Starfield Resources (SRFDF) 20-F 2006 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 20-F

[    ]

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

OR

[X ]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedFebruary 28, 2006

OR

[    ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to __________

OR

[    ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ………………………………

STARFIELD RESOURCES INC.

 (Exact name of Registrant as specified in its charter)

Alberta, Canada

(Jurisdiction of incorporation or organization)

420-465 Howe Street, Vancouver, British Columbia, Canada  V6C 2T6

 (Address of principal executive offices)

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

None

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

Common Shares, without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the Company’s classes of capital or common stock as of the close of the period covered by the annual report.                                           163,350,351

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   

Yes  __     No   xxx

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 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 ninety days.            YesXXX  No___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   Accelerated filer   Non-accelerated filer  xxx

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17xxx   Item 18 ___

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes___   No  XXX  N/A  ___

Page 2 of 101

Index to Exhibits on Page 78

STARFIELD RESOURCES INC.

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

	PART I	Page
Item 1.	Identity of Directors, Senior Management and Advisors	5
Item 2.	Offer Statistics and Expected Timetable	6
Item 3.	Key Information	6
Item 4.	Information on the Company	13
Item 5.	Operating and Financial Review and Prospects	44
Item 6.	Directors, Senior Management and Employees	51
Item 7.	Major Shareholders and Related Party Transactions	58
Item 8.	Financial Information	60
Item 9.	The Offer and Listing	61
Item 10.	Additional Information	66
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	79
Item 12.	Description of Other Securities Other Than Equity Securities	79
	PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	79
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	79
Item 15.	Controls and Procedures	79
Item 16.	Reserved	79
Item 16A.	Audit Committee Financial Expert	79
Item 16B.	Code of Ethics	80
Item 16C.	Principal Accountant Fees and Services	80
Item 16D.	Exemptions from Listing Standards for Audit Committees	80
Item 16E.	Purchase of Equity Securities by the Issuer and Affiliated Purchasers	80
	Part III
Item 17.	Financial Statements	80
Item 18.	Financial Statements	81
Item 19.	Exhibits	81

INTRODUCTION

Starfield Resources Inc. is organized under the laws of Alberta, Canada.  In this Annual Report, the “Company”, “Registrant”, "we", "our", and "Starfield", refer to Starfield Resources Inc. (unless the context otherwise requires).  Summary discussions of documents referred to in this Annual Report may not be complete, and we refer you to the actual documents for more complete information.  Our principal corporate offices are located at 420-625 Howe Street, Vancouver, British Columbia, Canada  V6C 2T6; our telephone number is 604-608-0400.

BUSINESS OF STARFIELD RESOURCES INC.

Starfield Resources Inc. (the “Company") is a mineral company engaged directly in the exploration of mineral properties.  The Company’s primary property is the exploration stage Ferguson Lake Property located in the Nunavut Territory, Canada.

FINANCIAL AND OTHER INFORMATION

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

FORWARD-LOOKING STATEMENTS

Certain statements in this annual report constitute “forward-looking statements” principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review and Prospects". Some, but not all, forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend,” statements that an action or event “may,” “might,” “could,” “should,” or “will” be taken or occur, or other similar expressions.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Registrant, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such fact ors include, among others, the following risks: the risks associated with outstanding litigation, risks associated with project development; the need for additional financing; operational risks associated with mining and mineral processing; fluctuations in metal prices; title matters; uncertainties and risks related to carrying on business in foreign countries; environmental liability claims and insurance; reliance on key personnel; the potential for conflicts of interest among certain officer, directors or promoters of the Registrant with certain other projects; the absence of dividends; currency fluctuations; competition; dilution; the volatility of the Registrant’s common share price and volume; and tax consequences to U.S. Shareholders.  

PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

1.A.1.  Directors

Table No. 1 lists as of 7/30/2006 the names of the Directors of the Company.

Table No. 1

Directors

Name	Age	Date First Elected/Appointed
Glen Indra	58	November, 1997
Glen MacDonald (2)	57	November 1997
Robert Maddigan (1) (2)	42	November 2003
Henry M. Giegerich (1) (2) (3)	75	January, 2000
Ross Glanville (1) (3)	59	August, 2004
Norman Betts (3)	51	March, 2006

(1)

Members of the Audit Committee of the Board of Directors.

(2)

Members of the Compensation Committee of the Board of Directors.

(3)

Members of the Corporate Governance and Nominating Committee.

1.A.2.  Senior Management

Table No. 2 lists, as of 7/30/2006, the names of the Senior Management of the Company.  The Senior Management serves at the pleasure of the Board of Directors.

Table No. 2

Senior Management

Name	Age	Position	Date of Appointment
Glen J. Indra	58	President	November 1997
Ming Wong	59	Corporate Secretary	March 2005
David Lewis	61	Chief Financial Officer	June 2006

Glen Indra’s business functions, as President of the Company, include leading the search for businesses opportunities, strategic planning, business development, operations, financial administration, accounting, liaison with auditors-accountants-lawyers-regulatory authorities-financial community/ shareholders; and preparation/payment/organization of the expenses/taxes/ activities of the Company, and reporting to Board of Directors.  The President shall be the Chief Executive Officer and, subject to the authority of the Board, shall have general supervision of the business of the Company, and shall have other powers and duties as the Board may specify.  Mr. Wong’s business functions, as Corporate Secretary, include financial and corporate administrative matters.  He shall give or cause to be given, as and when instructed, all notices to shareholders, Directors, officers, auditors and members of committees of the Board, and shall be the custodian of t he stamp or mechanical device generally used for affixing the corporate seal of the Company and of all books, records and instruments belonging to the Company, except when some other officer or agent has been appointed for that purpose.  Mr. Lewis’ business functions as Chief Financial Officer include acting as Principal Accounting Officer, keeping proper accounting records in compliance with the Act and shall be responsible for the deposit of money, the safekeeping and the disbursement of the funds of the Company.  He shall render to the Board whenever required an account of all his transaction as CFO and of the financial position of the Company, and shall have such powers and duties as the Board may specify.

1.C.  Auditors

The Company’s auditors for its financial statements for the fiscal year ended February 28, 2006 is Davidson & Company LLP, Chartered Accountants, Vancouver, British Columbia. The auditor for each of the preceding four years has been Loewen, Stronach & Co., Chartered Accountants, Vancouver, British Columbia. There was no disagreement between the Company and its prior auditor.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

         --- No Disclosure Necessary ---

ITEM 3.  KEY INFORMATION.

3.A.1.  Selected Financial Data

3.A.2.  Selected Financial Data

The selected financial data of the Company for Fiscal 2006 was audited by Davidson & Company LLP, Chartered Accountants. The auditor for Fiscal 2005 and 2004, as well as Fiscal 2003 and 2002, was Loewen, Stronach & Co., was derived from the financial statements of the Company. Loewen, Stronach & Co., Chartered Accountants, independent auditors.

The information in Table No. 3 was extracted from the more detailed financial statements and related notes included herein and should be read in conjunction with such financial statements and with the information appearing under the heading ITEM 5, “OPERATING AND FINANCIAL REVIEW AND PROSPECTS”.

Reference is made to Note 13 of the financial statements of the Company included herein for a discussion of the differences, in the case of the Company, between Canadian GAAP and US GAAP, and their effect on the Company’s financial statements.

To date, the Company has not generated sufficient cash flow from operations to fund ongoing operational requirements and cash commitments.  The Company has financed its operations principally through the sale of its equity securities and short term loans.  While the Company believes it has access to sufficient capital and liquidity to finance current operations, nevertheless, its ability to continue operations is dependent on the ability of the Company to obtain additional financing.

Table No. 3 is derived from the financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as disclosed in footnotes to the financial statements.

#

Table No. 3

Selected Financial Data

(CDN$ in 000, except per share data)

	Year	Year	Year	Year	Year
	Ended	Ended	Ended	Ended	Ended
	2/28/06	2/28/05	2/29/04	2/28/03	2/28/02
Revenue	$0	$0	$0	$0	$0
Net Income (Loss)	($2,695)	($1,922)	($1,723)	($1,970)	($1,390)
Earnings (Loss) Per Share	($0.02)	($0.02)	($0.02)	($0.04)	($0.04)
Net Income (Loss) US GAAP	($14,731)	($11,830)	($4,778)	($8,476)	($7,804)
EPS (Loss) US GAAP	($0.11)	($0.11)	($0.07)	($0.16)	($0.22)
Wtg.Avg.No.Shares US GAAP	139,439	108,333	70,241	51,906	35,370
Dividends Per Share	$0	$0	$0	$0	$0
Dividends Per Share (US GAAP)	$0	$0	$0	$0	$0
Wtg.Avg.No.Shares Cdn GAAP	139,439	108,333	70,241	51,906	35,370
Working Capital	$803	$839	($432)	($1,344)	$777
Resource Properties	$46,375	$34,051	$24,381	$21,327	$14,821
Long Term Debt	Nil	Nil	Nil	Nil	$634
Long Term Debt (US GAAP)	Nil	Nil	Nil	Nil	$634
Shareholder’s Equity	$45,553	$34,855	$23,964	$20,003	$15,014
Total Assets	$48,923	$35,689	$25,425	$21,596	$15,958
Total Assets (US GAAP)	$2,549	$1,638	$1,044	$269	$1,137

3.A.3.  Exchange Rates

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended February 28^th, the average rates for the period, and the range of high and low rates for the period.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar.  The average rate means the average of the exchange rates on the last day of each month during the period.

Table No. 4

U.S. Dollar/Canadian Dollar

Period	Average	High	Low	Close
July 2006		$1.14	$1.11	$1.13
June 2006		1.12	1.10	1.12
May 2006		1.13	1.09	1.10
April 2006		1.18	1.12	1.12
March 2006		1.17	1.13	1.17
February 2006		1.16	1.14	1.14
Fiscal Year Ended 2/28/06	$1.19	$1.26	$1.14	$1.14
Fiscal Year Ended 2/28/05	1.28	1.40	1.18	1.23
Fiscal Year Ended 2/29/04	1.36	1.49	1.27	1.34
Fiscal Year Ended 2/28/03	1.56	1.60	1.49	1.53
Fiscal Year Ended 2/28/02	1.57	1.61	1.51	1.60

3.B.  Capitalization and Indebtedness

      --- No Disclosure Necessary ---

3.C.  Reasons For The Offer And Use Of Proceeds

      --- No Disclosure Necessary ---

3.D.  Risk Factors

An investment in the Common Shares of the Company must be considered speculative due to the nature of the Company’s business and the present stage of exploration of its non producing mineral properties. In particular, the following risk factors apply:

Risks Associated with Mineral Exploration

Cumulative Unsuccessful Exploration Efforts by Starfield Personnel Could Result in The Company having to Cease Operations.

The Company’s properties are in the exploration stage only and are without a known body of commercial ore.

Exploration of Starfield’s properties will only continue upon obtaining satisfactory results from previous exploration programs. Mineral exploration involves a high degree of risk and few properties that are explored become producing mines.  There is no assurance that the Company’s future mineral exploration activities will result in any discoveries of bodies of commercial ore.  The long-term profitability of Starfield’s operations will be in part directly related to the cost and success of its future exploration programs, which may be affected by a number of factors.

Starfield Resources’ exploration activities are subject to government legislation and regulations, policies and controls relating to all aspects of mineral exploration, mineral property maintenance, environmental protection and labor standards. For example, mineral claims in Nunavut Territory are valid for two years from the initial recording date and may be renewed for an additional year by completing representation (assessment) work in the amount of $4.00/acre within the initial two-year period. Annual work in the amount of $2.00/acre is required to renew the claims beyond the third year. Representation work to maintain the company’s mineral claims has been filed on a regular basis since the inception of exploratory programs in 1999. Land use permits, enabling exploration work to be conducted over the entire property area, have been issued on a yearly basis by the Nunavut Impact Review Board and Department of Indian Affairs and Northern Development. Baseline en vironmental studies of the property area are ongoing.  

Operating Hazards and Risks Associated with the Mining Industry

Mineral exploration activities generally involve a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.  Hazards such as unusual or unexpected formations and other conditions are involved.  Operations in which Starfield Resources has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration for precious and base metals, any of which could result in work stoppages, damage to or destruction of facilities, damage to life and property, environmental damage and possible legal liability for any or all damage.  The Company may become subject to liability for various hazards for which it cannot insure or against which it may elect not to insure where premium costs are disproportionate to Starfield’s perception of the relevant risks.  The payment of such insurance premiums and of such liabilities would reduce the funds available for expl oration activities.

Risks Associated with Starfield Resources’ Failure to Comply with Canadian Mining Regulations and Government Rules Associated with Mining in Canada

Starfield Resources carries out its Ferguson Lake property exploration in the Nunavut Territory. In Canada, the Company’s claims are worked under Territorial Mines Acts and Regulations.  Starfield Resources has the right to carry out exploration on its claims subject to the terms and conditions outlined by the local mines inspectors.  The Company from time to time may be required to post small monetary bonds to be held against project cleanup.  Territorial labor health and welfare codes apply to all operations.  Starfield generally carries out all exploration work utilizing professional exploration consultants who carry general liability and third party insurance. The Company carries $2,000,000 in liability insurance, which may not be sufficient in the event of an adverse event or judgment.

Starfield Resources’ exploration activities in Canada are regulated by various government agencies, both federal and territorial. Environmental legislation provides for restrictions and prohibitions on spills and releases or emission of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas that would result in environment pollution.  A breach of legislation may result in imposition of fines and penalties.

Prior to entering into any property agreements or resulting exploration activities, Starfield conducts a review of previous exploration and development activity on the property and, if necessary, conducts water and geological sampling and analysis to identify any environmental concerns.

Starfield Resources has obtained all necessary permits for exploration work performed to date, and to the best of its knowledge, the Company is in compliance with all material laws and regulations that currently apply to its activities.  There can be no assurance, however, that all permits that Starfield may require for its future operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any mining project that the Company might undertake.

Starfield Resources is aware that environmental legislation is evolving in a manner that will require more stringent assessments of proposed projects, stricter standards and enforcement, including increased fines and penalties for non-compliance, and a heightened degree of responsibility for companies and their officers, directors and employees.  There is no assurance that future changes in environmental regulation, if any, will not adversely affect Starfield’s operations.  Environmental hazards caused by previous or existing owners or operators of the properties may exist on the Company’s properties that are unknown to Starfield at the present time.  Any form of environmental liability insurance does not cover the Company at the present time.

Risks Associated with Reclamation Obligations

Reclamation requirements vary depending on the location and the managing agency, but they are similar in that they aim to minimize long-term effects of exploration by requiring the operating company to control possible harmful discharges and to reestablish to some degree, pre-disturbance landforms and vegetation.  Starfield Resources is actively providing for or has carried out any requested reclamation activities on its properties. Reclamation obligations are provided for in a bond deposited with the Government of Nunavut in the amount of $42,866 and is listed as Refundable deposits under Current Assets in the Balance Sheet.

The Uncertainty of Starfield Resources’ Ability to Obtain Future Permits and Licenses

The operations of the Company may require licenses and permits from various governmental authorities.  There can be no assurances that Starfield will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining at its properties.

The Uncertainty Associated with the Calculation of Reserves and Mineralization

There is a degree of uncertainty attributable to the calculation of reserves and mineralization and corresponding grades being mined or dedicated to future production.  Until reserves or mineralization are actually mined and processed, quantity of mineralization and grades must be considered as estimates only.  In addition, the quantity of reserves and mineralization may vary depending on metal prices.  Any material change in quantity or reserves, mineralization, grade or stripping ratio may affect the economic viability of Starfield Resources’ properties.  In addition, there can be no assurance that precious or other metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions during production.

The Mining Industry is Highly Competitive which could Restrict the Company’s Growth

There is competition from other mining exploration and development companies with operations similar to those of Starfield Resources’.  Many of the mining companies with which the Company competes have operations and financial strength many times that of Starfield. Nevertheless, the market for the Company's possible future production of minerals tends to be commodity oriented, rather than company oriented.  Commodity prices fluctuate and there is no guarantee that market prices at any one time will be higher than production costs. Starfield Resources does not engage in any material hedging or other transactions, which are intended to manage risks relating to the fluctuations in mineral prices and does not intend to do so in the foreseeable future.

Financing Risks

The Lack of Assurance that Starfield Resources’ will be able to Meet its Future Capital Requirements which could cause a delay in, or cessation of, Operations

While the Company has met exploration expenditures on the Ferguson Lake Property as of 2/28/06, according to its obligations, further expenditures would likely require additional equity or debt financing.  Starfield has no source of operating cash flow to fund future exploration projects or corporate overhead.  The Company has limited financial resources, and there is no assurance that additional funding will be available.  Starfield’s ability to continue exploration of its properties will be dependent upon its ability to raise significant additional funds in the future. The only source of funds available to the Company for future exploration expenditures is through the sale of its equity shares.  Even if the results of future exploration are encouraging, Starfield may not have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists.  While the Company may gen erate additional working capital through further equity offerings or through the sale or possible syndication of its property, there is no assurance that such funds will be available.  If available, future equity financing may result in substantial dilution to purchasers under such offerings.

The Company Has a History of Net Losses and Expects Losses to Continue for the Foreseeable Future

The Company has had a history of losses and there is no assurance that it can reach profitability in the future.  As of the end of the most recent fiscal year dated February 28, 2006, the Company historical net loss totals $11,885,387. Starfield has no history of significant earnings, and due to the nature of its business, there can be no assurance that the Company will be profitable.  The Company has paid no dividends on its common shares since incorporation and does not anticipate doing so in the foreseeable future.

Risks Relating to an Investment in the Securities of the Company

Broker-Dealers May Be Discouraged From Effecting Transactions in Starfield’s common Shares Because They are Considered Penny Stocks and are Subject to The Penny Stock Rules

Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended, impose sales practice and disclosure requirements on NASD broker-dealers who make a market in "a penny stock".  A penny stock generally includes any non-NASDAQ equity security that has a market price of less than $5.00 per share. The additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from effecting transactions in the Company’s shares, which could severely limit the market liquidity of the shares and impede the sale of the Company’s shares in the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of US$1,000,000 or an annual income exceeding US$200,000, or US$300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.

In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the US Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities.  Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

The Market for The Company’s Shares has been Subject to Volume and Price Volatility which could Negatively Effect a Shareholder’s Ability to Buy or Sell the Company’s Shares

The market for the common shares of the Company may be highly volatile for reasons both related to the performance of the Company or events pertaining to the industry (ie, mineral price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry.  In particular, market demand for products incorporating minerals in their manufacture fluctuates from one business cycle to the next, resulting in change of demand for the mineral and an attendant change in the price for the mineral.  The Company’s common shares can be expected to be subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding the Company’s business, and changes in estimates and evaluations by securities analysts or other events or factors.  In recent years the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the ma rket price of securities of many companies, particularly small-capitalization companies such as the Company, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values, or prospects of such companies.  For these reasons, the shares of the Company’s common shares can also be expected to be subject to volatility resulting from purely market forces over which the Company will have no control.  Further, despite the existence of a market for trading the Company’s common shares in Canada, stockholders of the Company may be unable to sell significant quantities of common shares in the public trading markets without a significant reduction in the price of the stock.

The Company has a Dependence Upon Key Management Employees, the Absence of Which Would Have a Negative Effect on the Company’s Operations

The Company strongly depends on the business and technical expertise of its management and key personnel, including Glen Indra, President, Glen MacDonald, Director, Ming Wong, Corporate Secretary, and David Lewis, Chief Financial Officer.  There is little possibility that this dependence will decrease in the near term.  As the Company’s operations expand, additional general management resources will be required. The Company may not be able to attract and retain additional qualified personnel and this would have a negative effect on the Company’s operations. The Company does not carry any formal services agreements between itself and its directors, and the Company does not carry any “Key Man” Life Insurance.

Certain Officers and Directors Serve as Officers and/or Directors of Other Companies and May Have Conflicts of Interest which could have a Negative Effect on the Company’s Operations

Certain of the directors and officers of the Company are also directors and/or officers and/or shareholders of other natural resource companies.  While the Company was engaged in the business of exploiting mineral properties, such associations may have given rise to conflicts of interest from time to time.  The Directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company.  If a conflict of interest arises at a meeting of the board of directors, any director in a conflict must disclose his interest and abstain from voting on such matter.  In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time.

U.S. Investors May Not Be Able to Enforce Their Civil Liabilities Against the Company or its Directors, Controlling Persons and Officers

It may be difficult to bring and enforce suits against the Company.  The Company is a corporation incorporated in Canada under theAlberta Business Corporation Act. A majority of the Company’s directors and officers are residents of Canada and a substantial portion of the Company’s assets and its subsidiaries are located outside of the United States.  Consequently, it may be difficult for United States investors to effect service of process in the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under United States securities laws..  There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities under the U.S. Securities Act.

The Company Could be Deemed a Passive Foreign Investment Company Which could have Negative Consequences for U.S. Investors

The Company could be classified as a Passive Foreign Investment Company (“PFIC”) under the United States tax code. If the Company is declared a PFIC, then owners of the Company’s Common Stock who are U.S.  taxpayers  generally  will be required to treat any so-called  "excess distribution"  received  on its  common  shares,  or any  gain  realized  upon a disposition of common shares,  as ordinary  income and to pay an interest charge on a portion of such distribution or gain, unless the taxpayer makes a qualified electing fund ("QEF") election or a mark-to-market  election with respect to the Company’s shares. A U.S. taxpayer who makes a QEF election generally must report on a current basis its share of the Company’s net  capital  gain and  ordinary  earnings  for any year in which the Company is classified as a PFIC, whether or not the Company distributes any amounts to its shareholders.

As a "foreign private issuer”, Starfield is exempt from the Section 14 proxy rules and Section 16 of the 1934 Securities Act May Result in Shareholders Having Less Complete and Timely Data

The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data.  The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.

ITEM 4.  INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Introduction

Starfield Resources Inc. (hereinafter also referred to as the “Company” and the “Registrant”) is a Canadian-based natural resource exploration company. In December 1999, after the Company had fulfilled the terms of an option agreement, the Company earned a 100% interest in certain mineral claims in the Ferguson Lake area of the Nunavut Territory, Canada and a five-kilometers area of influence around the claims.

Presently, Starfield is an exploration stage company and there is no assurance that a commercially viable mineral deposit exists on any of the Company’s mineral properties. Further exploration will be required before a final evaluation as to the economic and legal feasibility is determined.

The Company's head office is located at:

    Suite 420, 625 Howe Street,

    Vancouver, British Columbia V6C 2T6.  

    Telephone: (604) 608-0400

    Facsimile: (604) 608-0344

The contact person is:

    Glen J. Indra, President and Director.

The Company has an unlimited number of common shares authorized, an unlimited number of first preferred shares authorized, and an unlimited number of second preferred shares authorized.  All of these shares have no par value.  To date, no first preferred shares and no second preferred shares have been issued.  As of 2/28/2006, the end of the Company’s most recent fiscal year, there were 163,350,351 common shares outstanding.

The Company's common shares trade on the TSX Venture Exchange under the symbol "SRU" and NASD-OTC Bulletin Board in United States, under the trading symbol “SRFDF”. The Company’s shares are also registered to trade on the Frankfurt, Germany Stock Exchange.

The Company's fiscal year ends February 28^th.

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).

Incorporation and Name Changes

The Company was incorporated by Certificate of Incorporation issued pursuant to the provisions of the Business Corporation Act (Alberta) on 4/22/1994 under the name “608337” Alberta Inc. Per Certificate of Amendment, the articles of the Company were amended to change the name to Starfield Communications Group Inc. and to remove the “private company” restrictions by Certificate of Amendment dated 10/6/1994.  The Certificate of Amendment dated 12/18/1997, further amended the Articles of the Corporation to change the name of the Company to Starfield Resources Inc.

At the most recent Annual and Special Meeting of the Company held on July 28, 2006, shareholder’s approved a resolution to allow the Company to continue from Alberta into British Columbia under theBusiness Corporations Act (British Columbia). Such Continuation would require the filing of an application of continuation and Notice of Articles with the British Columbia Registrar of Companies. The application for continuation is at the sole discretion of the Company’s Board of Directors and they may decide not to proceed with the Continuation.

Financings

The Company has financed its operations through funds raised in loans, public/private placements of common shares, shares issued for property, shares issued in debt settlements, and shares issued upon exercise of stock options and share purchase warrants.

Capital Expenditures

Fiscal 2004:

$3,054,414 for mineral property exploration.

Fiscal 2005:

$9,804,045 for mineral property exploration and acquisition of equipment.

Fiscal 2006:

$12,734,376 for mineral property exploration and acquisition of equipment.

4.B.  BUSINESS OVERVIEW

Historical Corporate Development

The Company’s common shares were listed and posted for trading on the facilities of The Alberta Stock Exchange in February 1995.  The ASE suspended trading of the common shares on 11/24/1995 because the founding Directors of the Company made improper loans of the Company’s assets in the amount of $132,384 (the “Loans”).  A loan made to Cascade Communications Inc. by the founding directors violated ASC Policy 4.11 as it was an inappropriate use of funds and was contrary to the use of proceeds as set out in the Company’s JCP prospectus.

The founding Directors entered into a Settlement and Undertaking Agreement dated 11/20/1997 with the ASC, which stated that the Loans would be repaid to the Company partially through a transfer within escrow of common shares, and partially through forgiveness of a debt owed by the Company to a founding Director.

In order to satisfy the undertaking agreement and repay the Company the consideration for the escrowed shares (being $120,000) the founding directors agreed to transfer 1,500,000 escrowed common shares at $0.08 per share for a total of $120,000 and deposit the funds back into the Company.  The balance of the Loans was repaid to the Company through forgiveness of a debt of $12,384 owed by the Company to a founding director.

Upon the completion of the transfer within escrow, current directors Glen Indra and Glen McDonald became the beneficial owners of 1,000,000 and 500,000 common shares respectively.  The undertaking agreement has been fully satisfied and none of the founding Directors currently own shares in the Company, nor are they presently involved with the Company.

The Company entered into an arm’s length Option Agreement on 9/15/1997 with Hunter Exploration Group and Major General Resources Ltd. as the Company’s Major Transaction.  According to Alberta Stock Exchange policy, the transaction was considered to be “at arm’s length” as none of the founding directors or officers, nor the current (then nominee) directors and officers of the Company had an interest in the Abe Property.  There are no affiliations between any of the officers and directors and Hunter Exploration Group or Major General Resources Ltd.

Under the terms of the agreement the Company could earn a 60% interest in twelve mineral claims, totaling 140 units located in the Omineca Mining Division, called the Abe Property, which is located in north central British Columbia.  The Company could earn its 60% interest in the claims through the issuance of cash, common shares and by satisfying certain work commitments as outlined in the Option Agreement.

On 11/19/1997, the Alberta Stock Exchange cleared the Company’s proxy materials for mailing to its shareholders, and conditionally approved the Major Transaction described above.

On 11/28/1997, the Company held its Annual and Special Meeting of Shareholders.  At the meeting, the shareholders approved the acquisition of the Option Agreement pertaining to the twelve mineral claims located in the Omineca Mining Division described above and Glen Indra, Glen MacDonald and Kelly Kerr were elected as the new Board of Directors.  In conjunction with the Company’s Major Transaction, the transfer of shares within escrow effectively changed the management of the Company.  Prior to the transfer within escrow, Messrs. Indra, MacDonald and Kerr were not affiliated with the Company.

Also at the meeting, Loewen, Stronach & Co., Chartered Accountants, were appointed as the auditors; a Special Warrant private placement was approved; a new stock option plan was approved; the reservation of 6,200,000 common shares for a future private placement was approved; and, by a special resolution, the Company’s name was changed to Starfield Resources Inc.

The Alberta Stock Exchange required the Company to satisfy the following conditions in order to complete the Major Transaction pertaining to the twelve mineral claims located in the Omineca Mining Division (The Abe Property):

1.  

