UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  Form 10-K (Mark One)  [√]
        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2008  or  [  ]
        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from __________________ to __________________ Commission file number: 33-139037  XTRA-GOLD RESOURCES CORP. (Name of registrant as specified in its charter)  Nevada
        91-1956240(State or other jurisdiction of incorporation or organization)
        (I.R.S. Employer Identification No.)
  360 Bay Street, Suite 301, Toronto, Ontario Canada
        M5H 2V6(Address of principal executive offices)
        (Zip Code)
  Registrants telephone number, including area code:
        (416) 366-4227
  Securities registered under Section 12(b) of the Act:  Title of each class
        Name of each exchange on which registeredNone
        Not applicable
  Securities registered under Section 12(g) of the Act:  None (Title of class)  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes
        [√] No
  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes
        [√] No
  Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [√] Yes
        [  ] No
  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:  Large accelerated filer
        [  ]
        Accelerated filer
        [  ]Non-accelerated filer
        [  ]
        Smaller reporting company
        [√]
 (Do not check if smaller reporting company)  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) [  ] Yes
        [√] No
  The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold or the average bid and asked prices of such common equity, as of June 30, 2008, was approximately $47,099,076.  As of March 27, 2009, the Registrant had 31,330,602 issued and outstanding shares of common stock.  DOCUMENTS INCORPORATED BY REFERENCE  The following documents of the Registrant are incorporated by reference in this Report:  None 
  TABLE OF CONTENTS




PagePART IItem 1.
        Description of Business
        5Item 1A.
        Risk Factors
        8Item 1B.
        Unresolved Staff Comments
        13Item 2.
        Properties
        13Item 3.
        Legal Proceedings
        41Item 4.
        Submission of Matters to a Vote of Security Holders
        41PART IIItem 5.
        Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
        42Item 6.
        Selected Financial Data
        43Item 7.
        Managements Discussion and Analysis of Financial Conditions and Results of Operations
        43Item 7A.
        Quantitative and Qualitative Disclosures about Market Risk
        48Item 8.
        Financial Statements and Supplementary Data
        48Item 9.
        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
        49Item 9A(T).
        Controls and Procedures
        49Item 9B.
        Other Information
        49PART IIIItem 10.
        Directors, Executive Officers and Corporate Governance
        50Item 11.
        Executive Compensation
        54Item 12.
        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
        59Item 13.
        Certain Relationships and Related Transactions, and Director Independence
        61Item 14.
        Principal Accounting Fees and Services
        61PART IVItem 15.
        Exhibits, Financial Statement Schedules
        62SIGNATURES
        
        64



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION



This Report contains forward-looking statements with respect to our financial condition, results of operations, business prospects, plans, objectives, goals, strategies, future events, capital expenditure, and exploration and development efforts. Words such as anticipates, expects, intends, plans, forecasts, projects, budgets, believes, seeks, estimates, could, might, should, and similar expressions identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot be certain that these plans, intentions or expectations will be achieved. Actual results, performance or achievements could differ materially from those contemplated,
expressed or implied by the forward-looking statements. These statements include comments regarding the establishment and estimates of mineral reserves and mineral resources, production, production commencement dates, productions costs, cash operating costs per ounce, total cash costs per ounce, grade, processing capacity, potential mine life, feasibility studies, development costs, capital and operating expenditures, exploration, the closing of certain transactions including acquisitions and offerings.



The following, in addition to the factors described elsewhere in this Report under Risk Factors, are among the factors that could cause actual results to differ materially from the forward-looking statements:




●
        unexpected changes in business and economic conditions;




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        significant increases or decreases in gold or oil and gas prices;




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        changes in interest rates and currency exchange rates;




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        timing and amount of production;




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        unanticipated grade changes;




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        unanticipated recovery rates or production problems;




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        changes in mining, processing and overhead costs;




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        changes in metallurgy and processing technology;




●
        access and availability of materials, equipment, supplies, labor and supervision, power and water;




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        determination of mineral reserves and mineral resources;




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        availability of drill rigs; changes in project parameters;




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        costs and timing of development of new mineral reserves; results of current and future exploration activities;




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        results of pending and future feasibility studies; joint venture relationships;




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        political or economic instability, either globally or in the countries in which we operate;




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        local and community impacts and issues;




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        timing of receipt of government approvals; accidents and labor disputes; environmental costs and risks; and




●
        competitive factors, including competition for property acquisitions; and availability of capital at reasonable rates or at all.



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With respect to any forward-looking statement that includes a statement of its underlying assumptions or bases, we believe such assumptions or bases to be reasonable and have formed them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material depending on the circumstances. When, in any forward-looking statement, we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis, but there can be no assurance that the stated expectation or belief will result or be achieved or accomplished. All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except for our ongoing
obligations to disclose material information under the Federal securities laws, we do not undertake any obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this Report or to reflect unanticipated events that may occur. These forward-looking statements speak only as of the date of this Report and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.



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PART I




Item 1.
        BUSINESS



Description of Business



We are engaged in the exploration of gold properties exclusively in the Republic of Ghana (Ghana), West Africa. Our interests in our projects are held, by our Ghanaian subsidiaries, through prospecting licenses and mining leases granted by the Government of Ghana for licensed or leased areas respectively located within and upon concessions in Ghana. A concession is a grant of a tract of land made by a government or other controlling authority in exchange for an agreement that the land will be used for a specific purpose.



Exploration means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or produced and typically includes the review of existing data, grid establishment, geological mapping, geophysical surveying, trenching and pitting to test the areas of anomalous soil samples and reverse circulation and/or diamond drilling to test targets followed by infill drilling, if successful, to define reserves. We have the following six projects all of which are in the exploration stage:




●
        Kwabeng Project.Our interest in this project is held by a mining lease. In January 2007, we commenced an early stage pre-production mining process whereby a sample area of ore was processed, the results of which assisted us in determining the best way and most profitable manner in which to mine the gold to be recovered from the mineralized material at our Kwabeng Project. The foregoing process was internally referred to by our company as aBulk Test. We tested
32,906.70 bank cubic meters(BCM)of mineralized material at our Kwabeng Project that we processed through our floating placer gold washing processing plant
(theWash Plant) and recovered 608.50 ounces of gold. Following
completion of the Bulk Test on March 25, 2007, our company has made modifications to our Wash Plant. We have been recovering gold
from the mineralized material at our Kwabeng Project since January 19, 2007. In October 2008, we temporarily suspended our
operations at the Kwabeng Project while management of our company (Management) considers a more economic and efficient manner in which to extract and process the gold recovered from the mineralized
material at this Project. As of December 31, 2008, the total mineralized material that has been recovered from our Kwabeng Project
is 361,791.66 BCM. As of December 31, 2008, we have recovered 8,771.34 fine ounces of gold from the mineralized material at our
Kwabeng Project and as of such date we have sold 8,771.34 fine ounces of gold for cash proceeds of $6,833,007.




●
        Pameng Project.Our interest in this project is held by a mining lease. This project is in the exploration stage.




●
        Banso Project.Our interest in this project is held by a prospecting license. This project is in the exploration stage. To advance the gold exploration achieved by prior work programs, a trenching and soil sampling program was carried out from late November 2007 to May 2008. See Banso Concession Exploration Activities for the results of this program. Additional exploration activities will be planned once a thorough review of all data has been completed.




●
        Muoso Project.Our interest in this project is held by a prospecting license. This project is in the exploration stage. To advance the gold exploration achieved by prior work programs, a trenching and soil sampling program was carried out from late February to November 2008. See Muoso Concession Exploration Activities for the results of this program. Additional exploration activities will be planned once a thorough review of all data has been completed.




●
        Apapam Project.Our interest in this project is held by a mining lease. This project is in the exploration stage. An initial 3,001 meter scout diamond drilling program was conducted from September to October 2008. See Phase I Drilling Program - Apapam Project for the results of this program. A trenching / drilling program has been recommended. See 2008 Kibi Gold Trend Follow-up Program.



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●
        Edum Banso Project.We have an option to acquire the interest in this project which is held by a prospecting license. This project is in the exploration stage. A first phase exploration program was implemented from August 2007 to January 2008. See Edum Banso - Phase I Exploration Program for the results of this exploration program. Additional exploration activities will be planned once a thorough review of all data has been completed.



To a much lesser extent, we also plan in the next year or two to engage in the acquisition and exploitation  of prospective oil and gas  properties in Canada and Ghana through two of our wholly-owned subsidiaries, which subsidiaries currently conduct limited activity.



As of the date of this Report, we have received cash proceeds of $391,414 derived from the recovery of gold during the Bulk Test, have subsequently derived cash proceeds of $6,441,593 from the recovery of gold from the mineralized material at our Kwabeng Project since April 24, 2007, have achieved losses since inception, have minimal operations, and currently rely upon the sale of our securities to fund our operations. Once we resume operations at our Kwabeng Project, we estimate that the mine operating, capital equipment purchases or improvements and administration costs to recover gold from the mineralized material at our Kwabeng Project will be approximately $500,000, the aggregate cost for the exploration programs at all of our Projects will be an aggregate of approximately $1,000,000 and our general and administrative costs will be approximately $500,000 for the next 12 months. Based
on approved expenditures in our corporate operating budget for the next 12 months, we anticipate spending a minimum of approximately $2,000,000, however, we would not expend this amount unless we are able to generate sufficient cash proceeds derived from the sale of the gold recovered from the mineralized material at our Kwabeng Project to cover our operating costs in Ghana and are successful in raising additional capital. At December 31, 2008, we had working capital of approximately $1,299,625, comprised of current assets of $1,470,382 less current liabilities of $535,272. Our current assets were comprised mostly of $271,573 in cash and cash equivalents and $1,470,382 in trading securities.



Corporate History



Xtra-Gold Resources Corp. (theRegistrantor thecompany) was incorporated under the laws of the State of Nevada on September 1, 1998 under the name Silverwing Systems Corporation (Silverwing) with an authorized capital consisting of 25,000,000 shares of common stock at a par value of $.001 per share. From the incorporation of Silverwing until March 14, 1999, we were inactive. Thereafter until June 1999, we were involved in the negotiation and closing of the acquisition of a business opportunity described below.



On June 23, 1999, we acquired all of the issued and outstanding shares of Advertain On-Line Canada, Inc. (Advertain) from the sole shareholder of Advertain in exchange for 1,550,000 shares of common stock (24% of our then issued and outstanding shares of common stock). At the time of the acquisition, Advertain was in the business of creating and developing computer software for an Internet web site called Advertain.com and maintaining and operating the said web site. The primary purpose of the web site was to collect and distribute entertaining advertising on the Internet. This transaction resulted in the formation of our being a holding company for Advertain, our then only wholly-owned subsidiary. Since our only business activities was the business activities of Advertain, the president of Advertain joined our then
current management as president of our company. On August 19, 1999, we changed our name to Advertain On-Line Inc. to better describe our intended business.



From the date of the acquisition of Advertain on June 23, 1999 to December 31, 2000, our principal business activities were the continuation of the business activities of Advertain. We continued to fund the activities of Advertain through December 31, 2000. After December 31, 2000 we continued to use our best efforts to fund Advertain. Since we were unable to complete further funding, it was decided, on May 21, 2001, to abandon our interest in Advertain and enter into a plan to dispose of Advertain and reorganize our company for a future acquisition. On May 21, 2001, our then president, who was also president of Advertain, resigned since we determined to dispose of Advertain, and our former president, who was a director at the time, was appointed president. On June 15, 2001, we sold the shares we owned in Advertain back to the former sole shareholder and president of Advertain. On June
18, 2001, we consolidated our outstanding common shares on a basis of 20 for 1, adopted a new business plan to develop and operate laser eye correction (lasik surgery) clinics, and changed our name to RetinaPharma International, Inc. (RetinaPharma) to better describe our new intended business plan, which was ultimately never developed for lack of capital. No change of management occurred between May 21, 2001, when our former president rejoined our company as described above, and October 31, 2003 when we acquired our subsidiary, XGRI, as described below.



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From June 18, 2001 to October 31, 2003, we were inactive except for searching for a business opportunity to acquire. During this period our principal shareholders made capital contributions as needed to pay certain debts and fund our minimal activities, which consisted of locating a business opportunity. In addition, on July 22, 2002, we consolidated our outstanding common shares on a basis of 5 for 1. In the fall of 2002, through the referral to our former president by our current president, we commenced discussions for the acquisition of XGRI, as described below.



On October 31, 2003, we acquired all of the issued and outstanding shares of Xtra-Gold Resources, Inc., a Florida corporation (XGRI) from the shareholders of XGRI, all of which were unaffiliated third parties, in exchange for 10,070,000 shares of common stock (approximately 80% of our then issued and outstanding shares of our common stock). This transaction resulted in a change of control of our company and the formation of our being a holding company for XGRI, our then only wholly-owned subsidiary. As a result of this change in control, the president and directors of XGRI were appointed as our new management, and management immediately prior to this acquisition resigned. Subsequently, on November 22, 2003, we executed a 5 for 1 forward stock split. On December 16, 2003, we changed our name to Xtra-Gold Resources Corp. and
increased the number of shares of common stock we are authorized to issue to 250,000,000 shares effective December 19, 2003. We undertook this name change to better describe our intended business. As a condition for the acquisition of XG Mining in December 2004, two former officers and directors of our company agreed to return 47,000,000 of the original shares of common stock issued in connection with the acquisition of XGRI for cancellation and these shares were subsequently cancelled in May 2005.



XGRI was incorporated on October 24, 2003 and its only operations prior to the share exchange was the issuance of 10,070,000 shares to its two founders in exchange for an option to develop a mining property located in Switzerland and the sale of 50,000 shares of its common stock to pay certain expenses.



On October 20, 2005, we amended the name of XGRI to Xtra Energy Corp. (Xtra Energy). On October 20, 2005, we incorporated our wholly-owned subsidiary, Xtra Oil & Gas Ltd. (XOG), an Alberta, Canada corporation, and on March 2, 2006, we incorporated our wholly-owned subsidiary, Xtra Oil & Gas (Ghana) Limited (XOG Ghana), an Accra, Ghana corporation for the business purpose set forth hereunder. On April 7, 1998, our wholly-owned subsidiary Xtra-Gold Exploration Limited (XGEL), a Ghana corporation, was formed. On June 7, 1989, our 90% owned subsidiary, Xtra-Gold Mining Limited (XG Mining), a
Ghana corporation, was formed.



Location



As at the date of this Report, our corporate office is located at 360 Bay Street, Suite 301, Toronto, Ontario, Canada, M5H 2V6, and our telephone number there is (416) 366-4227. We maintain a technical office at our field camp (theField Camp) located at 2 Masalakye Street, in the town of Kwabeng, in the Republic of Ghana. References in this Report to Xtra-Gold, company, we, us and our are to Xtra-Gold Resources Corp., a Nevada corporation, and our wholly owned subsidiaries, Xtra Energy, XOG; XGEL, XOG Ghana and our 90% owned subsidiary, XG Mining.



Employees



As at the date of this Report, our company has no salaried employees. Our President devotes approximately 90% of his time to our company. Our Vice-President, Exploration devotes approximately 50% of his time in consulting services to our company. We further engage the consulting services of our Vice-President, Ghana Operations for our Ghanaian subsidiaries who devotes  a variable percentage of his time in consulting services to our company on an as needed basis. We also engage our Secretary and Treasurer with respect to corporate and administrative services who devotes  a variable percentage of her time in consulting services to our company on an as needed basis.



Other Pertinent Information



Our fiscal year end is December 31.



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Item 1A.
        RISK FACTORS



AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. THE FOLLOWING FACTORS ARE BELIEVED BY MANAGEMENT TO BE THE MATERIAL RISKS THAT SHOULD BE CAREFULLY CONSIDERED BY INVESTORS BEFORE PURCHASING OUR SHARES.



WE ARE CURRENTLY IN THE EXPLORATION STAGE WITH RESPECT TO ALL OUR PROJECTS. THE CHANCE OF EVER REACHING THE PRODUCTION STAGE AT OUR PROJECTS IS UNCERTAIN. IN THE EVENT WE SHOULD EVER REACH THE PRODUCTION STAGE AT ANY OF OUR PROJECTS AND BEGIN SUBSTANTIVE MINING OPERATIONS, WE WILL BE SUBJECT TO A NUMBER OF RISKS WHICH COULD ADVERSELY AFFECT OUR ABILITY TO EVER GENERATE ANY SIGNIFICANT REVENUES.



All of our projects are in the exploration stage. As of December 31, 2008, we have derived cash proceeds of approximately $6,833,007 from the sale of 8,771.34 fine ounces of gold recovered from the mineralized material at the Kwabeng Project. Our exploration efforts are subject to risks which are beyond our control, including:




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        mineral exploration involves a high degree of risk and few properties which are explored are ever developed into producing mines and our exploration efforts may never result in the discovery of commercial bodies of mineralization;




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        we may experience delays in obtaining, or be unable to obtain, the necessary approvals, licenses, permits or surface land and easement rights necessary to develop our projects which could delay or prevent us from continuing our development efforts;




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        mining activities are inherently dangerous and we may not be able to obtain insurance to cover the liabilities associated with these activities;




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        illicit mining on one or more of our projects by artisanal miners could result in environmental damage and surface depletion of mineral deposits making the future mining of those deposits not economically feasible.



We may be unable to commence substantive mining operations or, if commenced, we may not ever generate any significant revenues from mining operations. In that event, we could be forced to cease operations.



WE WILL NEED SUBSTANTIAL ADDITIONAL CAPITAL TO COMMENCE PRODUCTION AT OUR KWABENG, PAMENG AND APAPAM PROJECTS AND TO COMPLETE THE EXPLORATION AT ALL OF OUR PROJECTS. IF WE CANNOT RAISE ADDITIONAL CAPITAL AS NEEDED, OUR ABILITY TO EXECUTE OUR BUSINESS PLAN AND FUND OUR ONGOING OPERATIONS WILL BE IN JEOPARDY.



We estimate that the mine operating, capital and administration costs at our Kwabeng Project will be approximately $500,000, the cost for the exploration programs at all of our Projects will be an aggregate of approximately $1,000,000 and our general and administrative costs will be approximately $500,000 for the next 12 months. Based on approved expenditures in our corporate operating budget for 2009, we anticipate spending a minimum of approximately $2,000,000 over the next 12 months, however, we would not expend this amount unless we are able to continue to derive cash proceeds from the sale of the gold recovered from the mineralized material at our Kwabeng Project or raise additional capital. Our future capital requirements depend on a number of factors, including our ability to continue to derive cash proceeds from the sale of the gold recovered from the mineralized material at our
Kwabeng Project, manage our business and control our expenses. As described elsewhere herein, at December 31, 2008, we had working capital of approximately $1,299,625, comprised of current assets of $1,834,897, mostly $271,573 in cash and cash equivalents and $1,470,382 in trading securities, less current liabilities of $535,272. We are exploring various financing alternatives to meet our projected costs and expenses. We cannot assure you that we will be able to obtain the necessary financing for our Projects on favorable terms or at all. Additionally, if the actual costs to continue production at our Kwabeng Project and the development of and production at our Pameng and Apapam Projects are significantly higher than we expect, we may not have sufficient funds to cover these costs and we may not be able to obtain other sources of financing. The failure to continue to derive cash proceeds from the sale of the gold recovered from the mineralized material at our Kwabeng Project or to
obtain all necessary financing would prevent us from achieving production at our Kwabeng, Pameng and Apapam Projects and would impede our ability to sustain operations or become profitable, and we could be forced to cease our operations.



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ALL OF OUR PROJECTS ARE IN THE EXPLORATION STAGE AND MAY NOT RESULT IN THE DISCOVERY OF COMMERCIAL BODIES OF MINERALIZATION WHICH WOULD RESULT IN OUR DISCONTINUING THAT PROJECT.



All of our Projects are in the exploration stage. Mineral exploration involves a high degree of risk and few properties which are explored are developed into producing mines. The exploration efforts on our Projects may not result in the discovery of commercial bodies of mineralization which would require us to discontinue that project.



THE COMMENCEMENT OF DEVELOPMENT OF AND PRODUCTION AT OUR KWABENG, PAMENG AND APAPAM PROJECTS AND THE DEVELOPMENT OF ALL OF OUR EXPLORATION PROJECTS MAY BE DELAYED DUE TO DELAYS IN RECEIVING REGULATORY PERMITS AND APPROVALS, WHICH WOULD DELAY OUR ABILITY TO COMMENCE PRODUCTION AND GENERATE REVENUES WHICH, ABSENT RAISING ADDITIONAL CAPITAL, COULD CAUSE US TO CURTAIL OR DISCONTINUE DEVELOPMENT OR OPERATIONS, IF ANY.



We may experience delays in developing and producing at our Kwabeng, Pameng and Apapam Projects and developing our other exploration Projects. The timing of development of and production at our Kwabeng, Pameng and Apapam Projects and the development of our other exploration Projects depends on many factors, some of which are beyond our control, including the:




●
        timely issuance of permits; and




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        acquisition of surface land and easement rights required to develop and operate the projects, particularly if we are required to acquire surface land through expropriation in connection with our mining concessions.



These delays could increase project development costs, affect project economic viability, or prevent us from completing the development of our Projects and generating revenues therefrom.



WE MAY NOT BE ABLE TO OBTAIN, RENEW OR CONTINUE TO COMPLY WITH ALL OF THE PERMITS NECESSARY TO DEVELOP AND OPERATE EACH OF OUR PROJECTS WHICH WOULD FORCE US TO DISCONTINUE DEVELOPMENT OR OPERATIONS, IF ANY, ON THAT PROJECT.



Pursuant to Ghanaian law, we must obtain various approvals, licenses or permits in connection with the development and operations, if any, of our Projects in connection with environmental protection and the use of water resources. In addition to requiring permits for the development of and production at our mining concessions located at each of our Kwabeng, Pameng and Apapam Projects, we may need to obtain other permits and approvals during the life of these Projects. Obtaining, renewing and continuing to comply with the necessary governmental permits and approvals can be a complex and time-consuming process. The failure to obtain or renew the necessary permits or licenses or continue to meet their requirements could delay future development, increase our costs or, in some cases, prevent us from commencing mining operations.



THE GOVERNMENT OF GHANA HAS THE RIGHT TO INCREASE ITS OWNERSHIP INTEREST OF 10% IN OUR XG MINING SUBSIDIARY FOR A CONSIDERATION AGREED UPON BY THE PARTIES OR BY ARBITRATION AND HAS A RIGHT OF PRE-EMPTION TO PURCHASE ALL MINERALS PRODUCED BY XG MINING. IF THE GOVERNMENT OF GHANA WERE TO EXERCISE ANY OF ITS RIGHTS, OUR RESULTS OF OPERATIONS IN FUTURE PERIODS COULD BE ADVERSELY IMPACTED.



The Government of Ghana currently
has a 10% free carried interest in XG Mining, one of our Ghanaian subsidiaries that holds three mining leases covering our Kwabeng,
Pameng and Apapam concessions. The Government of Ghana also has: (a) the right to acquire an additional interest in XG Mining for a
price to be determined by agreement or arbitration; (b) the right to acquire a special share (as defined in the Minerals and Mining
Act, 2006 (Act 703)) in XG Mining at any time for or such consideration as the Government of Ghana and XG Mining might agree; and
(c) a right of pre-emption to purchase all minerals raised, won or obtained in Ghana. While we are not aware of the Government of
Ghana having ever exercised such right of pre-emption, we cannot assure you that the Government of Ghana would not seek to exercise
one or more of these rights which, if exercised, could have an adverse affect on our results of operations in future periods. If the
Government of Ghana should exercise its right to either acquire the additional interest in XG Mining or its right to acquire the
special share, any profit we might otherwise report from XG Minings operations would be proportionally reduced in the same
percentage as the minority interest attributable to the Government of Ghana in that subsidiary would be increased. If the Government
of Ghana should exercise its right to purchase all gold and other minerals produced by XG Mining, the price it would pay may be
lower than the price we could sell the gold or other minerals for in transactions with third parties and it could result in a
reduction in any revenues we might otherwise report from XG Minings operations.



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OUR ACTIVITIES ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS THAT MAY INCREASE OUR COSTS OF DOING BUSINESS AND MAY RESTRICT OUR OPERATIONS.



All of our exploration activities in Ghana are subject to regulation by governmental agencies under various environmental laws. To the extent we conduct exploration activities or undertake new mining activities in other foreign countries, we will also be subject to environmental laws and regulations in those jurisdictions. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations. Environmental legislation in many countries is evolving and the trend has been towards stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees.
Compliance with environmental laws and regulations may require significant capital outlays and may cause material changes or delays in our intended activities. We cannot assure you that future changes in environmental regulations will not adversely affect our business, and it is possible that future changes in these laws or regulations could have a significant adverse impact on some portion of our business, causing us to re-evaluate those activities at that time.



In addition, we may be exposed to potential environmental impacts during any full scale mining operation. At such time of commencement of full scale mining, if ever, we plan to negotiate posting of a reclamation bond to quantify the reclamation costs. We anticipate that the dollar amount of reserves established for exposure to environmental liabilities is $150,000, as estimated by the Ghana Environmental Protection Agency (EPA), however, we are currently unable to predict the ultimate cost of compliance or the extent of liability risks.



OUR ACTIVITIES ARE AND WILL BE SUBJECT TO COMPLEX LAWS, SIGNIFICANT GOVERNMENT REGULATIONS AND ACCOUNTING STANDARDS THAT MAY DELAY OR PREVENT OPERATIONS AT OUR PROJECTS AND CAN ADVERSELY AFFECT OUR OPERATING COSTS, THE TIMING OF OUR OPERATIONS, OUR ABILITY TO OPERATE AND OUR FINANCIAL RESULTS.



Our business, exploration activities and any future mining operations and development activities are and will be subject to extensive Ghanaian, United States and other foreign, federal, state, territorial and local laws and regulations and also exploration, development, production, exports, taxes, labor standards, waste disposal, protection of the environment, reclamation, historic and cultural resource preservation, mine safety and occupational health, reporting and other matters, as well as accounting standards. Compliance with these laws, regulations and standards or the imposition of new such requirements could adversely affect our operating and future development costs, the timing of our operations, our ability to operate and our financial results. These laws and regulations governing various matters include:




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        environmental protection;




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        management of natural resources;




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        exploration, development of mines, production and post-closure reclamation;




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        export and import controls and restrictions;




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        price controls;




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        taxation;




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        labor standards and occupational health and safety, including mine safety;




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        historic and cultural preservation; and




●
        generally accepted accounting principles.



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The costs associated with compliance with these laws and regulations may be substantial and possible future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the development of our Projects. These laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. In addition, our failure to comply strictly with applicable laws, regulations and local practices relating to permitting applications or reporting requirements could result in
loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners. Any such loss, reduction, expropriation or imposition of partners could have a materially adverse effect on our operations or business.



WE DEPEND ON THE CONTINUED SERVICES OF OUR
VICE-PRESIDENT, EXPLORATION, SENIOR PROJECT MANAGER, EXPLORATION, MINING GEOLOGIST AND MINE MANAGER AND THE LOSS AND FAILURE TO
REPLACE ANY OF THESE PERSONS MAY DAMAGE OUR OPERATIONS AND OUR ABILITY TO COMMENCE DEVELOPMENT OR GENERATE REVENUES IN FUTURE
PERIODS.



Our future success depends upon
the continued services of our geological and gold mining team, comprised of our Vice-President, Exploration, our Senior Project
Manager, Exploration, our Mining Geologist and our Mine Manager. The exploration and mining engineering experience of these
individuals with respect to the geological and gold mining knowledge and experience that is fundamental to our business operations
is unique and if we were to lose their services, we may encounter difficulty in replacing them. If we were unable to replace these
persons it may lead to our having to delay, curtail or discontinue our exploration, future development or operations, if any. In
this event, any trading market for our securities and your ability to liquidate your investment would be negatively impacted and you
could lose your entire investment in our company. We do not maintain key person insurance on any of these persons.



WE MAY EXPERIENCE DIFFICULTY IN ENGAGING THE SERVICES OF QUALIFIED PERSONNEL IN CONNECTION WITH OUR TECHNICAL OPERATIONS AT OUR KWABENG, PAMENG AND APAPAM PROJECTS.



In the event of the loss of any of our technical personnel at our Kwabeng, Pameng and Apapam Projects, we may have difficulty finding qualified replacement. We will also need to engage additional sought-after professionals to operate our Kwabeng, Pameng and Apapam Projects according to plan, including an environmental manager.



Our inability to hire and retain the services of qualified persons for these positions in a timely manner could impede the planned production at our Kwabeng, Pameng and Apapam Projects which would have a material adverse effect on our ability to conduct our business.



