**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-K**

 

**(Mark One)**

**ý****  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31,2004**

 

**OR**

 

**o****  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                              to                              .**

 

**Commission file number 0-11226**

 

**GOLDEN CYCLE GOLD CORPORATION**

(Exact name of registrant asspecified in its charter)

 
| **Colorado**                                                     |       | **84-0630963**                          |
|------------------------------------------------------------------|------------|-----------------------------------------|
| State or  other jurisdiction of   incorporation or organization) |       | (I.R.S.  Employer   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 |       | Pacific Exchange                                 |

 

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

 

Indicate by check mark whether the Registrant (1) has filed allreports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or such shorterperiod that the Registrant was required to file such reports), and (2) hasbeen subject 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 an accelerated filer(as defined in Rule 12b-2 of the Act). Yes o         Noý

 

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: $14,705,087

 

 

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The number of shares of theRegistrant’s Common Stock outstanding as of March 28, 2005 was 9,669,250.

 

**DOCUMENTS  INCORPORATED BY REFERENCE:**

 

Portions of the Definitive Proxy Statementfor the 2005 Annual Meeting of Shareholders (the “2005 Proxy Statement”) areincorporated by reference into Part III of this Annual Report on Form 10-K.

 

This Annual Report on Form 10-K containscertain forward looking statements. Actual results could differ materially from those projected in theforward looking statements as a result of certain factors, described elsewhereherein, including but not limited to fluctuations in the market price of goldand uncertainties regarding the ability of the Joint Venture (as defined below)to operate profitably.

 

**PART I**

 

**ITEM 1. BUSINESS**

 

Golden Cycle Gold Corporation wasincorporated under the laws of the State of Colorado on May 19, 1972 forthe purpose of acquiring and developing the mining properties (the “MiningProperties”) of the Golden Cycle Corporation, located in the Cripple CreekMining District of Colorado.  Unless thecontext otherwise requires, the terms “Registrant” and “Company” as well as “we”,“us” and “our”, mean Golden Cycle Gold Corporation.

 

The primary business of the Company has beenits participation in the Cripple Creek & Victor Gold Mining Company (“CC&V”),a joint venture (the “Joint Venture”) with AngloGold Ashanti (Colorado) Corp.,formerly Pikes Peak Mining Company (“AngloGold”), a wholly-owned subsidiary ofAngloGold Ashanti North America Inc., which, in turn, is a wholly ownedsubsidiary of AngloGold Ashanti Ltd.  TheJoint Venture engages in gold mining activity in the Cripple Creek area ofColorado.

 

In addition to its Joint Venture activities,the Company incorporated Golden Cycle Philippines, Inc. (“GCPI”), awholly-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 Companyincorporated Golden Cycle Gold Exploration, Inc., a wholly-ownedsubsidiary, to conduct exploration activities for the Company.  As of this date the Company has not fundedGolden Cycle Gold Exploration, Inc.

 

As of December 31, 2004, the Company had3 employees.

 

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Description of Mining Joint Venture

 

The Company’s interest in the Joint Venturewas received in exchange for the Company’s rights to gold mining properties inthe Cripple Creek Mining District of Colorado. The rights and obligations of the parties are covered by an Amended andRestated Joint Venture Agreement (the “Joint Venture Agreement”) dated andeffective as of January 1, 1991, between AngloGold and the Company.  The Joint Venture engages in gold miningactivity in the Cripple Creek area of Colorado and the Company’s participationin the Joint Venture constitutes its primary business activity.  AngloGold serves as the manager (the “Manager”)of the Joint Venture.  The Joint Venture’sprincipal mining operations are conducted at the Cresson mine, where commercialproduction was commenced in the first half of 1995.

 

The Joint Venture Agreement defines anInitial Phase that will end when (i) the Initial Loans (defined below)have been repaid and (ii) Net Proceeds (defined in the Joint VentureAgreement generally as gross revenues less costs) in the amount of $58 millionhave been distributed as follows: 80% to AngloGold and 20% to the Company.  After the Initial Phase, the Joint Venturewill distribute metal in kind in the proportion of 67% to AngloGold and 33% tothe Company.  In addition, the Companywill generally be entitled to receive, in each year during the Initial Phase oruntil the mining of ore by the Joint Venture ceases due to the exhaustion ofeconomically recoverable reserves, whichever occurs first, an annual minimumdistribution of $250,000 (a “Minimum Annual Distribution”).  The first three Minimum Annual Distributionsin 1991, 1992 and 1993 were not deemed to be a distribution of Net Proceeds tothe Company and were not applied against the Company’s share of any NetProceeds.  The Minimum AnnualDistributions received on January 15, 1994 and thereafter constitute anadvance on Net Proceeds and will be recouped against future shares of NetProceeds 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.  Except for the MinimumAnnual Distributions, the Initial Loans and interest thereon must be repaidprior to distributions of Net Proceeds to the Joint Venturers.  The audited Joint Venture financialstatements reported that as of December 31, 2004, the Joint Venture had$365.7 million in Initial Loans payable to AngloGold.  After the Initial Phase, the Joint Venturerswill contribute funds in proportion to their respective distributive shares.

 

The Joint Venture recorded net income of $7.7million for the year ended December 31, 2004 compared to net losses of$0.5 million and $14.3 million for the years ended December 31, 2003 and December 31,2002, respectively.  There is noassurance that the Joint Venture will be able to achieve profitability in anysubsequent period 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, whichis volatile and subject to speculative movement, and the extent ofmineralization in the area controlled by the Joint Venture and the efficiencyof its mining operations.

 

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Whether future gold prices and the results ofthe Joint Venture’s operations will reach and maintain a level necessary torepay the Initial Loans, complete the Initial Phase, and thereafter generatenet income cannot be assured.

 

The Joint Venture completed construction ofthe required infrastructure for the Cresson Mine and began mining operations in1995, with the first Cresson Mine gold pour occurring on February 14,1995.  In 1996, the Joint Venturecompleted its first full year of Cresson Mine operations.  The development of the East and North Cressonmines began during the second quarter of 1999. The Joint Venture began construction of expanded facilities during early2002, completing the new truck shop, crushing facility, expanded processfacility, and expanded valley leach facility by September 2003.  The last step in the mine expansion, a $15.5million expansion of the valley fill leach facility, was completed during thefall of 2004.

 

2004 Operational Highlights

 

As the Joint Venture’s Manager, AngloGoldprovides the Company with detailed information on the activities and operationsof the Joint Venture.  The followingdescription of the Joint Venture’s operation is derived from information madeavailable by the Manager, upon whom reliance is placed.

 

Production

 

The 2004 Joint Venture gold production was329,029 troy ounces (approximately 94% of budget) compared to 283,886 troyounces of gold (83% of budget) produced during 2003.  CC&V has corrected most of the leach padchemistry problems previously reported and is experiencing improvedrecoveries.  CC&V is monitoring andworking to improve leach pad chemistry on a daily basis.

 

CC&V appears to have overcome its truckcapacity problems, chiefly through improved maintenance.  CC&V mined 58.3 million tons of materialduring the year (the expansion plan budgeted rate is 58 million tons a year),including 20.3 million tons of ore and 38 million tons of waste.   CC&V also moved 1.3 million tons ofstockpiled ore to the crusher for a total of 59.6 million tons moved.

 

The new primary crusher operated at plantcapacity during the year, crushing 20.1 million tons during the year versus abudget of 20 million tons.  Ore placed onthe valley leach facility averaged 0.0245 troy ounces per ton, containing anestimated 492,943 troy ounces of gold (an estimated 355,950 recoverable ouncesof gold).

 

Revenue and Costs

 

The Joint Venture sold approximately 331,299troy ounces of gold at an average price of $409.52 per ounce producing totalmetal sale revenues of approximately $135.7 million.  The Joint Venture cash production costs for2004 were approximately $256 per troy ounce compared to $198.9 per troy ounceduring 2003 and a budget of $225.34 per troy ounce.  The main reason for the higher cost per ouncein 2004 compared to the budgeted cost per ounce was the reduced number ofounces produced (94% of budget) and increased variable costs such as dieselfuel.  The Joint Venture had total operatingcosts of $104.4 million, including depreciation, depletion and amortization(DD&A) of $30.7 million, and expensed exploration

 

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of approximately $1.4 million for the year, compared to $85.1 million,$25.8 million and $2.8 million comparatively for the year ended 2003.  Interest expense on the Initial Loans wasapproximately $23.8 million ($22.4 million in the year 2003).  The Company did receive the Minimum Annual Distributionof $250,000, which will be recouped from future shares of Net Proceeds to theCompany.

 

Ore Reserves and Non-reserve Mineralization

 

The Joint Venture is conducting continuingexploration and engineering feasibility work concerning future operations.  These activities will serve to direct futureexploration drilling programs as well as future development and projectplanning as part of its determination of the Joint Venture reserves.  The main objective of CC&V’s continuingexploration program for 2004 was to delineate the boundaries of two areas ofmineralization in the Wild Horse Extension area and to increase the drillinformation available within areas which have previously indicated existingmineralization.  The decrease in currentreserves is due to depletion.

 

CC&V currently controls over 85% of thepatented claims within the district and 100% of the land within the year-end2004 Ore Reserve Estimate.  All gold orereserves and mineral resources are stated at 100% ownership basis althoughportions of the ore reserves are subject to third party royalties which varyaccording to individual agreements with the underlying property owner.