Completion of the Special Warrant private placement in the gross amount of $250,000 and satisfactory submission of all the relevant documentation relating thereto;

2.  

Completion of a public offering for a gross amount of $285,000; obtaining a working capital position of $400,000;

3.  

Demonstration of evidence of public distribution for a minimum of 300 public shareholders each holding a board lot (a minimum of 100 shares for stock selling at or above $1.00; a minimum of 1,000 shares for stock selling below $0.10; or a minimum of 500 shares for stock selling between $0.10 and $1.00.)

4.  

Written confirmation from the Corporation’s auditor that the Company has been repaid in accordance with the undertaking agreement.

The Company completed a private placement of 2,500,000 Special Warrant Units at $0.10 per Special Warrant Unit, raising an aggregate of $250,000.  Each Special Warrant Unit was comprised of one Common Share and one Common Share purchase warrant which gives the holder the right to subscribe for an additional common share at the price of $0.15 per share within two years from the date of issuance.  This satisfied condition 1. set out above.

The purchasers in the Special Warrant private placement are outlined below:

Name	Number Units
Glen Indra	500,000
Floralynn Investments Ltd.	500,000
Glen McDonald	500,000
Robert Madigan	500,000
Kelly Kerr	50,000
Biscay Exploration	300,000
Fairholme Developments Ltd.	150,000

*Floralynn Investments Ltd. is 100% owned by Glen Indra

The Common Shares and Warrants issuable upon the exercise of the Special Warrants were qualified in Canada by the Prospectus dated 7/2/1998, according to Circular No. 7 of the Alberta Stock Exchange Policies (see the conditions outlined on pages 7-8).  A copy of the Prospectus is included as Exhibit #9.c.  The offering described by the Prospectus dated 7/2/1998 closed on 7/30/1998, and this satisfied conditions 2., 3., and 4. set out above.

As previously outlined, to facilitate the Major Transaction and to satisfy the undertaking, the founding directors entered into an agreement dated 11/20/1997 with Glen Indra, Company President and a Director, and Glen MacDonald, a Director of the Company, in which the founders transferred within escrow 1,500,000 escrowed common shares to Messrs. Indra and MacDonald for an aggregate sum of $120,000.  (See Exhibit #6.a. for a copy of this agreement.)  The founders then repaid these funds to the Company in order to partially satisfy the undertaking.  One of the founders also agreed to forgive a debt of $12,384 owed by the Company to him.  The combination of the repayment to the Company of $120,000 and the forgiveness of debt satisfied the undertaking. This transaction satisfied condition 4 set out above. The Company abandoned the ABE project in 1999.

In February 1999, the Company entered into a letter agreement with the Ferguson Lake Syndicate (the “Syndicate”).  The agreement granted the Company an option to purchase a 100% interest in certain mineral claims in the Ferguson Lake area of Nunavut Territory, Canada (formerly Northwest Territories) and a five-kilometers area of influence around the claims for $75,000 cash and $1,700,000 in common shares (4,250,000 common shares at $0.40 per share).  The interest is subject to a 3% net smelter royalty on mineral production, a 3% gross overriding royalty on diamond production, and a $25,000 annual advanced royalty payment to the Syndicate.

The acquisition was considered to be a reverse take-over pursuant to the provisions of ASE Circular No. 8.  As such, the acquisition was subject to regulatory approval. The Company received approval for the proposed acquisition from a majority of its shareholders.  The Company received conditional approval for the proposed transaction from the ASE.  The ASE required, as conditions of Phase I approval, that the Company submit a Filing Statement, a reporting letter, and raise a minimum of $600,000 by way of a private placement prior to proceeding with Phase II of the acquisition.  These conditions have all been met.

The Company, pursuant to an Offering Memorandum dated 4/2/1999, issued 1,500,000 Special Warrants at $0.50 per Special Warrant. (600,000 of these special warrants were sold to related parties.) Each Special Warrants comprised of one Common Share in the capital of the Company and one Common Share Purchase Warrant (“Warrant”). Each Warrant together with payment of $0.60 entitled the holder to acquire a further Common Share in the capital of the Company for a period of 12 months from the date of issue.  As part of the Offering Memorandum, the Company offered up to 1,000,000 Flow Through Special Warrants at $0.50 each.  Each Flow Through Special Warrant is comprised of one Flow Through Common Share and one half common share purchase Warrant. No Flow Through Special Warrants were issued.

Under the terms of the agreement, the Company was required to incur $1,700,000 in exploration expenses.  The Company completed a minimum $1,700,000 exploration expenses by 2/29/2000, fulfilled its obligation under the agreement and earned a 100% interest in the property.

4,250,000 common shares at $0.40 each issued by the Company to the Syndicate as consideration for the interest in the Ferguson Lake claims were held in escrow according to the terms of an ASE Form 10B Performance Escrow Agreement. The Escrowed shares were releasable from escrow upon application to the ASE on the basis of one common share for every $0.40 spent on exploration on the property.  The release of the escrowed shares was a maximum of 1/3 of escrowed shares on 2/28/2000, a further 1/3 on 2/28/2001 and the balance of the escrowed shares on 2/28/2002, provided the Company incurred the necessary exploration expenses of the work commitment.  Applications to the ASE for releases from escrow were based upon exploration expenses disclosed in a schedule to the Company’s annual audited financial statements.  In fiscal 1999 and 2000, the Company fulfilled its obligations to incur $1,700,000 in exploration expenses and earned a 100% interest in the propert y.  Accordingly, 1,416,666 escrowed shares were released from escrow on 2/28/2000, a further 1,416,666 escrowed shares were released from escrow on 2/28/2001, and the balance of 1,416,668 shares were released on 2/28/2002.

On August 20, 1999 the Company completed a private placement consisting of 334,000 Special Warrants at a price of $0.90 per Special Warrant. (118,000 of these special warrants were sold to related parties.) Each Special Warrant consisted of one flow through share and one half share purchase warrant each full warrant entitling the holder to purchase an additional common share for twelve months at a price of $0.99 per share. This private placement netted the Company $300,600. There was no difference between the price of the flow through shares and the fair market value of the Company’s common stock. The Company renounced $300,600 in exploration expenses, transferring the income tax deduction to the shareholders.

In October 1999 the Company completed a private placement consisting of 274,500 Special Warrants at a price of $0.60 per Special Warrant. (112,500 of these special warrants were sold to related parties.) Each Special Warrant consisted of one common share and one share purchase warrant entitling the holder to purchase an additional common share for twenty-four months at a price of $0.66 per share.  This private placement netted the Company $164,700.

In February 2000 the Company completed a private placement consisting of 250,000 Special Warrants at a price of $0.40 per Special Warrant. All shares were subscribed as flow-through shares whereby the Company renounced $100,000 in exploration expenses, transferring the income tax deduction to the shareholders.  Each Special Warrant consisted of one flow through share and one share purchase warrant entitling the holder to purchase an additional share for twelve months at a price of $0.45 per share.

In March 2000 the Company completed a private placement consisting of 1,120,000 Special Warrants at a price of $0.45 per Special Warrant.  Each Special Warrant consisted of one common share and one common share purchase warrant entitling the holder to purchase an additional common share for twelve months at a price of $0.55 per share.

In May 2000 the Company completed a private placement consisting of 1,400,000 Special Warrants at a price of $0.50 per Special Warrant. 600,000 shares were subscribed as flow-through shares whereby the Company renounced $300,000 in exploration expenses transferring the income tax deduction to the shareholders.  Each Special Warrant consisted of one common share and one common share purchase warrant entitling the holder to purchase one additional common share for twelve months at a price of $0.60 per share.

In July 2000, the Company completed a private placement consisting of 175,000 special warrants at a price of $0.62 per special warrant.  Each special warrant consisted of one common share and one share purchase warrant.  Each share purchase warrant entitles the owner to purchase an additional share for $0.77 for a period of one year.

In August 2000, the company completed a private placement consisting of 200,000 special warrants at $0.58 per special warrant.  Each special warrant consisted of one common share and one share purchase warrant.  Each share purchase warrant entitles the owner to purchase an additional share for $0.72 for a period of one year.

In October 2000, the Company completed a private placement consisting of 771,000 special warrants at a price of $1.10 per special warrant. 270,000 shares were subscribed as flow-through shares whereby the Company renounced $297,000 in exploration expenses transferring the income tax deduction to shareholders. Each special warrant consisted of one common share (270,000 of which possess flow-through entitlements) and a purchase warrant which may be exercised into a further common share within one year of issuance upon payment of $1.38.

In October 2000, the Company completed a private placement consisting of 600,000 special warrants at a price of $0.50 per special warrant. 200,000 shares were subscribed as flow-through shares whereby the Company renounced $100,000 in exploration expenses transferring the income tax deduction to the shareholder.  Each special warrant consisted of one common share (200,000 of which possessed flow through entitlements) and one share purchase warrant. Each share purchase warrant entitles the owner to purchase an additional share for $0.60 for a period of one year.

In November 2000, the Company completed a private placement consisting of 600,000 special warrants at a price of $0.50 per special warrant.  Each special warrant consisted of one share and one non-transferable share purchase warrant to purchase an additional share for $0.52 for a period of one year.

In December 2000, the Company negotiated a private placement consisting of 333,334 units at a price of $0.45 per unit. Each unit consisted of a flow-through common share and a non-transferable one-half share purchase warrant to purchase an additional common share at $0.50 per share for each full warrant for a one year period. These shares were issued on 3/19/2001.

In December 2000, the Company negotiated a private placement consisting of 3,879,000 units at a price of $0.50 per unit.  Each unit consists of one common share and one share purchase warrant to purchase an additional share for $1.00 for a period of one year. 2,941,000 shares were subscribed as flow-through shares whereby the Company renounced $1,470,500 in exploration expenses, transferring the income tax deduction to the shareholders. These shares were issued on 3/19/2001.

In June 2001, the Company completed a private placement consisting of 2,248,862 units at a price of $0.50 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.60 for a period of two years.

In August 2001, the Company completed a private placement consisting of 1,673,692 units at a price of $0.60 per unit. Each unit consisted of one common share and one-half of a share purchase warrant to purchase an additional share for $0.75 for a period of one year. 496,667 shares were subscribed as flow-through shares whereby the Company renounced $298,000 in exploration expenses transferring the income tax deduction to the shareholders. These shares were issued on 10/03/2001.

In October 2001, the Company completed a private placement consisting of 4,001,000 units at a price of $0.50 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.55 for a period of two years.  1,000,000 units were subscribed as flow-through shares whereby the Company renounced $500,000 in exploration expenses transferring the income tax deduction to the shareholders.  These shares were issued on 1/15/2002.

In November 2001, the Company completed a private placement consisting of 2,475,000 units at a price of $0.50 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.60 for a period of two years. 1,300,000 units were subscribed as flow-through shares whereby the Company renounced $650,000 in exploration expenses transferring the income tax deduction to the shareholders.  These shares were issued on 1/21/2002.

In February 2002, the Company completed a private placement consisting of 315,750 units at a price of $0.50 per unit.  Each unit consisted of one common share and one flow-through share purchase warrant to purchase an additional share for $0.55 for a period of 18 months.  All units were subscribed as flow-through shares whereby the Company renounced $156,875 in exploration expenses transferring the income tax deduction to the shareholders.  These shares were issued on 2/27/2002.

In February 2002, the Company completed a private placement consisting of 3,000,000 units at a price of $0.50 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.75 for a period of one year.  1,600,000 units were subscribed as flow-through shares whereby the Company renounced $800,000 in exploration expenses transferring the income tax deduction to the shareholders.  These shares were issued on 2/27/2002.

In April 2002, the Company issued 25,100 private placement units at a price of $0.50 in lieu of finder fees in the amount of $12,550. Each unit consisted of one common share and one flow-through share purchase warrant to purchase an additional share for $0.55 for a period of 18 months.  All units were subscribed as flow-through shares whereby the Company renounced $12,550 in exploration expenses, transferring the income tax deduction to the shareholders.  These shares were issued on 4/24/2002.

In April 2002, the company issued 16,000 private placement units at a price of $0.50 in lieu of finder fees of $8,000. Each unit consisted of one common share and one share purchase warrant to purchase one additional share for $0.75 for a period of one year.  All units were paid as flow-through shares whereby the Company renounced $8,000 in exploration expenses, transferring the income tax deduction to the shareholders.  These shares were issued on 4/24/2002.

In October 2002, the Company completed a private placement consisting of 7,526,196 units at a price of $0.40 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.75 for a period of one year.  One subscriber for $150,000 received purchase warrants that are exercisable up to 18 months. 4,662,000 units were subscribed as flow-through shares whereby the Company renounced $1,864,800 in exploration expenses transferring the income tax deduction to the shareholders.  These shares were issued on 11/28/2002.

In January 2003, the Company completed a private placement consisting of 216,250 units at a price of $0.32 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.35 for a period of 18 months. The Company also completed a private placement consisting of 772,500 units at a price of $0.32 per unit.  Each unit consisted of one common share and one flow-through share purchase warrant to purchase an additional share for $0.35 for a period of 18 months. The Company issued 40,000 private placement units at a price of $0.32 in lieu of finder fees in the amount of $12,800. All units were subscribed as flow-through shares whereby the Company renounced $329,200 in exploration expenses transferring the income tax deduction to the shareholders.  These shares were issued on 1/31/2003.

In February 2003, the Company received $1,594,056 for 4,554,445 January 2003 private placement units at $0.35 per unit.  Each unit consisted of one common share and one share purchase warrant to purchase an additional share for $0.45 for a period of 18 months. 2,435,715 units were subscribed as flow-through shares whereby the Company renounced $852,500 in exploration expenses transferring the income tax deduction to the shareholders. 1,250,000 additional units of this private placement were issued in March 2003 for proceeds of $437,500.  

Also in February 2003 the Company announced that it would amend the Stock Option Agreements dated 3/8/2002, between the Company and each of Louise Davey, Barbara Kelly, Brian Game, John Nicholson and Per Hedblum, who are consultants of the Company.  The proposed amendment would reduce the exercise price from $0.90 to the market price at the close of trading on February 14, 2003, being $0.40.  The expiry date for exercise of the options will remain unchanged.  Under its Stock Option Plan, the Company also issued a total of 2,340,000 options to two directors at $0.40 to acquire listed shares.

In June 2003, the Company announced a private placement of up to 7,400,000 common share units at a price of $0.30. Each unit consisted of 1 common share and 1 common share purchase warrant, with each warrant exercisable into 1 additional common share at a price of $0.45 until March 19, 2005. During the second quarter of fiscal year 2004 ended August 31, 2003, the Company issued 3,123,885 units of the private placement for net proceeds of $847,342. During the third quarter ended November 30, 2003, the Company issued an additional 4,016,000 units of the private placement for net proceeds of $1,091,820.  As Finder’s Fees, Yorkville Capital received $36,874 cash; Dundee Securities received $24,000 cash; Vencorp Capital received $10,650 cash; William Gaudet received $9,600 cash; Canaccord Capital received $4,800 cash; Quail Creek Investments received $1,587 cash; and Carl Jones $115,293.

In June 2003, the Company, through the Standard Bank of London, entered into a financial agreement with Resourceworks PLC (“RW”) of London, England. The agreement called for RW to acquire a $2,600,000 convertible debenture in Starfield with a 3-year term, a commitment to raise an additional $4,400,000 on a best-efforts basis, and a $10,000,000 short term loan facility. Upon final approval of the agreement, RW would have appointed two Directors to Starfield’s Board of Directors. In September, Starfield announced that it had decided to not enter a final agreement with RW as final terms agreeable to the Company could not be reached.

In July 2003, the Company reached an agreement with Wyn Developments whereupon the Company can earn a 50% interest in 5,165 hectares of exploration property contiguous to the Eastern and Western boundaries of the Company’s Ferguson Lake Property. To earn a 50% interest, the Company must expend a total of $575,000 in exploration expenditures through 2005 as well as pay $30,000 towards the advance royalty due to the original vendors of the property. The agreement was accepted by the TSX Venture Exchange in October, 2003.

In October 2003, the Company announced the private placement of 7,250,000 units at a price of $0.20 per unit. The placement consisted of 2,350,000 flow-through and 4,900,000 non-flow through units. Each flow-through unit consisted of one common share and one-half of a common share purchase warrant. Each non-flow through share consisted of one common share and one common share purchase warrant. One full warrant from either unit is exercisable into one additional common share at a price of $0.25 until November 7, 2005. Net proceeds from the placement were $1,332,875. As finder’s fees, Carl Jones received $46,425 cash; Vencorp Capital received $37,000 cash; Canaccord Capital received $24,000 cash; Odlum Brown received $6,400 cash; and William Gaudet received $3,300 cash.

In November 2003, the Company announced the private placement of up to 7,000,000 units at a price of $0.20. The placement consisted of 1,201,500 flow-through and 5,693,250 non-flow through units. Each flow-through unit consisted of one common share and one-half of a common share purchase warrant. Each non-flow through share consisted of one common share and one common share purchase warrant. One full warrant from either unit is exercisable into one additional common share at a price of $0.25 until November 7, 2005. Net proceeds from the 6,894,750 units issued in the placement were $1,239,455. As finder’s fees, Zevtec Canada received $45,800 cash; Carl Jones received $36,665 cash; Vencorp Capital received $34,830 cash; William Gaudet received $16,700 cash; and Odlum Brown received $5,500 cash.  

In December 2003, the Company announced the private placement of up to 1,500,000 units at a price of $0.30 per unit. Each unit consisted of one common share and one common share purchase warrant, with each warrant exercisable into one common share at a price of $0.40 until January 21, 2006. A total of 1,477,430 units were issued for net proceeds of $398,906. As finder’s fees, Vencorp Capital received $24,900 cash and Zevtec Canada received $19,423 cash.

Also in December 2003, the Company engaged D. Weckstein & Co. Inc. of New York to act as a financial consultant and investment banker and assist the Company in seeking equity or debt financings in the United States. Weckstein & Co. will receive a finder’s fee for any completed transactions as well as 550,000 options to purchase the Company’s stock at a price of $0.25 per share until January 7, 2009.

In January 2004, the Company announced that due to positive exploration results, it had staked an additional 15,495 acres of mineral claims contiguous to the southern boundary of its Ferguson Lake Property. The Company holds a 100% interest in these additional claims. In February 2004, the Company and its option partner Wyn Development announced that they have staked 12,912 acres on a 50%-50% joint-venture basis. These additional claims are also adjacent to the Company’s Ferguson Lake Property.

In March, 2004, the Company announced that it had engaged Williams de Broe PLC, a subsidiary of the ING Group, to act as agent for the private placement of the Company’s shares totaling between $6 million and $7.5 million. In May 2004, the Company announced that it had closed the financing led by William de Broe. The placement was for 18,749,703 common units at a price of $0.40 per unit. Each unit consisted of one common share and one common share purchase warrant, with each warrant exercisable into one additional common share at a price of $0.60 until March 12, 2006. The proceeds from the placement were $7,499,881. As agents for the placement, Williams de Broe received 1,500,000 units, while Zevtec Canada received $20,000 cash and Vencorp Capital received $129,998 cash as finder’s fees.

In December 2004, the Company completed the private placement of 1,385,000 flow-through common shares and 7,975,241 private placement units, each at a price of $0.45, which was announced in October, 2004. Each private placement unit consisted of one common share and one common share purchase warrant, with 2 warrants exercisable into one common share at a price of $0.75 for a two-year period from closing. A portion of the warrants are exercisable until November 29, 2006, with the remainder exercisable until December 2, 2006. Gross proceeds from the placement was $4,212,108, while net proceeds were $3,795,897 after payments totaling $416,211 consisting of 10% cash of the gross proceeds from units sold to subscribers found by Jory Capital Inc; 10% cash of the gross proceeds from units sold to subscribers found by Williams de Broe PLC; and 10% cash paid to Carl Jones.

Also in December 2004, the Company completed the private placement of 888,890 flow-through common shares at a price of $0.45. The placement was announced in December 2004, and proceeds were $400,000.

In June 2005, the Company closed the private placement of 2,000,000 flow-through common shares at a price of $0.55 per share. Gross proceeds from the placement were $1,100,000, with Finder’s Fees of $44,000 paid to Carl Jones and $55,000 to Jory Capital Inc.

In July 2005, the Company announced that it had increased the size of its Ferguson Lake mineral claim holdings by 200% to a total of 1,288,350 acres. The additional acreage was staked in response to a regional airborne survey performed by the Company’s contractor Geotech Ltd. which determined that continuous multi-kilometer conductive trends run across the existing property boundaries into the new acreage.

In September 2005, the Company closed a non-brokered private placement of 1,030,000 flow-through common shares at $0.55 per share for gross proceeds of $566,500. Finder’s Fees of $1,320 were paid to Dundee Securities Corp.

In November 2005, the Company closed the private placement of 5,552,219 flow-through common shares at a price of $0.45 per share for gross proceeds of $2,498,499. Finder’s fees $8,280 were paid to Carl Jones and Agents’ Fees of $80,000 were paid to Limited Market Dealers Inc.

In February 2006, the Company completed the private placement of 3,123,776 flow-through common shares at a price of 45 cents per flow-through share, and 9,999,875 non-flow through common share units at a price of $0.40 per non-flow through unit. Each non-flow through unit consisted of one common share and one common share purchase warrant, with each two warrants exercisable into one non-flow through common share at a price of $0.50 per share. Of the warrants in the non-flow through units, 3,250,000 of the warrants will expire on December 28, 2007 and 6,749,875 will expire on January 20, 2008. Gross proceeds of the placement were $5,405,649. Finder’s Fees of $114,737 were paid to Cenkos Securities Ltd., $112,456 were paid to Limited Market Dealer Inc., $68,260 were paid to Williams de Broe and $34,000 were paid to Carl Jones.

Subsequent to the most recent fiscal year-end, In June 2006 the Company completed a non-brokered private placement of 5,571,796 flow-through common shares at a price of $0.65 per flow-through share, and 24,424,501 non-flow through common share units at a price of $0.53 per unit. Each non-flow through unit consisted of one non-flow through common share and one-half of a common share purchase warrant, with each full warrant exercisable into one non-flow through common share at a price of $0.75 until May 10, 2007. Total gross proceeds from both the flow-through and non-flow through portions of the placement were $16,566,653. Finders’ Fees of 7% cash of the gross proceeds raised and finder’s warrants to acquire the number of common shares equal to 3.35% of the units and flow-through common shares subscribed exercisable at a price of $0.65 per share for a period of one year from closing was payable to Max Capital Markets Ltd.

The Company’s current focus is on exploration at its 100% owned Ferguson Lake property, 240 kilometers west-southwest of Rankin Inlet in Nunavut Territory of northern Canada. Access to the property is by fixed wing aircraft from either Rankin Inlet or Thompson, Manitoba to an airstrip adjacent to the exploration camp.

The Ferguson Lake property hosts a large nickel-copper-cobalt-palladium-platinum mineral resource.  

Plan Of Operations

Source of Funds for Fiscal 2007

The Company’s primary source of funds since incorporation has been through the issuance of common shares, special warrants and private placement units.  Currently the Company does not have operating revenues, and the Company does not anticipate generating any operating revenue until the Ferguson Lake project begins production.  However, production will not begin unless and until commercially viable minerals are discovered.

The Company had working capital of $802,947 as of 2/28/2006, the end of the most recent fiscal year, and working capital of $839,920 at 2/28/2005.  The Company had $2,134,103 in cash and cash equivalents as of 2/28/2006 and $1,329,164 at 2/28/2005. Subsequent to Fiscal 2006 Year End, the Company closed the private placement of 5,571,796 flow-through common shares at a price of $0.65 per flow-through share, and 24,424,501 non-flow through common share units at a price of $0.53 per unit, for total gross proceeds of $16,566,653. Also subsequent to the fiscal year-end, the Company issued 85,000 common shares pursuant to the exercise of options for proceeds of $37,500, and issued 1,033,334 common shares pursuant to the exercise of warrants for proceeds of $620,000.

Use of Funds for Fiscal 2007

During Fiscal 2007, the Company estimates that it might expend approximately $2,280,000 on general/administrative expenses.  During Fiscal 2007, the Company estimates that it might expend $10,000,000 on property acquisition and exploration expenses.  These estimates are contingent upon many factors.

Anticipated Changes to Facilities/Employees

The Company will continue to focus its efforts on the exploration of the Ferguson Lake property.  The Company has no plans to add any additional personnel.  Management anticipates that any property exploration efforts will be carried out by outside contractors.

United States vs. Foreign Sales/Assets

At 2/28/2006, 2/28/2005 and 2/29/2004 the Company generated no sales revenue.

At 2/28/2006, 2/28/2005, and 2/29/2004, all of the Company’s assets of $48,923,459, $35,689,464, and $25,425,329, were located in Canada.

Material Effects of Government Regulations

The current and anticipated future operations of the Company, including further exploration and/or production activities require permits from various Canadian Federal, Provincial and territorial governmental authorities.  Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters.  Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.  The Company has had no material costs related to compliance and/or permits in recent years, and anticipates no material costs for Fiscal Year 2007.

Seasonality

The Company’s operations are currently focused on the exploration of the Ferguson Lake project in Nunavut Territory, Canada. The project is located in a sub-artic climate, and although certain exploration can be conducted year-round, the Company has conducted the majority of its field exploration during the warmer months to facilitate ease of access and supply.

Dependency upon Patents/Licenses/Contracts/Processes

Sources/Availability of Raw Materials

--- No Disclosure Necessary ---

4.C. Organization Structure

The Company was originally formed as a junior capital pool corporation pursuant to Alberta Securities Commission Policy 4.11 and Circular No. 7 of The Alberta Stock Exchange Policies.  A junior capital pool (JCP) corporation is defined in Circular 7 of the Alberta Stock Exchange (ASE) and Rule 46-501 of the Alberta Securities Commission (ASC) as follows:

A JCP company:

(a)

Files a preliminary JCP Prospectus under ASC Rule 46-501;

(b)

Has no significant assets or business, and has no specific plans for the acquisition of an asset or business, or has a specific plan or plans for the acquisition of an asset or business but such plan or plans have not yet reached the stage of an enforceable agreement.

According to ASC Rule 46-501, the business objective of a JCP corporation shall be to identify and evaluate assets or businesses with a view to completing a Major Transaction approved by the ASE and the majority of the minority (not including insider) shareholders.  Until the completion of the Major Transaction, the JCP corporation shall not carry on any other business.

Upon completion of a public offering, a JCP corporation may have its common shares listed for trading on the facilities of the ASE.  However, the JCP corporation must bring a Major Transaction into the company within 18 months of the listing date.  A Major Transaction, pursuant to ASC Policy 4.11 is a transaction whereby:

(i)

the issuer issues more than 25% of its issued and outstanding securities to acquire assets (other than cash) or securities of another issuer;

(ii)

the issuer enters into an arrangement, amalgamation, merger or reorganization with another issuer whereby the ratio of securities distributed to the two sets of security holders results in the security holders of the other issuer acquiring control of the entity arising from the reorganization, or

(iii)

the issuer acquires significant assets (other than cash) or a business in any way other than set out above.

The original founders of the Company failed to bring a Major Transaction to the company within the specified period of time.  On 9/15/1997, the new directors of the Company satisfied the requirement to bring a Major Transaction into the Company by entering into an option agreement, which entitled the Company to earn a 60% interest in the Abe mineral property in north central British Columbia.  The Company has satisfied all of the conditions outlined by the ASE to complete its Major Transaction. The Company did not carry out any business until the completion of its Major Transaction.

