**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

**FORM 10-K**

**(MarkOne)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended December 31, 2006**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from                       to                       ..**

**Commissionfile number 0-11226**

**GOLDEN CYCLE GOLD CORPORATION**

(Exact name of registrantas specified in its charter)

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

 

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

Securities registeredpursuant to Section 12 (g) of the Act:

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

 

Securities RegisteredPursuant To Section 12 (b) of the Act:  **None**

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.  o Yes   x No

Indicateby check mark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) of the Act.  o Yes   x No

Indicateby checkmark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  x Yes   o No

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K.  x

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

| Large accelerated filer o |   | Accelerated  filer o |   | Non-accelerated  filer x |
|---------------------------|--------|----------------------|--------|--------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). o Yes   x No

Statethe aggregate market value of the voting and non-voting common equity held bynon-affiliates computed by reference to the price at which the common equitywas last sold, or the average bid and asked price of such common equity, as ofthe last business day of the registrant’s most recently completed second fiscalquarter:  $47,720,240.

The number of shares ofthe Registrant’s Common Stock outstanding as of March 23, 2007 was 9,744,250.

**DOCUMENTS  INCORPORATED BY REFERENCE:**

Portions of theDefinitive Proxy Statement in connection with its Annual Meeting to be held inJune 2007, are incorporated by reference into Part III of this Annual Report onForm 10-K.  The Company’s Proxy Statementwill be filed within 120 days after December 31, 2006.

This Annual Report onForm 10-K contains certain forward looking statements.  Actual results could differ materially fromthose projected in the forward looking statements as a result of certainfactors, described elsewhere herein, including but not limited to fluctuationsin the market price of gold and uncertainties regarding the ability of theJoint Venture (as defined below) to operate profitably.

 

----

**PART I**

**ITEM 1. BUSINESS**

Golden Cycle GoldCorporation was incorporated under the laws of the State of Colorado on May 19,1972 for the 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 primarybusiness of the Company has been its 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”).  The Joint Venture engages in gold miningactivity in the Cripple Creek area of Colorado.

In addition to itsJoint Venture activities, the Company incorporated Golden Cycle Philippines,Inc. (“GCPI”), a wholly-owned subsidiary, under the laws of the Philippines onNovember 12, 1996.  GCPI entered into anagreement with Benguet Corporation, a Philippine mining company, providing fortheir joint participation in the exploration, development and production ofmining properties in certain areas of the Philippines.  All GCPI exploration work has been placed ona standby basis until a Mineral Profits Sharing Agreement (“MPSA”) is awardedto the claim owner of the Sagittarius Alpha Realty (“SAR”) claims.  See “Golden Cycle Philippines, Inc.” forfurther information regarding the proposed activities of GCPI in the Philippines.

During January2002, the Company incorporated Golden Cycle Gold Exploration, Inc., awholly-owned subsidiary, to conduct exploration activities for theCompany.  As of this date the Company hasnot funded Golden Cycle Gold Exploration, Inc.

2

----

As of December 31,2006, the Company had 2 employees.

Description of MiningJoint Venture

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

The Joint VentureAgreement defines an Initial Phase that will end when (i) the Initial Loans(defined below) have been repaid (ii) a cash reserve has been established tofund accrued reclamation and severance tax obligations, plus an amountapproximating nine months of estimated operating costs, plus an amountapproximating twelve months of estimated capital costs, and (iii) Net Proceeds(defined in the Joint Venture Agreement generally as gross revenues less costs)in the amount of $58 million have been distributed as follows: 80% to AngloGoldand 20% to the Company.  After theInitial Phase, the Joint Venture will distribute metal in kind in the proportionof 67% to AngloGold and 33% to the Company. In addition, the Company will generally be entitled to receive, in eachyear during the Initial Phase or until the mining of ore by the Joint Ventureceases due to the exhaustion of economically recoverable reserves, whicheveroccurs first, an annual minimum distribution of $250,000 (a “Minimum AnnualDistribution”).  The first three MinimumAnnual Distributions in 1991, 1992 and 1993 were not deemed to be adistribution of Net Proceeds to the Company and were not applied against theCompany’s share of any Net Proceeds.  TheMinimum Annual Distributions received on January 15, 1994 and thereafterconstitute an advance on Net Proceeds and will be recouped against futureshares of Net Proceeds to the Company.

The Joint VentureAgreement provides that, during the period from January 1, 1991 until the endof the Initial Phase, all funds required for operations and mine development bythe Joint Venture will be loaned (the “Initial Loans”) to the Joint Venture by eitherAngloGold or, if such loans are available at a lower cost than from AngloGold,financial institutions.  Except for theMinimum Annual Distributions, the Initial Loans and interest thereon must berepaid prior to distributions of Net Proceeds to the Joint Venturers.  The audited Joint Venture financialstatements reported that as of December 31, 2006, the Joint Venture had $333.8million in Initial Loans payable to AngloGold. After the Initial Phase, the Joint Venturers will contribute funds inproportion to their respective distributive shares.

The Joint Venturerecorded net income of $38.4 million for the year ended December 31, 2006compared to net income of $9.5 million and $7.7 million for the years endedDecember 31, 2005 and December 31, 2004, respectively.  There is no assurance that the Joint Venturewill be able to achieve profitability in any subsequent period or to sustainprofitability for an extended period.  Theability of the Joint Venture to sustain profitability is dependent upon a numberof factors beyond the control of the Joint Venture, including withoutlimitation, the market price of gold, which is volatile and subject tospeculative movement, and the extent of mineralization in the area controlledby the Joint Venture and the efficiency of its mining operations.

Whether futuregold prices and the results of the Joint Venture’s operations will reach andmaintain a level necessary to repay the Initial Loans, complete the InitialPhase, and thereafter generate net income cannot be assured.

The Joint Venturecompleted construction of the required infrastructure for the Cresson Mine andbegan mining operations in 1995, with the first Cresson Mine gold pouroccurring on February 14, 1995.  In 1996,the Joint Venture completed its first full year of Cresson Mineoperations.  The development of the Eastand North Cresson mines began during the second quarter of 1999.  The Joint Venture began construction ofexpanded facilities during early 2002, completing the new truck shop, crushingfacility, expanded process facility, and expanded valley leach facility bySeptember 2003.  The last step in themine expansion, a $15.5 million expansion of the valley fill leach facility,was completed during the fall of 2004.

3

----

2006 Operational Highlights

As the JointVenture’s Manager, AngloGold provides the Company with detailed information onthe activities and operations of the Joint Venture.  The following description of the JointVenture’s operation is derived from reports made available by the Manager, uponwhom reliance is placed.

Production

The 2006 JointVenture gold production was 283,486 troy ounces compared to 329,625 troy ouncesof gold produced during 2005.  CC&Vexperienced a prolonged drought over the fourteen months leading into June2006.  The drought caused reducedpregnant pond levels within Valley Leach Facility (“VLF”), which causedCC&V to reduce the flow rates through the gold recovery circuit, which inturn resulted in reduced fluid movement through the leach facility, andultimately reduced daily gold recoveries. In recent months the leach facility has received precipitation at morenormal rates.  The precipitation hasworked its way into the leach facility and recovery systems, which combinedwith CC&V’s addition of significant quantities of water to the barrensolution raised pond levels to normal and permitted CC&V to restoresolution flow levels to planned flows of 14,000 gallons per minute.  The increased flows through the leachfacility have increased daily gold recoveries from a June 2006 low of 580 troyounces per day to approximately 900 troy ounces per day during December 2006.

CC&V has hadimproved success in its mining operations in the past few months.  Higher grade ores were mined in the upperbenches of the South Cresson and the third and final mining area in thesouthern portion of the East Cresson. This success translated into higher than planned recoverable ounceplacement on the VLF during the following recent months:  June 2006, 35,302 troy ounces (109% of plan);July 2006, 39,541 troy ounces (133% of plan); August 2006, 37,075 troy ounces(152% of plan); September 2006, 36,499 troy ounces (112% of plan); October2006, 29,119 troy ounces (115% of plan); and November 2006, 28,723 troy ounces(119% of plan) and December 2006; 26,285 (103% of plan).  The mining and crushing operations areperforming at a 22 million ore ton per year pace in spite of numerous truck andshovel maintenance challenges.  Variablemining costs continue to escalate, in part due to increased mining volumes;however mine personnel are aggressively seeking to manage costs to minimize theimpact upon cost per ounce.

As of December 31,2006, the inventory of recoverable gold within the VLF is estimated to be551,340 troy ounces.  Management believesthe increased inventory of gold within the leach facility is primarily causedby three factors: what we perceive to be a normal inventory increase related tothe growth of the VLF in size, the reduced number of gold ounces produced fromthe leach facility in the earlier months of the year due to reduced fluidflows, and the increased recoverable gold ounces placed, discussed above.  Management believes this inventory maycontinue to increase, although not as rapidly as it has during 2006, until oreceases to be loaded on the VLF and CC&V begins the final leaching stages ofthe leach facility, which is expected to take several years.

CC&V appearsto have overcome its truck capacity problems, chiefly through improvedmaintenance.  CC&V mined 59.2 milliontons of material during the year, including 22.4 million tons of ore, 1 milliontons of run-of-mine ore (ore which was sufficiently fine after blasting andmining and therefore not sent through the crusher circuit) and 35.8 milliontons of waste.  CC&V also moved 1million tons of stockpiled ore to the crusher for a total of 53.9 million tonsmoved.

The crushingfacility operated at above plant design capacity (20 million tons/year) duringthe year, crushing 23.0 million tons during the year.  Ore placed on the valley leach facilityaveraged 0.024 contained troy ounces per ton, containing an estimated 570,792troy ounces of gold (an estimated 383,697 recoverable ounces of gold).

Revenue and Costs

During 2006, theJoint Venture sold 286,637 troy ounces of gold at an average price of $603 perounce producing total gold sale revenues of approximately $172.8 million.  The Joint Venture cash production costs for2006 were approximately $246 per troy ounce compared to $232 per troy ounceduring 2005 and a budget of $240 per troy ounce.  The main reason for the higher cost per ouncein 2006 compared to the budgeted cost per ounce was the decrease in troy ouncesof gold produced in 2006.  The Joint Venturehad total operating costs of $98.3 million, including depreciation, depletionand amortization (DD&A) expenses of $26.5 million and accretion expense of$1.4 million for the year.  This comparesto $106.9 million, $30.1 million and $1.1 million for the year ended 2005.

4

----

Interest expenseon the Initial Loans was approximately $34.4 million ($29.2 and $23.8 millionin the years 2005 and 2004 respectively). The Company received the Minimum Annual Distribution of $250,000 whichwill be recouped from future shares of Net Proceeds to the Company.

Ore Reserves and Non-reserve Mineralization

The Joint Venturefocused on development, exploration and engineering feasibility work concerningfuture operations.  The main objective ofCC&V’s continuing exploration program for 2006 was to expand information onthe gold mineralization in two areas of the Wild Horse Extension, area withparticular emphasis on metallurgical data, and to further increase the drillinformation available within areas which have previously indicated existingmineralization.

CC&V currentlycontrols over 85% of the patented claims within the district and 100% of theland within the year-end 2006 Total Mineral Resource.  All gold ore reserves and mineral resourcesare stated at 100% ownership basis, although portions of the ore reserves aresubject to third party royalties which vary according to individual agreementswith the underlying property owner.

Each year CC&Vmodels its gold ore reserves to incorporate the results of its explorationprogram, new geologic information, revised metallurgical recoveries, revised goldprice, new geotechnical data, new pit designs, new operating costs and/orallowances for 2006 depletion.  All orereserves for 2006 were modeled using a $550 gold price, an increase from the$400 gold price used to model the reserves shown for 2005.  The cutoff grade for reserves remainedunchanged from 2005 at a recoverable cutoff of 0.007 ounces per ton.

The year enddistrict wide central drill hole database contains 8,496 drill holes (6% coreand 94% reverse circulation rotary) with a total footage of 4,757,499feet.  Samples are collected from thereverse circulation drills at five foot intervals and split with a rotary, wetsplitter.  Coarse exploration drillsamples are collected as two splits.  Onesplit (analytical sample) is sent for analysis, and the second split is kept asa coarse replicate (metallurgical sample). Individual samples are dried, split into one 300 gram sample, pulverizedto 95% minus 150 mesh, blended and fire assayed (FA) using a one assay-toncharge.  Prior to 1996, all samplesgreater than 0.010 opt FA were also analyzed for cyanide soluble gold using ashake leach method (SL).  Commencing1996, all samples are analyzed using both FA and SL assay methods.  The procedure for collecting drill sampleswithin and adjacent to the existing reserve pits was modified in 2003 tocollecting samples on ten foot intervals to minimize costs without losing anycritical data.  In 2005, the centraldrill database was audited by Barnes Engineering Services, Inc.  Any material errors or other issuesidentified were corrected prior to the start of 2005 ore reserve modeling.