 

Each year CC&V models its gold orereserves to incorporate the results of its exploration program, new geologicinformation, revised metallurgical recoveries, revised gold price, new geotechnicaldata, new pit designs, new operating costs and/or allowances for 2004depletion.  The ore reserves and mineralresources shown for 2004 were modeled using a $375 gold price and a 0.007 ounceper ton (opt) recoverable cutoff grade. A total of 252,654 feet of additional drilling was added (308 drillholes), and all geotechnical data remains as reported at year end 2003.  Resources remain restricted to a $425Lerchs-Grossmann shell envelope around the reserve pits.  The geostatistical modeling procedures usedby the Manager in computing the ore reserves have been reviewed by independentconsultants (Independent Mining Consultants, Inc., Mine Reserve Associates, Inc.,Mineral Resource Development Associates, Inc., and Mine DevelopmentAssociates, Inc.) over previous years, and conform to industrystandards.  The ore reserves are shown onthe table below:

 

UnauditedCC&V Ore Reserve Estimate as of December 31, 2004*Cripple Creek / Victor District

 
| ** **            | ** ** | **Ore  Tons**    | ** ** | **Gold  Ounces  Per Ton** | ** ** | **Contained  Gold  Ounces** | ** ** | **Estimated  Recoverable  Ounces **** | ** ** |
|-----------------------|------------|------------------|------------|---------------------------|------------|-----------------------------|------------|---------------------------------------|------------|
| ** **            | ** ** | **(000’s)** | ** ** | ** **                | ** ** | ** **                  | ** ** | ** **                            | ** ** |
| Proven                |       | 52,830           |       | 0.031                     |       | 1,645,844                   |       | 1,012,785                             |       |
| Probable              |       | 81,469           |       | 0.027                     |       | 2,231,971                   |       | 1,361,682                             |       |
|                  |       |             |       |                      |       |                        |       |                                  |       |
| Total  Reserves, 2004 |       | 134,299          |       | 0.029                     |       | 3,877,815                   |       | 2,374,467                             |       |
|                  |       |             |       |                      |       |                        |       |                                  |       |
| Change from  2003     |       | 3,536            |       |                      |       | (102,823                    | )          | (159,976                              | )          |

 

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

 

*    Thesegold reserve figures were estimated based on a $375 per troy ounce gold pricefor all district deposits, and are subject to various royalties.  There can be no assurance, however, that theJoint Venture can earn a profit when the market price of gold equals or exceedsthe gold price used in estimating those reserves.

 

** Recoverability of contained ounces is based on heap leaching andmetallurgical testing.  Recoverabilityrates vary by ore type.  The recoverableounces shown are based on weight proportion metallurgical averages for alldeposits.

 

The above estimates are based upon drill dataand are a combination of “proven” and “probable” reserves.  The classifications of “proven” and “probable”are taken from the Securities and Exchange Commission’s Industry Guide 7, whichdefines 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 areestimates and no assurance can be given that any particular level of recoveryof gold from ore reserves will in fact be realized.

 

The focus of the Joint Venture’s 2005 explorationprogram is to develop additional metallurgical information in mineral resourceareas to enable it to change the classification of a portion of its non-reservemineral resources to mineral reserve ounces of gold.  It expects to achieve this goal throughadditional infill drilling, geotech and metallurgical drilling and studies andmining studies.  Further, the JointVenture is exploring a new area on a widely- spaced drill hole basis with theobjective of defining a mineral resource in the area.

 

Environmental Reclamation

 

CC&V has developed an effectiveenvironmental protection and reclamation plan for this high-altitude, semiarid,cold-weather, year-round leaching environment. Reclamation has continued since 1992 to support post mining land use forwild life, including elk.  Work continuedin 2004 on the detoxification of the Victor leach pad with a view to itseventual closure and final reclamation. Although the Victor leach pad has been detoxified to less than freecyanide standards for detoxification, its nitrates level remain elevated. TheJoint Venture has secured total financial warranties of approximately $45million to insure its success in completing the final reclamation of the entireproperty.  Ongoing compliance withfederal and state regulations includes seismic, fugitive dust, and noisemonitoring for the

 

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operation’s meeting applicable standards for ground and surface water;monitoring rain and snow fall, water and air emissions.

 

Employment

 

AngloGold provides the work force required bythe Joint Venture, which has no employees. AngloGold employment related to the Joint Venture increased to 316 at December 31,2004, from 304 at December 31, 2003. The increase in employment was a result of completing the mineexpansion.

 

Governmental Regulation

 

Like all mining operations in the UnitedStates, the Joint Venture is subject to a multitude of environmental laws andregulations promulgated by federal, state and local governments including, butnot limited to, the Comprehensive Environmental Response, Compensation andLiability Act (“CERCLA”);  the Clean AirAct (“CAA”); the Clean Water Act (“CWA”); the Hazardous MaterialsTransportation Act (“HMTA”); the Toxic Substances Control Act (“TSCA”);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 (“MSHA”) 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 frommining and mineral processing operations are temporarily exempt from regulationunder RCRA.  The EPA is currentlyconsidering the promulgation of a special set of rules to regulate miningwastes under RCRA, 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 compliancewith federal, state and local environmental and land use laws and regulationswill continue to require significant future outlays of resources, it is notpossible to say with any certainty what impact such compliance may have on theJoint Venture’s future capital expenditures or earnings.

 

Distribution of Proceeds and Other FinancialAspects

 

The Joint Venture made payments of theMinimum Annual Distribution of $250,000 to the Company on June 13, 1991, January 15,1992, and January 15 of each subsequent year, to and including January 15,2005.  Subsequent payments of the sameamount are scheduled to be made on January 15th of each year until theconclusion of the Initial Phase, as defined in the Joint Venture Agreement, oruntil the completion of mining.  Thepayments made on

 

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January 15, 1994 and subsequent annual payments of $250,000constitute an advance on Net Proceeds and will be recouped by the Manageragainst future distributions of net proceeds. After recovery by the Manager of these advances, if the Company’s share(20% in the Initial Phase) of Net Proceeds exceeds the applicable MinimumAnnual Distribution after recouping any advanced distributions, the largeramount will be distributed to the Company. The Joint Venture recorded net income of $7.7 million for the year endedDecember 31, 2004.

 

The Company accounts for its investment inthe Joint Venture on the equity method. Joint Venture distributions in excess of the investment carrying valueare recorded as income.  During 1992, theCompany’s share of Joint Venture losses exceeded the remaining carrying valueof the investment and, 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 of the reduction of the JointVenture investment carrying value to zero during 1992, the Company has notrecorded its share of the Joint Venture net income for the 2004 period,$1,538,400, nor its share of the Joint Venture’s net loss for the 2003 period($93,800) or 2002 period ($2,863,600). 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 ($17,480,058 as of December 31, 2004) arerecovered.

 

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

 

GCPI and its exploration activities wereplaced into a standby status in January 1999 for the reasons stated below.

 

GCPI Background

 

In January 1997, GCPI signed acomprehensive exploration agreement (the “BGA Agreement”) with BenguetCorporation (“Benguet”), which provided that all costs and participation willbe shared 50/50 by the parties.  In October 1997,the two companies signed the First Supplemental Agreement to the BGA Agreement,which added 1,050 acres of mineral claims held by Benguet to the BGA.  Under the terms of this supplemental agreement,GCPI will earn a 50% interest in these claims in exchange for funding the first$250,000 (about 10 million Philippine pesos) of exploration work.  The claim area lies immediately south of thehistoric Masara and Hijo gold mines in the Philippines and just north ofBenguet’s Kingking copper/gold deposit.

 

First Supplemental Agreement to the BGA

 

Phase I of the exploration effort on the fiveSagittarius Alpha Realty (“SAR”) claims was completed in May 1998.  This effort consisted of geological mapping,grid soil sampling and analysis, and stream sediment and water analysis.  This work indicates the presence of sizableareas interpreted to be anomalous gold concentrations.  These must be further tested throughtrenching, tunneling and drilling to properly evaluate the gold potential.  The Phase II

 

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exploration could not be carried out as the old leased claims have notas of this 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 2005.  The Companyexpects to expend approximately $5,000 during 2005 to maintain GCPI on astandby status.

 

**OTHER OPPORTUNITIES**

 

During 2001 the Company acquired two claimgroups in Nevada: the Table Top and the Illipah gold prospects.  During first quarter 2002 the Companyincorporated a wholly owned subsidiary, Golden Cycle Gold Exploration, Inc.(“GCX”), to independently direct the exploration efforts for these claimgroups.  As of this report, the Companyhas not yet funded GCX.  Finally, theCompany has an on-going exploration program in southwest Colorado.

 

**Table Top**

 

The Table Top claim group consists of 38twenty acre claims and lies within the Basin and Range province ofnorth-central Nevada, which over the past forty years has become one of theworld’s premier gold producing regions. The Table Top property can be interpreted to lie within the “Midas” goldbearing zone striking northeast across Nevada, and also as a part of anorth-south trend containing the Sleeper Mine, Sandman, Florida Canyon,Rochester and Relief Canyon.  Theproperty is located ten miles west of Winnemucca, Nevada.

 

The Table Top claims cover a brecciated andsilicified sediment that is poorly exposed and has only been unsystematicallyexplored and partially drill tested in the past.  The key gold mineralized feature on the propertyis a hydrothermal breccia, which contains anomalous gold, arsenic, antimony andmercury.  Goldfields Mining Corporationfirst staked the Table Top property in 1986 while conducting surfaceexploration for an open pit type operation. A limited rock chip sampling and reverse circulation drilling programindicated the presence of a gold mineralized system.

 

The Company’s intended exploration targetwill be the discovery of a high grade mineralized gold vein system at depth, tobe developed by a phased exploration program.

 

**Illipah**

 

The Company’s Board of Directors has approveda budget to drill test the Illipah claim groups located in White Pine County,Nevada.  This gold project is situated ineastern Nevada at the southern extension of the Carlin Trend that contains thelargest accumulation of gold deposits in North America.  The Company’s controls 191 unpatented lode,mining claims (approximately 3800 acres) over a six-mile strike length thatcontains favorable stratigraphic and structural environments for the discoveryof a significant gold deposit.  Theproperty is subject to advance royalty payments and a 2% Net Smelter Return (“NSR”)royalty on all mineral production.  AnNSR is a royalty, usually a percent, of smelter production less certainallowable costs such as smelting and transportation to the smelter.  The NSR royalty is reduced to 1% if$2,000,000 in advance royalties is paid.

 

Past production from the immediate area ofIllipah is 37,000 ounces of gold from an

 

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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 approved drill program that GoldenCycle will undertake in the spring of 2005.

 

The recommended drill program for Illipahconsists of eight reverse circulation drill holes which will be angled toapproximate perpendicular to the envisioned structures.  The holes are designed to test the favorablestratigraphic horizons and structural intersections at depth beneath goldanomalies on the surface.  The depths ofthe drill holes will range from 800 to 1500 feet.  A budget of approximately $259,000 will fundthe drilling, assaying of samples, personnel, expenses, application and filingfor exploration permit and necessary bonding.

 

**Colorado**

 

A continuing exploration effort is underwayin the Company’s home state of Colorado, which the Company believes iscurrently being overlooked by both junior and major mining companies.  This exploration is focused on a particulararea in southwest Colorado where the Company has developed a geologic conceptindicating the possibility of an exploration target which meets the Company’scriterion.  During 2005, the Company willcomplete a regional study of the target area, including satellite imagery whichit began in 2004, with the objective of narrowing the target area.  The Company is also continuing its selectivesearch in western Colorado for additional mineral prospects to undertake during2005.