THE MARKETABILITY OF OUR COMMON STOCK MAY BE ADVERSELY IMPACTED AS A RESULT OF THE REGULATORY HISTORY OF ONE OF OUR EXECUTIVE OFFICERS AND DIRECTORS. IN THIS EVENT, YOUR ABILITY TO LIQUIDATE YOUR INVESTMENT IN OUR COMPANY COULD BE ADVERSELY IMPACTED AND YOU COULD LOSE SOME OR ALL OF YOUR INVESTMENT IN OUR COMPANY.



Since one of our officers and directors has a regulatory history, potential investors could decide not to purchase our securities out of concern which could impair the liquidity of our common stock. As a result, you may find it more difficult to sell your investment in our company at a time when you wish to liquidate your position, or at all.



WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE REDUCED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND OTHER MATTERS.



- 11 -

Recent Federal legislation,
including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote
the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal
requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the
NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures rules of national
securities exchanges are those that address board of directors independence, audit committee oversight, and the adoption of a
code of ethics. As our stock is not listed on an exchange, we are not required to adopt these corporate governance standards. Our
board of directors (Board) has not established Audit and Compensation Committees and we have not adopted all of the
corporate governance measures which we might otherwise have been required to adopt if our securities were listed on a national
securities exchange. It is possible that if we were to adopt some or all of the corporate governance measures, stockholders would
benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that
policies had been implemented to define responsible conduct. Prospective investors should bear in mind our current lack of corporate
governance measures in formulating their investment decisions.



OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTC BULLETIN BOARD (OTCBB) AND TRADING IN THE SHARES IS LIMITED. BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE OTCBB, OUR STOCK IS CONSIDERED A PENNY STOCK WHICH CAN LIMIT OR MAKE TRADING AND LIQUIDITY IN THE STOCK MORE DIFFICULT TO EFFECTUATE.



The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exemptions. Such exemptions include an equity security listed on a national securities exchange or quoted on NASDAQ and an equity security issued by an issuer that has net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for more than three (3) years. Unless such an exemption is available, the regulations require the delivery of a disclosure document to the investor explaining the penny stock market and the risks associated therewith prior to any transaction involving a penny stock. In addition, as long as the common stock is not listed on a national securities exchange or at any time that the company has less that $2,000,000 in net tangible assets, trading in the common stock is
covered by Rule 15g-9 under the Securities Exchange Act of 1934, as amended (theExchange Act), for non-exchange listed securities. Under that rule, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchasers written agreement to a transaction prior to sale. Securities are exempt from this rule if the market price is at least $5.00 per share. To the extent that we do not meet the exemptions under the Penny Stock Rule, there will be reduced liquidity in the market.



OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE, WHICH COULD CAUSE THE VALUE OF YOUR INVESTMENT TO DECLINE.



The market price of our Common Stock may be highly volatile. Investors may not be able to resell their shares of our Common Stock following periods of volatility because of the markets adverse reaction to volatility. Factors that could cause such volatility may include, among other things:




●
        actual or anticipated fluctuations in our quarterly operating results;




●
        large purchases or sales of our Common Stock;




●
        additions or departures of key personnel;




●
        investor perception of our business prospects;




●
        conditions or trends in other industry related companies;




●
        changes in the market valuations of publicly traded companies in general and other industry-related companies; and




●
        worldwide political, economic and financial conditions.



- 12 -

IT MAY BE DIFFICULT FOR STOCKHOLDERS TO ENFORCE ANY JUDGMENT OBTAINED IN THE UNITED STATES AGAINST US OR OUR OFFICERS OR DIRECTORS, WHICH MAY LIMIT THE REMEDIES OTHERWISE AVAILABLE TO OUR STOCKHOLDERS.



All of our directors and officers are residents of countries other than the United States and all or a substantial portion of such persons assets are located outside the United States. As a result, it may be difficult or impossible for investors to:




●
        effect service of process on our directors or officers, or




●
        enforce any United States judgment they receive against us or our officers or directors in a foreign court, or




●
        enforce within the United States any judgments obtained against us or our officers or directors,



including judgments predicated upon the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether foreign courts would be competent to hear original actions brought in such foreign court against us or such persons predicated upon the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against us or our officers and directors. The foregoing risks also apply to those experts identified in this Report that are not residents of the United States.



WE CANNOT PREDICT WHETHER WE WILL SUCCESSFULLY EFFECTUATE OUR CURRENT BUSINESS PLAN. EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS AND MERITS OF AN INVESTMENT IN THE SHARES AND SHOULD TAKE INTO CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHERS, THE RISK FACTORS DISCUSSED ABOVE.




Item 1B.
        UNRESOLVED STAFF COMMENTS




None.



Item 2.
        PROPERTIES



Real Property



We do not own any real property, however, we do own the mineral rights on our Projects. All of our exploration activities are currently conducted at project sites located in Ghana. Mining leases or prospecting licenses to which we are a party, granting us the right to operate at our Kwabeng, Pameng, Apapam, Banso and Muoso and Edum Banso Projects, are described elsewhere in this Report.



Our administrative activities are currently conducted from our corporate office, where we have leased 1,163 square feet for a 66 month term commencing on May 1, 2007. This office is located at Suite 301, 360 Bay Street, Toronto, Ontario, Canada, M5H 2V6. We paid rent of approximately $3,397 per month in the first and second years of the lease and will pay approximately $3,494 per month in the third and fourth years of the lease and approximately $3,591 per month in the fifth year of the lease.



As of the date of this Report, our technical activities are conducted at our Field Camp located in Kwabeng, Ghana. Our technical activities were also previously conducted from our technical office located at House No. 15, Ade-Coker Road, East Legon, Accra, Ghana. As of February 2009, we terminated the lease for these premises as a cost-saving measure.



We previously maintained a technical office located at 430 Westmount Avenue, Unit F, Sudbury, Ontario, Canada, P3A 5Z8, where our  Vice-President, Exploration and his staff conduct business. As of December 2008, we terminated the rental arrangement at this location as a cost-saving measure.



Map of Properties and Operations



The map, on the following page, shows the locations of our Kwabeng, Pameng, Apapam, Banso and Muoso and Edum Banso Projects all of which are described in further detail in this Report.



- 13 -

- 14 -

Description of Properties



Each of our mineral exploration projects is currently at an early stage of evaluation and no mineralized material or reserve estimates have been made. The present exploration activities on these projects, including grid establishment, soil sampling, prospecting/geological mapping, pitting/trenching and geophysics, are aimed at identifying lode gold (hardrock) mineral occurrences to be further evaluated through drilling. We have completed preliminary lode gold exploration programs at our Banso and Muoso, Apapam and Edum Banso Projects and their respective results are noted hereunder. We have not yet produced any gold at our Apapam, Pameng, Banso and Muoso and Edum Banso Projects and we will require substantial additional capital in order to do so.



Three concessions totaling 118.92 sq km; namely our Kwabeng Project, Pameng Project and our Apapam Project, which is located to the south of our Kwabeng and Pameng Projects, are contiguous to our Banso and Muoso Project.



Kwabeng and Pameng Projects



Access and Location



Access to our Kwabeng Project can be gained by driving northwest from the City of Accra on the Accra-Kumasi Trunk Road, which is the main paved national highway, for approximately 110 km until arrival at the road sign for Kwabeng where we have posted a sign reading Xtra-Gold Mining Ltd. - Kwabeng. Make a left hand turn on the road where a sign reads Town of Anyinam and drive southwest approximately 10 km until the Town of Kwabeng is reached where our Field Camp is located on the right side of the road approximately 50 meters from the Anyinam to Kwabeng road. Our Field Camp is located approximately 500 meters from the Town of Kwabeng. The eastern boundary of our Kwabeng Project is approximately 500 meters to the east of our Field Camp.



Access to our Pameng Project can be gained by driving northwest from the City of Accra on the Accra-Kumasi Trunk Road, which is the main paved national highway, for approximately 125 km until arrival at the village of Pameng where there is a road sign reading Pameng. Make a left hand turn at the Pameng sign and drive southwest approximately 2 km to reach our Pameng concession. Our Pameng concession is located approximately 15 km south-southwest from our Field Camp.



Title to Properties



We hold 30-year mining leases expiring on July 26, 2019 on our Kwabeng and Pameng mining concessions (see Mining Leases - Kwabeng and Pameng Projects) and a 7-year mining lease on our Apapam mining concession expiring on December 17, 2015 (see Mining Lease - Apapam Project). Our interest in our Banso and Muoso Project is held in a prospecting license (see Banso and Muoso Prospecting License) and our interest in our Edum Banso Project is held through an option agreement (see The Edum Banso Project - Option Agreement for Prospecting License).



Historical Work



These three Projects have had very little exploration for lode source gold deposits; however, there has been detailed exploration for placer gold deposits. The Kwabeng, Pameng and Apapam Projects contain approximately 12,583,000 BCM with an average grade of 0.568 grams/BCM. In addition to the mineralized material, there is potential to define reserves with further exploration.



The placer gold deposit currently located at our Kwabeng concession was mined by the former owner in the early 1990s for 15 months and produced approximately 16,800 ounces of gold before operations were ceased due to mining difficulties as noted hereunder. The placer gold is contained in a gravel deposit distributed across the floor of the river valleys west of the Atewa Range which can easily be excavated.



- 15 -

Field Camp at Kwabeng Project



In addition to the three mining leases, XG Mining owns the Wash Plant and the Field Camp which is a functional living compound for mining personnel and is also comprised of offices and facilities for stores, engineering and exploration activities. The Wash Plant and the Field Camp are located on the property included in our Kwabeng concession, close to the town of Kwabeng.



We engage experienced mining personnel with respect to our recovery of gold effort at our Kwabeng Project. When the operations resume, approximately 100 personnel will be working at the Kwabeng Field Camp. Our Mine Manager supervises all personnel at our Plant, Field Camp and gold recovery room (Gold Room) and a  Mining Geologist supervises the exploration and planning of daily recovery of gold activities of our personnel.



Former Ownership



In the early 1990s, the former mining lessee invested approximately $24,000,000 to open and operate a mine at the Kwabeng concession. The mining operation lasted for 15 months and 16,800 ounces of gold was produced before the mine was shut down.



The preceding mining effort failed as the former operator was unable to achieve anticipated throughput due to the design and construction deficiencies of the processing plant. Significant operational costs to sustain high throughputs, a poor gold price, lack of funds to continue mining operations and the lack of available qualified placer gold consultants, engineers and operators which led to the engagement of expensive foreign personnel also contributed to the failure of the previous mining effort.



We are able to address the foregoing past failings of the former operator as we have: (i) redesigned our Wash Plant to accommodate a higher capacity of throughput; (ii) engaged experienced Ghanaian engineers, geological consultants and accounting personnel; (iii) cash available to sustain our current recovery of gold effort for approximately 12 months; and (iv) a plan to derive cash proceeds from our current recovery of gold effort in order to meet operational costs through the course of advancing our plan. Also, the current gold price (approximately $930 per ounce) is significantly greater compared to the gold price during the previous mining effort (approximately $300 per ounce). On the basis of our planned annual recovery of gold of approximately 360,000 BCM, we anticipate that our plan could continue for 20 years, however, this will depend upon numerous factors including the grade and
commercial recoverability of the mineralized material and the selling gold price at the relevant time.



Floating Gold Ore Washing and Processing Plant



The Wash Plant was custom manufactured for the placer gold ores located on the Kwabeng and Pameng concessions by IHC of the Netherlands and shipped to Ghana in disassembled modules in the early 1990s while the Kwabeng mining lease was held by the former owner, Goldenrae Mining Company Limited. The Wash Plant is made up of two major functional components: (i) a series of modular pontoons which are assembled on-site to make up the floating barge portion of the Wash Plant; and (ii) the gold ore processing and recovery equipment, power generation equipment are installed, which is comprised of vibrating grizzly feeder, scrubber, vibrating screen, a three stage IHC radial jig gold recovery unit and provisions for the disposal of the barren processed gravels back into the mining pit. The rated recovery of gold capacity of the Wash Plant is approximately 80 cubic meters of ore gravels per
hour and we anticipate that it will be operated continuously by the staff to be hired at the commencement of full scale production at our Kwabeng concession. When operations resume at our Kwabeng Project, we plan to operate the Wash Plant on a one 10 hour shift per day for six days of the week. The Wash Plant and our Field Camp thereto are connected to the national power grid (hydro) in Ghana. As well, a new vibrating screen deck and water supply pump have been installed and the Wash Plant is fully operational.



Bulk Test



We completed the Bulk Test at our Kwabeng Project on March 25, 2007. During the Bulk Test, we collected, processed, analyzed and sold the gold recovered from the Bulk Test. We obtained the necessary approvals and permits from the Ghanaian government authorities prior to commencing the Bulk Test.



- 16 -

Mining Leases  Kwabeng and Pameng Projects



Our subsidiary, XG Mining, which is owned by us as to a 90% interest, entered into two individual mining leases on July 26, 1989 with The Government of the Republic of Ghana (theGovernment of Ghana),  which holds a 10% interest in XG Mining, covering an area of 44.76 sq km with respect to the Kwabeng concession and 40.51 sq km with respect to the Pameng concession (collectively, theLease Area), located in the East Akim District of the Eastern Region of the Republic of Ghana. These mining leases have a 30 year term expiring on July 26, 2019. We have been granted surface and mining rights by the Government of Ghana to work, develop and produce gold in the lease area (including processing, storing and transportation of ore and materials). With respect to each mining lease,
we are: (i) required to pay applicable taxes and annual rental fees of approximately $15 to the Government of Ghana; and (ii) committed to pay a royalty in each quarter through the Commissioner of Internal Revenue based on the production for that quarter within 30 days from the quarter end as well as a royalty on all timber felled in accordance with existing legislation. Under the terms and conditions of each mining lease, we are required to furnish to the Secretary for Lands and Natural Resources (now the Minister of Lands, Forestry and Mines), the Chief Inspector of Mines (now the Head of the Inspectorate Division of the Minerals Commission) (theHIDMC), the Chief Executive of the Minerals Commission and the Director of Geological Survey (now the Director of Ghana Geological Survey (theDGGS) (collectively referred to as theGovernment
Authorities) (i) a report in each quarter not later than 30 days after the quarter end in connection with quantities of gold won, quantities sold, revenue received and royalties payable for that quarter; (ii) a report half-yearly not later than 40 days after the half year end to the aforementioned government authorities summarizing the results of operations in the Lease Area during the half year and technical records to be maintained by the company as particularly set forth in the respective mining leases (theTechnical Records), which report shall further contain a description for any geological or geophysical work carried out by the company during that half year and a plan upon a scale approved by the Head of the Inspectorate Division of the Minerals Commission showing mine workings and dredging areas; (iii) a report not later than 60 days after the end of each financial year to the Government
Authorities (except for the DGGS) summarizing the results of its operations in the Lease Area during that financial year and the Technical Records, which report shall further contain a description of the proposed operations for the following year with an estimate of the production and revenue to be obtained; (iv) a report not later than three months after the expiration or termination of the respective mining leases, to the Government Authorities, giving an account of the geology of the Lease Area including the stratigraphic and structural conditions and a geological map on a scale prescribed in the Mining Regulations; (v) a report to the Government Authorities (except for HIDMC and DGGS) of any proposed alteration to its regulations and a report of the particulars of any proposed transfer of any share of its capital stock representing 1% of more of the total number of issued and outstanding shares; (vi) a report to the Government Authorities on the particulars of any fresh share
issuance or borrowings in excess of an amount equal to the stated capital of XG Mining; and (vii) having regard to items (v) and (vi), these reports shall be submitted not less than 60 days in advance of the proposed alteration, transfer, issue or borrowing; (viii) a copy of XG Minings annual financial reports including a balance sheet, profit and loss account and notes thereto certified by a qualified accountant who is a member of the Ghana Institute of Chartered Accountants not later than 180 days after the financial year end to the Government Authorities (except for HIDMC and DGGS); and (ix) such other reports and information in connection with our operations to the Government Authorities as they may reasonably require. We are entitled to surrender all or any part of our interest in the lease area upon providing proper notice to the Government of Ghana. We have the right to terminate our interest in each mining lease if the subject mine can no longer be economically worked,
by giving not less than nine months notice to the Government Authorities, without prejudice to any obligation or liability incurred prior to such termination. The Government of Ghana has the right to terminate our interest in the mining leases if (i) we fail to make payments when due; (ii) contravene or fail to comply with terms and conditions of mining lease (however, we have three months to remedy from the notice of such event); (iii) become insolvent or commit an act of bankruptcy; or (iv) submit false statements to the Government Authorities.



The mining leases further provide that XG Mining shall report forthwith to the Government Authorities in the event it discovers any other minerals in the Lease Area, who in turn will provide XG Mining with the first option to prospect further and to work the said minerals subject to satisfactory arrangements  made between XG Mining and the Government Authorities.



Recovery and Sale of Gold



As of December 31, 2008, we have sold an aggregate of 8,771.34 ounces of gold recovered from the mineralized material at our Kwabeng Project. We do not have an exclusive agreement with any company or entity to buy the gold that we recover.



- 17 -

Ancillary Operations




Kwabeng Field Camp



Our company already possesses a fully operational and well maintained Field Camp comprised of office, administration accommodation and workshop facilities located on the Kwabeng concession and is accessible by paved road located approximately 2 hours drive from the capital city of Accra. Our Field Camp is the base of operations for our Kwabeng, Pameng and Apapam Projects. The Field Camp is within cell phone coverage and is supplied with electricity from the national power grid, which lines run along the road accessing the Field Camp. When operations resume at the Kwabeng Project, all of our senior staff will be accommodated in the Field Camp with the junior staff finding accommodation in the surrounding towns and villages.




Fuel and Spare Parts Supply



We deliver fuel from Accra by tanker and discharge the fuel into and store the fuel in the fuel tank facility located within the Field Camp. We purchase spare parts for all of our equipment either locally or from suppliers overseas and store such parts in the secure spare parts warehouse located at the Field Camp.




Workspace



There is adequate office space at the Field Camp to accommodate our mine planning and engineering, geology, surveying, environmental, processing, equipment maintenance and other departments, as well as our laborers.




Equipment Maintenance



We currently rent our equipment, however, in the event we decide to own and operate our own earthmoving equipment fleet, then the maintenance of that fleet will be carried out in the workshops located within the Field Camp. Should we decide to own and operate an earth moving equipment fleet, at that time we will plan for some re-tooling and re-equipping of our workshops to suit the equipment that we anticipate being utilized for our mining operations. If our company decides to make use of a mining contractor to carry out the earth moving at our Kwabeng, Pameng and Apapam Projects, then we anticipate leasing the workshops to the contractor as part of the contract.



Capital Expenditures



To commence full scale production at the Kwabeng, Pameng and Apapam Projects, with a view to maximizing revenues, we anticipate capital requirements of approximately $2,500,000 as set out below:




Mining Equipment (1)
        $
        1,500,000Wash Plant Upgrades
        $
        500,000Working Capital
        $
        500,000TOTAL CAPITAL EXPENDITURES
        $
        2,500,000




(1)
        This capital cost contemplates the purchase of mining equipment, which includes bull dozers, excavators and a front end loader , and will be reduced by $1,500,000 in the event that we decide to lease such equipment through third parties.



XG Mining has rehabilitated the Field Camp which included installation of a communication system for Internet access, electronic mail, telephone and facsimile service and minor construction repairs.



Since completion of our Bulk Test, we commenced the recovery of gold from the mineralized material at our Kwabeng Project on April 24, 2007.



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Banso and Muoso Projects



Our Banso and Muoso Projects consist of two concessions totaling 107.32 sq km. We hold one prospecting license, as more particularly described hereunder, for the Banso and Muoso concessions which are situated in the Eastern Region of Ghana approximately 80 kilometers north of Accra. These concessions lie in the Kibi-Winneba Gold Belt on the western flanks of the prominent Atewa Range, which is underlain by Birimian greenstone, phyllites, meta-tuffs, epi-diorite, meta-greywacke and chert. The valleys, over which the concessions are located, are underlain by thick sequences of Birimian metasediments. The north-western end of the Atewa Range is the type-locality for the Birimian metasediments and metavolcanics.



This area is one of the oldest placer gold mining areas of Ghana, dating back many centuries. Historical exploration and mining has mainly focused on placer gold. Prior to our acquisition of the Banso and Muoso concessions, to the best of our knowledge and based on mining records in Ghana, there has never been a detailed documented bedrock exploration program conducted on these concessions.



Our Banso and Muoso Project is at an early stage of evaluation and no mineralized material or reserve estimates have been made. The present exploration activities on these concessions, including grid establishment, soil sampling, prospecting/geological mapping, pitting/trenching and geophysics, are aimed at identifying lode gold (hardrock) mineral occurrences to be further evaluated through drilling. We have completed preliminary lode gold exploration programs at our Banso and Muoso Project and have received the respective results as noted hereunder.



Access and Location




Muoso Concession



Access to the Muoso Concession is gained by driving northwest approximately 80 km from Accra on the paved Accra-Kumasi Trunk Road. This highway passes through the easternmost portion of the Muoso concession and shares a common boundary with the Kwabeng Concession. From the town of Osino, one would drive northwest approximately 5 km to the town of Anyinam, from which an all weather direct road heads south through the centre of the Muoso Concession and onto the Banso Concession, approximately 15 km south of the Accra-Kumasi Trunk Road. The town of Muoso is approximately 10 km from Anyinam. A number of dirt roads, trails and footpaths offer additional access to this concession. Our Project is located approximately 10 km south-southeast from our Field Camp.




Banso Concession



Access to the Banso Concession is gained by driving northwest approximately 136 km from Accra on the paved Accra-Kumasi Trunk Road. Our Project is located approximately 11 km south-southwest from our Field Camp.



Banso and Muoso Prospecting License



Our wholly-owned subsidiary, XGEL entered into a prospecting license with the Government of Ghana on September 24, 2001 covering a licensed area of 107.32 sq km (theBanso and Muoso Licensed Area). The current term of the prospecting license has been extended to October 13, 2009 on approval by the Minerals Commission of Ghana (Min Com). A further application for renewal of the prospecting license, requires our submission of (i) a comprehensive terminal report, including logs of pits and assay results; (ii) a detailed financial report; (iii) a site plan indicating the areas to be retained and those to be shed off; (iv) evidence of annual ground rent payments; and (v) an environmental permit from the EPA. Under the prospecting license, we have been granted the right and
license by the Government of Ghana to conduct geological and geophysical investigations in the licensed area to determine adequate
quantity of geologically proven and mineable reserve of gold and diamonds (directly or through agents, contractors or
sub-contractors). The terms and conditions of the prospecting license include, among other things, our requirement to (i) conduct a
preliminary pitting program (Phase I); (ii) conduct a reserve definition program (Phase II); and (iii) prepare an
engineering/feasibility report (Phase III); (iv) provide an annual report in prescribed form within 60 days after each calendar year
to various mining regulatory bodies and government authorities (collectively, theAuthorities). We have the right to (i) assign or mortgage our interest in the prospecting
license, subject to obtaining the consent of the Government of Ghana who may impose certain conditions in connection therewith; (ii)
surrender our interest in the prospecting license; and (iii) renew the term of the prospecting license for a period of two years or
such other renewal



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period may be granted in accordance with applicable
mining laws of Ghana. The Government of Ghana has the right to terminate the prospecting license in the event we (i) fail to make
payments when due; (ii) contravene or fail to comply with terms and conditions of the prospecting license; (iii) become insolvent or
commit an act of bankruptcy; or (iv) submit false statements to the Government of Ghana. In any of the foregoing events, we have 21
days in which to remedy any of these occurrences. If upon expiration of prospecting license, we have fulfilled our obligations and
have established to the Government of Ghana that development of a mine from ore reserves established within the licensed area is
economical and financially feasible, the Government of Ghana shall grant us with first option to (i) acquire a lease for purposes of
mining in the licensed area of the Banso and Muoso Project; and ii) participate in a mining project in the licensed area, subject to
negotiation with the Government of Ghana of satisfactory terms for such license and participation.



Regional Exploration Program



On July 4, 2004, we commenced the first exploration stage on these concessions with fieldwork ending on August 23, 2004. We contracted with CME to conduct the exploration program. Fieldwork included stream sediment sampling, line cutting, GPS surveying of the grid and soil sampling. Acquisition and interpretation of airborne geophysical data and satellite imagery was also undertaken.



Results



Results from the first phase of exploration evidenced a bedrock gold source within both the Banso and Muoso concessions. Silt sampling indicated significant gold values, with soil sampling showing several significant anomalous zones. The gold-in-soil anomalies appear to correlate with an interpreted contact between the Birimian volcanoclastics and metasediments.



Further Exploration Work



On April 27, 2005, we further contracted with CME to conduct a second stage exploration program at our Banso and Muoso Project located at the Banso and Muoso concessions. The work program included detailed grid establishment and soil sampling, ground magnetometer surveying, updating the geodatabase and recommendations for future work. The purpose of this program was to determine areas of gold mineralization at the Banso and Muoso concessions that can be followed up with induced polarization surveys, trenching and diamond drilling.



Fieldwork included the following:



Grid Establishment



Grid placement was based on the results from the 2004 regional work program. Four grids were established in the areas of primary interest, one on the Muoso concession and three on the Banso concession. The grids on the latter concession are referred to as Area 1, Area 2 and Area 3.



Soil Sampling



Soil sampling was undertaken along all grid lines established during this work program. From the 6,961 established stations, 177 locations were not sampled due to possible contamination from villages, streams and/or swamps.



A total of 6,516 samples were submitted for gold and 6,066 samples for arsenic analyses. A breakdown of the gold results per property area includes:




●
        Muoso Grid
        3,318




●
        Banso Area 1 Grid
        1,560




●
        Banso Area 2 Grid
        696




●
        Banso Area 3 Grid
        942



- 20 -

Results, Interpretation and Conclusions



Soil sample geochemistry has been completed over selected portions of the anomalous zones indicated by the 2004 regional sampling program. Work during the 2005 program suggests the presence of a bedrock source within both the Muoso and Banso concessions.



Values greater than the threshold value (mean + 2 standard deviations) of 0.063 ppm gold are considered to be anomalous. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb). On the Muoso concession 284 samples (9%) out of the 3,318 samples submitted for gold analyses yielded values greater than the threshold value; while at Banso 152 samples (5%) out of the 3,198 samples submitted for gold analyses yielded values greater than the 0.063 ppm Au threshold value.



At the southwest boundary of the concession several gold-in-soil anomalies appear, the largest of which measures 350 meters in length and up to 300 meters in width. Immediately below this is an easterly trending anomaly with a strike length of approximately 300 meters and a width of approximately 75 meters.



At Muoso the most significant gold-in-soil anomalies occur along the inferred location of the northeast-southwest trending dolerite dyke. Secondary anomalies occur to the east of this dyke and are oriented sub-parallel to the strike of the dyke. These may represent possible structural events (shears/faults) lying along geological contacts (planes of weakness). In the southwest portion of the grid, a possible north-south to northwest-southeast trending gold anomaly is coincident with inferred faulting in similar directions. In the southwestern area of the Muoso grid, two of the arsenic anomalies flank the sides of the north-south trending gold anomaly.



At Banso, each of the three grids outlined two gold-in-soil anomalies. The Area I anomalies trend northwest-southeast and occur at the junction of cross cutting structures. Within Area 2 and 3, linear gold anomalies trend northeast-southwest, parallel to the regional geological trend. The western most gold anomaly in Area 3 flanks the margins of a strong magnetic high (possible intrusive). Arsenic anomalies at Banso typically occur on hill/ridge tops with the gold anomalies flanking the sides of the arsenic anomalies.



The soil sampling program at Banso was successful in locating a number of gold-in-soil anomalies (> 0.063 ppm Au), the most significant of these is located about 400 meters NE of Abesim Township (i.e. Area 3). This anomalous zone has an average width of about 50 meters and a length of about 500 meters and follows the northeasterly regional geological trend.



Recommendations



The following staged exploration program was recommended to further advance the geological knowledge of the concessions:




●
        An estimated 200 kilometers of grid to be cut at Muoso and Banso. This will include the extension of selected existing lines and the establishment of new ones. In addition, soil sampling, geochemical analysis, GPS and ground magnetometer surveys should be conducted on the newly established grid lines.




●
        A grid should be established within the eastern areas of the Muoso concession, and soil samples collected, to follow up on anomalous silt samples taken in the previous sample program.




●
        At Banso, a grid should be cut within the northern portion to cover those areas that returned anomalous silt samples. Additional soil sampling is proposed to confirm and further define the anomalous area.




●
        Auger sampling to depths of 2.5 meters should be conducted on both concessions testing sites that returned greater than 0.1 ppm gold in soils.




●
        Trenches are recommended at selected sites at both concessions to investigate gold-in-soil anomalies and the relationship the anomalies have to geology/structure. An estimated 300 meters of trenching, to 3.0 meter depth, is recommended.




●
        Approximately 50 line kilometers of surface IP surveying may be carried out on priority areas as identified in previous sampling/work programs.



