** | ** ** | **5 years** | ** ** |
| Long-Term Debt  Obligations      |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Capital Lease  Obligations       |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Operating Lease  Obligations     |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Purchase  obligations            |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Other Long-Term  Liabilities     |       | $          | 252,000    |                                     | $          | 103,000 |   | $ | 149,000 |   | — |   | — |   |
| Total                            |       | $          | 252,000    |                                     | $          | 103,000 |   | $ | 149,000 |   | — |   | — |   |

 

**ITEM 7A.  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We do not hedge, sellforward or otherwise commit any asset on a contingency basis.  We do not normally commit to multi-yearcontracts other than employment agreements and office space rental (see Notesto Consolidated Financial Statements, Note 8, Commitments and Contingencies).  The Joint Venture, in the course of normalbusiness, periodically executes long term supply contracts to limit itsexposure to various supply risks.  The JointVenture has not previously hedged or sold forward gold or other assets for thejoint account.

 

**ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

The financial statementsand supplementary data required by this item are included herein in Item 15.

 

**ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

During fiscal years 2005and 2004, we have had no disagreements with our independent auditors regardingaccounting or financial disclosure matters.

 

**ITEM 9A. CONTROLS AND PROCEDURES**

 

Disclosure controls andprocedures

 

Disclosure controls andprocedures are our controls and other procedures that are designed to ensurethat information required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934, as amended, is recorded,processed, summarized and reported, within the time periods specified in theSecurities and Exchange Commission’s rules and forms. Disclosure controlsand procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by us in the reports that wefile under

 

26

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the Securities ExchangeAct is accumulated and communicated to our management, including our principalexecutive officer and principal financial officer, as appropriate to allowtimely decisions regarding required disclosure.

 

As of the end ofthe period covered by this report (the “Evaluation Date”), we carried out anevaluation, under the supervision and with the participation of the Company’smanagement, including the Company’s Chief Executive Officer, who is also ourCompany’s Chief Financial Officer, of the effectiveness of the design andoperation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.Based upon that evaluation, our Chief Executive Officer, who is also our ChiefFinancial Officer, concluded that as of the Evaluation Date, our disclosurecontrols and procedures were effective in alerting them in a timely manner tomaterial information relating to the Company and its subsidiaries that isrequired to be included in the reports that we file or submit under theSecurities Exchange Act of 1934.

 

Internal control overfinancial reporting

 

Internal controlover financial reporting is defined as a process designed by, or under thesupervision of our Chief Executive Officer, who is also our Chief Financial Officer,and effected by our Board of Directors, through our audit committee, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. These include procedures that (i) pertainto maintenance of records in reasonable detail to accurately reflect the ourtransactions and disposition of assets; (ii) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and thatreceipts and expenditures are being made only in accordance with authorizationsof our management and directors; and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use ordisposition of our assets that could have a material effect on our financialstatements.

 

We are notrequired to report management’s assessment of the effectiveness of our internalcontrols over financial reporting and we have not undertaken the kind of reviewof such controls that we would have been required to undertake if we wererequired to make such a report. We have planned and scheduled a review of ourinternal controls by an outside contractor which we expect will be completed byJuly 2006.  However, in connectionwith our review of disclosure controls and procedures now in place, above, wehave noted certain areas in our systems of internal control which, if leftunresolved or unaddressed, could result in material deficiencies and weaknessesin our internal control.  These areasinclude, lack of segregation of duties due to limited personnel, limitedcapability due to the size of our Company to interpret and apply United Statesgenerally accepted accounting standards, lack of adequate documentation of oursystem of internal controls, lack of formal accounting policy and proceduresand related documentation, and lack of a formal budgeting process. Although, wehave not instituted new internal control processes related to these identifiedareas, as has been characteristic of companies that have completed their reviewof internal controls and have had to report on the effect of such review, weare considering what appropriate remedial actions, if any, are necessary toimprove our systems of internal controls. In conjunction with our outside audit for the year ended December 31,2005, we determined that we had a significant deficiency in our accounts payableaccruals at year end.  The deficiencycould have resulted in under accruals of approximately $18,000 at year end,which

 

27

----

 

would have understatedthe net loss for the year by a comparable amount.  Management has instituted a policy requiringreview of subsequent period invoices to address this deficiency.

 

Within the yearended December 31, 2005, there were no changes to our internal controlover financial reporting that materially affected, or is reasonably likely, orare reasonably likely, to materially affect our internal control over financialreporting.

 

**ITEM 9B. OTHER INFORMATION**

 

None.

 

**PART III**

 

**ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT**

 

The informationrequired by this item is incorporated by reference to the Company’s Definitive ProxyStatement relating to the 2006 Annual Meeting of Shareholders which will befiled with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

 

**ITEM 11.  EXECUTIVE COMPENSATION**

 

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2006 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

 

**ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2006 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

 

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

Theinformation required by this item is incorporated by reference to the Company’sDefinitive Proxy Statement relating to the 2006 Annual Meeting of Shareholderswhich will be filed with the Securities and Exchange Commission no later than120 days following the end of the fiscal year.

 

28

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**ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2006 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

 

**PART IV**

 

**ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES**

 

(a) Documents filedas part of this report:

 
| (1) Financial  Statements                                                                                   |   |   |
|------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                             |   |   |
| Report of Independent  Registered Accounting Firm,  Ehrhardt Keefe Steiner & Hottman, P.C.              |   |   |
|                                                                                                             |   |   |
| Consolidated Balance Sheets,  December 31, 2005 and 2004                                                    |   |   |
|                                                                                                             |   |   |
| Consolidated Statements of  Operations for the Years  Ended December 31, 2005, 2004 and 2003                |   |   |
|                                                                                                             |   |   |
| Consolidated  Statements of Shareholders’ Equity for the Years  Ended December 31, 2005, 2004 and 2003 |   |   |
|                                                                                                             |   |   |
| Consolidated Statements of  Cash Flows for the Years  Ended December 31, 2005, 2004 and 2003                |   |   |
|                                                                                                             |   |   |
| Notes to Consolidated Financial  Statements                                                                      |   |   |

 

(2) FinancialStatement Schedules.  Financialstatement schedules are omitted because they are not applicable or the requiredinformation is shown in the financial statements or notes thereto.

 

Exhibit Index

 

3.1.  Articles of Incorporation and By-laws(incorporated by reference to Exhibit 2 to the Company’s Form 10dated May 19, 1983).

 

10.1.  Amended and Restated Joint Venture Agreementbetween AngloGold Ashanti (Colorado) Inc. and the Company dated as of January 1,1991 (incorporated by reference to Exhibit 1 to the Company’s CurrentReport on Form 8-K dated June 17, 1991).

