UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F
(Mark One)
[ ] 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 ENDED AUGUST 31, 2005 OR

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

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

Commission file number: 000-30196

HALO RESOURCES LTD.
(Exact name of Registrant as specified in its charter)

HALO RESOURCES LTD.
(Translation of Registrant's name into English)

BRITISH COLUMBIA, CANADA
(Jurisdiction of incorporation or organization)

SUITE 1280, 625 HOWE STREET, VANCOUVER, BRITISH COLUMBIA, V6C 2T6
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.
NONE

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

COMMON STOCK, NO PAR VALUE
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

NOT APPLICABLE
(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

21,005,765 COMMON SHARES AS OF AUGUST 31, 2005

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

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes No X
------ ------
Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X 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. (Check
one):

Large accelerated filer Accelerated filer Non-accelerated filer X
---- ---- ---

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

Item 17 X 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 X
----- -----

-2-

GENERAL INFORMATION:

UNLESS OTHERWISE INDICATED, ALL REFERENCES HEREIN ARE TO CANADIAN DOLLARS.

THE COMPANY IS REQUIRED UNDER CANADIAN LAW (NATIONAL INSTRUMENT 43-101 STANDARDS
OF DISCLOSURE FOR MINERAL PROJECTS) ("NI 43-101") TO CALCULATE AND CATEGORIZE
"MINERAL RESERVE", "PROVEN MINERAL RESERVE", "PROBABLE MINERAL RESERVE",
"MINERAL RESOURCE", "MEASURED MINERAL RESOURCE", "INDICATED MINERAL RESOURCE"
AND "INFERRED MINERAL RESOURCE" UNDER THE CANADIAN INSTITUTE OF MINING
METALLURGY AND PETROLEUM ("CIM") STANDARDS ON MINERAL RESOURCES AND RESERVES -
DEFINITIONS AND GUIDELINES DATED DECEMBER 11 2005. THESE STANDARDS ESTABLISH
DEFINITIONS AND GUIDELINES FOR THE REPORTING OF EXPLORATION INFORMATION, MINERAL
RESOURCES AND MINERAL RESERVES IN CANADA. THESE DEFINITIONS HAVE NOT BEEN
ADOPTED FOR USE IN THE UNITED STATES OF AMERICA BY THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"). UNDER THESE GUIDELINES, THE CIM DEFINITIONS OF PROVEN
AND PROBABLE MINERAL RESERVES EQUATE TO THE DEFINITIONS OF PROVEN AND PROBABLE
RESERVES AS SET OUT IN GUIDE 7 OF THE SECURITIES ACT INDUSTRY GUIDES ADOPTED BY
THE SEC ("GUIDE 7"). IN ADDITION, CANADIAN LAW REQUIRES DISCLOSURE OF MINERAL
RESOURCES THAT EQUATE TO MEASURED, INDICATED AND INFERRED RESOURCES.

GLOSSARY

The following is a glossary of geological terms used in this report:

andesite a fine grained intermediate volcanic
rock composed of andesine and one or
more mafic constituents.

cm centimeter

diamond drill a type of rotary drill in which the
cutting is done by abrasion using
diamonds embedded in a matrix rather
than by percussion. The drill cuts a
core of rock which is recovered in long
cylindrical sections.

epithermal hydrothermal mineral deposit formed
within about 1 kilometer of the earth's
surface and within a temperature range
of 50 to 200 degrees centigrade,
occurring mainly as veins.

g gram

g/t grams per tonne.

grade the concentration of each ore metal in a
rock sample, usually given as weight
percent. Where extremely low
concentrations are involved, the
concentration may be given in grams per
tonne (g/t) or ounces per ton (oz/t).
The grade of an ore deposit is
calculated, often using sophisticated
statistical procedures, as an average of
the grades of a very large number of
samples collected from throughout the
deposit.

indicated resource (NI 43-101 definition) means 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.

induced polarization (I.P.) method the method used to measure various
electrical responses to the passage of
alternating currents of different
frequencies through near-surface rocks
or to the passage of pulses of
electricity.