- 21 -

Phase II Exploration Program



We entered into a Phase II exploration contract in September 2006 with CME incorporating some of the above recommendations, including additional grid establishment, soil geochemical surveying, and prospecting on the Muoso concession; and a pitting/trenching program designed to test the geochemical signature at depth of the three primary gold-in-soil anomalies detected on the Banso concession by the Phase I exploration program (i.e. Banso Area 1, 2, 3).



The work program for this project was completed in December 2006 at a cost of approximately $200,000. The results of this program are noted hereunder.



The Phase II exploration program commenced on September 27, 2006 with fieldwork ending December 2, 2006 on the Muoso and Banso Concessions. Work included the following:




●
        Grid establishment (Muoso Concession): 67.4 line-km;




●
        Soil sampling: 2,338 samples collected, 1,438 sample submitted for gold analysis;




●
        Rock sampling: 177 samples;




●
        GPS surveying: 67.4 km;




●
        Trenching and pitting (Banso Concession): 4 trenches (80.2 meters) and 61 pits, 183 horizontal channel samples, 197 vertical channel samples, 24 rock samples.




Muoso Concession Soil and Rock Sampling




(A)
        Grid Layout / Soil Sampling Methodology



The present soil sampling program encompasses a combined semi-detailed (200m) and detailed (100m) soil sampling grid (67.4 km) covering the eastern 5.5 km portion of the Muoso concession. Grid placement was designed to cover the Birimian volcanic-sediment contact and an inferred NE - trending regional structure; which we believe represent highly favorable environments for the hosting of lode gold deposits throughout Ghana.



A total of 2,338 soil samples were collected from all cross lines with 1,438 samples submitted for gold analyses. All samples collected from the 100 meter spaced lines were submitted for analysis. Along 200 meter spaced lines, every second sample was submitted for analysis. The held back samples may be submitted at a later date to bracket any anomalous samples. Rock sampling was undertaken concurrent with the soil sampling program. A total of 166 rock samples were collected at Muoso with sample collection typically confined to the immediate vicinity of grid lines.




(B)
        Soil / Rock Sampling Results



Soil sampling from the current program extended the grid to the east and identified significant geochemical anomalies over this portion of the concession. Values greater than the threshold value (mean + 2 standard deviations) of 0.10 ppm gold are considered to be anomalous. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb). 152 samples (11%) out of the 1,438 samples submitted for gold analyses yielded values greater than the 0.10 ppm gold threshold value; including 53 samples (4%) returning values greater than 0.20 ppm gold. Contouring of the gold in soil results suggests an S-fold geochemical anomaly (> 0.10 ppm Au) in the very eastern part of the concession.



Rock sampling in the northern portion of the anomaly (around the highway) returned no significant results. The geochemical anomaly here is located in the valley of the Birim River and may be an alluvial (paleoplacer) occurrence.



- 22 -

Three (3) rock samples collected in the southern part of the anomaly yielded anomalous gold values from oxidized quartz and phyllite floats. These rock floats are located up on the hillsides in the soil anomaly, well out of any obvious alluvial influence, thus indicating the potential for lode gold mineralization in the vicinity.



A second linear anomaly (> 0.10 ppm Au) is present, extending 4.5 km in an ESE direction from 9000E/18800N to 12750E/21200N. The anomaly is narrow (100 to 150 meters) and tends to occasionally pinch-out. Airborne geophysical and LANDSAT interpretation (Naas, 2004) identifies a possible correlating ESE-trending structure (fault?) although it requires extending that structure to the east. Another interpreted structure, trending SE may intersect the aforementioned structure in the area of the previously described geochemical anomaly.



Banso Pitting / Trenching Program




(A)
        Pit / Trench Program Design and Sampling Methodology



A pitting - trenching program was carried out to test the geochemical signature at depth of the three primary gold-in-soil anomalies detected on the Banso concession by the Phase I exploration program (i.e. Banso Area 1, 2, 3). Single sample anomalies were pitted, while two or more continuous soil sample anomalies were trenched.



Pits were dug manually by pickaxes and shovels; with pit dimensions typically being 1 meter wide by 2 meters long by 3 meters deep. Two horizontal samples and three vertical samples were collected from all the pits that reached the saprolite. Only vertical samples were collected from pits that did not reach saprolite. Grab and chip samples were also collected from quartz veins and veinlets. A total of 305 samples were collected from 61 pits excavated according to the following distribution in the Area 1, 2, and 3 gold-in-soil anomalies.




●
        25 pits (125 samples) from Area 1;




●
        13 pits (65 samples) from Area 2; and




●
        23 pits (115 samples) from Area 3.



Trenches were also dug manually to a width of one meter and an average depth of 3.0 meters. The four trenches excavated on the Area 3 anomaly consisted of one 50 meter trench and three 10 meter trenches. All trenches encountered saprolite. A total of 80 horizontal samples were collected at 1 meter intervals approximately 0.20 meter above the trench floor.




(B)
        Pitting / Trenching and Rock Sampling Results



The current pitting - trenching program tested the gold-in-soil anomalies in the subsurface, preferably in the saprolite horizon.



Area 1 / Area 2



Two pits out of the 25 pits excavated in Area 1 and one pit out of the 13 pits in Area 2 returned anomalous gold results. But these anomalous values reflect auriferous quartz gravels of probable alluvial provenance.



Area 3



Pitting - trenching and surface rock sampling in the eastern portion of the Area 3 grid returned exploration - significant results indicative of potential lode gold mineralization in the vicinity.



- 23 -

Vertical sampling in Pit 3P2 returned a length weighted average grade of 1.36 ppm Au over 1.70 meters and horizontal sampling yielded a length weighted average grade of 1.69 ppm Au over 2.10 meters. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb). A 0.4 meter channel sample across a vein present in this pit returned 0.75 ppm Au. Pit 3P6 returned exploration - significant results of 1.91 ppm over 1.00 meters (vertical) and 1.74 ppm Au over 1.00 meters (horizontal). The former is from the upper (near-surface) horizon. The latter appears associated with quartz veining observed in the saprolite. Quartz veins were mapped in many pits and are generally associated with the anomalous gold values, though the converse is not necessarily true.



The four trenches (3T1 to 3T4) were excavated along a single line (1400N) between 11570E and 11680E. Eleven samples (14%) out of the 80 channel samples (1 meter) collected from the four (4) trenches yielded anomalous gold values (> 0.10 ppm Au). Trench sampling returned similar sub economic but exploration - significant results as with the pits. Trench 3T4 yielded a length weighted average grade of 0.41 ppm Au over 4.0 meters; with the mineralization appearing to be associated with a quartz vein oriented at 324 (degree)/30 (degree) E. A similar modest mineralized zone in 3T3 of 0.16 ppm Au over 4.00 meters is associated with a quartz vein stringer zone oriented similarly at 315 (degree)/30 (degree) E. In 3T2, a zone returning 0.29 ppm Au over 2.00 meters appears associated with veins oriented at 220 (degree)/50-58 (degree) W. Structural understanding based on the limited vein exposure
precludes any conclusions at this point.



Rock sampling (11 samples) in the vicinity of the trenches and pits returned three (3) anomalous gold values from massive quartz boulders. This suggests a potential lode source for gold in this area.




(C)
        Recommendations



Recommended work to further advance the project includes:




(I)
        The gold-in-soil anomalies of the Muoso Concession should be pitted and trenched where consecutive anomalies exist;




(II)
        A total of 10 kilometers of soil sampling is recommended at the Banso Concession. This includes the extension of selected existing lines and the establishment of new ones; and




(III)
        Rock sampling should continue throughout the Concessions.



2008 Banso  Muoso Target Follow Up Program



Exploration work on the Banso-Muoso prospecting license during the 2008 reporting period was aimed at advancing the lode gold targets produced by the Phase I (2005) and Phase II (2006) work programs. Work focused on the further evaluation of the Banso Area 3 and Ankaase gold-in-soil anomalies located at the southern extremity of the Banso, and eastern extremity of the Muoso concessions, respectively.



The Banso concession was subjected to manual trenching and soil geochemistry on an intermittent basis from late November 2007 to May 2008, while hand auger sampling and trenching programs were implemented at the Muoso concession on an intermittent basis from February to November, 2008. All geotechnical field work such as mapping and sampling was conducted in-house by XGEL personnel. Grid establishment (line cutting) and manual trench excavation was conducted on a contract basis by Amofah and Associates of Accra and Andaco Enterprises Limited of Kwabeng, respectively.



All gold results for the following exploration programs are reported in ppm Au (part per million gold). The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).



Further exploration activities for the Banso-Muoso concessions will be planned once an ongoing geological, geochemical and geophysical data compilation has been completed.



- 24 -

Banso Concession Exploration Activities



Banso Area 3 Trenching



Three hand-dug trenches totaling 138 meters were excavated on the Banso Area 3 gold-in-soil anomaly located at the southeastern extremity of the Banso concession. Trenches Nos. TAB001 to TAB003 were excavated in a north-south direction, across the Phase II (2006) trenching located along the L1400N gold-in-soil anomaly, to test the subsurface expression of an extensive ENE-trending quartz float train discovered during prospecting. Trenches TAB002 and TAB003 form a continuous trench extending over a 112 meter length. A total of 69 horizontal channel samples were collected at 2 metre intervals, with shorter samples utilized in areas of geological interest (i.e. quartz veining).



Trenches TAB002  TAB003 exposed a system of intermittent, ENE-trending, quartz veining extending over a 80 meter trench-length, including a 10 meter zone encompassing three parallel quartz veins ranging from 0.25 meters to 0.35 meters in width, within the northern portion of TAB002. Two of the quartz veins yielded significant gold values of 4.64 ppm and 7.67 ppm over true-widths of 0.25 meters and 0.28 meters, respectively. The TAB002-TAB003 trench yielded intermittent, anomalous gold values over its entire 112 meter length. Including exploration significant intervals of 0.19 ppm gold over 46 meters and 0.22 ppm gold over 16 meters.



Banso Area 3 Soil Sampling



The Banso Area 3 gold-in-soil anomaly was covered by a new, detailed (100 m), north-south oriented, soil geochemistry grid designed to better define the ENE-trending, gold-bearing quartz vein system discovered in trenches TAB002 and TAB003. A total of 460 soil samples were collected at 25 meter intervals along the 12.625 line-kilometers of cross lines. Including the Regional Exploration (2004) and Phase II (2005) work programs a total of 1,702 soil samples have been collected on the Banso Area 3 grid.



The anomalous threshold for the soil sample results was set at 0.05 ppm gold based on past work experience in the Kibi Belt. 205 (12%) out of the 1,702 soil samples returned gold values greater than the 0.05 ppm anomalous threshold, including: 43 (2.5%) samples over 0.25 ppm; 22 (1.3%) samples over 0.50 ppm; and 14 (0.8%) samples over 1.0 ppm gold.



The combined soil geochemistry surveys outlined three parallel, ENE-trending, gold-in-soil anomalous trends across a 600 meter distance. The gold-in-soil anomalies (> 0.05 ppm Au), ranging from 50 meter to 150 meter in width,  tend to be patchy in nature and / or pinch-out along their 600 meter to 1,500 meter trend-extents. The northernmost anomalous trend exhibits a good correlation with the quartz vein system identified in trenches TAB002-TAB003.



Muoso Concession Exploration Activities



Ankaase Trend Auger Sampling



As a follow up to the Phase II (2006) soil geochemistry survey, a hand-auger program was implemented on the Ankaase gold-in-soil anomaly located at the eastern extremity of the Muoso concession. The auger sampling was designed to test the geochemical signature of the gold-in-soil anomalies at depth within the saprolite horizon in order to better define trenching targets. A total of 99 sites, totaling 371 linear-meters, were augered to an average depth of approximately 3.75 meters (5m max.). A one (1) meter sample was collected from the saprolite horizon at the bottom of each hole. Auger hole spacing was typically at 25 meters, with some 12.5 meter infilling.



The anomalous threshold for the auger sample results was set at 0.10 ppm gold based on past work experience in the Kibi Belt. 21 (21%) out of the 99 auger samples returned gold values greater than the 0.10 ppm anomalous threshold; including 4 samples over 0.5 ppm and a maximum value of 2.46 ppm. The auger sampling proved to be an efficient trench target definition method.



Ankaase Trend Trenching Program



The 2008 scout trenching program encompassed 19 hand dug trenches, ranging from 8 meters to 236 meters in length and from 1.5 meters to 3.5 meters in depth, and totaling 805 linear meters. The reconnaissance trenching was designed to test the geochemical signature at depth, within the in situ saprolite (oxidized rock) horizon, of the southern half (1.4 km) of the extensive Ankaase Gold Trend; an over 3.5 km long, NE-trending, anomalous gold-in-soil trend characterized by the widespread occurrence of auriferous quartz floats.



- 25 -

This initial reconnaissance trenching program yielded very encouraging results and confirmed that the extensive Ankaase gold-in-soil trend is spatially associated with a typical Ashanti style shear zone setting developed proximal to a Birimian metavolcanic-metasediment contact with associated Belt granitoids.



A total of 511 horizontal channel samples were collected from a canal excavated along the bottom sidewall of the trench (~ 0.10m above floor). Samples were typically 2 metres in length, with shorter (1 m) samples utilized in areas of geological interest (i.e. quartz veining). 85 (17%) out of the 511 channel samples returned gold values greater than 0.5 ppm, including: 52 (10%) samples over 1.0 ppm; and 20 (4%) samples over 3.0 ppm gold.



Nine (9) out of the 19 trenches yielded significant gold intercepts as presented in Table 1; with an additional seven (7) trenches yielding anomalous, exploration significant gold values; and three (3) trenches failing to return any anomalous gold values.



Table 1: Significant Trench Specifications  Ankaase Gold Trend




Trench ID
        From
(meters)
        To
(meters)
        Trench Length
(meters)(1)
        Gold(2)
(ppm)TMU001
        17.00
        25.00
        8.00
        2.08including
        17.00
        21.00
        4.00
        3.59TMU002
        42.00
        44.00
        2.00
        13.70TMU004
        4.00
        22.00
        18.00
        1.75including
        19.00
        20.00
        1.00
        9.37TMU004
        47.00
        58.00
        11.00
        1.24including
        48.00
        52.00
        4.00
        2.75TMU005
        0.00
        62.00
        62.00
        0.43including
        2.00
        26.00
        24.00
        0.63TMU008-010
        N/A
        N/A
        24.00
        1.79including
        
        
        1.00
        7.00TMU015
        0.00
        15.00
        15.00
        1.06including
        8.00
        12.00
        4.00
        2.16TMU016
        20.00
        26.00
        6.00
        4.73TMU019
        15.00
        29.00
        14.00
        2.08including
        16.00
        20.00
        4.00
        6.52including
        18.00
        19.00
        1.00
        10.95





(1)
        Reported intercepts are trench-lengths; true width of mineralization is unknown at this time.





(2)
        The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t).





Note:
        Trenches #TMU003, 011, 012, 013, 014, 017 and 108 yielded anomalous, exploration significant gold value. Trenches #TMU006, 007 and 009 yielded no anomalous gold values.





Trenching to date has intermittently traced an approximately 150 meter to 200 meter wide, NE-trending deformation zone over an approximately 1.4 km strike length. This structural corridor is characterized by several sub parallel, shear hosted, gold-bearing quartz vein zones ranging from less than 1 meter to approximately 24 meters in trench length; with individual quartz veins ranging from less than 1 cm to 5.5 meters in trench length. A granitoid body exhibiting widespread, low grade gold mineralization (0.43 ppm gold over 62 meters) exposed within trench TMU005 at the southwestern extremity of the Ankaase Gold Trend is also of significant exploration interest.



- 26 -

Additional trenching and geophysics are planned to better define the structural controls of the known mineralization and to test the northern half (approximately 1.7 km) of the over 3.5 km long Ankaase Gold Trend.



No ore reserves have been identified on the Banso and Muoso Projects.



The Apapam Project



Access and Location



Our Apapam Project concession lies within the Kibi-Winneba area in the Eastern Region of Ghana and is located on the eastern flank of the Atewa Range along the headwaters of the Birim River in the immediate vicinity of the district capital of Kibi, approximately 75 km NNW of the nations capital city of Accra. Access to our Apapam Project is by driving northwest from Accra on the paved Accra-Kumasi Trunk Road which is the main national highway for approximately 90 km until the town of Kibi, marked by a road sign, is reached. One would make a left hand turn at the Kibi sign and drive southwest for approximately 5 km to arrive at our Apapam concession. A tarred road emanating from the Accra-Kumasi Trunk Road approximately 15 km northeast of Kibi dissects the north-central and south-eastern portions of our concession, while the tarred road servicing the town of Apapam provides access to
the concessions south-western extremity. Our Apapam Project is located approximately 20 km south-southeast from our Field Camp.



The Kibi-Winneba area is characterized by a narrow sequence of Birimian metavolcanics underlying most of the Atewa Range, which is covered by an extensive laterite/bauxite capping, and surrounded by a thick package of Birimian metasediments dominating the flanks and the lower lying areas. Our Apapam Project covers the Birimian volcanic-sediment contact which we believe represents a highly favorable environment for the hosting of lode gold deposits throughout Ghana.



Prior to the exploration work conducted by our company as noted hereunder, very little systematic exploration work for bedrock gold deposits has been conducted in the Kibi area since the 1930s.



Phase I Exploration Program



A first phase exploration program was implemented by geological consultant CME on the Apapam concession from August 12 to September 23, 2006. The Phase I exploration program undertaken in 2006 consisted of regional stream sediment sampling, followed by gridded soil sampling, rock sampling and detailed sampling of several adits located 400 meters northwest of Kibi. The work program for this Project was completed at a cost of approximately $100,000. The results of this program are noted hereunder.



In addition, a reconnaissance geology / prospecting program covering the west-central portion of the Apapam concession was also intermittently implemented by the Xtra-Gold exploration staff from November 2006 to February 2007. The results to date from the various surveys show very promising evidence for the presence of a bedrock gold source within the Apapam concession.




Phase I fieldwork consisted of the following




●
        Concession-wide stream sediment sampling survey (88 samples collected from 44 sites);




●
        Survey grid establishment (33.78 line-km);




●
        Soil sampling (1,306 samples);




●
        GPS surveying (33.78 line-km);




●
        Rock sampling (89 samples); and




●
        Historical adit and bulldozer cut sampling (100 samples).



- 27 -

Stream Sediment Sampling



A total of 88 samples were collected from 44 sample sites from two major streams and their respective tributaries; including 44 silt samples for geochemical analysis (BLEG) and 44 pan concentrate samples for visual gold grain counts.



Values greater than the threshold value (mean + 2 standard deviations) of 0.14 ppm are considered to be anomalous. Five (5) samples (11%) yielded values greater than the threshold value. Gold grain count of the pan concentrates showed visible gold grains in 36 of the 44 samples (82%); with the average gold grain count per sample being five (5) small grains.



The stream sediment anomalies are divided into two zones as follows:



Zone A (Adansu Anomaly): Consists of 1.5 km stretch from Line 158+00N westwards at an average width of 1.0 km along the northwestern boundary of the concession



Zone B (Kokorabo Anomaly): Consists of 3.0 km stretch by 2.0 km in width to cover the area between the southwestern boundary of the concession and the floodplains of river Birim and river Krensen



Soil Sampling Survey



A total of 1,306 soil samples were collected from 30.58 line - kilometers of cross lines established within the Kibi North and Kibi South survey grids. Grid location was based on testing historical mineral occurrences located on and around Kibi Mountain (Kibi North Grid) and promising silt samples results from creeks southeast of Kibi (Kibi South Grid). Line spacing was 100-meter interval within the Kibi Mountain area of the North Grid and 400 meters elsewhere within the gridded areas. Soil samples were collected at a depth of 60 cm at 25 meter intervals along the SE - NW trending grid lines. Soil samples were by analyzed by Fire Assay and reported in parts per billion (1 ppb = 0.001 ppm). The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).



The geochemical soil survey
conducted on the Apapam concession produced several interesting gold-in-soil anomalies that are listed below. A geochemical trend of
050-060 (degree) (ENE-WSW) is in conformity with the regional geological trend. Values greater than the threshold value (mean plus 2
standard deviations) of 0.098 ppm gold are considered to be anomalous. A total of 105 samples (8% out of the 1,306 samples
submitted for analysis produced gold-in-soil values greater than the threshold value of 0.098 ppm gold.



Area 1: The area consists of the following 50 meter to 125 meter wide anomalous zones extending over a minimum 200 meter distance on three (3) adjacent grid lines. The limits of this anomaly located on the northwestern flank of Kibi Mountain are well defined by the present soil survey.




●
        L163+00N, from 51+75E to 52+75E (100 meters), 5 samples average 0.12 ppm Au




●
        L164+00N, from 51+75E to 53+00E (125 meters), 6 samples averaging 0.25 ppm Au




●
        L165+00N, from 52+75E to 53+25E (50 meters), 3 samples averaging 0.21 ppm Au



Area 2: The area is defined by three (3) 125 meter to 250 meter wide anomalous zones extending over a 600 meter distance on the following three (3) grid lines. Further detailed soil sampling is required to well define limits of the area.




●
        L166+00N, from 39+75E to 42+25E (250 meters), 11 samples averaging 0.27 ppm Au




●
        L170+00N, from 44+00E to 45+75E (175 meters), 8 samples averaging 0.41 ppm Au




●
        L172+00N, from 45+75E to 47+00E (125 meters), 6 samples averaging 0.30 ppm Au



- 28 -

Area 3: This area consists of a single 225 meter wide gold-in-soil anomalous zone extending from 42+75E to 45+00E on L 158+00N (10 samples averaging 0.23 ppm Au). Further detailed soil sampling is required to well define limits of the area.



Area 4: This area consists of a single 100 meter wide gold-in-soil anomalous zone extending from 41+00E to 42+00E on L 170+00N (5 samples averaging 0.18 ppm Au). Further detailed soil sampling is required to well define limits of the area.



Rock and Historical Adit Sampling



A total of 89 rock (float) samples were collected during stream sediment and soil sampling traversing. In addition, three historical adits ranging from 7 to 85 meters in length and a bedrock face exposed along a bulldozer cut, located on and in the vicinity of Kibi Mountain were also sampled during the Apapam Phase I exploration program. A total of 77 channel samples were collected from the three adits and 23 samples from the bulldozer cut face. Rock and adit samples were analyzed by Fire Assay and reported in parts per billion (1 ppb = 0.001 ppm). Rock and adit samples returning greater than 1,000 ppb (1.0 ppm) gold were re-analyzed by Fire Assay with results reported in grams per metric tonne (1 g/t = 1.0 ppm). The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).



Seven (8%) out of the 89 rock (float) samples returned anomalous gold values greater than the threshold value (mean + 2 standard deviations). Three adits and a bulldozer cut were located and sampled during the current exploration program. Adit 1 was extensively sampled but no significant values reported. Adit 2 has indicated potential for lode gold mineralization in the Kibi Mountain area. Three (3) channel samples collected in this adit returned a length weighted average grade of 3.47 ppm Au over 3.80 meters; including 6.36 ppm over 1.7 meters. Adit 2 falls within the Area 1 gold-in- soil anomaly. No significant values were returned from Adit 3, although sampling was not able to reach the end of the adit due to unsafe ground conditions. The channel sampling (23 samples) of the bedrock face exposed in the bulldozer cut on the southwest side of Kibi Mountain returned a single anomalous
value of 1.52 ppm Au over a 1.00 meter length.



Reconnaissance Geology / Prospecting Program



A reconnaissance geology /
prospecting program covering the west-central portion of the Apapam concession was intermittently implemented by the Xtra-Gold
exploration staff from November 2006 to February 2007. The program was initiated to follow-up on the anomalous gold-in-silt sample
results returned by the 2006 concession-wide stream sediment sampling program (i.e. Zone A-Adansu Anomaly).



The reconnaissance program identified a 150 meter long, NW - trending gold anomalous float train located approximately 400m west-northwest of the anomalous gold-in-silt sample yielded by the Adansu stream. The rock floats typically consist of strongly silicified metavolcanic cross-cut by sheeted to stockworked quartz stringers exhibiting disseminated boxworks after pyrite.



An historical rock pit was also located within the west-central portion of the concession. Grab samples collected from sheared quartz-iron carbonate veining within the 3.5 meter deep pit returned anomalous gold values. This auriferous vein occurrence is located approximately 550 meters west-northwest of the open-ended Area 3 gold-in-soil anomaly described in the above Soil Sampling section.



Recommendations



Recommended work to further advance the project includes: (a) reconnaissance soil sample gridding for the evaluation of the two (2) anomalous areas defined by the stream sediment sampling, and the auriferous float train and rock pit areas identified during the in-house reconnaissance geology program; (b) and detailed soil sampling and / or pitting-trenching to further define the limits of the four (4) gold-in-soil anomalies and to test their geochemical signature at depth.



Phase II Exploration Program



A reconnaissance trenching program was intermittently implemented by the Xtra- Gold exploration staff from February 2007 to December 2007 on the Apapam concession. The trenching was carried out to test the geochemical signature at depth of the gold-in-soil anomalies detected within the north-western portion of the concession during the Phase I work program and to obtain additional geological / structural information in order to optimize the design of detailed trenching and drilling targets. A total of 542 channel samples were collected from 21 trenches totaling 1,090 linear-meters.



- 29 -

In order to obtain an independent assessment of the 2007 Xtra-Gold trenching results, a National Instrument 43-101 compliant data verification program was undertaken by CME Consultants Inc. (CME) from December 3 to 7, 2007. The program involved the resampling of selected trenches which yielded exploration-significant gold mineralization intervals. CME is a Canada-based geological consultancy with over 15 years of project management experience in Ghana. The Apapam data validation program was implemented under the direct supervision of a professional geologist registered with the Association of Professional Engineers and Geoscientists of British Columbia. The trenching program results noted hereunder correspond to the results returned by the independent CME data verification program.



Trenching; Methodoly / Targets



A total of 21 trenches ranging from 2 meters to 224 meters in length were excavated by Xtra-Gold personnel within the north-western portion of the Apapam concession during the 2007 reconnaissance trenching program. A total of 542 channel samples (2 meters) were collected from the 21 trenches totaling 1,090 linear-meters. Trenches were manually excavated by pickaxes and shovels to a typical width of 1 meter and an average depth of 3 meters, with some sections of the trenches reaching 4.0 meters in depth. Trenching typically extended down to the saprolite horizon but locally the saprolite could not be reached due to safety concerns. Trench specifications are presented in Table 1 below



The bulk of the trenching efforts,
including 8 trenches totaling 834 linear-meters (approx. 75%), focused on testing the Area #1, #2, and #3 gold-in-soil anomalies
detected during the 2006 Phase I work program. Five (5) trenches totaling 112 meters were excavated to test the subsurface along the
train of gold anomalous rock floats encountered during the November 2006 reconnaissance geology / prospecting program (i.e.
Ahwiniase Area). An additional 8 trenches totaling 144 meters were excavated to test the subsurface in the general area of the
historical rock pit also discovered during said prospecting program (i.e. Adadietem Area).



Table 1: Trench Specifications  Apapam Concession




Trench No.
        Area / Zone
        Location (UTM Zone 30N)
        Length(m)
        TrenchOrientation
        No ChannelSamplesEasting
        NorthingTKB001
        Area No.
1
        769824
        683276
        102
        320
        51TKB002
        Area No. 1
        769961
        683117
        74
        320
        37TKB003
        Area No. 1
        769736
        683251
        110
        316
        55TKB004
        Area No. 2
        769700
        684137
        224
        318
        112TKB005
        Area No. 2
        769896
        684217
        116
        316
        58TKB005A
        Area No. 2
        769812
        684297
        36
        316
        18TAD001
        Adadietem
        768012
        683691
        20
        140
        10TAD002
        Adadietem
        768091
        683618
        22
        315
        11TAD003
        Area No. 3
        768748
        683474
        126
        317
        63TAD004
        Adadietem
        768012
        683691
        50
        320
        25TAD005
        Adadietem
        768043
        683708
        12
        320
        6TAD006
        Adadietem
        768008
        683744
        8
        320
        4TAD007
        Area No. 3
        768757
        783573
        46
        317
        23TAH001
        Ahwiniase
        767291
        682664
        80
        315
        40TAH002
        Ahwiniase
        766982
        683002
        22
        140
        11TAH003
        Ahwiniase
        767264
        682711
        24
        315
        12PAD001
        Ahwiniase
        767981
        683666
        4
        345
        2PAD002
        Ahwiniase
        n/a
        n/a
        4
        305
        1PAD003
        Ahwiniase
        767927
        683753
        4.5
        340
        1PAD004
        Ahwiniase
        767977
        683765
        4
        320
        1PAD006
        Ahwiniase
        767940
        683801
        2
        320
        1




Note:
        Trenches #TAD001 and #TAD004 extend from a common point of origin in opposite directions resulting in one continuous trench.