 

10.2  1997 Officers’ & Directors’ StockOption Plan (incorporated by reference to Appendix A of the Company’sDefinitive Proxy Statement dated April 30, 1997).

 

29

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10.3  2002 Stock Option Plan (incorporated byreference to Appendix A of the Company’s Definitive Proxy Statement dated April 27,2001).

 

10.5 Employment Agreementdated December 2, 2004 with R. Herbert Hampton (incorporated by referenceto Exhibit 1 to the Company’s Form 8-K dated December 3, 2004).

 

21.1. Subsidiary of theCompany:  Golden Cycle Philippines Inc.incorporated in the Republic of the Philippines.

 

21.2. Subsidiary of theCompany:  Golden Cycle Gold ExplorationInc. incorporated in the state of Nevada.

 

23.1 Consent of EKS&HPC.

 

31.1 Certification of ChiefExecutive Officer pursuant to the Sarbanes-Oxley Act of 2002, Section 302.

 

31.2 Certification ofChief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002, Section 302.

 

32.1 Certification ofChief Executive Officer pursuant to the Sarbanes-Oxley Act of 2002, Section 906.

 

32.2 Certification ofChief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002, Section 906.

 

30

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SIGNATURES

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereto duly authorized.

 

 
|   | /s/ R. Herbert Hampton                                                                                                                                                |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | R. Herbert Hampton, President, Chief  Executive Officer, and Treasurer (Principal  Executive Officer, Principal Financial  Officer, and Principal Accounting Officer) |

 

 

Date: March 29, 2006

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant in thecapacities and on the dates indicated.

 

 
| /s/ R. Herbert Hampton                       |   | March 29, 2006 |   |
|----------------------------------------------|--------|---------------------|--------|
| R. Herbert Hampton,  President, Chief        | Date   |
| Executive Officer, and  Treasurer            |   |
| (Principal Executive  Officer, Principal     |   |
| Financial Officer, and  Principal Accounting |   |
| Officer)                                     |   |
|                                         |   |
|                                         |   |
| /s/ James C. Ruder                           |   | March 29, 2006 |   |
| James C. Ruder,  Director                    | Date   |
|                                         |   |
|                                         |   |
| /s/ Robert T. Thul                           |   | March 29, 2006 |   |
| Robert T. Thul,  Director                    | Date   |
|                                         |   |
|                                         |   |
| /s/ Dr. Taki N.  Anagnoston             |   | March 29, 2006 |   |
| Dr. Taki N.  Anagnoston, Director       | Date   |
|                                         |   |
|                                         |   |
| /s/ Donald L. Gustafson                      |   | March 29, 2006 |   |
| Donald L. Gustafson,  Director               | Date   |

 

31

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Board of Directors and Stockholders

Golden Cycle Gold Corporation

Colorado Springs, Colorado

 

Wehave audited the accompanying consolidated balance sheets of Golden Cycle GoldCorporation and Subsidiaries (a Colorado Corporation) as of December 31,2005 and 2004, and the related consolidated statements of operations, changesin stockholders’ equity and comprehensive income (loss), and cash flows for theyears ended December 31, 2005, 2004 and 2003.  These consolidated financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements arefree of material misstatement.  TheCompany is not required to have, nor were we engaged to perform an audit of itsinternal control over financial reporting. Our audit included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

 

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Golden Cycle GoldCorporation and Subsidiaries as of December 31, 2005 and 2004, and theconsolidated results of its operations and its cash flows for the years ended December 31,2005, 2004 and 2003 in conformity with accounting principals generally acceptedin the United States of America.

 

 
|                | **/s/ Ehrhardt  Keefe Steiner & Hottman P.C.** |
|---------------------|---------------------------------------------------------|
|                |
|                |
| March 23, 2006 |
| Denver, Colorado    |

 

32

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

** **

Consolidated Balance Sheets

 
| ** **                                                                                                                             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                                                                             | ** ** | **2005**              | ** ** | **2004**              | ** ** |
| **Assets**                                                                                                                             | ** ** | ** **            | ** ** | ** **            | ** ** |
| ** **                                                                                                                             | ** ** | ** **            | ** ** | ** **            | ** ** |
| Current assets:                                                                                                                        |       |                  |       |                  |       |
| Cash and cash  equivalents                                                                                                             |       | $                     | 167,169    |                  | $          | 457,000 |   |
| Short-term  investments (note 2)                                                                                                       |       | 888,627               |       | 1,120,273             |       |
| Interest receivable  and other current assets                                                                                          |       | 15,753                |       | 13,524                |       |
| Prepaid  insurance                                                                                                                     |       | 24,827                |       | 24,380                |       |
|                                                                                                                                   |       |                  |       |                  |       |
| Total current  assets                                                                                                                  |       | 1,096,376             |       | 1,615,177             |       |
|                                                                                                                                   |       |                  |       |                  |       |
| Property and  equipment, at cost:                                                                                                      |       |                  |       |                  |       |
| Land                                                                                                                                   |       | 2,025                 |       | 2,025                 |       |
| Mineral claims                                                                                                                         |       | 20,657                |       | 20,657                |       |
| Furniture and  fixtures                                                                                                                |       | 10,064                |       | 10,030                |       |
| Machinery and  equipment                                                                                                               |       | 33,013                |       | 31,819                |       |
|                                                                                                                                   |       | 65,759                |       | 64,531                |       |
| Less accumulated  depreciation and depletion                                                                                           |       | (37,224               | )          | (33,126               | )          |
|                                                                                                                                   |       | 28,535                |       | 31,405                |       |
| Total assets                                                                                                                           |       | $                     | 1,124,911  |                  | $          | 1,646,582 |   |
|                                                                                                                                   |       |                  |       |                  |       |
| **Liabilities and Shareholders’ Equity**                                                                                          |       |                  |       |                  |       |
| ** **                                                                                                                             |       |                  |       |                  |       |
| Current  liabilities:                                                                                                                  |       |                  |       |                  |       |
| Accounts payable  and accrued liabilities                                                                                              |       | $                     | 43,808     |                  | $          | 56,868 |   |
| Total current  liabilities                                                                                                             |       | 43,808                |       | 56,868                |       |
|                                                                                                                                   |       |                  |       |                  |       |
| Commitments and  contingencies (note 8)                                                                                                |       |                  |       |                  |       |
|                                                                                                                                   |       |                  |       |                  |       |
| Shareholders’ equity  (note 6):                                                                                                   |       |                  |       |                  |       |
| Common stock, no  par value. Authorized 100,000,000 shares; issued and outstanding 9,744,250  shares in 2005; 9,669,250 shares in 2004 |       | 7,499,429             |       | 7,406,317             |       |
| Additional  paid-in capital                                                                                                            |       | 1,927,736             |       | 1,927,736             |       |
| Accumulated  deficit                                                                                                                   |       | (8,314,551            | )          | (7,712,526            | )          |
| Accumulated  other comprehensive loss                                                                                                  |       | (31,511               | )          | (31,813               | )          |
| Total  shareholders’ equity                                                                                                       |       | 1,081,103             |       | 1,589,714             |       |
|                                                                                                                                   |       |                  |       |                  |       |
| Total  liabilities and shareholders’ equity                                                                                       |       | $                     | 1,124,911  |                  | $          | 1,646,582 |   |

 

See accompanying notes toconsolidated financial statements.