 

**ITEM2.  PROPERTIES**

 

**MINING, OIL AND GAS, AND WATER RIGHTS**

 

Mining Properties

 

The Joint Venture mining properties consistof owned, leased and optioned mining claims and other land covering more than4,800 acres of patented mining claims in and around the Cripple Creek MiningDistrict of Teller County, Colorado and include most of the principalformerly-producing mines of the Cripple Creek district.  The majority of the above acreage wascontributed by the Company to the Joint Venture.  Subsequently, the Joint Venture haspurchased, leased and optioned additional acreage, and continues to do so asopportunity arises to complete the consolidation of the district.

 

The Joint Venture mining properties aresituated on the west flank of Pikes Peak, about 20 air miles west of ColoradoSprings and 65 air miles south of Denver. The area is accessible by paved highway and supplied by requisiteutilities.  The elevation of theproperties averages slightly over 10,000 feet above sea level.  Snow accumulations are generally light and donot materially interfere with access to the property.

 

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To a great extent, the Joint Venture miningproperties lie within the boundary of a geological entity known as a caldera or“volcanic subsidence basin” (the “Basin”). The Basin is of rudimentary elliptical outline, with its long axistrending in a northwesterly direction. It has a length of about 4-1/2 miles and a width of about 2-1/2 miles,covering some 5,000 acres at the ground surface.  The area of the Basin gradually narrows withdepth.  The bulk of the historicalCripple Creek gold production was from the underground mines within the Basin,with the major mines located in the southern portion of the Basin.

 

From the inception of production in 1891until the suspension of operations in 1960, the Cripple Creek Mining Districtwas the major gold mining district in the United States.  It is estimated that approximately 21 millionounces of gold were produced in this period, principally from mines latercontributed to the Joint Venture by Golden Cycle Gold Corporation.  The Joint Venture, including a number ofjoint venture partners, has added about 2.5 million troy ounces of goldproduction to this total during the period 1985 through 2004.  The Joint Venture mining properties includemost of the principal formerly producing mines in the Cripple Creek district,including the Ajax, Cresson, Portland, Independence, Vindicator and GoldenCycle.  Because of the age of many of themines and the fact that mining operations throughout the Basin declined andwere suspended more than thirty years ago, the existing mine shafts andworkings 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 arecomprised of approximately 7,300 acres of mineral rights in the Penrose Area ofFremont County, Colorado.  There is noevidence of successful oil and gas development nearby, with the exception ofthe Florence, Colorado area.  Florencewas the site of the first producing wells in Colorado in the 1860’s and thearea is still producing on a limited scale today.  Several years ago, interest was shown inleasing very large acreages of state land about 50 to70 miles east of theCompany’s land.  No development of thatarea is visible at this 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**

 

As previously reported, the Sierra Club andMineral Policy Center filed two complaints in U.S. District Court for theDistrict of Colorado against CC&V and its Joint Venture partners, includingthe Company, alleging certain violations of the CWA.

 

1.           Thefirst ten Causes of Action in the first of these two cases allege un-permitteddischarges 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.  A pre-trial conference was held on March 25,2005, in this case, and it

 

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should beready by mid-summer for trial, though no trial date has yet been set.

 

2.           Thesecond of these two cases relates to seeps asserted to be point-sourcedischarges of Cresson Project drainage from the Moffat Tunnel Cribbing Wall andthe Squaw Gulch Pond to Cripple Creek and a tributary thereto in SquawGulch.  Plantiffs assert and Defendantsdeny that the law requires a permit for these seeps.  This case was set for trial on April 12,2005, but that setting was vacated and the two cases consolidated for trial ona date not yet set.

 

Management is contesting both of these cases,and is coordinating its own efforts with those of the owner and operator,CC&V, and the majority owners thereof, AngloGold North America, Inc.,and AngloGold Colorado Corp.  The Companyis neither the owner nor operator and its interest is limited to its minorityinterest in CC&V.  Therefore, thelikelihood of an unfavorable outcome to the Company cannot be evaluated, and noestimate can be made of the amount or range of potential loss, if any, whichmight result either to the Company or to its interest in CC&V.

 

The suit pending at the end of 2003 inMadison County, Illinois, was recently dismissed on stipulation.

 

The Company expended approximately $17,000and $12,500 during the years 2004 and 2003, respectively, defending againstthese suits.

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

The Company did not submit any matters to avote of security holders during the fourth quarter of 2004.

 

12

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**PART II**

 

**ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES**

 

Market Information

 

The Company’s Common Stock has been listedand traded on the Pacific Exchange since 1987 (except during the period from July 6,1994 to August 30, 1994), and from July 1, 1983 until June 30,1992 was quoted on NASDAQ.  The Company’strading symbol is GCGC on the Pacific Exchange. The following table shows the high and low bid price per share on thePacific Exchange, or the Over the Counter market, for each calendar quartersince January 1, 2003.  All stockprices have been adjusted to reflect the five for one stock split July 2004.

 
| **Price Range For:**                   | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|----------------------------------------|------------|----------|------------|---------|------------|
| 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    |       |
| Quarter  ended December 31, 2003  |       | 3.40     |       | 2.40    |       |
| Quarter  ended September 30, 2003 |       | 3.00     |       | 2.20    |       |
| Quarter  ended June 30, 2003      |       | 3.60     |       | 2.60    |       |
| Quarter  ended March 31, 2003     |       | 3.20     |       | 2.60    |       |
|                                        |            |          |            |         |            |  |  |

 

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 theCompany’s Common Stock as of March 28, 2005 was 804.  The number of beneficial owners for whomshares are held in “street name” as of March 28, 2005 is believed to bemore than 500.

 

Dividends

 

The Company has not paid any dividends.  The Company effected a five-for-one stocksplit effective July 2004 following shareholder approval of an increase inthe authorized shares of the Company’s Common Stock from 3.5 million to 100million at the 2004 annual meeting of shareholders.

 

Equity Compensation Plans

 

The following table shows information for allequity compensation plans:

 

13

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| **Plan Category**                                           | ** ** | **Number of Securities to  be Issued Upon Exercise  of Outstanding Options  Warrants and Rights** | ** ** | **Weighted-Average  Exercise Price of  Outstanding Options,  Warrants and Rights** | ** ** | **Number of Securities  Remaining Available for  Future Issuance Under  Equity Compensation  Plans (Excluding  Securities Reflected in  the First Column)** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                        |       |                                                                                              |       |                                                                               |       |                                                                                                                                                        |       |
| Equity  Compensation Plans Approved by Security Holders     |       | 200,000                                                                                           |       | 1.83                                                                               |       | 50,000                                                                                                                                                      |       |
|                                                        |       |                                                                                              |       |                                                                               |       |                                                                                                                                                        |       |
| Equity  Compensation Plans Not Approved by Security Holders |       | —                                                                                            |       | —                                                                             |       | —                                                                                                                                                      |       |
| Total                                                       |       | 200,000                                                                                           |       | 1.83                                                                               |       | 50,000                                                                                                                                                      |       |

 

There were no sales of unregistered securities during the year ended December 31,2004.

 

**ITEM 6. SELECTED FINANCIAL DATA**

 
| ** **                                | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** | **2001**  | ** ** | **2000**  | ** ** |
|-------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Revenues (1)                              |       | $         | 250,000    |      | $          | 250,000   |       | $         | 250,000    |      | $          | 250,000 |   | $ | 250,000 |   |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Other income                              |       | 30,000    |       | 581,000   |       | 30,000    |       | 86,000    |       | 105,000   |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Expenses                                  |       | 602,000   |       | 607,000   |       | 503,000   |       | 430,000   |       | 321,000   |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Share of  Mining Joint Venture Losses (2) |       | —    |       | —    |       | —    |       | —    |       | —    |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Net income  (Loss)                        |       | (322,000  | )          | 224,000   |       | (223,000  | )          | (94,000   | )          | 34,000    |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Net income  (Loss) Per Share              |       | (0.03     | )          | 0.02      |       | (0.02     | )          | 0.00      |       | 0.00      |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Total Assets                              |       | 1,647,000 |       | 1,872,000 |       | 1,417,000 |       | 1,649,000 |       | 1,727,000 |       |
|                                      |       |      |       |      |       |      |       |      |       |      |       |
| Long term  obligations                    |       | —    |       | —    |       | —    |       | —    |       | —    |       |
|                                           |            |           |            |           |            |           |            |           |            |           |            |  |  |  |  |  |

 

----

(1)  Revenues are comprised of the Minimum AnnualDistribution.  See Management’sDiscussion and Analysis below, and Notes to the consolidated financialstatements for a description of the accounting for the Minimum AnnualDistribution.

 

 (2)  The Joint Venturerecorded net income of $7.7 million for the year ended December 31, 2004,and net losses of $0.5 million and $14.3 million for the years ended December 31,2003 and 2002, respectively.  The Companyhas not recorded its share of the Joint Venture net income for the 2004 period($1,538,400) nor its share of the Joint Venture’s net loss for the 2003 period($93,800) or 2002 period ($2,863,600) because its Joint Venture investmentbalance was reduced to zero in 1992.  TheCompany will not record its share of any future Joint Venture net income untiland unless the balance of the Company’s accumulated unrecorded losses from theJoint Venture ($17,480,058 as of December 31, 2004) are recovered.  See Management’s Discussion and Analysisbelow, and Notes to the consolidated financial statements.

 

14

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**ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATION**

 

Overview

 

Our financial statements consolidate theoperations of our wholly-owned subsidiary, Golden Cycle Philippines, Inc.with those of Golden Cycle Gold Corporation. Golden Cycle Philippines, Inc. has minimal costs and assets andGolden Cycle Gold Exploration, Inc. had no operations or assets during theyear ended December 31, 2004.

 

Currently, our primary mining investment andsource of cash flows is our 33% interest in the CC&V Joint Venture.  The Joint Venture engages in gold miningactivity in the Cripple Creek area of Colorado. The Company’s Joint Venture co-venturer is AngloGold.  In addition to our interest in the JointVenture, we own three gold mineral prospects which we are not activelyexploring at present.