- 30 -

(ii)
        Trenching Results / CME Data Verification Program



Based on past work experience in Ghana, the Xtra-Gold geological personnel arbitrarily established channel sample intervals yielding weighted average grades greater than 1.0 ppm gold has been exploration significant. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb). Nevertheless, anomalous channel sample results below the 1.0 ppm gold threshold remain of considerable exploration interest and will be subjected to further investigation. Sixty-one (61) out of the 542 channel samples (11%) yielded gold values greater than the 1.0 ppm exploration-significant threshold.



Four (4) out of the 21 trenches yielded length-weighted average grade intervals greater than the arbitrarily set exploration - significant threshold of 1.0 ppm gold, including: trench #TKB003 in gold-in-soil anomaly Area #1 (i.e. Kibi Mountain); trenches #TKB004 and #TKB005 in gold-in-soil anomaly Area #2; and trench #TAD001 in the Adadietem Area.



The independent data verification program undertaken by CME from December 3 to 7, 2007 encompassed the complete resampling of the exploration-significant intervals (= 1.0 ppm Au)from the four (4) above noted trenches. The CME resampling included 116 channel samples totaling 115.41 linear meters. Sampling consisted of a horizontal channel cut along the sidewall of the trench, approximately 0.2 meters above the trench floor. Sampling was typically established at one meter intervals, with sample lengths locally adjusted to accommodate geological features.



Forty-six (46) out of the 116 channel samples (39.5%) collected by CME returned values greater than 1.0 ppm gold. Exploration - significant gold intervals (= 1 ppm Au) from the independent data validation program are presented in Table 2. Note that all the weighted average grade intervals represent trench lengths and are not necessarily indicative of the true widths of the mineralization. Calculation of true widths within trenches can be difficult, as not all geological features are properly exposed. In addition, these mineralized intervals currently represent isolated features for which no strike extension can be measured due to the relatively long distances between the trenches; additional infill soil sampling and trenching is required to define the actual strike length of the mineralization.



At Apapam, gold mineralization has been found to occur in several different geological features, including steeply and flat - lying quartz veins and alteration haloes proximate to the quartz veining. The presence of shallow dipping (flat lying) veins may produce an exaggeration in both the width and grade of the mineralization. The effect of shallow veining is apparent in trench #TKB004 where a 4.07 ppm gold grade over a 11.0 meter trench - length is estimated to represent a true width of 3 to 4 meters due to the flat lying nature of the quartz veins. As previously noted calculation of true widths within trenches can be difficult, as not all the geological features are properly exposed.



Table 2:  Significant Trench Intersections  Apapam Concession




Trench No.
        Zone / Area
        Intervals (meters)
        Gold(ppm)From
        To
        LengthTKB003
        Area No. 1
        46.36
        54.10
        7.74
        1.60TKB003
        Area No. 1
        64.10
        74.55
        10.45
        1.62including
        
        68.00
        70.25
        2.25
        4.64TKB004
        Area No. 2
        194.00
        196.00
        2.00
        1.70TKB004
        Area No. 2
        203.00
        214.00
        11.00(1)
        4.07TKB005
        Area No. 2
        61.00
        74.00
        13.00
        5.23including
        Adadietem
        69.00
        71.00
        2.00
        14.45TAD001
        Adadietem
        0.00
        1.00
        1.00
        4.95TAD001
        Adadietem
        4.00
        8.00
        4.00
        1.82TAD001
        Adadietem
        11.00
        15.00
        4.00
        1.18




(1)
        Apparent Width: Estimated to represent a true width of 3 to 4 meters based on shallow dipping (flat lying) nature of the quartz veining.




Note:
        All intersections represent trench lengths and are not necessarily indicative of the true width of the mineralization.



- 31 -

Sample Analyses



Samples taken during the data verification program were analyzed at Eco Tech Laboratory Ltd., an ISO9001 registered laboratory located in British Columbia, Canada. Prepared samples are weighed to 30 grams and fused along with proper fluxing materials. The bead is digested in aqua regia and analyzed on an atomic absorption instrument. Values are reported in parts per billion (1 ppb = 0.001 ppm or 0.001 g/t). Samples returning greater than 500 ppb (0.5 ppm) gold were re-analysed by the metallic gold assay method. The purpose of this analysis was to determine if there was a nugget effect with the gold mineralization. The process involved taking minus 140 mesh fraction, homogenize it, then take 2 samples sub samples for gold fire assay. The plus 140 mesh material was assayed in its entirety. The resultant fire assay bead is digested with acid and after parting is analyzed on a
Perkin Elmer atomic absorption machine using air-acetylene flame to 0.03 grams/tonne (0.03 ppm) detection limit. Results are collated by computer and are printed along with accompanying quality control data (repeats and standards).



2008 Kibi Gold Trend Follow-Up Program



Exploration work on the Apapam concession during the 2008 reporting period was aimed at advancing the lode gold targets identified within the the Kibi Gold Trend; an over 5.5 km long, NE-trending, anomalous gold-in-soil trend characterized by four (4) extensive, higher grade zones ranging from approximately 800 meters by 75-300 meters to 1,000 meters by 100-500 meters in area.



An extensive soil geochemistry survey covering approximately 47 line-kilometers (1,827 samples) was implemented in early 2008 to further define the extensive Kibi gold-in-soil trend. The entire Apapam grid was also covered by Induced Polarization (IP) / Resistivity (62 km) and ground magnetometer (79 km) surveys to help map the extent of the granitoid bodies spatially associated with the gold occurrences, and to provide information on the strike extent and attitude of the mineralized structures.



The 2008 Apapam trenching program encompassed 22 trenches totaling approximately 1,375 linear meters, including: 8 trenches (425 m) on Zone 2 (TKB006-013); and 14 trenches (950 m) on Zone 3 (TAD008-021) of the 5.5 km long Kibi gold-in-soil trend.



A Phase I scout drilling program encompassing 18 diamond drill holes, ranging from 60 meters to 320.5 meters in length, and totalling 3,001 linear meters was implemented on the Apapam concession from August 30 to October 28, 2008. This reconnaissance drilling was designed to test the depth continuity of gold mineralization discovered in trenches excavated on Zone 2 and Zone 1 of the Kibi Gold Trend.



This initial reconnaissance drilling program yielded very encouraging results and demonstrated that the granitoid-hosted gold mineralization occurrences intersected along the Kibi gold-in-soil trend offers potential for shallow oxide mineralization amenable to bulk mining and heap leaching, as well as large primary gold systems at depth.



All gold results for the following exploration programs are reported in ppm Au (part per million gold). The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).



Recommended work to further advance the project includes: (a) additional mechanical trenching to further define the geological / structural nature and extent of the granitoid-host gold mineralization in Zone 2 and 3; and (b) a 5,000 m combined reverse circulation / diamond drilling program. The estimated cost of the follow-up exploration program is approximately $800,000.



No ore reserves have been identified on the Apapam Project.



Apapam Grid Expansion



The Apapam grid was expanded to provide control for detail (100m) soil sampling coverage of the gold-in-soil anomalies yielded by the Phase I (2006) work program and the gold occurrences identified in the 2007 trenching, located at the northwestern extremity of the concession, and for reconnaissance (200m) soil sampling to follow-up on anomalous gold-in-silt samples identified in streams at the southwestern extremity of the property. A total of 54.45 line-kilometers of cross-lines and 2.1 kilometers of baselines were established. The expanded grid now covers the entire northwestern portion of the concession with a total of 78.8 line-kilometers of southeast trending cross-lines extending along a 6.1 kilometer baseline.



- 32 -

Soil Geochemistry Survey



An extensive soil geochemistry survey was undertaken on the Apapam concession to provide detailed (100m) soil sampling coverage of the gold-in-soil anomalies yielded by the Phase I (2006) work program and the gold occurrences identified in the 2007 trenching, located at the northwestern extremity of the concession, and for reconnaissance (200m) soil sampling to follow-up on anomalous gold-in-silt samples identified in streams at the southwestern extremity of property during the 2004 Regional Exploration program. A total of 1,827 soil samples were collected at 25 meter intervals along the 46.975 line-kilometers of cross lines. Including the Phase I (2006) work program, a total of 2,859 soil samples have been collected on the Apapam grid.



The anomalous threshold for the soil sample results was set at 0.075 ppm gold based on past exploration experience on the Apapam concession. 666 (23%) out of the 2,859 soil samples returned gold values greater than the 0.075 ppm anomalous threshold, including: 236 (8%) samples over 0.150 ppm; 95 (3.5%) samples over 0.30 ppm; and 61 (2%) samples over 0.5 ppm gold.



The expanded soil survey outlined an over 5.5 km long, NE-trending, anomalous gold-in-soil trend (Kibi gold-in-soil trend) characterized by four (4) extensive, higher grade zones (i.e. Zone 1 to 4) ranging from approximately 800 meters by 75-300 meters to 1,000 meters by 100-500 meters in area. This gold-in-soil anomalous trend (> 0.075 ppm Au) tends to be patchy in nature and/or to pinch-out along its 5.5 km extent. The gold-in-soil anomalies exhibit a good spatial relationship with the bedrock gold occurrences identified to date in trenches at the northwestern extremity of the Apapam concession.



IP / Resistivity And Magnetometer Surveys



An Induced Polarization (IP) / Resistivity survey covering the entire 5.5 km extent of the Kibi gold-in-soil trend was conducted to help define drill targets for the Phase I drill program. The 61.9 line-kilometer IP / Resistivity (Time Domain) survey, covering the entire extent of the Kibi gold-in-soil trend at 200 meter spacing, with some 100 meter detail sections centred on known gold showings, was conducted using a Pole-Dipole Array with a dipole length of 50 meters and dipole separations of n = 1 to 6. This survey design should yield an approximate depth of investigation of about 175 to 200 meters at n=6.



The IP / Resistivity survey helped map the extent of the granitoid bodies spatially associated with the gold occurrences identified to date by trenching and drilling, and yielded information on the strike extent and attitude of the mineralized structures.



A ground magnetometer survey encompassing 78.8 line-kilometers was also conducted on the Apapam grid. The magnetometer survey was implemented to help map the geology of the Kibi gold-in-soil trend area and to assist in the IP / Resistivity survey interpretation. The geophysical surveys were implemented in August to September 2008 by Sagax Afrique of Ouagadougou, Burkina Faso.



Kibi Gold-In-Soil Trend Trenching Program



The 2008 Apapam trenching program encompassed 22 trenches totaling approximately 1,375 linear meters, including: 8 trenches (425 m) on Zone 2 (TKB006-013); and 14 trenches (950 m) on Zone 3 (TAD008-021) of the 5.5 km long Kibi gold-in-soil trend. The 19 hand dug and 3 mechanical trenches, ranging from 20 meters to 154 meters in length and from 1.5 meters to 4.0 meters in depth, were designed to test the geochemical signature at depth, within the in situ saprolite (oxidized rock) horizon, of the gold-in-soil anomalies. To date, a total of 35 trenches totaling approximately 2,320 m have been excavated on the Kibi gold-in-soil trend.

Trenching exposed widespread occurrences of classical granitoid-hosted gold mineralization in Zone 2 and 3. Mineralization is hosted by swarms of granitoid bodies interpreted to be emplaced along splay structures off an inferred NE-trending regional structure. The broadly spaced trenching encountered significant granitoid-hosted gold mineralization, over trench lengths ranging from 10 meters to 45 meters, spread out over approximately 975 meter and 500 meter E-W distances in Zone 2 and 3, respectively. In addition several granitoid occurrences yielded lower grade but still exploration significant anomalous gold values. Significant gold intercepts from the 2008 trenching program, as well as significant intercepts from the 2007 Zone 2 trenching, are presented in Table 1 below. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part
per billion (ppb).

A total of 14 manual trenches totaling approximately 950 linear meters (TAD008-TAD021) were completed in 2008 on Zone 3 of the Kibi gold-in-soil trend, located approximately 700 meters southwest of the Phase I drilling area on Zone 2. To date saprolitic occurrences of altered granitoid exhibiting quartz-iron carbonate veining and oxidized sulphide sites have been encountered in six (6) trenches on Zone 3.



- 33 -

The Zone 3 trenching yielded two (2) significant granitoid-hosted gold mineralization intercepts: 4.93 ppm gold over 45 meters, including 10.12 ppm gold over 12 meters; and 1.60 ppm gold over 18 meters, including 9.89 ppm gold over 2 meters, in trenches TAD019 and TAD016, respectively. In addition, reconnaissance trenching of the Zone 3 gold-in-soil anomaly in 2007 yielded an intercept of 1.09 ppm gold over a 10 meter trench length in trench TAD001-TAD004. The remaining three (3) mineralized granitoid occurrences yielded lower grade but exploration significant, anomalous gold values.



Table 1:  Significant Trench Intersections  Kibi Gold Trend(Length Weighted Average Grades)




Trench ID
        Intervals (meters)
        Gold(ppm)From
        To
        (1)Trench LengthTKB002
        12.00
        14.00
        2.00
        8.79TKB003
        46.36
        54.10
        7.74
        1.60TKB003
        64.10
        74.55
        10.45
        1.62including
        68.00
        70.25
        2.25
        4.64TKB004
        194.00
        214.00
        20.00
        2.54including
        203.00
        214.00
        11.00 (2)
        4.07TKB005
        60.00
        90.00
        30.00
        2.49including
        61.00
        74.00
        13.00
        5.23including
        69.00
        71.00
        2.00
        14.45TKB006
        58.00
        94.00
        36.00 (3)
        1.46including
        64.00
        81.00
        17.00
        2.20including
        64.00
        65.00
        1.00
        7.90TAD001-004
        -
        -
        10.00
        1.09including
        -
        -
        1.00
        4.95TKB010
        0.00
        42.00
        42.00
        1.29including
        15.00
        28.00
        13.00
        2.26TKB011
        12.00
        27.00
        15.00
        1.26including
        19.00
        25.00
        6.00
        2.41TKB012
        1.00
        5.00
        4.00
        2.51TAD016
        23.00
        41.00
        18.00
        1.60including
        33.00
        35.00
        2.00
        9.89TAD019
        16.00
        61.00
        45.00
        4.93including
        16.00
        46.00
        30.00
        6.23including
        34.00
        46.00
        12.00
        10.12including
        42.00
        44.00
        2.00
        17.00





(1)
        Reported intercepts are trench-lengths; true width of mineralization is unknown at this time.





(2)
        Estimated to represent a true width of ~ 4m due to flat lying nature of quartz veining.





(3)
        Apparent Width: Estimated to represent a true width of ~ 25 meters based on flat lying nature of the quartz veining



Phase I Drill Program  Kibi Gold Trend



The Apapam scout drilling program encompassed 18 diamond drill holes (NQ2 core), ranging from 60 meters to 320.5 meters in length, and totalling 3,001 linear meters. This reconnaissance drilling was designed to test the depth continuity of gold mineralization discovered in trenches excavated on Zone 2 and Zone 1 of the Kibi Gold Trend; an over 5.5 km long, NE-trending, anomalous gold-in-soil trend characterized by four (4) extensive, higher grade zones ranging from approximately 800 meters by 75-300 meters to 1,000 meters by 100-500 meters in area. The diamond drilling program was implemented from August 30 to October 28, 2008 by Burwash Drilling of Cobble Hill, British Columbia, Canada.



This initial reconnaissance drilling program yielded very encouraging results and demonstrated that the granitoid-hosted gold mineralization occurrences intersected along the Kibi gold-in-soil trend offers potential for shallow oxide mineralization amenable to bulk mining and heap leaching, as well as large primary gold systems at depth.



- 34 -

The first 15 holes of the program targeted gold mineralization discovered in four (4) trenches, TKB005, TKB004, TKB006, and TKB009-010, spread out over an approximately 975 meter E-W distance on the Zone 2 gold-in-soil anomaly. Thirteen (13) out of the 15 holes on Zone 2 yielded significant gold intercepts, including 10 holes intersecting significant granitoid-hosted gold mineralization over 7 meter to 45 meter core lengths. Significant gold intercepts are presented in Table 2 below. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).



Mineralized material consists of altered quartz diorite and tonalite exhibiting quartz-iron carbonate veining, and disseminated sulphides. Mineralization discovered to date by trenching and/or drilling on Zone 2 and Zone 3 appears to be hosted by swarms of granitoid bodies, ranging from 5.5 meters to 79 meters in core length, interpreted to be emplaced along splay structures off an inferred NE-trending regional structure.



Limited drilling to date traced the granitoid-hosted gold mineralization over a 200 meter strike length and to a vertical depth of 100 meters at the Trench TKB004 Zone, including gold intercepts of: 2.11 ppm gold over 25.4 meters; 0.87 ppm gold over 15 meters and 1.28 ppm gold over 33 meters; 2.24 ppm gold over 16 meters; and 2.78 ppm gold over 15 meters in holes KBD08012, 013, 014, and 015, respectively. Similarly, mineralization at the Trench TKB005 Zone was traced over an approximately 135 meter strike length and to a vertical depth of 76 meters in holes KBD08003 & 004 and KBD08010 & 011. Including significant intercepts of 8.49 ppm gold over 12 meters and 4.83 ppm gold over 7 meters in holes KBD08004 and KBD08010, respectively.



Limited Zone 1 scout drilling (3 holes) intersected a typical Ashanti style shear zone setting developed proximal to a metavolcanic-metasediment contact with a spatially associated granitoid body. Hole KBD08017 yielded intermittent, exploration significant, anomalous gold values over a 60 meter core length. Including encouraging intercepts of 1.43 ppm gold over 13.5 meters, 1.04 ppm gold over 6 meters, and 1.02 ppm gold over 8 meters. In addition, trench TKB012 excavated on a gold-in-soil anomaly located approximately 100 meters west of hole KBD08017 returned a channel sample intercept of 2.51 ppm gold over a 4 meter trench length.



Recommended work to further advance the project includes: (a) additional mechanical trenching to further define the geological / structural nature and extent of the granitoid-host gold mineralization in Zone 2 and 3; and (b) a 5,000 m combined reverse circulation / diamond drilling program. The estimated cost of the follow-up exploration program is approximately $800,000.



No ore reserves have been identified on the Apapam Project.



- 35 -

Table 2:  Significant Drill Intercepts  Kibi Gold Trend Project(Length Weighted Average Grades)




Hole ID
        Intervals (meters)
        Gold(ppm)
        Comments(2)From
        To
        (1)Core
LengthKBD08001
        107
        108
        1
        8.77KBD08001
        132
        133
        1
        13.65KBD087002
        No significant resultsKBD08003
        22.5
        35
        12.5
        2.04
        GRDincluding
        22.5
        24
        1.5
        5.51including
        29
        32
        3
        3.65KBD08004
        76
        88
        12
        8.49
        GRDincluding
        76
        77
        1
        28.50including
        77
        78
        1
        42.40including
        80
        85
        5
        5.64KBD08005
        22
        39
        17
        1.18
        GRDincluding
        33
        39
        6
        2.04KBD08005
        45
        60
        15
        1.02
        GRDKBD08006
        116
        117
        1
        31.30
        VGKBD08007
        65
        78
        13
        1.02
        GRDincluding
        72
        76
        4
        2.06KBD08008
        15
        60
        45
        1.01
        GRDincluding
        37
        49
        12
        2.01
        VGKBD08009
        No significant resultsKBD08010
        47
        54
        7
        4.83
        GRDKBD08010
        58
        59
        1
        9.58KBD08011
        106
        116
        10
        1.01including
        115
        116
        1
        4.53KBD08012
        46.6
        72
        25.4
        2.11
        GRD, VGincluding
        63
        72
        9
        3.95(including)
        63
        64
        1
        13.60KBD08013
        72
        87
        15
        0.87
        GRDKBD08013
        96
        129
        33
        1.28
        GRDincluding
        98.3
        105
        6.7
        2.40including
        122
        128
        6
        2.70KBD08014
        115
        131
        16
        2.24
        GRDincluding
        116
        126
        10
        3.23
        VGKBD08015
        20
        35
        15
        2.78
        GRDincluding
        27
        34
        7
        5.06(including)
        32
        33
        1
        9.48KBD08015
        42
        45
        3
        2.37
        GRDKBD08015
        63
        64
        1
        16.40
        GRDKBD08016
        No significant resultsKBD08017
        82.5
        96
        13.5
        1.43KBD08017
        115
        121
        6
        1.04KBD08017
        135
        143
        8
        1.02KBD08018
        No significant results





(1)
        Reported intercepts are core-lengths; true width of mineralization is unknown at this time.





(2)
        GRD  Granitoid hosted / associated; VG  Visible gold noted.



- 36 -

Mining Lease  Apapam Project



XG Minings interest in the Apapam Project was previously held by a prospecting license granted by The Government of Ghana on March 29, 2004 covering a licensed area of 33.65 sq km. Subsequently, in May 2008, XG Mining made an application to The Government of Ghana to convert the prospecting license to a mining lease. Our application received parliamentary approval resulting in The Government of Ghana granting and registering a mining lease to XG Mining on the following terms and conditions.



Our subsidiary, XG Mining, which is owned by us as to a 90% interest, entered into a mining lease dated December 18, 2008 (theApapam mining lease) with The Government of Ghana, who holds a 10% free carried interest in XG Mining. The Apapam mining lease covers an area of 33.65 sq km (theLease Area) and is located in the East Akim District of the Eastern Region of the Republic of Ghana. The Apapam mining lease has a 7 year term expiring on December 17, 2015 and can be renewed for a further 30 year term in accordance with the Minerals and Mining Act, 2006 (Act 703) by making application not less than six months prior to the expiration of the mining lease. We have been granted surface and mining rights by the Government of Ghana to work, develop and produce gold in the Lease
Area (including the processing, storing and transportation of ore and materials). With respect to the Apapam mining lease, we are: (i) required to pay applicable taxes and annual rental fees to the Government of Ghana of approximately $15; and (ii) committed to pay a royalty in each quarter to the Government of Ghana, through the Commissioner of Internal Revenue, based on the production for that quarter within 30 days from the quarter end as well as a royalty on all timber felled in accordance with existing legislation. Under the terms and conditions of the Apapam mining lease, we are required to (i) commence commercial production of gold within two years from the date of the mining lease; (ii) conduct our operations with due diligence, efficiency, safety and economy, in accordance with good commercial mining practices and in a proper and workmanlike manner, observing sound technical and engineering principles using appropriate modern and effective equipment, machinery, materials and
methods and paying particular regard to the conservation of resources, reclamation of land and environmental protection generally; (iii) mine and extract ore in accordance with subparagraph (ii) herein, utilizing methods which include dredging, quarrying, pitting, trenching, stoping and shaft sinking in the Lease Area.



We are further required to furnish (i) a report in each quarter not later than 30 days after the quarter end to the Government Authorities in connection with quantities of gold won in that quarter, quantities sold, revenue received and royalties payable; (ii) a report half-yearly not later than 40 days after the half year end to the Government Authorities summarizing the results of operations during the half year and Technical Records, which report shall also contain a description of any geological or geophysical work carried out by our company in that half year and a plan upon a scale approved by the HIDMC showing dredging areas and mine workings; (iii) aa report in each financial year not later than 60 days after the end of the financial year summarizing the results of our operations in the Lease Area during that financial year and the Technical Records, which report shall further
contain a description of the proposed operations for the following year with an estimate of the production and revenue to be obtained; (iv) a report not later than three months after the expiration or termination of the mining lease, to the Government Authorities giving an account of the geology of the Lease Area including the stratigraphic and structural conditions and a geological map on scale prescribed in the Mining Regulations; (v) a report to the Government Authorities (except for HIDMC and DGGS) of any proposed alteration to our regulations, (vi) a report to the Government Authorities (except for HIDMC and DGGS) on the particulars of any fresh share issuance or borrowings in excess of an amount equal to the stated capital of XG Mining; (vii) having regard to items (v) and (vi), these reports shall be submitted not less than 21 days in advance of the proposed alteration, issuance or borrowing; (viii) a copy of XG Minings annual financial reports to the Government
Authorities (except for HIDMC and DGGS) including a balance sheet, profit and loss account and notes thereto certified by a qualified accountant, who is a member of the Ghana Institute of Chartered Accountants, not later than 180 days after the financial year end; and (ix) such other reports and information in connection with our operations to Government Authorities as they may reasonably require. We are entitled to surrender all of our rights in respect of any part of the Lease Area not larger in aggregate than 20% of the Lease Area by providing not less than two months notice to the Government of Ghana. We may surrender a larger part of the Lease Area by providing not less than 12 months notice. We have the right to terminate our interest in the Apapam mining lease if the mine can no longer be economically worked, by giving not less than nine months notice to the Government Authorities, without prejudice to any obligation or liability incurred prior to such
termination. The Government of Ghana has the right to terminate our interest in the Apapam mining lease if (i) we fail to make payments when due; (ii) contravene or fail to comply with terms and conditions of the mining lease (however, we have 120 days to remedy from the notice of such event); (iii) become insolvent or commit an act of bankruptcy; or (iv) submit false statements to the Government Authorities.



The Apapam mining lease further provides that XG Mining shall report forthwith to the Government Authorities in the event it discovers any other mineral deposits apart from gold and silver in the Lease Area, who in turn will provide XG Mining with the first option to prospect further and to work the said minerals subject to satisfactory arrangements between made between XG Mining and the Government Authorities.



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The Edum Banso Project



Access and Location



Our Edum Banso Project lies within the south Ashanti gold belt in the Western Region of Ghana and is located approximately 235 kilometers west of Accra and 15 kilometers northwest of Takoradi, the regional capital.



Access to the Project is by asphalt road from Accra to Takoradi and by gravel road from Takoradi to Edum Banso through the town of Apowa. Internal access within the concession area is quite poor, however there are many footpaths that interconnect the scattered settlements within this concession. Our Edum Banso Project is located approximately 200 km southwest from our Field Camp.



Option Agreement for Prospecting License



Our wholly-owned subsidiary, XGEL entered into an option agreement dated October 17, 2005 (theAdom Option Agreement) with Adom Mining Ltd. (Adom), a 100% wholly registered Ghanaian company, who is the registered proprietor of a prospecting license which Adom entered into with The Government of Ghana on May 8, 1991, covering a licensed area of 20.60 sq km (theEdum Banso Licensed Area). The current term of the prospecting license has been extended to July 14, 2009 on approval by Min Com. A further application for renewal of the prospecting license requires our submission of (i) a comprehensive terminal report, including logs of pits and assay results; (ii) a detailed financial report; (iii) a site plan indicating
the areas to be retained and those to be shed off; (iv) evidence of annual ground rent payments; and (v) an environmental permit from the EPA.



Previously, Newmont Ghana Limited (Newmont) had entered into an option agreement with Adom in connection with the Edum Banso Project, however abandoned their interest.



Under the terms and conditions of the prospecting license, Adom has the right to prospect for and prove gold under or in the licensed area including the right to conduct such geological and geophysical investigations in the licensed area in order to determine an adequate quantity of geologically proven and mineable reserve of gold (directly or through agents, contractors or sub-contractors). Under the prospecting license, the holder has the right to (i) assign or mortgage its interest in the prospecting license, subject to obtaining the consent of the Government of Ghana who may impose certain conditions in connection therewith; (ii) surrender its interest in the prospecting license; and (iii) renew the term of the prospecting license for a period of two years or such other renewal period as may be granted in accordance with applicable mining laws of Ghana.



The Government of Ghana has the right to terminate the prospecting license in the event the holder of the prospecting license (i) fails to make payments when due; (ii) contravenes or fails to comply with terms and conditions of prospecting license; (iii) becomes insolvent or commits an act of bankruptcy; or (iv) submits false statements to the Government of Ghana. In any of the foregoing events, the holder will have 21 days in which to remedy any of these occurrences. If upon expiration of prospecting license, the holder has fulfilled its obligations and has established to the Government of Ghana that development of a mine from ore and reserves established within the licensed area is economical and financially feasible, the Government of Ghana shall grant the holder with first option to (i) acquire a license for purposes of mining gold in the licensed area of the Edum Banso concession;
and (ii) participate in mining project in licensed area, subject to negotiation with the Government of Ghana of satisfactory terms for such license and participation.



At the time of execution of the Adom Option Agreement, we paid Adom $5,000 as consideration for entering into the agreement with us. We are required to pay Adom additional payments of $5,000 on the anniversary date of the Adom Option Agreement for each year that we hold an interest in such agreement. The term of the Adom Option Agreement is for five years. There are no other termination rights available to Adom.