Resource shellswere changed to a $650 Lerchs-Grossman envelope around the reserve pits for2006 resource estimates from the $475 price of gold used in 2005 ore resourceestimates.  The geostatistical modelingprocedures used by the Manager in computing the ore reserves have been reviewedby independent consultants (Independent Mining Consultants, Inc., Mine ReserveAssociates, Inc., Mineral Resource Development Associates, Inc., and MineDevelopment Associates, Inc.) over previous years, and conform to industrystandards.  The ore reserves are shown onthe table below:

5

----

Cripple Creek& Victor Gold Mining District

Unaudited CC&VOre Reserve Estimate as of December 31, 2006*
| ** **            | ** ** | **Ore**          | ** ** | **Gold**         | ** ** | **Contained** | ** ** | **Estimated** | ** ** | **Estimated**      | ** ** |
|-----------------------|------------|------------------|------------|------------------|------------|---------------|------------|---------------|------------|--------------------|------------|
| ** **            | ** ** | **Tons**         | ** ** | **Ounces**       | ** ** | **Gold**      | ** ** | **Recovery**  | ** ** | **Recoverable**    | ** ** |
| ** **            | ** ** | **(000’S)** | ** ** | **Per Ton** | ** ** | **Ounces**    | ** ** | **(Percent)** | ** ** | **Ounces **** | ** ** |
| Proven                |       | 102,995          |       | 0.027            |       | 2,797,639     |       | 60.96         | %          | 1,705,496          |       |
| Probable              |       | 39,237           |       | 0.027            |       | 1,044,836     |       | 59.76         | %          | 624,347            |       |
| Total Reserves,  2006 |       | 142,232          |       | 0.027            |       | 3,842,475     |       | 60.63         | %          | 2,329,843          |       |
|                  |       |             |       |             |       |          |       |          |       |               |       |
| Change from 2005      |       | 10,918           |       |             |       | 539,040       |       |          |       | 271,831            |       |

 

Unaudited CC&VOre Reserve Estimate as of December 31, 2005*
| ** **           | ** ** | **Ore**          | ** ** | **Gold**         | ** ** | **Contained** | ** ** | **Estimated** | ** ** | **Estimated**      | ** ** |
|----------------------|------------|------------------|------------|------------------|------------|---------------|------------|---------------|------------|--------------------|------------|
| ** **           | ** ** | **Tons**         | ** ** | **Ounces**       | ** ** | **Gold**      | ** ** | **Recovery**  | ** ** | **Recoverable**    | ** ** |
| ** **           | ** ** | **(000’S)** | ** ** | **Per Ton** | ** ** | **Ounces**    | ** ** | **(Percent)** | ** ** | **Ounces **** | ** ** |
| Proven               |       | 96,313           |       | 0.025            |       | 2,423,049     |       | 63.13         | %          | 1,529,684          |       |
| Probable             |       | 35,001           |       | 0.025            |       | 880,386       |       | 60.01         | %          | 528,328            |       |
|                 |       |             |       |             |       |          |       |          |       |               |       |
| Total Reserves, 2005 |       | 131,314          |       | 0.025            |       | 3,303,435     |       | 62.30         | %          | 2,058,012          |       |

 

*Note:* *The tonnage is shown inshort tons.*

*    These gold reserve figures were estimated based on a $550 pertroy ounce gold price for all district deposits for the 2006 estimates and a$400 per troy ounce gold price for the 2005 estimates, and are subject tovarious royalties.  There can be noassurance, however, that the Joint Venture can earn a profit when the marketprice of gold equals or exceeds the gold price used in estimating thosereserves.

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

The aboveestimates are based upon drill data and are a combination of “proven” and “probable”reserves.  The classifications of “proven”and “probable” are taken from the Securities and Exchange Commission’s IndustryGuide 7, which defines the terms as follows.

*Proven(Measured) Reserves*. Reserves for which (a) quantity is computed from dimensions revealed inoutcrops, trenches, workings or drill holes; grade and/or quality are computedfrom the results of detailed sampling and (b) the sites for inspection,sampling and measurement are spaced so closely and the geologic character is sowell defined that the size, shape, depth and mineral content of reserves arewell established.

*Probable(Indicated) Reserves*. Reserves for which quantity and grade and/or quality are computed frominformation similar to that used for proven (measured) reserves, but the sitesfor inspection, sampling, and measurement are farther apart or are otherwiseless adequately spaced.  The degree ofassurance, although lower than that for proven (measured) reserves, is highenough to assume continuity between points of observation.

The ore reservefigures set forth above are estimates and no assurance can be given that anyparticular level of recovery of gold from ore reserves will in fact berealized.

The increase inthe December 31, 2006 ore reserves (an estimated 539,040 contained troy ouncesof gold, with an estimated 271,831 recoverable troy ounces of gold) isprimarily a result of higher gold bullion prices and 

6

----

additional explorationdrill results used in the 2006 ore reserve model.

The focus of theJoint Venture’s 2007 exploration program is to expand existing ore reserves,particularly in the west high wall of the East Cresson mine, and developadditional metallurgical information in mineral resource areas to enable it tochange the classification of a portion of its non-reserve mineral resources tomineral reserve ounces of gold.  Itexpects to achieve this goal through additional infill drilling, geotech andmetallurgical drilling and studies and mining studies.  Further, the Joint Venture is conductingexploration drilling in additional areas on a widely- spaced drill hole basiswith the objective of defining a mineral resource in the area.

The dominant trendour industry has been facing is increasing gold prices.  The increasing gold price trend has beeninterrupted periodically by corrections of varying magnitude.  It appears to management that the variousnational and international economic trends such as increasing demand for gold,decreasing mine production of gold, weakness in the US dollar and instabilityin various countries around the world will continue for the immediate future.  Management believes the long term trend ofincreasing gold prices will continue to favorably impact the economics of itsJoint Venture’s operations.  The industryhas been impacted by increasing costs such as diesel and natural gasfuels.  Management expects continued costpressures over time. 

EnvironmentalReclamation

CC&V hasdeveloped an effective environmental protection and reclamation plan for thishigh-altitude, semiarid, cold-weather, year-round leaching environment.  Reclamation has continued since 1992 to supportpost mining land use for wildlife, including elk.  Further, CC&V completed its voluntaryreclamation of the Portland surface mine during 2005.  The Joint Venture has secured financialwarranties of approximately $45 million to insure its success in completing thefinal reclamation of the entire property. Ongoing compliance with federal and state regulations includes seismic,fugitive dust, and noise monitoring for the operation’s meeting applicablestandards for ground and surface water; monitoring rain and snow fall, waterand air emissions.

Employment

AngloGold providesthe work force required by the Joint Venture, which has no employees.  AngloGold employment related to the JointVenture increased to 327 at December 31, 2006, from 307 at December 31, 2005.

GovernmentalRegulation

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

Certain solid andhazardous wastes from mining and mineral processing operations are temporarilyexempt from regulation under RCRA.  TheEPA is currently considering the promulgation of a special set of rules to regulatemining wastes under RCRA, but those may be delayed pending anticipatedCongressional re-authorization and revision of RCRA.  The effect of any future regulation on theJoint Venture’s operations cannot be determined until the legislative processis completed and new rules are issued. However, it is assumed that regulations may have a significant impact onoperations of all mining companies and increase the costs of those operations.

Although theManager expects that compliance with federal, state and local environmental andland use laws and regulations will continue to require significant futureoutlays of resources, it is not possible to state with any certainty whatimpact such compliance may have on the Joint Venture’s future capitalexpenditures or earnings.

Distribution ofProceeds and Other Financial Aspects

The Joint Venturemade payments of the Minimum Annual Distribution of $250,000 to the Company onJune 13, 1991, January 15, 1992, and January 15 of each subsequent year, to andincluding January 15, 2007.  Subsequentpayments of the same amount are scheduled to be made on January 15th of eachyear until the conclusion of the Initial Phase, as defined in the Joint VentureAgreement, or until the completion of mining. The payments made on January 

7

----

15, 1994 and subsequentannual payments of $250,000 constitute an advance on Net Proceeds and will berecouped by the Manager against future distributions of net proceeds.  After recovery by the Manager of theseadvances, if the Company’s share (20% in the Initial Phase) of Net Proceeds exceedsthe applicable Minimum Annual Distribution after recouping any advanceddistributions, the larger amount will be distributed to the Company.  The Joint Venture recorded net income of$38.4 million for the year ended December 31, 2006.

The Company accountsfor its investment in the Joint Venture on the equity method.  Joint Venture distributions in excess of theinvestment carrying value are recorded as income.  During 1992, the Company’s share of JointVenture losses exceeded the remaining carrying value of 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 thereduction of the Joint Venture investment carrying value to zero during 1992,the Company has not recorded its share of the Joint Venture net income for the2006 period, $7.7 million, nor its share of the Joint Venture’s net income of$1,892,000 for the 2005 period, $1,538,400 for the 2004 period or its share ofthe Joint Venture’s net loss of $93,800 for the 2003 period.  The Company will not record its share of anyfuture Joint Venture net income unless and until the balance of the Company’saccumulated unrecorded losses from the Joint Venture ($7,910,000 as of December31, 2006) are recovered.

**GOLDENCYCLE PHILIPPINES, INC. (GCPI)**

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

GCPI Background

In January 1997,GCPI signed a comprehensive exploration agreement (the “BGA Agreement”) withBenguet Corporation (“Benguet”), which provided that all costs andparticipation will be shared 50/50 by the parties.  In October 1997, the two companies signed theFirst Supplemental Agreement to the BGA Agreement, which added 1,050 acres ofmineral 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 10million Philippine pesos) of exploration work. The claim area lies immediately south of the historic Masara and Hijogold mines in the Philippines and just north of Benguet’s Kingking copper/golddeposit.

First SupplementalAgreement to the BGA

Phase I of theexploration effort on the five Sagittarius Alpha Realty (“SAR”) claims wascompleted in May 1998.  This effortconsisted of geological mapping, grid soil sampling and analysis, and streamsediment and water analysis.  This workindicates the presence of sizable areas interpreted to be anomalous goldconcentrations.  These must be furthertested through trenching, tunneling and drilling to properly evaluate the goldpotential.  The Phase II explorationcould not be carried out as the old leased claims have not as of this date beenawarded a Mineral Production Sharing Agreement (“MPSA”) as required by the 1995Philippine Mining Law. Thus, all work on this project has been placed on astandby basis until the MPSA is awarded to Benguet, as claim owner.  Benguet has not applied for an MPSA as ofMarch 2007.  The Company expects toexpend approximately $6,000 during 2007 to maintain GCPI on a standby status.

**OTHEROPPORTUNITIES**

During 2001, theCompany acquired two claim groups in Nevada: the Table Top and the Illipah goldprospects.  During first quarter of 2002,the Company incorporated a wholly owned subsidiary, Golden Cycle GoldExploration, Inc. (“GCX”), to independently direct the exploration efforts forthese claim groups.  As of this report,the Company has not yet funded GCX. Finally, the Company has an on-going exploration program in southwestColorado.

 

8

----

**Table Top**

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

The Table Top claim groupconsists of 38 wholly owned Federal mineral claims, controlled by the Bureau ofLand Management (“BLM”), 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 claims are subject to an Exploration Right with Option toPurchase agreement requiring the Company to pay the annual assessment fees tothe BLM and Humboldt County and five percent of all expenditures on theproperty up to a maximum amount of $500,000 to Mr. Wendt, from whom the claimswere originally purchased.  At present,the Company has paid Mr. Wendt approximately $7,500.  The Table Top property can be interpreted tolie within the “Midas” gold bearing zone striking northeast across Nevada, andalso as a part of a north-south trend containing the Sleeper Mine, Sandman,Florida Canyon, Rochester and Relief Canyon. The property is located ten miles west of Winnemucca, Nevada.

TheTable Top claims cover brecciated and silicified sediment that is poorlyexposed and has only been unsystematically explored and partially drill testedin the past.  The key gold mineralizedfeature on the property is a hydrothermal breccia, which contains anomalousgold, arsenic, antimony and mercury. Goldfields Mining Corporation first staked the Table Top property in1986 while conducting surface exploration for an open pit type operation.  A limited rock chip sampling and reversecirculation drilling program indicated the presence of a gold mineralized system.

TheTable Top claims do not have a readily available source of power, contain noknown mineral reserve or resource, and are exploratory in nature.  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. The Company does not anticipate additional exploration activity on thisproperty during 2007.

9

----

**Illipah**

The Companyentered into an agreement, effective August 23, 2006, with Tornado GoldInternational Corporation (TOGI-Q) (“Tornado”) pursuant to which Tornadoacquired certain mining claims referred to as the Illipah claims.  Tornado paid the Company US$50,000 uponexecution of the agreement.  Under theagreement Tornado paid the Company an additional US$50,000 and 50,000 shares ofTornado common stock which was due within ninety days of the date of theagreement, and an additional 100,000 shares of Tornado common stock which wasdue within one hundred eighty days of the date of the agreement.  An additional 200,000 shares of Tornadocommon stock is due to be paid to the Company within one year of the signing ofthe agreement (due August 23, 2007). Upon execution of the agreement, Tornado assumed Golden Cycle’sobligations in an underlying exploration and mining lease agreement on theclaims, and granted to Golden Cycle a production royalty of two percent of netsmelter returns on all rents and mineral production from the property.  Tornado has the option, exercisable at anytime prior to commercial production on any of the Illipah claims, to reduceGolden Cycle production royalties from two percent to one percent by payingGolden Cycle, at Golden Cycle’s option, either US$1 million, or its equivalentin gold bullion at the August 23, 2006 closing price of gold on the New YorkCommodity Exchange.  Tornado also agreedto undertake an exploration program on the Illipah property and related area ofinterest, and incur exploration and development expenditures of at US$750,000within two years, of which US$250,000 must be expended during the first year ofthe agreement.  In the event of a defaultunder the agreement by Tornado, Golden Cycle may reacquire the Illipah claimsunder certain circumstances, such as default by Tornado.