 

33

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

** **

ConsolidatedStatements of Operations

 
| ** **                                                                    | ** ** | **For the Years Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2005**                                                      | ** ** | **2004** | ** ** | **2003** | ** ** |
| Revenue:                                                                      |       |                                                          |       |   |   |   |   |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $                                                             | 250,000    |   | $ | 250,000 |   | $ | 250,000 |   |
|                                                                          |       |                                                          |       |   |   |   |   |
| Expenses:                                                                     |       |                                                          |       |   |   |   |   |
| General and  administrative expense                                           |       | 603,044                                                       |       | 542,510 |   | 464,348 |   |
| Depreciation  expense                                                         |       | 3,973                                                         |       | 5,286 |   | 1,217 |   |
| Exploration  expense                                                          |       | 305,661                                                       |       | 54,372 |   | 141,851 |   |
|                                                                          |       | 912,678                                                       |       | 602,168 |   | 607,416 |   |
| Operating loss                                                                |       | (662,678                                                      | )          | (352,168 | ) | (357,416 | ) |
|                                                                          |       |                                                          |       |   |   |   |   |
| Other income:                                                                 |       |                                                          |       |   |   |   |   |
| Interest and  other income                                                    |       | 35,667                                                        |       | 21,545 |   | 15,405 |   |
| Gold bullion  mark to market                                                  |       | 24,986                                                        |       | 8,041 |   | 24,229 |   |
| Gain on assets  sold (net)                                                    |       | —                                                        |       | — |   | 541,917 |   |
|                                                                          |       | 60,653                                                        |       | 29,586 |   | 581,551 |   |
| Net income  (loss)                                                            |       | $                                                             | (602,025   | ) | $ | (322,582 | ) | $ | 224,135 |   |
| Basic earnings  (loss) per share                                              |       | $                                                             | (0.06      | ) | $ | (0.03 | ) | $ | 0.02 |   |
| Diluted earnings  (loss) per share                                            |       | (0.06                                                         | )          | (0.03 | ) | 0.02 |   |
|                                                                          |       |                                                          |       |   |   |   |   |
| Basic weighted  average shares outstanding                                    |       | 9,738,086                                                     |       | 9,597,231 |   | 9,529,100 |   |
|                                                                          |       |                                                          |       |   |   |   |   |
| Diluted weighted  average shares outstanding                                  |       | 9,738,086                                                     |       | 9,597,231 |   | 10,364,100 |   |

 

See accompanying notes toconsolidated financial statements.

 

34

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

** **

ConsolidatedStatements of Shareholders’ Equity and Comprehensive Income (Loss)

Forthe Years ended December 31, 2005, 2004, and 2003

 
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **Accumulated**                   | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-----------------|------------|-----------------------------------|------------|------------|------------|
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **other**                         | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **comprehensive**                 | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **loss – foreign** | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **      | ** ** | **currency**                      | ** ** | ** ** | ** ** |
| ** **                               | ** ** | **Common stock** | ** ** | **paid-in** | ** ** | **Accumulated** | ** ** | **translation** | ** ** | ** **                        | ** ** |
| ** **                               | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **capital**     | ** ** | **deficit**     | ** ** | **adjustment**                    | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2002       |       | 9,442,250             |       | $           | 7,116,604  |            | $          | 1,927,736       |       | $                                 | (7,614,079 | )          | $          | (31,538 | ) | $ | 1,398,723 |   |
|                                     |       |                  |       |        |       |            |       |            |       |                              |       |       |       |   |   |   |   |   |
| Stock options  exercised                 |       | 100,000               |       | 191,250     |       | —          |       | —          |       | —                            |       | 191,250    |       |
| Net income                               |       | —                |       | —      |       | —          |       | 224,135         |       | —                            |       | 224,135    |       |
| Foreign currency  translation adjustment |       | —                |       | —      |       | —          |       | —          |       | (203                              | )          | (203       | )          |
| Comprehensive net  income                |       |                  |       |        |       |            |       |            |       |                              |       | 223,932    |       |
|                                     |       |                  |       |        |       |            |       |            |       |                              |       |       |       |
| Balance at  December 31, 2003       |       | 9,542,250             |       | 7,307,854   |       | 1,927,736       |       | (7,389,944      | )          | (31,741                           | )          | 1,813,905  |       |
|                                     |       |                  |       |        |       |            |       |            |       |                              |       |       |       |
| Stock options  exercised                 |       | 127,000               |       | 98,463      |       | —          |       | —          |       | —                            |       | 98,463     |       |
| Net loss                                 |       | —                |       | —      |       | —          |       | (322,582        | )          | —                            |       | (322,582   | )          |
| Foreign currency  translation adjustment |       | —                |       | —      |       | —          |       | —          |       | (72                               | )          | (72        | )          |
| Comprehensive net  loss                  |       |                  |       |        |       |            |       |            |       |                              |       | (322,654   | )          |
|                                     |       |                  |       |        |       |            |       |            |       |                              |       |       |       |
| Balance at  December 31, 2004       |       | 9,669,250             |       | 7,406,317   |       | 1,927,736       |       | (7,712,526      | )          | (31,813                           | )          | 1,589,714  |       |
|                                     |       |                  |       |        |       |            |       |            |       |                              |       |       |       |
| Stock options  exercised                 |       | 75,000                |       | 93,112      |       | —          |       | —          |       | —                            |       | 93,112     |       |
| Net loss                                 |       | —                |       | —      |       | —          |       | (602,025        | )          | —                            |       | (602,025   | )          |
| Foreign currency  translation adjustment |       | —                |       | —      |       | —          |       | —          |       | 302                               |       | 302        |       |
| Comprehensive net  loss                  |       |                  |       |        |       |            |       |            |       |                              |       | (601,723   | )          |
|                                     |       |                  |       |        |       |            |       |            |       |                              |       |       |       |
| Balance at  December 31, 2005       |       | 9,744,250             |       | $           | 7,499,429  |            | $          | 1,927,736       |       | $                                 | (8,314,551 | )          | $          | (31,511 | ) | $ | 1,081,103 |   |

 

See accompanying notes to consolidated financial statements.