-3-

inferred resource (NI 43-101 definition) means 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 outcrops,
trenches, pits, workings and drill
holes.

intrusion general term for a body of igneous rock
formed below the surface.

km kilometer

m meters

measured resource (NI 43-101 definition) means that part
of a mineral resource for which
quantity, grade or quality, densities,
shape and physical characteristics are
so well established that they can be
estimated with confidence sufficient to
allow the appropriate application of
technical and economic parameters, to
support production planning and
evaluation of the economic viability of
the deposit. The estimate is based on
detailed and reliable exploration,
sampling and testing information
gathered through appropriate techniques
from locations such as outcrops,
trenches, pits, workings and drill holes
that are spaced closely enough to
confirm both geological and grade
continuity.

mineral reserve (NI 43-101 definition) means the
economically mineable part of a measured
or indicated resource demonstrated by at
least a preliminary feasibility study.
This study must include adequate
information on mining, processing,
metallurgical, economic and other
relevant factors that demonstrate, at
the time of reporting, that economic
extraction can be justified. A mineral
reserve includes diluting materials and
allowances for losses that may occur
when the material is mined.

mineral resource (NI 43-101 definition) is a
concentration or occurrence of diamonds,
natural solid inorganic material, or
natural solid fossilized organic
material including base and precious
metals, coal, and industrial minerals in
or on the Earth's crust in such form and
quantity and of such grade or quality
that is has reasonable prospects for
economic extraction. The location,
quantity, grade, geological
characteristics and continuity of a
mineral resource are known, estimated or
interpreted from specific geologic
evidence and knowledge.

petrographic the description and classification of
rocks.

porphyry rock type with mixed crystal sizes, i.e.
containing phenocrysts of one or more
minerals.

probable mineral reserve (NI 43-101 definition) the economically
mineable part of an indicated, and in
some circumstances a measured mineral
resource demonstrated by at least a
preliminary feasibility study. This
study must include adequate information
on mining, processing, metallurgical,
economic, and other relevant factors
that demonstrate, at the time of
reporting, that economic extraction can
be justified.

probable (indicated) reserves (SEC Guide 7 definition) reserves for
which quantity and grade and/or quality
are computed from information similar to
that used for proven (measured)
reserves, but the sites for inspection,
sampling, and measurement are farther
apart or are otherwise less adequately
spaced. The degree of assurance,
although lower than that for proven
(measured) reserves, is high enough to
assume continuity between points of
observation.

proven (measured) reserves (SEC Guide 7 definition) reserves for
which (a) quantity is computed from
dimensions revealed in outcrops,
trenches, workings or drill holes; grade
and/or quality are computed from the
results of detailed sampling; and (b)
the sites for inspection, sampling and
measurement are spaced so closely and
the geologic character is so well
defined that size, shape, depth and
mineral content of reserves are
well-established.

-4-

proven mineral reserve (NI 43-101 definition) means the
economically mineable part of a measured
resource demonstrated by at least a
preliminary feasibility study. This
study must include adequate information
on mining, processing, metallurgical,
economic, and other relevant factors
that demonstrate, at the time of
reporting, that economic extraction is
justified.

pyrite iron sulphide

Qualified Person means an individual who (a) is an
engineer or geoscientist with at least
five years of experience in mineral
exploration, mine development or
operation or mineral project assessment,
or any combination of these; (b) has
experience relevant to the subject
matter of the mineral project and the
technical report; and (c) is a member in
good standing of a professional
association.

reserve (SEC Guide 7 definition) that part of a
mineral deposit which could be
economically and legally extracted or
produced at the time of the reserve
determination.

rhyolite a fine-grained extrusive volcanic rock,
similar to granite in composition.

shear zone where a fault affects a width of rock
rather than being a single clean break,
the width of affected rock is referred
to as the shear zone. The term implies
movement, i.e. shearing.

strike the direction of a horizontal line on
the surface of the bed, or other planar
feature.

tailings material rejected from a mill after
recoverable valuable minerals have been
extracted.