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

****

This gold projectis situated in eastern Nevada at the southern extension of the Carlin Trendthat contains the largest accumulation of gold deposits in North America.  The Illipah claims consist of 191 unpatentedFederal BLM lode mining claims (approximately 3,800 acres) over a six-milestrike length that contains favorable stratigraphic and structural environmentsfor the discovery of a significant gold deposit.  The property is subject to advance royaltypayments and a 2% Net Smelter Return (“NSR”) royalty on all mineralproduction.  An NSR is a royalty, usuallya percent, of smelter production less certain allowable costs such as smeltingand transportation to the smelter.  TheNSR royalty is reduced to 1% if $2,000,000 in advance royalties is paid.

Past productionfrom the immediate area of Illipah is 37,000 ounces of gold from an open pitmined in the late 1980’s and early 1990’s. The ore was processed using heap leach technology.  This gold mineralization is envisioned as asurface gold anomaly that indicates there is a strong possibility of high-gradegold mineralization at depth near favorable stratigraphic contacts andstructures.  The geological similaritiesbetween Illipah and Newmont’s 

10

----

Rain Deposit (the “RainDeposit”) 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.

The Illipah claimscontain no known mineral reserve or resource and are exploratory innature.  Past exploration on the propertylargely focused on its near surface mineral potential, though some deeperexploration drilling was completed by two companies.  The Company used generator power for its 2005exploration program.  Power is availablejust outside the property’s boundary should Tornado or the Company elect to paythe cost to bring it on to the property for future operations.

**Colorado**

The Company’scontinuing exploration effort in the Company’s home state of Colorado waslargely placed on hold during 2005 and 2006 while the Company focused on itsexploration priority at that time, the Illipah exploration project untilTornado acquired the Illipah claims.  TheCompany has developed a geologic concept indicating the possibility of anexploration target which meets the Company’s criterion in southwestColorado.  During 2007, the Company plansto complete a regional study of the target area, including satellite imagerywhich it began in 2004, with the objective of narrowing the target area.

**ITEM1A.  RISK FACTORS**

An investment inour securities involves risks and uncertainties.  These risks and uncertainties could cause ouractual results to differ materially from our historical results or the resultscontemplated by any forward-looking statement contained in this Annual Reporton Form 10-K or that we make in other filings with the Securities and ExchangeCommission (“SEC”) under the Securities Exchange Act of 1934 or in other publicstatements.  You should consider thefollowing factors carefully, in addition to the other information contained inthis Form 10-K, before deciding to purchase, sell or hold our securities.

**RisksRelating to Our Company and Industry**

***The explorationof mineral properties is highly speculative in nature and is frequentlyunproductive. We cannot be certain that our acquisition, exploration, anddevelopment activities will be commercially successful.***

Other than ourinterest in CC&V, we do not have any properties with current or plannedgold production. Exploration for minerals is highly speculative. Mostexploration projects do not result in the discovery of mineable deposits ofore. Moreover, any mineralization discovery may not be of sufficient quantityor quality to be mined profitably. We use the evaluation work of professionalgeologists, geophysicists, and engineers for estimates in determining whetherto commence or continue mining. These estimates generally rely on scientificand economic assumptions, which may not be correct. As a result of theseuncertainties, we may expend substantial amounts of funds on exploration ormining projects that may ultimately result in failure to locate gold mineralssufficient to justify commercial mining operations.

***Due to thenature of mining activities, we face risks of delays and increased costsresulting from environmental, technical, and geological factors****.*

Mining activitiesare subject to substantial operating hazards, including weather, environmentalconditions, unforeseen technical difficulties, unusual or unexpected geologicalformations, equipment breakdowns or malfunctions and work interruptions.  There may also be limited availability ofwater, which is essential to milling operations. The occurrence of any of theseevents could delay or interrupt production, increase production costs, orresult in liability for us. Our results of operation could therefore be adverselyaffected as well.

***We face strong competition in our industry and may not beable to compete effectively.***

Our industryconsists of numerous companies which compete in the acquisition and developmentof mining properties. Many of these companies are significantly larger than usor CC&V. They may also enjoy access to more capital resources than we do.Our competitors may be able to engage in more exploration activities, acquirerights to more properties with potential quantities of gold, and more easilyobtain the funds necessary to conduct production activities. Accordingly, wemay not be able to compete effectively with these companies.

11

----

***The mining and mineral processing industries are subject toextensive governmental regulations which can impose significant costs andburdens.***

Our miningactivities, including those of CC&V, are subject to extensive federal,state, and local regulations governing air and water quality, mine reclamation,solid and hazardous waste handling and disposal, and occupational safety.Although we are not aware of any circumstances which would cause CC&V orany of our other properties to be in violation of any of these regulations,there can be no assurance that we and CC&V will be able to be in compliancewith such regulations in the future. Factors that may lead to our inability tocomply with regulations include, for example, future changes in regulations,increased cost of compliance, and our financial condition in the future.Failure to comply with the regulations can result in injunctive action,damages, and civil and criminal penalties, all of which could adversely affectour business.

In addition, as ofDecember 31, 2006, CC&V had posted a bond of approximately $45 million withthe Colorado Mined Land Reclamation Board to secure reclamation of miningdisturbances arising from the CC&V Joint Venture’s mining activities, andwill likely be required to post additional sums to accommodate further miningat the Cresson site.

Further, onNovember 27, 2000 and on November 30, 2001, the Sierra Club and Mineral PolicyCenter filed two lawsuits against CC&V, AngloGold (and one of itsaffiliates) and the Company (the Defendants), alleging various past and ongoingviolations of the federal Clean Water Act at the Cresson Project near Victor, Colorado.  (See Item 3, Legal Proceedings, foradditional information).

***We are subject to risks related to our Philippineactivities.***

We have enteredinto an agreement with a Philippine mining company, Benquet Corporation. Theoperating agreement stipulates that our Philippine subsidiary, Golden CyclePhilippines, Inc., would manage the exploration, development and/or mining ofcertain designated properties in the Philippines. We have never before engagedin mining activities in the Philippines. Moreover, since our inception in 1972,we have never served as manager of any mining project in the United States orany foreign country. Consequently, we will, in connection with activities inthe Philippines, be subject to the risks and uncertainties inherent in any newbusiness enterprise, such as the ability to hire and retain qualified personneland to raise sufficient capital. Further, we may also be subject to certain risks of doing business inforeign countries, such as political instability, unfamiliarity with locallaws, and currency exchange risk. Currently all the activities of the Philippines subsidiary are on holdpending approval of a Mineral Production Sharing Agreement by the Philippinegovernment.  The Company wrote off theremaining value of its investment in the Philippine subsidiary during2006.  If opportunities to economicallypursue activities in the Philippines are available, and if we elect to pursuethem, additional capital may be required. There is no assurance that we will be able to obtain the additionalcapital, if required, or that such capital would be available to us on termswhich would be acceptable.

***We are dependent on the efforts of key personnel and may beharmed if we are unable to retain these individuals.***

The success of ourbusiness depends, in large part, upon the skills and efforts of a small groupof key personnel, including R. Herbert Hampton, our President, Chief ExecutiveOfficer, and Treasurer. If we are not successful in retaining such keypersonnel, or attracting similarly qualified individuals, our business may beharmed. We do not maintain “key man” life insurance on any of our keypersonnel.  Therefore, the loss of ourkey personnel could adversely impact our ability to execute our business plan,which may adversely affect our results of operations.

***Wecould be deemed an “investment company” under the Investment Company Act of1940.  This would impose significantrestrictions on us and would be likely to have a material adverse impact on ourfinancial condition and results of operations.***

Our principalassets include our equity interest and participation in the Joint Venture.  Our interest in the Joint Venture could bedeemed an “investment security” for purposes of the Investment CompanyAct.  In the event that such interest isdetermined to have a value that comprises 40% or more of our total assets, wecould be deemed to be an investment company under the Investment Company Act,unless an exemption from registration were available or we were to obtain anorder of the SEC excluding or exempting us from registration under theInvestment Company Act.

If anything wereto happen which would cause us to be deemed an investment company, theInvestment Company Act would impose significant restrictions on us, includingsevere limitations on our ability to borrow money, 

12

----

to issue additionalcapital stock and to transact business with affiliates.  In addition, because our operations are verydifferent from those of the typical registered investment company, regulationunder the Investment Company Act could affect us in other ways that areextremely difficult to predict.  In sum,if we were deemed to be an investment company it could become impractical forus to continue our business as currently conducted and our financial conditionand results of operations could suffer materially.

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

***Because we rely on CC&V for substantially all of ourrevenues and cash flow, our business will be harmed if CC&V’s operation isnegatively impacted.***

Our participationin CC&V constitutes our primary business. Gold production at CC&Vaccounted for all of our total gold production in fiscal years ended December31, 2006 and December 31, 2005. Substantially all of our revenues and cash floware derived from this gold production. Our results of operations, cash flow,and financial condition could be materially adversely affected if production atthe Cresson mine is disrupted due to labor interruptions, technical problems,or environmental factors, such as seismic events, or other unforeseeableevents.

In addition,AngloGold has the ability to reduce CC&V’s gold production, even withoutour consent.  AngloGold, as the managerof the CC&V Joint Venture, develops, revises and implements budget andplans for the Joint Venture.  As the 67%majority shareholder in the Joint Venture, AngloGold can adopt or change anyplan or budget for the Joint Venture.  Wecannot assure you that AngloGold will not reduce CC&V’s planned goldproduction in the future which will materially and adversely affect ourprofitability.

***CC&V is substantially dependent on AngloGold for itsoperating funds and may not be able to continue operations if such funds are nolonger available.***

The explorationand development of CC&V’s properties are governed by the terms of the JointVenture agreement, which grants operational responsibility and managementauthority in the Joint Venture to AngloGold. If AngloGold, whose proportionateshare of the Joint Venture’s costs is much larger than ours, is not in a positionto furnish (or otherwise chooses not to furnish) any operating funds requiredby the Joint Venture, it is unlikely that the Joint Venture would continue inoperation. Because CC&V constitutes our primary operating asset, such anevent would adversely affect our results of operations and financialcondition.  Should AngloGold withdrawfrom the CC&V Joint Venture, our primary source of annual operatingrevenues would cease and, unless we find a new Joint Venture partner, ourability to continue as a going concern would be severely impaired.  It is uncertain that we would be able to finda new Joint Venture partner, or that terms satisfactory to us could benegotiated with the new partner.

***CC&V has had a history of losses prior to 2004.  Because CC&V’s profitability depends onthe price of gold, it may incur losses again in the future.***

During fiscalyears ended December 31, 2006, 2005, and 2004 the CC&V Joint Venturerecorded net income of $38.4 million, $9.460 million, and $7.692 millionrespectively.  However, in previousyears, CC&V incurred substantial losses during each year of operationexcept 1996.  There is no assurance thatCC&V will be able to achieve profitability in any subsequent period or tosustain profitability for an extended period. The ability of CC&V tooperate on a profitable basis depends, to a large degree, on the market pricefor gold. The market price of gold is volatile, subject to speculative movementand is affected by numerous factors beyond our control, including international,economic and political conditions, levels of supply and demand, the inventorylevels maintained by gold producers and others and, to a lesser degree,inventory carrying costs (primarily interest charges) and internationalexchange rates. Whether gold prices will maintain a level that will enableCC&V to operate profitability on a continuing basis cannot be assured.

***It is unlikely that we will receive net proceeds fromCC&V in the foreseeable future.***

Based on theamount of the Initial Loans payable by CC&V to AngloGold ($333.8 million asof December 31, 2006) which must be repaid prior to the distribution of any netproceeds to us, and the amount of income which the Joint Venture can reasonablybe expected to generate over the next several years, we believe that, absent asignificant and sustained increase in the price of gold and an improvement inthe efficiency of the operations of the Joint Venture, it is unlikely that wewill receive more than the minimum annual distributions from CC&V for theforeseeable future based on the current terms of the Joint Venture agreement.Therefore, even if CC&V achieves profitability for a sustained period, itis unlikely that this would have any impact on our cash flow for theforeseeable future.

13

----

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

CC&V hasprepared gold ore reserve estimates in accordance with industry practice andSEC Industry Guide Number 7. Ore reserve estimates are based on prepared miningplans; however actual reserves and/or production may vary from theestimates.  Key assumptions used in theestimation may prove to be inaccurate (such as future gold prices, goldrecovery rates, cut-off grades and operating costs). Reserve estimates requirerevision based on actual experience or new information. Experience may requirechanges or adjustments to the mining plans in a way which adversely impacts theore reserve estimates. Future gold prices may decline, operating costs mayincrease, gold recoveries may decrease to a point which would make mining of lowergrade mineralization uneconomical.