The Company became a reporting issuer in the Province of Alberta on 12/12/1994 pursuant to the issuance of a receipt for its junior capital pool prospectus dated 12/7/1994. (See Exhibit #9.b. for a copy of the prospectus.)  A JCP corporation, as part of the first stage of the JCP process, is required to file a junior capital pool prospectus document.  The document is required as support for the public offering required to be completed in order to have the JCP corporation’s shares listed for trading on the facilities of the ASE.  The JCP Prospectus must contain disclosure as contained in any prospectus, along with additional disclosure required by ASC Rule 46-501.  Such additional disclosure includes: Disclosure of the JCP corporation’s business objective; disclosure of additional risk factors; disclosure that any proposed Major Transaction must be approved by the majority of the minority of shareholders; and, disclosure of restrictions on paym ents to parties related to the JCP corporation.

The JCP process is a two-stage process. In Stage One, the Issuer files both its application for listing and its preliminary prospectus with the Alberta Stock Exchange.  The preliminary prospectus is also filed with the Alberta Securities Commission.  Once the documentation has been approved, a final prospectus is filed with both the Alberta Stock Exchange and the Alberta Securities Commission.  At this point a public distribution is completed; final listing documentation is filed and upon the resolution of all deficiencies associated with the documentation, the securities are listed and posted for trading.

In Stage Two, the Issuer instigates and completes a “major transaction”.  (The acquisition of an asset or business.) In February 1999, the Company entered into a letter agreement with the Ferguson Lake Syndicate (the “Syndicate”).  The agreement granted the Company an option to purchase a 100% interest in in the Ferguson Lake property for $75,000 cash and $1,700,000 in common shares (4,250,000 common shares at $0.40 per share).  The acquisition was considered to be a reverse take-over pursuant to the provisions of ASE Circular No. 8.  As such, the acquisition was subject to regulatory approval. The Company received approval for the proposed acquisition from a majority of its shareholders.  The Company received conditional approval for the proposed transaction from the ASE.  The ASE required, as conditions of Phase I approval, that the Company submit a Filing Statement, a reporting letter, and raise a minimum of $600,000 by way of a private placement prior to proceeding with Phase II of the acquisition.  Once these conditions were met, the Company ceased to be a JCP.

4.D.  Property, Plant and Equipment

The Company's executive offices are located in rented premises of approximately 2,000 square feet at Suite 420, 625 Howe Street, Vancouver, British Columbia V6C 2T6.  The Company considers these premises suitable for current needs.

Ferguson Lake Property

The Ferguson Lake property is located in the Nunavut Territory, Canada. Currently, the property covers 1,322,735 acres.

LOCATION MAP

Acquisition Details

In February 1999, an option agreement was signed between the Company and the Ferguson Lake Syndicate (The Syndicate) with respect to an option to acquire a 100% interest in three mineral claims known as the Ferguson Claims located in the Ferguson Lake area of Nunavut Territory.  Under the terms of the agreement, the Company has the right to earn a 100% interest in the property, subject to a 3% net smelter royalty (NSR) on mineral production, a 3% gross overriding royalty on diamond production and a $25,000 annual advance royalty payment.  The Company had the right to purchase 1% of the 3% NSR for $1,000,000 up to 180 days after receipt of a positive feasibility study recommending commercial production.

The option interest was acquired for $75,000 cash and by issuing 4,250,000 common shares in the Company at a deemed price of $0.40 per share.  The first 1,250,000 common shares were issued into escrow on closing.  The balance of 3,000,000 common shares were issued and placed into escrow after the company had incurred $500,000 in mineral exploration expenses and demonstrated to the TSX Venture Exchange (formerly the Canadian Venture Exchange) that it had raised $600,000 through private placement for further exploration.  The deemed value of the 4,250,000 common shares issued in escrow was $1,700,000.

In July 2003, the Company entered into an option agreement with Wyn Developments whereupon the Company can earn a 50% interest in Wyn’s 5,165 hectares located contiguous to the eastern and western boundaries of the Ferguson Lake property. Wyn’s has an underlying option agreement to earn a 100% interest in the property from Hunter Exploration Group (the “Hunter Agreement”) by expending $1,000,000 on exploration over the next 3 years. To earn a 50% interest, Starfield must spend $500,000 in exploration and Wyn must spend $487,715. The property expenditures are required to be made as follows:

Year	Expenditures Required by Wyn	Expenditures Required by Starfield	Total
2002	$   12,285	$      Nil	$    12,285
2003	50,000	Nil	50,000
2004	137,715	275,000	412,715
2005	300,000	300,000	600,000
Totals	$  500,000	$  575,000	$ 1,075,000

In addition to the above expenditures, Starfield must provide Wyn with another $75,000 for exploration in 2004, with the value being approximately 50% of the value of the common shares Wyn paid Hunter for the underlying option. Starfield is also required to pay 50% of the advance royalty of $15,000 per year due on the project under the following schedule:

Date Due	Royalty Payments Required by Wyn	Royalty Payments Required by Starfield	Total
July 1, 2002	$ 25,000	$    Nil	$ 25,000
July 1, 2003	Nil	5,000	5,000
July 1, 2004	Nil	15,000	15,000
July 1, 2005	5,000	10,000	15,000
Totals	$ 30,000	$ 30,000	$ 60,000

The exploration commitments were not completed by either party. Therefore, During the fiscal year ended February 28, 2006, the Company wrote-down its acquisition costs in the joint-venture properties to $1 and wrote-off the exploration costs to date. However, the Company and Wyn still retain interests in certain claims that fall outside the Hunter agreement and are still maintained in good standing.

Further to the above 50%-50% option agreement, Starfield and Wyn staked an additional 12,912 acres covering prospective magnetic anomalies adjacent to the eastern and western boundaries of the Ferguson Lake property, which increased the area covered by the 50%-50% JV to 25,825 acres.

In January 2004, the Company announced that it had staked 15,495 acres of claims contiguous to the southern boundary of the Ferguson Lake property. Starfield holds these claims 100%. In July 2005, the Company announced that it had staked additional land to cover conductive trends identified during a regional aeromagnetic survey which increased the size of the property by approximately 200% to a total of 1,288,350 acres. During the year ended February 28, 2006, the Company added additional claims to the Ferguson Lake property which currently totals 1,322,735 acres.

Property Description

The Ferguson Lake property is underlain principally by northeast-trending, early Precambrian (Archean) volcanic, sedimentary and gneissic rocks which are cut by a variety of dykes and small plutons.

Oldest rocks identified are exposed in the northern property area and within an area south of the claims include metamorphosed volcanic sedimentary rocks. The volcanic rocks in the central parts of the property are present as amphibolites and are locally interlayered with more areally extensive granitic gneisses which are the products of metamorphism of earlier granitic, volcanic and sedimentary rocks. Archean granites, diorites and gabbros intrude both the amphibolites and gneissic rocks.

All of the foregoing rock units are highly deformed and strongly metamorphosed. Pronounced layering within the various rock units trends northeasterly and generally dips moderately to steeply north. Post-dating the period of intense metamorphism and deformation are a variety of younger dykes, sills and irregular intrusions. These younger intrusions include medium- to coarse-grained gabbros which are the host rocks for base and precious metals- bearing massive sulphides and platinum group elements associated with zones of lower sulphide content below the massive sulphide lenses. The gabbro intrusions, which are conformable with the layering in older gneissic sequences and dip moderately to steeply north, are thought to be the metamorphic products of original mafic and ultramafic magmas. Several intrusive phases are evident within these sill-like intrusions including peridotites, pyroxenites and coarser-grained gabbros.

The main gabbro sill, which hosts the most significant massive sulphide and platinum group elements zones encountered to date (East, Central, West, 119), varies in width from ten to hundreds of meters and has been traced in bedrock exposures and drill holes over an east-west strike length of more than 12 kilometers. The linear nature of this intrusion is clear evidence that it post-dates much of the intense deformation and metamorphism seen in the enclosing, older gneissic rocks. The gabbro sill is thought to be fault-controlled, possibly occupying an east-west suture between two structural domains.

A number of other gabbro sills south of the main unit are host to lesser explored zones of massive sulphide mineralization. These include West Zone South and South Discovery Zone west of Ferguson Lake and Anomaly 51 and M Zone east of the lake. The host gabbro units are thought to have been emplaced along east- to northeast-trending fault zones.

All of the mineralized gabbro sills are locally offset by later, northerly-trending faults. Both the gabbros and the older gneissic units are cut by younger (Proterozoic) syenites, quartz-feldspar porphyries, diabases, gabbros, diorites and fine-grained mafic dykes.  

Mineral Zones

The various mineral zones associated with gabbro sills in the central property area are mainly magmatic nickel-copper sulphide deposits which also contain cobalt and PGE (platinum group elements) values. As noted, four of the more significant zones identified to date (East, Central (lake), West, 119) are apparently hosted by the same gabbro intrusion which has been traced over a strike length of more than 12 kilometers east and west of Ferguson Lake. The disposition of the various mineral zones referred to in the following narrative is shown on the following diagram.

Metallic minerals within the various mineral zones include pyrrhotite, marcasite, chalcopyrite, pentlandite, magnetite and pyrite. The sulphide minerals occur as massive to semi-massive pods, lenses and stringers and as fracture-fillings and disseminations over    thicknesses of up to several tens of meters. Sulphide matrix breccias, featuring 1-2 centimeter sub-rounded mafic clasts, are a common feature of massive sulphide zones. Net-textures have been noted in some of the stringer and fracture-filling sulphide sections. The sulphide zones are best developed in the upper, hanging wall portion of the north-dipping gabbro units but are also locally present as remobilized sections within hanging wall gneisses. The sulphide-rich zones are marked on surface by prominent gossans up to 25 meters wide and several hundred meters long.

The East, West and Central (lake) Zones were tested by more than 27000 meters of diamond drilling in 170 holes by Inco in the early 1950s. Most drilling was on 120 to 150 meters spaced sections; distance between holes averaged about 70 meters. Hole lengths averaged 150 to 180 meters with the deepest hole being 640 meters. This previous drilling did not test the zones below a vertical depth of about 240 meters.

The most significant drilling results from more recent programs (1999 – 2002) have been obtained from East, West and 119 Zones. Better grades (+1% combined copper-nickel) of nickel-copper-cobalt-PGE mineralization within and marginal to the host gabbro intrusion in these three zones are contained in lenses and pods of massive and semi-massive sulphides which have a lateral extent of between 350 metres (East Zone II) and +3000 meters (West Zone) and apparent down-dip continuities of between 60 and +500 meters. Lens widths range between 1 and 71 meters (average 10 meters) for West Zone, 2 and 14 meters (average 9 meters) for 119 Zone and between 1 and 24 meters (average 6 meters) for East Zone. Two or more parallel lenses, separated by between 5 and 100 meters of lower grade sulphide mineralization and/or unmineralized hostrock, are present in many of the holes drilled to date.

The principal focus of previous and current work has been directed to West Zone which has been traced by intermittent bedrock exposures, geophysical surveys and by a considerable amount of diamond drilling over a zone length of several kilometers. The zone was tested by 72 Inco holes (10833 meters) between 1951 and 1955 and by more than 50000 meters of drilling in 130 holes by Starfield between 1999 and 2002. Results obtained from the more recent programs have significantly expanded the mineral resource identified by earlier Inco work.

Note that all references to grades of base and precious metals in the following section incorporate weighted average grades for all elements.

Work on West Zone in 2001 and 2002 consisted of drill holes designed to test the deeper, western part of the zone; Most holes drilled intersected intervals of ten’s of meters containing +1% combined copper+nickel most of which included significant sections of +1.5% and +2% combined copper+nickel plus platinum group elements (palladium + platinum) averaging more than 2 grams/tonne. Three holes drilled on section 62+00W, helped to clarify the fault offset of the zone in the area of 60+00W where the zone appears to have been down-dropped between 50 and 100 meters. Further evidence of the offset is provided by a displaced, post-mineral syenite dyke. A highlight of hole FL01-104, drilled on section 63+00W, was a 0.50 meter section of sheared and brecciated gabbro, some 50 meters down-hole from, or in the footwall of the main massive sulphide intervals, which contained 9.86 grams/tonne palladium and 1.44 grams/tonne platinum.

The westernmost drilling of West Zone to date includes hole FL01-101 on section 68+00W which returned 1.17% Cu+Ni and 1.46 g/t Pd+Pt over a 4.39 meters interval but the most significant results included a 0.35 meter section grading 90 to 105.64 g/t palladium, 26.71 to 35.03 g/t platinum and 2.74 to 3.51 g/t rhodium. This interval, in the hangingwall some 7 meters above the massive sulphide horizon, consisted of a distinctive, foliated, biotite-rich zone with no visible sulphides. Petrographic work identified very fine-grained kotulskite (tellurium- bismuth palladium mineral) and minor sperrylite (platinum arsenide mineral). Of particular interest is the fact that this discrete zone contains 108 ppm tellurium and values of 40 to 50 ppm tellurium occur both above and below the zone. Four wedge holes were drilled off hole FL01-101 in 2002 to further investigate the exceptionally high platinum group element values.  One of these wedge holes, which intersected the same alt ered zone 1 meter west and 1 meter above the original hole, returned a 0.16 meter interval grading 42.58 g/t palladium and 5.62 g/t platinum.     

Definition drilling of the eastern part of West Zone in 2002 consisted of 39 relatively shallow inclined holes between sections 42+68W and 51+20W to better define near-surface sulphide resources. An inferred resource in this area, consisting of combined copper+nickel grades greater than 1.5%, was initially explored by a number of shallow Inco holes completed between 1951 and 1955. The moderately north-dipping zone was tested by original inclined drill holes at approximately 60 meters intervals along north-south section lines 122 meters apart.

By drilling on section lines midway between the original sections or at 60 meters spacings, this program was intended to provide detailed information regarding the down-dip and lateral continuity of the north-dipping sulphide horizon(s) plus confirmation of original copper and nickel grades and a more precise assessment of platinum group element and cobalt grades (original Inco results included only limited precious metals grades and no cobalt analyses).  Further, the program would also provide ample material for subsequent metallurgical test work.

Most of the holes drilled intersected two or more parallel sulphide lenses with grades in excess of 1% copper+nickel; hole intervals between the individual sulphide lenses ranged from 5 meters to 45 meters. Down-dip continuity of the lenses ranged 30 to 325 meters and true widths ranged from the minimum 2 meters to 45 meters with an overall average of 6.65 meters. Sulphide lenses on more than half of the nineteen sections drilled remain open both up and down-dip. Data obtained from the 2002 program permitted an estimate of an indicated mineral resource for this part of West Zone.

In addition to better defining the sulphide zone, this program was also successful in identifying a unique style of low-sulphide platinum group element mineralization hosted by footwall gabbros some 50 meters below the sulphide horizon(s). This style of mineralization was first recognized at depth in hole FL01-104 on section 63+00W as noted previously.

In the shallower, eastern part of West Zone, this zone is characterized by dispersed biotite alteration and fine-grained disseminated pyrite. Palladium values in these zones range from 100 to 500 ppb over several tens of meters within which combined palladium+platinum grades of up to tens of grams per tonne occur over narrow intervals. Some of the better results were obtained in holes FL02-109 and FL02-135 drilled on sections 43+20W and 43+50W respectively. Hole FL02-109 intersected a 1.04 meters interval grading 12.89 g/t palladium and 1.38 g/t platinum; hole FL02-135 returned a 2.81 meters interval grading 7.76 g/t palladium and 6.82 g/t platinum which included a 1.11 meter section of 19.13 g/t palladium and 13.96 g/t platinum.

The overall zone containing enhanced palladium and platinum values was seen to be more or less continuous over a strike length of 160 meters within the area drilled; the continuity of the higher grades was not readily apparent. To better assess the nature and distribution of these higher grades, nine holes (2721 meters) were drilled in the eastern part of West Zone in 2003. Eight of these holes were drilled between and adjacent to previous holes and one hole was completed on ice-covered Ferguson Lake 150 meters from the western shore. The nine holes, collared between sections 36+00W and 45+80W were designed to expand upon results obtained from 2002 drilling and to provide additional information regarding possible footwall low sulphide platinum group elements mineralization in the vicinity of previous Inco drill holes which did not test this style of mineralization which was unrecognized until 2002.

All holes intersected massive sulphide lenses and two of the holes cut significant thicknesses containing enhanced nickel grades. These include hole FL03-160, drilled beneath Ferguson Lake, which intersected an 11.25 meters interval grading 0.77% copper, 0.97% nickel, 0.118% cobalt and 1.95 g/t palladium+platinum and hole FL03-159 with a 20.95 meters interval which assayed 1.53% copper, 0.97% nickel, 0.099% cobalt and 2.48 g/t palladium+platinum.

Five of the holes drilled encountered footwall, low sulphide platinum group elements mineralization with combined palladium+platinum grades in excess of 5 grams/tonne over hole lengths of between 0.45 meter to 3.29 meters. An exception was hole FL03-157 on section 45+80W, the westernmost hole drilled in 2003. This hole intersected a 15.50 meters interval grading 3.82 g/t palladium and 3.10 g/t platinum. This interval includes 3.30 meters of 12.16 g/t palladium and 8.10 g/t platinum which in turn includes 0.95 meters grading 10.82 g/t palladium and 17.01 g/t platinum.

Three of the 2003 holes also intersected narrow (0.30 – 1.23 meters) intervals of massive sulphides with palladium+platinum values greater than 5 grams/tonne. Values ranged from 6.46 g/t palladium and 0.27 g/t platinum to 11.79 g/t palladium and 0.97 g/t platinum.

119 Zone, between 800 and 1200 meters west of previous West Zone drilling, was discovered in 2002 by drilling the westward continuation of geophysical anomalies including a deep-seated UTEM conductive zone and a coincident inverted magnetic anomaly. 119 Zone, interpreted to be the western continuation of West Zone proper, includes parallel massive sulphide lenses featuring base and precious metals grades that are generally higher than those encountered in West Zone. Six of the eight holes (10433 meters) completed intersected two or more, apparently parallel sulphide lenses with grades ranging from 0.55% to 2.23% copper and 0.47% to 1.04% nickel. An estimate of inferred mineral resources was prepared for this zone.

East Zone, near the east shore of Ferguson Lake was initially tested by 1950s Inco drilling which consisted of 7115 meters in 56 holes completed over a zone strike length of 2500 meters. Data from these holes plus results for an additional 11 holes (2564 meters) drilled by Starfield Resources in 1999 and 2000 permit estimates of resources for two sections of East Zone (East Zone I and II).

Anomaly 51, also east of Ferguson Lake, includes a northeast-trending, 50 meters wide, gossanous gabbro exposed over 2500 meters of strike length some 2 kilometers southeast of East Zone. This zone, which contains pods and stringers of massive pyrrhotite with lesser chalcopyrite and pyrite, particularly in its western half, was tested over 1700 meters of strike length by 1094 meters of diamond drilling in nine widely-spaced, inclined diamond drill holes in the 1950s. Several holes contained narrow intervals of copper-nickel mineralization; better grades (+1% combined copper-nickel) are associated with narrow intervals (0.15 to 2.29 meters) of massive pyrrhotite and pyrite hosted by gabbro. This zone was further tested in 2000 by four holes which were drilled in three locations to test isolated geophysical (UTEM) conductors north and east of the area previously drilled. Only narrow sulphide intervals were encountered.

M Zone, discovered in 2000, is within a kilometer north of Anomaly 51. Five inclined holes, drilled from three setups in 2000 to test a blind, gently north-dipping UTEM conductor, confirmed that the conductive zone was due to the presence of sulphide minerals within a gabbro, a setting similar to the other known mineral zones at Ferguson Lake. Best results were from one drill hole which included a 23 meters section of gabbro containing consistent sulphide mineralization. A hole drilled 100 meters west encountered a narrow sulphide lens containing relatively enhanced palladium (1700 parts per billion - ppb) and platinum (2059 ppb) values. An additional five drill holes completed on M Zone in 2001 included one hole 700 meters east which returned a 3.5 metres interval containing 1.24% copper+nickel and 1.70 grams/tonne platinum group elements.

West Zone South, associated with a gossanous gabbro, subparallel to and between 600 and 800 meters south of West Zone, is intermittently exposed over a strike length of about 1000 meters. Previous surface sampling of this zone returned relatively high platinum group element values of between 540 and 1170 ppb platinum and 1250 to 4500 ppb palladium. One Inco hole and five holes drilled in 1999 and 2000, designed to test a strong UTEM conductor and a coincident magnetic signature, intersected narrow (0.3 to 1.5 meters) intervals of copper-nickel-PGE mineralization. Better copper-nickel grades are restricted to stringer and massive pyrrhotite, pyrite and chalcopyrite; three narrow mineralized intervals in one hole contained palladium + platinum values of 2 to 3 grams/tonne, confirming earlier surface sampling results.

South Discovery Zone, a sulphide-bearing gabbro unit some 3.5 kilometers southwest of West Zone, has an exposed northeast strike length of 800 meters and is offset by, but continues beyond, two parallel, northwest-striking faults. Two holes drilled to test the central part of the zone in 1999 intersected 1.5 to 2 meters intervals grading 0.30-0.62% copper, 0.11-0.50% nickel, 0.02-0.10% cobalt and 0.13-0.67 grams/tonne  palladium-platinum.

The Central or lake zone, underlying Ferguson Lake between East and West zones, was tested by some 35 vertical and inclined drill holes in the 1950s. The majority of holes completed intersected at least some copper-nickel values and ten holes contained significant results. One of the better holes, drilled near the centre of the lake north of, and between a large and small island, intersected 17.4 meters grading more than 2% combined copper-nickel and 1.51 grams/tonne PGE (palladium + platinum). Two holes drilled down-dip returned no significant values but a hole drilled 250 meters further west intersected 3.4 meters of 0.54% copper, 0.79% nickel and 5.31 g/t PGE (one of the highest PGE values encountered to date in massive sulphides). There is a clustering of better holes immediately north of the small island; three of these have +5 meter intervals with grades of up to 1.96% copper, 1.01% nickel and 1.95 grams/tonne PGE. Near the west shore of Ferguson Lake, one 1950s hole cut 13.5 meters grading 0.78% copper, 0.88% nickel and 1.44 grams/tonne PGE (palladium and platinum) plus a lower 5.8 meters interval containing 1.36% copper, 0.50% nickel and 0.69 grams/tonne PGE. Two holes were drilled on ice-covered Ferguson Lake by Starfield in the spring of 2000 in an attempt to further test this part of the zone some 40 metres down-dip of the previous intersections. The first hole was abandoned; the second hole intersected gabbro containing low copper and nickel values over narrow intervals.

Geophysical Surveys

UTEM and magnetometer geophysical surveys were completed over approximately 300 line-km of survey grid, including the frozen surface of Ferguson Lake, in 1999 and 2000. An airborne magnetometer survey of the entire property area was also completed in 1999. Surface geophysical work between 1999 and 2003 was undertaken by contract with SJ Geophysics Ltd.

The UTEM-3 system uses a transmitter, receiver and coil. A 1 x 1 km loop of copper wire, connected to the transmitter, provides the inducing or primary field. The receiver measures the vertical component of the total field; secondary fields are induced by the primary field by any conductivity contrasts. UTEM surveys over the known sulphide zones at Ferguson Lake identified very strong secondary fields. Pyrrhotite and magnetite within the sulphide zones are reflected by strong magnetic anomalies.

More than thirty loops have been used to complete UTEM surveys over a grid area in the central property area which includes all of the known sulphide zones, namely East and West Zones, 119 Zone, West Zone extension, East Zone extension, the Central Zone beneath Ferguson Lake, West Zone South, South Discovery Zone, Anomaly 51 and M Zone. Most of the initial survey readings were taken at a base frequency 30.974 Hz; subsequent surveys used a lower base frequency of 3.872 Hz.

The surveys indicated little or no response at depth on the Central (lake) Zone. Work at West Zone South suggested that the zone of high conductivity and coincident strong magnetics does not continue appreciably beyond the limits of an initial survey completed in 1999. Surveys over South Discovery Zone indicated conductivity and coincident magnetic responses over the known part of the zone and suggested a possible continuation of the zone of some 500 meters to the west.

UTEM readings, collected in 2000 from beyond the limits of the 1999 survey at East Zone suggest a continuation of the zone 1 km to the northeast. Coincident high magnetic response, however, does not extend beyond 16E or the approximate eastern limits of the East Zone II resource identified in 1999. Consequently, the nature of the identified conductive zone is unknown. Depths to top of the conductor range from nil (surface) to about 140 meters in the easternmost part of the survey area.

UTEM surveys over the East Zone I resource area (beneath Ferguson Lake near the east shore) indicated down-dip extents of strong conductivity of 120 to 300 meters. 2000 drilling of this zone essentially confirms these data.

The most significant geophysical results were obtained from West Zone west of the previously known limits of the zone. Interpretation of the UTEM survey results for this area indicates continuity of the strongly conductive zone at depth over a distance of more than 1 kilometer west of the previously drilled area.  Conductivities (>2000 mhos) are apparently continuous over a down-dip distance of 800 metres within this zone. Vertical depths to the top of this large conductive zone range from 60 metres at section 60W to 600 metres at section 82W.

Initial (1999) UTEM surveys of the partly exposed section of West Zone between sections 40W and 58W identified similar strong conductivities and coincident high magnetic response over the sulphide zone. High magnetic response does not continue west of section 60W which may be explained in part by the deeper nature of the conductive zone.

Down-dip extent of the zone of strong conductivity over the previously drilled portion of West Zone is estimated to range from 225 metres at section 40W to about 800 metres at section 60W. Previous drilling essentially confirmed the shallow nature of the eastern part of this zone and good potential for significant increases in down-dip extents west of section 50W.

UTEM surveys in 2000 employed a lower base frequency of 3.872 Hz which provided a better definition of conductors at depth. A re-surveying of the eastern grid area using this lower frequency identified M Zone which is a blind, strongly conductive zone at depths of between 140 and 240 metres and extending over an east-west strike length of 2 km. Situated between East Zone and Anomaly 51 this gently (10-20 degrees) north-dipping conductive zone has an apparent down-dip extent of 500 metres.

Best UTEM results through 2002 had been obtained from surveys over West Zone where a 5 kilometers long, strongly conductive zone was defined as extending westerly from the shore of Ferguson Lake to the 119 Zone near the western limits of survey coverage. This conductive zone is coincident over much of its length with higher magnetic response. As noted, the top of the conductive zone is near surface in the eastern part of the zone while in the western half of the zone it is 100 to several hundred meters below surface. Drill testing of the conductive zone over much of its length shows it to be reflecting one or more parallel massive sulphide lenses comprising the copper-nickel-cobalt-PGE-bearing West and 119 Zones.

Further UTEM surveys in 2003 were directed to expanding the area of West Zone coverage beyond the limits of previous surveys. It had been noted that the orientation of the conductive zone near the western survey limits was suggestive of a southwesterly trend rather than the westerly trend seen throughout much of West Zone. This apparent flexure was confirmed in part by 119 Zone drilling in 2002 and by inversion of magnetic data for this part of the property. Accordingly, the 2003 UTEM survey grid was established with northwest-southeast cross lines at 200 meters intervals off a 4 kilometers long, southwest-oriented baseline between the area of 119 Zone drilling to a point 1.5 kilometers beyond the South Discovery Zone.

The UTEM-3 survey, conducted over the established grid at a base frequency of 3.875 Hz, outlined a southwesterly trending conductive zone over an apparent strike length of 3.5 kilometers. Depths to the top of the conductive zone were estimated to be in the range of 400 to 600 meters and the conductivity-thickness product of +2000 siemens over much of its length was similar to that identified over much of West and 119 Zones.     

Results of airborne magnetic surveys completed in 1999 of the entire property area are generally coincident with the regional geology and show principal structural trends and some of the lithologic units, most notably the younger syenites within and marginal to the property area. Strong magnetic responses are also coincident with the previously drilled portions of East and West Zones; a much weaker response was obtained from the intervening area beneath Ferguson Lake.