 

35

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

** **

ConsolidatedStatements of Cash Flows

 
| ** **                                                                                                                          | ** ** | **For the Years Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                                          | ** ** | **2005**                                                      | ** ** | **2004** | ** ** | **2003** | ** ** |
| Cash flows from  operating activities:                                                                                              |       |                                                          |       |   |   |   |   |
| Net income  (loss)                                                                                                                  |       | $                                                             | (602,025   | ) | $ | (322,582 | ) | $ | 224,135 |   |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities:                                               |       |                                                          |       |   |   |   |   |
| Depreciation  expense                                                                                                               |       | 3,973                                                         |       | 5,286 |   | 1,217 |   |
| Increase in  market value of gold asset                                                                                             |       | (24,986                                                       | )          | (8,041 | ) | (24,229 | ) |
| (Gain) loss on  disposal of assets                                                                                                  |       | —                                                        |       | — |   | (541,817 | ) |
| Decrease  (increase) in interest receivable and other current assets                                                                |       | (2,229                                                        | )          | (6,510 | ) | 5,605 |   |
| Decrease  (increase) in prepaid insurance                                                                                           |       | (447                                                          | )          | 200 |   | (5,436 | ) |
| Increase  (decrease) in accounts payable and accrued liabilities                                                                    |       | (13,060                                                       | )          | (1,611 | ) | 40,227 |   |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Net cash used in  operating activities                                                                                              |       | (638,774                                                      | )          | (333,258 | ) | (300,298 | ) |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Cash flows from  investing activities:                                                                                              |       |                                                          |       |   |   |   |   |
| Decrease  (increase) in short-term investments, net                                                                                 |       | 256,632                                                       |       | (188,563 | ) | (258,652 | ) |
| Proceeds from  account receivable on sale of water rights                                                                           |       | —                                                        |       | 679,098 |   | — |   |
| Purchases of  property and equipment                                                                                                |       | (1,103                                                        | )          | (767 | ) | (8,210 | ) |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Net cash  provided by (used in) investing activities                                                                                |       | 255,529                                                       |       | 489,768 |   | (266,862 | ) |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Cash flows  provided by financing activity:                                                                                         |       |                                                          |       |   |   |   |   |
| Proceeds on  exercise of stock options                                                                                              |       | 93,112                                                        |       | 98,463 |   | 191,250 |   |
| Net cash  provided by investing activities                                                                                          |       | 93,112                                                        |       | 98,463 |   | 191,250 |   |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Effect of  exchange rate changes on cash                                                                                            |       | 302                                                           |       | (72 | ) | (203 | ) |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Net increase  (decrease) in cash and cash equivalents                                                                               |       | (289,831                                                      | )          | 254,901 |   | (376,113 | ) |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Cash and cash  equivalents, beginning of year                                                                                       |       | 457,000                                                       |       | 202,099 |   | 578,212 |   |
| Cash and cash  equivalents, end of year                                                                                             |       | $                                                             | 167,169    |   | $ | 457,000 |   | $ | 202,099 |   |
|                                                                                                                                |       |                                                          |       |   |   |   |   |
| Supplemental  disclosure of non-cash activity:                                                                                      |       |                                                          |       |   |   |   |   |
| During 2003, the  Corporation sold assets held for sale for $679,098 which was recorded as a  receivable at December 31, 2003. |       |                                                          |       |   |   |   |   |
| During 2004,  77,900 shares were surrendered in cashless exercise of stock options.                                                 |       |                                                          |       |   |   |   |   |

 

See accompanying notes toconsolidated financial statements.

 

36

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**(1)**                     Summary of Significant Accounting Policies

** **

Golden Cycle GoldCorporation (the Company), a Colorado corporation, acquires and exploresmining properties in Colorado, Nevada, and the Republic of the Philippines. TheCompany’s principal investment consists of its joint venture participation inthe Cripple Creek and Victor Gold Mining Company (the Joint Venture), aprecious metals mining company in the Cripple Creek Mining District of TellerCounty, Colorado. In addition, during 1997 the Company established GoldenCycle Philippines, Inc. (GCPI), a wholly owned subsidiary of the Company,in the Republic of the Philippines in order to participate in potential miningopportunities.  In January 2002, theCompany established Golden Cycle Gold Exploration, Inc. (GCGE), a whollyowned subsidiary, to conduct exploration activities for the Company.

 

***(a)***                      Use of Estimates

*** ***

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make variousestimates and assumptions in determining the reported amounts of assets,liabilities, revenues, and expenses for each period presented, and in thedisclosure of commitments and contingencies. Actual results could differsignificantly from those estimates. Changes in these estimates and assumptionswill occur based on the passage of time and the occurrence of future events.

 

***(b)***                      Principles of Consolidation

*** ***

The consolidatedfinancial statements include the accounts of the Company and its wholly ownedsubsidiaries. All significant intercompany transactions and balances have beeneliminated in consolidation.

 

***(c)****                     ****Cashand Cash Equivalents***

 

The Company considers allhighly liquid instruments purchased with an original maturity of three monthsor less to be cash equivalent.

 

***(d)***                      Short-Term Investments

*** ***

Short-term investmentsconsist primarily of certificates of deposit. Short-term investments also includes 310 troy ounces of gold bullionpurchased by the Company in 2002. Interest revenue and the increase or decrease in the value of the goldbullion is included in the consolidated statement of operations.

 

***(e)***                       Investment in Mining Joint Venture

*** ***

The Company accounts forits investment in the Joint Venture on the equity method. In prior years, theCompany’s share of Joint Venture losses exceeded the remaining carrying valueof the investment and, accordingly, the investment was reduced to zero. JointVenture distributions in excess of the investment carrying value are recordedas income. The Company does not record its share of Joint Venture lossesincurred subsequent to the reduction of its investment balance to zero, as theCompany has no obligation to fund operating losses. To the extent the JointVenture is profitable, the Company does not record its share of equity incomeuntil the cumulative amount of previously unrecorded Joint Venture losses havebeen recouped.

 

***(f)***                         Mineral Exploration and Development Costs

*** ***

Mineral exploration costsare expensed as incurred. Mineral property development costs are capitalizedand depleted based upon estimated proven and probable recoverable

 

37

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reserves. The Company hasno capitalized mineral property development costs at December 31, 2005 or December 31,2004.