**RisksRelating to the Market**

***Our stock price has been and could continue to be volatile.***

Themarket price of our Common Stock has been subject to significant fluctuations.The securities markets have experienced, and are likely to experience in thefuture, significant price and volume fluctuations which could negatively affectthe market price of our Common Stock without regard to our actual operatingperformance. In addition, the trading price of our Common Stock could besubject to significant fluctuations in response to:

·                  actualor anticipated variations in our quarterly operating results;

·                  publicannouncements by us or other industry participants;

·                  factorsaffecting the gold market;

·                  changesin national or regional economic conditions; and

·                  generalmarket conditions.

**ITEM 1B. UNRESOLVED SEC STAFF COMMENTS**

None.

**ITEM 2. PROPERTIES**

**MINING, OIL AND GAS RIGHTS**

Mining Properties

The Joint Venturemining properties consist of owned, leased and optioned mining claims and otherland covering more than 4,800 acres of patented mining claims in and around theCripple Creek Mining District of Teller County, Colorado and include most ofthe principal formerly-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 Venturemining properties are situated on the west flank of Pikes Peak, about 20 airmiles west of 

14

----

Colorado Springs and 65air miles south of Denver.  The area isaccessible by paved highway and supplied by requisite utilities.  The elevation of the properties averagesslightly over 10,000 feet above sea level. Snow accumulations are generally light and do not materially interferewith access to the property.

To a great extent,the Joint Venture mining properties lie within the boundary of a geologicalentity known as a caldera or “volcanic subsidence basin” (the “Basin”).  The Basin is of rudimentary ellipticaloutline, with its long axis trending in a northwesterly direction.  It has a length of about 4-1/2 miles and awidth of about 2-1/2 miles, covering some 5,000 acres at the groundsurface.  The area of the Basin graduallynarrows with depth.  The bulk of thehistorical Cripple Creek gold production was from the underground mines withinthe Basin, with the major mines located in the southern portion of the Basin.

****

To drive to themine from Colorado Springs, Colorado, travel west on East Pikes Peak Avenuetoward North Nevada Avenue / I-25 BR / US-87 / US-85 for less than 1 mile. Turnleft onto S. Nevada Avenue / I-25 BR S / US-87 S / US-85 S at a half mile. Turnright onto E Cimarron Street for 3 miles. E Cimarron Street becomes US-24 W for22 miles.  Turn left onto CO-67 for 18.7miles. Turn left onto CO-67 / S 2ND ST. Continue to follow CO-67 for 5 miles. Staystraight to go onto Victor Avenue for less than 1 mile. Turn right onto 2ndStreet into Victor, CO.

The dominantgeologic feature of the Cripple Creek & Victor Mining District is a 32-28Ma diatreme-intrusive complex hosted in Precambrian rocks located between thetowns of Cripple Creek and Victor, Colorado. The diatreme-intrusive complex is 6.4 km long, 3.2 km wide and consistsof diatremal breccia that has been intruded by stocks, dikes and discordantbreccias.  Diatremal breccia lithologiesinclude breccias composed exclusively of volcanic, Precambrian or sedimentarymaterial to any combination of the three. Early intrusions are predominantly within the alkalinephonolite-phonotephrite petrographic series and were followed by laterlamprophyres.  All rocks have undergone along history or structural and hydrothermal activity.  Gold mineralization occurs in all rock typesas disseminated and/or structurally-controlled orebodies.  Primary ore minerals include microscopicnative gold and gold tellurides.  Silveris present but is economically unimportant.

From the inceptionof production in 1891 until the suspension of operations in 1960, the CrippleCreek Mining District was the major gold mining district in the UnitedStates.  It is estimated thatapproximately 21 million ounces of gold were produced in this period,principally from mines later contributed to the Joint Venture by Golden CycleGold Corporation.  The Joint Venture,including a number of Joint Venture partners, has added about 3.1 million troyounces of gold production to this total during the period 1985 through2006.  The Joint Venture miningproperties include most of the principal formerly producing mines in theCripple Creek district, including the Ajax, Cresson, Portland, Independence,Vindicator and Golden Cycle.  Because ofthe age of many of the mines and the fact that mining operations throughout theBasin declined and were suspended more than thirty years ago, the existing 

15

----

mine shafts and workingsare unsuitable for current operation without substantial rehabilitation.  The Joint Venture is not currently and doesnot anticipate, operating underground.

Oil and GasMineral Rights

The oil and gasproperties of the Company are comprised of approximately 7,300 acres of mineralrights in the Penrose Area of Fremont County, Colorado.  There is no evidence of successful oil andgas development nearby, with the exception of the Florence, Colorado area.  Florence was the site of the first producingwells in Colorado in the 1860’s and the area is still producing on a limitedscale today.  Several years ago, interestwas shown in leasing very large acreages of state land about 50 to70 miles eastof the Company’s land.  No development ofthat area is visible at this time, nor is it expected in the foreseeablefuture.  The oil and gas properties haveno carrying value for balance sheet purposes.

**ITEM3.  LEGAL PROCEEDINGS**

As previouslyreported, the United States District Court for the District of Colorado ruledon April 13, 2006, against the plaintiffs and for the defendants, including theCompany and Cripple Creek & Victor Gold Company (“CC&V”), our JointVenture, on all causes of action asserted in two law suits consolidated fortrial, in which the Sierra Club and Mineral Policy Center filed complaintsagainst CC&V and its Joint Venture partners including the Company, allegingcertain violations of the U.S. Clean Water Act.  The Court also allowedthe defendants to apply for an award of their attorneys’ fees and costs. The defendants did so and, notwithstanding the plaintiffs’ objections thereto,the Court ruled on December 20, 2006 that the defendants are entitled torecover such fees and costs incurred after November 16, 2005, the date when itbecame clear to the Court that the plaintiffs’ “dogged pursuit of factuallyunsupported claims” was unreasonable.  The plaintiffs have appealed theCourt’s judgment dismissing the consolidated cases and from its awardto each defendant of approximately one-fifth of its attorneys’ feesincurred over the last six years.  Whether such an appeal will besuccessful in whole or in part cannot be predicted at this early juncture.

The first tenCauses of Action in the first of these two cases, Civil Action No. 00-MK-2325,alleged unpermitted discharges of pollutants into Fourmile Creek and from theRoosevelt Tunnel into Cripple Creek, and discharges of pollutants exceedingpermitted amounts from the Carlton Tunnel and Arequa Gulch outfalls.  Theeleventh and twelfth causes of action in that case concerned a discharge permitissued by the Colorado Water Quality Control Division in 1996 for an outfall inArequa Gulch.  Plaintiffs asserted, and the defendants denied, that thereare, among other things, any ongoing violations of the federal Act.

The second ofthese two cases, Civil Action No. 01-MK-2307, related to seeps asserted to bepoint-source discharges of Cresson Project drainage from the Moffat TunnelCribbing Wall and the Squaw Gulch Pond to Cripple Creek and a tributary theretoin Squaw Gulch.  The Company has notrecorded a receivable for the court costs awarded by the Court, approximately$28,000, and will not do so at least until the award is affirmed and no moreappeals can be initiated or objections thereto interposed.  Management iscoordinating its own efforts in these cases with those of the owner andoperator, CC&V, and the majority owners thereof, AngloGold North America,Inc., and AngloGold (Colorado) Corp., now AngloGold Ashanti North America,Inc., and AngloGold Ashanti (Colorado) Corp., respectively.  The Companyis neither the owner nor the operator and its interest is limited to itsminority interest in CC&V.  The ultimate outcome to theCompany in these continuing proceedings cannot be predicted.

The Company expended approximately $86,000, $12,000and $17,000 during the years 2006, 2005 and 2004, respectively, defendingagainst these suits.

16

----

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

The Company didnot submit any matters to a vote of security holders during the fourth quarterof 2006.

**PART II**

**ITEM5.  MARKET FOR REGISTRANT’S COMMONEQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

Market Information

As of March 6, 2006 the Company’s listing was moved tothe NYSE-Arca.  The Company’s tradingsymbol is GCGC on the NYSE-Arca Exchange. The following table shows the high and low bid price per share on thePacific Exchange, NYSE-Arca or the Over the Counter market, for each calendarquarter since January 1, 2005.

| Price Range For:        | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|-----------------------------------|------------|----------|------------|---------|------------|
| Quarter ended  December 31, 2006  |       | $        | 7.90       |    | $          | 6.30 |   |
| Quarter ended  September 30, 2006 |       | 8.50     |       | 5.25    |       |
| Quarter ended  June 30, 2006      |       | 11.00    |       | 3.65    |       |
| Quarter ended  March 31, 2006     |       | 4.20     |       | 3.40    |       |
|                              |       |     |       |    |       |
| Quarter ended  December 31, 2005  |       | $        | 4.10       |    | $          | 3.25 |   |
| Quarter ended  September 30, 2005 |       | 3.55     |       | 2.00    |       |
| Quarter ended  June 30, 2005      |       | 3.30     |       | 1.90    |       |
| Quarter ended March 31,  2005     |       | 3.12     |       | 2.00    |       |

 

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

Holders of theCompany’s Common Stock

The number of holders of record of the Company’s Common Stock as ofMarch 21, 2007 was 684.  The number ofbeneficial owners for whom shares are held in “street name” as of March 21,2007 is believed to be more than 500.

Dividends

The Company hasnot paid any dividends.  The Companyeffected a five-for-one stock split effective July 2004 following shareholderapproval of an increase in the authorized shares of the Company’s Common Stockfrom 3.5 million to 100 million at the 2004 annual meeting ofshareholders.  The Company does not haveplans to pay any dividends.

Equity Compensation Plans

The followingtable shows information for all equity compensation plans:

17

----

 
| **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  (excluding securities  referenced in column a)** | ** ** | **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     |       | 510,000                                                                                                                                              |       | $                                                                                                                                                                               | 3.69       |                                                                                                                                                                                                                    | 100,000    |   |
|                                                        |       |                                                                                                                                                 |       |                                                                                                                                                                            |       |                                                                                                                                                                                                                    |       |
| Equity Compensation Plans  Not Approved by Security Holders |       | —                                                                                                                                               |       | —                                                                                                                                                                          |       | —                                                                                                                                                                                                                  |       |
| Total                                                       |       | 510,000                                                                                                                                              |       | $                                                                                                                                                                               | 3.69       |                                                                                                                                                                                                                    | 100,000    |   |

 

There were no sales ofunregistered securities or stock repurchases by the Company during the yearended December 31, 2006.

**ITEM 6.  SELECTED FINANCIAL DATA**
| ** **            | ** ** | **2006**   | ** ** | **2005**  | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** |
|-----------------------|------------|------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Revenues (1)          |       | $          | 250,000    |      | $          | 250,000   |       | $         | 250,000    |      | $          | 250,000 |   | $ | 250,000 |   |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Other income          |       | 166,000    |       | 61,000    |       | 30,000    |       | 581,000   |       | 30,000    |       |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Expenses              |       | 1,513,000  |       | 913,000   |       | 602,000   |       | 607,000   |       | 503,000   |       |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Share of Mining Joint |       |       |       |      |       |      |       |      |       |      |       |
| Venture Losses  (2)   |       | —     |       | —    |       | —    |       | —    |       | —    |       |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Net income (Loss)     |       | (1,097,000 | )          | (602,000  | )          | (322,000  | )          | 224,000   |       | (223,000  | )          |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Net income (Loss)     |       |       |       |      |       |      |       |      |       |      |       |
| Per Share             |       | (0.11      | )          | (0.06     | )          | (0.03     | )          | 0.02      |       | (0.02     | )          |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| Total Assets          |       | 803,000    |       | 1,125,000 |       | 1,647,000 |       | 1,872,000 |       | 1,417,000 |       |
|                  |       |       |       |      |       |      |       |      |       |      |       |
| 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)  TheJoint Venture recorded net income of $38.4 million for the year ended December31, 2006, net income of $9.5 million for the year ended December 31, 2005, netincome of $7.7 million for the year ended December 31, 2004, and net loss of$0.5 million for the year ended December 31, 2003.  The Company has not recorded its share of theJoint Venture net income for the 2006 period ($7.7 million) nor its share ofthe Joint Venture’s net income for the

18

----

2005 ($1.9 million) or2004 ($1.5 million) periods nor its share of the Joint Venture’s net loss forthe 2003 period ($93,800) because its Joint Venture investment balance wasreduced to zero in 1992.  The Companywill not record its share of any future Joint Venture net income until andunless the balance of the Company’s accumulated unrecorded losses from theJoint Venture ($7,910,000 as of December 31, 2006) are recovered.  See Management’s Discussion and Analysisbelow, and Notes to the consolidated financial statements.

**ITEM7.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

Overview

Our financial statementsconsolidate the operations of our wholly-owned subsidiary, Golden CyclePhilippines, Inc., with those of Golden Cycle Gold Corporation.  Golden Cycle Philippines, Inc. has minimalcosts and assets and Golden Cycle Gold Exploration, Inc. had no operations orassets during the year ended December 31, 2006.