 

Our rights and obligations relating to ourJoint Venture interest are governed by the Joint Venture Agreement.  The Joint Venture is currently, and for theforeseeable future will be, operating in the Initial Phase, as defined in theJoint Venture Agreement.  In accordancewith the Joint Venture Agreement, AngloGold manages the Joint Venture and isrequired to finance all operations and capital expenditures during the InitialPhase.  See “Description of Mining JointVenture” above.

 

Liquidity and Capital Resources

 

Our working capital was $1,558,000 at December 31,2004 compared to $1,778,000 at December 31, 2003.  Cash used in operations was $333,000 in 2004compared to $300,000 during 2003.  Theincrease in cash used in operations during 2004 was primarily due to theincreased general and administrative expenses during the 2004 period.  Working capital decreased by approximately$220,000 at December 31, 2004 compared to December 31, 2003 primarilydue to net losses in the 2004 period offset by approximately $98,000 inproceeds from the exercise of stock options during the year.

 

For 2005, the Company has budgetedapproximately $259,000 for the initial exploration program for its Illipah goldexploration project.  Exploration permitshave been obtained for exploration drilling on property beyond the drill holesin the initial exploration budget.  Ifthe initial exploration proves successful, the Company may elect to accelerateexploration on the property and has the exploration permits to move rapidlyinto phase two exploration drilling. Should the Company elect to accelerate the exploration program, it islikely that the Company will have to raise additional capital to finance theacceleration.  At this time, thelikelihood that the Company will be able raise additional capital whenrequired, and the cost of raising such additional capital is unknown.

 

15

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The Company completed the sale of certainJohnson Ditch Water Rights it owned in Fremont County, Colorado to the City ofCripple Creek on December 31, 2003, for $679,098 in the form of areceivable which resulted in a $546,418 gain. The total revenue to the Company from sale of this Water Right was$991,598, which amount includes the $312,500 which was received by the Companywhen a portion of the sale to the City of Cripple Creek closed on December 31,1996.  The Company received payment infull from the City of Cripple Creek on January 7, 2002.  The Company does not have any further WaterRights.

 

We believe that the Company’s workingcapital, augmented by the Minimum Annual Distribution from the joint venture,is adequate to support operations at the current level for the coming year,barring unforeseen events.  We anticipatethat our Philippine subsidiary will hold all work on a standby basis until theMPSA is awarded to the claim owner.  Ifopportunities to economically pursue or expand Philippine, Nevada, Coloradooperations, or any other opportunity discussed above (see Item 1, OtherOpportunities) are available, and we elect to pursue them, additional workingcapital may also be required.  It is possiblethat the Company will elect to expand the Illipah exploration program whichwill require additional capital.  Thereis no assurance that we will be able to obtain such additional capital, ifrequired, or that such capital would be available to the Company on terms thatwould be acceptable.  Furthermore, if wewere to commence such operations, it is not presently known when or if apositive cash flow could be derived from the operations.

 

Results of Operations

 

2004 vs 2003

 

We recorded net loss of approximately$322,000 for the year ended December 31, 2004 compared to a net profit forthe year ended December 31, 2003 of approximately $224,000.  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).  Each year the carrying costs of the Illipahclaim group increase as have most of the general and administrative costs ofdoing business.  During the past year,the cost of compliance with the provisions of the Sarbanes-Oxley Act of 2002also significantly increased the Company’s administrative costs, particularlyits legal expenses.

 

2003 vs 2002

 

We achieved a net profit of approximately$224,000 for the year ended December 31, 2003 compared to a net loss forthe year ended December 31, 2002 of approximately $223,000.  The positive results for 2003 were the resultof the completion of the one time sale of our Water Rights to the City ofCripple Creek which resulted in approximately a $540,000 gain.

 

We account for our investment in the JointVenture on the equity method.  JointVenture distributions in excess of the investment carrying value are recordedas revenue, as we are not required to finance the Joint Venture’s operatinglosses or capital expenditures. Correspondingly, we have not recorded our share of Joint Venture incomeor losses incurred subsequent to the reduction of the Company’s Joint Ventureinvestment balance to zero in 1992.  Wewill not record our share of equity income until the cumulative amount of

 

16

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previously unrecorded Joint Venture losses has been recouped.  As of December 31, 2004, the Company’saccumulated unrecorded losses from the Joint Venture are $17,480,058.  At the current prevailing price of gold we donot expect distributions from the Joint Venture in excess of the Minimum AnnualDistribution ($250,000 per year) for several years.

 

The Joint Venture recorded net income for theyear ended December 31, 2004 of approximately $7.7 million compared to netlosses of $0.5 million, and $14.3 million for the years ended December 31,2003 and 2002, respectively.  The primaryreason for the Joint Venture’s improved performance in both 2004 and 2003 overthe previous years’ performance was the increase in the prevailing price forgold bullion during each year.

 

Tabular Disclosure of Contractual Obligations

 

The following table summarizes the Company’scurrent contractual obligations.

 
| ** **                   | ** ** | **Payment due by period** | ** ** |
|------------------------------|------------|---------------------------|------------|
| **Contractual Obligations**  | ** ** | **Total**                 | ** ** | **Less than  1 year** | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **More than  5 years** | ** ** |
| Long-Term  Debt Obligations  |       | —                    |       | — |   | — |   | — |   | — |   |
| Capital  Lease Obligations   |       | —                    |       | — |   | — |   | — |   | — |   |
| Operating  Lease Obligations |       | —                    |       | — |   | — |   | — |   | — |   |
| Purchase  obligations        |       | —                    |       | — |   | — |   | — |   | — |   |
| Other  Long-Term Liabilities |       | 354,700                   |       | 107,600 |   | 189,400 |   | 57,700 |   | — |   |
| Total                        |       | 354,700                   |       | 107,600 |   | 189,400 |   | 57,700 |   | — |   |

 

**ITEM 7A.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

We do not hedge, sell forward or otherwisecommit any asset on a contingency basis. We do not normally commit to multi-year contracts other than employmentagreements and office space rental (see Notes to Consolidated FinancialStatements, Note 7, Commitments and Contingencies).  The Joint Venture, in the course of normalbusiness, periodically executes long term supply contracts to limit itsexposure to various supply risks.  TheJoint Venture has not previously hedged or sold forward gold or other assetsfor the joint account.

 

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

 

The financial statements and supplementarydata required by this item are included herein in Item 15.

 

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE**

 

We have had no disagreements with ourindependent auditors regarding accounting or financial disclosure matters.

 

17

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**ITEM 9A. CONTROLS AND PROCEDURES**

 

Disclosure controls and procedures

 

Disclosure controls and procedures are ourcontrols and other procedures that are designed to ensure that informationrequired to be disclosed by us in the reports that we file or submit under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported, within the time periods specified in the Securities and ExchangeCommission’s rules and forms. Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by us in the reports that we file under the SecuritiesExchange Act is accumulated and communicated to our management, including ourprincipal executive officer and principal financial officer, as appropriate toallow timely decisions regarding required disclosure.

 

As of the end of the period covered by thisreport (the “Evaluation Date”), we carried out an evaluation, under thesupervision and with the participation of the Company’s management, includingthe Company’s Chief Executive Officer and the Company’s Chief FinancialOfficer, of the effectiveness of the design and operation of our disclosurecontrols and procedures pursuant to Exchange Act Rule 13a-15. Based upon thatevaluation, our Chief Executive Officer and the Chief Financial Officerconcluded that as of the Evaluation Date, our disclosure controls and procedureswere, effective in alerting them in a timely manner to material informationrelating to the Company and its subsidiaries that is required to be included inthe reports that we file or submit under the Securities Exchange Act of 1934.

 

Internal control over financial reporting

 

Internal control over financial reporting isdefined as a process designed by, or under the supervision of our chiefexecutive officer and our chief financial officer, and effected by our board ofdirectors, through our audit committee, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles. These include procedures that (i) pertain tomaintenance of records in reasonable detail to accurately reflect the ourtransactions and disposition of assets; (ii) provide reasonable assurance thattransactions 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 not required to report management’sassessment of the effectiveness of our internal controls over financialreporting and we have not undertaken the kind of review of such controls thatwe would have been required to undertake if we were required to make such areport. However, in connection with our initial review of disclosure controls andprocedures above, we have noted certain areas in our systems of internalcontrol

 

18

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which, if left unresolved or unaddressed, could result in materialdeficiencies and weaknesses in our internal control. These areas include, lackof segregation of duties due to limited personnel, limited capability due tothe size of our Company to interpret and apply United States generally acceptedaccounting standards, lack of adequate documentation of our system of internalcontrols, lack of formal accounting policy and procedures and relateddocumentation, and lack of a formal budgeting process. Although, we have notinstituted new internal control processes related to these identified areas, ashas been characteristic of companies that have completed their review ofinternal controls and have had to report on the effect of such review, we areconsidering what appropriate remedial actions, if any, are necessary to improveour systems of internal controls.

 

Within the quarter ended December 31, 2004,there were no significant changes to internal control over financial reportingor in other factors that could significantly affect the internal control overfinancial reporting.

 

**ITEM 9B. OTHER INFORMATION**

 

None.

 

**PART III**

 

**ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

Incorporated byreference from the Company’s Proxy Statement relating to the 2005 AnnualMeeting of Shareholders to be filed pursuant to General Instruction G(3) toForm 10-K.  The Company’s Code ofEthics is available by visiting the Company’s internet web site,Goldencycle.com, under investor information.

 

**ITEM 11. EXECUTIVE COMPENSATION**

 

Incorporated by reference from the Company’sProxy Statement relating to the 2005 Annual Meeting of Shareholders to be filedpursuant to General Instruction G(3) to Form 10-K.

 

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS**

 

Incorporated by reference from the Company’sProxy Statement relating to the 2005 Annual Meeting of Shareholders to be filedpursuant to General Instruction G(3) to Form 10-K.

 

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

 

Incorporated by reference from the Company’sProxy Statement relating to the 2005 Annual Meeting of Shareholders to be filedpursuant to General Instruction G(3) to Form 10-K.

 

19

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

 

Ehrhardt Keefe Steiner & Hottman,P.C., Denver, Colorado (“EKS&H”), conducted the audit of our consolidatedfinancial statements for the years ended December 31, 2004 and 2003 andthe review of our quarterly consolidated financial statements for the quartersended September 30, 2003 through December 31, 2004.  KPMG, LLP performed the review of thequarters ended March 31, 2003 and June 30, 2003.  EKS&H is obligated to maintain auditindependence as prescribed by the accounting profession and certainrequirements of the Securities and Exchange Commission.  As a result, our directors specificallyapprove, in advance, non-audit services provided by EKS&H, and consider theeffect, if any, of such services on audit or independence.