Inversion of these airborne magnetic data, undertaken at the University of British Columbia Department of Geophysics inversion facility, enables an interpretation of these data to depth. Strong, near-surface, relative magnetic susceptibilities are coincident with East Zone and with West Zone to about section 58W where the fault offset of the zone is clearly shown. Between 58W and 72W, these higher relative susceptibilities (0.010 to 0.018 relative to a background of about 0.002) occur within broad zones (several hundred metres in diameter) immediately south of, and below, the UTEM conductor, are pod- or pipe-like in form and extend from depths of about 200 metres below surface to 700 metres which is at about the detection limits for these data. The higher relative susceptibilities are noted closer to surface around section 78W and continue to section 90W.

While the significance of the West Zone relative magnetic susceptibilities, which are a reflection of the lithologic unit(s) immediately below the sulphide horizon, remains unknown, the distribution of these clearly demonstrates a structural continuity both to depth and along strike to the west.

Prior Exploration

Nature and Scope

Additional exploration work on the Ferguson Lake property, carried out between April and November of 2004, included 21,388 meters of diamond drilling in 52 holes plus various airborne, surface and geophysical surveys. West Zone and its extensions was the focus of much of the 2004 work but the property area east of Ferguson Lake also received some attention.

More than 65% of the diamond drilling completed was directed to additional definition drilling of near surface sulphide mineralization in the eastern half of West Zone known as the “Pit Area”. Nearly 14000 meters of drilling was completed in 41 inclined holes in this area between sections 35+67W and 48+80W. Several of the easternmost holes were drilled beneath Ferguson Lake while the remainder served to increase the density of drill hole spacings within the “Pit Area”. In addition to further assessing the structural and grade continuity of the massive sulphide lenses, this program also provided additional data pertaining to the nature and distribution of platinum group elements mineralization associated with low sulphide zones developed in gabbroic footwall rocks below the massive sulphide lenses.

Four holes (1800 meters) were drilled in the western half of West Zone and  two deep holes and two wedges, for a total of 3950 meters of drilling, were drilled to test the apparent southwest extension of the 119 Zone. 1700 meters of drilling completed east of Ferguson Lake included three additional holes on M Zone and two holes in the area of Anomaly 50 as part of a joint venture with Wyn Developments Inc.

Geophysical surveys undertaken in 2004 included a helicopter-borne VTEM electromagnetic and magnetic survey completed by Geotech Ltd. of a 43 square kilometer area in the central part of the property, and surface and borehole pulse electromagnetic surveys using the time domain method in various parts of the property area by Crone Geophysics and Exploration Ltd. Referred to as  SQUID (Superconducting Quantum Interference Devices), this system has the capability of identifying conductive targets at depths exceeding 700 meters.

Other work completed as part of the 2004 program included ongoing metallurgical test work on drill core samples directed to the recoveries of platinum group elements.  

Results of 2004 Diamond Drilling

All of the 41 holes completed in the “Pit Area” in 2004 intersected massive sulphide lenses containing copper, nickel, cobalt and platinum-palladium values. Most of the drill holes were between 250 to 325 meters in length and intersection lengths for the moderately north-dipping sulphide lens(es) approximate true widths. The 2004 definition drilling provided additional information regarding the lateral and down-dip continuity of the sulphide lenses.

Many of the holes encountered significant thicknesses of sulphide mineralization ranging from 2 to 20 meters in one or more apparently parallel lenses. Combined copper+nickel grades of more than 2% were not uncommon and one hole (FL04-173) intersected five massive sulphide lenses ranging from 3.33 to 14.76 meters and containing nickel grades exceeding 1%. Significant results included those from FL04-185 which intersected a 20.1 meters interval of massive sulphides grading 1.0% copper, 0.90% nickel, 0.12% cobalt and 2.25 grams/tonne combined platinum and palladium.

Holes completed in the “Pit Area” in 2004 also provided additional information regarding the nature and distribution of platinum group element enriched areas in both low sulphide and massive and stringer sulphide zones developed in footwall gabbroic rocks below the main massive sulphide lenses. More detailed drilling over a +1 kilometer strike length (between sections 38W and 49W) helped to define a broad zone of low sulphide, low grade platinum group element mineralization in which features significantly higher grades in four areas. Examples include two intervals in hole FL04-165 grading 8.54 grams/tonne platinum and 32.23 grams/tonne palladium over a 1 meter hole length and 2.41 grams/tonne palladium and 43.39 grams/tonne platinum over a hole length of 0.9 meter. Structural orientation of this style of mineralization is imprecisely known at this time; the four areas containing significantly higher platinum group element values, as currently known, are 100 to 15 0 meters in length and have a vertical extent of less than 100 meters.  

Intervals of massive sulphides in footwall gabbros below the main massive sulphide lenses of the “Pit Area” feature enhanced platinum group element grades in addition to the base metals values. An example is hole FL04-202 which encountered a 10.82 meters section of massive sulphides grading 2.44% combined copper+nickel, 2.67 grams/tonne palladium and 0.79 gram/tonne platinum and included a 1 meter interval of 4.84 grams/tonne platinum.

Additional drilling of the central and western portions of West Zone included two holes on sections 61+50W and 62+50W which tested the zone at hole depths of more than 700 meters and returned results similar to those obtained from earlier drilling in this area including +2% combined copper+nickel plus  significant cobalt and platinum group element values over hole lengths of 10 to 20 meters.

The 119 Extension Zone, as identified by surface UTEM geophysical surveys in 2003 and further defined by SQUID surface electromagnetic surveys in 2004, was tested by two deep holes (and two wedges off one hole) collared between 700 and 1300 meters southwest of 119 Zone. The cause of the strong conductive zone  identified by the geophysical surveys was determined to be intervals of massive sulphides encountered by the two holes between hole depths of 1170 and 1300 meters. Best results were obtained from the northeasternmost hole (FL04-174) and one of the two wedges completed off this hole which included 1.34% and 1.62% combined copper+nickel plus cobalt and platinum group element values over hole lengths of 7.1 and 8.1 meters. The southwesterly hole (FL04-200) intercepted one main interval of massive sulphides containing values of 1% or less combined copper+nickel and two intervals, each less than a meter, of better grade material between hole depths of between 1171 an d 1192 meters.

Two mineral zones east of Ferguson Lake were also drill tested in 2004. Three holes, completed on M Zone to test interpretation of recent and previous geophysical surveys, in the main encountered sulphide mineralization similar to that intersected in 2001 drill holes. Narrow sulphide intervals containing less than 1% combined copper+nickel were obtained from two holes, with the best results being 1.34% combined copper+nickel over 4.1 meters in hole FL04-208.

Anomalies or areas 50 and 49, within and adjoining the eastern boundary of the Ferguson Lake property and in part comprising a part of the Starfield – Wyn Developments joint venture, were tested by four inclined drill holes designed to test conductive zones originally identified by UTEM surveys in 2002 and further defined by SQUID electromagnetic surveys in 2004. All three holes intersected several meters of massive sulphide mineralization which returned low copper, nickel, cobalt and platinum group element values.          

Geophysical Surveys

The helicopter-borne magnetic and electromagnetic survey over the central part of the Ferguson Lake property in 2004 identified a number of conductive zones to depths of 400 meters. Most of these conductors are coincident with known sulphide mineral zones including West Zone where previous UTEM surveys  outlined a 5 kilometers long, strongly conductive zone extending westerly from the shore of Ferguson Lake to the 119 Zone near the western limits of survey coverage. As noted, this conductive zone is coincident over much of its length with higher magnetic response. The top of the conductive zone is near surface in the eastern part of the zone while in the western half it is 100 to several hundred meters below surface. Drill testing of the conductive zone over much of its length shows it to be reflecting one or more parallel massive sulphide lenses comprising the copper-nickel-cobalt-PGE-bearing West and 119 Zones.

Additional UTEM surveys in 2003, coupled with SQUID surface electromagnetic surveys and borehole UTEM and pulse EM surveys in 2004, defined a southwesterly trend of the conductive zone beyond the 119 Zone. Referred to as the 119 Extension, this conductive zone extends more than 3 kilometers southwest of the 119 Zone. Modeling of data derived from recent surveys indicates a depth to the top of the strongest part of the conductive zone in the order of 750 meters, a minimum depth extent of approximately 450 meters and a strike extent of more than 800 meters. As noted in the previous section, the cause of this conductive zone is the massive sulphide mineralization intersected in two deep holes drilled 600 meters apart.

SQUID surface electromagnetic and borehole pulse EM surveys were also carried out in the eastern property area prior to and during drill testing of the M Zone and Areas 5 and 49. The helicopter-borne VTEM survey had delineated a 5 kilometers long, near-surface conductive zone extending from the east shore of Ferguson Lake past the eastern property boundary and into the Starfield – Wyn Developments joint venture property. Detailed surface and bore hole surveys within and adjacent to M Zone identified a shallow, flat-lying conductive zone coincident with sulphide mineralization in contrast to a gently-dipping conductive zone, also coincident with sulphide mineralization, on the joint venture ground.        

Fiscal 2006 Exploration

During fiscal 2006, the Company had 6 objectives for its Ferguson Lake property exploration program:

1.

Complete airborne geophysics over the old and newly staked regional claims of 2,500 square kilometers.

2.

Follow-up SQUID geophysics on conductors discovered in 2004.

3.

Diamond core drilling in the “Pit Area” West Zone to assist in the calculation of new resource evaluations for both the massive sulphides and low sulphide PGE targets.

4.

Diamond core drilling in the West Zone to attempt to connect it with the 119 Zone.

5.

Continue metallurgical laboratory initiatives.

6.

Additional geophysics and possible exploration drilling on the Wyn property option.

Geotech Inc. was contracted to fly a 9,624 line kilometer helicopter VTEM and high resolution magnetic survey over 60% of the Ferguson Lake property. The instrumentation is capable of identifying conductive zones to a depth of 450 meters. It successfully outlined most of the previously known near surface mineralized zones in the central property area, including the East and West Zones, M Zone, Area 51. It also identified numerous other conductive zones on the expanded property. The anomalies were prioritized by the Company’s geophysical contractor, and ground geological crews prospected and sampled outcroppings of 9 conductive VTEM trends with strike lengths of 2 to 8 kilometers that have been determined to be geochemcially anomalous in copper and silver, copper and nickel, or copper and zinc. The VTEM survey also identified approximately 250 anomalies that may have diamond kimberlite potential and require ground follow-up.

Surface and borehole pulse electromagnetic surveys were conducted by Crone Geophysics and Exploration Ltd. Utilizing their SQUID device which has the capability of identifying conductive targets at depths exceeding 800 meters. SQUID was particularly useful in confirming and further defining conductive zones prior to drill testing.

8 diamond drill holes totaling 2,392 meters were completed into the West Zone “Pit Area” to provide additional data on the massive sulphide lenses and to assess footwall PGE mineralization. 9 holes were drilled to provide data for the ongoing geostatistical analyses of grade distribution within the massive sulphide lenses. Highlights of the 17 holes are as follows:

Hole No.	Intervals (m)	Length (m)	Cu %	Ni %	Co %	Pd (g/t)	Pt (g/t)
FL05-243	11.73-14.97 21.50-26.90 40.88-45.27	3.24 5.40 4.39	0.80 1.20 0.84	0.43 0.66 1.03	0.050 0.077 0.125	1.18 1.45 1.73	0.12 0.22 0.08
FL05-242	54.00-76.17	22.17	1.30	0.80	0.095	1.90	0.23
FL05-241	30.85-55.38	24.53	1.19	0.73	0.084	1.61	0.28
FL05-240	29.88-36.82 41.67-44.43	6.94 2.76	1.04 1.10	0.89 0.88	0.104 0.109	1.98 2.07	0.22 0.10
FL05-239	28.47-36.24 40.85-49.29	7.77 8.44	1.25 1.47	0.63 0.72	0.074 0.087	1.56 1.77	0.34 0.25
FL05-238	15.10-22.52 65.00-67.60	7.42 2.60	1.56 0.64	0.86 0.86	0.093 0.102	2.63 2.42	0.31 0.25
FL05-237	7.50-109.17	101.67	1.30	0.74	0.08	1.96	0.39
FL05-236	106.27-122.0	15.73	0.85	1.03	0.113	2.78	0.31
FL05-235	71.77-78.84 83.88-90.90	7.07 7.02	1.29 1.35	0.84 0.97	0.06 0.095	1.90 2.07	0.22 0.44
FL05-222	206.00-209.00 212.00-214.00	3.00 2.00	0.44 0.56	0.28 0.33	0.04 0.04	0.69 1.29	0.10 0.29
FL05-221	153.50-157.05	3.55	0.56	0.99	0.129	3.04	0.68
FL05-220	203.25-206.50	3.25	1.10	0.66	0.085	1.46	0.17
FL05-219	157.64-165.26	7.62	1.15	1.03	0.122	1.84	0.47
FL05-218	131.45-141.00	9.55	1.21	0.90	0.113	1.65	0.22
FL05-217	114.92-116.57 132.77-134.29	1.65 1.52	0.62 1.19	0.83 0.74	0.108 0.092	1.19 1.32	0.23 0.14
FL05-216	108.75-110.00	1.25	1.06	0.99	0.205	1.55	0.27
FL05-215	134.18-137.00	2.82	0.64	1.23	0.154	1.70	0.21

10 holes, ranging in depth from 962 to 1353 meters, were drilled to test the “gap” area between the known western limits of the West Zone at depth and the deep 119 Zone previously drill tested over a 400 meter strike length. Massive sulphide lenses containing good base and precious metal grades over hole lengths of up to tens of meters in six of the holes consistent with those previously obtained from the western part of the West Zone and the 119 Zone, which suggests that the 119 Zone is actually part of the West Zone. Highlights from these holes is as follows:

Hole No.	Intervals (m)	Length (m)	Cu %	Ni %	Co %	Pd (g/t)	Pt (g/t)
05-233	857.14-867.15	10.01	1.13	0.64	0.076	1.70	0.60
05-231	877.42-878.05 888.23-905.12	0.63 16.89	0.29 1.57	1.12 0.78	0.124 0.088	2.46 2.08	0.01 0.47
05-228	640.09-641.44 785.51-786.00	1.35 0.49	1.21 0.30	0.45 0.84	0.063 0.157	0.54 1.35	0.19 0.03
05-226	708.89-716.00 752.19-754.77 761.00-762.40	6.11 2.58 1.40	0.86 0.52 0.82	0.50 0.55 0.71	0.072 0.080 0.121	1.07 0.95 1.37	0.06 0.11 0.11
05-229	806.68-830.00 837.90-842.25	23.33 4.35	1.23 1.10	0.62 0.63	0.076 0.074	1.62 1.85	0.47 0.25
05-223	1017.30-1022.20 1049.00-1067.50	4.90 18.50	1.83 1.66	0.57 0.99	0.077 0.117	1.62 2.55	0.18 2.77
05-224	1056.75-1057.92 1240.45-1240.77	1.17 0.32	0.52 0.16	0.75 0.81	0.087 0.050	1.67 2.36	0.16 0.17
05-230	725.47-726.02 894.38-895.38	0.55 1.00	0.24 0.24	0.80 0.69	0.112 0.093	1.33 1.83	0.14 0.10
05-232	852.47-856.65 864.79-869.32 873.18-880.60	4.18 4.53 7.42	1.68 1.37 1.22	0.89 0.82 0.94	0.103 0.092 0.103	2.21 2.08 2.14	0.60 0.12 0.15
05-234	1245.95-1246.45	0.50	0.13	0.97	0.118	4.39	0.03
05-225	817.89-825.11 833.05-839.40 920.70-921.58	7.22 6.35 0.88	0.67 0.73 1.06	0.58 0.43 0.76	0.068 0.053 0.085	1.52 1.00 1.63	0.13 0.34 0.26
05-227	833.00-835.78 856.56-860.00	2.78 3.44	0.65 0.76	0.91 0.80	0.100 0.086	2.54 2.28	0.75 0.18
05-224	1033.50-1034.75	1.25	<.01	<.01	<.01	7.76	0.21

Positive hydrometallurgical initial laboratory test results have been received which has prompted an acceleration of its 2006/2007 laboratory scoping hydromet-test programs. Studies were conducted on whole rock core samples of massive sulphide mineralization from the proposed “Pit Area”. The hydrometallurgical laboratory test programs have produced up-graded sulphide concentrates which are amenable to further standard flotation processing and/or secondary hydromet processing. From the initial tests, greater than 90% of the nickel was selectively recovered from a secondary hydromet process. These positive achievements are now expected to be duplicated in a larger scale, 450 kilogram primary hydromet test that will generate significant quantities of up-graded sulphide concentrate for secondary hydromet processing and sulphide floatation test-work.

INTERPRETATION and CONCLUSIONS

Diamond drilling to date at Ferguson Lake has encountered copper, nickel, cobalt and PGE (platinum group elements) values associated with fracture-filling, disseminated and semi-massive to massive sulphides over an east-west strike length of 19 kilometers. The three most significant mineral zones identified to date within this overall strike length include the East, West and 119 Zones in which better copper-nickel-cobalt-PGE grades are invariably associated with semi-massive and massive sulphide lenses in all of these zones.

The three principal mineral zones are associated with a north-dipping, sill-like, medium- to coarse-grained gabbro derived from an original mafic-ultramafic magma and thought to have been emplaced along an easterly-trending fault zone of regional extent. Repeated movement along this fault may partially explain the remobilized nature of some of the sulphide mineralization seen to date.

Detailed or definition drilling, initially undertaken in the eastern part of West Zone (“Pit Area”) in 2002 to further define a near surface sulphide resource, was also successful in identifying a unique style of low-sulphide platinum group element mineralization in footwall gabbros below the sulphide horizons or lenses. Broadly distributed, low palladium values envelop localized, significantly higher grades of platinum and palladium within a zone of currently unknown orientation that has been encountered in a number of 2002-2004 drill holes completed in the eastern part of West Zone between sections 35+97W and 48+80W. Enhanced values of +5 grams/tonne palladium+platinum are present in holes drilled between sections 40+50W and 41+50W, 42+45W and 43+50W, 45+50W and 46+00W and 48+50W and 49+00W. Both the lateral and down-dip continuity of this higher grade mineralization requires further definition.

N.C. Carter, Ph.D., P.Eng., Independent Consulting Geologist, initially prepared a resource estimate on the Ferguson Lake property in 1999, with further updates as additional drilling discovered new zones and mineralization. The previous estimate was prepared in 2003 which included more than 86,000 meters of 1999-2004 Starfield drilling from 1999-2004 as well as the results of Inco’s drilling in the 1950’s. With the additional exploration performed since 2003, N.C. Carter further updated the resource estimate in April 2006, which includes 108,000 meters of Starfield drilling performed between 1999 and 2005 as well as Inco’s 1950’s drill results. However, the new estimate does not include the results of the 17 drill holes completed in the “Pit Area” in Fiscal 2006.

The property resource estimate includes four areas of mineral resources (East Zone I and II, West Zone, 119 Zone) within and adjacent to the main, +12 kilometers long gabbro host. The most significant of these to date is West Zone, which contains more than 80% of the inferred mineral resources. In view of the widely-spaced drilling completed by Inco between 1951 and 1955 and by Starfield between 1999 and 2001 (principally along 120 metres spaced sections), the mineral resource estimates for East Zone I and II and for West Zone have been categorized as Inferred Mineral Resources, defined by the CIM Standing Committee as being “that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling, gathered through appropriate techniques from locations such as outcr ops, trenches, pits, workings and drill holes”.

Estimates of Inferred Mineral Resources for each of the four principal mineral zones, at cutoff grades of 1%, 1.5% and 2% combined copper + nickel are presented below. A 1% copper + nickel cutoff grade, the lowest used, is considered to be based on reasonable economic assumptions.

Total Inferred Mineral Resource – 2006 Resource Estimate

Cautionary Note to U.S. Investors concerning estimates of Inferred Mineral Resources

This section uses the term “inferred mineral resources”. We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or prefeasibility studies, except in rare cases.U.S. investors are cautioned not to assume that part or all of an inferred mineral resource exists, or is economically or legally minable.

Cutoff Grade	Mineral Zone	Tonnes(millions)	Cu(%)	Ni(%)	Co(%)	Pd(g/t)	Pt(g/t)
1.0% Cu+Ni	West Zone	53.2	0.98	0.56	0.067	1.39	0.25
	119 Zone	7.6	1.33	0.72	0.086	2.01	0.33
	East Zone I	3.7	1.01	0.75	N/A	1.01	0.17
	East Zone II	1.6	0.93	0.80	N/A	1.03	0.17
		66.1	1.02	0.60	0.069	1.43	0.25
1.5% Cu+Ni	West Zone	29.0	1.23	0.71	0.084	1.79	0.32
	119 Zone	7.6	1.33	0.72	0.086	2.01	0.33
	East Zone I	2.4	1.18	0.87	N/A	1.10	0.18
	East Zone II	1.0	1.21	0.96	N/A	1.28	0.22
		39.9	1.25	0.73	0.084	1.78	0.31
2.0% Cu+Ni	West Zone	15.5	1.44	0.80	0.093	2.02	0.38
	119 Zone	4.0	1.62	0.78	0.089	2.20	0.40
	East Zone I	1.3	1.41	0.93	N/A	1.18	0.20
	East Zone II	0.7	1.33	1.07	N/A	N/A	N/A
		21.5	1.47	0.81	0.092	2.00	0.37

The 2002 detailed drilling program, undertaken in the eastern part of West Zone between sections 42+68W and 51+20W (the “Pit Area”), has rendered a better definition of geological and grade continuity and resources in this part of West Zone can be properly categorized as an Indicated Mineral Resource. As defined by the CIM Standing Committee, an Indicated Mineral Resource is “that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.”

Indicated Mineral Resource – West Zone “Pit Area”

Cautionary Note to U.S. Investors concerning estimates of Indicated Mineral Resources

This section uses the term “indicated mineral resources.” We advise U.S. investors that while this term is recognized and   required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it.U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves.

Cutoff Grade	Tonnes (millions)	Cu(%)	Ni(%)	Co(%)	Pd(g/t)	Pt(g/t)
1.0% Cu+Ni	8.7	0.93	0.67	0.080	1.47	0.21
1.5% Cu+Ni	5.8	1.02	0.75	0.086	1.57	0.23
2.0% Cu+Ni	2.3	1.31	0.98	0.118	2.22	0.28

The foregoing estimates of Inferred and Indicated Mineral Resources have been prepared pursuant to CIM Standards on Mineral Resources and Reserves, and incorporate the following parameters:

•

Cutoff Grades - 1.0%, 1.5% and 2.0% combined Cu+Ni

•

Minimum True Width - 2.00 metres

•

Area of Influence for Individual Drill Holes (down-dip) - midway point between drill holes

•

Area of Influence for Individual cross-sections - midway point between sections

•

Assumed Specific Gravity – 4.15

The West Zone remains open at depth and along strike to the west. The 119 Zone is now considered part of the West Zone, although the average grades are higher than those encountered to date in the West Zone and confirm an overall increase in grades to the west. 119 Zone remains open both along strike and up-dip.  

Planned Work Program for Fiscal 2007

Additional exploration work and infill drilling is planned for Fiscal 2007. Major Drilling Group of Moncton, New Brunswick, has been contracted for diamond drilling services. Crone Geophysics and Exploration has been contracted for SQUID ground EM geophysical surveying and downhole PEM geophysical surveying of 2006 drill holes. Hydrometallurgical leach testing and process development is ongoing at laboratories in Kingston, Ontario, and Quebec City. Testing will be scaled up to 450 kilograms of massive sulphide from the “Pit Area”. A comprehensive report and interpretation of the regional VTEM helicopter survey completed on more than 720,000 acres of the project has been prepared, and coincident regional geochemical and airborne geophysical anomalies have been prioritized for detailed ground geological examination, geophysical surveying, and diamond drilling.

In May 2006, Phase One of delineation-infill drilling on the west side of Ferguson Lake has commenced. Three diamond drills are operating on the property, and approximately 26,000 meters of drilling in more than 100 holes is planned between grid lines L 38+00W and L 64+00 W. The results are expected to be included in a revised 2006 resource estimate which is anticipated to enhance the “measured and indicated” resource categories by utilizing a closer drill spacing, as well as converting a portion of the currently classified “inferred” category resources to a higher category. Regional crews are also conducting detailed geological mapping, prospecting, rock and till sampling, ground geophysical surveys and diamond drilling focused on priority targets identified in the 2005 VTEM regional airborne survey and till surveys.

The Company has an approximate budget of $10,000,000 for its Fiscal 2007 work program on the Ferguson Lake project.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP except as noted in footnotes to the financial statements.  The value of the U.S. Dollar in relationship to the Canadian Dollar was 1.14 at February 28, 2006 and $1.12 at June 30, 2006.

The Company has for the past five years financed its activities through the distribution of equity capital.  The timing of such distributions was dependent on the requirements of the Company and the economic climate.  The Company anticipates having to raise additional funds by equity issuance in the next several years, as the Company does not expect to generate material revenue from mining operations or to achieve self-sustaining commercial mining operations for several years.

The most recent significant financings are described in ITEM 4, “Information on the Company”.

Results of Operations

Fiscal 2006 Ended 2/28/2006 vs. Fiscal 2005

The net loss for Fiscal 2006 ended 2/28/2006 was ($2,695,494) compared to a loss of ($1,921,900) in Fiscal 2005. Operating Expenses totaled ($2,436,280) before Future Income Tax Recovery of $63,509. The Expense amount was slightly higher than originally budgeted Operating and Administrative Expenses of ($2,316,000). Large increases is expenses from Fiscal 2005 occurred in Consulting Fees, which rose to ($403,415) from ($288,384), Management Fees of ($96,000) compared to ($52,000), Office which rose to ($85,340) from ($45,256), Transfer and Regulatory Fees of ($113,067) compared to ($94,311), and Travel and Conferences of ($916,329) which increased from ($599,144). Most of the increases are due to higher levels of corporate activity, including additional private placements of stock in fiscal 2006 and additional mineral property exploration spending which resulted in higher consulting fees, office expenses and travel expenses. Large decreases in expenses occurred in Advertis ing and Promotion, which fell to ($100,215) from ($121,973); Accounting and Legal, which declined to ($180,410) from ($220,730); and Investor Relations, which fell to ($50,698) compared to ($128,403). Since the Company issued no stock options in Fiscal 2006, Stock Based Compensation was zero compared to ($188,705) in Fiscal 2005. Other Items for Fiscal 2006 were the Write-down of Mineral Claims of ($19,999) and Write-off of Deferred Mineral Exploration of ($311,520) as management determined that due to its focus on the 100% owned Ferguson Lake claims, it would write-down the value of certain 50% owned claims under the Hunter Agreement to nominal value. Interest Income also fell in Fiscal 2006 to $8,796 from $19,251 due to lower average cash balances held during the year.

Property Acquisition and Exploration expenditures totaled $12,438,623. The expenditures were broken down as follows:

Fiscal 2006 Property Expenditures, Ferguson Lake Property (100% owned)

Type of Expenditure	Amount ($)
Personnel	2,702,923
Aircraft support, including helicopter moves	2,725,889
Diamond drilling	2,123,335
Camp support costs, including fuel	2,479,166
Analytical and Geophysical Services	2,383,622
Mobilization and Demobilization	23,688
TOTAL	$12,438,623

Fiscal 2006 Property Expenditures, Ferguson Lake Option (50% Option)

Type of Expenditure	Amount ($)
None	Nil
TOTAL	$         0

Fiscal 2005 Ended 2/28/2005 vs. Fiscal 2004

The net loss for Fiscal 2005 ended 2/28/2005 was ($1,921,900) compared to a loss of ($1,723,364) in Fiscal 2004. Operating Expenses totaled ($2,159,974) before Future Income Tax Recovery of $238,074. The Expense amount was under the budgeted Operating and Administrative Expenses of ($2,316,000). Large increases in expenses occurred in Travel and Conferences of ($599,144) compared to ($368,940); Accounting and Legal of ($220,730) compared to ($112,211); Investor Relations of ($128,403), up from ($93,561); and Transfer and Regulatory Fees of ($94,311) compared to ($81,889). The higher expenses in these areas were largely due with increased corporate activity associated with arranging and completing the higher number of private placements during Fiscal 2005.