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

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

Liquidity and CapitalResources

Our workingcapital was $785,000 at December 31, 2006 compared to $1,053,000 at December31, 2005.  Cash used in operations was$362,000 in 2006 compared to $639,000 during 2005.  Working capital decreased by approximately$268,000 at December 31, 2006 compared to December 31, 2005 primarily due tonet losses in the 2006 period.  Thedecrease in cash used in operations during 2006 was primarily due to revenuefrom the sale of the Company’s Illipah gold prospect in Nevada ($100,000),elimination of the holding costs of the Illipah gold prospect in Nevada($50,000) elimination of the exploration expenses associated with the Illipahdrilling program ($255,000) in the 2005 period, offset by increased legal costswithin general and administrative expenses ($192,000) during the 2006 period.

We believe thatthe Company’s working capital, augmented by the Minimum Annual Distributionfrom the Joint Venture, is adequate to support operations at the current levelfor the coming year, barring unforeseen events. We anticipate that our Philippine subsidiary will hold all work on astandby basis until the MPSA is awarded to the claim owner.  If opportunities to economically pursue orexpand Philippine, Nevada, Colorado operations, or any other opportunitydiscussed above (see Item 1, Other Opportunities) are available, and we electto pursue them, additional working capital may also be required.  There is no assurance that we will be able toobtain such additional capital, if required, or that such capital would beavailable to the Company on terms that would be acceptable.  Furthermore, if we were to commence suchoperations, it is not presently known when or if a positive cash flow could bederived from the operations.  The Companyis considering financing up to 33% of CC&V’s initial loan ($333.8 millionat December 31, 2006).  To finance itsportion of CC&V’s initial loan the Company would have to raise additionalcapital in some form of debt and/or equity issue and obtain the agreement ofAngloGold.  There is no

19

----

assurance the Companycould raise these funds, or, if possible, obtain acceptable terms on thefinancing. Such financing would likely result in a substantial dilution of theCompany’s current equity holders.

Results ofOperations

2006 vs 2005

We recorded netloss of approximately $1,183,000 for the year ended December 31, 2006 comparedto a net loss of approximately $602,000 for the year ended December 31,2005.  The increase in net loss duringthe 2006 period was primarily due to stock-based compensation expense of $791,597recorded upon the June 5, 2006 automatic grant of stock options in accordancewith the Company’s Stockholder approved plan.  The net loss for 2006 excluding the above stock- based compensationexpense would have been approximately $391,000. The decreased loss during 2006 represented by the $391,000 was largelydue to decreased exploration expenses associated with the Illipah explorationdrilling program of approximately $255,000, increased revenue of $100,000 fromthe Illipah gold prospect sale, elimination of holding costs of $50,000 on theIllipah gold prospect, and increased administrative costs, specifically legalfees.

2005 vs 2004

We recorded net loss of$602,025 for the year ended December 31, 2005 compared to a net loss of$322,582 for the year ended December 31, 2004. The increase in net loss during the 2005 period was primarily due toincreased exploration expenses associated with the Illipah (which was soldduring August 2006) exploration drilling program of approximately $255,000 andincreased administrative costs, specifically legal fees.  The cost of compliance with the provisions ofthe Sarbanes-Oxley Act of 2002 continues to significantly increase the Company’sadministrative costs, particularly its legal expenses.  Compliance costs will further increase in2006 to complete the required internal control reviews.

We account for ourinvestment in the Joint Venture on the equity method.  Joint Venture distributions in excess of theinvestment carrying value are recorded as revenue, as we are not required tofinance the Joint Venture’s operating losses or capital expenditures.  Correspondingly, we have not recorded ourshare of Joint Venture income or losses incurred subsequent to the reduction ofthe Company’s Joint Venture investment balance to zero in 1992.  We will not record our share of equity incomeuntil the cumulative amount of previously unrecorded Joint Venture losses hasbeen recouped.  As of December 31, 2006,the Company’s accumulated unrecorded losses from the Joint Venture are$7,910,000.  At the current prevailingprice of gold we do not expect distributions from the Joint Venture in excessof the Minimum Annual Distribution ($250,000 per year) for several years.

The Joint Venturerecorded net income for the year ended December 31, 2006 of approximately $38.4million compared to net income of $9.5 and $7.7 million for the years endedDecember 31, 2005 and December 31, 2004 respectively.  The primary reason for the Joint Venture’simproved performance in both 2006 and 2005 over the previous years’ performancewas the increase in the prevailing price for gold bullion during eachyear.  The Joint Venture’s average goldbullion sales prices per troy ounce were: $603 during 2006, $445 during 2005 and $410 during 2004.

Tabular Disclosure ofContractual Obligations

The followingtable summarizes the Company’s current contractual obligations.

20

----

 
| ** **                       | ** ** | ** ** | ** ** | **Payment due by period** | ** ** |
|----------------------------------|------------|------------|------------|------------------------------------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Less than**                       | ** ** | **1-3** | ** ** | **3-5** | ** ** | **More than** | ** ** |
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **1 year**                          | ** ** | **years** | ** ** | **years** | ** ** | **5 years** | ** ** |
| Long-Term Debt Obligations       |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Capital Lease  Obligations       |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Operating Lease  Obligations     |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Purchase obligations             |       | —     |       | —                                   |       | — |   | — |   | — |   |
| Other Long-Term  Liabilities     |       | $          | 178,250    |                                     | $          | 111,550 |   | $ | 66,700 |   | — |   | — |   |
| Total                            |       | $          | 178,250    |                                     | $          | 111,550 |   | $ | 66,700 |   | — |   | — |   |

 

**ITEM 7A.               QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

We do not hedge,sell forward or otherwise commit any asset on a contingency basis.  We do not normally commit to multi-yearcontracts other than employment agreements and office space rental (see Notesto Consolidated Financial Statements, Note 8, Commitments andContingencies).  The Joint Venture, inthe course of normal business, periodically executes long term supply contractsto limit its exposure to various supply risks. The Joint Venture has not previously hedged or sold forward gold orother assets for the joint account.

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

The financialstatements and supplementary data required by this item are included herein inItem 15.

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

During fiscalyears 2006 and 2005, we have had no disagreements with our independent auditorsregarding accounting or financial disclosure matters.

**ITEM 9A. CONTROLSAND PROCEDURES**

Disclosurecontrols and procedures

Disclosurecontrols and procedures are our controls and other procedures that are designedto ensure that information required to be disclosed by us in the reports thatwe file or submit under the Securities Exchange Act of 1934, as amended, isrecorded, processed, summarized and reported, within the time periods specifiedin the Securities and Exchange Commission’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by us in thereports that we file under the Securities Exchange Act is accumulated andcommunicated to our management, including our principal executive officer andprincipal financial officer, as appropriate to allow timely decisions regardingrequired disclosure.

Asof the end of the period covered by this report (the “Evaluation Date”), wecarried out an evaluation, under the supervision and with the participation ofthe Company’s management, including the Company’s Chief Executive Officer, whois also our Company’s principal financial officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toExchange Act Rule 13a-15. Based upon that evaluation, our Chief ExecutiveOfficer, who is also our principal financial officer, concluded that as of theEvaluation Date, our disclosure controls and procedures were effective inalerting them in a timely manner to material information relating to theCompany and its subsidiaries that is required to be included in the reportsthat we file or submit under the Securities Exchange Act of 1934.

21

----

Internal controlover financial reporting

Internalcontrol over financial reporting is defined as a process designed by, or underthe supervision of our Chief Executive Officer, who is also our principalfinancial officer, and effected by our Board of Directors, through our auditcommittee, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. These includeprocedures that (i) pertain to maintenance of records in reasonable detail toaccurately reflect the our transactions and disposition of assets; (ii) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (iii)provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use or disposition of our assets that could have amaterial effect on our financial statements.

Weare not required to report management’s assessment of the effectiveness of ourinternal controls over financial reporting and we have not undertaken the kindof review of such controls that we would have been required to undertake if wewere required to make such a report. We have planned and scheduled a review ofour internal controls by an outside contractor which we expect will becompleted by June 2007.  However, inconnection with our review of disclosure controls and procedures now in place,above, we have noted certain areas in our systems of internal control which, ifleft unresolved or unaddressed, could result in material deficiencies andweaknesses in our internal control. These areas include, lack of segregation of duties due to limitedpersonnel, limited capability due to the size of our Company to interpret andapply United States generally accepted accounting standards, lack of adequatedocumentation of our system of internal controls, lack of formal accountingpolicy and procedures and related documentation, and lack of a formal budgetingprocess. Although, we have not instituted new internal control processesrelated to these identified areas, as has been characteristic of companies thathave completed their review of internal controls and have had to report on theeffect of such review, we are considering what appropriate remedial actions, ifany, are necessary to improve our systems of internal controls.  In conjunction with our outside audit for theyear ended December 31, 2005, we determined that we had a significantdeficiency in our accounts payable accruals at year end.  The deficiency could have resulted in underaccruals of approximately $18,000 at year end, which would have understated thenet loss for the year by a comparable amount. Management has instituted a policy requiring review of subsequent periodinvoices to address this deficiency.

Withinthe year ended December 31, 2006, there were no changes to our internal controlover financial reporting that materially affected, or is reasonably likely, orare reasonably likely, to materially affect our internal control over financialreporting.

**ITEM 9B.OTHER INFORMATION**

None.

**PART III**

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

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2007 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

**ITEM 11.  EXECUTIVE COMPENSATION**

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2007 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

22

----

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

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2007 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

**ITEM 13.  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2007 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

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

The informationrequired by this item is incorporated by reference to the Company’s DefinitiveProxy Statement relating to the 2007 Annual Meeting of Shareholders which willbe filed with the Securities and Exchange Commission no later than 120 daysfollowing the end of the fiscal year.

**PART IV**

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

(a) Documents filed aspart of this report:

(1) FinancialStatements
| Report of Independent  Registered Accounting Firm,  Ehrhardt Keefe Steiner & Hottman, P.C.              |   |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                        |   |   |
| Consolidated  Balance Sheets, December 31, 2006 and 2005                                                    |   |   |
|                                                                                                        |   |   |
| Consolidated Statements of Operations for the Years  Ended December 31, 2006, 2005 and 2004                 |   |   |
|                                                                                                        |   |   |
| Consolidated Statements of Shareholders’ Equity for  the Years  Ended December 31, 2006, 2005 and 2004 |   |   |
|                                                                                                        |   |   |
| Consolidated Statements of Cash Flows for the Years  Ended December 31, 2006, 2005 and 2004                 |   |   |
|                                                                                                        |   |   |
| Notes to Consolidated Financial Statements                                                                  |   |   |

 

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

 

Exhibit Index

  2.1. Letter Agreement dated August 23, 2006, between Golden Cycle GoldCorporation and Tornado Gold International Corporation (incorporated byreference to Exhibit 2.1 to the Company’s Current Report on Form 8-K datedAugust 23, 2006)

23

----

  3.1. Articles of Incorporation, as amended, effective June 15, 2004,(incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2006)

  3.2 Articles of Amendment to the Articles of Incorporation of Golden CycleGold Corporation (incorporated by reference to Exhibit 3.1 to the Company’sForm 8-K filed May 12, 2006).

  3.3. By-laws (incorporated by reference to Exhibit 2 to the Company’s Form 10dated May 19, 1983).

10.1.  Amended and Restated Joint Venture Agreementbetween AngloGold Ashanti (Colorado) Inc. and the Company dated as of January1, 1991 (incorporated by reference to Exhibit 1 to the Company’s Current Reporton Form 8-K dated June 17, 1991).

10.2  1997 Officers’ & Directors’ Stock OptionPlan (incorporated by reference to Appendix A of the Company’s Definitive ProxyStatement dated April 30, 1997).

10.3  2002 Stock Option Plan (incorporated byreference to Appendix A of the Company’s Definitive Proxy Statement dated April27, 2001).