 

The Company assesses thecarrying value of its long-lived assets for impairment whenever changes infacts or circumstances indicate that they may be impaired.  Potential impairment is estimated bycomparing estimated future undiscounted cash flows expected to be generatedfrom such assets with their net book value. If net book value exceeds estimatedcash flows, the asset is written down to fair value.  The Company has not recorded impairment costsat December 31, 2005 or December 31, 2004.

 

***(g)***                      Property and Equipment

*** ***

Office furniture,fixtures, and equipment are stated at cost and are depreciated using thestraight-line method over estimated useful lives ranging from three to tenyears.

 

***(h)***                      Foreign Currency Translation

*** ***

The GCPI operations’functional currency is the local currency and, accordingly, the assets andliabilities of its Philippines operations are translated into their UnitedStates dollar equivalent at rates of exchange prevailing at each balance sheetdate. Revenue and expenses are translated at average exchange rates prevailingduring the periods in which such items are recognized in operations.

 

Gains and losses arisingfrom translation of the consolidated financial statements of GCPI operationsare included in accumulated other comprehensive income (loss) in shareholders’equity. Amounts in this account are recognized in the consolidated statementsof operations when the related net foreign investment is reduced. Gains andlosses on foreign currency transactions are included in the consolidatedstatements of operations.

 

***(i)***                         Stock Options

*** ***

In December 2002, the Financial AccountingStandards Board issued SFAS No. 148, *Accounting for Stock-BasedCompensation – Transition and Disclosure*(“SFAS No. 148”).  SFAS No. 148 amends SFAS No. 123 toprovide alternative methods of transition for a voluntary change to the fair valuebased method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends thedisclosures requirements of SFAS No. 123 to require prominent disclosuresin both annual and interim financial statements about the method of accountingfor stock-based employee compensation and the effect of the method used onreported results.  The amendments to SFASNo. 123 are effective for financial statements for fiscal years endingafter December 15, 2002.  Hadcompensation cost been determined under the provisions of SFAS No. 123,the following pro forma net loss and per share amounts would have beenrecorded. net loss and per share amounts would have been recorded.

 

38

----

 
| ** **                                                                                                              | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                                                    |       |     |       |     |       |     |       |
| Net income  (loss):                                                                                                     |       |     |       |     |       |     |       |
| As reported                                                                                                             |       | $        | (602,025   | )        | $          | (322,582 | )          | $ | 224,135 |   |
| Deduct:  Total stock-based employee compensation  expense, determined under fair value based method for all awards |       | (244,360 | )          | (182,398 | )          | (69,600  | )          |
| Pro forma                                                                                                               |       | (846,385 | )          | (504,980 | )          | 154,535  |       |
|                                                                                                                    |       |     |       |     |       |     |       |
| Basic and  diluted earnings (loss) per share:                                                                           |       |     |       |     |       |     |       |
| As reported                                                                                                             |       | $        | (0.06      | )        | $          | (0.03    | )          | $ | 0.02 |   |
| Pro forma                                                                                                               |       | (0.09    | )          | (0.05    | )          | 0.02     |       |

 

The fair value of each option grant was estimated onthe date of grant using the Black-Scholes option-pricing model with thefollowing weighted average assumptions used for options granted:

 
| ** **               | ** ** | **Dividend  yield** | ** ** | **Expected  volatility** | ** ** | **Risk-free  interest  rate** | ** ** | **Expected  life (in  years)** | ** ** | **Weighted-  average  fair value  of option** | ** ** |
|--------------------------|------------|---------------------|------------|--------------------------|------------|-------------------------------|------------|-------------------------------------|------------|---------------------------------------------------------|------------|
|                     |       |                |       |                     |       |                          |       |                                |       |                                                    |       |
| Options granted  in 2003 |       | 0                   | %          | 38                       | %          | 4.10                          | %          | 10                                  |       | $                                                       | 1.39       |   |
| Options granted  in 2004 |       | 0                   | %          | 55                       | %          | 4.77                          | %          | 10                                  |       | $                                                       | 1.82       |   |
| Options granted  in 2005 |       | 0                   | %          | 70                       | %          | 4.05                          | %          | 10                                  |       | $                                                       | 1.95       |   |

 

***(j)***                         Income Taxes

*** ***

The Company utilizes the asset and liability method ofaccounting for income taxes. Under the asset and liability method, deferred taxassets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amountsand the tax basis of existing assets and liabilities using enacted tax ratesexpected to apply in the years in which such temporary differences are expectedto be recovered or settled. Changes in tax rates are recognized in the periodof the enactment date. A valuation allowance is recognized unless tax assetsare more likely than not to be realized.

 

***(k)***                      Comprehensive Income

*** ***

In 1998, the Company adopted SFAS No. 130, *Reporting Comprehensive Income*.  SFAS No. 130 requires that allcomponents of comprehensive income (loss), including net income (loss), bereported in the financial statements in the period they are recognized.  Comprehensive income (loss) is defined as thechange in equity during a period from transactions and other events andcircumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), includingforeign currency translation adjustments, shall be reported, net of theirrelated tax effect, to arrive at comprehensive income (loss).  We have disclosed comprehensive income (loss)in our consolidated financial statements accordingly.

 

***(l)***                         Revenue Recognition

*** ***

The Company recognizes revenue as Minimum AnnualDistributions from the Joint Venture are received as all services necessary forrevenue recognition have been

 

39

----

 

previously provided to the Joint Venture by theCompany.  The Joint Venture Agreement, asamended, provides for the Company to receive a minimum annual distribution of$250,000 during the Initial Phase (see Note 4). Beginning in 1994, such Minimum Annual Distributions are potentiallyrecoupable against the Company’s future share of Net Proceeds, if any.  Whether future gold prices and the results ofthe Joint Venture’s operations will reach and maintain a level necessary torepay the Initial Loans (see Note 4), complete the Initial Phase, andthereafter generate net income from which Minimum Annual Distributions can berecouped, cannot be assured due to uncertainties inherent within any miningoperation.  Based on the amount ofInitial Loans payable to the Manager and the uncertainty of future operatingrevenues, there is no assurance that the Company will receive more than theMinimum Annual Distribution from the Joint Venture in the foreseeable future.

 

***(m)***                   Per Share Information

*** ***

Basic earnings (loss) per common share are computed asnet income (loss) divided by the weighted average number of common sharesoutstanding during the period.  Dilutedearnings (loss) per common share are computed as net income (loss) divided bythe weighted average number of common shares and potential common shares, usingthe treasury stock method, outstanding during the period.