FORWARD LOOKING STATEMENTS

The Company cautions readers regarding forward looking statements found in the
following discussion and elsewhere in this annual report and in any other
statement made by, or on the behalf of the Company, whether or not in future
filings with the Securities Exchange Commission ("SEC"). Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. See "Item 3. Key Information - Risk Factors". These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by or on
behalf of the Company. The Company disclaims any obligation to update forward
looking statements.

-5-

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.
- --------------------------------------------------------------------------------

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.
- --------------------------------------------------------------------------------

Not applicable.

ITEM 3. KEY INFORMATION.
- --------------------------------------------------------------------------------

SELECTED FINANCIAL DATA

The selected financial data of the Company for the years ended August 31, 2005,
2004 and 2003, was derived from the consolidated financial statements of the
Company which have been prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") and audited by D & H Group LLP, independent
Chartered Accountants, as indicated in their report which is included elsewhere
in this report. The selected financial data set forth for the years ended August
31, 2002 and 2001 are derived from the Company's audited consolidated financial
statements, not included herein.

The information in the following table was extracted from the more detailed
consolidated 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 16 of the Company's consolidated financial statements
included herein for a discussion of the material differences between Canadian
GAAP and US GAAP, and their effect on the Company's financial statements.

-----------------------------------------------------------
($ IN 000, EXCEPT PER SHARE DATA)
-----------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------
2005 2004 2003 2002 2001
--------- --------- --------- --------- ---------

Revenues $31 $82 $69 $163 $635
Production expenses - $22 $17 $135 $185
Depreciation, depletion and impairment $4 $10 $1,252 $6,011 $5,168
General and administrative expenses $1,060 $184 $177 $242 $330
Stock-based compensation $559 $180 - - -
Net loss $(368) $(257) $(1,473) $(6,567) $(5,048)
Loss per share $(0.02) $(0.05) $(0.50) $(2.24) $(2.03)
Weighted average number of shares 16,050 5,654 2,927 2,927 2,480
Dividends per share - - - - -
Working capital (deficiency) $507 $279 $(2) $77 $6
Resource interests $22,759 $76 $76 $1,111 $7,022
Other assets $78 - - $115 $619
Shareholders' equity $9,078 $355 $(945) $528 $7,094
Capital stock $28,488 $20,914 $19,537 $19,537 $19,537
Contributed surplus $739 $180 - - -
Total assets $23,929 $418 $93 $1,631 $8,168
-----------------------------------------------------------

-6-

ADJUSTMENT TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated financial statements of the Company are presented in accordance
with Canadian GAAP. Canadian GAAP differs in certain material respects from US
GAAP. The material differences between Canadian and US GAAP, in respect of these
consolidated financial statements, are summarized in the tables below.

Consolidated Statement of Loss

2005 2004 2003
$ $ $

Net loss under Canadian GAAP (1,697,110) (257,022) (1,472,642)
Unproven mineral interest expensed (i) (22,683,427) (75,906) -
Other compensation expense (iii) (12,144) (15,503) -
Gain on settlement (iv) - (97,207) -
Additional depreciation, depletion and amortization (vi) - - (500)
Deferred income tax expense (vii) (1,103,364) - -
------------ ------------ ------------
Net loss under US GAAP (25,496,045) (445,638) (1,473,142)
============ ============ ============

Loss per share under US GAAP (1.59) (0.08) (0.50)
============ ============ ============

Consolidated Balance Sheet

2005 2004
$ $

Total liabilities under Canadian GAAP 14,850,721 62,965
------------ ------------
Total liabilities under US GAAP 14,850,721 62,965
============ ============

Total shareholders' equity under Canadian GAAP 9,077,961 354,616
Unproven mineral interest expensed (i) (22,759,333) (75,906)
------------ ------------
Total shareholders' equity (deficiency) under US GAAP (13,681,372) 278,710
============ ============

(i) Unproven Mineral Interests

Unproven mineral interests and deferred exploration costs are accounted
for in accordance with Canadian GAAP . The Company has determined for
US GAAP purposes to expense the acquisition and exploration costs
relating to unproven mineral interests as incurred. In addition, US
GAAP requires that exploration costs not be capitalized until a
positive feasibility study is completed. The capitalized costs of such
claims would then be assessed for impairment, on a periodic basis, to
ensure that the carrying value can be recovered on an undiscounted cash
flow basis. If the carrying value cannot be recovered on this basis,
the mineral claims would be written down to net recoverable value on a
discounted cash flow basis.