Property Acquisition and Exploration expenditures totaled $9,630,383. The expenditures were broken down as follows:

Fiscal 2005 Property Expenditures, Ferguson Lake Property (100% owned)

Type of Expenditure	Amount ($)
Personnel	2,285,812
Aircraft support, including helicopter moves	2,856,755
Diamond drilling	2,282,539
Camp support costs, including fuel	1,199,717
Analytical and Geophysical Services	615,020
Mobilization and Demobilization	79,020
TOTAL	$ 9,318,863

Fiscal 2005 Property Expenditures, Ferguson Lake Option (50% Option)

Type of Expenditure	Amount ($)
Personnel	92,621
Aircraft support, including helicopter moves	72,282
Diamond drilling	67,250
Camp support costs, including fuel	26,093
Analytical and Geophysical Services	44,598
Mobilization and Demobilization	8,676
TOTAL	$   311,520

Fiscal 2004 Ended 2/29/2004 vs. Fiscal 2003

The Company recorded a net loss for Fiscal 2004 of ($1,723,364) compared to a loss of ($1,970,057) in Fiscal 2003. Operating expenses were ($1,723,364) compared to ($1,970,057). The fiscal year-over-year decline was largely due to lower Stock-based Compensation of ($49,284) compared to ($558,074) in Fiscal 2003 as the Company granted fewer stock options in the current year.

In Fiscal year 2004, the Company concentrated all of its efforts on exploration work on its Ferguson Lake Property. This work consisted primarily of exploration drilling and geophysical surveys. A total of $3,024,414 was spent on exploration on the property, broken down as follows:

Fiscal 2004 Property Expenditures, Ferguson Lake Property (100% owned)

Type of Expenditure	Amount ($)
Personnel	1,617,134
Aircraft support, including helicopter moves	638,186
Diamond drilling	255,336
Camp support costs, including fuel	213,358
Analytical and Geophysical Services	206,741
Mobilization and Demobilization	93,659
TOTAL	$ 3,024,414

The Company also added additional claims to the property through a 50-50 joint venture and staking.

Liquidity and Capital Resources

The Company's primary source of funds since incorporation has been through private placement, offering memorandum, and the exercise of stock options and common share purchase warrants.  The Company has no revenue from mining to date and does not anticipate mining revenues in the foreseeable future.

In Fiscal 2007, the Company will again focus its exploration efforts on the Ferguson Lake Property. The Company’s Fiscal 2007 Ferguson Lake Property exploration costs are estimated at $10,000,000.

For Fiscal 2007, the Company plans on spending approximately $190,000 per month ($2,280,000 for the fiscal year) on administration expenses.  The budget for the monthly administration expenses is outlined below:

Expense Item	($)
Automobile and Travel	$  40,000
Computer Fees	$   3,000
Advertising and Promotion	$  20,000
Consulting	$  37,000
Insurance and Bank Charges	$  10,000
Management and Investor Relations Fees	$  17,000
Office and Rent	$  40,000
Professional Fees and Regulatory Fees	$  20,000
Telephone	$   3,000
Total Expenses	$ 190,000

With the completion of the private placement of 24,424,501 common stock units and 5,571,796 flow-through common shares subsequent to the year-end, the Company has sufficient cash on hand to fund its anticipated exploration program and administrative expenditures for Fiscal 2007. Future cash needs for Fiscal 2008 are expected to come from the proceeds of private placements and the exercise of common share purchase warrants and options.

The Company intends to raise any required additional funds by selling equity or debt securities and/or by selling or joint venturing its property until it develops a flow of cash from operations.

The Company does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Company's liquidity either materially increasing or decreasing at present or in the foreseeable future. Material increases or decreases in the Company's liquidity are substantially determined by the success or failure of the Company's exploration programs or the future acquisition of projects.

Fiscal 2006 Ended 2/28/2006

The Company had working capital of $802,947 at February 28, 2006 compared to working capital of $839,920 at February 28, 2005.

Operating Activities used cash of ($2,116,171), including the Net Loss of ($2,695,494). Non-cash items included Amortization of Computers and Office Equipment of $4,412 and Mineral Claims and Exploration Costs Written-off of $331,519. Changes in non-cash working capital items included an increase of Receivables of ($39,100), a decrease in Prepaid Expenses and Deposits of $8,489, and an increase in Accounts Payable and Accrued Liabilities of $337,512.

Investing Activities used cash of ($12,199,365), with ($12,060,656) spent on Mineral Properties and ($138,709) used on Acquisition of Exploration Equipment. Financing Activities provided cash of $15,120,475. Issuance of Shares and Units provided cash of $15,661,958, while Share Issue Costs used cash of ($541,483).

During the year, the Company issued 39,765,495 common shares. 21,705,870 common shares were issued in Private Placements, 17,434,625 were issued pursuant to the exercise of common stock warrants, and 625,000 were issued pursuant to the exercise of common stock options. The Company’s cash position as at February 28, 2006 was $2,134,103.

Fiscal 2005 Ended 2/28/2005

The Company had working capital of $839,920 at February 28, 2005 compared to a working capital deficiency of ($432,192) at February 29, 2004.

Operating Activities used cash of ($1,645,106), including the Net Loss of ($1,921,900). Non-cash items included Future Income Tax Recovery of ($238,074), Stock-based Compensation related to the granting of stock options of $188,705, and Amortization of Office Equipment of $4,948. Other changes in non-cash working capital items include a decrease in Accounts Receivable of $76,825; Increase in Refundable Deposits of ($7,866); Decrease in Prepaid Expenses and Deposits of $155,330; and an increase in Accounts Payable and Accrued Liabilities of $96,926.

Investing Activities used cash of ($9,804,045). The largest component was cash spent on Mineral Properties of ($9,647,808). Acquisition of Computers and Office Equipment used cash of ($5,737), and Acquisition of Exploration Equipment used cash of ($150,500).

Financing Activities provided cash of $12,138,478. Issuance of Shares and Units provided cash of $13,608,677, while Share Issue Costs used cash of ($566,199). Repayments of Loans used cash of ($904,000).

During the year, the Company issued 34,869,584 common shares. 30,498,834 were issued pursuant to private placements and the conversion of previously issued units, and 4,370,750 were issued pursuant to the exercise of common share purchase warrants. The Company’s cash position as of February 28, 2005 was $1,329,164.

Fiscal 2004 Ended 2/29/2004

The Company had a working capital deficiency of ($432,192) at February 29, 2004 as compared to working capital deficiency of ($1,344,153) at February 28, 2003.

Operating Activities used cash of ($2,546,103), including the loss of ($1,723,364). Non-cash items included Stock-based Compensation of $49,284 and Amortization of Computers and Office Equipment of $5,682. Other changes in non-cash working capital items included decrease in Accounts Receivable of $16,212, Increase in Prepaids and Deposits of ($162,769), increase in Accounts Payable and Accrued Liabilities of ($695,962), and increase in Large Corporate Tax payable of ($35,186).

Investing Activities used cash of ($3,054,414), with the entire amount spent on Mineral Properties. Financing Activities provided cash of $6,234,921. Issuance of Common Shares, net of issue costs, provided $5,634,773, Loans provided cash of $605,000, and Repayment of Capital Lease Obligations used cash of ($4,852).

During the year, the Company issued 28,656,510 common shares. All of the shares were issued pursuant to the conversion of private placement units.

The Company’s cash position at the end of Fiscal 2004 was $639,837.  

Variation in Operating Results

The Company is presently exploring its properties for sufficient reserves to justify production.  However, to date no reserves have been discovered and none of the properties are yet in production and consequently, do not produce any revenue.  As a result there is little variation expected in operating results from year to year and little is to be expected until such time, if any, as a production decision is made on its properties.

The Company derives interest income on its bank deposits, which depend on the Company's ability to raise funds.

Management periodically through the exploration process, reviews results both internally and externally through mining related professionals.  Decisions to abandon, reduce or expand exploration efforts is based upon many factors including general and specific assessments of mineral deposits, the likelihood of increasing or decreasing those deposits, land costs, estimates of future mineral prices, potential extraction methods and costs, the likelihood of positive or negative changes to the environment, permitting, taxation, labor and capital costs.  There cannot be a pre-determined hold period for any property as geological or economic circumstances render each property unique.

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP except as noted in Note 13 to the financial statements.  

5.C.  Research and Development, Patents and Licenses.  

The Company conducts no Research and Development activities, and has no Patents and Licenses, nor is it dependent upon any for its business.

5.D.  Trend Information  

The Company is unaware of any trends which would have a material effect on its operations or financial position.

5.E.  Off-Balance Sheet Arrangements.

The Company has no off-balance sheet arrangements.

5.F.  Tabular disclosure of contractual obligations.

The Company currently leases office space in Vancouver, office equipment in Vancouver, and exploration equipment at the Ferguson Lake property.

Table Number 5

Contractual Obligation

As of February 28, 2006

	Payments Due by Period
Contractual Obligations as of February 28, 2006	Total	Less than 1 year	1- 3 years	3 -5 years	More than 5 years
Long-Term Debt Obligations	-	-	-	-	-
Capital (Finance) Lease Obligations(1)	$ 24,320	$  7,680	$ 15,360	$  1,280	-
Operating Lease Obligations(2)	$109,384	$ 84,776	$ 24,608	-	-
Purchase Obligations	-	-	-	-	-
Other Long-Term Liabilities reflected on the Corporation’s Balance Sheet under Canadian GAAP	-	-	-	-	-
Total	$133,704	$ 92,456	$ 39,968	$  1,280	-

⁽¹⁾  

The Lease is for office copiers which expire April 2009.

⁽²⁾

Operating lease obligations represent leases on the Company’s current offices to August, 2007 and the Ferguson Lake Camp Lodge to March 2007.

US GAAP Reconciliation with Canadian GAAP

The Company’s financial statements have been prepared in accordance with generally accepted accounting principles in Canada (CDN GAAP) which conform in all material respects with those in the United States (U.S. GAAP), except as follows and as detailed in Note 13 to the Company’s audited financial statements for the year ended February 28, 2006.

Exploration Expenditures

In accordance with EITF 04-02, the Company classifies the costs of acquiring its mineral interests as tangible assets resulting in no difference between Canadian and U.S. GAAP. Under U.S. GAAP exploration costs on mineral properties, other than acquisition costs, prior to the establishment of proven or probable reserves are expensed as incurred. Under Canadian GAAP these costs may be deferred.

Under U.S. GAAP, the Company performs evaluations of its investment in mineral properties to assess the recoverability and the residual value of its investments in these assets. All mineral properties are reviewed for impairment whenever events or circumstances change which indicates the carrying amount of an asset may not be recoverable, utilizing established guidelines based on undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization.

For the year ended February 28, 2006, the Company recorded Mineral Property Acquisition costs of $216,230 under Canadian GAAP. These amounts include advance royalty payments and property costs which are considered to be exploration related expenditures under U.S. GAAP. Therefore, these amounts have been expensed as exploration expenditures under US GAAP.

Flow-through Shares and Future Income Tax Recovery

Under Canadian income tax legislation, the Company is permitted to issue shares whereby the Company agrees to incur qualifying expenditures (as defined under the Income Tax Act of Canada) and renounce the related income tax deductions to the investors.  Under Canadian GAAP, flow-through shares are accounted for as part of the issuance of capital stock at the price paid for the shares, net of any future income tax liability.  Under U.S. GAAP, any difference between the fair value of the non flow-through shares and the fair value of the flow-through shares must be recorded as a liability if a premium is paid by investors for the flow-through shares.  The liability is charged to income as the flow-through share proceeds are expended on qualifying expenditures and the related income tax deductions are renounced to investors.

The Company did issued 7,804,665 flow-through shares during the year ended February 29, 2004 for total proceeds of 42,056,460. During the year ended February 28, 2005, the Company issued 2,273,890 flow-through shares for total proceeds of $1,023,250. As the value of the compensation received for the flow-through shares issued during the year ended February 28, 2005 was equal to the fair value of non-flow through shares on the date issued, there is no difference for U.S. GAAP purposes. During the year ended February 28, 2006, the Company issued 11,705,995 flow-through shares for total proceeds of $5,570,698. As the value of the compensation received for the flow-through shares issued during the year ended February 28, 2006 exceeded the fair value of the non-flow through shares on the date issued by $350,839, the Company recorded a difference in capital stock and related income tax expenses on renunciation.

The reader is advised to consult Starfield’s audited annual financial statements for the year ended February 28, 2006, particularly Note 13, for quantification of the differences.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

Table No. 6 lists as of 7/30/2006 the names of the Directors of the Company.  The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.  All Directors are residents and citizens of Canada.

6.A.  Directors and Senior Management

Table No. 6

Directors and Senior Management

8/15/2006

Name	Position	Age	Date of First Election or Appointment
Glen Indra	President, CEO and Director	58	November, 1997
David Lewis	Chief Financial Officer	61	June, 2006
Ming Wong	Corporate Secretary	59	July, 2005
Glen MacDonald	Director	57	November, 1997
Robert Maddigan (1)	Director	42	November, 2003
Henry M. Giegerich (1)	Director	75	January, 2000
Ross Glanville (1)	Director	59	August, 2004
Norman Betts	Director	51	March, 2006

 (1)  Member of Audit Committee.

Glen Indra joined Starfield in November 1997. He is a graduate of the University of British Columbia and began his career as a financial analyst with an international oil company. Following a ten-year career in banking he focused on major commercial lending servicing the Canadian securities industry. He has served on the boards of several publicly traded resource corporations and is the president and owner of Floralynn Investments Ltd., a private investment company. He currently serves as a director of Sutcliffe Resources, a mineral exploration company traded on the TSX Venture Exchange.

David Lewis joined the Company in June 2006. He holds a bachelor of engineering (metallurgy) degree from Dalhousie University, and obtained his Chartered Accountant designation in 1974 while with Coopers & Lybrand in Toronto. He has over 35 years of corporate finance business experience, and has served as Chief Financial Officer of several public companies. From 2004 to April 2006, he was CFO of Fiber Optic Systems Technology, a technology company in the oil and gas sector. He currently serves as CFO of Aurelian Resources Inc., a mineral exploration company traded on the TSX Venture Exchange, Chief Financial Officer of Khan Resources Inc., a mineral exploration company traded on the TSX Exchange, and as a director and chairman of the audit committee of Revett Minerals Inc., a mineral exploration company traded on the TSX Exchange.

Ming Wong joined the Company in December 2003, and was appointed Corporate Secretary in July 2005. He is a graduate of Simon Fraser University B.Sc. and receieved a Ph.D from the University of British Columbia. He has owned his own consulting firm since 1982 and provides administrative and accounting services for small businesses and resource companies.

Glen Macdonald joined the Company in November 1997. He is a graduate of the University of British Columbia and is a Professional Geologist and has been a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta from 1982 to the present and a member of the Professional Engineers and Geoscientists of British Columbia from1993 to the present. Since 1982, he has been a self-employed geological consultant, and he serves as a Director of several publicly traded resource companies including AVC Capital Corp., a mineral exploration company traded on the TSX Venture Exchange; a director of Anglo Swiss Resources Inc., a mineral exploration company traded on the TSX Venture Exchange and the NASD OTCBB in the United States; a director of Consolidated Gold Win Ventures, a mineral exploration company traded on the TSX Venture Exchange; a director of Golden Cariboo Resources, a natural resource exploration company traded on the TSX Venture Exchange; a director of Maxim Resources, a natural resource exploration company traded on the TSX Venture Exchange; a director of ISX Resources Inc., a mineral exploration company traded on the TSX Venture Exchange; a director of Solitaire Minerals, a mineral exploration company traded on the TSX Venture Exchange; and a director and Corporate Secretary of Thelon Ventures, a mineral exploration company traded on the TSX Venture Exchange.

Henry Giegerich joined the Company in January 2000. He is a graduate of the University of British Columbia and is a Professional Engineer and a member of the Association of Professional Engineers of British Columbia since 1956. From 1982 to 1987, he was President & General Manager of Cominco Alaska Inc. and in this position was responsible for the development of the Red Dog Mine in northwest Alaska. From 1971 to 1981 he was with Cominco Ltd., including Project Engineer on the Black Angel Mine Project in Greenland, Project Manager for the Polaris Mine Project on Little Cornwallis Island, NWT, and finally Cominco Vice President, Northern Group, responsible for operations of the Con Mine (Yellowknife, NWT), Pine Point Mine (Pine Point, NWT) and the Polaris Mine. Since 1988 Mr. Giegerich has acted as a mineral industry consultant to various clients throughout the world and currently serves as a director of Phoscan Chemical Corp., a mineral exploration company traded on the TSX Venture Exchange.

Robert Maddigan joined the Company in November 2003. He is a graduate of the University of Alberta. He is a Professional Engineer and has owned his own consulting firm as well as experience as a project manager for Ferguson Simek Clark, specializing in artic engineering and construction projects. He currently serves as a director of Sutcliffe Resources, a mineral exploration company traded on the TSX Venture Exchange;

Ross Glanville joined the Company in August 2004. He received a Bachelor of Applied Science Degree (Mining Engineering) from the University of British Columbia in 1970 and in 1974 he obtained an MBA. He is the principal of Ross Glanville & Associates, a mineral consulting firm which has valued more than five hundred mining/exploration properties and/or companies worldwide. He has also provided more than two hundred fairness opinions for mergers, amalgamations, and acquisitions of public and private companies. He currently serves as a director of Oremex Resources Inc., Baja Mining, and of Archon Minerals Limited, mineral exploration companies traded on the TSX Venture Exchange.

Norman Betts joined the Company in March 2006. He joined the faculty of the University of New Brunswick in 1981, served as assistant dean of the MBA program and associate dean of faculty. He currently holds the position of associate professor in the Faculty of Business Administration. He was elected to the Legislative Assembly of the Province of New Brunswick in 1999 and served as both Minister of Finance and Minister of Business. He currently serves as a director of several companies, including New Brunswick Power, the primary power utility in New Brunswick; A director and chair of the audit committee for Minacs Worldwide, a business solutions company traded on the TSX Exchange; A director of Tembec Inc., a forest products company traded on the TSX Exchange; A director and chair of the audit committee of Tanzanian Royalty Exploration Corporation, a mineral exploration company traded on the TSX and American Stock Exchange.

No Director and/or Executive Officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he/she is a Director and/or Executive Officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he /she is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony other than that described in the next paragraph.

There are no family relationships between any two or more Directors or Executive Officers.  There are no material arrangements or understandings between any two or more Directors or Executive Officers.

6.B.  Compensation

The Company compensates its Directors both through the granting of stock options and through the payment of $1,000/month for committee related work. Refer to ITEM 12 “OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES”.

The Company also may grant stock options to Executive Officers, consultants and employees; refer to ITEM 12 “OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES”.

Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors.  The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director.

During Fiscal 2006, no Executive Officer or Director individually received/accrued in excess of U.S. $60,000 in compensation except as disclosed below. No funds were set aside or accrued by the Company during Fiscal 2006 to provide pension, retirement or similar benefits for Executive Officers or Directors.

The Company entered into a Management Agreement with Glen Indra, President of the Company, and Floralynn Investments Ltd., a company that is wholly owned by Mr. Indra, on 6/16/1998. Under the terms of this agreement Mr. Indra and Floralynn Investments Ltd. provided management services to the Company for a fee of $6,000 per month. Effective June 1, 2006, the management contract with with Floralynn Investments increased to $12,000 per month.

Effective June 1, 2006, the Company entered into an management consulting agreement with Glen McDonald for $4,000 per month.

Effective June 1, 2006, The Company entered into a management contract with Qualis Management Inc., a private company controlled by David Lewis, for $5,000 per month.

The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2006 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$130,000 per Executive Officer.

No Executive Officer or Director received other compensation in excess of the lesser of US$25,000 or 10% of such officer’s cash compensation, and all Executive Officers and Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.

Except for the stock option program discussed in ITEM #6, the Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company’s Executive Officers or Directors.

Fees and executive options compensation are anticipated to be increased to more closely reflect industry standards if the Company is successful at establishing economic mineral reserves on one or more of its properties which results in operating revenues or a significant level of financing.

6.C.  Board Practices

6.C.1.  Terms of Office.  Refer to ITEM 6.A.1.

6.C.2.  Directors’ Service Contracts.  --- No Disclosure Necessary ---

6.C.3.  Board of Director Committees.

The Company currently has 3 Board of Director Committees: The Audit Committee, the Compensation Committee, and the Corporate Governance Committee.

The Audit Committee recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company.  The current members of the Audit Committee are: Robert Maddigan, Henry Giegerich, and Ross Glanville.

The Compensation Committee reviews corporate goals and objectives relevant to the President and CEO, evaluating their performance based on those goals and objectives, and recommending the President and CEO’s compensation on this evaluation for approval by Independent Board members. It reviews the evaluation of executive management’s performance and recommending to the Board executive management’s compensation, compensation practices, and ensuring processes are in place to annually evaluate the performance of the Compensation Committee. It administers the Stock Option Plan, Director’s compensation, and prepares for review and approval by the Board the report on executive compensation for inclusion in the Company’s management information circular. The current Compensation Committee members are Glen MacDonald, Henry Giegerich, and Robert Maddigan.

Corporate Governance and Nominating Committee monitors the size and composition of the Board and Board committees to ensure effective decision making; developing, reviewing and monitoring criteria for selecting directors; Identifying candidates qualified to become Board members and selecting or recommending that the Board select the director nominees for the next annual general meeting of shareholders; Reviewing the performance of the Board, Board committees and Board members; assisting the Board in determining Board committee composition; Reviewing corporate governance principles applicable to the Company; Reviewing and monitoring procedures for meeting the Board’s information needs; Reviewing annually the Company’s Corporate Governance Manual; Ensuring that processes are in place to annually evaluate the performance of the Governance Committee; Review the performance of the President and CEO; and schedule Board meetings. The current committee members are Norman Betts, Ross Glanville and Henry Giegerich.

6.D.  Employees

As of 7/31/2006, the Company had six employees, in addition to five directors (two of which are officers of the Company). All are located in Vancouver and their duties included administration and investor relations. The Chief Financial Officer of the Corporation is located in Toronto.

6.E.  Share Ownership

The Registrant is a publicly-owned Canadian corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries.  The Registrant is not controlled directly or indirectly by another corporation or any foreign government, except as described below.

Table No. 7 lists, as of 8/15/2006, Directors and Executive Officers who beneficially own the Registrant's voting securities and the amount of the Registrant's voting securities owned by the Directors and Executive Officers as a group.

Table No. 7

Shareholdings of Directors and Senior Management

Title Of Class	Name of Beneficial Owner	Amount and Nature Of Beneficial Ownership	Percent Of Class
Common	Glen J. Indra (1)	6,698,500	3.44%
Common	Glen MacDonald (2)	3,646,000	1.85%
Common	Robert Maddigan (3)	2,683,680	1.36%
Common	Henry Giegerich (4)	575,000	0.29%
Common	Ross Glanville (5)	400,000	0.22%
Common	Norman Betts (6)	310,000	0.16%
Common	David Lewis	Nil	Nil
Common	Ming Wong (7)	328,500	0.17%
	Total Directors/Management	14,641,680	7.17%

(1)

409,500 of these shares are held in the name of Florlynn Investments Ltd., a company 100% owned by Glen J. Indra. 3,295,000 of these shares are represented by currently exercisable share purchase options.

(2)

2,590,000 of these shares are represented by currently exercisable share purchase options.

(3)

2,520,000 of these shares are represented by currently exercisable share purchase options.

(4)

550,000 of these shares are represented by currently exercisable share purchase options.

(5)

400,000 of these shares are represented by currently exercisable share purchase options.

(6)

300,000 of these shares are represented by currently exercisable share purchase options.

(7)

160,000 of these shares are represented by currently exercisable share purchase options.

# Based on 194,464,982 shares outstanding as of 8/28/2006.

Stock Options

Stock Options to purchase securities from the Company are granted to Directors, Consultants and Employees of the Company on terms and conditions acceptable to the regulatory authorities in Canada, notably the TSX Venture Exchange (formerly the Canadian Venture Exchange). The exercise prices for stock options were determined in accordance with TSX Venture Exchange guidelines and reflect the average closing price of the Company’s common stock for the ten trading days on the TSX Venture Exchange immediately preceding the day on which the Directors granted and publicly announced the stock options.

The Company’s Stock Option Plan was originally approved by Shareholders on November 28, 1997. An amended and restated Stock Option Plan (the “Plan”) was approved by shareholders at the Annual Special Meeting held on July 28, 2006. The details of the Plan are as follows:

The purpose of the Plan is to assist the Corporation (the “Corporation”) in attracting and retaining directors, officers, advisors, employees and other persons engaged to provide ongoing services to the Corporation as an incentive for such persons to put forth maximum effort for the continued success and growth of the Corporation and in combination with these goals, to encourage their participation in the performance of the Corporation.

The number of common shares reserved for issuance under the Plan may not exceed 10% of the issued and outstanding Common Shares. The Board of Directors may from time to time grant options to acquire all or part of the Common Shares under the Plan to directors, officers, advisors, employees, and other persons or companies engaged to provide ongoing services to the Corporation. The options are non-assignable and non-transferable otherwise than by will or by laws governing the devolution of property in the event of death. Each option entitles the holder to purchase one Common share. The exercise price for options granted under the Plan will be determined by the Board of Directors on the date of the grant, which price may not be less than the market value. The market value is defined as the last daily closing price per share on the Exchange on the trading day immediate preceding the relevant date. The term of the options is determined by the Board of Directors, which term may not exceed 10 years from the date of the grant. The Board also has the authority to determine the vesting conditions of the options, and certain other terms and conditions. Options may be exercised as soon as they are vested.

Options granted under the Plan will be subject to certain restrictions which include:

(a)

the number of common shares which may be issued pursuant to the Plan to any one person may not exceed 5% of the Common shares issued and outstanding on a non-diluted basis from time to time;

(b)

the number of common shares which may be reserved for issuance pursuant to the Plan to all insiders of the Corporation may not exceed 10% of the issued and outstanding common shares on a non-diluted basis from time to time;

(c)

the number of common shares which may be issued pursuant to the Plan to all insiders of the Corporation within a one-year period may not exceed 10% of the issued and outstanding Common shares on a non-diluted basis from time to time.

An optionee whose employment with the Corporation is terminated as a result of retirement, disability or redundancy will have 60 days from the date of termination to exercise any options that have vested as of the termination date. An optionee whose employment with the Corporation is terminated, other than for cause, at any time in the six months following a change of control of the Corporation shall have 90 days from the date of termination to exercise any option granted, and all options granted will immediately vest on the date of the termination. In the event of the death of an optionee, either prior to termination or after retirement or disability, the optionee’s legal representative will have one year from the date of the optionee’s death to exercise any options that had vested on the date of the optionee’s death. In the event of any other termination, the optionee shall have 30 days from the date of termination to exercise any options that had vested o n the termination date. In the event that an optionee is terminated for cause, any options not exercised prior to the termination shall lapse.

In the even that the Corporation:

(a)

subdivides, consolidates, or reclassifies the Corporation’s outstanding common shares, or makes another capital adjustment or pays a stock dividend, the number of common shares receivable under the Plan will be increased or reduced proportionally; and

(b)

amalgamates, consolidates with or merges with or into another body corporate, holders of Options under the Plan will, upon exercise thereafter of such option, be entitled to receive and compelled to accept, in lieu of common shares, such other securities, property or cash with the holder would have received upon such amalgamation, consolidation or merger if the option was exercised immediately prior to the effective date of such amalgamation, consolidation or merger.