 

**(2)**                     Short-Term Investments

** **

The Company heldcertificates of deposit of approximately $677,000 and $985,000 at December 31,2005 and 2004, respectively. All certificates of deposit held at December 31,2005 mature within one year. Short-term investments also include 310 troyounces of gold bullion purchased by the Company in 2002 at a cost of $102,859and is carried at market value of $160,115 at December 31, 2005.  The Company has reflected unrealized gains of$24,986, $8,041 and $24,229 for the years ended December 31, 2005, 2004and 2003, respectively, in the Consolidated Statement of Operations.

 

**(3)**                     Accounts Receivable From Sale of Water Rights

** **

The Company completed thesale of certain Water Rights it owned in Fremont County, Colorado to the Cityof Cripple Creek on December 31, 2003, for $679,098 in the form of areceivable and resulted in a $546,418 gain. The Company does not have any further Water Rights.

 

**(4)**                     Investment in Mining Joint Venture

** **

The Company owns aninterest in the Joint Venture with AngloGold Ashanti (Colorado) Corp.(AngloGold). AngloGold manages the Joint Venture. The Joint Venture conductsexploration, development, and mining of certain properties in the Cripple CreekMining District, Teller County, Colorado. The Joint Venture owns or controlssurface and/or mineral rights in the Cripple Creek Mining District, certainportions of which are being actively explored and developed.

 

The Joint VentureAgreement, as amended, generally requires AngloGold to finance operations andcapital expenditures of the Joint Venture. The Joint Venture is currentlyoperating in an Initial Phase that will end when (i) the InitialLoans (defined below) have been repaid and (ii) Net Proceeds (defined inthe Joint Venture Agreement generally as gross revenues less costs) in theamount of $58 million have been distributed to the joint venturers in theproportion of 80% to AngloGold and 20% to the Company.  The Joint Venture Agreement provides that,during the period from January 1, 1991 until the end of the Initial Phase,all funds required for operations and mine development by the Joint Venturewill be loaned (the “Initial Loans”) to the Joint Venture by either AngloGoldor, if such loans are available at a lower cost than from AngloGold, financialinstitutions.  As of December 31, 2005, InitialLoans were approximately

 

40

----

 

$353.6 million andno Net Proceeds have been distributed. Initial Loans must be repaid prior toNet Proceeds being distributed to the venturers. After the Initial Phase, theJoint Venture will distribute metal in kind, 67% to AngloGold and 33% tothe Company. The Agreement also provides for the Company to receive a minimumannual distribution of $250,000 during the Initial Phase. Beginning in 1994,such minimum annual distributions are recoupable against the Company’s futureshare of Net Proceeds, if any.

 

Whether future gold pricesand the results of the Joint Venture’s operations will reach and maintain alevel necessary to repay the Initial Loans, complete the Initial Phase, andthereafter generate net income cannot be assured due to uncertainties inherentwithin any mining operation. Based on the amount of Initial Loans payable tothe manager and the uncertainty of future operating revenues, there is noassurance that the Company will receive more than the Minimum AnnualDistribution from the Joint Venture in the foreseeable future.

 

The Company’s share of2005 Joint Venture net income, which has not been recorded in its consolidatedfinancial statements, is approximately $1,892,000. The Company’s share of the2004 Joint Venture net income, $1,538,000, and the 2003 Joint Venture net loss,$93,800, also were not recorded in its consolidated financial statements. As ofDecember 31, 2005, the Company’s accumulated unrecorded losses from theJoint Venture are approximately $15,588,000.

 

The condensedbalance sheets of the Joint Venture as of December 31, 2005 and 2004 aresummarized as follows:

 
| ** **                                     | ** ** | **2005**                | ** ** | **2004**   | ** ** |
|------------------------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| **Assets**                                     | ** ** | ** **              | ** ** | ** ** | ** ** |
| Inventory                                      |       | $                       | 40,474     |       | 34,505     |   |
| Other current  assets                          |       | 558                     |       | 662        |       |
|                                           |       |                    |       |       |       |
| Total current  assets                          |       | 41,032                  |       | 35,167     |       |
|                                           |       |                    |       |       |       |
| Fixed assets and  mine development costs, net  |       | 197,600                 |       | 222,948    |       |
| Inventories                                    |       | 111,790                 |       | 90,888     |       |
|                                           |       |                    |       |       |       |
| Total assets                                   |       | $                       | 350,422    |       | 349,003    |   |
|                                           |       |                    |       |       |       |
| **Liabilities and Venturers’ Deficit**    | ** ** | ** **              | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** **              | ** ** | ** ** | ** ** |
| Current  liabilities                           |       | $                       | 16,218     |       | 13,473     |   |
| Payable to  AngloGold                          |       | 353,589                 |       | 365,698    |       |
| Capital lease  obligations                     |       | 7,902                   |       | 10,451     |       |
| Asset retirement  obligation                   |       | 20,512                  |       | 16,716     |       |
| Other long-term  liabilities                   |       | 2,017                   |       | 1,691      |       |
|                                           |       |                    |       |       |       |
| Total  liabilities                             |       | 400,238                 |       | 408,029    |       |
|                                           |       |                    |       |       |       |
| Venturers’  deficit                       |       | (49,816                 | )          | (59,026    | )          |
|                                           |       |                    |       |       |       |
| Total  liabilities and Venturers’ deficit |       | $                       | 350,422    |       | 349,003    |   |

 

41

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The condensedstatements of operations of the Joint Venture for each of the years in thethree-year period ended December 31, 2005 are summarized as follows:

 
| ** **                                                     | ** ** | **2005**                | ** **  | **2004**   | ** ** | **2003**   | ** ** |
|----------------------------------------------------------------|------------|-------------------------|-------------|------------|------------|------------|------------|
| ** **                                                     | ** ** | **(In thousands)** | ** **  |
| ** **                                                     | ** ** | ** **              | ** **  | ** ** | ** ** | ** ** | ** ** |
| Revenue                                                        | ** ** | **$**                   | **145,347** | ** ** | $          | 135,673    |       | $ | 102,645 |   |
| Operating  expenses                                            |       | ** **              | ** **  |       |       |       |       |
| Production costs                                               | ** ** | **75,662**              | ** **  | 72,239     |       | 56,470     |       |
| Depreciation,  depletion,amortization, and reclamation         |       | **30,151**              | ** **  | 29,769     |       | 25,037     |       |
| Accretion  expense                                             | ** ** | **1,113**               | ** **  | 947        |       | 810        |       |
| ** **                                                     |       | **106,926**             | ** **  | 102,955    |       | 82,317     |       |
| Mineral  exploration expense                                   | ** ** | **17**                  | ** **  | 1,401      |       | 2,821      |       |
| Total operating  costs                                         | ** ** | **106,943**             | ** **  | 104,356    |       | 85,138     |       |
|                                                           |       | ** **              | ** **  |       |       |       |       |
| Income from  operations                                        | ** ** | **38,404**              | ** **  | 31,317     |       |       |       |
| Other Expenses:                                                |       | ** **              | ** **  |       |       | 17,507     |       |
| Interest expense                                               | ** ** | **(29,243**             | **)**       | (23,813    | )          | (22,378    | )          |
| Other income  (expense)                                        | ** ** | **299**                 | ** **  | 188        |       | (514       | )          |
| Income (loss)  before effect of change in accounting principle | ** ** | **9,460**               | ** **  | 7,692      |       | (5,385     | )          |
| Cumulative  effect of change in accounting principle           | ** ** | **—**              | ** **  | —     |       | 4,916      |       |
|                                                           |       | ** **              | ** **  |       |       |       |       |
| Net income  (loss)                                             | ** ** | **$**                   | **9,460**   | ** ** | $          | 7,692      |       | $ | (469 | ) |