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

21.1. Subsidiaryof the Company:  Golden Cycle PhilippinesInc. incorporated in the Republic of the Philippines.

21.2. Subsidiaryof the Company:  Golden Cycle GoldExploration Inc. incorporated in the state of Nevada.

23.1 Consent ofEhrhardt Keefe Steiner & Hottman P.C.

31.1 Certificationof Chief Executive Officer pursuant to the Sarbanes-Oxley Act of 2002, Section302.

31.2 Certificationof principal financial officer pursuant to the Sarbanes-Oxley Act of 2002,Section 302.

24

----

SIGNATURES

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned, thereto duly authorized.
|                      |   | /s/ R. Herbert Hampton                                                                                                                                               |
|----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   | R. Herbert Hampton, President, Chief Executive Officer,  and Treasurer (Principal Executive Officer, Principal Financial Officer, and  Principal Accounting Officer) |
| Date: March 27, 2007 |   |                                                                                                                                                                 |

 

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

 
| /s/ R. Herbert Hampton                      |   | March 27, 2007 |   |
|---------------------------------------------|--------|----------------|--------|
| R. Herbert Hampton, President, Chief        |   | Date           |   |
| Executive Officer, and Treasurer            |   |           |   |
| (Principal Executive Officer, Principal     |   |           |   |
| Financial Officer, and Principal Accounting |   |           |   |
| Officer)                                    |   |           |   |
|                                        |   |           |   |
|                                        |   |           |   |
| /s/ James C. Ruder                          |   | March 27, 2007 |   |
| James C. Ruder, Director                    |   | Date           |   |
|                                        |   |           |   |
|                                        |   |           |   |
| /s/ Robert T. Thul                          |   | March 27, 2007 |   |
| Robert T. Thul, Director                    |   | Date           |   |
|                                        |   |           |   |
|                                        |   |           |   |
| /s/ Taki N. Anagnoston                      |   | March 27, 2007 |   |
| Dr. Taki N. Anagnoston, Director            |   | Date           |   |
|                                        |   |           |   |
|                                        |   |           |   |
| /s/ Donald L. Gustafson                     |   | March 27, 2007 |   |
| Donald L. Gustafson, Director               |   | Date           |   |

 

25

----

**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

Board ofDirectors and Stockholders

GoldenCycle Gold Corporation

Colorado Springs, Colorado

Wehave audited the accompanying consolidated balance sheets of Golden Cycle GoldCorporation and Subsidiaries (a Colorado Corporation) as of December 31, 2006and 2005, and the related consolidated statements of operations, changes instockholders’ equity and comprehensive income (loss), and cash flows for theyears ended December 31, 2006, 2005 and 2004. These consolidated financial statements are the responsibility of theCompany’s management.  Our responsibilityis to express an opinion on these consolidated financial statements based onour audits.

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

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Golden Cycle GoldCorporation and Subsidiaries as of December 31, 2006 and 2005, and theconsolidated results of its operations and its cash flows for the years endedDecember 31, 2006, 2005 and 2004 in conformity with accounting principalsgenerally accepted in the United States of America.
|                  | **/s/ Ehrhardt Keefe Steiner & Hottman P.C.** |
|------------------|---------------------------------------------------|
| ** **       |
| March 29, 2007   |
| Denver, Colorado |

** **

26

----

**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

Consolidated Balance Sheets
| ** **                                                                                                            | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                                                            | ** ** | **2006**              | ** ** | **2005**              | ** ** |
| **Assets**                                                                                                            |       |                  |       |                  |       |
| Current assets:                                                                                                       |       |                  |       |                  |       |
| Cash and cash  equivalents                                                                                            |       | $                     | 53,142     |                  | $          | 167,169 |   |
| Short-term  investments (note 2)                                                                                      |       | 677,944               |       | 888,627               |       |
| Interest  receivable and other current assets                                                                         |       | 19,168                |       | 15,753                |       |
| Prepaid  insurance                                                                                                    |       | 25,203                |       | 24,827                |       |
| Total current  assets                                                                                                 |       | 775,457               |       | 1,096,376             |       |
| Property and equipment,  at cost:                                                                                     |       |                  |       |                  |       |
| Land                                                                                                                  |       | 2,025                 |       | 2,025                 |       |
| Mineral claims                                                                                                        |       | 20,657                |       | 20,657                |       |
| Furniture and  fixtures                                                                                               |       | 9,354                 |       | 10,064                |       |
| Machinery and  equipment                                                                                              |       | 21,516                |       | 33,013                |       |
|                                                                                                                  |       | 53,551                |       | 65,759                |       |
| Less accumulated  depreciation                                                                                        |       | (26,130               | )          | (37,224               | )          |
|                                                                                                                  |       | 27,421                |       | 28,535                |       |
| Total assets                                                                                                          |       | $                     | 802,878    |                  | $          | 1,124,911 |   |
|                                                                                                                  |       |                  |       |                  |       |
| **Liabilities  and Shareholders’ Equity**                                                                        | ** ** | ** **            | ** ** | ** **            | ** ** |
| Current liabilities:                                                                                                  |       |                  |       |                  |       |
| Accounts payable  and accrued liabilities                                                                             |       | $                     | 18,373     |                  | 43,808     |   |
| Total current  liabilities                                                                                            |       | 18,373                |       | 43,808                |       |
|                                                                                                                  |       |                  |       |                  |       |
| Commitments and  contingencies (note 7)                                                                               |       |                  |       |                  |       |
|                                                                                                                  |       |                  |       |                  |       |
| Shareholders’ equity  (note 5):                                                                                  |       |                  |       |                  |       |
| Common stock, no  par value. Authorized 100,000,000 shares; issued and outstanding 9,744,250  shares in 2006 and 2005 |       | 7,499,429             |       | 7,499,429             |       |
| Additional  paid-in capital                                                                                           |       | 2,728,273             |       | 1,927,736             |       |
| Accumulated  deficit                                                                                                  |       | (9,411,686            | )          | (8,314,551            | )          |
| Accumulated other  comprehensive loss                                                                                 |       | (31,511               | )          | (31,511               | )          |
| Total  shareholders’ equity                                                                                      |       | 784,505               |       | 1,081,103             |       |
| Total liabilities and  shareholders’ equity                                                                      |       | $                     | 802,878    |                  | $          | 1,124,911 |   |

 

Seeaccompanying notes to consolidated financial statements.

27

----

**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

Consolidated Statements ofOperations
| ** **                                                                    | ** ** | **For the Years Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2006**                                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenue:                                                                      |       |                                                          |       |   |   |   |   |
| Distributions  from mining joint venture in excess of carrying value (note 3) |       | $                                                             | 250,000    |   | $ | 250,000 |   | $ | 250,000 |   |
|                                                                          |       |                                                          |       |   |   |   |   |
| Expenses:                                                                     |       |                                                          |       |   |   |   |   |
| General and  administrative expense *                                         |       | 1,502,938                                                     |       | 603,044 |   | 542,510 |   |
| Depreciation  expense                                                         |       | 2,224                                                         |       | 3,973 |   | 5,286 |   |
| Exploration  expense                                                          |       | 8,410                                                         |       | 305,661 |   | 54,372 |   |
|                                                                          |       | 1,513,572                                                     |       | 912,678 |   | 602,168 |   |
| Operating loss                                                                |       | (1,263,572                                                    | )          | (662,678 | ) | (352,168 | ) |
|                                                                          |       |                                                          |       |   |   |   |   |
| Other income:                                                                 |       |                                                          |       |   |   |   |   |
| Interest and  other income                                                    |       | 30,787                                                        |       | 35,667 |   | 21,545 |   |
| Gold bullion  mark to market                                                  |       | 35,650                                                        |       | 24,986 |   | 8,041 |   |
| Gain on assets  sold (net)                                                    |       | 100,000                                                       |       | — |   | — |   |
|                                                                          |       | 166,437                                                       |       | 60,653 |   | 29,586 |   |
| Net loss                                                                      |       | $                                                             | (1,097,135 | ) | $ | (602,025 | ) | $ | (322,582 | ) |
| Basic loss per share                                                          |       | $                                                             | (0.11      | ) | $ | (0.06 | ) | $ | (0.03 | ) |
|                                                                          |       |                                                          |       |   |   |   |   |
| Diluted loss per share                                                        |       | (0.11                                                         | )          | (0.06 | ) | (0.03 | ) |
|                                                                          |       |                                                          |       |   |   |   |   |
| Basic weighted average  shares outstanding                                    |       | 9,744,250                                                     |       | 9,738,086 |   | 9,597,231 |   |
|                                                                          |       |                                                          |       |   |   |   |   |
| Diluted weighted average shares outstanding                                   |       | 9,744,250                                                     |       | 9,738,086 |   | 9,597,231 |   |

 

Seeaccompanying notes to consolidated financial statements.

28

----

**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

Consolidated Statements ofShareholders’ Equity and Comprehensive Income (Loss)

For the Years ended December 31, 2006, 2005, and 2004
| ** **                                                                   | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **Accumulated**                   | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-----------------|------------|-----------------------------------|------------|------------|------------|
| ** **                                                                   | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **other**                         | ** ** | ** ** | ** ** |
| ** **                                                                   | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **comprehensive**                 | ** ** | ** ** | ** ** |
| ** **                                                                   | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **loss — foreign** | ** ** | ** ** | ** ** |
| ** **                                                                   | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **      | ** ** | **currency**                      | ** ** | ** ** | ** ** |
| ** **                                                                   | ** ** | **Common stock** | ** ** | **paid-in** | ** ** | **Accumulated** | ** ** | **translation** | ** ** | ** **                        | ** ** |
| ** **                                                                   | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **capital**     | ** ** | **deficit**     | ** ** | **adjustment**                    | ** ** | **Total**  | ** ** |
| Balance at December 31,  2003                                                |       | 9,542,250             |       | $           | 7,307,854  |            | $          | 1,927,736       |       | $                                 | (7,389,944 | )          | $          | (31,741 | ) | $ | 1,813,905 |   |
| Stock options exercised                                                      |       | 127,000               |       | 98,463      |       | —          |       | —          |       | —                            |       | 98,463     |       |
| Net loss                                                                     |       | —                |       | —      |       | —          |       | (322,582        | )          | —                            |       | (322,582   | )          |
| Foreign currency  translation adjustment                                     |       | —                |       | —      |       | —          |       | —          |       | (72                               | )          | (72        | )          |
| Comprehensive net loss                                                       |       |                  |       |        |       |            |       |            |       |                              |       | (322,654   | )          |
| Balance at December 31,  2004                                                |       | 9,669,250             |       | 7,406,317   |       | 1,927,736       |       | (7,712,526      | )          | (31,813                           | )          | 1,589,714  |       |
| Stock options exercised                                                      |       | 75,000                |       | 93,112      |       | —          |       | —          |       | —                            |       | 93,112     |       |
| Net loss                                                                     |       | —                |       | —      |       | —          |       | (602,025        | )          | —                            |       | (602,025   | )          |
| Foreign currency  translation adjustment                                     |       | —                |       | —      |       | —          |       | —          |       | 302                               |       | 302        |       |
| Comprehensive net loss                                                       |       |                  |       |        |       |            |       |            |       |                              |       | (601,723   | )          |
| Balance at December 31,  2005                                                |       | 9,744,250             |       | 7,499,429   |       | 1,927,736       |       | (8,314,551      | )          | (31,511                           | )          | 1,081,103  |       |
| Net loss                                                                     |       | —                |       | —      |       | —          |       | (1,097,135      | )          | —                            |       | (1,097,135 | )          |
| Non-cash stock-based  compensation                                           |       | —                |       | —      |       | 791,597         |       | —          |       | —                            |       | 791,597    |       |
| Non-cash compensation  liability accrual reclassified to contributed capital |       | —                |       | —      |       | 8,940           |       | —          |       | —                            |       | 8,940      |       |
| Balance at December 31, 2006                                                 |       | 9,744,250             |       | $           | 7,499,429  |            | $          | 2,728,273       |       | $                                 | (9,411,686 | )          | $          | (31,511 | ) | $ | 784,505 |   |

 

Seeaccompanying notes to consolidated financial statements.

29

----

**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

Consolidated Statements ofCash Flows
| ** **                                                                   | ** ** | **For the Years Ended December 31,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2006**                                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Cash flows from  operating activities:                                       |       |                                                          |       |   |   |   |   |
| Net loss                                                                     |       | $                                                             | (1,097,135 | ) | $ | (602,025 | ) | $ | (322,582 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                                                          |       |   |   |   |   |
| Depreciation  expense                                                        |       | 2,224                                                         |       | 3,973 |   | 5,286 |   |
| Increase in  market value of gold asset                                      |       | (35,650                                                       | )          | (24,986 | ) | (8,041 | ) |
| Stock based  compensation expense                                            |       | 791,597                                                       |       | — |   | — |   |
| Non-cash  Compensation liability accrual reclassified to contributed capital |       | 8,940                                                         |       | — |   | — |   |
| Write-down of  investment in subsidiary                                      |       | (2,964                                                        | )          | — |   | — |   |
| Increase in  interest receivable and other current assets                    |       | (3,415                                                        | )          | (2,229 | ) | (6,510 | ) |
| Decrease  (increase) in prepaid insurance                                    |       | (376                                                          | )          | (447 | ) | 200 |   |
| Decrease in  accounts payable and accrued liabilities                        |       | (25,435                                                       | )          | (13,060 | ) | (1,611 | ) |
|                                                                         |       |                                                          |       |   |   |   |   |
| Net cash used in  operating activities                                       |       | (362,214                                                      | )          | (638,774 | ) | (333,258 | ) |
|                                                                         |       |                                                          |       |   |   |   |   |
| Cash flows from  investing activities:                                       |       |                                                          |       |   |   |   |   |
| Decrease  (increase) in short-term investments, net                          |       | 249,297                                                       |       | 256,632 |   | (188,563 | ) |
| Proceeds from  account receivable on sale of water rights                    |       | —                                                        |       | — |   | 679,098 |   |
| Purchases of property  and equipment, net                                    |       | (1,110                                                        | )          | (1,103 | ) | (767 | ) |
|                                                                         |       |                                                          |       |   |   |   |   |
| Net cash  provided by investing activities                                   |       | 248,187                                                       |       | 255,529 |   | 489,768 |   |
|                                                                         |       |                                                          |       |   |   |   |   |
| Cash flows provided by  financing activity:                                  |       |                                                          |       |   |   |   |   |
| Proceeds on  exercise of stock options                                       |       | —                                                        |       | 93,112 |   | 98,463 |   |
| Net cash  provided by financing activities                                   |       | —                                                        |       | 93,112 |   | 98,463 |   |
|                                                                         |       |                                                          |       |   |   |   |   |
| Effect of exchange rate  changes on cash                                     |       | —                                                        |       | 302 |   | (72 | ) |
| Net increase (decrease)  in cash and cash equivalents                        |       | (114,027                                                      | )          | (289,831 | ) | 254,901 |   |
| Cash and cash  equivalents, beginning of year                                |       | 167,169                                                       |       | 457,000 |   | 202,099 |   |
| Cash and cash equivalents, end of year                                       |       | $                                                             | 53,142     |   | $ | 167,169 |   | $ | 457,000 |   |

 

Supplemental disclosure of non-cash activity:

During 2004, 77,900 shareswere surrendered in cashless exercise of stock options.