We are required to make an additional payment of $200,000 to Adom at the time of commencement of the production of gold in or on the Edum Banso Project; provided, however in the event less than two million ounces of proven and probable reserves are discovered in or on the Edum Banso Project, this payment shall be reduced to $100,000. Under the terms and conditions of the Adom Option Agreement, Adom has granted XGEL the sole and exclusive right and option to acquire all of its right, title and interest in the



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prospecting license, which option may be exercised by XGEL at any time during the term. Adom has further granted XGEL the exclusive right of free and unrestricted access to the Edum Banso Project to explore, develop and, provided XGEL has exercised the  option, to mine, extract, remove and sell any and all ores, minerals, concentrates or other products from the Edum Banso Project. Upon XGELs written election to exercise the option, Adom shall forthwith transfer the prospecting license to XGEL, subject only to a reserved royalty of 2% of the net smelter returns (NSR) from all ores, minerals or other products mined and removed from the Edum Banso Project and sold by XGEL. In the event less than two million ounces of proven and probable reserves are discovered in or on the Adom Project, the reserved royalty shall be 1% of the NSR. Adom has
granted XGEL the exclusive right and option, exercisable by XGEL at any time to purchase the entirety of the reserved royalty for the sum of $2,000,000. No payment of the actual NSR shall be credited toward the reserved royalty purchase price. In the event less than two million ounces of proven and probable reserves are discovered in or on the Edum Banso Project, the reserved royalty purchase price shall be $1,000,000. Pursuant to the terms of an amending agreement entered into between the parties on October 19, 2006, XGEL has the right, without the prior consent of Adom, to assign or transfer its rights under the Option Agreement and the option to any affiliate or third party or to enter into a joint venture in connection therewith provided that any assignment, transfer or joint venture by XGEL shall be subject to agreement by the assignee, transferee or joint venture partner to be bound by the terms of this agreement.



Reserves



There are no proven (measured) reserves reported on this Project at this time.



Geology



The Edum Banso concession is underlain by basic to intermediate metavolcanic rocks, volcanoclastic rocks, greywackes and phyllites of the Upper Birimian Formation. These rocks are intruded by Dixcove suite granites in the north, mainly composed of hornblende granites, granodiorites, and gabbros and diorites in the south. Similar intrusive granites in Ghana have been proven to host disseminated sulphide hosted gold mineralization. Two major thrust faults interpreted from aeromagnetic data run north by northeast through the project area.



Historic Work



The only gold production on the concession was from local miners working the auriferous gravels and quartz veins as reported by J.W. Lunn in the 1930s. Amercosa (formerly AngloAmerican) reportedly worked on the project in the late 1990s, however the results from this work are not published. St. Jude Resources, a Canadian public mining company, conducted geophysical surveys including magnetic and induced polarization surveys. The prospective structures identified in these surveys were followed up by geochemical surveys which included soil, trench and pit sampling.



Stream sediment sampling throughout the entire concession area by Newmont Mining in 2003 defined a broad anomalous gold zone approximately 7 km long by 1.5 km wide, roughly conforming to the regional geological trend. Follow-up soil (1,109 samples) and rock sampling by Newmont in 2004 further constrained this broadly anomalous area into two distinctive anomalies, while geophysical interpretation suggests they are coincident with the surface expression of two major North-South oriented thrust faults.



Phase I Exploration Program



A first phase exploration program (thePhase I Work Program) was implemented on the Edum Banso concession from August 2007 to January 2008 by Torkornoo & Associates Limited (TAL), at a cost of approximately $177,000. TAL is a Ghanaian geological consultancy with the principal being a professional geologist registered with The Australasian Institute of Mining and Metallurgy (AusIMM).



Based on the complex structural nature of gold deposits identified to date by Third Parties within the Hwini-Butre/Benso-Subriso gold district, the Phase I Work Program encompassed infill soil sampling, reconnaissance geology / prospecting, hand auger sampling and trenching designed to identify cost-effective drill targets. The tighter soil geochemical coverage (200m) was implemented to better define the length-extents and trends of the gold-in-soil anomalies detected by the historical Newmont soil program (2004). The deep auger components of the program was proposed to test the geochemical signature of gold-in-soil anomalies at depth in order to better define trenching and drilling targets. The results of this program are noted hereunder.



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Phase I fieldwork consisted of the following:




●
        Grid establishment: 8.4 km baseline, 73.8 km gridlines;




●
        Soil sampling: 2,703 samples collected, 1,815 samples submitted for gold analysis;




●
        Rock sampling: 68 samples;




●
        Hand auger sampling: 252 holes / samples;




●
        Trenching: 6 trenches (319 meters), 214 channel samples.



Soil / Rock Sampling; Methodology  Results



The first pass of the soil sampling survey was carried out using a classical digging tool called a soso to a typical depth 0.5 meters. Infill sampling in areas of interest was implemented by shallow auger sampling to a 1.0 meter depth. A total 1,815 soil samples were submitted for gold analysis.



TAL arbitrarily set the anomalous
threshold for the soil sample results at 0.05 ppm gold based on past work experience in the Hwini-Butre / Benso-Subriso gold
district. 123 out of the 1,815 soil samples (approx. 7%) returned gold values greater than the 0.05 ppm anomalous threshold. The
soil geochemistry survey outlined a 8.0 km long by approximately 0.6 km wide, gold-in-soil anomalous trend conforming to the
regional NNE structural trend. This gold-in-soil anomaly (> 0.05 ppm Au) tends to be patchy in nature and / or to pinch-out
along its 8.0 km extent. The term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) =
1,000 part per billion (ppb). Four areas (i.e. Zone A, B, C and D) within the defined gold-in-soil anomalous corridor were relative
continuity and / or the favorable geological and structural settings of the gold-in-soil anomalies.



Zone A, located to the north of the town of Edum Banso, extends from gridline 14700N to 15200N (500 meters). Zone B, located to the northeast of the hamlet of Edum Dominase, extends from line 11300N to 12100N (800 meters). Zone C is an approximately 200 meter by 200 meter area located in the east-central portion of the concession. This zone is characterized by three (3) consecutive, strongly anomalous gold-in-soil values over a 50 meter distance on Line 11300N. Zone D consists of a NE-trending zone of discrete gold-in-soil values extending from L8200N to L9900N (1,700 meters) at the south-western extremity of the concession.



Based on geophysical interpretation, including airborne magnetic and radiometric data, the Zone C and Zone D gold-in-soil anomalies appear to be spatially associated with the contact between the Birimian Metavolcanics and the circular Mpohor Intrusive Complex.



A total of 68 rock (float) samples were collected during reconnaissance geological mapping carried out alongside the soil sampling. This rock sampling produced a single exploration-significant gold value from a float of iron oxide stained quartz located to the south of the Zone D gold-in-soil anomaly. Similarly to the Zone C and Zone D anomalies this anomalous quartz float also appears to lie proximate to the inferred metavolcanic-Mpohor Complex contact.



Deep Auger Sampling; Methodology  Results



As a follow up to the soil sampling a deep auger program was implemented on the four priority areas to test the geochemical signature of the gold-in-soil anomalies at depth within the saprolite horizon in order to better define trenching targets. A total of 252 sites were augered to an average depth of approximately 4.0 meters with a one (1) meter sample collected from the saprolite horizon at the bottom of each hole. Auger hole spacing was typically 25 meters, with some 12.5 meter infilling.



TAL set the anomalous threshold for the auger sample results at 0.10 ppm gold based on past work experience in the Hwini-Butre / Benso-Subriso gold district. 19 (7.5%) out of the 252 deep auger samples returned gold values greater than the 0.10 ppm anomalous threshold.



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Manual Trenching; Methodology  Results



The Zone A and Zone D deep auger anomalies (> 0.10 ppm Au) were further tested by three (3) trenches totaling 160 meters and three (3) trenches totaling 159 meters, respectively. The trenches were manually excavated with pickaxes and shovels to a vertical depth of 4 meters. A total of 214 channel samples were collected from the sidewall of the six (6) trenches totaling 319 meters. Samples consisted of horizontal channels, typically 1 meter or 2 meters in length, cut approximately 0.1 meter above the floor of the trench.



The Zone A trenching failed to yield any significant gold results. Trench EBTR005 yielded the only exploration  significant gold results from the Zone D trenching in the form of a length-weighted average grade of 1.23 ppm gold over a 4 meter trench-length (2 samples). The anomalous section is characterized by chlorite altered mafic metavolvanic rock hosting fine, iron oxide stained, quartz stringers.



Results / Recommendations



Although the Edum Banso Phase I Work Program only yielded limited exploration-significant gold results, the spatial association of the Zone C and Zone D gold-in-soil and deep auger anomalies, the anomalous trench EBTR005 channel samples, and the auriferous quartz float, with the geophysically interpreted, north-western rim of the Mpohor Intrusive Complex is of considerable exploration significance.



Economically significant gold mineralization is known to exist along the south- eastern margin of the circular Mpohor Complex, approximately 2 km to the south-east of the Edum Banso concession. Although published information, geophysical interpretation, and the results of the present work program indicate that the Edum Banso concession shares a similar geological / structural setting as the deposits located on the south- eastern rim of the Mpohor Complex, it by no means implies that the Edum Banso property hosts similar mineral deposits.



Recommended work to further advance the project includes: (a) additional deep auger sampling of the Zone C and Zone D gold-in-soil anomalies; (b) continued reconnaissance geology and rock (float) sampling along the inferred margin of the Mpohor Complex; and (c) detail structural interpretation of the property area based on the airborne magnetic and radiometric data. Further exploration activities will be planned once an ongoing geological, geochemical and geophysical data compilation has been completed.




Item 3.
        LEGAL PROCEEDINGS



Neither the Registrant nor any of its subsidiaries is a party or of which any of their property is the subject in any material pending legal proceedings that exceeds 10% of the current assets of the Registrant and its subsidiaries on a consolidated basis.




Item 4.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



As we do not have a class of securities registered under either Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, we are not subject to proxy rules. Accordingly, no matters were submitted to a vote of security holders of the Registrant, through the solicitation of proxies or otherwise, during the quarter ended December 31, 2008.



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PART II




Item 5.
        MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



Market information




(i)
        Bid and ask prices for our common stock are quoted from broker dealers on the OTCBB under the symbol XTGR.




(ii)
        The following table sets forth the range of high and low bid prices for our common stock on the OTCBB for each full quarterly period within the two most recent fiscal years and any subsequent interim period for which financial statements are included, or are required to be included by Article 3 of Regulation S-X. The quotations reflect inter-dealer prices and do not include mark-ups or mark-downs or commissions and do not represent actual transactions..




PERIOD
        HIGH BID
        LOW BIDOctober 1, 2008 through December 31, 2008
        $1.50
        $0.25July 1, 2008 through September 30, 2008
        $1.73
        $1.10April 30, 2008 through June 30, 2008
        $2.05
        $1.31January 1, 2008 through March 31, 2008
        $1.45
        $1.15October 1, 2007 through December 31, 2007
        $1.40
        $0.90July 1, 2007 through September 30, 2007
        $1.35
        $0.55April 1, 2007 through June 30, 2007
        $1.14
        $0.66January 1, 2007 through March 31, 2007
        $0.98
        $0.67October 1, 2006 through December 31, 2006
        $1.30
        $0.60July 1, 2006 through September 30, 2006
        $1.30
        $0.90April 1, 2006 through June 30, 2006
        $1.28
        $0.96January 1, 2006 through March 31, 2006
        $1.25
        $0.94



The last reported sales price of our common stock on OTCBB on March 26, 2009 was $0.70.



Holders



As of March 27, 2009, we have 439 shareholders of record holding 31,330,602 Shares issued and outstanding having a par value of $0.001 per common share.



Dividends



We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors. Our retained earnings deficit currently limits our ability to pay dividends.



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Securities Authorized for Issuance Under Equity Compensation Plans



The following table sets forth information relating to our outstanding equity compensation plans as of December 31, 2008:




NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS(A)
        WEIGHTED AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANS AND RIGHTS(B)
        NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (INCUDING SECURITIES REFLECTED IN COLUMN (A)(C)Equity Compensation Plans Approved by Security Holders
        N/A
        N/A
        N/AEquity Compensation Plans Not Approved by Security Holders2005 Equity Incentive Compensation Plan (1)
        1,080,000
        $ 0.75
        1,820,000TOTAL
        1,080,000
        $ 0.75
        1,820,000




(1)
        As of December 31, 2008, 100,000 options have been exercised under the 2005 Equity Incentive Compensation Plan by our former Project Manager, Operations.



A description of our 2005 Equity Incentive Compensation Plan is contained later in this Report under Part III, Item 11  Executive Compensation - Stock Option Plans.



Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities



None.




Item 6.
        SELECTED FINANCIAL DATA



As a smaller reporting company, we are not required to provide the information required under this item.




Item 7.
        MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS



The following discussion and analysis of our consolidated financial conditions and results of operations for the year ended December 31, 2008 and 2007 should be read in conjunction with the consolidated financial statements and the related notes to our consolidated financial statements and other information presented elsewhere in this Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Report, particularly in the item entitled Risk Factors beginning on page 8 of this Report. Our consolidated audited financial statements are stated in United States Dollars and are prepared in
accordance with United States Generally Accepted Accounting Principles.



Plan of Operations



We are a gold exploration company engaged in the exploration of gold properties in the Republic of Ghana, West Africa. Our mining portfolio currently consists of 246.84 square kilometers (also referred to herein assq km) comprised of 51.67 sq km for our Banso Project, 55.65 sq km for our Muoso Project, 33.65 sq km for our Apapam Project, 44.76 sq km for our Kwabeng Project, 40.51 sq km for our Pameng Project and 20.60 sq km for our Edum Banso Project, or 60,969 acres, pursuant to the leased and licensed areas set forth in our respective mining leases, prospecting licenses and/or option agreement.



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Our strategic plan is, with respect to our gold projects: (i) to define potential reserves on our exploration projects; (ii) to mine the mineralized material, where possible, to generate cash proceeds to assist funding of our exploration programs; and (iii) to acquire further interests in gold mineralized projects and oil and gas prospects that fall within the criteria of providing a geological basis for development of drilling initiatives that can enhance shareholder value by demonstrating potential to define reserves.



We anticipate that our ongoing efforts, subject to adequate funding being available, will continue to be focused on the exploration and development of our properties and completing acquisitions in strategic areas.



Our ability to continue to expand land acquisitions and drilling opportunities during the next 12 months is dependent on adequate capital resources being available. In October 2008, we temporarily suspended our operations at the Kwabeng Project while Management considers a more economic and efficient manner in which to extract and process the gold recovered from the mineralized material at this Project. Assuming that we will be able to continue to derive cash proceeds from the sale of the gold recovered from the mineralized material at our Kwabeng Project, we intend to continue to advance operations at our Kwabeng Project, recover gold for sale and acquire further interests in mineral projects by way of acquisition or joint venture participation.



We anticipate that, over the next 12 months, we will spend an aggregate of $2,000,000 comprised of $500,000 for mining operating, capital and administrative costs at our Kwabeng Project, $1,000,000 for exploration expenses and approximately $500,000 for general and administrative expenses. However, we would not expend this amount unless we are able to derive cash proceeds from the sale of the gold recovered from the mineralized material at our Kwabeng Project or raise additional capital.



We require additional capital to implement our plan of operations. We anticipate that these funds primarily will be raised through equity and debt financing or from other available sources of financing. If we raise additional funds through the issuance of equity or convertible debt securities, it may result in the dilution in the equity ownership of investors in our common stock. There can be no assurance that additional financing will be available upon acceptable terms, if at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to take advantage of prospective new opportunities or acquisitions, which could significantly and materially restrict our operations, or we may be forced to discontinue our current projects.



We do not expect to purchase significant ore processing and gold recovery equipment as our Wash Plant has sufficient capacity to handle our processing requirements at our Kwabeng Project. We rent our earthmoving and ancillary earthmoving equipment fleet in connection with our operations at our Kwabeng Project. We plan to increase the number of key mining personnel including technical consultants, contractors and skilled laborers during the next 12 months. Our current business strategy is that we plan to continue engaging technical personnel under contract where possible as Management believes that this strategy, at its current level of development, provides the best services available in the circumstances, leads to lower overall costs, and provides the best flexibility for our business operations.



The cash proceeds derived from the
sale of 608.50 fine ounces of gold recovered from the mineralized material at our Kwabeng Project during the Bulk Test (defined
herein), as discussed elsewhere in this Report, was categorized as Recovery of Gold. The Bulk Test was only a pre-production stage
test that was completed on March 25, 2007. Since April 24, 2007 to December 31, 2008, we have recovered 8,162.84 fine ounces of gold
from the mineralized material at our Kwabeng Project and derived cash proceeds of $6,441,593 from the related gold sales.



Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007



Our loss for the year ended December 31, 2008 was $3,231,403 as compared to a loss of $1,874,757 for the year ended December 31, 2007, an increase of $1,356,646. We incurred expenses of $6,239,722 in the year ended December 31, 2008 as compared to $5,319,503 in the year ended December 31, 2007, an increase of $920,219. The increase in expenses in the year ended December 31, 2008 can be primarily attributed to exploration costs of $5,140,679 incurred mostly in connection with (a) exploration programs at our Banso and Muoso Project, our Apapam Project and our Edum Banso Project; (b) a drilling program of 3,001 meters; and (c) operational costs for our Kwabeng Project as compared to $3,932,845 expended on these projects in the year ended December 31, 2007. Exploration costs were incurred in connection with our exploration programs at our Banso and Muoso, Apapam and Edum Banso Projects and
costs associated with extracting and producing the mineralized material at our Kwabeng Project which we have booked as exploration expenses. General and administrative expenses (G&A) were $1,035,369 as compared to $1,348,898 for the year ended December 31, 2007. A down-sizing of management consultants, a significant reduction in legal costs and labor costs at our Kwabeng Project in the year ended December 31, 2008 attributed to the decrease in G&A.



- 44 -

Our loss for the year ended December 31, 2008 was greater than our loss for the year ended December 31, 2007 due to (i) a significant net unrealized loss on trading securities of $857,980 (compared to a gain of $389,793 in 2007); and (ii) a foreign exchange loss of $424,559 (compared to a foreign exchange gain of $366,687 in 2007). Trading securities were comprised mostly of investments in common shares and income trust units of resource companies. The net unrealized loss can be attributed to a decrease in the market value of those securities due to poor market conditions and economic strain, in particular, the significant weakening of the Canadian dollar in which our marketable securities are denominated.



Other items totaled a gain of
$3,008,319 for the year ended December 31, 2008 compared to a gain of $3,444,746 for the year ended December 31, 2007. In
particular, during the year ended December 31, 2008, we recovered and sold 4,809.02 fine ounces of gold recovered from the
mineralized material at our Kwabeng Project for cash proceeds of $4,140,765 which was booked as Recovery of Gold as compared to
$2,692,242 for the year ended December 31, 2007. We had a foreign exchange loss of $424,559 for the year ended December 31, 2008
(2007  gain of $366,687) which can be attributed to the weakening of the Canadian dollar. Our portfolio of marketable
securities is largely Canadian currency denominated. The sharp depreciation of the Canadian dollar resulted in the bulk of the
foreign exchange loss. Additionally, the continuing strength of the US dollar increased our expenses that are denominated in other
foreign currencies. Consequently, transactions denominated in US dollars would be more expensive.



Our portfolio of marketable securities had an unrealized loss of $857,980 (compared to an unrealized gain of $389,793 in 2007) due to declining market conditions and economic strain which commenced in the summer of 2008. Our securities portfolio realized a gain of $2,585 on the sale of trading securities during the year ended December 31, 2008 compared to a loss in 2007 of $94,855. Other income derived from dividends increased slightly (2007 - $196,621; 2007 - $163,119). The decrease in our interest expense (2008 - $49,113; 2007 - $72,240) is largely attributable to our convertible debentures which interest we ceased paying from the end of the second quarter due to the automatic conversion of the debentures.



Our basic and diluted loss per share for the year ended December 31, 2008 was $0.11 compared to $0.07 per share for the year ended December 31, 2007. The weighted average number of shares outstanding was 30,389,400 at December 31, 2008 compared to 28,216,728 for the year ended December 31, 2007. The increase in the weighted average number of shares outstanding can be attributed to the issuance of (i) 1,062,000 shares in connection with a private placement financing completed during fiscal 2008; (ii) 100,000 shares in connection with an exercise of stock options; (iii) 650,000 shares in connection with an automatic conversion of debentures; (iv) 631,000 shares in connection with an exercise of warrants; and (v) 131,243 shares in connection with a settlement of outstanding accounts for services rendered to our subsidiary, XG Mining.



Liquidity and Capital Resources



Historically, our principal source of funds is our available resources of cash and cash equivalents and investments, as well as debt and equity financings. During the year ended December 31, 2008, we received cash proceeds of $4,140,765 derived from the sale of gold recovered from the mineralized material at our Kwabeng Project during this financial reporting period.



Unrealized Gain on Trading Securities



Unrealized gain on trading
securities represents the change in value of securities as of the end of the financial reporting period. For the year ended December
31, 2008, we recognized an unrealized loss of $857,980 on trading securities, as compared to an unrealized gain of $389,793 for the
year ended December 31, 2007. The change reflects a significant decline in the value of our resource company investments following a
significant rebound during 2007. Trading securities were comprised mostly of investments in common shares and income trust units of
resource companies.



Liquidity Discussion



Net cash provided by financing activities for the year ended December 31, 2008 was $2,489,460 (2007 - $812,540).



As of December 31, 2008, we had working capital equity of $1,299,625, comprised of current assets of $1,834,897 less current liabilities of $535,272. Our current assets were comprised mostly of $271,573 in cash and cash equivalentsand $1,470,382 in trading securities, which is based on our analysis of the ready saleable nature of the securities including an existing market for the securities, the lack of any restrictions for resale of the securities and sufficient active volume of trading in the securities. Our trading securities are held in our investment portfolio with an established brokerage in Canada in which we primarily invest in the common shares and income trust fund units of publicly traded resource companies.



- 45 -

We have historically relied on equity and debt financings to finance our ongoing operations. Existing working capital, possible debt instruments, anticipated warrant exercises, further private placements and anticipated cash flow are expected to be adequate to fund our operations over the next year. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private equity financings and a convertible debt financing. In connection with our business plan, Management anticipates operating expenses and capital expenditures as follows: (i) $1,000,000 for exploration; (ii) $500,000 for mine operating, capital and administration costs at our Kwabeng Project; and (iii) $500,000 for general and administrative costs.



Until we achieve profitability, we will need to raise additional capital for our exploration programs. We intend to finance these expenses with our cash proceeds and to the extent that our cash proceeds are not sufficient, then from further sales of our equity securities or debt securities, or from investment income. Thereafter, we may need to raise additional capital to meet long-term operating requirements. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities or existing agreements and projects which could significantly and materially restrict our business operations.



The independent auditors report accompanying our December 31, 2008 and December 31, 2007 consolidated financial statements contains an explanatory paragraph expressing doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.



Material Commitments



Mineral Property Commitments



Save and except for fees payable from time to time to (i) the Minerals Commission for an extension of an expiry date of a prospecting license (current consideration fee payable is $15,000) or mining lease or annual operating permits; (ii) the EPA for the issuance of permits prior to the commencement of any work at a particular concession or the posting of a bond in connection with any mining operations undertaken by our company; and (iii) a legal obligation associated with our mineral properties for clean up costs when work programs are completed, we are committed to expend an aggregate of less than $500 in connection with annual or ground rent and mining permits to enter upon and gain access to the following concessions and such other financial commitments arising out of any approved exploration programs in connection therewith:




(i)
        the Kwabeng concession (Kwabeng Project);




(ii)
        the Pameng concession (Pameng Project);




(iii)
        the Banso and Muoso concessions (Banso and Muoso Project);




(iv)
        the Apapam concession (Apapam Project); and




(v)
        the Edum Banso concession (Edum Banso Project).



With respect to the Kwabeng, Pameng and Apapam Projects, upon and following the commencement of gold production, a royalty of 3% of the net smelter returns is payable quarterly to the Government of Ghana.



With respect to the Edum Banso Project:




(a)
        $5,000 is payable to Adom Mining Limited (Adom) on the anniversary date of the Option Agreement in each year that we hold an interest in the agreement;




(b)
        $200,000 is payable to Adom when the production of gold is commenced (or $100,000 in the event that less than 2 million ounces of proven and probable reserves are discovered on our project at this concession; and




(c)
        an aggregate production royalty of 2% of the net smelter returns (NSR) from all ores, minerals and other products mined and removed from the project, except if less than 2 million ounces of proven and probable reserved are discovered in or at the Project, then the royalty shall be 1% of the NSR.



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Repayment of Convertible Debentures and Accrued Interest



We are committed to repay our Convertible Debenture holders outstanding amounts of principal and interest calculated at 7% per annum on an aggregate face value of $900,000. Interest only payments are payable quarterly on the last days of September, December, March and June in each year of the term or until such time that the principal has been repaid in the full. The Convertible Debenture holders are entitled, at their option, to convert, at any time and from time to time, until payment in full of their respective Convertible Debentures, all or any part of the outstanding principal amount of the Convertible Debenture, plus the Accrued Interest, into shares (theConversion Shares) of our common stock at the conversion price of $1.00 per share (theConversion Price).
Provided there is a registration statement then in effect covering the Conversion Shares, or the Conversion Shares may otherwise be resold pursuant to Rule 144, the outstanding principal amount of each Convertible Debenture, and all accrued but unpaid interest, shall automatically be converted into shares of our common stock, at the Conversion Price, in the event that our common stock trade for 20 consecutive trading days (a) with a closing bid price of at least $1.50 per share and (b) a cumulative trading volume during such twenty (20) trading day period of at least 1,000,000 shares.



In June 2008, we provided notice of automatic conversion of the Convertible Debentures and in July 2008 we converted $650,000 of the aggregate principal of the Convertible Debentures by way of the issuance of 650,000 Conversion Shares.



Purchase of Significant Equipment



We do not expect to purchase significant ore processing and gold recovery equipment as our Wash Plant has sufficient capacity to handle our processing requirements at our Kwabeng Project. We rent our earthmoving and ancillary earthmoving equipment fleet in connection with our ongoing operations at our Kwabeng Project.



Off Balance Sheet Arrangements



We have no off balance sheet arrangements.



Significant Accounting Applications



Application of Critical Accounting Policies



We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.



Mineral Properties



The valuation of our mineral
properties (the Assets) is based upon the fair value of cash or securities issued as consideration for the purchase of
the Assets.



Asset Retirement Obligation



The fair value of our asset retirement obligation is recorded as liabilities when they are incurred. As such, the valuation could be affected by the following:



Costs - When work actually commences on asset retirement obligations, actual costs could materially differ from what has been projected. This would materially affect the value of the obligation.



Ghanaian laws and regulations - If the Government of Ghana approves or changes laws and regulations that affect mining operations in Ghana, the cost of meeting our asset retirement obligations could change materially.



Deferred Income Taxes



As we have no history of profitability and currently have derived limited cash proceeds, we have recognized a 100% valuation on our future tax assets. If our company becomes profitable in the future, a material amount of these future tax assets could actually be realized.



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Recent Accounting Pronouncements



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities by requiring enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect an entitys operating results, financial position, and cash flows.



SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. Early adoption is permitted. The Company is currently reviewing the provisions of SFAS No. 161 and have not yet adopted the statement. However, as the provisions of SFAS No. 161 are only related to disclosure of derivative and hedging activities, the Company does not believe the adoption of SFAS No. 161 will have a material impact on the consolidated operating results, financial position, or cash flows.



In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets or FSP FAS 142-3. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of the position is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the intangible asset. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is assessing the potential impact that the adoption of FSP FAS 142-3 may have on the Companys consolidated financial position, results of operations or cash flows.



In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles or SFAS No. 162. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement shall be effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not believe that implementation of this standard will have a material impact on the consolidated financial position, results of operations or cash flows.



In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. Management has determined that the adoption of FSP EITF 03-6-1 will not have an impact on the Financial Statements.



We do not anticipate that the adoption of the foregoing pronouncements will have a material effect on our companys consolidated financial position or results of operations.




Item 7A.
        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



As a smaller reporting company, we are not required to provide the information required under this item.




Item 8.
        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Our financial statements are contained in pages F-1 through F-24, which appear at the end of this annual report.



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Item 9.
        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



There have been no changes in and disagreements with our accountants on accounting and financial disclosure from the inception of our company through to the date of this Report.



Item 9A(T).
        CONTROLS AND PROCEDURES



Disclosure Controls and Procedures



Our management, including our
Chief Executive Officer who also serves as our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based on that evaluation,
our Chief Executive Officer concluded that as of the end of the period covered by this Report our disclosure controls and procedures
were not effective such that the information required to be disclosed in our Securities and Exchange Commission reports (i) is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. Our
Chief Executive Officer is not a financial or accounting professional, and we lack any accounting staff who are sufficiently trained
in the application of U.S. generally accepted accounting principles. Until such time as we hire a chief financial officer or
similarly titled person with the requisite experience in the application of U.S. GAAP, there is a likelihood that we may experience
material weaknesses in our disclosure controls that may result in errors in our financial statements in future periods.



Our management, including our
Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error
and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,
within our company have been detected.



Managements Report on Internal Control over Financial Reporting



As we were not subject to the
reporting requirements of the Securities Exchange Act of 1934 at December 31, 2008, our management was not then required to assess
the effectiveness of our internal control over financial reporting as of December 31, 2008 pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002.