 

**(5)**                     Income Taxes

** **

The tax effects oftemporary differences that give rise to significant portions of the deferredtax assets at December 31, 2005 and 2004 are presented below:

 
| ** **                        | ** ** | **2005**   | ** ** | **2004** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------|------------|----------|------------|------------|------------|------------|
| Deferred tax  assets:             |       |       |       |     |       |       |       |       |
| Net operating  loss carryforwards |       | $          | 918,000    |     | 802,000    |       |       |       |   |
| Exploration  expenditures         |       | 163,000    |       | 67,000   |       |       |       |       |
| Other                             |       | 4,000      |       | 5,000    |       |       |       |       |
| Total deferred  tax assets        |       | 1,085,000  |       | 874,000  |       |       |       |       |
|                              |       |       |       |     |       |       |       |       |
| Deferred tax  liability:          |       |       |       |     |       |       |       |       |
| Gold bullion  mark to market      |       | (21,000    | )          | —   |       |       |       |       |
|                              |       |       |       |     |       |       |       |       |
| Total deferred  tax assets        |       | 1,064,000  |       | 874,000  |       |       |       |       |
|                              |       |       |       |     |       |       |       |       |
| Valuation  allowance              |       | (1,064,000 | )          | (874,000 | )          |       |       |       |
|                              |       |       |       |     |       |       |       |       |
| Net deferred tax  assets          |       | $          | —     |     | —     |       |       |       |   |

 

42

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A reconciliation of thestatutory federal income tax rate to the effective tax rate follows:

 
| ** **                         | ** ** | **2005** | ** ** | **2004** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|------------|------------|------------|
| Statutory  federal income tax rate |       | 34.0     | %          | 34.0     | %          |       |       |       |
| Effect of:                         |       |     |       |     |       |       |       |       |
| State and local income  taxes      |       | 3.05     |       | 3.30     |       |       |       |       |
| Other - net                        |       | (0.10    | )          | (1.96    | )          |       |       |       |
| Change in  valuation allowance     |       | (36.95   | )          | (35.34   | )          |       |       |       |
| Effective tax  rate                |       | 0.00     | %          | 0.00     | %          |       |       |       |

 

At December 31,2005, the Company has net operating loss carryforwards for income tax purposesof approximately $2,477,000 which expire beginning in 2007 through 2025.

 

The Company has notrecorded an income tax benefit in 2005 or 2004 as it does not believe it ismore likely than not that the benefit of the deferred tax assets will berealized in the future.

 

**(6)**                     Common Stock Options

** **

During 1992, the Company’sBoard of Directors adopted a Directors’ Stock Option Plan (the Directors’ Plan)and a 1992 Stock Option Plan (the 1992 Plan). All options available under the Directors’ Plan were granted prior to December 31,1994.  During 1997, shareholders approvedthe 1997 Officers’ and Directors’ Stock Option Plan, and during 2002,shareholders approved the 2002 Stock Option Plan pursuant to which 1,000,000and 625,000 shares, respectively, of the Corporation’s common stock werereserved for issuance pursuant to options to be granted.  The 1992 Plan provided for the grant ofoptions on a discretionary basis to certain employees and consultants.  Under each plan, the exercise price cannot beless than the fair market value of the common stock on the date of thegrant.  The expiration of the options isten years from the date of the grant.

 

During 2005, the Companygranted 125,000 options to directors of the Corporation, and during 2004 and 2003the Company granted 100,000 and 50,000 options respectively to directors of theCorporation under the above plans.

 

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Changes in stockoptions for each of the years in the three-year period ended December 31,2005 are as follows:

 
| ** **                                                   | ** ** | ** ** | ** ** | ** **            | ** **  | **Weighted**            | ** ** |
|--------------------------------------------------------------|------------|------------|------------|-----------------------|-------------|-------------------------|------------|
| ** **                                                   | ** ** | ** ** | ** ** | **Option price** | ** **  | **average**             | ** ** |
| ** **                                                   | ** ** | **Shares** | ** ** | **per share**    | ** **  | **exercise price** | ** ** |
| Outstanding and  exercisable at December 31,  2002 |       | 885,000    |       | $                     | 1.19 - 2.33 |                    | $          | 1.52 |   |
| Granted                                                      |       | 50,000     |       | 2.60                  |        | 2.60                    |       |
| Exercised                                                    |       | (100,000   | )          | 1.50 - 2.05           |        | 1.91                    |       |
|                                                         |       |       |       |                  |        |                    |       |
| Outstanding and  exercisable at December 31,  2003 |       | 835,000    |       | 1.04 - 2.60           |        | 1.46                    |       |
| Granted                                                      |       | 100,000    |       | 2.60                  |        | 2.60                    |       |
| Exercised                                                    |       | (204,900   | )          | 1.33 - 1.80           |        | 1.44                    |       |
| Expired                                                      |       | (320,100   | )          | 1.04 - 2.33           |        | 1.63                    |       |
|                                                         |       |       |       |                  |        |                    |       |
| Outstanding and  exercisable at December 31,  2004 |       | 410,000    |       | 1.04 - 2.60           |        | 1.92                    |       |
| Granted                                                      |       | 125,000    |       | 2.50                  |        | 2.50                    |       |
| Exercised                                                    |       | (75,000    | )          | 1.04 - 1.50           |        | 1.24                    |       |
| Expired                                                      |       | (75,000    | )          | 2.33 - 2.60           |        | 2.51                    |       |
|                                                         |       |       |       |                  |        |                    |       |
| Outstanding and  exercisable at December 31,  2005 |       | 385,000    |       | $                     | 1.04 - 2.60 |                    | $          | 2.13 |   |

 

The weighted averageremaining term of options outstanding was 6.94 and 6.81 years at December 31,2005 and 2004, respectively.