See accompanying notes toconsolidated financial statements.

30

----

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

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

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

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

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

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

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

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

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

Short-term investmentsconsist primarily of certificates of deposit. Short-term investments also include 310 troy ounces of gold bullionpurchased by the Company in 2002.  Interestrevenue and the increase or decrease in the value of the gold bullion isincluded in the consolidated statement of operations.

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

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

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

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

31

----

reserves. The Company hasno capitalized mineral property development costs at December 31, 2006 orDecember 31, 2005.

The Company assesses thecarrying value of its long-lived assets for impairment whenever changes infacts or circumstances indicate that they may be impaired.  Potential impairment is estimated bycomparing estimated future undiscounted cash flows expected to be generatedfrom such assets with their net book value. If net book value exceeds estimatedcash flows, the asset is written down to fair value.  The Company recorded impairment costs in itsGCPI operations at December 31, 2006 of $2,964. The Company did not record impairment costs during the year endedDecember 31, 2005.

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

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

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

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

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

As of December 31, 2006,the Company has impaired 100% of its GCPI investment and therefore has notrecorded comprehensive income for the year ended December 31, 2006.

***(i)***                         Stock Options

On January 1, 2006 the Company adopted therevised Statement of Financial Accounting Standard No. 123, “Share BasedPayment” (“SFAS No. 123R”).  SFAS No.123R requires public entities to measure the cost of employee services receivedin exchange for an award of equity instruments based upon the grant-date fairvalue of the award and requires that the cost be recognized over the periodduring which an employee is required to provide service in exchange for theaward, which is generally the vesting period. The grant-date fair value of employee share options and similarinstruments will be measured using option-pricing models adjusted for anyunique characteristics of those instruments. The Company computes the fair value of each option on the date of grantbased upon the Black-Scholes option pricing model.  This model requires the input of subjectiveassumptions, including the expected term based upon historical data of pastexercises of option awards and expected stock-price volatility based upon thehistorical quoted market prices of the Company’s common stock as well as anestimate of forfeitures.  These estimatesinvolve inherent uncertainties and the application of management judgment.  As a result, if other assumptions had beenused, the Company’s recorded and pro-forma stock-based compensation expensecould have been materially different from that reported.

The Company determined the fair value of theoptions granted in 2006 was $791,597 using a Black-Scholes option pricingmodel, for a weighted average fair value of $6.33 per share.  In determining the fair value, the Companyused the following assumptions:

32

----

 

|                          | ** ** | **Dividend  yield** | ** ** | **Expected  volatility** | ** ** | **Risk-free  interest  rate** | ** ** | **Expected  life (in years)** | ** ** | **Weighted  average  fair value  of option** | ** ** |
|--------------------------|------------|---------------------|------------|--------------------------|------------|-------------------------------|------------|-----------------------------------------|------------|--------------------------------------------------------|------------|
|                     |       |                |       |                     |       |                          |       |                                    |       |                                                   |       |
| Options granted  in 2004 |       | 0                   | %          | 55                       | %          | 4.77                          | %          | 10                                      |       | $                                                      | 1.82       |   |
| Options granted  in 2005 |       | 0                   | %          | 70                       | %          | 4.05                          | %          | 10                                      |       | $                                                      | 1.95       |   |
| Options granted in 2006  |       | 0                   | %          | 61                       | %          | 5.03                          | %          | 10                                      |       | $                                                      | 6.33       |   |

 

Accordingly, the Company recognized optioncompensation expense of $791,597 for the year ended December 31, 2006.  This option compensation expense is includedin general and administrative expense. As of December 31, 2006, there are nounvested stock options outstanding and accordingly, there was no unrecognizedcompensation expense related to unvested stock options.

The Company adopted SFAS 123R using themodified prospective method.  Under thismethod, compensation cost recognized in the year ended December 31, 2006includes: a) compensation cost for all stock-based payments granted prior to,but not yet vested as of January 1, 2006, based on the grant-date fair valueestimated in accordance with the original provisions of SFAS 123, and b)compensation cost for all stock-based payments granted subsequent to January 1,2006, based on the grant-date fair value estimated in accordance with theprovisions of SFAS 123R.  The results forprior periods have not been restated and accordingly, there was no stock optionrelated compensation expense recorded during the years ended December 31, 2005and 2004.

Prior to adoption of SFAS 123R, the Companyaccounted for stock-based employee compensation under the recognition andmeasurement provisions of Accounting Principles Board Opinion No. 25, “Accountingfor Stock Issued to Employees” (“APB 25”) and related Interpretations, aspermitted by SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”).  The following illustrates the effect on netincome and earnings per share if the fair value recognition provision of SFASNo. 123R had been applied to the years ended December 31, 2005 and 2004:

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

 

The following summarizes the activity of theCompany’s stock options for the year ended December 31, 2006:

33

----

 

|                                   | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic  Value (1)** | ** ** |
|-----------------------------------|------------|------------|------------|----------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------|------------|
| Number of shares  under option:   |       |       |       |                                   |       |                                                |       |                                     |       |
| Outstanding at  January 1, 2006   |       | 385,000    |       | $                                      | 2.13       |                                                |       |                                     |       |   |
| Granted                           |       | 125,000    |       | 8.50                                   |       |                                                |       |                                     |       |
| Exercised                         |       | —     |       | —                                 |       |                                                |       |                                     |       |
| Canceled or  expired              |       | —     |       | —                                 |       |                                                |       |                                     |       |
| Outstanding at  December 31, 2006 |       | 510,000    |       | $                                      | 3.69       |                                                | 6.81       |                                     | $          | 1,688,100 |   |
| Exercisable at December  31, 2006 |       | 510,000    |       | $                                      | 3.69       |                                                | 6.81       |                                     | $          | 1,688,100 |   |

----

(1) The intrinsic value of a stock option isthe amount by which the current market value of the underlying stock ($7.00 pershare) exceeds the exercise price of the option.

***(j)***                         Income Taxes

The Company utilizes the asset and liability method of accounting forincome taxes. Under the asset and liability method, deferred tax assets andliabilities are recognized for the future tax consequences attributable todifferences between the financial statement carrying amounts and the tax basisof existing assets and liabilities using enacted tax rates expected to apply inthe years in which such temporary differences are expected to be recovered orsettled. Changes in tax rates are recognized in the period of the enactmentdate. A valuation allowance is recognized unless tax assets are more likelythan not to be realized.

***(k)***                      Comprehensive Income

In 1998, the Company adopted SFAS No. 130, *ReportingComprehensive Income*.  SFASNo. 130 requires that all components of comprehensive income (loss), includingnet income (loss), be reported in the financial statements in the period theyare recognized.  Comprehensive income(loss) is defined as the change in equity during a period from transactions andother events and circumstances from non-owner sources.  Net income (loss) and other comprehensiveincome (loss), including foreign currency translation adjustments, shall bereported, net of their related tax effect, to arrive at comprehensive income(loss).  We have disclosed comprehensiveincome (loss) in our consolidated financial statements accordingly.

***(l)***                         Revenue Recognition

The Company recognizes revenue as Minimum Annual Distributions from theJoint Venture are received as all services necessary for revenue recognitionhave been previously provided to the Joint Venture by the Company.  The Joint Venture Agreement, as amended,provides for the Company to receive a minimum annual distribution of $250,000during the Initial Phase (see Note 3). Beginning in 1994, such Minimum Annual Distributions are potentiallyrecoupable against the Company’s future share of Net Proceeds, if any.  Whether future gold prices and the results ofthe Joint Venture’s operations will reach and maintain a level necessary torepay the Initial Loans (see Note 3), complete the Initial Phase, andthereafter generate net income from which Minimum Annual Distributions can berecouped, cannot be assured due to uncertainties inherent within any miningoperation.  Based on the amount ofInitial Loans payable to the Manager and the uncertainty of future operating revenues,there is no assurance that the

34

----

Company will receive more than the Minimum Annual Distribution from theJoint Venture in the foreseeable future.

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

Basic earnings (loss) per common share are computed as net income(loss) divided by the weighted average number of common shares outstandingduring the period.  Diluted earnings(loss) per common share are computed as net income (loss) divided by theweighted average number of common shares and potential common shares, using thetreasury stock method, outstanding during the period.

**(2)**                     Short-Term Investments

The Company heldcertificates of deposit of approximately $380,000 and $677,000 atDecember 31, 2006 and 2005, respectively. All certificates of deposit heldat December 31, 2006 mature within one year. Short-term investments alsoinclude 310 troy ounces of gold bullion purchased by the Company in 2002 at acost of $102,859 and is carried at market value of $195,765 at December 31,2006.  The Company has reflectedunrealized gains of $35,650, $24,986 and $8,041 for the years ended December31, 2006, 2005 and 2004, respectively, in the Consolidated Statement ofOperations.

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

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

The Joint VentureAgreement, as amended, generally requires AngloGold to finance operations andcapital expenditures of the Joint Venture. The Joint Venture is currentlyoperating in an Initial Phase that will end when (i) the 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, 2006, Initial Loans wereapproximately $333.8 million and no Net Proceeds have been distributed.Initial Loans must be repaid prior to Net Proceeds being distributed to theventurers. After the Initial Phase, the Joint Venture will distribute metalin kind, 67% to AngloGold and 33% to the Company. The Agreement also providesfor the Company to receive a minimum annual distribution of $250,000 during theInitial Phase. Beginning in 1994, such minimum annual distributions arerecoupable against the Company’s future share of Net Proceeds, if any.

Whether future goldprices and the results of the Joint Venture’s operations will reach andmaintain a level necessary to repay the Initial Loans, complete the InitialPhase, and thereafter generate net income cannot be assured due touncertainties inherent within any mining operation. Based on the amount ofInitial Loans payable to the manager and the uncertainty of future operatingrevenues, there is no assurance that the Company will receive more than the MinimumAnnual Distribution from the Joint Venture in the foreseeable future.

The Company’s share of2006 Joint Venture net income, which has not been recorded in its consolidatedfinancial statements, is approximately $7.7 million. The Company’s share of the2005 and 2004 Joint Venture net income, $1.9 million and $1.5 million,respectively, also were

35

----

not recorded in itsconsolidated financial statements. As of December 31, 2006, the Company’saccumulated unrecorded losses from the Joint Venture are approximately$7,910,000.