Subject where required to Exchange and/or applicable securities regulatory authorities, the Board may from time to time amend, suspend or terminate the Plan in whole or in part. Shareholder approval is required for amendments to the Plan that involve:

(a)

amendments to the number of securities issuable under the arrangement, including an increase to a fixed maximum number or a fixed maximum percentage or a change from a fixed maximum number to a fixed maximum percentage;

(b)

the introduction of a provision permitting reloading upon exercise;

(c)

any change to the eligible participants which would have the potential of broadening or increasing insider participation;

(d)

the addition of any form of financial assistance;

(e)

any amendment to a financial assistance provision which is more favorable to participants;

(f)

the addition of a cashless exercise feature, payable in cash or securities, which does not provide for a full deduction of the number of underlying securities from the reserved shares;

(g)

the addition of a deferred or restricted share unit or any other provision which results in participants receiving securities while no cash consideration is received by the issuer; and

(h)

in circumstances where the amendment could lead to a significant or unreasonable dilution in the issuer’s outstanding securities or may provide additional benefits to eligible participants, especially insiders at the expense of the issuer and its existing securityholders.

The Plan and any outstanding options may be amended or terminated by the Board if the amendment or termination is required by any securities regulators, a stock exchange or a market as a condition of approval to a distribution to the public of the common shares or to obtain or maintain a listing or quotation of the Corporation’s Common Shares. The Board may also amend or terminate any outstanding option, including, but not limited to, substituting another award of the same or of a different type or changing the date of exercise; provided, however, that the holder of the option must consent to such action if it would materially and adversely affect the holder.  

Stock Options Outstanding

The names and titles of the Directors/Executive Officers of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in Table No. 8 as of 8/15/2006, as well as the number of options granted to Directors and all employees as a group.

Table No. 8

Stock Options Outstanding

______________________________________________________________________________

______________________________________________________________________________

Name	Position	Number of Shares of Common Stock	Exercise Price	Expiry Date
Glen Indra	President, CEO and Director	300,000 1,140,000 1,000,000 425,000 430,000	$0.90 $0.40 $0.25 $0.40 $0.60	03/08/07 02/14/08 11/18/08 08/27/09 04/01/11
Ming Wong	Corporate Secretary	60,000 100,000	$0.40 $0.60	01/31/10 03/31/10
Robert Maddigan	Director	1,580,000 80,000 860,000	$0.25 $0.40 $0.60	11/18/08 08/27/09 03/31/11
Glen MacDonald	Director	740,000 150,000 1,000,000 500,000 200,000	$0.50 $0.90 $0.40 $0.40 $0.60	10/24/06 03/08/07 02/14/08 08/27/09 03/31/11
Henry Giegrich	Director	150,000 100,000 200,000 100,000	$0.25 $0.40 $0.40 $0.60	11/18/08 08/27/09 01/31/10 03/31/11
Ross Glanville	Director	200,000 100,000 100,000	$0.40 $0.40 $0.60	08/27/09 01/31/10 03/31/11
Norman Betts	Director	300,000	$0.60	03/31/11
Total Officers/Directors		9,815,000
Employees/Consultants		6,802,347
Total Stock Options Outstanding		16,617,347

______________________________________________________________________________

______________________________________________________________________________

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A.  Major Shareholders.

7.A.1.a.  Holdings By Major Shareholders.

The Company believes there are three persons/companies who beneficially control 5% or more of the Registrant's voting securities.

Table No. 9

5% or Greater Shareholders

Individual or Company	Amount Held	Percentage *
RAB Capital (1)	21,500,000	10.60%
Fidelity  Company (2)	20,500,366	10.54%
Delta Fund Europe Ltd.	18,867,925	9.70%

(1)

RAB Capital and Mr. William Philip Seymour Richards, Director, are considered to having voting control of these shares. Of the total, 8,375,000 represent currently exercisable share purchase warrants.

(2)

The shares are held in accounts and funds managed by Fidelity Management & Research Company, Fidelity Management Trust Company, and Fidelity International Ltd., collectively referred to as “Fidelity”. Fidelity has control but not ownership of these securities.

* percentage is based upon 194,464,982 common shares outstanding as of June 23, 2006, and currently exercisable warrants held by each holder.

No shareholders of the Company have different voting rights from any other shareholder.

7.A.2. Share Ownership by Country.

On 8/31/2006, the shareholders' list for the Registrant's common stock showed 107 shareholders of record (including depositories) and 194,464,982 common shares outstanding.  37 of these shareholders are registered in the United States, owning 12,291,824 shares representing 6.32% of the issued and outstanding shares of common stock.  60 of these shareholders are registered in Canada, owning 161,148,261 shares representing 82.87% the issued and outstanding shares of common stock. 10 of these shareholders are registered in countries other than either the United States or Canada.  These shareholders own 21,024,897 shares representing 10.81% of the issued and outstanding shares.

The Registrant has researched the indirect holdings by depositories and other financial institutions and believes it has in excess of 2000 shareholders of its common stock.

The Registrant has an active market in the United States for its common shares.  The Registrant's common shares are registered to trade in the United States in the form of NASD’s OTC Bulletin Board under the symbol “SRFDF”. The Company’s shares are also registered to trade on the Frankfurt Stock Exchange in Germany.

The Registrant has not declared any dividends for the last five years and does not anticipate that it will do so in the foreseeable future.  The present policy of the Registrant is to retain future earnings for use in its operations and the expansion of its business.

7.A.3.  Control of Company.

The Company is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents.  The Company is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., “History and Growth of the Company”, ITEM #6.E., “Share Ownership”, and ITEM 7.A.1.a, “Holdings by Major Shareholders”.

7.A.4.  Change of Control of Company Arrangements.   

            ---No Disclosure Necessary---

7.B.  Related Party Transactions

Amounts Owing to Senior Management/Directors

During the year, the Company had the following transactions with officers and directors and other Companies with which officers or directors are related:

Management Fees in the amount of $72,000 (2005 - $52,000; 2004 - $48,000) to Florlynn Investments Ltd., a company 100% owned by Glen J. Indra, the President of the Company.

Management Fees in the amount of $24,000 (2005 - $2,000; 2004 – Nil) were paid to Glen MacDonald, Director and former Chief Financial Officer. Mr. MacDonald also received Consulting Fees of $13,000 (2005 – Nil; 2004 – Nil) and Committee fees of Nil (2005 - $4,000; 2004 – Nil).

Consulting Fees of $28,000 (2005 – Nil; 2004 – Nil) were paid to Ming Wong, Corporate Secretary.

Directors Fees of $13,000 (2005 - $4,000; 2004 – Nil) were paid to Henry Giegerich, Director.

Directors Fees of $13,000 (2005 – $4,000; 2004 – Nil) were paid to Ross Glanville, Director.

Directors Fees of $12,000 (2005 - $3,000; 2004 – Nil) were paid to Robert Maddigan, Director.

7.C.  Interests of Experts and Counsel   

          --- No Disclosure Necessary ---

ITEM 8.  FINANCIAL INFORMATION

8.A.  Consolidated Statements and Other Financial Information

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Registration Statement.  The audit reports of Davidson & Company, LLP, Chartered Accountants, independent auditors, are included herein immediately preceding the financial statements.

8.A.7.  Legal/Arbitration Proceedings

Ross Glanville, director of the Company, is the owner of Ross Glanville & Associates (“Associates”), a mineral consulting firm. Associates has been named in a lawsuit filed by John Lepinski, a former officer and director of Getty Copper Inc., a publicly traded mineral exploration company. The suit alleges Associates and others conspired to harm Mr. Lepinski. Associates denies all allegations and intends to vigorously defend against these claims. The result of the suit is unknown at this time, but the outcome is unlikely to have any effect upon the Company.

8.B.  Significant Changes

Since the date of the audited financial statements for the Fiscal Year ended February 28, 2006, the Company completed the private placement of 5,571,796 flow-through common shares and 24,424,501 common share units, with each unit consisting of one common share and one-half of a share purchase warrant, with each full warrant exercisable at a price of $0.75 until May 10, 2007. Proceeds from the placement were $16,566,653.

The Company also issued 1,033,334 shares pursuant to the exercise of common share purchase warrants for proceeds of $620,000 and issued 85,000 common shares pursuant to the exercise of stock options for proceeds of $37,500.

18,591,369 share purchase warrants and 562,000 share purchase options expired unexercised.

4,790,000 common share options were granted at an exercise price of $0.60 expiring March 31, 2011.

Except as detailed above, no other significant changes have occurred since the date of the annual financial statements.

ITEM 9.  THE OFFER AND LISTING

9.A.  Common Share Trading Information

The Company's common shares trade on the TSX Venture Exchange (formerly the Canadian Venture Exchange), having the trading symbol "SRU" and CUSIP # 85528N103 and NASD’s OTC Bulletin Board in United States, having the trading symbol “SRFDF”. On January 21, 2004, the common shares of Starfield were admitted to trade on the Frankfurt stock Exchange in Germany; However, no active market for the Company’s shares has developed in Frankfurt.

On 2/5/1999, the ASE temporarily halted trading of the common shares of the Corporation.  Trading of the Corporation’s shares was halted pending finalization of the agreement for purchase of the Ferguson Lake Syndicate 100% interest in certain mineral claims and a five (5) kilometer area of influence in Ferguson Lake Area of Nunavut Territory in Canada.

The Company’s common shares were listed and posted for trading on the facilities of the Alberta Stock Exchange (”ASE”) in February 1995.  The ASE suspended trading of the common shares on 11/24/1995 because the founding Directors of the Company made improper loans of the Company’s assets.  The founding Directors entered into a Settlement and Undertaking Agreement dated 11/20/1997 with the ASE, which stated that the loans would be repaid to the Company partially through a transfer within escrow of common shares, and partially through forgiveness of a debt owed by the Company to a founding Director.  The undertaking agreement has been fully satisfied and none of the founding Directors currently own shares in the Company, nor are they presently involved with the Company.

Table No. 10 lists the high and low sales prices on the TSX Venture Exchange (formerly the Canadian Venture Exchange) for the five most recent financial years, the three most recent financial years by quarter end and the most recent six months for the Company's common shares.

Table No. 10

TSX Venture Exchange

Common Shares Trading Activity

Canadian Dollars

	High	Low
Fiscal Year Ended 2/28/06	$0.90	$0.335
Fiscal Year Ended 2/28/05	$0.61	$0.32
Fiscal Year Ended 2/29/04	$0.49	$0.19
Fiscal Year Ended 2/28/03	$1.09	$0.30
Fiscal Year Ended 2/28/02	$1.14	$0.30
Quarter Ended  2/28/06	$0.62	$0.365
Quarter Ended 11/30/05	$0.465	$0.335
Quarter Ended  8/31/05	$0.66	$0.37
Quarter Ended  5/31/05	$0.90	$0.485
Quarter Ended  2/28/05	$0.61	$0.32
Quarter Ended 11/30/04	$0.50	$0.33
Quarter Ended  8/31/04	$0.47	$0.33
Quarter Ended  5/31/04	$0.57	$0.38
Quarter Ended  2/29/04	$0.49	$0.25
Quarter Ended 11/30/03	$0.28	$0.19
Quarter Ended  8/31/03	$0.32	$0.24
Quarter Ended  5/31/03	$0.38	$0.24
Quarter Ended  2/28/03	$0.46	$0.30
Quarter Ended 11/30/02	$0.57	$0.31
Quarter Ended  8/31/02	$0.81	$0.34
Quarter Ended  5/31/02	$1.09	$0.73
July 2006	$0.445	$0.345
June 2006	$0.49	$0.38
May 2006	$0.64	$0.445
April 2006	$0.64	$0.51
March 2006	$0.64	$0.50
February 2006	$0.55	$0.425

Table 10a.

NASD Electronic Bulletin Board

Stock Trading Activity

US Dollars

	High	Low
Fiscal Year Ended 2/28/06	$0.74	$0.28
Fiscal Year Ended 2/28/05	$0.50	$0.24
Fiscal Year Ended 2/28/04	$0.37	$0.14
Fiscal Year Ended 2/28/03	$0.90	$0.18
Fiscal Year Ended 2/28/02	$0.77	$0.20
Quarter Ended  2/28/06	$0.55	$0.32
Quarter Ended 11/30/05	$0.39	$0.28
Quarter Ended  8/31/05	$0.55	$0.31
Quarter Ended  5/31/05	$0.74	$0.40
Quarter Ended  2/28/05	$0.50	$0.25
Quarter Ended 11/30/04	$0.40	$0.25
Quarter Ended  8/31/04	$0.35	$0.24
Quarter Ended  5/31/04	$0.39	$0.29
Quarter Ended  2/28/04	$0.37	$0.19
Quarter Ended 11/30/03	$0.19	$0.14
Quarter Ended  8/31/03	$0.24	$0.17
Quarter Ended  5/31/02	$0.26	$0.18
Quarter Ended  2/28/03	$0.30	$0.18
Quarter Ended 11/30/02	$0.36	$0.20
Quarter Ended  8/31/02	$0.53	$0.21
Quarter Ended  5/31/02	$0.90	$0.46
July 2006	$0.41	$0.30
June 2006	$0.45	$0.34
May 2006	$0.58	$0.40
April 2006	$0.56	$0.45
March 2006	$0.56	$0.41
February 2006	$0.50	$0.40

The Registrant's common shares are issued in registered form and the following information is from the Registrant's registrar and transfer agent, Computershare Investor Services Inc. of Canada (Formerly Montreal Trust Company), located in Calgary, Alberta, Canada.

The TSX Venture Exchange

The TSX Venture Exchange (“TSX-V”) is a result of the acquisition of the Canadian Venture Exchange by the Toronto Stock Exchange.  

The Canadian Venture Exchange was a result of the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange, which took place on 11/29/1999. On 8/1/2001, the Toronto Stock Exchange completed its purchase of the Canadian Venture Exchange from its member firms and renamed the Exchange the TSX Venture Exchange.  The TSX Venture Exchange currently operates as a complementary but independent exchange from its parent.

The initial roster of the CDNX was made up of venture companies previously listed on the Vancouver Stock Exchange or the Alberta Stock Exchange and later incorporated junior listings from the Toronto, Montreal and Winnipeg Stock Exchanges. The TSX Venture Exchange is a venture market as compared to the Toronto Stock Exchange, which is Canada’s senior market, and the Montreal Exchange, which is Canada’s market for derivatives products.

The TSX Venture Exchange currently has five service centers: Calgary, Toronto, Vancouver, Winnipeg and Montreal.  These service centers provide corporate finance, surveillance and marketing expertise.  The corporate office for the TSX Venture Exchange is located in Calgary and the operations office is located in Vancouver.

The TSX Venture Exchange is a self-regulating organization owned and operated by the TSX Group.  Representatives of its member firms and the public govern it.

The TSX Group acts as a business link between TSX Venture Exchange members, listed companies and investors. The TSX Venture Exchange policies and procedures are designed to accommodate companies still in their formative stages and recognize those that are more established. Listings are predominately small and medium sized companies.

Regulation of the TSX Venture Exchange, its member firms and its listed companies is the responsibility of Market Regulation Services Inc. (“RS”), which was created as a joint initiative of The Toronto Stock Exchange Inc. and the Investment Dealers Association of Canada.

RS is recognized as a self-regulatory entity in the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. As a Regulation Service Provider, RS provides independent regulation services to marketplaces (existing exchanges, quotation and trade reporting systems (QTRSs) and alternative trading systems (ATSs) and their participants in Canada that contract with RS Inc. for the provision of regulation services. As a national regulator for the Canadian marketplace, it is the first independent regulator of its kind for the Canadian securities market.

RS administers, oversees and enforces the Universal Market Integrity Rules (“UMIR”). To ensure compliance with UMIR, RS monitors real-time trading operations and market-related activities of marketplaces and participants. RS also enforces compliance with UMIR by investigating alleged rule violations and administering any settlements and hearings that may arise in respect of such violations.

RS's areas of responsibility include Market Surveillance; Operations and General Counsel (Market Policy); and Investigations and Enforcement.

The Market Surveillance division monitors all securities trading for compliance with the Universal Market Integrity Rules and marketplace specific rules. Market Surveillance also investigates irregularities and complaints relating to trading on marketplaces for which RS acts as regulation services provider to ensure a fair and orderly marketplace for all participants. This division is responsible for market supervision, which includes monitoring trading activity and timely disclosure, as well as preliminary investigations and trade desk compliance.

The market surveillance department issues TSX Venture Exchange notices to inform the public of halts, suspensions, delists and other enforcement actions.  All TSX Venture Exchange notices can be found on the TSE/TSX website at www.tse.com.  In the public interest, trading halts or suspensions are maintained until the surveillance department is satisfied that there is adequate disclosure of the company’s affairs and a level playing field for investors. By Exchange policy, the department also reviews and approves certain types of transactions for all TSX listed companies. These types of transactions includes option grants, private placements and other share issuances, mergers and acquisitions, property-asset acquisitions and dispositions, loans, bonuses and finder’s fees, changes of business, name changes, stock splits, and related party transactions. If the Exchange’s review of such transactions finds them to be contrary to the public interest or is in violation of policy, approval for the transaction will be denied and any action taken by the company towards the completion of the transaction must be reversed.

The Operations and General Counsel division is responsible for the development and implementation UMIR as well as providing interpretations of, or exemptions from, UMIR with the goal of promoting market integrity. This division also coordinates all operational activities of RS including strategic planning and overall organizational matters. Finally, the General Counsel's office of this division is responsible for all legal services and matters relating to RS's Board of Directors.

The Investigation and Enforcement division is responsible for conducting investigations and prosecutions of violations of the UMIR and Policies and market integrity and market quality rules specific to the TSX Venture Exchange. Functions of this division include Investigations, Enforcement and Investigative Research.

a) Investigations

Investigations focus on activities that may be in breach of the UMIR and/or the rules of the TSX Venture Exchange. The types of violations frequently investigated include high closings, market manipulation, client priority trading violations, unapproved trading, trading in restricted securities and conduct inconsistent with the just and equitable principles of trade.

Requests for investigations come primarily from the Market Surveillance division of RS. Other sources include the provincial securities commissions, the Operations and General Counsel division, marketplaces, and in some instances, the general public. Investigators also lend assistance to investigations conducted by provincial securities commissions.

b) Enforcement

Once an investigation is complete and a decision has been made to proceed with a prosecution a statement of allegations is served upon the concerned party which references the rule or rules alleged to have been in violation. An Offer of Settlement is also presented to the concerned party, who can either accept or reject the Offer of Settlement. If accepted, a hearing panel of RS must approve the Offer of Settlement. The hearing panel may accept the Offer of Settlement or reject it. If the Offer of Settlement is rejected by either the concerned party or by a settlement-hearing panel, a Notice of Hearing is issued and served upon the concerned party and the matter proceeds to a hearing before a hearing panel. If the hearing panel determines that an applicable requirement has been violated, it may impose a range of penalties, including a reprimand, a fine, or the restriction, suspension or revocation of access to a marketplace. After all hearings, there is an official public notification concerning the outcome of the hearing and the penalty or remedy imposed.

c) Investigative Research

The Investigative Research Division performs in-depth corporate research relating to officers, directors, and significant shareholders of organizations applying to list securities on the TSX Venture Exchange, or applying to obtain access to the marketplace's trading systems. Due diligence is a major function of the Enforcement division. The overall goal is to improve communication and to raise the standards of compliance in the securities trading industry.

The Canadian Investor Protection Fund (“CIPF”) protects Investors in Canada. The CIPF is a private trust fund established to protect customers in the event of the insolvency of a member of any of the following Self-Regulatory Organizations: the TSX Venture Exchange, the Montreal Exchange, the Toronto Stock Exchange, the Toronto Futures Exchange and the Investment Dealers Association of Canada.

9.A.5.  Common Share Description

Registrar/Common Shares Outstanding/Shareholders

The Company's common shares are issued in registered form and the following information is taken from the records of ComputerShare Investor Services Inc. (located in 600, 530- 8^th Avenue, S.W. Calgary, Alberta, T2P 3S8, Canada), the registrar and transfer agent for the common shares.

Common Share Description

All of the authorized common shares of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets.  Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.  Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.

Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, if any, remaining after payments of all debts and liabilities.  No shares have been issued subject to call or assessment.  There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.

Provisions as to the modification, amendment or variation of such shareholder rights or provisions are contained in the Business Corporation Act (Alberta).  Unless theCompany Act or the Company's Articles or Memorandum otherwise provide, any action to be taken by a resolution of the members may be taken by an ordinary resolution or by a vote of a majority or more of the shares represented at the shareholders' meeting.

There are no restrictions on the repurchase or redemption of common shares of the Company while there is any arrearage in the payment of dividends or sinking fund installments.

Stock Options

Refer to ITEM 6.E. and Table No. 8 for additional information.

Share Purchase Warrants

As of 7/31/06 the Company has share purchase warrants outstanding pursuant to which up to an additional 20,166,472 common shares of the Company may be issued as follows:

Table No. 11

Share Purchase Warrants Outstanding

Number of Warrants	Exercise Price	Expiry Date
2,611,100	$0.75	November 29, 2006
1,376,519	$0.75	December 2, 2006
591,666	$0.50	December 28, 2007
3,374,937	$0.50	January 20, 2008
10,075,458	$0.75	May 10, 2007
2,136,792	$0.75	May 23, 2007
Total Share Purchase Warrants Outstanding     20,166,472

9.A.6.  Differing Rights

9.A.7.a.  Subscription Warrants/Right

9.A.7.b.  Convertible Securities/Warrants

          --- No Disclosure Necessary ---

9.C.  Stock Exchanges Identified

The common shares trade on the TSX Venture Exchange in Vancouver, British Columbia Canada. Refer to ITEM #9.A.4.

ITEM 10.  ADDITIONAL INFORMATION

10.A.  Share Capital

10.A.1.  Authorized/Issued Capital

The Company has an unlimited number of common shares authorized; an unlimited number of first preferred shares authorized; and, an unlimited number of second preferred shares authorized.  All of these shares have no par value.  To date, no first preferred shares and no second preferred shares have been issued.  As of 2/28/2006, the end of the Company’s most recent fiscal year, there were 163,350,351 common shares outstanding.  As of 7/31/2006, there were 194,464,982 common shares outstanding.

The Company has financed its activities through the sale of equity capital.  The timing of such sales was dependent on the requirements of the Company and the economic climate.  The Company anticipates having to raise additional funds by equity issuance in the next several years, as the Company does not expect to generate material revenue from mining operations or to achieve self-sustaining commercial mining operations for several years.

The most recent financings are described in ITEM 4, “Information on the Company”.

10.A.2.  Shares Not Representing Capital.

10.A.3.  Shares Held By Company.

--- No Disclosure Necessary ---

10.A.4.  Stock Options/Share Purchase Warrants

10.A.5.  Stock Options/Share Purchase Warrants

--- Refer to Table No. 8 and Table No. 10. ---

10.A.6.  History of Share Capital

The Company has financed its operations through funds raised in public/private placements of common shares and warrants; and shares issued upon conversion of common share purchase warrants and options.

Table No. 12

Common Share Issuances

Date	Nature of Share Issuance	Number of Shares	Capital Raised
From inception to February 28, 1998		3,600,000	$226,172
Fiscal 1999:	Exercise of Stock Options Exercise of Warrants Private Placement & Public Offering For Property	278,000 250,000 4,400,000 100,000	$41,700 $37,500 $444,929 $20,000
Fiscal 2000:	Exercise of Stock Options Exercise of Warrants Special Warrants Conversion (net) For Property	867,000 1,870,000 1,720,500 4,250,000	$145,050 $762,000 $884,700 $1,700,000
Fiscal 2001	Exercise of Stock Options Exercise of Warrants Special Warrants Conversion (net)	914,000 3,314,000 4,014,000	$372,100 $1,443,650 $2,421,600
Fiscal 2002	Exercise of Stock Options Exercise of Warrants Special Warrants Conversion (net) Units Conversion (net)	1,055,300 2,176,667 1,490,000 17,922,638	$482,760 $1,201,749 $799,000 $8,226,577
Fiscal 2003	Exercise of Options Exercise of Warrants Units Conversion (net)	1,268,500 1,189,612 8,596,045	$543,040 $780,190 $3,045,044
Fiscal 2004	Exercise of Options Exercise of Warrants Units Conversion (net)	50,000 732,500 28,656,510	$12,500 $256,375 $6,778,688
Fiscal 2005	Private Placements of common shares	30,498,834	$11,545,790
	Exercise of Warrants	4,370,750	$1,496,688
Fiscal 2006	Private Placements of common shares	21,705,870	$9,570,648
	Exercise of Options	625,000	$256,500
	Exercise of Warrants	17,434,625	$5,834,810

10.A.7.  Resolutions/Authorizations/Approvals

--- No Disclosure Necessary ---

10.B.  Memorandum and Articles of Association

Objects and Purposes

The Articles of Incorporation place no restrictions upon the type of business that the Company may engage in.

10.B.2.  Directors

Disclosure of Interest of Directors/Officers

As described in the By-Laws of the Company:

 a.

Director shall not vote on any resolution to approve a contract in which he/she has a material interest unless the contract is an arrangement by way of security for money lent to or obligations undertaken by him/her, or by a body corporate, in which he/she has an interest for the benefit of the Company or an affiliate, a contract relating primarily to his remuneration as a director, officer, employee or agent of the Company or an affiliate, a contract for indemnity or insurance pursuant to the Act, or a contract with an affiliate.

 b.

In the absence of an independent quorum, directors cannot vote compensation to themselves or any members of their body.

 c.

The Board of Directors may from time to time, in such amounts and on such terms as it deems expedient charge, mortgage, hypothecate or pledge all or any of the currently owned or subsequently acquired real or personal, movable or immovable, property of the Corporation, including book debts, rights, powers, franchises and undertaking, to secure any debt obligations or any money borrowed, or other debt or liability of the Corporation.

 d.

A director need not be a shareholder of the Company.

Director Retirement

The Company’s memorandum/ articles/by-laws does not require retirement or non-retirement of directors under an age limit requirement.

10.B.3.  Rights, Preferences, Restrictions of Common Shares

The First Preferred Shares as a class shall have attached thereto the following rights, privileges, restrictions and conditions:

Issuance in Series

The First Preferred Shares may be issued from time to time in one or more series and subject to these articles, the board of directors is authorized to fix, from time to time before issuance, the number of shares in and the designation, rights, privileges, restrictions and conditions attaching to the shares of each series of First Preferred Shares.

Ranking of First Preferred Shares

The First Preferred Shares of each series shall, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, rank on a parity with the First Preferred Shares of every other series and be entitled to preference over the Second Preferred Shares, the Common Shares and the shares of any other class ranking junior to the First Preferred Shares.  The First Preferred Shares of any series shall also be entitled to such other preferences, not inconsistent with these provisions, over the Second Preferred Shares, the Common Shares and the shares of any other class ranking junior to the First Preferred Shares or as may be fixed in accordance with subparagraph 1(a).

Approval by Holders of First Preferred Shares

The approval by the holders of the First Preferred Shares with respect to any and all matters referred to herein may, subject to the provisions of the Business Corporation Act (Alberta), be given in writing by the holders of all of the First Preferred Shares for the time being outstanding or by resolution duly passed and carried by not less than two-thirds of the votes cast on a poll at a meeting of the holders of the First Preferred Shares duly called and held for the purpose of considering the subject matter of such resolution and at which meeting holders of not less than a majority of all First Preferred Shares then outstanding are present in person or represented by proxy; provided, however, that if at any such meeting, when originally held, the holders of at least a majority of all First Preferred Shares then outstanding are not present in person or represented by proxy within 30 minutes after the time fixed for the meeting, then the meeting shall be adjourned to such date, being not less than 15 days later and to such time and place, as may be fixed by the chairman of such meeting and at such adjourned meeting the holders of First Preferred Shares present in person or represented by proxy, whether or not they hold a majority of all First Preferred Shares then outstanding, may transact the business for which the meeting was originally called, and a resolution duly passed and carried by not less than two-thirds of the votes cast on a poll at such adjourned meeting shall constitute the approval of the holders of the First Preferred Shares hereinbefore mentioned.  Notice of any such original meeting of the holders of the First Preferred Shares shall be given not less than 21 days nor more than 50 days prior to the date fixed for such meeting and shall specify in general terms the purpose for which the meeting is called.  No notice of any such adjourned meeting need be given unless such meeting is adjourned by one or more adjournments for an aggregate of 30 days or more from the date of such original meeting shall be given in the manner prescribed for the original meeting as aforesaid.  The formalities to be observed with respect to the giving of notice of any such original meeting or adjourned meeting and the conduct thereof shall be those form time to time prescribed in the by-laws of the Corporation with respect to meetings of the shareholders.