 

**(7)**                     Recently Issued Financial Accounting Standards:

** **

In December 2004,the FASB issued SFAS No. 123(R), “Share-Based Payments”, which revisedSFAS No. 123, “Accounting for Stock-Based Compensation” and supersededAccounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued toEmployees” and its related implementation guidance.  SFAS No. 123 (R) requires measurementand recording in the financial statements of the costs of employee servicesreceived in exchange for an award of equity instruments based on the grant-datefair value of the award, recognized over the period during which an employee isrequired to provide services in exchange for such award.  The Company will adopt the provisions of SFASNo. 123(R) on January 1, 2006, using the modified prospectivemethod.  Accordingly, compensationexpenses will be recognized for all newly granted awards and awards modified,repurchased, or cancelled after January 1, 2006.  The compensation cost will be based on thefair value at date of grant, adjusted for forfeitures, as utilized in the SFAS No. 123pro forma disclosure above.  The actual effecton net income and earnings per share in future periods will vary depending uponthe number and fair value of options granted in future years compared to prioryears.  It is believed that adoption willimpact the Company’s statement of operations by $250,000 in 2006 and will notimpact the Company’s cash flow.

 

In March 2005, theFinancial Accounting Standards Board (“FASB”) ratified Emerging Issues TaskForce (“EITF”) Issue No. 04-06, “Accounting for Stripping Costs Incurredduring Production in the Mining Industry.” EITF Issue No. 04-06 addresses the accounting for stripping costsincurred during the production phase of a mine and refers to these costs as

 

44

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variable production coststhat should be included as a component of inventory to be recognized inproduction costs applicable to sales in the same period as the revenue from thesale of inventory.  As a result,capitalization of post-production stripping costs is appropriate only to theextent product inventory exists at the end of a reporting period.  The guidance in EITF Issue No. 04-06 iseffective for the first reporting period in fiscal years beginning after December 15,2005, with early adoption permitted.  Theguidance requires application through recognition of a cumulative effectadjustment in the period of adoption, with no charge to current earnings forprior periods.  The most significantexpected impacts of adoption are the elimination of the deferred strippingcosts and the recognition of future post-production stripping costs as acomponent of inventory to be recognized in production costs applicable to salesin the same period as the revenue from the sale of inventory, or in the cast ofinventory on hand at the end of a period, from writedowns where the carryingvalue of inventory on hand exceeds the net realizable value.  The Company will adopt this new accounting rule asof January 1, 2006.  Adoption of thenew guidance will have no impact on the Company’s income or cash position.

 

**(8)**                     Commitments andContingencies

** **

Twofederal Clean Water Act cases against an active mining enterprise near CrippleCreek and Victor, in Teller County, Colorado, initiated by privateorganizations against the owner and operator thereof, in which the Company hasbeen actively engaged for more than five years, were tried in the United StatesDistrict Court for the District of Colorado beginning February 13,2006.  The trial ended with the filing ofproposed findings of fact and closing written arguments on March 6, 2006.

 

c.               The first ten Causes of Action in the firstof these two cases, Civil Action No. 00-MK-2325, allege unpermitteddischarges of pollutants into Fourmile Creek and from the Roosevelt Tunnel intoCripple Creek, and discharges of pollutants exceeding permitted amounts fromthe Carlton Tunnel and Arequa Gulch outfalls; the eleventh and twelfth causesof action in that case concern a discharge permit issued by the Colorado WaterQuality Control Division in 1996 for an outfall in Arequa Gulch.  Plaintiffs assert, and the defendants deny,that there are, among other things, any ongoing violations of the federal Act.

 

d.              The second of these two cases, Civil Action No. 01-MK-2307,relates to seeps asserted to be point-source discharges of Cresson Projectdrainage from the Moffat Tunnel Cribbing Wall and the Squaw Gulch Pond toCripple Creek and a tributary thereto in Squaw Gulch.

 

Managementhas contested both of those cases, and is coordinating its own efforts withthose of the owner and operator, Cripple Creek & Victor Gold Company (“CC&V”),and the majority owners thereof, AngloGold North America, Inc., andAngloGold (Colorado) Corp., now AngloGold Ashanti North America, Inc., andAngloGold Ashanti (Colorado) Corp., respectively.  The Company is neither the owner nor operatorand its interest is limited to its minority interest in CC&V.  The likelihood of an unfavorable outcome tothe Company cannot be evaluated, and no estimate can be made of the amount or rangeof potential loss, if any, which might result either to the Company or to itsinterest in CC&V, because the case is now pending decision by the Court,and as observed by the Judge, the winners can expect the losers to appeal.  It is too early to evaluate what might happenon any such appeal.

 

TheCompany expended approximately $12,000 and $17,000 during the years 2005 and2004, respectively, defending against these suits.

 

45

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**(9)**                     Selected quarterly financialdata

** **

(unaudited)

 
| ** **                                                                    | ** ** | **2005**    | ** ** |
|-------------------------------------------------------------------------------|------------|-------------|------------|
| ** **                                                                    | ** ** | **First**   | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| ** **                                                                    | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $           | 250,000    |   | $ | — |   | $ | — |   | $ | — |   |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Operating income  (loss)                                                      |       | 138,885     |       | (164,566 | ) | (322,861 | ) | (314,136 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Net income  (loss)                                                            |       | 146,486     |       | (154,505 | ) | (313,041 | ) | (280,965 | ) |
| Net income  (loss) per share                                                  |       | 0.02        |       | (0.02 | ) | (0.03 | ) | (0.03 | ) |
| Pro forma net  income (loss) per share                                        |       | 0.02        |       | (0.04 | ) | (0.03 | ) | (0.03 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| ** **                                                                    | ** ** | **2004**    | ** ** |
| ** **                                                                    | ** ** | **First**   | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| ** **                                                                    | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $           | 250,000    |   | $ | — |   | $ | — |   | $ | — |   |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Operating income  (loss)                                                      |       | 158,252     |       | (157,013 | ) | (214,486 | ) | (138,921 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Net income  (loss)                                                            |       | 162,975     |       | (151,885 | ) | (207,868 | ) | (125,804 | ) |
| Net income  (loss) per share                                                  |       | 0.02        |       | (0.02 | ) | (0.02 | ) | (0.01 | ) |
| Pro forma net  income (loss) per share                                        |       | 0.02        |       | (0.04 | ) | (0.02 | ) | (0.01 | ) |

 

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