Thecondensed balance sheets of the Joint Venture as of December 31, 2006 and2005 are summarized as follows:

|                                                | ** ** | **2006**                | ** ** | **2005**   | ** ** |
|------------------------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| **Assets**                                     |       |                    |       |       |       |
|                                           |       |                    |       |       |       |
| Inventory                                      |       | $                       | 42,615     |       | 40,474     |   |
| Other current  assets                          |       | 1,038                   |       | 558        |       |
|                                           |       |                    |       |       |       |
| Total current assets                           |       | 43,653                  |       | 41,032     |       |
|                                           |       |                    |       |       |       |
| Fixed assets and  mine development costs, net  |       | 176,107                 |       | 197,600    |       |
| Inventories                                    |       | 148,761                 |       | 111,790    |       |
|                                           |       |                    |       |       |       |
| Total assets                                   |       | $                       | 368,521    |       | 350,442    |   |
|                                           |       |                    |       |       |       |
| **Liabilities and Venturers’ Deficit**    | ** ** | ** **              | ** ** | ** ** | ** ** |
|                                           |       |                    |       |       |       |
| Current  liabilities                           |       | $                       | 15,288     |       | 16,218     |   |
| Payable to  AngloGold                          |       | 333,843                 |       | 353,589    |       |
| Capital lease  obligations                     |       | 5,168                   |       | 7,902      |       |
| Asset retirement  obligation                   |       | 24,029                  |       | 20,512     |       |
| Other long-term  liabilities                   |       | 1,867                   |       | 2,017      |       |
|                                           |       |                    |       |       |       |
| Total liabilities                              |       | 380,195                 |       | 400,238    |       |
|                                           |       |                    |       |       |       |
| Venturers’  deficit                       |       | (11,674                 | )          | (49,816    |       |
|                                           |       |                    |       |       |       |
| Total  liabilities and Venturers’ deficit |       | $                       | 368,521    |       | 350,422    |   |

 

Thecondensed statements of operations of the Joint Venture for each of the yearsin the three-year period ended December 31, 2006 are summarized asfollows:

|                                                         | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** **                                              | ** ** | **(In thousands)** | ** ** |
|                                                    |       |                    |       |     |       |     |       |
| Revenue                                                 |       | $                       | 172,827    |     | $          | 145,347  |       | $ | 135,673 |   |
| Operating  expenses                                     |       |                    |       |     |       |     |       |
| Production costs                                        |       | 70,437                  |       | 75,662   |       | 72,239   |       |
| Depreciation, depletion, amortization, and  reclamation |       | 26,454                  |       | 30,151   |       | 29,769   |       |
| Accretion expense                                       |       | 1,398                   |       | 1,113    |       | 947      |       |
|                                                    |       | 98,289                  |       | 106,926  |       | 102,955  |       |
| Mineral  exploration expense                            |       | —                  |       | 17       |       | 1,401    |       |
| Total operating  costs                                  |       | 98,289                  |       | 106,943  |       | 104,356  |       |
|                                                    |       |                    |       |     |       |     |       |
| Income from  operations                                 |       | 74,538                  |       | 38,404   |       | 31,317   |       |
| Other Expenses:                                         |       |                    |       |     |       |     |       |
| Interest expense                                        |       | (34,408                 | )          | (29,243  | )          | (23,813  | )          |
| Other income (expense)                                  |       | (1,738                  | )          | 299      |       | 188      |       |
|                                                    |       |                    |       |     |       |     |       |
| Net income (loss)                                       |       | $                       | 38,392     |     | $          | 9,460    |       | $ | 7,692 |   |

 

36

----

**(4)**                     Income Taxes

Thetax effects of temporary differences that give rise to significant portions ofthe deferred tax assets at December 31, 2005 and 2004 are presented below:

|                                      | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------------------|------------|------------|------------|------------|------------|
| Deferred tax  assets:                |       |       |       |       |       |
| Net operating loss carryforwards     |       | $          | 967,000    |       | 918,000    |   |
| Exploration expenditures             |       | 145,000    |       | 163,000    |       |
| FAS 123R non-qualified stock options |       | 293,000    |       | —     |       |
| Other                                |       | 1,000      |       | 4,000      |       |
| Total deferred tax assets            |       | 1,406,000  |       | 1,085,000  |       |
|                                 |       |       |       |       |       |
| Deferred tax  liability:             |       |       |       |       |       |
| Gold bullion mark to market          |       | (73,000    | )          | (59,000    | )          |
|                                 |       |       |       |       |       |
| Total deferred tax assets            |       | 1,333,000  |       | 1,026,000  |       |
|                                 |       |       |       |       |       |
| Valuation  allowance                 |       | (1,333,000 | )          | (1,026,000 | )          |
|                                 |       |       |       |       |       |
| Net deferred tax  assets             |       | $          | —     |       | —     |   |

 

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

|                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Statutory  federal income tax rate |       | 34.0     | %          | 34.0     | %          |
| Effect of:                         |       |     |       |     |       |
| State and local income taxes       |       | 3.05     |       | 3.05     |       |
| Other - net                        |       | (0.10    | )          | (0.10    | )          |
| Change in valuation allowance      |       | (36.95   | )          | (36.95   | )          |
| Effective tax rate                 |       | 0.00     | %          | 0.00     | %          |

 

At December 31,2006, the Company has net operating loss carry forwards for income tax purposesof approximately $2,610,000 which expire beginning in 2007 through 2026.

The Company has notrecorded an income tax benefit in 2006 or 2005 as it does not believe it ismore likely than not that the benefit of the deferred tax assets will berealized in the future.

**(5)**                     Common Stock Options

During 1992, the Company’sBoard of Directors adopted a Directors’ Stock Option Plan (the Directors’ Plan)and a 1992 Stock Option Plan (the 1992 Plan). All options available under the Directors’ Plan were granted prior toDecember 31, 1994.  During 1997,shareholders approved the 1997 Officers’ and Directors’ Stock Option Plan, andduring 2002, shareholders approved the 2002 Stock Option Plan pursuant to which1,000,000 and 625,000 shares, respectively, of the Corporation’s common stockwere reserved for issuance pursuant to options to be granted.

37

----

The 1992 Plan providedfor the grant of options on a discretionary basis to certain employees andconsultants.  Under each plan, theexercise price cannot be less than the fair market value of the common stock onthe date of the grant.  The expiration ofthe options is ten years from the date of the grant.

The Company granted 125,000, 125,000 and 100,000options to directors of the Corporation during 2006, 2005 and 2004,respectively.

Changes in stock options for each of the years in thethree-year period ended December 31, 2006 are as follows:

|                                                   | ** ** | **Shares** | ** ** | **Option price  per share** | ** **  | **Weighted  average  exercise price** | ** ** |
|---------------------------------------------------|------------|------------|------------|---------------------------------------|-------------|--------------------------------------------|------------|
| Outstanding and  exercisable at December 31, 2003 |       | 835,000    |       | 1.04 - 2.60                           |        | $                                          | 1.46       |   |
| Granted                                           |       | 100,000    |       | 2.60                                  |        | 2.60                                       |       |
| Exercised                                         |       | (204,900   | )          | 1.33 - 1.80                           |        | 1.44                                       |       |
| Expired                                           |       | (320,100   | )          | 1.04 - 2.33                           |        | 1.63                                       |       |
|                                              |       |       |       |                                  |        |                                       |       |
| Outstanding and  exercisable at December 31, 2004 |       | 410,000    |       | 1.04 - 2.60                           |        | 1.92                                       |       |
| Granted                                           |       | 125,000    |       | 2.50                                  |        | 2.50                                       |       |
| Exercised                                         |       | (75,000    | )          | 1.04 - 1.50                           |        | 1.24                                       |       |
| Expired                                           |       | (75,000    | )          | 2.33 - 2.60                           |        | 2.51                                       |       |
|                                              |       |       |       |                                  |        |                                       |       |
| Outstanding and  exercisable at December 31, 2005 |       | 385,000    |       | $                                     | 1.04 - 2.60 |                                       | 2.13       |   |
| Granted                                           |       | 125,000    |       | 8.50                                  |        | 8.50                                       |       |
|                                              |       |       |       |                                  |        |                                       |       |
| Outstanding and  exercisable at December 31, 2006 |       | 510,000    |       | $                                     | 1.04 - 8.50 |                                       | $          | 3.69 |   |

 

The weighted averageremaining term of options outstanding was 6.81, 6.94 and 6.81 years atDecember 31, 2006, 2005 and 2004 respectively.

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

In June 2006, the FASB issued FASB InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) aninterpretation of FASB Statement No. 109, “Accounting for Income Taxes.”  FIN 48 prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return.  The Interpretation requires that the entitiesrecognize in the financial statements, the impact of a tax position, if thatposition is more likely than not of being sustained on audit, based on thetechnical merits of the position.  FIN 48also provides guidance on de-recognition, classification, interest andpenalties, accounting in interim periods and disclosure.  The provisions of FIN 48 are effectivebeginning January 1, 2007 with the cumulative effect of the change inaccounting principle recorded as an adjustment to the opening balance ofretained earnings. The Company adopted FIN 48 on January 1, 2007 and has

38

----

not yet determined what effect if any, the adoptionof SFAS No. 155 will have its financial position, results of operations or cashflows.

In September 2006, the Securities and ExchangeCommission issued Staff Bulletin No. 108 (SAB 108). SAB 108 was issued toprovide interpretive guidance on how the effects of the carryover reversal ofprior year misstatements should be considered in quantifying a current yearmisstatement. The provisions of SAB 108 are effective for Golden Cycle GoldCorporation for its December 31, 2006 year end. The adoption of SAB 108 had noimpact on the Company’s financial position, results of operation or cash flows.

In September 2006, the Board issued Statement No.157, Fair Value Measurements (“SFAS 157”). This Statement defines fair value,establishes a framework for measuring fair value in generally acceptedaccounting principles (“GAAP”), and expands disclosures about fair valuemeasurements. SFAS 157 applies under other accounting pronouncements thatrequire or permit fair value measurements, the Board having previouslyconcluded in those accounting pronouncements that fair value is the relevantmeasurement attribute. Accordingly, this Statement does not require any newfair value measurements. The Statement is effective for financial statementsissued for fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years. Earlier application is encouraged, provided that thereporting entity has not yet issued financial statements for that fiscal year,including financial statements for an interim period within that fiscal year.Golden Cycle Gold Corporation will adopt the provisions of SFAS 157 in itsfiscal year commencing January 1, 2008. Management currently believes thatadoption of the provisions of SFAS 157 will not have a material impact on theCompany’s consolidated financial statements.

**(7)**                     Commitments and Contingencies:

As previously reported, the United StatesDistrict Court for the District of Colorado ruled on April 13, 2006, againstthe plaintiffs and for the defendants, including the Company and Cripple Creek& Victor Gold Company (“CC&V”), our Joint Venture, on all causes ofaction asserted in two law suits consolidated for trial, in which the SierraClub and Mineral Policy Center filed complaints against CC&V and its JointVenture partners including the Company, alleging certain violations of the U.S.Clean Water Act.  The Court also allowed the defendants to apply for anaward of their attorneys’ fees and costs.  The defendants did so and,notwithstanding the plaintiffs’ objections thereto, the Court ruled on December20, 2006 that the defendants are entitled to recover such fees and costsincurred after November 16, 2005, the date when it became clear to the Courtthat the plaintiffs’ “dogged pursuit of factually unsupported claims” wasunreasonable.  The plaintiffs have appealed the Court’sjudgment dismissing the consolidated cases and from its award to eachdefendant of approximately one-fifth of its attorneys’ fees incurred overthe last six years.  Whether such an appeal will be successful in whole orin part cannot be predicted at this early juncture.

The first ten Causes of Action in the firstof these two cases, Civil Action No. 00-MK-2325, alleged unpermitted dischargesof pollutants into Fourmile Creek and from the Roosevelt Tunnel into CrippleCreek, and discharges of pollutants exceeding permitted amounts from theCarlton Tunnel and Arequa Gulch outfalls.  The eleventh and twelfth causesof action in that case concerned a discharge permit issued by the ColoradoWater Quality Control Division in 1996 for an outfall in Arequa Gulch. Plaintiffs asserted, and the defendants denied, that there are, among otherthings, any ongoing violations of the federal Act.

The second of these two cases, Civil ActionNo. 01-MK-2307, related to seeps asserted

39

----

to be point-source discharges of CressonProject drainage from the Moffat Tunnel Cribbing Wall and the Squaw Gulch Pondto Cripple Creek and a tributary thereto in Squaw Gulch.

The Company has not recorded a receivable forthe court costs awarded by the Court, approximately $28,000, and will not do soat least until the award is affirmed and no more appeals can be initiated orobjections thereto interposed.  Management is coordinating its own effortsin these cases with those of the owner and operator, CC&V, and the majorityowners thereof, AngloGold North America, Inc., and AngloGold (Colorado) Corp.,now AngloGold Ashanti North America, Inc., and AngloGold Ashanti (Colorado)Corp.  The Company is neither the owner nor the operator and its interestis limited to its minority interest in CC&V.  The ultimate outcome tothe Company in these continuing proceedings cannot be predicted.

The Company expended approximately $86,000, $12,000and $17,000 during the years 2006, 2005 and 2004, respectively, defendingagainst these suits.

**(8)**                     Selected quarterly financial data (unaudited)

|                                                                               | ** ** | **2006**    | ** ** |
|-------------------------------------------------------------------------------|------------|-------------|------------|
| ** **                                                                    | ** ** | **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)                                                      |       | 40,243      |       | (1,071,681 | ) | (82,557 | ) | (149,577 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Net income  (loss)                                                            |       | 66,701      |       | (1,053,636 | ) | (77,874 | ) | (32,326 | ) |
| Net income  (loss) per share                                                  |       | 0.01        |       | (0.11 | ) | (0.01 | ) | (0.00 | ) |
| Pro forma net  income (loss) per share                                        |       | 0.01        |       | (0.11 | ) | (0.01 | ) | (0.00 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
|                                                                               |            |             |            |  |  |  |  |  |  |  |  |  |  |

 

|                                                                               | ** ** | **2005**    | ** ** |
|-------------------------------------------------------------------------------|------------|-------------|------------|
| ** **                                                                    | ** ** | **First**   | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| ** **                                                                    | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $      | 250,000    |   | $  | — |   | $  | — |   | $  | — |   |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Operating income  (loss)                                                      |       | 138,885     |       | (164,566 | ) | (322,861 | ) | (314,136 | ) |
|                                                                          |       |        |       |   |   |   |   |   |   |
| Net income  (loss)                                                            |       | 146,486     |       | (154,505 | ) | (313,041 | ) | (280,965 | ) |
| Net income  (loss) per share                                                  |       | 0.02        |       | (0.02 | ) | (0.03 | ) | (0.03 | ) |
| Pro forma net income  (loss) per share                                        |       | 0.02        |       | (0.04 | ) | (0.03 | ) | (0.03 | ) |
|                                                                               |            |             |            |  |  |  |  |  |  |  |  |  |  |

 

40

----