 

The fees paid by the Corporation to EKS&H LLP for servicesprovided:

 
| ** **                                                                                                                                                                 | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                                                                                                                       |       |     |       |     |       |
| 1)  Audit fees, including audits of our annual  financial statements, review of our quarterly financial statements and  statutory audits of our foreign subsidiaries. |       | $        | 29,614     |     | $          | 33,700 |   |
| 2)  Audit-related fees.                                                                                                                                               |       | 0        |       | 0        |       |
| 3)  Tax fees (including tax compliance and  advice).                                                                                                                  |       | 5,670    |       | 8,500    |       |
| 4)  All other fees.                                                                                                                                                   |       | 0        |       | 0        |       |
|                                                                                                                                                                       |       |     |       |     |       |
| The fees  paid by the Corporation to KPMG LLP for services provided:                                                                                                       |       |     |       |     |       |
|                                                                                                                                                                       |       |     |       |     |       |
| ** **                                                                                                                                                                 | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                                                                                                                                       |       |     |       |     |       |
| 1)  Audit fees, including audits of our annual  financial statements, review of our quarterly financial statements and  statutory audits of our foreign subsidiaries. |       | $        | 2,900      |     | $          | 2,000 |   |
| 2)  Audit-related fees.                                                                                                                                               |       | 0        |       | 0        |       |
| 3)  Tax fees (including tax compliance and  advice).                                                                                                                  |       | 0        |       | 0        |       |
| 4)  All other fees.                                                                                                                                                   |       | 0        |       | 0        |       |

 

The Company has concluded that the provision of services by EKS&His compatible with maintaining its independence.

 

**PART IV**

 

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

 

(a) Documents filed as part of this report:

 

(1) Financial Statements

 
|   | Report of Independent Registered Accounting Firm, Ehrhardt Keefe  Steiner & Hottman, P.C. |   |
|--------|----------------------------------------------------------------------------------------------------|--------|
|   |                                                                                               |   |
|   | Independent Auditors’ Report, KPMG LLP                                                        |   |
|   |                                                                                               |   |
|   | Consolidated Balance Sheets, December 31, 2004 and 2003                                       |   |
|   |                                                                                               |   |
|   | Consolidated Statements of Operations for the Years  Ended December 31, 2004, 2003 and 2002   |   |
|   |                                                                                               |   |

 

20

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|   | Consolidated Statements of Shareholders’  Equity for the Years  Ended December 31, 2004, 2003 and 2002 |   |
|--------|------------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                             |   |
|   | Consolidated Statements of Cash Flows for  the Years  Ended December 31, 2004, 2003 and 2002                |   |
|   |                                                                                                             |   |
|   | Notes to Consolidated Financial Statements                                                                       |   |

 

(2) Financial Statement Schedules.  Financial statement schedules are omittedbecause they are not applicable or the required information is shown in thefinancial 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 Agreement between AngloGold Ashanti(Colorado) Inc. and the Company dated as of January 1, 1991 (incorporatedby reference to Exhibit 1 to the Company’s Current Report on Form 8-Kdated June 17, 1991).

 

10.2 1997 Officers’ & Directors’ Stock Option Plan (incorporated byreference to Appendix A of the Company’s Definitive Proxy Statement dated April 30,1997).

 

10.3 2002 Stock Option Plan (incorporated by reference to Appendix A of theCompany’s Definitive Proxy Statement dated April 27, 2001).

 

10.4 Employment Agreement dated August 1,2002 with R. Herbert Hampton (incorporated by reference to Exhibit 10.4 tothe Company’s Form 10 dated March 28, 2003).

 

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

 

21a. Subsidiary of the Company:  Golden Cycle Philippines Inc. incorporated inthe Republic of the Philippines.

 

21b. Subsidiary of the Company:  Golden Cycle Gold Exploration Inc.incorporated in the state of Nevada.

 

23.1 Consent of EKS&H PC.

 

23.2 Consent of KPMG LLP.

 

31.1 Certification of Chief Executive Officerand Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002, Section 302.

 

31.2 Certification of Chief Financial Officer pursuant to the Sarbanes-OxleyAct of 2002, Section 302.

 

21

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32.1 Certification of Chief Executive Officerpursuant to the Sarbanes-Oxley Act of 2002, Section 906.

 

32.2 Certification of Chief Financial Officer pursuant to the Sarbanes-OxleyAct of 2002, Section 906.

 

22

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SIGNATURES

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereto dulyauthorized.

 

 
|                      | /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 30, 2005 |                                        |   |

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant in the capacities and on thedates indicated.

 
| /s/ R. Herbert Hampton                                                                                                                                                 |   | March  30, 2005 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
| R. Herbert Hampton, President, Chief  Executive Officer, and Treasurer  (Principal Executive Officer, Principal  Financial Officer, and Principal Accounting  Officer) |   | Date                 |
|                                                                                                                                                                   |   |                 |
|                                                                                                                                                                   |   |                 |
| /s/ James C. Ruder                                                                                                                                                     |   | March  30, 2005 |   |
| James C. Ruder, Director                                                                                                                                               |   | Date                 |
|                                                                                                                                                                   |   |                 |
|                                                                                                                                                                   |   |                 |
| /s/ Robert T. Thul                                                                                                                                                     |   | March  30, 2005 |   |
| Robert T. Thul, Director                                                                                                                                               |   | Date                 |
|                                                                                                                                                                   |   |                 |
|                                                                                                                                                                   |   |                 |
| /s/ Dr. Taki N. Anagnoston                                                                                                                                        |   | March  30, 2005 |   |
| Dr. Taki N. Anagnoston, Director                                                                                                                                  |   | Date                 |
|                                                                                                                                                                   |   |                 |
|                                                                                                                                                                   |   |                 |
| /s/ Donald L. Gustafson                                                                                                                                                |   | March  30, 2005 |   |
| Donald L. Gustafson, Director                                                                                                                                          |   | Date                 |
|                                                                                                                                                                        |        |                      |        |  |

 

23

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**GOLDEN CYCLE GOLD CORPORATIONAND SUBSIDIARIES**

 

Consolidated Financial Statements

 

December 31, 2004 and 2003

 

(With Report of Independent Registered Accounting Firm)

 

24

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**GOLDEN CYCLE GOLD CORPORATIONAND SUBSIDIARIES**

 

**Tableof Contents**

 
| Report of Independent Registered  Public Accounting Firm |   |   |
|----------------------------------------------------------|--------|--------|
|                                                     |   |   |
| Consolidated Balance Sheets                              |   |   |
|                                                     |   |   |
| Consolidated Statements of  Operations                   |   |   |
|                                                     |   |   |
| Consolidated  Statements of Shareholders’ Equity    |   |   |
|                                                     |   |   |
| Consolidated  Statements of Cash Flows                   |   |   |
|                                                     |   |   |
| Notes to Consolidated Financial Statements               |   |   |

 

25

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**REPORT OF INDEPENDENT**REGISTEREDPUBLIC ACCOUNTING FIRM

 

Board of Directors and Stockholders

Golden Cycle Gold Corporation

Colorado Springs, Colorado

 

 

We have audited the consolidated balance sheets of Golden Cycle GoldCorporation and Subsidiaries (a Colorado corporation) as of December 31, 2004and 2003, and the related consolidated statements of operations, changes instockholders’ equity, and cash flows for the two years in the period endedDecember 31, 2004. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinionon these consolidated financial statements based on our audit.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the consolidated financial statements are free of materialmisstatement. ******The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion.  An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements, assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall consolidated financial statement presentation.  Webelieve that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the consolidated financial positionof Golden Cycle Gold Corporation and Subsidiaries as of December 31, 2004 and2003, and the consolidated results of its operations and its cash flows for thetwo years in the period ended December 31, 2004, in conformity with accountingprinciples generally accepted in the United States of America.

 

 
|             |   | /s/ Ehrhardt Keefe Steiner & Hottman P.C. |
|------------------|--------|-----------------------------------------------|
|             |   |
|             |   |
| February 9, 2005 |   |
| Denver, Colorado |   |

 

26

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Report of IndependentRegistered Public Accounting Firm

 

 

Board of Directors

Golden Cycle Gold Corporation:

 

We have audited the accompanying consolidated statements of operations,shareholders’ equity and comprehensive income (loss), and cash flows of GoldenCycle Gold Corporation and subsidiaries for the year ended December 31,2002.  These consolidated financialstatements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these consolidated financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believe that our audit provides areasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the results of operations and thecash flows of Golden Cycle Gold Corporation and subsidiaries for the year endedDecember 31, 2002, in conformity with U.S. generally accepted accountingprinciples.

 

 
| KPMG LLP         |
|------------------|
|             |
|             |
| Denver, Colorado |
| March 21, 2003   |

 

27

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**GOLDEN CYCLE GOLD CORPORATIONAND SUBSIDIARIES**

 