This annual report does not
include an attestation report of the Registrants independent registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by the Registrants registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that permit the Registrant to provide only managements report
in this annual report.



Changes in Internal Control over Financial Reporting



There has been no change in our
internal control over financial reporting identified in connection with our evaluation that occurred during the last fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.



Item 9B.
        OTHER INFORMATION



None.



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PART III




Item 10.
        DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



Directors and Executive Officers



The following individuals serve as our executive officers and members of our Board:




Name
        Age
        PositionJames Longshore
        42
        President, Chief Executive Officer, Chief Financial Officer and DirectorRichard Grayston
        64
        Chairman of the Board and DirectorPeter Minuk
        44
        DirectorRebecca Kiomi Mori
        58
        Secretary and TreasurerRobert H. Montgomery
        47
        DirectorYves Pierre Clement
        44
        Vice-President, ExplorationAlhaji Nantogma Abudulai
        66
        Vice-President, Ghana Operations



James Werth Longshore,BA, Economics

President (Principal Executive Officer), Principal Financial Officer and Director



Mr. Longshore is one of the founders of our company and was appointed as President in March 2007 and a director in November 2006. Mr. Longshore has been a director of our Ghanaian subsidiaries, XGEL and XOG Ghana, since April 2006 and XG Mining, since June 2006 and an officer and director of Xtra Energy since March 2007. Mr. Longshore has approximately 17 years of business experience. Since 1995 to the present, Mr. Longshore has been President of Brokton International Ltd. (Brokton), a Turks & Caicos Islands, British West Indies based private investment company focused on investing in natural resource companies. Since February 2004 until February 2006, Mr. Longshore has provided financial advisory consulting services to our company through his corporation, Brokton. From 1990 to 1995, he was a salesman
for UNUM Insurance Company selling in both the United States and Canada.



In August 2002, Mr. Longshore, formerly known as James Pincock, entered into a settlement agreement and order with the Ontario Securities Commission (theOSC). Pursuant to a settlement agreement reached between the OSC and Mr. Longshore, he voluntarily agreed to abide by the order which included, among other things, that he cease trading in securities for five years from the date of the order (until August 27, 2007), with the exception that after three years he can trade in securities beneficially owned by him in his personal accounts in his name, and that he be prohibited from becoming or acting as an officer or director of any issuer in Ontario or an officer or director of any issuer which has an interest directly or indirectly in any registrant, for a period of five years. Mr. Longshore paid the OSC approximately
$17,740 for cost incurred by the OSC and its Staff with respect to the proceeding. Mr. Longshore disclosed this matter to the company prior to his appointment as a director and advised that as he was a non-resident of Ontario at the relevant time, he had sought, relied and acted upon poor financial and legal advice of Ontario advisors and completed certain securities transactions which ultimately gave rise to the Order.



Mr. Longshore devotes approximately 90% of his time to our company. He currently provides 10% of his time to unrelated companies. He has not entered into a management consulting agreement with our company.



Richard W. Grayston

Chairman and Director



Mr. Grayston was appointed as
Chairman and a director of our company in March 2007. Since 1985, Mr. Grayston has been a self-employed business consultant
with more than 23 years of experience in financial and economic consulting and public company management including preparation of
valuations, feasibility studies, capital budgeting, financial reorganizations, profit improvement studies and business plans and
going public and business brokerage during which time he has provided his consulting services to oil and gas, mineral exploration,
technology, manufacturing, retail and wholesale consumer businesses. Since May 2008, Mr. Grayston has been a director of Ranger
Canyon Energy Inc., a private Alberta, Canada oil and gas company seeking listing on the TSX Venture



- 50 -

Exchange (theTSXV) and was appointed its Chief Executive Officer and Chief Financial Officer in
October 2008. Since September 2008, he has been the Vice President, Finance and Chief Financial Officer of Ruby Red Resources Inc.,
a TSXV listed issuer. Since January 1991 to May 2008, Mr. Grayston was a director of New Cantech Ventures Inc., an oil and gas
and mineral exploration (diamonds and gold) company listed on the TSXV. From April 1980 to September 1985, Mr. Grayston served
as the Executive Vice President, Secretary and a director of Brent Resources Group Ltd., a TSXV and NASDAQ listed junior oil company
with operations in Canada, the U.S.A. and Australia. Mr. Grayston received a Ph.D. in Business Administration, Finance and
Economics from the University of Chicago in 1971, a MBA from the University of Chicago in 1969, a BA, in Commerce and Business
Administration from the University of British Columbia in 1966 and has been a certified general accountant since 1977.



Peter Minuk

Director



Mr. Minuk was appointed as
Vice-President, Finance (VP, Finance) and a director of our company in
March 2007. He resigned as VP, Finance effective January 31, 2009. Mr. Minuk has more than 21 years of experience in finance
and investment as well as experience in project management, training and developing staff and client relationships. Prior to joining
our company, from 1990 to 2006, Mr. Minuk was employed by BMO InvestorLine (BMO) in connection with implementing project management protocols. Mr. Minuk
received a Masters Certificate in Project Management from the Schulich School of Business, York University in 2005. He obtained his
FCSI (Fellow of the Canadian Securities Institute) in 1989 and completed the Business Administration program from Southern Alberta
Institute of Technology in 1985.



Rebecca Kiomi Mori

Secretary and Treasurer



Ms. Mori was appointed Secretary and Treasurer of our company in September 2005 and was further appointed as a director of our company in April 2006. . Ms. Mori resigned as a director of our company in July 2008. Since March 2007, Ms. Mori has been a director of Verbina Resources Inc. (Verbina) and was appointed Secretary-Treasurer in August 2007. Verbina is a uranium and silica exploration company listed on the TSXV. Ms. Mori has approximately 26 years of legal experience. During the last 14 years, she has worked exclusively with both public and private mining companies and also at a Toronto, Ontario, Canada corporate securities law firm. Prior to joining our company as Secretary and Treasurer, Ms. Mori was (i) the Corporate Securities Legal Assistant for Roxy Resources Inc., a private Canadian mining
company from December 2003 to May 2005, (ii) a consultant to our company from June 2005 to August 2005 for purposes of becoming Secretary and Treasurer, and (iv) responsible for the corporate operations including the maintenance of corporate records and regulatory reporting requirements for Valucap Investments Inc. from July 1997 to June 2004 and Romarco Minerals Inc. from May 1997 to March 2003. Prior thereto, she was a corporate securities legal assistant and/or law clerk at numerous Toronto, Canada law firms. Ms. Mori has diverse legal experience with respect to securities, corporate, accounting, finance and litigation matters and is knowledgeable and experienced in Canadian and U.S. securities matters.



As of the date of this Report, Ms. Mori devotes  a variable percentage of her time in consulting services to our company and provides her services on an as needed basis. She provides the majority of her time to unrelated companies. There is no management consulting agreement in force at this time. She previously entered into a non-disclosure agreement with our company which remains in force.



Robert H. Montgomery,CA

Director



Mr. Montgomery was appointed as a director of our company in March 2007. Mr. Montgomery has more than 14 years of experience as a chartered accountant and auditor and since February 2004 to the present time, he has been a Sarbanes Oxley contractor to the Canadian Imperial Bank of Commerce (CIBC), from February 2004 to January 2005, the Bank of Montreal (BMO) from January to September 2005 and a major Canadian investment dealer from September 2005 to December 2006 where he was responsible for documentation and testing of key financial and non-financial controls for various lines of business and assisted in the preparation and transfer of Sarbanes Oxley audit files and supporting documentation from their project groups to internal and external auditors.



- 51 -

Mr. Montgomery assisted in the design of process narrative and control testing documents, planned and supervised the control testing program at a major Canadian investment dealer and assisted in the remediation of control gaps and weaknesses identified during the testing process and as identified by its external auditors. At CIBC, Mr. Montgomery assisted in the update and maintenance a database identifying key accounts, linking them to controls procedures, testing and lines of business and assisted in theremediation of control gaps and weaknesses identified during the testing process. He was not employed during the periods December 2006 to March 2007 and August 2003 to February 2004. Prior thereto, from January 2001 to August 2003, Mr. Montgomery was the Manager, Financial Operations of Ellis Entertainment Corporation, Toronto where
he was responsible for accounting and financial reporting. Mr. Montgomery was a Senior Auditor and Auditor of the US/Canada Regional Audit Group of Walt Disney Company in Toronto from 1998 to 2000 and 1996 to 1997 respectively where he conducted contractual compliance audits for the product licensing divisions throughout the U.S. and Canada assessing audit risk factors and developing methodologies to validate information supplied by licensees relating to royalty reporting and maintenance of quality controls for licensed products. Prior thereto, Mr. Montgomery was a Senior Staff Accountant - Audit from 1994 to 1995 at Price Waterhouse LLP, Toronto, an audit and tax contractor from 1992 to 1994 and a Staff Accountant - Audit at Deloitte & Touche LLP, Toronto from 1990 to 1992. He obtained his Chartered Accountant designation from the Institute of Chartered Accountants of Ontario in 1994 and a BA, Double Major Economics and Geography from the University of Victoria,
Victoria, British Columbia in 1985



Yves Pierre Clement,P. Geo.

Vice-President, Exploration of the Registrant



Mr. Clement was appointed Vice-President, Exploration of our company in May 2006. Mr. Clement has over 20 years experience in the generation, evaluation and development of a wide variety of mineral resources hosted by a broad spectrum of geological environments in Canada and South America. Prior to joining our company, Mr. Clement was senior project geologist for Lake Shore Gold Corp. in the Timmins lode gold camp from August 2005 to April 2006 and was formerly exploration manager for Aurora Platinum Corp.s Sudbury operations from August 2000 to July 2005. Prior to joining Aurora, Mr. Clement was senior project geologist/exploration manager for Southwestern Resources Corp. where he was responsible for the generation of precious and base metal exploration opportunities in Peru and Chile. Mr. Clements experience will allow us to further maximize the
value of our existing portfolio of projects, as well as allowing us to expand our strategy of growth through strategic acquisitions.



Mr. Clement devotes approximately 50% of his time in consulting services to our company. He provides 50% of his time to an unrelated company. He has entered into a management consulting agreement but has not entered into a non-competition and non-disclosure agreement with our company.



Alhaji Nantogma Abudulai,BA

Vice-President, Ghana Operations



Mr. Abudulai was appointed as Vice-President, Ghana Operations of our company in April 2005. He is also the Secretary and the President, Community Relations and a director of our Ghanaian subsidiaries. Mr. Abudulai has more than 13 years of business experience in the mining industry. Since 1994 to the present, he has been the managing director of CME (Ghana) Ltd. and a director of CME (Nigeria) Ltd. where his responsibilities included protocol and coordination of government and local authority affairs in Ghana and overseeing logistical support. Mr. Abudulai is familiar and experienced with respect to obtaining mining permits, prospecting and reconnaissance licenses and the government regulations relating thereto and is knowledgeable in connection with environmental and forestry issues, immigration and customs affairs. He is also the President of the Canadian Business
Association in Ghana. Mr. Abudulais primary responsibilities with our company is the continued improvement of community and government relations on behalf of our Ghanaian subsidiaries. His experience and background will assist us with respect to acquiring approvals, prospecting licenses, mining leases and related permits and renewals from the relevant government authorities in order to advance our operations in Ghana and acting as our primary government liaison in connection therewith.



As at the date of this Report, Mr. Abudulai devotes  a variable amount of his time in consulting services to our company, as he is currently engaged on an as needed basis. He provides the majority of his time to unrelated companies. There is no management consulting agreement in force at this time. He previously entered into a non-disclosure agreement with our company which remains in force.



There are no family relationships between any of the executive officers and directors. Each director currently holds office until he resigns or his successor is elected at an annual stockholders meeting.



- 52 -

Consultants



One of our business strategies is to outsource other services as required by our company from time to time by engaging consultants on an as needed basis or entering into special purpose contracts with a view to maintaining our overhead at a reasonable, affordable cost.



Compliance with Section 16(a) of the Exchange Act



We are not currently subject to Section 16(a) of the Securities Exchange Act of 1934, and, therefore, our directors and executive officers, and persons who own more than 10% of our common stock are not required to file with the Securities and Exchange Commission reports disclosing their initial ownership and changes in their ownership of our common stock.



Corporate Governance Matters



Committees Generally



Our Board has not established any committees. In March 2007, we expanded our Board by appointing two independent directors, Mr. Richard Grayston and Mr. Robert Montgomery, and we intend to establish audit and compensation committees in the future.



Audit Committee



Our Board has not yet established an audit committee. The functions of the audit committee are currently performed by the entire Board. We are not currently subject to any law, rule or regulation requiring that we establish or maintain an audit committee. We may establish an audit committee in the future if the Board determines it to be advisable or we are otherwise required to do so by applicable law, rule or regulation.



Board of Directors Independence



Our Board consists of four members. Although, we are not currently subject to any law, rule or regulation requiring that all or any portion of our Board include independent directors, two of our directors are considered to be an independent director, within the meaning of Nasdaq Marketplace Rule 4200.



Audit Committee Financial Expert



While we have not yet established
an audit committee, Robert Montgomery is an audit committee financial expert within the meaning of Item 401(h)(1) of
Regulation S-K. In general, an audit committee financial expert is an individual member of the audit committee (board of
directors) who (a) understands generally accepted accounting principles and financial statements, (b) is able to assess the general
application of such principles in connection with accounting for estimates and accruals, (c) has experience preparing, auditing,
analyzing or evaluating financial statements comparable to the breadth and complexity of issues that can reasonably be expected to
be raised by the companys financial statements, (d) understands internal controls over financial reporting (e) understands
audit committee functions, and (f) is an independent director.



Code of Ethics



Effective May 12, 2008, we adopted a Code of Ethics applicable to our principal executive officer, principal financial and accounting officers and persons performing similar functions. A Code of Ethics is a written standard designed to deter wrongdoing and to promote (a) honest and ethical conduct, (b) full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, (c) compliance with applicable laws, rules and regulations, (d) the prompt reporting violation of the code and (e) accountability for adherence to the Code. We will provide a copy of our Code of Ethics, without charge, to any person desiring a copy of the Code of Ethics, by written request to us at our principal offices.



Nominating Committee



We have not yet established a nominating committee. Our Board, sitting as a board, performs the role of a nominating committee. We are not currently subject to any law, rule or regulation requiring that we establish a nominating committee.



- 53 -

Compensation Committee



We have not yet established a compensation committee. Our Board, sitting as a board, performs the role of a compensation committee. We are not currently subject to any law, rule or regulation requiring that we establish a compensation committee.



Nomination of Directors



We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board. Given our relative size, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the
consideration of director nominees.




Item 11.
        EXECUTIVE COMPENSATION



Summary Compensation Table



The following table sets forth information relating to all compensation awarded to, earned by or paid by us during each of the two fiscal years ended December 31, 2008 and 2007 respectively, to: (a) our chief (principal) executive officer; (b) each of our executive officers who was awarded, earned or we paid more than $100,000; and (c) up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our company at December 31, 2008. The value attributable to any option awards is computed in accordance with FAS 123R.



SUMMARY COMPENSATION TABLE




NAME ANDPRINCIPALPOSITION(A)
        YEAR(B)
        SALARY($)(C)
        BONUS($)(D)
        STOCK AWARDS($)(E)
        OPTION AWARDS($)(F)
        NON-EQUITYINCENTIVE PLAN COMPENSATION($)(G)
        NONQUALIFIED DEFERRED COMPENSATION EARNINGS($)(H)
        ALL OTHER COMPENSATION($)(I)
        TOTAL($)(J)James LongshoreCEO, CFO (1)
        2008

2007
        0

0
        0


0
        0

0
        13,948

14,040
        0

0
        0

0
        0

0
        13,948

14,040William EdwardMcKechnie,CEO, CFO andChairman (2)
        2008

2007
        22,000 (3)
        0

0
        0

0
        0

0
        0

0
        0

0
        0

0
        0

22,000




(1)
        Mr. Longshore was appointed as our CEO and CFO on March 3, 2007.




(2)
        Mr. McKechnie served as our CEO, CFO and Chairman from August 26, 2005 to March 2007. Our company had entered into a management consulting agreement with Goldeye Consultants Ltd., a corporation of which Mr. McKechnie is a director and from which Mr. McKechnie received this compensation. Mr. McKechnie has executed a non-disclosure and non-competition agreement.




(3)
        All of the 716,000 nonqualified stock options previously granted to Mr. McKechnie on June 21, 2005, April 21, 2006 and August 1, 2006 were cancelled in March 2007.



- 54 -

As of the date of this Report, Mr. Longshore does not receive any monetary compensation in his capacity as our Chief Executive Officer and we are not a party to any management consulting agreement with Mr. Longshore. The terms of any future compensation to be paid to Mr. Longshore will be determined by our Board of which he is a member. At such time, the Board will consider a number of factors in determining Mr. Longshores compensation including the scope of his duties and responsibilities to our company and the time he devotes to our business. At the Boards discretion, it will be determined whether to consult with any experts or other third parties in fixing the amount of Mr. Longshores compensation. During fiscal 2008, Mr. Longshore did not receive any compensation package. He was reimbursed for out-of-pocket expenses incurred on behalf of
our company in connection with carrying out his duties and responsibilities.



Management Consulting Agreements



As of the date of this Report, we
have entered into the following management consulting agreement with an officer of our company.



Management Consulting Agreement with Vice-President, Exploration



We entered into a management
consulting agreement with our Vice-President, Exploration (VPE), Yves Clement,
on May 1, 2006 for a term of 36 months which will expire on May 1, 2009. We plan to negotiate terms for renewal of this agreement
with our VPE prior to the expiration of the term. Our VPE is paid approximately $4,720 (Cdn$5,000) per month and is reimbursed for
expenses incurred by him on behalf of our company. Our VPE shall be paid compensation equivalent to 18 months fees, based on
the rate of compensation being paid at the relevant time in the event of (i) termination without cause; or (ii) a Change of Control.
Our VPE shall provide certain services to our company including, but not limited to, making project or property site attendances as
may be required from time to time, preparing progress reports with respect to our mineral exploration projects, conducting due
diligence as may be required from time to time in connection with potential mineral properties; reviewing geological data and
liaising with principal owners of mineral properties in which our company may wish to acquire an interest, meeting with government
authorities and retaining technical experts, making recommendations to the Board and its relevant committees with respect to the
acquisition and/or abandonment of mineral exploration properties and preparing and implementing, subject to Board approval, plans
for the operation of our company including plans for exploration programs, costs of operations and other expenditures in connection
with our mineral projects.



Compensation of Management



The terms of the foregoing
management consulting agreement was determined at the time by our then constituted Board. Our Board has complete authority in
determining the amount of compensation to be paid and the other terms of management compensation. At the time of entering into the
foregoing agreement, our Board did not consult with any consultants or other third parties in determining the amount of compensation
to be paid under the management consulting agreement.



Termination Agreements



On July 1, 2007, we entered into a
new management consulting agreement with our former VP, Finance, Peter Minuk, for a term of one year expiring on July 1, 2008 which
was subsequently extended on mutual agreement to January 1, 2009. On mutual agreement, both parties agreed to terminate this
agreement. Mr. Minuk resigned as an officer of the company in January 2009. As of the date of this Report, Mr. Minuk
continues to provide limited services to our company on an as needed basis, and is paid approximately $472 per month
(Cdn$500) for such services.



On November 1, 2007, we renewed a management consulting agreement with our VP, Ghana Operations, Alhaji Abudulai for a further one year term expiring on November 1, 2008. On mutual agreement, both parties agreed to terminate this agreement. As of the date of this Report, Mr. Abudulai will provide certain services to our company on an as needed, non-compensatory basis including, but not necessarily limited to, improving community and government relations in Ghana.



On December 1, 2007, we entered
into a new management consulting agreement with our Secretary and Treasurer (theST), Kiomi Mori, for a term of one year. On mutual agreement, both parties agreed to
terminate this agreement in September 2008. As of the date of this Report, our ST continues to provide certain consulting services
to our company on an as needed basis including, but not necessarily limited to, preparing corporate documents and
regulatory filings, and is paid approximately $47 per hour (Cdn$50) for such services.



- 55 -

Outstanding Equity Awards at Fiscal Year End



The following table sets forth information concerning our grant of options to purchase shares of our common stock during the fiscal year ended December 31, 2008 to each person named in the Summary Compensation table.




NAME(A)
        NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS(#)EXERCISABLE(B)
        NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS(#)UNEXERCISABLE(C)
        EQUITY INCENTIVE PLAN AWARDS NUMBER OF SECURITIES UNDERLYING UNEXERCISED UNEARNED OPTIONS(#)(D)
        OPTION EXERCISE PRICE($)(E)
        OPTION EXPIRATION DATE(F)
        NUMBER OF SHARES OR UNITS OF STOCK THATHAVENOTVESTED(#)(G)
        MARKET VALUE OF SHARES OR UNITS OF STOCK THATHAVENOTVESTED($)(H)
        EQUITY INCENTIVE PLANA AWARDS NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THATHAVENOTVESTED(#)(I)
        EQUITY INCENTIVE PLAN AWARDS MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THATHAVENOTVESTED(#)(J)James Longshore
        0
        0
        0
        N/A
        N/A
        0
        0
        0
        0



2005 Equity Incentive Compensation Plan



On June 21, 2005, our Board
authorized, approved and adopted, our 2005 Equity Incentive Compensation Plan. As the Plan was not submitted to our shareholders for
approval and was not approved by our shareholders, we are not permitted to issue any options qualifying as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended. A total of 3,000,000 shares of our common stock have been
reserved for issuance under the Plan. As at the date of this Report, we have granted options to purchase an aggregate of 1,080,000
shares of our common stock. During 2008, 300,000 options were cancelled pursuant to Board approval and 100,000 options were
exercised by a former consultant of the company.



The purpose of the Plan is to
encourage stock ownership by our officers, directors, key employees and consultants, and to give such persons a greater personal
interest in the success of our business and an added incentive to continue to advance and contribute to us. Our Board, or a
committee of the Board, will administer the Plan including, without limitation, the selection of the persons who will be awarded
stock grants and granted options, the type of options to be granted, the number of shares subject to each option and the exercise
price.



Plan options may only be
non-qualified options. In addition, the Plan allows for the inclusion of a reload option provision, which permits an eligible person
to pay the exercise price of the option with shares of common stock owned by the eligible person and receive a new option to
purchase shares of common stock equal in number to the tendered shares. Furthermore, compensatory stock amounts may also be issued.
The term of each plan option and the manner in which it may be exercised is determined by our Board or a committee of the Board. All
awards granted under the Plan are made on a case by case basis, and the Board does not have any policy regarding timing of grants,
amount of shares subject to any option to be granted or the exercise price, except that the Board does consider and/or approve
option grants to incoming officers and directors at the time of their appointment.



Eligibility



Our officers, directors, key employees and consultants are eligible to receive stock grants and non-qualified options under the Plan.



- 56 -

Administration



The Plan will be administered by
our Board or an underlying committee. The Board or an underlying committee determines from time to time those of our officers,
directors, key employees and consultants to whom stock grants or plan options are to be granted, the terms and provisions of the
respective option agreements, the time or times at which such options shall be granted, the dates such Plan options become
exercisable, the number of shares subject to each option, the purchase price of such shares and the form of payment of such purchase
price. All other questions relating to the administration of the Plan, and the interpretation of the provisions thereof and of the
related option agreements, are resolved by our Board or an underlying committee. As of the date of this Report, the entire Board
administers the Plan.



Shares Subject to Awards



We have currently reserved 3,000,000 of our authorized but unissued shares of common stock for issuance under the Plan, and a maximum of 3,000,000 shares may be issued, unless the Plan is subsequently amended, subject to adjustment in the event of certain changes in our capitalization, without further action by our Board and stockholders, as required. Subject to the limitation on the aggregate number of shares issuable under the Plan, there is no maximum or minimum number of shares as to which a stock grant or Plan option may be granted to any person. Shares used for stock grants and Plan options may be authorized and unissued shares or shares reacquired by us. Shares covered by Plan options which terminate unexercised or shares subject to stock awards which are forfeited or cancelled will again become available for grant as additional options or stock awards, without decreasing the
maximum number of shares issuable under the Plan.



The Plan provides that, if our
outstanding shares are increased, decreased, exchanged or otherwise adjusted due to a share dividend, forward or reverse share
split, recapitalization, reorganization, merger, consolidation, combination or exchange of shares, an appropriate and proportionate
adjustment shall be made in the number or kind of shares subject to unexercised options and in the purchase price per share under
such options. Any adjustment, however, does not change the total purchase price payable for the shares subject to outstanding
options. In the event of our proposed dissolution or liquidation, a proposed sale of all or substantially all of our assets, a
merger or tender offer for our shares of common stock, the option may be assumed, converted or replaced by the successor corporation
(if any) or may substitute equivalent awards or provide substantially similar consideration to awardees. In the event such successor
corporation (if any) refuses or otherwise declines to assume or substitute awards, as provided above, (i) the vesting of any or all
Awards granted pursuant to this Plan will accelerate immediately prior to the effective date of a transaction described above and
(ii) any or all Options granted pursuant to the Plan will become exercisable in full prior to the consummation of such event at such
time and on such conditions as our Board or an underlying committee determines. If such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such time as determined by our Board or an underlying
committee.



Terms of Exercise



The Plan provides that the options
granted thereunder shall be exercisable from time to time in whole or in part, unless otherwise specified by our Board or an
underlying committee.



Exercise Price



The purchase price for shares
subject to options is determined by our Board or an underlying committee and may be below fair market value on the day of grant. If
the purchase price is paid with consideration other than cash, our Board or an underlying committee shall determine the fair value
of such consideration to us in monetary terms.



The per share purchase price of shares issuable upon exercise of a plan option may be adjusted in the event of certain changes in our capitalization, but no such adjustment shall change the total purchase price payable upon the exercise in full of options granted under the Plan.



Manner of Exercise



Plan options are exercisable by
delivery of written notice to us stating the number of shares with respect to which the option is being exercised, together with
full payment of the purchase price therefor. Payment shall be in cash, checks, certified or bank cashiers checks, promissory
notes secured by the shares issued through exercise of the related options, shares of common stock or in such other form or
combination of forms which shall be acceptable to our Board or an underlying committee.



- 57 -

Option Period



The term of each non-qualified
stock option is determined and fixed by our Board or an underlying committee.



Termination



Except as otherwise expressly provided in the option agreement, all Plan options are nonassignable and nontransferable, except by will or by the laws of descent and distribution, and during the lifetime of the optionee, may be exercised only by such optionee. If an optionee shall die while our employee or within three months after termination of employment by us because of disability, or retirement or otherwise, such options may be exercised, to the extent that the optionee shall have been entitled to do so on the date of death or termination of employment, by the person or persons to whom the optionees right under the option pass by will or applicable law, or if no such person has such right, by his executors or administrators.



In the event of termination of
employment because of death while an employee or because of disability, an optionees options may be exercised not later than
the expiration date specified in the option or one year after the optionees death, whichever date is earlier, or in the event
of termination of employment because of retirement or otherwise, not later than the expiration date specified in the option or three
months after the optionees retirement, whichever date is earlier.



If an optionees employment by us terminates because of disability and such optionee has not died within the following three months, the options may be exercised, to the extent that the optionee shall have been entitled to do so at the date of the termination of employment, at any time, or from time to time, but not later than the expiration date specified in the option or one year after termination of employment, whichever date is earlier.



If an optionees employment shall terminate for any reason other than death or disability, such optionee may exercise the options to the same extent that the options were exercisable on the date of termination, for up to three months following such termination, or on or before the expiration date of the options, whichever occurs first. In the event that the optionee was not entitled to exercise the options at the date of termination or if the optionee does not exercise such options (which were then exercisable) within the time specified herein, the options shall terminate.



If an optionees employment
with us is terminated for any reason whatsoever, and within three months after the date thereof the optionee either (i) accepts
employment with any competitor of, or otherwise engages in competition with us, or (ii) discloses to anyone outside our company or
uses any confidential information or material of our company in violation of our policies or any agreement between the optionee and
our company, the committee, in its sole discretion, may terminate any outstanding stock option and may require the optionee to
return to us the economic value of any award that was realized or obtained by the optionee at any time during the period beginning on
that date that is six months prior to the date the optionees employment with us is terminated.



Our Board or an underlying
committee may, if an optionees employment with us is terminated for cause, annul any award granted under the Plan to such
employee and, in such event, our Board or an underlying committee, in its sole discretion, may require the optionee to return to us
the economic value of any award that was realized or obtained by an optionee at any time during the period beginning on that date
that is six months prior to the date the optionees employment with us is terminated.