2. The Second Preferred Shares as a class shall have attached thereto the following rights, privileges, restrictions and conditions:

Issuance in Series

The Second Preferred Shares may be issued from time to time in one or more series, and subject to these articles, the board of directors is authorized to fix, from time to time before issuance, the number of shares in and the designation, rights, privileges, restrictions and conditions attaching to the shares of each series of Second Preferred Shares.

Ranking of Second Preferred Shares

The Second Preferred Shares of each series shall, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, rank on a parity with the Second Preferred Shares of every other series and be entitled to preference over the Common Shares and the shares of any other class ranking junior to the Second Preferred Shares.  The Second Preferred Shares of any series shall also be entitled to such other preferences, not inconsistent with these provisions, over the common shares and the shares of any other class ranking to the Second Preferred Shares as may be fixed in accordance with subparagraph 2(a).

Approval by Holders of Second Preferred Shares

The approval of the holders of the Second Preferred Shares with respect to any and all matters referred to herein may, subject to the provisions of the Business Corporations Act (Alberta), be given in writing by the holders of all of the Second Preferred Shares for the time being outstanding or by resolution duly passed and carried by not less than two-thirds of the votes cast on a poll at a meeting of the holders of the Second Preferred Shares duly called and held for the purpose of considering the subject matter of such resolution and at which meeting holders of not less than a majority of all Second Preferred Shares then outstanding are present in person or represented by proxy; provided, however, that is at any such meeting, when originally held, the holders or at least a majority of all Second Preferred Shares then outstanding are not present in person or represented by proxy within 30 minutes after the time fixed for the meeting, then the meeting shall be adjourned t o such date, being not less than 15 Days later, and to such time and place, as may be fixed by the chairman of such meeting and at such adjourned meeting the holders of Second Preferred Shares present in person or represented by proxy, whether or not they hold a majority of all Second Preferred Shares then outstanding, may transact the business for which the meeting was originally called, and a resolution duly passed and carried by not less than two-thirds of the votes cast on a poll at such adjourned meeting shall constitute the approval of the holders of the Second Preferred Shares shall hereinbefore mentioned.  Notice of ant such original meeting of the holders of the Second Preferred Shares shall be given not less than 21 days nor more than 50 days prior to the date fixed for such meeting and shall specify in general terms the purpose for which the meeting is called.  No notice of any such adjourned meeting need be given unless such meeting is adjourned by one or more adjournments for an aggreg ate of 30 days or more from the date of such original meeting, in which latter case notice of the adjourned meeting shall be given in the manner prescribed for the original meeting as aforesaid.  The formalities to be observed with respect to the giving of notice of any such original meeting or adjourned meeting and the conduct thereof shall be those from time to time prescribed in the by-laws of the Corporation with respect to meetings of shareholders.

2. The Common Shares as a class shall have attached thereto the following rights, privileges, restrictions and conditions:

Liquidation, Dissolution or Winding-Up

Subject to the rights of the holders of the First Preferred Shares and Second Preferred Shares and any other class of shares ranking senior to the Common Shares, in the event if the liquidation, dissolution or winding up of the Corporation or other distribution of the assets of the Corporation among its shareholders for the purposes of winding up its affairs, the holders of the Common Shares without nominal or par value shall participate rateably in the distribution of the assets of the Corporation.

Restriction if any on Share Transfers

No share of the Corporation shall be transferred without the approval of the Board of Directors evidenced by a Directors Resolution.

Shareholders have no specified rights to share in the profits of the Company and there are no sinking fund provisions or shareholder liability to further capital calls by the Company.

There are no provisions discriminating against any existing or prospective holder of securities as a result of such shareholder owning a substantial number of shares.

A Special Shareholders’ meeting can only alter the rights of holders of the Company’s stock.

Rules pertaining to annual general meetings and extraordinary general meetings of shareholders are described in Section Ten of the Company’s By-Laws. These rules are summarized as follows:

1.

The annual meeting of shareholders shall be held at such time in each year at such place as the board, the chairman of the board, the managing director or the president may from time to time determine, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors if required, appointing auditors if required and transacting such other business as may properly be brought before the meeting.

2.  

Meetings of the shareholders shall be held at the registered office of the Company or elsewhere in the municipality in which the registered office is situated or, if the board shall so determine, at some other place in Alberta.

3.  

The board, the chairman of the board or the president shall have power to call a special meeting of the shareholders at any time.

There are no limitations on the rights to own securities.

There are no provisions of the Company’s articles of association, charter or bylaws that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company.

Shareholder ownership must be disclosed by any shareholder who owns more than 10% of the Company’s common stock.

Dividends

Subject to the rights of the holders of the First Preferred Shares and Second Preferred Shares and any other class of shares ranking senior to the Common Shares, the holders of the Common Shares without nominal or par value shall be entitled to receive and participate rateably in any dividends declared by the board of directors in the Corporation.

Voting Rights

The holders of the Common Shares without nominal or par value shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation and to one vote in respect of each Common Share without nominal or par value held at all such meetings.

Rights to Share in Profits

Rights in event of liquidation

Redemption Provisions

Sinking Fund Provisions

Liability to Further Capital Calls

Discriminatory Rights Against Significant Shareholders

The Company’s articles/by-laws do not address these issues.  Accordingly, Alberta law and any exchange upon which the common shares trade govern the shareholders’ rights regarding these issues.

10.B.4.  Modification of Rights of Shareholders

Provisions as to the modification, amendment or variation of such shareholder rights or provisions are contained in the “Company Act“ of Alberta, Canada.  Unless the “Company Act“ or the Company's Articles or Memorandum otherwise provide, any action to be taken by a resolution of the members may be taken by an ordinary resolution or by a vote of a majority or more of the shares represented at the shareholders' meeting.

10.C.  Material Contracts   --- No Disclosure Necessary ---

10.D.  Exchange Controls

There are no governmental laws, decrees or regulations in Canada relating restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of the Company’s common shares.  Any remittances of dividends to United States residents are, however, subject to a 15% withholding tax (5% if the shareholder is a corporation owning at least 10% of the common shares of the Company) pursuant to Article X of the reciprocal treaty between Canada and the United States.

Except as provided in the Investment Canada Act, there are no limitations under the laws of Canada, the Province of Ontario or in the Articles of Incorporation of the Company on the right of foreigners to hold or vote the common shares of the Company.

The Investment Canada Act (the "ICA"), which became effective on 6/30/85, regulates the acquisition by non-Canadians of control of a Canadian business enterprise.  In effect, the ICA required review by Investment Canada, the agency which administers the ICA, and approval by the Canadian government in the case of an acquisition of control of a Canadian business by a non-Canadian where: (i) in the case of acquisition (for example, through a share purchase or asset purchase), the assets of the business are $5 million or more in value; or (ii) in the case of an indirect acquisition (for example, the acquisition of the foreign parent of the Canadian business) where the Canadian business has assets of $50 million or more in value or if the Canadian business represents more than 50% of the assets of the original group and the Canadian business has assets of $5 million or more in value.  Review and approval are also required for the acquisition or establishment of a new business in areas concerning "Canada's cultural heritage or national identity" such as book publishing, film production and distribution, television and radio, production and distribution of music, and the oil and natural gas industry, regardless of the size of the investment.

In the context of the Company, in essence, three methods of acquiring control of a Canadian business are regulated by the ICA: (i) the acquisition of all or substantially all of the assets used in carrying on the Canadian business; (ii) the acquisition, directly or indirectly, of voting shares of a Canadian corporation carrying on the Canadian business; (iii) the acquisition of voting of an entity which controls, directly or indirectly, another entity carrying on a Canadian business. An acquisition of a majority of the voting interests of an entity, including a corporation, is deemed to be an acquisition of control under the ICA.  An acquisition of less than one- third of the voting shares of a corporation is deemed not to be an acquisition of control.  An acquisition of less than a majority, but one-third or more, of the voting shares of a corporation is presumed to be an acquisition of control unless it can be established that on the acquisition the corporation is not, in fact, controlled by the acquirer through the ownership of voting shares.  For partnerships, trusts, joint ventures or other unincorporated entities, an acquisition of less than a majority of the voting interests is deemed not to be an acquisition of control.

As a result of the cumulative impact of the Free Trade Agreement between Canada and the United States to relax the restriction of the ICA, except where the Canadian business is in the cultural, oil and gas, uranium, financial services or transportation sectors, the threshold for direct acquisition of control by U.S. Investors and other foreign investors acquiring control of a Canadian business from U.S. Investors has been raised from $5 million to $223 million of gross assets, and indirect acquisitions are not reviewable.

In addition to the foregoing, the ICA requires that all other acquisitions of control of Canadian businesses by non-Canadians are subject to formal notification to the Canadian government. These provisions require a foreign investor to give notice in the required form, which notices are for information, as opposed to review, purposes.

10.E.  Taxation

The following summary of the material Canadian federal income tax consequences generally applicable in respect of the common stock reflects the Company’s opinion.  The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder’s particular circumstances.  This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arm’s length with the Company, hold their common stock as capital property and who will not use or hold the common stock in carrying on business in Canada.  Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.

This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the "Tax Act" or “ITA”)and the Canada-United States Tax Convention (the “Tax Convention”) as at the date of the Registration Statement and the current administrative practices of Canada Customs and Revenue Agency.  This summary does not take into account provincial income tax consequences.

Each holder should consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.

Canadian Federal Income Tax Considerations

If a non-resident were to dispose of common stock of the Company to another Canadian corporation which deals or is deemed to deal on a non-arm’s length basis with the non-resident and which, immediately after the disposition, is connected with the Company (i.e., which holds shares representing more than 10% of the voting power and more than 10% of the market value of all issued and outstanding shares of the Company), the amount by which the fair market value of any consideration (other than any shares of the purchaser corporation) exceeds the paid-up capital of the common stock sold will be deemed to be taxable as a dividend paid by the purchasing corporation, either immediately or eventually by means of a deduction in computing the paid-up capital of the purchasing corporation, and subject to withholding taxes as described below.

Under the Tax Act, a gain from the sales of common stock by a non-resident will not be subject to Canadian tax, provided the shareholder (and/or persons who do not deal at arm’s length with the shareholder) have not held a “substantial interest” in the Company (25% or more of the shares of any class of the Company’s stock) at any time in the five years preceding the disposition.  Generally, the Tax Convention will exempt from Canadian taxation any capital gain realized by the resident of the United States, provided that the value of the common stock is not derived principally from real property situated in Canada.

Dividends

In the case of any dividends paid to non-residents, the Canadian tax is withheld by the Company, which remits only the net amount to the shareholder.  By virtue of Article X of the Tax Convention, the rate of tax on dividends paid to residents of the United States is generally limited to 15% of the gross dividend (or 5% in the case of certain corporate shareholders owning at least 10% of the Company’s voting shares).  In the absence of the treaty provisions, the rate of Canadian withholding tax imposed on non-residents is 25% of the gross dividend.  Stock dividends received by non-residents from the Company are taxable by Canada as ordinary dividends.

Where a holder disposes of common stock to the Company (unless the Company acquired the common stock in the open market in the manner in which shares would normally be purchased by any member of the public) will result in a deemed dividend to the U.S. holder equal to the amount by which the consideration paid by the Company exceeds the paid-up capital of such stock, the amount of such dividend will be subject to withholding tax as described above.

Capital Gains

A non-resident of Canada is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of a share of a class that is listed on a prescribed stock exchange unless the share represents “taxable Canadian property” to the holder thereof.  A common share of the Company will be taxable Canadian property to a non-resident holder if, at any time during the period of five years immediately preceding the disposition, the non-resident holder, persons with whom the non-resident holder did not deal at arm’s length, or the non-resident holder and persons with whom he/she did not deal at arm’s length owned 25% or more of the issued shares of any class or series of the Company.  In the case of a non-resident holder to whom shares of the Company represent taxable Canadian property and who is resident in the United States, no Canadian tax will be payable on a capital gain realized on such shares by reason of the Canada-United St ates Income Tax Convention 1980) (the “Treaty”) unless the value of such shares is derived principally from real property situated in Canada or the non-resident holder previously held the shares while resident in Canada.  However, in such a case, certain transitional relief under the Treaty may be available.

United States Federal Income Tax Consequences

The following is a discussion of material United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of common shares of the Company. This discussion does not cover any state, local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury Regulations, published Internal Revenue Service (“IRS) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possible on a retroactive basis, at any time.  In addition, the discussion does not consider the potential effects, both adverse and beneficial, or recently proposed legislation, which if enacted, could be applied, possibly on a retroactive basis, at any time. Holders and prospective holders of common shares of the Company should consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

U.S. Holders

As used herein, a (“U.S. Holder”) includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof and any other person or entity whose ownership of common shares of the Company is effectively connected with the conduct of a trade or business in the United States.  A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of common shares of the Company is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their stock through the exercise of employee sto ck options or otherwise as compensation.

Distribution on Common Shares of the Company

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

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

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax.  This election is made on a year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year.  There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his/her or its application of this limitation. The various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process.  There are further limitations on the foreign tax credit for certain types of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income.  The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (I) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company.  This gain or loss will be capital gain or loss if the common shares are capital assets in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders, which are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted.  For U.S. Holders, which are corporat ions (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company’s outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% or more of the Company’s gross income for such year was derived from certain passive sources (e.g. from dividends received from its subsidiaries), the Company would be treated as a “foreign personal holding company.”  In that event, U.S. Holders that hold common shares of the Company would be required to include in gross income for such year their allowable portions of such passive income to the extent the Company does not actually distribute such income.

The Company does not believe that it currently has the status of a “foreign personal holding company”.

Foreign Investment Company

If 50% or more of the combined voting power or total value of the Company’s outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Company might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.

Passive Foreign Investment Company

As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1296 of the Code, depending upon the percentage of the Company’s assets, which is held for the purpose of producing passive income.

Certain United States income tax legislation contains rules governing PFICs, which can have significant tax effects on U.S. Shareholders of foreign corporations.  These rules do not apply to non-U.S. shareholders.  Section 1296 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value or, if the Company is a controlled foreign corporation or makes an election, by adjusted tax basis, of its assets that produce or are held for the production of “passive income”, is 50% or more.

A U.S. shareholder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. Federal income taxation under one of two alternative tax regimes at the election of each such U.S. shareholder.  The following is a discussion of such two alternative tax regimes applied to such U.S. shareholders of the Company.

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

The effective QEF election also allows the Electing U.S. Shareholder to (i) generally treat any gain realized on the disposition of his Common Shares (or deemed to be realized on the pledge of his Common Shares) as capital, (ii) treat his share of the Company’s net capital gain, if any, as long-term capital gain instead of ordinary income, and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Company’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge on the deferred taxes.  If the Electing U.S. Shareholder is not a corporation, such an interest charge would be treated generally as “personal interest” that can be deducted only when it is paid or accrued an is only 10% deductible in taxable years beginning in 1990 and not deductible at all in taxable years beginning af ter 1990.

The procedures a U.S. Shareholder must comply with in making an effective QEF election will depend on whether the year of the election is the first year in the U.S. Shareholder’s holding period in which the Company is a PFIC.  If the U.S. Shareholder makes a QEF election in such first year, i.e. a timely QEF election, then the U.S. Shareholder may make the QEF election by simply filing the appropriate documentation at the time the U.S. Shareholder files its tax return for such first year.  If, however, the Company qualified as a PFIC in a prior year during such shareholder’s holding period, then in addition to filing documents, the U.S. Shareholder must elect to recognize (i) (under the rules of Section 1291 discussed below), any gain that he would otherwise recognize if the U.S. Shareholder sold his stock on the application date or (ii) if the Company is a controlled foreign corporation, and such shareholder so elects, his/her allocable portion of the Company’s post-1986 earnings and profits.

When a timely QEF election is made, if the Company no longer qualifies as a PFIC in a subsequent year, normal code rules will apply.  It is unclear whether a new QEF election is necessary if the Company thereafter re-qualifies as a PFIC.  U.S. Shareholders should seriously consider making a new QEF election under those circumstances.

If a U.S. Shareholder does not make a timely QEF election in the year in which it holds (or is deemed to have held) the shares in question and the Company is a PFIC (a “Non-resident U.S. shareholder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on disposition (or deemed to be realized by reason by of a pledge) of his/her common shares and (ii) certain “excess contributions”, as specially defined, by the Company.

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

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

Under Section 1291(f) of the Code, the Department of the Treasury has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by Non-electing U.S. Shareholders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.

Certain special, generally adverse, rules will apply with respect to the common shares while the Company is a PFIC whether or not it is treated as a QEF.  For example under Section 1297(b)(6) of the Code, a U.S. shareholder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such stock.

The foregoing discussion is based on existing provisions of the Code, existing and proposed regulations thereunder, and current administrative ruling and court decisions, all of which are subject to change.  Any such change could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect. There can be no assurance any of these proposed regulations will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. persons who are shareholders of the Company are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in the Company.

Based on the aforementioned discussion, management does not believe that Starfield Resources is a “passive foreign investment company”.

Controlled Foreign Corporation

If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company or the total value of the stock of (“United States Shareholder”) the Company, could be treated as a “controlled foreign corporation” under Subpart F of the Code.  This classification would effect many complex results including the required inclusion by such United States shareholders in income of their pro rata shares of “Subpart F income” (as specially defined by the Code) of the Company and the Company’s earnings invested in U.S. property and earnings invested “excess passive assets” (as specifically defined by the Code). &nb sp;In addition, under Section 1248 of the Code, gain from the sale or exchange of common shares of the Company by a U.S. person who is or was a United States shareholder (as defined in the Code) at any time during the five year period ending with the sale or exchange is treated as ordinary dividend income to the extent of earnings and profits of the company attributable to the stock sold or exchanged.  Because of the complexity of Subpart F., and because it is not clear that the Company is a controlled foreign corporation, a more detailed review of these rules is outside of the scope of this discussion.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          --- No Disclosure Necessary ---

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A.  Debt Securities            --- No Disclosure Necessary ---

12.B.  Warrants and Rights        --- No Disclosure Necessary ---

12.C.  Other Securities           --- No Disclosure Necessary ---

12.D.  American Depository Shares  -- No Disclosure Necessary ---

PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

          --- No Disclosure Necessary ---

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

          HOLDERS AND USE OF PROCEEDS   --- No Disclosure Necessary ---

ITEM 15.  CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” [as defined in the Exchange Act Rule 13a-15(e)] as of the end of the fiscal year covered by this report.  Based upon that evaluation, it was concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s SEC filings, and that information is recorded, processed, summarized and reported as and when required.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal year ended February 28, 2006 that has affected, or is reasonably likely to affect, the Company’s internal control over financial reporting. Nor were there any deficiencies or material weaknesses in the Company's internal controls requiring corrective actions.

ITEM 16.  RESERVED

ITEM 16A.  Audit Committee Financial Expert

The Company currently does not have a designated “Audit Committee Financial Expert”. However, the audit committee currently consists of three members, all of whom are considered independent. Each has extensive public company operational and directorial experience and have a high degree of financial knowledge.

ITEM 16B.  Code of Ethics

The Company currently has a Corporate Governance Committee that oversees a stated policy of adherence to a high standard of conduct for officers and directors. Glen Macdonald, Director, has been appointed ombudsman to deal with complaints, as part of a whistleblower policy established by the Company.

ITEM 16C.  Principal Accountant Fees and Services

Davidson & Company LLP, Chartered Accountants, audited the Company’s financial statements for the year ended February 28, 2006. Loewen, Stronach & Co., Chartered Accountants, audited the Company’s financial statements for the year ended February 28, 2005.

Loewen, Stronach & Co. received the following payments for their services in those respective years:

	Fiscal Year 2005	Fiscal Year 2004
Audit Services Fees	$ 19,382	$ 13,766
Audit-related Services Fees	$  3,567	$  6,878
Other Accounting Services Fees	$  6,347	$ 18,162
Tax Fees	$  1,750	$  1,750

ITEM 16D.  Exemptions from the Listings Standards for Audit Committeees

   --- No Disclosure Necessary ---

ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

       --- No Disclosure Necessary ---

PART III

ITEM 17.  FINANCIAL STATEMENTS

The Company’s financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP except as detailed in Note #13 to the Company’s audited Financial Statements.

The financial statements as required under ITEM 17 are attached hereto and found immediately following the text of this Registration Statement. The auditors report, prepared by Davidson & Company LLP, Chartered Accountants, independent auditor, is included herein immediately preceding the financial statements.

Audited Financial Statements

Auditor’s Report, dated June 14, 2006

Balance Sheet at 2/28/2006 and 2/28/2005

Statement of Loss and Deficitfor the years ended 2/28/2006, 2/28/2005, 2/29/2004.

Statement of Cash Flowsfor the years ended 2/28/2006, 2/28/2005, 2/29/2004.

Notes to Financial Statements

ITEM 18.  FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM #17.

ITEM 19.  EXHIBITS

(A)  The financial statements as required under ITEM 17 are attached hereto and found immediately following the text of this Registration Statement.  The Auditors’ Report of Davidson and Company LLP., Chartered Accountants, independent auditor, for the audited financial statements is included herein immediately preceding the audited financial statements.

(A)

Exhibits:

Exhibit

1. Articles of Amendment re: Name Change dated 12/4/97 – Incorporated by reference to Form 20-F and Form 6-K’s

2. Articles of Amendment re: Name Change dated 9/19/94 – Incorporated by reference to Form 20-F and Form 6-K’s

3. Articles of Incorporation dated 4/20/94 – Incorporated by reference to Form 20-F and Form 6-K’s

4. Certificate of Registration dated 4/22/98 – Incorporated by reference to Form 20-F and form 6-K’s

5. Instruments defining the rights of holders of equity or debt securities being registered

---Refer to Exhibit No. 3---

6. Material Contracts – N/A

7. Explanation of calculation of Ratio – N/A

8. Diagram of Parent and Subsidiaries: N/A

9. Other Documents

SIGNATURE PAGE

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

FINANCIAL STATEMENTS

(Presented in Canadian Dollars)

FEBRUARY 28, 2006

#

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of

Starfield Resources Inc.

We have audited the balance sheet of Starfield Resources Inc. as at February 28, 2006 and the statements of operations and deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at February 28, 2006 and the results of its operations and cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

The audited financial statements as at February 28, 2005 and for the years ended February 28, 2005 and February 29, 2004 were examined by other auditors who expressed an opinion without reservation on those statements in their report dated June 1, 2005.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada	Chartered Accountants
June 14, 2006

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA –

U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 1 to the financial statements.  Our report to the shareholders dated June 14, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors' report when these are adequately disclosed in the financial statements.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada	Chartered Accountants
June 14, 2006

A Member of SC INTERNATIONAL

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

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

#

LOEWEN, STRONACH & CO.

CHARTERED ACCOUNTANTS

AUDITORS’ REPORT

To The Shareholders of Starfield Resources Inc.:

We have audited the balance sheet of Starfield Resources Inc. (An Exploration Stage Company) as at February 28, 2005 and February 29, 2004 and the statements of loss and deficit and cash flows for the years ended February 28, 2005, February 29, 2004 and February 28, 2003 and for the cumulative period from April 22, 1994 (inception) to February 28, 2005.  These financial statements are the responsibility of the company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material respects, the financial position of the company as at February 28, 2005 and February 29, 2004 and the results of its operations and cash flows for the years ended February 28, 2005, February 29, 2004 and February 28, 2003 and for the cumulative period from April 22, 1994 (inception) to February 28, 2005 in accordance with Canadian generally accepted accounting principles which differ in certain respects from generally accepted accounting principles in the United States (refer to Note 13).

     “Loewen, Stronach & Co.”

Chartered Accountants

Vancouver, BC, Canada

June 1, 2005

Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Conflict

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the company’s ability to continue as a going concern, such as described in Note 1 (b) to the financial statements. Our report to the shareholders dated June 1, 2005 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.

     “Loewen, Stronach & Co.”

Chartered Accountants

Vancouver, BC, Canada

June 1, 2005

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

BALANCE SHEET

AS AT FEBRUARY 28

	2006	2005
ASSETS
Current
Cash	$ 2,134,103	$ 1,329,164
Receivables	152,807	113,707
Refundable deposits	42,866	42,866
Prepaid expenses and deposits	-	8,489
	2,329,776	1,494,226
Mineral properties(Note 3)	46,374,775	34,051,441
Equipment(Note 4)	218,908	143,797
	$ 48,923,459	$ 35,689,464
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities	$ 1,526,829	$ 654,306
Future income taxes (Note 5)	1,843,783	180,376
	3,370,612	834,682
Shareholders’ equity
Capital stock (Note 6)
Authorized:
Unlimited number of common voting shares without nominal or par value
Unlimited number of First Preferred Shares
Unlimited number of Second Preferred Shares
Issued and fully paid:
163,350,351 common shares (2005 – 123,584,856)	56,768,001	43,249,352
Contributed surplus (Note 6)	670,233	795,323
Deficit	(11,885,387)	(9,189,893)
	45,552,847	34,854,782
	$ 48,923,459	$ 35,689,464

Nature and continuance of operations(Note 1)

Commitments(Note 9)

Subsequent events(Note 12)

On behalf of the Board:
“Glen Macdonald”	Director	“Glen Indra”	Director
Glen Macdonald		Glen Indra

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

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

STATEMENT OF OPERATIONS AND DEFICIT

	Year Ended February 28, 2006	Year Ended February 28, 2005	Year Ended February 29, 2004
EXPENSES
General and Administrative
- Accounting and legal	$ 180,410	$ 220,730	$ 112,211
- Advertising and promotion	100,215	121,973	84,815
- Computer	27,542	33,428	69,909
- Consulting fees	403,415	288,384	295,303
- Investor relations	50,698	128,403	93,561
- Interest on obligation under capital lease	-	-	1,055
- Management fees	96,000	52,000	48,000
- Office	85,340	45,256	48,471
- Office equipment rent	27,010	24,997	13,356
- Rent and office services	322,795	305,466	284,349
- Telephone	17,216	18,657	16,942
- Transfer and regulatory fees	113,067	94,311	81,889
- Travel and conferences	916,329	599,144	368,940
Amortization	4,412	4,948	5,682
Stock-based compensation (Note 6)	-	188,705	49,284
Interest and bank charges	91,831	52,823	150,138
Loss before the following:	2,436,280	2,179,225	1,723,905
Mineral claims written down	19,999	-	-
Deferred exploration expenses written off	311,520	-	-
Interest income	(8,796)	(19,251)	(541)
	322,723	(19,251)	(541)
Loss before income taxes	2,759,003	2,159,974	1,723,364
Future income tax recovery(Note 5)	(63,509)	(238,074)	-
Net Loss	2,695,494	1,921,900	1,723,364
Deficit, beginning of year	9,189,893	7,267,993	5,544,629
Deficit, end of year	$ 11,885,387	$ 9,189,893	$ 7,267,993
Basic and diluted loss per share	$ 0.02	$ 0.02	$ 0.02
Weighted average number of shares outstanding	139,439,136	108,333,048	70,241,100

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

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

STATEMENT OF CASH FLOWS

	Year Ended February 28, 2006	Year Ended February 28, 2005	Year Ended February 29, 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year	$ (2,695,494)	$ (1,921,900)	$ (1,723,364)
Items not affecting cash:
Future income tax recovery	(63,509)	(238,074)	-
Stock-based compensation	-	188,705	49,284
Amortization of computers and office equipment	4,412	4,948	5,682
Mineral claims and exploration costs written-off	331,519	-	-
Changes in non-cash working capital items:
Receivables	(39,100)	76,825	16,212
Refundable deposits	-	(7,866)	-
Prepaid expenses and deposits	8,489	155,330	(162,769)
Accounts payable and accrued liabilities	337,512	96,926	(695,962)
Large corporate capital tax payable	-	-	(35,186)
Net cash used in operating activities	(2,116,171)	(1,645,106)	(2,546,103)
CASH FLOWS FROM INVESTING ACTIVITIES
Mineral properties	(12,060,656)	(9,647,808)	(3,054,414)
Acquisition of computers and office equipment	-	(5,737)	-
Acquisition of exploration equipment	(138,709)	(150,500)	-
Net cash used in investing activities	(12,199,365)	(9,804,045)	(3,054,414)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term financing	-	-	(4,852)
Loans payable (repayments)	-	(904,000)	605,000
Share issue costs	(541,483)	(566,199)	(685,753)
Issuance of shares and units	15,661,958	13,608,677	6,320,526
Net cash provided by financing activities	15,120,475	12,138,478	6,234,921
Increase in cash	804,939	689,327	634,404
Cash, beginning of year	1,329,164	639,837	5,433
Cash, end of year	$ 2,134,103	$ 1,329,164	$ 639,837

Supplemental disclosure with respect to cash flows (Note 11)

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

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

1.