Consolidated Balance Sheets

 
| ** **                                                                                                                                | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                                                                | ** ** | **2004**         | ** ** | **2003**         | ** ** |
| **Assets**                                                                                                                                |       |             |       |             |       |
| Current assets:                                                                                                                           |       |             |       |             |       |
| Cash and cash  equivalents                                                                                                                |       | $                | 457,000    |             | $          | 202,099 |   |
| Short-term  investments (note 2)                                                                                                          |       | 1,120,273        |       | 923,669          |       |
| Interest  receivable and other current assets                                                                                             |       | 13,524           |       | 7,014            |       |
| Prepaid  insurance                                                                                                                        |       | 24,380           |       | 24,580           |       |
| Account  receivable from sale of water rights (note 3)                                                                                    |       | —           |       | 679,098          |       |
| Total current  assets                                                                                                                     |       | 1,615,177        |       | 1,836,460        |       |
| Property and  equipment, at cost:                                                                                                         |       |             |       |             |       |
| Land                                                                                                                                      |       | 2,025            |       | 2,025            |       |
| Mineral claims                                                                                                                            |       | 20,657           |       | 20,657           |       |
| Furniture and  fixtures                                                                                                                   |       | 10,030           |       | 10,037           |       |
| Machinery and  equipment                                                                                                                  |       | 31,819           |       | 33,806           |       |
|                                                                                                                                      |       | 64,531           |       | 66,525           |       |
| Less  accumulation depreciation and depletion                                                                                             |       | (33,126          | )          | (30,601          | )          |
|                                                                                                                                      |       | 31,405           |       | 35,924           |       |
| Total assets                                                                                                                              |       | $                | 1,646,582  |             | $          | 1,872,384 |   |
|                                                                                                                                      |       |             |       |             |       |
| **Liabilities and Shareholders’ Equity**                                                                                             |       |             |       |             |       |
| Current  liabilities:                                                                                                                     |       |             |       |             |       |
| Accounts payable  and accrued liabilities                                                                                                 |       | $                | 56,868     |             | $          | 58,479 |   |
| Total current  liabilities                                                                                                                |       | 56,868           |       | 58,479           |       |
|                                                                                                                                      |       |             |       |             |       |
| Commitments and  contingencies (note 8)                                                                                                   |       |             |       |             |       |
|                                                                                                                                      |       |             |       |             |       |
| Shareholders’  equity (note 6):                                                                                                      |       |             |       |             |       |
| Common stock, no  par value. Authorized 100,000,000 shares;   issued and outstanding 9,669,250 shares in 2004; 9,542,250   shares in 2003 |       | 7,406,317        |       | 7,307,854        |       |
| Additional  paid-in capital                                                                                                               |       | 1,927,736        |       | 1,927,736        |       |
| Accumulated  deficit                                                                                                                      |       | (7,712,526       | )          | (7,389,944       | )          |
| Accumulated  other comprehensive loss                                                                                                     |       | (31,813          | )          | (31,741          | )          |
| Total  shareholders’ equity                                                                                                          |       | 1,589,714        |       | 1,813,905        |       |
| Total  liabilities and shareholders’ equity                                                                                          |       | $                | 1,646,582  |             | $          | 1,872,384 |   |
|                                                                                                                                           |            |                  |            |                  |            |  |  |  |  |  |

 

See accompanyingnotes to consolidated financial statements.

 

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**GOLDEN CYCLE GOLD CORPORATIONAND SUBSIDIARIES**

 

Consolidated Statements ofOperations

 
| ** **                                                                    | ** ** | **For the Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                    | ** ** | **2004**                            | ** ** | **2003** | ** ** | **2002** | ** ** |
| Revenue:                                                                      |       |                                |       |   |   |   |   |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $                                   | 250,000    |   | $ | 250,000 |   | $ | 250,000 |   |
|                                                                          |       |                                |       |   |   |   |   |   |   |   |
| Expenses:                                                                     |       |                                |       |   |   |   |   |
| General and  administrative expense                                           |       | 542,510                             |       | 464,348 |   | 345,209 |   |
| Depreciation  expense                                                         |       | 5,286                               |       | 1,217 |   | 3,759 |   |
| Exploration  expense                                                          |       | 54,372                              |       | 141,851 |   | 153,934 |   |
|                                                                          |       | 602,168                             |       | 607,416 |   | 502,902 |   |
| Operating loss                                                                |       | (352,168                            | )          | (357,416 | ) | (252,902 | ) |
|                                                                          |       |                                |       |   |   |   |   |
| Other income  (expense):                                                      |       |                                |       |   |   |   |   |
| Interest and  other income                                                    |       | 21,545                              |       | 15,405 |   | 29,847 |   |
| Gold bullion  mark-up to market                                               |       | 8,041                               |       | 24,229 |   | — |   |
| Gain (loss) on  assets sold (net)                                             |       | —                              |       | 541,917 |   | (375 | ) |
|                                                                          |       | 29,586                              |       | 581,551 |   | 29,472 |   |
| Net income  (loss)                                                            |       | $                                   | (322,582   | ) | $ | 224,135 |   | $ | (223,430 | ) |
| Basic earnings  (loss) per share                                              |       | $                                   | (0.03      | ) | $ | 0.02 |   | $ | (0.02 | ) |
|                                                                          |       |                                |       |   |   |   |   |   |   |   |
| Diluted earnings  (loss) per share                                            |       | (0.03                               | )          | 0.02 |   | (0.02 | ) |
|                                                                          |       |                                |       |   |   |   |   |
| Basic weighted  average shares outstanding                                    |       | 9,597,231                           |       | 9,529,100 |   | 9,442,250 |   |
|                                                                          |       |                                |       |   |   |   |   |
| Diluted weighted  average shares outstanding                                  |       | 10,391,786                          |       | 10,364,100 |   | 9,442,250 |   |

 

See accompanyingnotes to consolidated financial statements.

 

29

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**GOLDEN CYCLE GOLD CORPORATIONAND SUBSIDIARIES**

 

Consolidated Statementsof Shareholders’ Equity and Comprehensive Income (Loss)

 

For the Years endedDecember 31, 2004, 2003, and 2002

 
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **Accumulated**         | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------------|------------|-------------|------------|-----------------|------------|-----------------|------------|-------------------------|------------|------------|------------|
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **other**               | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **comprehensive**       | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **loss – foreign** | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **      | ** ** | **currency**            | ** ** | ** ** | ** ** |
| ** **                               | ** ** | **Common stock** | ** ** | **paid-in** | ** ** | **Accumulated** | ** ** | **translation** | ** ** | ** **              | ** ** |
| ** **                               | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **capital**     | ** ** | **deficit**     | ** ** | **adjustment**          | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2001            |       | 9,442,250        |       | $           | 7,116,604  |            | $          | 1,927,736       |       | $                       | (7,390,649 | )          | $          | (30,715 | ) | $ | 1,622,976 |   |
| Net loss                                 |       | —           |       | —      |       | —          |       | (223,430        | )          | —                  |       | (223,430   | )          |
| Foreign currency  translation adjustment |       | —           |       | —      |       | —          |       | —          |       | (823                    | )          | (823       | )          |
| Comprehensive  loss                      |       |             |       |        |       |            |       |            |       |                    |       | (224,253   | )          |
| 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  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 |   |

 

See accompanyingnotes to consolidated financial statements.

 

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**GOLDEN CYCLE GOLD CORPORATIONAND SUBSIDIARIES**

 

Consolidated Statementsof Cash Flows

 
| ** **                                                                                                                     | ** ** | **For the Year Ended December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                                                     | ** ** | **2004**                            | ** ** | **2003** | ** ** | **2002** | ** ** |
| Cash flows from  operating activities:                                                                                         |       |                                |       |   |   |   |   |
| Net income  (loss)                                                                                                             |       | $                                   | (322,582   | ) | $ | 224,135 |   | $ | (223,430 | ) |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities:                                          |       |                                |       |   |   |   |   |
| Depreciation  expense                                                                                                          |       | 5,286                               |       | 1,217 |   | 3,759 |   |
| Increase in  market value of gold asset                                                                                        |       | (8,041                              | )          | (24,229 | ) | — |   |
| (Gain) loss on  disposal of assets                                                                                             |       | —                              |       | (541,817 | ) | 375 |   |
| Decrease  (increase) in interest receivable and other current assets                                                           |       | (6,510                              | )          | 5,605 |   | 9,994 |   |
| Decrease  (increase) in prepaid insurance                                                                                      |       | 200                                 |       | (5,436 | ) | 505 |   |
| Increase  (decrease) in accounts payable and accrued liabilities                                                               |       | (1,611                              | )          | 40,227 |   | (7,680 | ) |
|                                                                                                                           |       |                                |       |   |   |   |   |
| Net cash used in  operating activities                                                                                         |       | (333,258                            | )          | (300,298 | ) | (216,477 | ) |
|                                                                                                                           |       |                                |       |   |   |   |   |
| Cash flows from  investing activities:                                                                                         |       |                                |       |   |   |   |   |
| Decrease  (increase) in short-term investments, net                                                                            |       | (188,563                            | )          | (258,652 | ) | 236,516 |   |
| Proceeds from  account receivable on sale of water rights                                                                      |       | 679,098                             |       | — |   | — |   |
| Purchases of  property and equipment                                                                                           |       | (767                                | )          | (8,210 | ) | (11,846 | ) |
|                                                                                                                           |       |                                |       |   |   |   |   |
| Net cash  provided by (used in) investing activities                                                                           |       | 489,768                             |       | (266,862 | ) | 224,670 |   |
|                                                                                                                           |       |                                |       |   |   |   |   |
| Cash flows  provided by financing activity:                                                                                    |       |                                |       |   |   |   |   |
| Proceeds on  exercise of stock options                                                                                         |       | 98,463                              |       | 191,250 |   | — |   |
| Net cash  provided by investing activities                                                                                     |       | 98,463                              |       | 191,250 |   | — |   |
|                                                                                                                           |       |                                |       |   |   |   |   |
| Effect of  exchange rate changes on cash                                                                                       |       | (72                                 | )          | (203 | ) | (823 | ) |
| Net increase  (decrease) in cash and cash equivalents                                                                          |       | 254,901                             |       | (376,113 | ) | 7,370 |   |
| Cash and cash  equivalents, beginning of year                                                                                  |       | 202,099                             |       | 578,212 |   | 570,842 |   |
| Cash and cash  equivalents, end of year                                                                                        |       | $                                   | 457,000    |   | $ | 202,099 |   | $ | 578,212 |   |
|                                                                                                                           |       |                                |       |   |   |   |   |
| 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 accompanyingnotes to consolidated financial statements.

 

31

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**(1)**                     Summary of Significant AccountingPolicies

 

Golden Cycle Gold Corporation (the Company), a Coloradocorporation, acquires and explores mining properties in Colorado, Nevada, andthe Republic of the Philippines. The Company’s principal investment consists ofits joint venture participation in the Cripple Creek and Victor Gold MiningCompany (the Joint Venture), a precious metals mining company in the CrippleCreek Mining District of Teller County, Colorado. In addition, during 1997the Company established Golden Cycle Philippines, Inc. (GCPI), a wholly ownedsubsidiary of the Company, in the Republic of the Philippines in order toparticipate in potential mining opportunities. In January 2002, the Company established Golden Cycle Gold Exploration,Inc. (GCGE), a wholly owned subsidiary, to conduct exploration activities forthe Company.

 

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

*** ***

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make various estimates and assumptions in determining thereported amounts of assets, liabilities, revenues, and expenses for each periodpresented, and in the disclosure of commitments and contingencies. Actualresults could differ significantly from those estimates. Changes in theseestimates and assumptions will occur based on the passage of time and theoccurrence of future events.

 

***(b)***                      Principlesof Consolidation

*** ***

The consolidated financial statements include the accounts of theCompany and its wholly owned subsidiaries. All significant intercompanytransactions and balances have been eliminated in consolidation.