Modification and Termination of Plan



Our Board or an underlying
committee may amend, suspend or terminate the Plan at any time. However, no such action may prejudice the rights of any holder of a
stock grant or an optionee who has prior thereto been granted options under the Plan. Any such termination of the Plan shall not affect
the validity of any stock grants or options previously granted thereunder. Unless terminated by our Board, the Plan shall continue
to remain effective until such time as no further awards may be granted and all awards granted under the Plan are no longer
outstanding.



- 58 -

Compensation of Directors



We established compensation
arrangements for our directors for each individuals service and expense on our Board in March 2007. Directors fees are paid on a
quarterly basis. As of December 31, 2008, we did not pay fees to directors for their attendance at Board meetings. As an austerity
measure, the Board agreed to reduce their respective directors fees by 50% in and from the fourth quarter ended December 31,
2008.



The following table sets forth
information relating to the compensation paid to our directors for the fiscal year ended December 31, 2008:



DIRECTOR COMPENSATION




NAME(A)
        FEESEARNEDOR PAIDIN CASH($)(B)
        STOCKAWARDS($)(C)
        OPTIONAWARDS($)(D)
        NON-EQUITYINCENTIVE PLANCOMPENSATION($)(E)
        NON-QUALIFIED DEFERRED COMPENSATION EARNNGS($)(F)
        ALL OTHERCOMPENSATION($)(G)
        TOTAL($)(H)James Longshore
        7,239
        0
        0
        0
        0
        0
        7,239Richard Grayston
        7,239
        0
        0
        0
        0
        0
        7,239Peter Minuk
        5,428
        0
        0
        0
        0
        0
        5,428Robert Montgomery
        5,428
        0
        0
        0
        0
        0
        5,428Rebecca Kiomi Mori (1)
        3,305
        0
        0
        0
        0
        0
        3,305




(1)
        Ms. Mori resigned as a director in July 2008.




Item 12.
        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



At March 27, 2009, we had 31,330,602 shares of common stock issued and outstanding. The following table sets forth information known to us as of March 27, 2009 relating to the beneficial ownership of shares of our common stock by:




●
        each person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock;




●
        each director;




●
        each named executive officer; and




●
        all named executive officers and directors as a group.



- 59 -

Unless otherwise indicated, the business address of each person listed is in care of Suite 301, 360 Bay Street, Toronto, Ontario, Canada, M5H 2V6, except for our President whose address is Lot 3, Rose Island Estates, Nassau, Bahamas. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.




NAME OF BENEFICIAL OWNER
        AMOUNT AND NATUREOF BENEFICIAL OWNERSHIP
        PERCENTAGEOF CLASSJames Longshore
        2,117,000 shares (1)
        6.77%Rebecca Kiomi Mori
        108,000 shares (2)
        .34%Yves Pierre Clement
        324,000 shares (3)
        1.03%Alhaji Nantogma Abudulai
        208,000 shares (4)
        .66%Richard W. Grayston
        142,000 shares (5)
        .45%Peter Minuk
        80,000 shares (6)
        .26%Robert H. Montgomery
        78,000 shares (7)
        .25%Officers and Directors as a Group (7 persons)
        3,057,000 shares (1) to (7)
        9.76%5% StockholdersBrokton International Ltd.
        2,117,000 shares (1)
        6.77%Mark T. McGinnis
        2,084,855 shares (8)
        6.53%




(1)
        Consists of (a) 2,000,000 shares which are owned by Brokton International Ltd.; (b) Consists of 108,000,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 9,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Report; namely April 12 and May 12, 2009. Does not include 45,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 4,500 in each month. Brokton International Ltd. (Brokton) is a British West Indies corporation, whose sole
beneficial owner is James Longshore. Mr. Longshore exercises sole investment, voting and disposition powers over the shares included in the table.




(2)
        Consists of 105,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 3,000 shares which shall become issuable upon options that shall vest and be exercisable within 30 days following the date of this Report; namely April 21, 2009 at which time all of the options will have vested.




(3)
        Consists of (a) 306,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (b) 18,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Report; namely April 1 and May 1, 2009. Does not include 90,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 9,000 in each month.




(4)
        Consists of (a) 100,000 shares of common stock; (b) 102,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 6,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Report; namely April 1 and May 1, 2009 at which time all of the options will have vested.




(5)
        Consists of (a) 25,000 shares of common stock; (b) 108,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 9,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Report; namely April 5 and May 5, 2009. Does not include 45,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 4,500 in each month.




(6)
        Consists of (a) 2,000 shares of common stock; (b) 72,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 6,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Report; namely April 5 and May 5, 2009. Does not include 30,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 3,000 in each month.



- 60 -

(7)
        Consists of (a) 72,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (b) 6,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Report; namely April 12 and May 12, 2009. Does not include 30,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 3,000 in each month.




(8)
        Consists of (a) 2,024,826 shares of common stock held
by Mark McGinnis of which an aggregate of 70,000 shares of common stock is held by Mr. McGinnis in trust for his children; and (b)
60,029 shares of common stock held by his spouse.




Item 13.
        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE



Consulting Agreement with Principal Shareholder



From February 1, 2004 through February 1, 2006, we were a party to a consulting agreement with Brokton, a company which, as of the date of this Report, owns 6.77% of our common stock and one of only two shareholders that owns more than 5% of our issued and outstanding shares of common stock. Under the terms of this agreement, we engaged Brokton as a consultant to advise our Management with respect to hiring additional qualified management, providing support with respect to operational matters and government compliance in Ghana, mergers and acquisitions and financial advisory. James Longshore, our President and one of the directors of our company, is the President of Brokton and exercises sole investment, voting and disposition powers over the shares of Brokton. Mr. Longshore is also a director of our wholly-owned subsidiaries, XGEL and XOG Ghana (since April 2006) and Chief Operating
Officer (since February 2007) and a director of XG Mining (since June 2006) and Chief Operating Officer (since February 2007) and a director and officer of Xtra Energy (since March 2007). From February 2004 to February 2006, we paid Brokton an aggregate of $53,176 for its consulting services and reimbursed Brokton for expenses incurred by Brokton on behalf of our company.



A Principal Shareholder Manages our Investment Portfolio



We currently, and since
approximately five years ago, maintain our brokerage account with Haywood Securities Inc. (Haywood) in connection with our investment accounts. Haywood provides us with investment
recommendations and custodial services. Haywood is a member of the Toronto Stock Exchange, the TSXV, the Montreal Exchange, the
Canadian Trading and Quotation System, the Canadian Investor Protection Fund, and the Investment Dealers Association of Canada. In
addition, Haywood Securities (USA) Inc., a wholly owned subsidiary is a broker-dealer registered to transact securities business in
the United States and a member of the National Association of Securities Dealers. We pay Haywood ordinary brokerage commissions on
trade transactions and our accounts with Haywood can be terminated at any time. Mark McGinnis, a shareholder who, as at the date of
this Report, owns 6.53% of our common stock and one of only two shareholders that owns more than 5% of our issued and outstanding
shares of common stock, is an investment advisor with Haywood and is the manager of our accounts with Haywood.



Director Independence



Two of the members of our Board
(Robert H. Montgomery and Richard W, Grayston) are independent within the meaning of Marketplace Rule 4200 of the National
Association of Securities Dealers, Inc.




Item 14.
        PRINCIPAL ACCOUNTING FEES AND SERVICES



Davidson & Company LLP is our principal accountant for our audit of annual financial statements and review of the financial statements included in this Report and served as our independent registered public accounting firm for 2008 and 2007. The following table shows the fees that were billed for the audit and other services provided by such firm for 2008 and 2007.




2008
        
        2007Audit Fees
        
        $
        55,000
        
        $
        69,800Audit-Related Fees
        
        
        18,000
        
        
        23,000Tax Fees
        
        
        0
        
        
        0All Other Fees
        
        
        0
        
        
        4,500Total
        
        $
        73,000
        
        $
        97,300



- 61 -

Audit Fees



This category includes the audit of our annual financial statements, review of financial statements included in this Report and services that are normally provided by the independent auditors in connection with their engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of our interim financial statements.



Audit-Related Fees



This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees. The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.



Tax Fees



This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.



All Other Fees



This category consists of fees for other miscellaneous items.



Our Board has adopted a procedure
for pre-approval of all fees charged by our independent auditors. Under the procedure, the Board approves the engagement letter with
respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings,
by a designated member of our Board. Any such approval by the designated member is disclosed to the entire Board at the next
meeting. The audit and tax fees paid to the auditors with respect to 2008 were pre-approved by the entire Board.



PART IV




Item 15.
        EXHIBITS, FINANCIAL STATEMENT SCHEDULES




Exhibit No.
        Description of Document




2.1
        Stock Exchange Agreement dated October 31, 2003, by and between Xtra-Gold Resources Corp. and the former shareholders of Xtra Energy Corp. (formerly Xtra-Gold Resources, Inc.) (1)3.1
        Articles of Incorporation of Silverwing Systems Corporation filed on September 1, 1998 (1)3.2
        Articles of Amendment filed on August 19, 1999 to change our name to Advertain On-Line Inc. (1)3.3
        Articles of Amendment filed June 18, 2001 to change our name to RetinaPharma International, Inc. (1)3.4
        Articles of Amendment filed on October 8, 2001 to increase our capital stock from 25,000,000 to 100,000,000 shares (1)3.5
        Articles of Amendment filed December 16, 2003 to change our name to Xtra-Gold Resources Corp. and to increase our capital stock from 100,000,000 to 250,000,000 shares (1)3.6
        By-laws (1)4.1
        Form of common stock purchase warrant (1)4.2
        Form of convertible debenture (1)10.1
        2005 Equity Compensation Plan (1)10.2
        Memorandum of Agreement dated October 28, 2003, by and between Xtra Energy Corp. (formerly Xtra-Gold Resources, Inc.) and Ranger Canyon
Energy Inc. (formerly CaribGold Minerals, Inc.) (1)10.3
        Agreement dated February 16, 2004 by and between Xtra-Gold Resources Corp. and Akrokeri-Ashanti Gold Mines Inc. (1)10.4
        Share Purchase Agreement dated December 22, 2004 between Xtra-Gold Resources Corp. and 2058168 Ontario Inc., the trustee for
the former note holders of Akrokeri-Ashanti Gold Mines Inc. (1)



- 62 -

10.5
        Share Purchase Agreement dated December 22, 2004 among Xtra-Gold Resources Corp., 2058168 Ontario Inc., the trustee for the former debenture holders of Akrokeri-Ashanti Gold Mines Inc. and 2060768 Ontario Corp. (1)10.6
        Stock
Cancellation Agreement dated December 22, 2004 by and between Paul Zyla and Xtra-Gold Resources Corp. with respect to the cancellation of 24,000,000 shares (1)10.7
        Stock Cancellation Agreement dated December 22, 2004 by and between William Edward McKechnie and Xtra-Gold Resources Corp. with respect to the cancellation of 23,000,000 shares (1)10.09
        Stock option agreement dated September 5, 2005 with William Edward McKechnie, as optionee (1)10.10
        Stock option agreement dated April 21, 2006 with William Edward McKechnie, as optionee (1)10.11
        Stock option agreement dated April 21, 2006 with Kiomi Mori, as optionee (1)10.12
        Stock option agreement dated May 1, 2006 with Michael Byron, as optionee (1)10.13
        Stock option agreement dated May 1, 2006 with Yves Clement, as optionee (1)10.14
        Stock option agreement dated May 1, 2006 with Alhaji Abudulai, as optionee (1)10.15
        Stock option agreement dated August 1, 2006 with William Edward McKechnie, as optionee (1)10.16
        Stock option agreement dated August 1, 2006 with John Douglas Mills, as optionee (1)10.17
        Management consulting agreement dated May 1, 2006 with Yves Clement (1)10.18
        Management consulting agreement dated July 1, 2006 with Goldeye Consultants Ltd. (1)10.19
        Management consulting agreement dated July 1, 2006 with Rebecca Kiomi Mori (1)10.20
        Consulting agreement dated August 1, 2006 with JD Mining Ltd. (1)10.21
        Management consulting agreement dated November 1, 2006 with Alhaji Nantogma Abudulai (1)10.22
        Mining lease with respect to the Kwabeng concession (1)10.23
        Mining lease with respect to the Pameng concession (1)10.24
        Prospecting license with respect to the Banso and Muoso concessions (1)10.25
        Prospecting license with respect to the Apapam concession (1)10.26
        Prospecting license with respect to the Edum Banso concession (1)10.27
        Option Agreement dated October 17, 2005 between Xtra-Gold Exploration Limited and Adom
Mining Limited (1)10.28
        Consulting agreement dated January 17, 2006 between Xtra-Gold Mining Limited and Bio Consult Limited (1)10.29
        Purchase and Sale Agreement dated September 1, 2006 between Xtra Oil & Gas Ltd. and TriStar Oil & Gas Partnership (1)10.30
        Amending Agreement dated October 19, 2006 between Xtra-Gold Exploration and Adom Mining Limited (1)10.31
        Stock option agreement dated March 5, 2007 with Richard W. Grayston, as optionee (1)10.32
        Stock option agreement dated March 5, 2007 with Peter Minuk, as optionee (1)10.33
        Stock option agreement dated March 12, 2007 with Robert H. Montgomery, as optionee (1)10.34
        Stock option agreement dated March 12, 2007 with Brokton International Ltd., as optionee (1)10.35
        Stock option agreement dated March 12, 2007 with John Douglas Mills, as optionee (1)10.36
        Consulting agreement dated March 20, 2007 with JD Mining Ltd. (1)10.37
        Settlement termination agreement dated March 22, 2007 with Goldeye Consultants Ltd. and William Edward McKechnie (1)10.38
        Lease with 360 Bay Street Limited dated March 29, 2007 (1)10.39
        Termination agreement dated January 31, 2008 with JD Mining Ltd. and John Douglas Mills (1)10.40
        Mining lease with respect to the Apapam Concession14
        Code of Ethics (1)31.1
        Rule 13a-14(a)/15d-14(a) Certifications of Principal Executive Officer31.2
        Rule 13a-14(a)/15d-14(a) Certifications of Principal Financial Officer32.1
        Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer




(1)
        Incorporated by reference to the registration statement on Form SB-2 on Form S-1, SEC File No. 333-139037



- 63 -

SIGNATURES

(General Instruction D)



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.




Date:
        March 27, 2009
        XTRA-GOLD RESOURCES CORP.




(Registrant)




/s/  James Werth Longshore

By
        _________________________

James Werth Longshore

President, Chief Executive Officer and

Chief Financial Officer





Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.




Signature
        Title
        Date/s/  James Werth Longshore
_________________________
James Werth Longshore
        President, Chief Executive Officer, Chief Financial Officer and Director
        March 27, 2009/s/  Richard W. Grayston
_________________________
Richard W. Grayston
        Chairman and Director
        March 27, 2009/s/  Peter Minuk
_________________________
Peter Minuk
        Director
        March 27, 2009/s/  Robert H. Montgomery
_________________________
Robert H. Montgomery
        Director
        March 27, 2009



- 64 -

XTRA-GOLD RESOURCES CORP. AND SUBSIDIARIES

(An Exploration Stage Company)



CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)



December 31, 2008

















F-1

DAVIDSON&COMPANY LLPChartered Accountants
        A Partnership of Incorporated Professionals





REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM



To the Stockholders and the Board of Directors of

Xtra-Gold Resources Corp. and subsidiaries

(An exploration stage company)



We have audited the accompanying consolidated balance sheets of Xtra-Gold Resources Corp. and subsidiaries (an exploration stage company) as at December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders equity and cash flows for the years then ended and for the period from the beginning of the exploration stage on January 1, 2003 to December 31, 2008. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended and for the period from the beginning of the exploration stage on January 1, 2003 to December 31, 2008 in conformity with generally accepted accounting principles in the United States of America.



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations. These matters raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regards to these matters are discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



DAVIDSON & COMPANY LLP






Vancouver, Canada
        Chartered Accountants



March 24, 2009





1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6

Telephone (604) 687-0947 Fax (604) 687-6172



F-2

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. Dollars)

AS AT DECEMBER 31




2008
        
        2007ASSETSCurrentCash and cash equivalents
        
        $
        271,573
        
        $
        334,265Investment in trading securities, at fair value(cost of $2,208,373 (2007 - $2,160,741)) (Note 4)
        
        
        1,470,382
        
        
        2,167,741Receivables and other
        
        
        92,942
        
        
        54,509Total current assets
        
        
        1,834,897
        
        
        2,556,515Equipment(Note 5)
        
        
        312,300
        
        
        260,024Deferred financing costs(Note 6)
        
        
        3,850
        
        
        23,101Oil and gas investment(Note 7)
        
        
        40,000
        
        
        Mineral properties(Note 8)
        
        
        1,662,564
        
        
        1,625,594TOTAL ASSETS
        
        $
        3,853,611
        
        $
        4,465,234LIABILITIES AND STOCKHOLDERS EQUITYCurrentAccounts payable and accrued liabilities
        
        $
        535,272
        
        $
        795,231Total current liabilities
        
        
        535,272
        
        
        795,231Convertible debentures(Note 9)
        
        
        250,000
        
        
        900,000Asset retirement obligation(Note 10)
        
        
        65,369
        
        
        28,399Total liabilities
        
        
        850,641
        
        
        1,723,630Stockholders equityCapital stock (Note 11)Authorized250,000,000 common shares with a par value of $0.001Issued and outstanding31,330,602 common shares ( 2007  28,756,359 common shares)
        
        
        31,331
        
        
        28,756Additional paid in capital
        
        
        12,742,360
        
        
        9,252,166Deficit
        
        
        (1,427,764
        )
        
        (1,427,764
        )Deficit accumulated during the exploration stage
        
        
        (8,342,957
        )
        
        (5,111,554
        )Total stockholders equity
        
        
        3,002,970
        
        
        2,741,604TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
        
        $
        3,853,611
        
        $
        4,465,234



History and organization of the Company(Note 1)

Contingency and commitments(Note 16)



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



F-3

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)




Cumulativeamounts fromthe beginning ofthe explorationstage onJanuary 1, 2003to December 31,2008
        
        YearEndedDecember 31,2008
        
        YearEndedDecember 31,2007EXPENSESAmortization
        
        $
        117,853
        
        $
        63,674
        
        $
        37,760Exploration
        
        
        10,953,724
        
        
        5,140,679
        
        
        3,932,845General and administrative
        
        
        4,027,901
        
        
        1,035,369
        
        
        1,348,898Write-off of mineral property
        
        
        26,000
        
        
        
        
        
        LOSS BEFORE OTHER ITEMS
        
        
        (15,125,478
        )
        
        (6,239,722
        )
        
        (5,319,503
        )OTHER ITEMSForeign exchange gain (loss)
        
        
        67,285
        
        
        (424,559
        )
        
        366,687Interest expense
        
        
        (238,086
        )
        
        (49,113
        )
        
        (72,240
        )Realized gains (losses) on sales of trading securities
        
        
        196,218
        
        
        2,585
        
        
        (94,855
        )Net unrealized gain (loss) on trading securities
        
        
        (856,507
        )
        
        (857,980
        )
        
        389,793Other income
        
        
        684,174
        
        
        196,621
        
        
        163,119Recovery of gold
        
        
        6,833,007
        
        
        4,140,765
        
        
        2,692,242Gain (loss) on disposal of property
        
        
        96,430
        
        
        
        
        
        6,782,521
        
        
        3,008,319
        
        
        3,444,746Loss for the period
        
        $
        (8,342,957
        )
        $
        (3,231,403
        )
        $
        (1,874,757
        )Basic and diluted loss per common share
        
        
        
        
        $
        (0.11
        )
        $
        (0.07
        )Basic and diluted weighted average number of common shares outstanding
        
        30,389,400
        
        
        28,216,728



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



F-4

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)




Cumulativeamounts fromthe beginning ofthe explorationstage onJanuary 1, 2003to December 31,2008
        
        YearEndedDecember 31,2008
        
        YearEndedDecember 31,2007CASH FLOWS FROM OPERATING ACTIVITIESLoss for the period
        
        $
        (8,342,957
        )
        $
        (3,231,403
        )
        $
        (1,874,757
        )Items not affecting cash:Amortization
        
        
        117,853
        
        
        63,674
        
        
        37,760Amortization of deferred financing costs
        
        
        42,352
        
        
        19,251
        
        
        9,241Accretion of asset retirement obligation
        
        
        10,534
        
        
        
        
        
        2,162Shares issued for services
        
        
        202,365
        
        
        196,865
        
        
        Stock-based compensation
        
        
        599,130
        
        
        156,444
        
        
        195,623Unrealized foreign exchange (gain) loss
        
        
        (182,634
        )
        
        385,947
        
        
        (416,970
        )Realized (gain) losses on sale of trading securities
        
        
        (196,218
        )
        
        (2,585
        )
        
        94,855Purchase of trading securities (Note 4)
        
        
        (10,786,303
        )
        
        (2,088,467
        )
        
        (475,825
        )Proceeds on sale of trading securities (Note 4)
        
        
        8,838,266
        
        
        1,544,484
        
        
        1,670,677Unrealized (gain) loss on trading securities
        
        
        856,507
        
        
        857,980
        
        
        (389,793
        )Gain on disposal of property
        
        
        (95,342
        )
        
        
        
        
        Write-off of mineral property
        
        
        26,000
        
        
        
        
        
        Expenses paid by stockholders
        
        
        2,700
        
        
        
        
        
        Changes in non-cash working capital items:(Increase) decrease in receivables and other
        
        
        (84,567
        )
        
        (38,433
        )
        
        39,180Increase (decrease) in accounts payable and accrued liabilities
        
        
        524,580
        
        
        (259,959
        )
        
        557,289Increase in due to related party
        
        
        50,000
        
        
        
        
        
        Net cash used in operating activities
        
        
        (8,417,734
        )
        
        (2,396,202
        )
        
        (550,558
        )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of convertible debentures
        
        
        900,000
        
        
        
        
        
        Deferred financing costs
        
        
        (46,202
        )
        
        
        
        
        Repurchase of capital stock
        
        
        (7,000
        )
        
        
        
        
        Issuance of capital stock, net of financing costs
        
        
        8,229,722
        
        
        2,489,460
        
        
        812,540Net cash provided by financing activities
        
        
        9,076,520
        
        
        2,489,460
        
        
        812,540



- continued -



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



F-5

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)




Cumulativeamounts fromthe beginning ofthe explorationstage onJanuary 1, 2003to December 31,2008
        
        YearEndedDecember 31,2008
        
        YearEndedDecember 31,2007Continued ...CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of equipment
        
        
        (433,976
        )
        
        (115,950
        )
        
        (207,712
        )Oil and gas property expenditures
        
        
        (250,137
        )
        
        (40,000
        )
        
        Acquisition of cash on purchase of subsidiary
        
        
        11,510
        
        
        
        
        
        Acquisition of subsidiary
        
        
        (25,000
        )
        
        
        
        
        Proceeds on disposal of assets
        
        
        310,390
        
        
        
        
        
        Net cashused in investing activities
        
        
        (387,213
        )
        
        (155,950
        )
        
        (207,712
        )Change in cash and cash equivalents during the period
        
        
        271,573
        
        
        (62,692
        )
        
        54,270Cash and cash equivalents, beginning of the period
        
        
        
        
        
        334,265
        
        
        279,995Cash and cash equivalents, end of the period
        
        $
        271,573
        
        $
        271,573
        
        $
        334,265



Supplemental disclosure with respect to cash flows(Note 13)



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



F-6

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Expressed in U.S. Dollars)




Common Stock
        
        AdditionalPaid inCapital
        
        Deficit
        
        DeficitAccumulatedDuring theExplorationStage
        
        TotalNumber of Shares
        
        AmountBalance, December 31, 2002
        
        12,364,085
        
        $
        12,364
        
        $
        1,412,842
        
        $
        (1,427,764
        )
        $
        
        
        $
        (2,558
        )Paid on behalf of the Company
        
        
        
        
        
        
        
        5,258
        
        
        
        
        
        
        
        
        5,258October 31, 2003, issuance of stock for acquisition of subsidiary
        
        50,350,000
        
        
        50,350
        
        
        (50,350
        )
        
        
        
        
        
        
        
        Loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        (2,700
        )
        
        (2,700
        )Balance, December 31, 2003
        
        62,714,085
        
        
        62,714
        
        
        1,367,750
        
        
        (1,427,764
        )
        
        (2,700
        )
        
        March, 2004 - private placement at $0.35 per share
        
        2,000,000
        
        
        2,000
        
        
        698,000
        
        
        
        
        
        
        
        
        700,000May, 2004 - private placement at $0.35 per share
        
        2,129,400
        
        
        2,129
        
        
        743,161
        
        
        
        
        
        
        
        
        745,290December, 2004 - acquisition of subsidiary via issuance of common stock
        
        2,698,350
        
        
        2,699
        
        
        1,616,311
        
        
        
        
        
        
        
        
        1,619,010Share issuance costs
        
        
        
        
        
        
        
        (76,298
        )
        
        
        
        
        
        
        
        (76,298
        )Loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        (398,533
        )
        
        (398,533
        )Balance, December 31, 2004
        
        69,541,835
        
        
        69,542
        
        
        4,348,924
        
        
        (1,427,764
        )
        
        (401,233
        )
        
        2,589,469May, 2005  cancellation of shares
        
        (47,000,000
        )
        
        (47,000
        )
        
        47,000
        
        
        
        
        
        
        
        
        June 2005  for services
        
        10,000
        
        
        10
        
        
        5,490
        
        
        
        
        
        
        
        
        5,500June, 2005  private placement at $0.55 per share
        
        536,218
        
        
        536
        
        
        294,384
        
        
        
        
        
        
        
        
        294,920August, 2005  private placement at $0.55 per share
        
        300,000
        
        
        300
        
        
        164,700
        
        
        
        
        
        
        
        
        165,000November, 2005  private placement at $0.55 per share
        
        1,549,354
        
        
        1,550
        
        
        850,595
        
        
        
        
        
        
        
        
        852,145



- continued -



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



F-7

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Expressed in U.S. Dollars)




Common Stock
        
        AdditionalPaid in Capital
        
        Deficit
        
        DeficitAccumulatedDuring theExplorationStage
        
        TotalNumber of Shares
        
        Amountcontinued ...Share issuance costs
        
        
        
        
        
        (130,714
        )
        
        
        
        
        (130,714
        )Stock-based compensation
        
        
        
        
        
        41,022
        
        
        
        
        
        41,022Loss for the year
        
        
        
        
        
        
        
        
        
        (272,572
        )
        (272,572
        )Balance, December 31, 2005
        
        24,937,407
        
        24,938
        
        5,621,401
        
        (1,427,764
        )
        (673,805
        )
        3,544,770February, 2006  conversion of promissory note at $0.55 per share
        
        90,909
        
        91
        
        49,909
        
        
        
        
        
        50,000March, 2006  exercise of warrants at $0.75 per share
        
        108,500
        
        108
        
        81,267
        
        
        
        
        
        81,375March, 2006 - private placement at $0.70 per share
        
        792,029
        
        792
        
        553,628
        
        
        
        
        
        554,420April, 2006  exercise of warrants at $0.75 per share
        
        177,200
        
        177
        
        132,723
        
        
        
        
        
        132,900June, 2006  cancellation of shares
        
        (10,000
        )
        (10
        )
        (6,990
        )
        
        
        
        
        (7,000
        )June, 2006 - private placement at $0.90 per share
        
        578,112
        
        578
        
        519,722
        
        
        
        
        
        520,300July, 2006 - private placement at $0.90 per share
        
        1,132,000
        
        1,132
        
        1,017,668
        
        
        
        
        
        1,018,800October, 2006  private placement at $1.10 per share
        
        282,000
        
        282
        
        309,918
        
        
        
        
        
        310,200Share issuance costs
        
        
        
        
        
        (240,616
        )
        
        
        
        
        (240,616
        )Stock-based compensation
        
        
        
        
        
        206,041
        
        
        
        
        
        206,041Loss for the year
        
        
        
        
        
        
        
        
        
        (2,562,992
        )
        (2,562,992
        )Balance, December 31, 2006
        
        28,088,157
        
        28,088
        
        8,244,671
        
        (1,427,764
        )
        (3,236,797
        )
        3,608,198



- continued -



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



F-8

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Expressed in U.S. Dollars)




Common Stock
        
        AdditionalPaid inCapital
        
        Deficit
        
        DeficitAccumulatedDuring theExplorationStage
        
        TotalNumber of Shares
        
        Amountcontinued ...October, 2007  Private placement at $1.35 per unit
        
        668,202
        
        
        668
        
        
        901,405
        
        
        
        
        
        
        
        
        902,073Share issuance costs
        
        
        
        
        
        
        
        (89,533
        )
        
        
        
        
        
        
        
        (89,533
        )Stock-based compensation
        
        
        
        
        
        
        
        195,623
        
        
        
        
        
        
        
        
        195,623Loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        (1,874,757
        )
        
        (1,874,757
        )Balance, December 31, 2007
        
        28,756,359
        
        
        28,756
        
        
        9,252,166
        
        
        (1,427,764
        )
        
        (5,111,554
        )
        
        2,741,604February, 2008  Private placement at $1.50 per unit
        
        1,062,000
        
        
        1,062
        
        
        1,591,938
        
        
        
        
        
        
        
        
        1,593,000May, 2008  Exercise of options at $0.75 per share

        

        100,000
        

        

        100
        
        
        74,900
        
        
        
        
        
        
        
        
        75,000June, 2008  Conversion of debentures at $1.00 per share

        

        650,000
        

        

        650
        
        
        649,350
        
        
        
        
        
        
        
        
        650,000July, 2008  Exercise of warrants at $1.50 per share

        

        631,000
        

        

        631
        
        
        945,869
        
        
        
        
        
        
        
        
        946,500December, 2008  For services at $1.50 per share

        

        131,243
        

        

        132
        
        
        196,733
        
        
        
        
        
        
        
        
        196,865Share issuance costs
        
        
        
        
        
        
        
        (125,040
        )
        
        
        
        
        
        
        
        (125,040
        )Stock-based compensation
        
        
        
        
        
        
        
        156,444
        
        
        
        
        
        
        
        
        156,444Loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        (3,231,403
        )
        
        (3,231,403
        )Balance, December 31, 2008
        
        31,330,602
        
        $
        31,331
        
        $
        12,742,360
        
        $
        (1,427,764
        )
        $
        (8,342,957
        )
        $
        3,002,970



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



F-9

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






1.
        HISTORY AND ORGANIZATION OF THE COMPANY



Silverwing Systems Corporation (the Company), a Nevada corporation, was incorporated on September 1, 1998. On June 23, 1999, the Company completed the acquisition of Advertain On-Line Canada Inc. (Advertain Canada), a Canadian company operating in Vancouver, British Columbia, Canada. The Company changed its name to Advertain On-Line Inc. (Advertain) on August 19, 1999. Advertain Canadas business was the operation of a web site, Advertain.com, whose primary purpose was to distribute entertainment advertising on the Internet.