NATURE AND CONTINUANCE OF OPERATIONS

The Company was incorporated under the Business Corporations Act (Alberta, Canada) on April 22, 1994, registered in the province of British Columbia as an extra-provincial company on April 22, 1998 and in the Nunavut Territory, Canada as an extra-territorial corporation on March 18, 2003.  Its principal business is the exploration and development of mineral properties.  All of the Company’s properties are located in Canada.

The Company is in the process of exploring certain mineral properties.  The underlying value of the mineral properties and related deferred costs is entirely dependent on the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of these properties, and upon profitable future production. Currently, the Company has no producing mineral properties.  The Company plans to meet anticipated financing needs in connection with its obligations by the exercise of stock options and purchase warrants, through private placements and underwritings and short-term loans.

These financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future.

All amounts are in Canadian dollars unless otherwise stated.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses for the year reported. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future years could be significant. Actual results will likely differ from those estimates.

b)Mineral Properties

The cost of each mineral property, or interest therein, together with exploration costs are capitalized until the properties to which they relate are placed into production, sold or abandoned or management has determined there to be an impairment in value. Costs of abandoned properties are written off to operations. These costs will be amortized on the basis of units produced in relation to the proven and probable reserves available on the related property following commencement of production.

The costs capitalized do not necessarily reflect present or future values. The ultimate recovery of such amounts depends on the discovery of economically recoverable reserves, successful commercial development of the related properties, availability of financing and future profitable production or proceeds from the disposition of the properties.  There are no proven or probable reserves on the properties.

Although the Company has taken steps to verify the title to resource properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

b)Mineral Properties (cont’d…)

Company’s title. Property title may be subject to unregistered prior agreements, transfers or native land claims and title may be affected by undetected defects.

c)Equipment and Amortization

Equipment is recorded at cost with amortization provided on a declining balance as follows:

Exploration equipment

30%

Computers

30%

Office equipment

20%

In the year of acquisition only one-half of the normal rates are applied.  Amortization related to exploration equipment is deferred to mineral properties as they are part of exploration costs.

d)Asset retirement obligations

An asset retirement obligation is a legal obligation associated with the retirement of tangible long-lived assets that the Company is required to settle. The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability. To date, the Company has not incurred any asset retirement obligations.

e)Flow-through common shares

Resource expenditure deductions for income tax purposes related to exploration activities funded by flow-through share arrangements are renounced to investors in accordance with Canadian income tax legislation.  To the extent that the future tax liabilities created by the renunciation exceed the future tax assets available, the Company records a reduction in capital stock for the estimated tax benefits transferred to shareholders.

Effective March 19, 2004, the Company adopted EIC 146 “Flow-Through Shares” that dictates the accounting treatment on renunciation of the tax deductibility of the qualifying expenditures that give rise to taxable temporary differences. The change in accounting policy was applied prospectively. When the Company renounces flow-through expenditures, a portion of the Company’s future income tax assets that were not recognized in previous years, due to the recording of a valuation allowance, will be recognized as a recovery of income taxes in the statement of operations.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

f)Loss Per Share

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments.  Under this method the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.  It assumes that the proceeds would be used to purchase common shares at the average market price during the year. For loss per share the dilutive effect has not been computed as it proved to be anti-dilutive. Basic loss per share is calculated using the weighted-average number of shares outstanding during the year.

g)Stock-based Compensation

The Company follows the fair value method of accounting for its stock-based compensation.  The fair value of the stock options awarded is determined at the grant date using the Black-Scholes option pricing model.  

h)Income Taxes

Income taxes are provided for in accordance with the asset and liability method. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax bases (temporary differences). Future income tax assets and liabilities are measured using the enacted tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in rates is included in operations in the year in which the change is enacted or substantively enacted. The amount of future income tax assets recognized is limited to the amount that is more likely then not to be realized.

i)Commitments and Contingencies

The Company’s activities are subject to various governmental laws and regulations relating to the protection of the environment. These environmental regulations are continually changing and generally becoming more restrictive. The Company believes its exploration activities comply in all material respects with all applicable laws and regulations.

j)Comparative figures

Certain comparative figures have been reclassified to conform with the current year’s presentation.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

3.

MINERAL PROPERTIES

	Ferguson Lake	Starfield / Wyn Ferguson Lake project	Total
Acquisition costs:
Balance, February 29, 2004	$ 1,925,000	$ 5,000	$ 1,930,000
Additions	25,000	15,000	40,000
Balance, February 28, 2005	1,950,000	20,000	1,970,000
Additions	216,230	-	216,230
Acquisition costs written-down	-	(19,999)	(19,999)
Balance, February 28, 2006	2,166,230	1	2,166,231
Exploration costs:
Balance, February, 29, 2004	22,451,058	-	22,451,058
Personnel	2,285,812	92,621	2,378,433
Air support including helicopter moves	2,856,755	72,282	2,929,037
Diamond drilling	2,282,539	67,250	2,349,789
Camp support costs, including fuel	1,199,717	26,093	1,225,810
Analytical and geophysical services	615,020	44,598	659,618
Mobilization and demobilization	79,020	8,676	87,696
Balance, February 28, 2005	31,769,921	311,520	32,081,441
Personnel	2,702,923	-	2,702,923
Air support including helicopter moves	2,725,889	-	2,725,889
Diamond drilling	2,123,335	-	2,123,335
Camp support costs, including fuel	2,479,166	-	2,479,166
Analytical and geophysical services	2,383,622	-	2,383,622
Mobilization and demobilization	23,688	-	23,688
	44,208,544	311,520	44,520,064
Exploration costs written-off	-	(311,520)	(311,520)
Balance, February 28, 2006	44,208,544	-	44,208,544
Total costs, February 28, 2006	$ 46,374,774	$ 1	$ 46,374,775

Ferguson Lake claims

Under the terms of the purchase agreement, the Company earned a 100% interest in the property, subject to a 3% net smelter royalty (NSR) on mineral production, a 3% gross overriding royalty on diamond production and a $25,000 annual advance royalty payment. The Company was also required to pay the vendor an annual operator management fee on the annual qualifying exploration expenditures on the Ferguson Lake claims.  The Company has the right to purchase 1% of the 3% NSR for $1,000,000 up to 180 days after receipt of a positive feasibility study recommending commercial production. The Company has entered into negotiations to terminate the annual management fee in exchange for increasing the annual advance royalty payment from $25,000 to $50,000.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

3.

MINERAL PROPERTIES (cont’d…)

Starfield / Wyn Ferguson Lake project:

On November 8, 2002 (as amended May 6, 2003 and December 3, 2003), Wyn Developments Inc.  (“Wyn”) entered into an option agreement with Hunter Exploration Group (“Hunter”) to earn an undivided 100% interest in certain claims located contiguous to the Ferguson Lake claims, Nunavut Territory in consideration of the issuance of 1,100,000 units to Hunter, the expenditure of $1,000,000 over four calendar years between 2002 and 2005 on exploration and development on the property and the payment of advance royalty payments.  In July 2003, the Company signed an option agreement with Wyn whereby the Company can earn a 50% interest in these claims. Under the terms of the agreement, the Company was required to incur a total of $500,000 (one-half of the total commitment of Wyn) in exploration expenditures in the calendar years 2004 through to 2005 and contribute an additional $75,000 for exploration in calendar year 2004. In addition, t he Company was required to pay $15,000 and $10,000 advance royalties on July 1, 2004 and July 1, 2005 respectively.   In April 2004, the Company signed an addendum to the Starfield / Wyn option agreement to add claims which were staked under an area of mutual agreement.  The new claims are held on a 50-50 basis.

The exploration commitments were not completed by either party and it was decided by management to write-down the acquisition costs to $1 and to write-off the exploration costs to date.  However the Company and Wyn will still retain interests in certain claims that fall outside the Hunter agreement which still are maintained in good standing.

4.

EQUIPMENT

	2006
	Cost	Accumulated Amortization	Net Book Value
Exploration equipment	$ 289,209	$ 81,761	$ 207,448
Computers	42,458	33,799	8,659
Office equipment	9,461	6,660	2,801
	$ 341,128	$ 122,220	$ 218,908

	2005
	Cost	Accumulated Amortization	Net Book Value
Exploration equipment	$ 150,500	$ 22,575	$ 127,925
Computers	42,458	30,087	12,371
Office equipment	9,461	5,960	3,501
	$ 202,419	$ 58,622	$ 143,797

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

5.

FUTURE INCOME TAXES

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

	2006	2005	2004
Loss for the year before income tax recovery	$ (2,759,003)	$ (2,159,974)	$ (1,723,364)
Income tax recovery	$ (1,056,339)	$ (736,551)	$ (616,792)
Non-deductible expenses	131,555	4,039	4,614
Stock-based compensation	-	64,348	17,639
Resource loss for tax purposes	714,261	124,056	183,574
Other	-	(8,044)	(292)
Share issuance costs	(41,464)	(397,674)	(180,291)
Unrecognized benefit of non-capital losses	188,478	711,752	591,548
Total income tax recovery	$ (63,509)	$ (238,074)	$ -

The significant components of the Company’s future income tax assets and liabilities are as follows:

	2006	2005
Future tax assets (liabilities):
Loss carryforwards	$ 2,841,729	$ 3,103,504
Equipment	20,391	612
Share issuance costs	134,288	-
Resource deductions	(4,840,191)	(3,284,492)
Net future tax liabilities	$ (1,843,783)	$ (180,376)

The Company has non-capital losses of approximately $9,167,000 available for deduction against future years’ taxable income.  These losses, if not utilized, will expire through 2026.  Subject to certain restrictions, the Company also has resource expenditures available to reduce taxable income in future years.  

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

6.

CAPITAL STOCK AND CONTRIBUTED SURPLUS

	Number of Shares	Capital Stock	Contributed Surplus
Authorized:
Unlimited number of common voting shares, no par value
Unlimited number of First Preferred shares
Unlimited number of Second Preferred shares
Issued:
Balance, February 28, 2003	59,276,262	$23,577,761	$558,074
Private placements	28,656,510	7,463,701	-
Exercise of options	50,000	12,500	-
Exercise of warrants	732,500	256,375	-
Contributed surplus on exercise of options	-	740	(740)
Stock-based compensation	-	-	49,284
Share issuance costs	-	(685,753)	-
Balance, February 29, 2004	88,715,272	30,625,324	606,618
Exercise of warrants	4,370,750	1,496,688	-
Private placements	30,498,834	12,711,989	-
Stock-based compensation	-	-	188,705
Flow-through tax benefits renounced,
future income tax  recovery	-	(418,450)	-
Share issuance costs	-	(1,166,199)	-
Balance, February 28, 2005	123,584,856	43,249,352	795,323
Exercise of options	625,000	256,500	-
Exercise of warrants	17,434,625	5,834,810	-
Private placements	21,705,870	9,570,648	-
Contributed surplus on exercise of  options	-	125,090	(125,090)
Flow-through tax benefits renounced,
future income tax  recovery	-	(1,726,916)	-
Share issuance costs	-	(541,483)	-
Balance, February 28, 2006	163,350,351	$56,768,001	$  670,233

During the year ended February 28, 2006, the Company issued the following common shares:

i)

625,000 common shares issued pursuant to the exercise of stock options for proceeds of $256,500.

ii)

17,434,625 common shares issued pursuant to the exercise of purchase warrants for proceeds of $5,834,810.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

6.

CAPITAL STOCK AND CONTRIBUTED SURPLUS (cont’d…)

iii)

In June 2005, the Company issued 2,000,000 flow-through shares at $0.55 per share for gross proceeds of $1,100,000 and paid share issuance costs of $99,000.  

iv)

In August 2005, the Company issued 1,030,000 flow-through shares at $0.55 per share for net proceeds of $566,500.

v)

In October 2005, the Company issued 8,675,995 flow-through shares at $0.45 per share for gross proceeds of $3,904,198 and 9,999,875 units at $0.40 per unit for gross proceeds of $3,999,950.  Each unit consisted of one common share and one share purchase warrant with two warrants exercisable at $0.50 per share and expiring December 28, 2007 (3,250,000 warrants) and January 20, 2008 (6,749,875 warrants).  Share issuance costs of $442,483 were paid.

During the year ended February 28, 2005 the Company issued the following common shares:

i)

4,370,750 common shares issued pursuant to the exercise of purchase warrants for proceeds of $1,496,688.

ii)

In March 2004, the Company issued 18,749,703 units at $0.40 per unit for total proceeds of $7,499,881 and issued 1,500,000 units valued at $600,000 as finders’ fees. Each unit consisted of one common share and one share purchase warrant with each warrant exercisable at $0.60 per share and expiring March 12, 2006. The Company also paid $149,988 in share issuance costs.

iii)

In October 2004, the Company issued 1,385,000 flow-through shares at $0.45 per share for total proceeds of $623,250 and 7,975,241 units at $0.45 per unit for gross proceeds of $3,588,858.  Each unit consisted of one common share and one-half of a share purchase warrant with one full warrant exercisable at $0.75 per share and expiring November 29, 2006 (2,611,100 warrants) and December 2, 2006 (1,376,519 warrants).  The Company paid $416,211 in share issuance costs.

iv)

In December 2004, the Company issued 888,890 flow-through shares at $0.45 per share for total proceeds of $400,000.  

During the year ended February 29, 2004  the Company issued the following common shares:

i)

50,000 common shares issued pursuant to the exercise of stock options for proceeds of $12,500.

ii)

732,500 common shares issued pursuant to the exercise of purchase warrants for proceeds of $256,375.

iii)

In March 2003, the Company issued 5,804,445 units at a price of $0.35 per unit for total proceeds of $2,031,556.  Each unit consisted of one common share and one share purchase warrant entitling the holder to acquire one additional common share at $0.45 until October 4, 2004.  The Company incurred share issuance costs of $182,006.

iv)

In June 2003, the Company issued 7,139,885 units at a price of $0.30 per unit for total proceeds of $2,141,966.  Each unit consisted of one common share and one share purchase warrant with each warrant exercisable at $0.45 per share and expiring March 19, 2005.  Share issuance costs of $202,804 were paid.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

6.

CAPITAL STOCK AND CONTRIBUTED SURPLUS (cont’d…)

v)

In October 2003, the Company issued 7,250,000 units at a price of $0.20 per unit for total proceeds of $1,450,000.  Each unit consisted of one common share and one share purchase warrant entitling the holder to acquire one additional common share at $0.25 until November 7, 2005.  The Company incurred share issuance costs of $117,125.

vi)

In November 2003, the Company issued 6,984,750 units at a price of $0.20 per unit for total proceeds of $1,396,950. Each unit consisted of one common share and one share purchase warrant entitling the holder to acquire one additional common share for $0.25 until December 30, 2005.  The Company incurred share issuance costs of $139,495.

vii)

In December 2003, the Company issued 1,477,430 units at a price of $0.30 per unit for total proceeds of $443,229.  Each unit consisted of one common share and one share purchase warrant with each warrant exercisable at $0.40 per share expiring January 21, 2006.  Share issuance costs of $44,323 were paid.

Stock options

The Company has a stock option plan whereby, from time to time, at the discretion of the Board of Directors, stock options are granted to directors, officers and certain consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. The exercise price of each option is based on the market price of the Company’s common stock at the date of the grant less an applicable discount. The options can be granted for a maximum term of 5 years and vest at the discretion of the Board of Directors.

The following incentive stock options and share purchase warrants were outstanding at February 28, 2006:

	Number of Shares	Exercise Price	Expiry Date
Options	562,000	$    0.50	May 4, 2006
	785,000	0.50	October 24, 2006
	450,000	0.40	March 8, 2007
	450,000	0.90	March 8, 2007
	2,140,000	0.40	February 14, 2008
	2,730,000	0.25	November 18, 2008
	550,000	0.25	January 7, 2009
	2,495,000	0.40	August 27, 2009
	1,310,000	0.40	January 31, 2010
Warrants	19,624,703	0.60	March 12, 2006
	2,611,100	0.75	November 29, 2006
	1,376,519	0.75	December 2, 2006
	1,625,000	0.50	December 28, 2007
	3,374,937	0.50	January 20, 2008

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

6.

CAPITAL STOCK AND CONTRIBUTED SURPLUS (cont’d…)

Warrants and stock options transactions are summarized as follows:

	Warrants		Stock Options
	Number	Weighted Average Exercise Price	Number	Weighted Average Exercise Price
Outstanding, February 29, 2004	28,132,010	$ 0.37	8,440,000	$ 0.39
Granted	24,237,322	0.62	4,015,000	0.40
Exercised	(4,370,750)	0.34	-	-
Expired/cancelled	(6,920,695)	0.46	(358,000)	0.44
Outstanding, February 28, 2005	41,077,887	0.50	12,097,000	0.39
Granted	4,999,937	0.50	-	-
Exercised	(17,434,625)	0.34	(625,000)	0.41
Expired/cancelled	(30,940)	0.45	-	-
Outstanding, February 28, 2006	28,612,259	$ 0.59	11,472,000	$ 0.39
Number currently exercisable	28,612,259	$ 0.59	11,472,000	$ 0.39

Stock-based compensation

During the year ended February 28, 2006, the Company granted nil stock options (2005 - 4,015,000; 2004 - 3,330,000) to directors, employees and consultants. The Company recognized $nil (2005 - $188,705; 2004 - $49,284) in stock-based compensation expense, with a corresponding credit to contributed surplus on the balance sheet.  The compensation recognized was calculated using the Black-Scholes option pricing model.

The following weighted average assumptions were used in the valuation of stock options granted:

	2005	2004
Risk-free interest rate	2 – 3%	2-3%
Expected life of options	5 years	5 years
Annualized volatility	42.82%	42.82%
Dividend rate	0.00%	0.00%

Flow-through Shares

During the year ended February 28, 2006, the Company issued 11,705,995 flow-through shares and has renounced $5,570,698 of expenditures to the flow-through shareholders.  

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

7.

RELATED PARTY TRANSACTIONS

During the year, the Company had the following transactions with officers and directors and other companies with which officers or directors are related:

	2006	2005	2005
Management fees	$ 96,000	$ 52,000	$ 48,000
Consulting fees	79,000	15,000	-

These transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

8.

EXPLORATION EXPENDITURES AND ACCUMULATED LOSSES

Under the Canadian Income Tax Act, a Canadian entity in exploration and mining industries can accumulate its resource related exploration expenses and development expenses (as defined by Canada Revenue Agency), carry them forward indefinitely and use them to reduce taxable income in the future.  As of February 28, 2006, the Company has Cumulative Canadian Exploration expenses (CCEE) of $28,508,000 (2005 - $20,203,886) and Cumulative Canadian Development expenses (CCDE) of $2,252,000 (2005 - $2,010,000) that can be used to reduce exploration and development taxable income in the future.

9.

COMMITMENTS

a)

The Company leases its head office under an agreement expiring August 31, 2007. Minimum annual rents are $42,104 plus a proportionate share of the property taxes and operating expenses. The total minimum obligation under this lease over the next two years is as follows:

2007	$ 42,104
2008	21,052

b)

The Company rents its Ferguson Lake Camp Lodge under an agreement expiring March 30, 2007 with a renewal option for a further 2 years. Minimum annual rents are $42,672 plus related taxes. The minimum obligation under this lease over the next two years is as follows:

2007	$ 42,672
2008	3,556

c)

The Company rents its office copiers under a 60 month operating lease expiring April 2009 with annual lease payments of $7,680.  The minimum obligation under this lease over the next four years is as follows:

2007	$ 7,680
2008	7,680
2009	7,680
2010	1,280

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

10.

FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, receivables, refundable deposits, and accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.

11.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

	2006	2005	2004
Cash paid during the year for interest	$ 89,962	$ 52,823	$ 150,138
Cash paid during the year for income taxes	$ -	$ -	$ -

The significant non-cash transactions during the year ended February 28, 2006 included:

a)

The reclassification of contributed surplus amounting to $125,090 due to the exercise of stock options.

b)

The renunciation of $5,570,698 to subscribers of 11,705,995 flow-through shares.

c)

Incurring accounts payable of $535,011 towards mineral property costs.

The significant non-cash transaction during the year ended February 28, 2005 was the issuance of 1,500,000 common shares valued at $600,000 for finders’ fees on private placements.

The significant non-cash transactions during the year ended February 29, 2004 included:

a)

The issuance of 51,200 common shares valued at $12,800 for finders’ fees on private placements.

b)

Reclassification of contributed surplus of $740 due to exercise of stock options.

12.

SUBSEQUENT EVENTS

Subsequent to February 28, 2006, the Company:

a)

Received proceeds of $657,500 pursuant to the exercise of 1,033,334 share purchase warrants and 85,000 share purchase options.

b)

Received proceeds of $16,566,653 pursuant to a private placement consisting of 24,424,501 units at $0.53 per unit and 5,571,796 flow-through common shares.  Each unit consisted of one common share and one-half of one share purchase warrant with each full warrant exercisable at $0.75 per share and expiring May 10, 2007.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

12.

SUBSEQUENT EVENTS (cont’d…)

a)

Cancelled due to expiry share purchase warrants to acquire 18,591,369 common shares and share purchase options to acquire 562,000 common shares.

b)

Granted share purchase options to acquire 4,790,000 common shares at a price of $0.60 per share expiring March 31, 2011.

13.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These financial statements have been prepared in accordance with generally accepted accounting principles in Canada (CDN GAAP) which, in these financial statements, conform in all material respects with those in the United States (U.S . GAAP), except as follows:

Exploration Expenditures

In accordance with EITF 04-02, the Company classifies the costs of acquiring its mineral interests as tangible assets resulting in no difference between Canadian and U.S GAAP. Under U.S. GAAP exploration costs on mineral properties, other than acquisition costs, prior to the establishment of proven or probable reserves are expensed as incurred. Under Canadian GAAP these costs may be deferred.

Under U.S. GAAP, the Company performs evaluations of its investment in mineral properties to assess the recoverability and the residual value of its investments in these assets. All mineral properties are reviewed for impairment whenever events or circumstances change which indicates the carrying amount of an asset may not be recoverable, utilizing established guidelines based on undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization.

Flow-through Shares and Future Income Tax Recovery

Under Canadian income tax legislation, the Company is permitted to issue shares whereby the Company agrees to incur qualifying expenditures (as defined under the Income Tax Act of Canada) and renounce the related income tax deductions to the investors.  Under Canadian GAAP, flow-through shares are accounted for as part of the issuance of capital stock at the price paid for the shares, net of any future income tax liability.  Under U. S. GAAP, any difference between the fair value of the non flow-through shares and the fair value of the flow-through shares must be recorded as a liability if a premium is paid by investors for the flow-through shares.  The liability is charged to income as the flow-through share proceeds are expended on qualifying expenditures and the related income tax deductions are renounced to investors.

The Company did not issue any flow-through shares during the year ended February 29, 2004. During the year ended February 28, 2005, the Company issued 2,273,890 flow-through shares for total proceeds of $1,023,250. As the value of the compensation received for the flow-through shares issued during the year ended February 28, 2005 was equal to the fair value of non-flow through shares on the date issued, there is no difference for U.S. GAAP purposes.

During the year ended February 28, 2006, the Company issued 11,705,995 flow-through shares for total proceeds of $5,570,698. As the value of the compensation received for the flow-through shares issued during the year ended February 28, 2006 exceeded the fair value of the non-flow through shares on the date issued by $350,839, the Company recorded a difference in capital stock and related income tax expenses on renunciation.

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

13.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d…)

Comprehensive Income

Under U.S. GAAP, Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income“ (“SFAS 130”) requires that companies report comprehensive income as a measure of overall performance. Comprehensive income includes all changes in equity during a year except those resulting from investments by owners and distribution to owners. The Company has determined that it had no comprehensive income other than the loss in any of the years presented.

The following summarizes the balance sheet items with material variations under U.S. GAAP:

	2006	2005
Mineral properties	$ -	$ -
Deferred income tax liability	-	-
Share capital	61,655,452	46,760,726
Additional paid-in capital	725,324	850,414
Accumulated deficit	(61,358,921)	(46,627,423)

The following table summarizes the effect of differences between Canadian GAAP and U.S. GAAP on loss for the year:

	2006	2005	2004
Loss for the year under Canadian GAAP	$ (2,695,494)	$ (1,921,900)	$ (1,723,364)
U.S. GAAP material adjustments:
Write-off of mineral property expenditures	(12,323,334)	(9,670,383)	(3,054,414)
Future income tax expense	1,663,407	180,376	-
Future income tax recovery	(1,376,077)	(418,450)	-
Net loss for the year under U.S. GAAP	$ (14,731,498)	$ (11,830,357)	$ (4,777,778)
Basic and diluted loss per share under U.S. GAAP	$ 0.11	$ 0.11	$ 0.07
Weighted average number of shares under U.S. GAAP	139,439,136	108,333,048	70,241,100

#

STARFIELD RESOURCES INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

FEBRUARY 28, 2006

13.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d…)

The following table summarizes the effect on cash flows after considering the U.S. GAAP adjustments:

Cash flows from operating activities

	2006	2005	2004
Per Canadian GAAP	$ (2,116,171)	$ (1,645,106)	$ (2,546,103)
Mineral properties expensed as incurred	(12,060,656)	(9,647,808)	(3,054,414)
Per U.S. GAAP	$ (14,176,827)	$ (11,292,914)	$ (5,600,517)

Cash flows from investing activities:

	2006	2005	2004
Per Canadian GAAP	$ (12,199,365)	$ (9,804,045)	$ (3,054,414)
Mineral properties expensed as incurred	(12,060,656)	(9,647,808)	3,054,414
Per U.S. GAAP	$ (138,709)	$ (156,237)	$ -

Recent accounting pronouncements

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,“Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. T he adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

The FASB has also issued SFAS No. 155“Accounting for Certain Hybrid Financial Instruments” and SFAS No. 156“Accounting for Servicing of Financial Assets”, but they will not have any relationship to the operations of the Company. Therefore a description and its impact for each on the Company’s operations and financial position have not been disclosed.

The adoption of these new pronouncements is not expected to have a material effect on the Company’s financial position or results of operations.

Signature Page

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Starfield Resources Inc.

Registrant

Dated:  September 13, 2006	Signed:/s/  Glen Indra
	Glen Indra, President and Director

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