 

***(c)****                      **Cash and Cash Equivalents***

 

                                    TheCompany considers all highly liquid instruments purchased with an originalmaturity of three months or less to be cash equivalent.

 

***(d)***                      Short-TermInvestments

*** ***

Short-term investments consist of U.S. Treasury Bills and certificatesof deposit. U.S. Treasury Bills that the Company has both the intent andability to hold to maturity are carried at amortized cost.   Short-term investments also includes 310troy ounces of gold bullion purchased by the Company in 2002.  Interest revenue and the increase or decreasein the value of the gold bullion is included in the consolidated statement of operations.

 

***(e)***                       Investmentin Mining Joint Venture

*** ***

The Company accounts for its investment in the Joint Venture on theequity method. In prior years, the Company’s share of Joint Venture lossesexceeded the remaining carrying value of the investment and, accordingly, theinvestment was reduced to zero. Joint Venture distributions in excess of theinvestment carrying value are recorded as income. The Company does not recordits share of Joint Venture losses incurred subsequent to the reduction of itsinvestment balance to zero, as the Company has no obligation to fund operatinglosses. To the extent the Joint Venture is profitable, the Company does notrecord its share of equity income until the cumulative amount of previouslyunrecorded Joint Venture losses have been recouped.

 

***(f)***                         MineralExploration and Development Costs

*** ***

Mineral exploration costs are expensed as incurred. Mineral propertydevelopment costs are capitalized and depleted based upon estimated proven andprobable recoverable reserves. The

 

32

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Company has no capitalized mineral property development costs at December31, 2004 or December 31, 2003.

 

The Company assesses the carrying value of its long-lived assets for impairmentwhenever changes in facts 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, 2004 or December 31, 2003.

 

***(g)***                      Property andEquipment

*** ***

Office furniture, fixtures, and equipment are stated at cost and aredepreciated using the straight-line method over estimated useful lives rangingfrom three to ten years.

 

***(h)***                      ForeignCurrency Translation

*** ***

The GCPI operations’ functional currency is the local currency and,accordingly, the assets and liabilities of its Philippines operations aretranslated into their United States dollar equivalent at rates of exchangeprevailing at each balance sheet date. Revenue and expenses are translated ataverage exchange rates prevailing during the periods in which such items arerecognized in operations.

 

Gains and losses arising from translation of the consolidated financialstatements of GCPI operations are included in the accumulated othercomprehensive income (loss) in shareholders’ equity. Amounts in this accountare recognized in the consolidated statements of operations when the relatednet foreign investment is reduced. Gains and losses on foreign currency transactionsare included in the consolidated statements of operations.

 

***(i)***                         StockOptions

*** ***

In December 2002, the Financial Accounting Standards Board issued SFASNo. 148, *Accounting for Stock-Based Compensation –Transition and Disclosure*(“SFAS No. 148”).  SFAS No. 148 amends SFAS No. 123 to providealternative 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 disclosures inboth annual and interim financial statements about the method of accounting forstock-based employee compensation and the effect of the method used on reportedresults.  The amendments to SFAS No. 123are effective for financial statements for fiscal years ending after December15, 2002.  Had compensation cost beendetermined under the provisions of SFAS No. 123, the following pro forma netloss and per share amounts would have been recorded.

 
| ** **                                    | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                          |       |     |       |     |       |     |       |
| Net income  (loss):                           |       |     |       |     |       |     |       |
| As reported                                   |       | $        | (322,582   | )        | $          | 224,135  |       | $ | (223,430 | ) |
| Pro forma                                     |       | (504,980 | )          | 154,535  |       | (454,346 | )          |
|                                          |       |     |       |     |       |     |       |
| Basic and  diluted earnings (loss) per share: |       |     |       |     |       |     |       |
| As reported                                   |       | $        | (0.03      | )        | $          | 0.02     |       | $ | (.02 | ) |
| Pro forma                                     |       | (0.05    | )          | 0.02     |       | (.04     | )          |

 

33

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The fair value of eachoption grant was estimated on the date of grant using the Black-Scholes option-pricingmodel with the following 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 2002 |       | 0                   | %          | 48                       | %          | 4.61                            | %          | 10                               |       | $                                               | 1.84       |   |
| Options granted  in 2003 |       | 0                   | %          | 38                       | %          | 4.10                            | %          | 10                               |       | $                                               | 1.39       |   |
| Options granted  in 2004 |       | 0                   | %          | 55                       | %          | 4.77                            | %          | 10                               |       | $                                               | 1.82       |   |

 

***(j)***                         IncomeTaxes

*** ***

The Company utilizes theasset and liability method of accounting for income taxes. Under the asset andliability method, deferred tax assets and liabilities are recognized for thefuture tax consequences attributable to differences between the financialstatement carrying amounts and the tax basis of existing assets and liabilitiesusing enacted tax rates expected to apply in the years in which such temporarydifferences are expected to be recovered or settled. Changes in tax rates arerecognized in the period of the enactment date. A valuation allowance isrecognized unless tax assets are more likely than not to be realized.

 

***(k)***                      ComprehensiveIncome

*** ***

In 1998, we adopted SFAS No.130, *Reporting Comprehensive Income*.  SFAS No. 130 requires that all components ofcomprehensive income (loss), including net income (loss), be reported in thefinancial 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), including foreigncurrency translation adjustments, shall be reported, net of their related taxeffect, to arrive at comprehensive income (loss).  We have disclosed comprehensive income (loss)in our consolidated financial statements accordingly.

 

***(l)***                         RevenueRecognition

*** ***

The Company recognizesrevenue as advanced distributions from the Joint Venture are received.

 

**(2)**                     Short-Term Investments

** **

The Company held certificates of deposit of approximately $985,000 and$696,000 at December 31, 2004 and 2003, respectively. All certificates ofdeposit held at December 31, 2004 mature within one year. Short-terminvestments also include 310 troy ounces of gold bullion purchased by theCompany in 2002 at a cost of $102,859 and is carried at market value of$135,129 at December 31, 2004 which includes an unrealized gain of $32,270.

 

**(3)**                     Accounts Receivable From Sale ofWater Rights

** **

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

 

34

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

** **

The Company owns an interest in the Joint Venture with AngloGoldColorado (AngloGold). AngloGold manages the Joint Venture. The Joint Ventureconducts exploration, development, and mining of certain properties in theCripple Creek Mining District, Teller County, Colorado. The Joint Venture ownsor controls surface and/or mineral rights in the Cripple Creek Mining District,certain portions of which are being actively explored and developed.

 

The Joint Venture Agreement, as amended, generally requires AngloGoldto finance operations and capital expenditures of the Joint Venture. The JointVenture is currently operating in an Initial Phase that will end when (i) the Initial Loans(defined below) have been repaid and (ii) Net Proceeds (defined in the JointVenture Agreement generally as gross revenues less costs) in the amount of $58million have been distributed to the joint venturers in the proportion of 80%to AngloGold and 20% to the Company.  TheJoint Venture 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 loans are available at a lowercost than from AngloGold, financial institutions.  As of December 31, 2004, InitialLoans were approximately $365.7 million and no Net Proceeds have beendistributed. Initial Loans must be repaid prior to Net Proceeds beingdistributed to the venturers. After the Initial Phase, the Joint Venturewill distribute metal in kind, 67% to AngloGold and 33% to the Company. TheAgreement also provides for the Company to receive a minimum annualdistribution of $250,000 during the Initial Phase. Beginning in 1994, suchminimum annual distributions are recoupable against the Company’s future shareof Net Proceeds, if any.

 

Whether future gold prices and the results of the Joint Venture’soperations will reach and maintain a level necessary to repay the InitialLoans, complete the Initial Phase, and thereafter generate net income cannot beassured due to uncertainties inherent within any mining operation. Based on theamount of Initial Loans payable to the manager and the uncertainty of futureoperating revenues, there is no assurance that the Company will receive morethan the Minimum Annual Distribution from the Joint Venture in theforeseeable future.

 

The Company’s share of 2004 Joint Venture net income which has not beenrecorded in its consolidated financial statements is approximately $1,538,000.The Company’s share of the 2003 and 2002 Joint Venture losses, which havenot been recorded in its consolidated financial statements is approximately $93,800and $2,863,600, respectively. As of December 31, 2004, the Company’saccumulated unrecorded losses from the Joint Venture are approximately $17,480,000.

 

35

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The condensed balance sheets of the Joint Venture asof December 31, 2004 and 2003 are summarized as follows:

 
| ** **                                     | ** ** | **2004**           | ** ** | **2003** | ** ** |
|------------------------------------------------|------------|--------------------|------------|----------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| **Assets**                                     |       |               |       |     |       |
|                                           |       |               |       |     |       |
| Inventory                                      |       | $                  | 103,235    |     | 98,433     |   |
| Other current  assets                          |       | 662                |       | 5,002    |       |
|                                           |       |               |       |     |       |
| Total current  assets                          |       | 103,897            |       | 103,435  |       |
|                                           |       |               |       |     |       |
| Fixed assets and  mine development costs, net  |       | 245,106            |       | 250,310  |       |
|                                           |       |               |       |     |       |
| Total assets                                   |       | $                  | 349,003    |     | 353,745    |   |
|                                           |       |               |       |     |       |
| **Liabilities and Venturers’ Deficit**    |       |               |       |     |       |
|                                           |       |               |       |     |       |
| Current  liabilities                           |       | $                  | 13,473     |     | 14,377     |   |
| Payable to  AngloGold                          |       | 365,698            |       | 376,515  |       |
| Capital lease  obligations                     |       | 10,451             |       | 12,772   |       |
| Asset retirement  obligation                   |       | 16,716             |       | 14,786   |       |
| Other long-term  liabilities                   |       | 1,691              |       | 1,763    |       |
|                                           |       |               |       |     |       |
| Total liabilities                              |       | 408,029            |       | 420,213  |       |
|                                           |       |               |       |     |       |
| Venturers’  deficit                       |       | (59,026            | )          | (66,468  | )          |
|                                           |       |               |       |     |       |
| Total  liabilities and Venturers’ deficit |       | $                  | 349,003    |     | 353,745    |   |

 