In May 2001, the Company, being unable to continue its funding of Advertain Canadas operations, decided to abandon its interest in Advertain Canada. On June 15, 2001, the Company sold its investment in Advertain Canada back to Advertain Canadas original shareholder. On June 18, 2001, the Company changed its name from Advertain to RetinaPharma International, Inc. (RetinaPharma) and became inactive.



In 2003, the Company became a resource exploration company. On October 31, 2003, the Company acquired 100% of the issued and outstanding common stock of Xtra-Gold Resources, Inc. (XGRI). XGRI was incorporated in Florida on October 24, 2003. On December 19, 2003, the Company changed its name from RetinaPharma to Xtra-Gold Resources Corp.



In 2004, the Company acquired 100% of the issued and outstanding capital stock of Canadiana Gold Resources Limited (Canadiana) and 90% of the issued and outstanding capital stock of Goldenrae Mining Company Limited (Goldenrae). Both companies are incorporated in Ghana and the remaining 10% of the issued and outstanding capital stock of Goldenrae is held by the Government of Ghana.



On October 20, 2005, XGRI changed its name to Xtra Energy Corp. (Xtra Energy).



On October 20, 2005, the Company incorporated Xtra Oil & Gas Ltd. (XOG) in Alberta, Canada.



On December 21, 2005, Canadiana changed its name to Xtra-Gold Exploration Limited (XG Exploration).



On January 13, 2006, Goldenrae changed its name to Xtra-Gold Mining Limited (XG Mining).



On March 2, 2006, the Company incorporated Xtra Oil & Gas (Ghana) Limited (XOGG) in Ghana.




2.
        GOING CONCERN



The Company is in the exploration stage with respect to its resource properties, incurred a loss of $3,231,403 for the year ended December 31, 2008 and has accumulated a deficit during the exploration stage of $8,342,957. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Companys ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.



Management of the Company (Management) is of the opinion that sufficient financing will be obtained from external financing and further share issuances to meet the Companys obligations. At December 31, 2008, the Company has working capital of $1,299,625.




3.
        SIGNIFICANT ACCOUNTING POLICIES



Generally accepted accounting principles



These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America (US GAAP).



F-10

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






3.
        SIGNIFICANT ACCOUNTING POLICIES(contd...)



Principles of consolidation



These consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, Xtra Energy (from October 31, 2003), XG Exploration (from February 16, 2004), XOG (from October 20, 2005) and XOGG (from March 2, 2006) and its 90% owned subsidiary, XG Mining (from December 22, 2004). All significant intercompany accounts and transactions have been eliminated on consolidation.



Use of estimates



The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Cash and cash equivalents



The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2008 and 2007, cash and cash equivalents consisted of cash held at financial institutions.



Receivables



No allowance for doubtful accounts has been provided. Management has evaluated all receivables and believes they are all collectible.



Recovery of gold



Recovery of gold and other income is recognized when title and the risks and rewards of ownership to delivered bullion and commodities pass to the buyer and collection is reasonably assured.



Trading securities



The Companys trading securities are reported at fair value, with unrealized gains and losses included in earnings.



Oil and natural gas properties



The Company follows the full cost method of accounting for oil and natural gas operations. Under this method, all costs associated with the acquisition of, exploration for and development of oil and gas reserves are capitalized in cost centers on a country-by-country basis. Such costs include property acquisition costs, geological and geophysical studies, carrying charges on non-producing properties, costs of drilling productive wells, and overhead expenses directly related to these activities.



Depletion is calculated for producing properties by using the unit-of-production method based on estimated proved reserves, before royalties, as determined by management of the Company or independent consultants. Sales or dispositions of oil and gas properties are credited to the respective cost centers and a gain or loss is recognized when all properties in a cost center have been disposed of, unless such sale or disposition significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center. Costs of abandoned properties are accounted for as adjustments of capitalized costs and written off to expense.



F-11

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






3.
        SIGNIFICANT ACCOUNTING POLICIES(contd...)



Oil and natural gas properties(contd...)



Undeveloped properties are excluded from the depletion calculation until the quantities of proved reserves can be determined.



A ceiling test is applied to the proven properties for each cost center and for the aggregate of all cost centers by comparing the net capitalized costs to the estimated future net revenues from production of estimated proved reserves without discount, plus the costs of unproved properties net of impairment. Any excess capitalized costs are written off to expense. Further, the ceiling test for the aggregate of all cost centers is required to include the effects of future removal and site restoration costs, general and administrative expenses, financing costs and income taxes. The calculation of future net revenues is based upon prices, costs and regulations in effect at each year end.



Unproved properties are assessed for impairment on an annual basis by applying factors that rely on historical experience. In general, the Company may write off any unproved property under one or more of the following conditions:




(a)
        there are no firm plans for further drilling on the unproved property;



(b)
        negative results were obtained from studies of the unproved properties;



(c)
        negative results were obtained from studies conducted in the vicinity of the unproved property; or



(d)
        the remaining term of the unproved property does not allow sufficient time for further studies or drilling.




Equipment



Equipment is recorded at cost and is being amortized over its estimated useful lives using the declining balance method at the following annual rates:




Furniture and equipment
        20%

Computer equipment
        30%

Vehicles
        30%

Mining equipment
        20%



Deferred financing costs



Deferred financing costs consist of expenses incurred to obtain funds pursuant to the issuance of the convertible debentures and are being amortized straight-line over the term of the debentures.



Mineral properties and exploration and development costs



The costs of acquiring mineral rights are capitalized at the date of acquisition. After acquisition, various factors can affect the recoverability of the capitalized costs. If, after review, management concludes that the carrying amount of a mineral property is impaired, it will be written down to estimated fair value. Exploration costs incurred on mineral properties are expensed as incurred. Development costs incurred on proven and probable reserves will be capitalized. Upon commencement of production, capitalized costs will be amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves (which exclude non-recoverable reserves and anticipated processing losses).



F-12

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






3.
        SIGNIFICANT ACCOUNTING POLICIES(contd...)



Long-lived assets



The Company accounts for long-lived assets under Statements of Financial Accounting Standards Nos. 142 and 144Accounting for Goodwill and Other Intangible AssetsandAccounting for Impairment or Disposal of Long-Lived Assets(SFAS 142 and 144). In accordance with SFAS 142 and 144, long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.



Asset retirement obligations



The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost).



Stock-based compensation



The Company calculates the fair value of all stock options granted and records these amounts as compensation expense over the vesting period of the options using the straight-line method. The Black-Scholes option pricing model is used to calculate fair value.



Income taxes



The Company accounts for income taxes under Statements of Financial Accounting Standards No. 109,Accounting for Income Taxes(SFAS 109). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.



Loss per share



Basic loss per common share is computed using the weighted average number of common shares outstanding during the year. To calculate diluted loss per share, the Company uses the treasury stock method and the if converted method as defined in Financial Accounting Standards No. 128,Earnings Per Share.As of December 31, 2008, there were 1,547,881 warrants (2007  1,074,511); 1,080,000 stock options (2007 1,480,000) and convertible debentures exercisable into 250,000 common shares (2007  900,000) outstanding which have not been included in the weighted average number of common shares outstanding as these were anti-dilutive.



F-13

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






3.
        SIGNIFICANT ACCOUNTING POLICIES(contd...)



Foreign exchange



The Companys functional currency is the U.S. dollar. The Company does not have any significant non-monetary assets and liabilities that are in a currency other than the U.S. dollar. Any monetary assets and liabilities that are in a currency other than the U.S. dollar are translated at the rate prevailing at year end. Revenue and expenses in a foreign currency are translated at rates that approximate those in effect at the time of translation. Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations.



Financial instruments



The Companys financial instruments consist of cash and cash equivalents, trading securities, receivables, accounts payable and accrued liabilities and convertible debentures. It is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments. The fair values of these financial instruments approximate their carrying values unless otherwise noted. The Company has its cash primarily in one commercial bank in Toronto, Ontario, Canada.



Fair Value Measurements



Effective January 1, 2008, the Company implemented Statement of Financial Accounting Standard No. 157, Fair Value Measurement, or SFAS 157, for the financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In accordance with the provisions of FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, the Company has elected to defer implementation of SFAS 157 as it relates to the non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis until January 1, 2009. The adoption of SFAS 157 to the financial assets and liabilities and non-financial assets and liabilities that are re-measured and reported at fair value at
least annually did not have an impact on the financial results.



The following table presents information about the assets that are measured at fair value on a recurring basis as of December 31, 2008, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little, if any, market activity for the asset:




December 31,2008
        
        Quoted Pricesin ActiveMarkets(Level 1)
        
        SignificantOtherObservableInputs(Level 2)
        
        SignificantUnobservableInputs(Level 3)Assets:Cash and cash equivalents
        
        $
        271,573
        
        $
        271,573
        
        $
        
        
        $
        Marketable securities
        
        $
        1,470,382
        
        $
        1,470,382
        
        $
        
        
        $
        Total
        
        $
        1,741,955
        
        $
        1,741,955
        
        $
        
        
        $
        



The fair values of cash and cash equivalents and marketable securities are determined through market, observable and corroborated sources.



F-14

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008





3.
        SIGNIFICANT ACCOUNTING POLICIES(contd...)



Concentration of credit risk



The financial instrument which potentially subjects the Company to concentration of credit risk is cash. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of December 31, 2008 and 2007, the Company has exceeded the federally insured limit. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.



Recent accounting pronouncements



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities by requiring enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect an entitys operating results, financial position, and cash flows.



SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. Early adoption is permitted. The Company is currently reviewing the provisions of SFAS No. 161 and have not yet adopted the statement. However, as the provisions of SFAS No. 161 are only related to disclosure of derivative and hedging activities, the Company does not believe the adoption of SFAS No. 161 will have a material impact on the consolidated operating results, financial position, or cash flows.



In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets or FSP FAS 142-3. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of the position is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the intangible asset. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is assessing the potential impact that the adoption of FSP FAS 142-3 may have on the Companys consolidated financial position, results of operations or cash flows.



In May 2008, the FASB issued SFAS
No. 162, The Hierarchy of Generally Accepted Accounting Principles or SFAS No. 162. SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with GAAP. This statement shall be effective 60 days following the
Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not
believe that implementation of this standard will have a material impact on the consolidated financial position, results of
operations or cash flows.



F-15

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






3.
        SIGNIFICANT ACCOUNTING POLICIES(contd...)



Recent accounting pronouncements(contd...)



In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. Management has determined that the adoption of FSP EITF 03-6-1 will not have an impact on the Financial Statements.




4.
        INVESTMENTS IN TRADING SECURITIES



At December 31, 2008, the Company held investments classified as trading securities, which consisted of various equity securities. All trading securities are carried at fair value. As of December 31, 2008, the fair value of trading securities was $1,470,382(2007 $2,167,741).




5.
        EQUIPMENT




December 31, 2008
        
        December 31, 2007Cost
        
        Accumulated Amortization
        
        Net Book Value
        
        Cost
        
        Accumulated Amortization
        
        Net Book ValueFurniture and equipment
        
        $
        12,416
        
        $
        2,110
        
        $
        10,306
        
        $
        4,058
        
        $
        1,623
        
        $
        2,435Computer equipment
        
        
        24,864
        
        
        14,772
        
        
        10,092
        
        
        22,790
        
        
        6,753
        
        
        16,037Mining equipment
        
        
        316,791
        
        
        55,456
        
        
        261,335
        
        
        208,699
        
        
        18,590
        
        
        190,109Vehicles
        
        
        76,398
        
        
        45,831
        
        
        30,567
        
        
        76,564
        
        
        25,121
        
        
        51,443$
        430,469
        
        $
        118,169
        
        $
        312,300
        
        $
        312,111
        
        $
        52,087
        
        $
        260,024




6.
        DEFERRED FINANCING COSTS




December 31, 2008
        
        December 31, 2007Balance, beginning of year
        
        
        $       23,101
        
        
        $       32,342Costs incurred
        
        
        
        
        
        Amortization
        
        
        (19,251
        )
        
        (9,241
        )Balance, end of year
        
        
        $         3,850
        
        
        $       23,101



During the year ended December 31, 2005, the Company paid a finders fee of $45,000 and other expenses of $1,202 relating to a convertible debenture financing (Note 9).



F-16

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






7.
        OIL AND GAS PROPERTY



In April 2008, XOG purchased an 18.9% participating interest in a petroleum and natural gas lease at an Alberta Crown Land sale.



8.
        MINERAL PROPERTIES




December 31, 2008
        
        December 31, 2007Acquisition costs
        
        
        $       1,607,729
        
        
        $       1,607,729Asset retirement obligation (Note 10)
        
        
        54,835
        
        
        17,865Total
        
        
        $       1,662,564
        
        
        $       1,625,594



Kwabeng, Pameng and Apapam Projects



The Company holds three mining leases in Ghana. These mining leases grant the Company surface and mining rights to produce gold in the leased areas until July 26, 2019 with respect to the Kwabeng and Pameng Projects and until December 17, 2015 with respect to the Apapam Project, the latter of which can be renewed for a further 30 year term on application and payment of applicable fees to the Minerals Commission. All gold production will be subject to a 3% production royalty of the net smelter returns (NSR).



Banso and Muoso Project



The Company holds a prospecting license on its Banso and Muoso Project in Ghana. This license grants the Company the right to conduct exploratory work to determine whether there are mineable reserves of gold or diamonds in the licensed areas, and currently has been renewed for a further one year term (to October 13, 2009) and is further renewable on application and payment of applicable renewal fees to the Minerals Commission. If mineable reserves of gold or diamonds are discovered, the Company will have the first option to acquire a mining lease.



Option agreement on Edum Banso Project



In October, 2005, XG Exploration entered into an option agreement (the Option Agreement) with Adom Mining Limited (Adom) to acquire 100% of Adoms right, title and interest in and to a prospecting license on the Edum Banso concession (the Edum Banso Project) located in Ghana. Adom further granted XG Exploration the right to explore, develop, mine and sell mineral products from this concession. The Option Agreement has a five year term. The prospecting license has been renewed for a further one year term (to July 14, 2009) and is further renewable on application and payment of applicable renewal fees to the Minerals Commission.



The consideration paid was $15,000 with additional payments of $5,000 to be paid on the anniversary date of the Option Agreement in each year during the term. Upon the commencement of gold production, an additional $200,000 is to be paid, unless proven and probable reserves are less than 2,000,000 ounces, in which case the payment shall be reduced to $100,000.



Upon successful transfer of title from Adom to XG Exploration, a production royalty (the Royalty) of 2% of the net smelter returns shall be paid to Adom; provided, however that in the event that less than 2,000,000 ounces of proven and probable reserves are discovered, then the Royalty shall be 1%. The Royalty can be purchased by XG Exploration for $2,000,000; which will be reduced to $1,000,000 if proven and probable reserves are less than 2,000,000 ounces.



F-17

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






8.
        MINERAL PROPERTIES(contd...)



Mining lease and prospecting license commitments



The Company is committed to expend, from time to time to the Minerals Commission for an extension of an expiry date of a prospecting license (currently $15,000 for each occurrence) or a mining lease and the Environmental Protection Agency (EPA) (of Ghana) for processing and certificate fees with respect to EPA permits, an aggregate of less than $500 in connection with annual or ground rent and mining permits to enter upon and gain access to the areas covered by the Companys mining leases and prospecting licenses.




9.
        CONVERTIBLE DEBENTURES



During the year ended December 31, 2005, the Company completed a convertible debenture financing for gross proceeds of $900,000. The debentures bear interest at 7% per annum, payable quarterly, and the principal balance is repayable by June 30, 2010. Debenture holders have the option to convert any portion of the outstanding principal into common shares at the conversion rate of $1 per share. During the year ended December 31, 2008, convertible debentures totalling $650,000 were converted into 650,000 common shares.




10.
        ASSET RETIREMENT OBLIGATION




December 31, 2008
        
        December 31, 2007Balance, beginning of year
        
        
        $       28,399
        
        
        $       48,237Change in obligation
        
        
        36,970
        
        
        (22,000
        )Accretion expense
        
        
        
        
        
        2,162Balance, end of year
        
        
        $       65,369
        
        
        $       28,399



The Company has a legal obligation associated with its mineral properties for clean up costs when work programs are completed.



The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $150,000 (2007 - $109,261). The obligation was calculated using a credit-adjusted risk free discount rate of 10% and an inflation rate of 2%. The life of the mine was extended from 2007 to 2023 during fiscal 2007. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred.



11.
        CAPITAL STOCK



Cancellation of shares



In May 2005, 47,000,000 common shares owned by two former directors were returned to treasury and cancelled.



In June 2006, 10,000 common shares were returned to the Company in settlement of a dispute and cancelled.



F-18

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






11.
        CAPITAL STOCK(contd...)



Issuance of shares for services



In December 2008, an aggregate of 131,243 common shares were issued to three vendors of the Companys subsidiary, XG Mining to settle outstanding accounts for services at a value of $1.50 per share.



Private placements



In February 2008, the Company issued 1,062,000 units at $1.50 per unit for gross proceeds of $1,593,000. Each unit consisted of one common share and one share purchase warrant enabling the holder to acquire an additional common share at a price of $2.25 per share expiring on July 7, 2009. The Company also issued finders warrants enabling the holder to acquire up to 84,960 common shares at the same terms as the unit warrants. The fair value of the finders warrants was $15,136 and calculated using the Black-Scholes valuation method. The assumptions used were 1.5 years of expected life, risk free interest rate of 4.88%, volatility of 33% and a dividend rate of 0%.



In October 2007, the Company
issued 668,202 units at $1.35 per unit for gross proceeds of $902,073. Each unit consisted of one common share and one half of one
share purchase warrant. One whole warrant enables the holder to acquire an additional common share at a price of $1.75 for one year
which expiry date was extended to January 13, 2009 (expired). The Company also issued finders warrants enabling the holder to
acquire up to 33,410 common shares at the same terms as the unit warrants (expired). The fair value of the finders warrants was
$2,015 and calculated using the Black-Scholes valuation method. The assumptions used were 1 year of expected life, risk free
interest rate of 4.50%, volatility of 36% and a dividend rate of 0%.



In October 2006, the Company
issued 282,000 common shares at $1.10 per share for gross proceeds of $310,200. For each two shares subscribed for, the purchaser
received one share purchase warrant which enables the holder to acquire an additional common share at a price of $1.50 to April 23,
2008 which expiry date was extended to July 13, 2008 (65,000 exercised; 76,000 expired).



In July 2006, the Company issued
1,132,000 common shares at $0.90 per share for gross proceeds of $1,018,800. For each two shares subscribed for, the purchaser
received one share purchase warrant which enables the holder to acquire an additional common share at a price of $1.50 to July 31,
2007 which expiry date was extended to July 13, 2008 (566,000 exercised).



In June 2006, the Company issued 578,112 common shares at $0.90 per share for gross proceeds of $520,300. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $1.50 to June 16, 2007 (expired).



In March 2006, the Company issued 792,029 common shares at $0.70 per share for gross proceeds of $554,420.



In November 2005, the Company issued 1,549,354 common shares at $0.55 per share for gross proceeds of $852,145.



In August 2005, the Company issued
300,000 common shares at $0.55 per share for gross proceeds of $165,000. For each two shares subscribed for, the purchaser received
one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 to August 31, 2006
(expired).



F-19

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






11.
        CAPITAL STOCK(contd...)



Private placements(contd...)



In June 2005, the Company issued
536,218 common shares at $0.55 per share for gross proceeds of $294,920. For each two shares subscribed for, the purchaser received
one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 to April 30, 2006
(177,200 exercised; 90,910 expired).



Acquisition of subsidiary



Effective December 22, 2004, the Company acquired 90% of the outstanding shares of XG Mining in exchange for 2,698,350 shares of common stock. In connection with this acquisition, 47,000,000 shares owned by two former officers and directors of the Company were returned to treasury and cancelled.



Stock options



The number of shares reserved for issuance under the Companys equity compensation option plan is 3,000,000. The terms and conditions of any options granted, including the number and type of options, the exercise period, the exercise price and vesting provisions, are determined by the board of directors.



At December 31, 2008, the following stock options were outstanding:




Number of Options
        Exercise Price
        Expiry Date108,000
        $0.70
        April 21, 2009432,000
        $0.70
        May 1, 2009270,000
        $0.75
        March 5, 2010270,000
        $0.75
        March 12, 2010



Stock option transactions and the number of stock options outstanding are summarized as follows:




2008
        
        
        2007Number ofOptions
        
        Weighted AverageExercise Price
        
        
        Number ofOptions
        
        Weighted AverageExercise PriceOutstanding, beginning of year
        
        1,480,000
        
        
        $   0.75
        
        
        1,996,000
        
        
        $   0.72Granted
        
        
        
        
        
        
        
        740,000
        
        
        0.75Exercised
        
        (100,000
        )
        
        0.75
        
        
        
        
        
        Cancelled/Expired
        
        (300,000
        )
        
        0.80
        
        
        (1,256,000
        )
        
        0.70Outstanding, end of year
        
        1,080,000
        
        
        $   0.73
        
        
        1,480,000
        
        
        $   0.75Exercisable, end of year
        
        783,000
        
        
        $   0.72
        
        
        572,995
        
        
        $   0.75



The aggregate intrinsic value for options vested as of December 31, 2008 is approximately $Nil (2007 - $355,000) and for total options outstanding is approximately $Nil (2007 - $917,000).



F-20

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






11.
        CAPITAL STOCK(contd...)



Stock-based compensation



The fair value of stock options granted during the year ended December 31, 2008 totalled $Nil (2007 - $189,063). During the year ended December 31, 2008, $156,444 (2007 - $195,623) was expensed and included in general and administrative expenses. The remaining $83,870 (2007 - $302,377) will be expensed in future periods.



The following assumptions were used for the Black-Scholes valuation of stock options granted during the years ended December 31, 2008 and 2007:




2008
        2007Risk-free interest rate
        
        4.52%Expected life
        
        3 yearsAnnualized volatility
        
        55.30%Dividend rate
        
        0%



The weighted average fair value of options granted was $Nil (2007 - $0.26).



Warrants



At December 31, 2008, the following warrants were outstanding:




Number of Warrants
        Exercise Price
        Expiry Date400,921
        $1.75
        January 13, 2009 (subsequently expired)1,146,960
        $2.25
        July 7, 2009



Warrant transactions and the number of warrants outstanding are summarized as follows:




December 31, 2008
        
        December 31, 2007Balance, beginning of year
        
        1,074,511
        
        996,056Issued
        
        1,146,960
        
        367,511Exercised
        
        (631,000
        )
        Expired
        
        (76,000
        )
        (289,056
        )Balance, end of year
        
        1,514,471
        
        1,074,511



F-21

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






12.
        RELATED PARTY TRANSACTIONS



During the years ended December 31, 2008 and 2007, the Company entered into the following transactions with related parties:




(a)
        Paid or accrued consulting fees of $169,957 (2007 - $191,512) to officers of the Company or companies controlled by such officers.




(b)
        Paid or accrued directors fees of $28,639 (2007  $28,579) to directors of the Company or companies controlled by directors.



The amounts charged to the Company for the services provided have been determined by negotiation among the parties. These transactions were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the related parties.




13.
        SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS




Cumulative amountsfrom the beginning ofthe exploration stageon January 1, 2003 toDecember 31, 2008
        
        2008
        
        2007Cash paid during the period for:Interest
        
        $
        187,362
        
        $
        29,862
        
        $
        63,000Income taxes
        
        $
        
        
        $
        
        
        $
        



The significant non-cash transactions during the year ended December 31, 2008 were the issuance of 84,960 finders warrants with a value of $15,136 in connection to a private placement (Note 11), the conversion of $650,000 of convertible debentures into 650,000 common shares (Note 9) and the issuance of 131,243 common shares for services rendered.



The significant non-cash
transaction during the year ended December 31, 2007 was the issuance of 33,410 finders warrants with a value of $2,015 in
connection with a private placement (Note 11).



F-22

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






14.
        DEFERRED INCOME TAXES



Income tax benefits attributable to losses from United States of America operations was $Nil for the years ended December 31, 2008 and 2007, and differed from the amounts computed by applying the United States of America federal income tax rate of 34% to pretax losses from operations as a result of the following:




2008
        
        2007Loss for the year
        
        $
        (3,231,403
        )
        $
        (1,874,757
        )Computed expected tax (benefit) expense
        
        $
        (1,098,677
        )
        $
        (637,417
        )Non deductible (taxable) items
        
        
        487,376
        
        
        (174,452
        )Lower effective income tax rate on loss of foreign subsidiaries
        
        
        55,690
        
        
        90,383Valuation allowance
        
        
        555,611
        
        
        721,486Net expected tax (benefit) expense
        
        $
        
        
        $
        



The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below:




2008
        
        2007Deferred tax assets:Net operating loss carryforwards - US
        
        $
        1,279,002
        
        $
        983,035Net operating loss carryforwards - Ghana
        
        
        898,094
        
        
        648,335Valuation allowance
        
        
        (2,177,096
        )
        
        (1,631,370
        )Total deferred tax assets
        
        $
        
        
        $
        



The valuation allowance for deferred tax assets as of December 31, 2008 and 2007 was $2,172,096 and $1,631,370 respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.



Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in assessing the realizability of deferred tax assets. In order to fully realize the deferred tax asset attributable to net operating loss carryforwards, the Company will need to generate future taxable income of approximately $6,991,000 prior to the expiration of the net operating loss carryforwards. Of the $6,991,000 of operating loss carryforwards, $3,747,000 is attributable to the US, and expires between 2019 and 2028, and the balance of $3,244,000 is attributable to Ghana and expires between 2009 and 2012.



F-23

XTRA-GOLD RESOURCES CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

DECEMBER 31, 2008






15.
        SEGMENTED INFORMATION



The Company has one reportable segment, being the exploration and development of resource properties.



Geographic information is as follows:




2008
        
        2007Capital assets:Canada
        
        $
        61,307
        
        $
        16,089Ghana
        
        
        1,953,557
        
        
        1,869,529Total capital assets
        
        $
        2,014,864
        
        $
        1,885,618




16.
        CONTINGENCY AND COMMITMENTS




a)
        During the year ended December 31, 2006, a former consultant to the Companys Ghanaian subsidiaries brought an action for damages in the High Court of Ghana, alleging wrongful termination and claiming $172,000 was owed. The Company believed the lawsuit was without merit and vigorously defended against it. No liability has been recorded in connection with the lawsuit. On February 6, 2008, the High Court of Ghana rendered its judgment and dismissed the action with costs to be paid to the Company. The right to appeal by the former consultant expired on May 6, 2008.




b)
        Effective May 1, 2006, the Company entered into a
management consulting agreement with the Vice President, Exploration whereby the Company will pay $4,720 (Cdn$5,000) per month for
three years. In the event of termination, without cause, 18 months of fees will be payable. Terms for renewal of this agreement will
be negotiated.



F-24