(ii) Income Tax

Under Canadian GAAP, deferred tax assets relating to the potential
benefit of income tax loss carryforwards are not recognized unless the
realization of the benefit is more likely than not. US GAAP provides
similar treatment, but requires the benefit be recognized and a
valuation allowance be recognized to fully offset the deferred tax
asset.

-7-

As at August 31, 2004, the Company had fully reserved the $890,000 tax
benefit of operating loss carryforwards, by a valuation allowance of
the same amount, because the likelihood of realization of the tax
benefit could not be determined. Of the total tax benefit, $145,000 was
attributable to the 2004 fiscal year.

During the 2005 fiscal year, the Company recognized a future income tax
asset of its entire loss carryforward amount as the taxable temporary
differences related to the Company's issuance of flow-through common
shares are expected to reverse during the loss carryforward period. As
a result, there is no longer a US GAAP difference as the future income
tax asset for Canadian GAAP is the same as the deferred income tax
asset for US GAAP.

(iii) Private Placements of Common Stock

The Company conducts the majority of its equity financings pursuant to
private placements. Under the policies of the TSX Venture, the Company
may provide a discount off the market price of the Company's common
stock. US GAAP does not permit a discount from the market price. US
GAAP requires the recognition of the market value of the Company's
common stock as a credit to share capital, with a charge to operations
for the portion of the discount relating to equity financings conducted
with officers and directors of the Company and a charge to
shareholders' equity, as a capital distribution, for the discount
relating to the remaining portion of the equity financings.

Under US GAAP, loss and capital distributions for the 2005 fiscal year
would increase by $12,144 (2004 - $15,503; 2003 - $nil) and $966,502
(2004 - $206,497; 2003 - $nil), respectively, and share capital, as at
August 31, 2005, would increase by $2,162,048 (2004 - $1,183,402; 2003
- $961,402). There is no net change to shareholders' equity.

(iv) Settlement with Related Parties

US GAAP requires that gains on settlement of advances with related
parties be credited to deficit. There is no net change in shareholders'
equity.

(v) Functional Currency

The Company's functional currency is the Canadian dollar.

(vi) Asset Retirement Obligations

On September 1, 2003, the Company adopted SFAS 143 - Asset Retirement
Obligations ("SFAS 143") for US GAAP reporting purposes. SFAS 143
addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS 143 requires companies to record the
present value of obligations associated with the retirement of tangible
long-lived assets in the period in which it is incurred. The liability
is capitalized as part of the related long-lived asset's carrying
amount. Over time, accretion of the liability is recognized as an
operating expense and the capitalized cost is depreciated over the
expected useful life of the related asset. The Company's asset
retirement obligations relate primarily to the plugging, dismantlement,
removal, site reclamation and similar activities of its petroleum and
natural gas interests. Prior to adoption of SFAS 143, such obligations
were accrued ratably over the productive lives of the assets through
its depreciation, depletion and amortization of petroleum and natural
gas interests without recognizing a separate liability for such
amounts.

At the time of adoption, during the 2003 fiscal year, total assets and
total liabilities increased by $7,500. The amounts recognized upon
adoption are based upon numerous estimates and assumptions, including
future retirement costs, future recoverable quantities of petroleum and
natural gas, future inflation rates and the credit-adjusted risk free
interest rate. During the 2004 fiscal year, the petroleum and natural
gas interest was sold and the asset retirement obligation was settled.
Changes in asset retirement obligations during the 2004 and 2003 fiscal
years were:

-8-

2004 2003
$ $

Asset retirement obligations, beginning of year 7,900 -
Liabilities incurred - 7,500
Liabilities settled (7,900) -
Accretion expense (included in depreciation) - 400
------------ ------------
Asset retirement obligation, end of year - 7,900
Less: current portion - -
------------ ------------
Long-term portion - 7,900
============ ============

On September 1, 2004, the Company adopted Section 3110 "Asset
Retirement Obligations" of the CICA Handbook, which is harmonious with
SFAS 143. As such, there is no longer a US GAAP difference.