The condensed statementsof operations of the Joint Venture for each of the years in the three-year periodended December 31, 2004 are summarized as follows:

 
| ** **                                                                | ** ** | **2004**   | ** ** | **2003**           | ** ** | **2002**   | ** ** |
|---------------------------------------------------------------------------|------------|------------|------------|--------------------|------------|------------|------------|
| ** **                                                                | ** ** | ** ** | ** ** | **(In thousands)** | ** ** | ** ** | ** ** |
| Revenue                                                                   |       | $          | 135,673    |               | $          | 102,645    |       | $ | 70,462 |   |
| Operating  expenses                                                       |       | (104,356   | )          | (85,138            | )          | (63,123    | )          |
| Gross profit                                                              |       | 31,317     |       | 17,507             |       | 7,339      |       |
| Interest expense                                                          |       | (23,813    | )          | (22,378            | )          | (20,905    | )          |
| Other income  (expense)                                                   |       | 188        |       | (514               | )          | (752       | )          |
| Income (loss)  before cumulative effect of change in accounting principle |       | 7,692      |       | (5,385             | )          | (14,318    | )          |
| Cumulative  effect of change in accounting principle                      |       | —     |       | 4,916              |       | —     |       |
| Net income  (loss)                                                        |       | $          | 7,692      |               | $          | (469       | )          | $ | (14,318 | ) |

 

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**(5)**                     Income Taxes

 

The tax effects of temporary differences that giverise to significant portions of the deferred tax assets at December 31,2004 and 2003 are presented below:

 
| ** **                        | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
| Deferred tax  assets:             |       |     |       |     |       |
| Net operating  loss carryforwards |       | $        | 801,000    |     | 664,000    |   |
| Exploration  expenditures         |       | 67,000   |       | 96,000   |       |
| Other                             |       | 5,000    |       | —   |       |
|                              |       |     |       |     |       |
|                              |       | 873,000  |       | 760,000  |       |
|                              |       |     |       |     |       |
| Valuation  allowance              |       | (873,000 | )          | (760,000 | )          |
| Net deferred tax  assets          |       | $        | —     |     | —     |   |

 

A reconciliation of the statutory federal income tax rate to theeffective tax rate follows:

 
| ** **                         | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Statutory  federal income tax rate |       | 34.0     | %          | 34.0     | %          |
| Effect of:                         |       |     |       |     |       |
| State and local income  taxes      |       | 3.30     |       | 3.30     |       |
| Other - net                        |       | (1.96    | )          | 0.40     |       |
| Change in  valuation allowance     |       | (35.34   | )          | (37.70   | )          |
| Effective tax  rate                |       | 0.00     | %          | 0.00     | %          |

 

At December 31, 2004, the Company has net operating loss carry forwardsfor income tax purposes of approximately $2,148,000 which expires beginning in2005 through 2025.

 

The Company has not recorded an income tax benefit in 2004 or 2003 asit does not believe it is more likely than not that the benefit of the deferredtax assets will be realized in the future.

 

**(6)**                     Common Stock Options

 

During 1992, the Company’s Board of Directors adopted a Directors’Stock Option Plan (the Directors’ Plan) and a 1992 Stock Option Plan (the 1992Plan).  All options available under theDirectors’ Plan were granted prior to December 31, 1994.  During 1997, shareholders approved the 1997Officers’ and Directors’ Stock Option Plan, and during 2002, shareholdersapproved the 2002 Stock Option Plan pursuant to which 1,000,000 and 625,000shares, respectively, of the Corporation’s common stock were reserved forissuance pursuant to options to be granted. The 1992 Plan provided for the grant of options on a discretionary basisto certain employees and consultants. Under each plan, the exercise price cannot be less than the fair marketvalue of the common stock on the date of the grant.  The expiration of the options is ten yearsfrom the date of the grant.

 

37

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During 2004, the Company granted 100,000 options todirectors of the Corporation, and during 2003 and 2002 the Company granted50,000 and 125,000 options respectively to directors of the Corporation underthe above plans.

 

Changes in stock optionsfor each of the years in the three-year period ended December 31, 2004 areas follows:

 
| ** **                                             | ** ** | **Shares** | ** ** | **Option price  per share** | ** ** | **Weighted   average  exercise price** | ** ** |
|--------------------------------------------------------|------------|------------|------------|-----------------------------|------------|----------------------------------------|------------|
|                                                   |       |       |       |                        |       |                                   |       |
| Outstanding and  exercisable at December 31, 2001 |       | 760,000    |       | $                           | 1.41       |                                   | $          | 1.41 |   |
| Granted                                                |       | 125,000    |       | 2.33                        |       | 2.33                                   |       |
|                                                   |       |       |       |                        |       |                                   |       |
| 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                                   |       |
|                                                        |            |            |            |                             |            |                                        |            |  |  |

 

The weighted average remaining term of optionsoutstanding was 6.81 and 6.35 years at December 31, 2004 and 2003,respectively.

 

**(7)**                     Recently Issued FinancialAccounting Standards:

** **

In December 2004, the FASB issued SFAS No. 153, *“Exchanges of Non-monetary Assets an amendment of APBNo. 29”*. This Statement amends APB Opinion No. 29, *“Accounting for Non-monetary Transactions”*toeliminate the exception for non-monetary exchanges of similar productive assetsand replaces it with a general exception for exchanges of non-monetary assetsthat do not have commercial substance. This Statement is effective for fiscal years beginning afterJune 15, 2005. We do not believe that the adoption of SFAS No. 153will have a material impact on our financial position, net earnings or cashflows.

 

In December 2004, the FASB issued SFAS No. 123 revised 2004, *“Share-Based Payment”*. This Statement is arevision of SFAS No. 123, *“Accountingfor Stock-Based Compensation”*, and supercedes APB No. 25, “Accountingfor Stock Issued to Employees”. The Statement requires companies to recognizein the income statement the grant-date fair value of stock options and otherequity based compensation issued to employees. This Statement is effective asof the beginning of the first interim or annual period that commences afterJune 15, 2005. The Company cannot yet determine the impact that theadoption of SFAS No. 123 revised 2004 will have on our financial position,net earnings or cash flows.

 

In November 2004, the FASB issued SFAS No. 151, *“Inventory Costs – An Amendment of ARB No. 43,Chapter 4”*(“SFAS 151”). SFAS 151 amends the guidance in ARBNo. 43, Chapter 4, *“Inventory*

 

38

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*Pricing*,” toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Among other provisions, the newrule requires that items such as idle facility expense, excessive spoilage,double freight, and rehandling costs be recognized as current-period chargesregardless of whether they meet the criterion of “so abnormal” as stated in ARBNo. 43. Additionally, SFAS 151 requires that the allocation of fixedproduction overhead to the costs of conversion be based on the normal capacityof the production facilities. SFAS 151 is effective for fiscal years beginningafter June 15, 2005. We are currently evaluating the effect that the adoptionof SFAS 151 will have on our results of operations or financial position, butdo not expect SFAS 151 to have a material effect.

 

In September 2004, the FASB issued EITF Issue No. 03-1, *“The Meaning of Other-Than-Temporary Impairment andIts Application to Certain Investments”*(EITF No. 03-1). Theguidance in EITF No. 03-1 was effective for other-than-temporary impairmentevaluations made in reporting periods beginning after June 15, 2004.However, certain provisions regarding the assessment of whether an impairmentis other than temporary have been delayed. Although the disclosure requirementscontinue to be effective in annual financial statements for fiscal years endingafter December 15, 2003, for investments accounted for under SFAS No. 115and 124. For all other investments addressed by EITF No. 03-1, thedisclosures continue to be effective in annual financial statements for fiscalyears ending after June 15, 2004. We do not believe that the adoption ofEITF No. 03-1 will have a material impact on our financial position, netearnings or cash flows.

 

**(8)**                     Commitments and Contingencies

 

As previously reported, the Sierra Club and Mineral Policy Center filedtwo complaints in U.S. District Court for the District of Colorado againstCripple Creek & Victor Gold Mining Company (CC&V) and its Joint Venturepartners, including the Company, alleging certain violations of the U.S. CleanWater Act (CWA).

 

1.                      Thefirst ten Causes of Action in the first of these two cases allege un-permitteddischarges of pollutants into Fourmile Creek and from the Roosevelt Tunnelinto  Cripple Creek, and discharges ofpollutants exceeding permitted amounts from the Carlton Tunnel and Arequa Gulchoutfalls; the eleventh and twelfth causes of action in that case concern adischarge permit issued by the Colorado Water Quality Control Division in 1996for an outfall in Arequa Gulch.  Apre-trial conference was held on March 25, 2005, in this case, and it should beready by mid-summer for trial, though no trial date has yet been set.

 

2.                      Thesecond of these two cases relates to seeps asserted to be point-sourcedischarges of Cresson Project drainage from the Moffat Tunnel Cribbing Wall andthe Squaw Gulch Pond to Cripple Creek and a tributary thereto in Squaw Gulch.  Plantiffs assert and Defendants deny that thelaw requires a permit for these seeps. This case was set for trial on April 12, 2005, but that setting wasvacated and the two cases consolidated for trial on a date not yet set.

 

Management is contesting both of these cases, and is coordinating itsown efforts with those of the owner and operator, Cripple Creek & VictorGold Company (“CC&V”), and the majority owners thereof, AngloGold NorthAmerica, Inc., and AngloGold Colorado Corp. The Company is neither the owner nor operator and its interest islimited to its minority interest in CC&V. Therefore, the likelihood of an unfavorable outcome to the Companycannot be evaluated, and no

 

39

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estimate can be made of the amount or range of potential loss, if any,which might result either to the Company or to its interest in CC&V.

 

The suit pending at the end of 2003 in Madison County, Illinois, wasrecently dismissed on stipulation.

 

The Company expended approximately $17,000 and $12,500 during the years2004 and 2003, respectively, defending against these suits.

 

** (9)**                  Selectedquarterly financial data

 

(unaudited)

 
| ** **                                                                    | ** ** | **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 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| ** **                                                                    | ** ** | **2003**    | ** ** |
| ** **                                                                    | ** ** | **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)                                                      |       | 119,524     |       | (192,563 | ) | (163,950 | ) | (120,427 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Net income  (loss)                                                            |       | 124,689     |       | (188,316 | ) | (160,193 | ) | 447,955 |   |
| Net income  (loss) per share                                                  |       | 0.01        |       | (0.02 | ) | (0.02 | ) | 0.05 |   |
| Pro forma net  income (loss) per share                                        |       | 0.01        |       | (0.03 | ) | (0.02 | ) | 0.05 |   |

 

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