(vii) Canadian Flow-Through Shares

During the 2005 fiscal year, the Company issued 4,626,364 flow-through
common shares for gross proceeds of $4,395,046. Resource expenditure
deductions for income tax purposes related to exploration and
development activities funded by flow-through share arrangements are
renounced to investors in accordance with Canadian income tax
legislation. Under Canadian GAAP, the flow-through shares are recorded
at their face value when issued and the renunciation of such
expenditures is accounted for as a financing cost related to the flow-
through issuance and results in a reduction of share capital with a
corresponding increase in the Company's future income tax liability.

US GAAP requires that the proceeds from issuance should be allocated
between the offering of shares and the sale of tax benefits. The
allocation is made between the quoted price of the existing shares and
the amount the investor pays for the shares. A liability is recognized
for this difference. This liability is reversed when tax benefits are
renounced and a deferred tax liability is recognized at that time.
Income tax expense is the difference between the amount of the deferred
tax liability and the liability recognized on issuance.

Under US GAAP loss for the 2005 fiscal year and share capital as at
August 31, 2005, would increase by $1,103,364. There is no net change
in shareholders' equity.

(viii) Capitalization of Dividend on Redeemable Preferred Shares

As part of the Duport Property acquisition, the Company issued
mandatory redeemable preferred shares. Due to the characteristics of
these preferred shares, for both Canadian and US GAAP, the preferred
shares are accounted for as liabilities.

Under Canadian GAAP, dividends paid on shares accounted for as
liabilities should be disclosed as interest rather than as a charge to
capital. As such, the Company has decided to capitalize the dividends
paid as a carrying cost directly attributable to the unproven mineral
interest.

Under US GAAP, SFAS 34 - Capitalization of Interest Cost ("SFAS 34")
lists assets qualifying for interest capitalization. The exploration of
unproven mineral interests does not qualify. As such, $41,667 of
capitalized dividends on redeemable preferred shares would be
separately charged to earnings. There is no net change to net loss
under US GAAP.

(ix) Development Stage Company

The Company is in the exploration stage and, as of July 1, 2004, is
considered a development stage company as defined by SFAS 7. To August
31, 2005, the Company has accumulated a deficit of $25,662,242 while in
the development stage.

The Company's consolidated statements of cash flow comply with US GAAP.

-9-

New Technical Pronouncements

In December 2004, the Financial Accounting Standards Board ("FASB") issued its
final standard on accounting for employee stock options, SFAS No. 123 (Revised
2004) - Share-Based Payment ("SFAS 123(R)"). SFAS 123(R) replaces SFAS No. 123 -
Accounting for Stock-Based Compensation ("SFAS 123"), and supersedes APB 25 -
Accounting for Stock Issued to Employees. SFAS 123(R) requires companies to
measure compensation costs for all share-based payments, including grants of
employee stock options, based on the fair value of the awards on the grant date
and to recognize such expense over the period during which an employee is
required to provide services in exchange for the award. The pro forma
disclosures previously permitted under SFAS 123 will no longer be an alternative
to financial statement recognition. SFAS 123(R) is effective for all awards
granted, modified, repurchased or cancelled after, and to unvested portions of
previously issued and outstanding awards vesting after, interim or annual
periods, beginning after December 15, 2005, which for the Company will be the
second quarter of fiscal 2006. This Company is currently evaluating the effect
of adopting SFAS 123(R) on our financial position and results of operations. The
Company currently estimates the adoption of SFAS 123(R) will result in expenses
in amounts that are similar to the current pro forma disclosures under SFAS 123.

The FASB has also issued SFAS No. 153 - Exchange of Non-Monetary Assets ("SFAS
153") which is effective for fiscal years ending after June 15, 2005. SFAS 153
refines the circumstances under which non-monetary transactions should be
accounted for at fair value. The adoption of SFAS 153 is not expected to have an
effect on the Company's financial position.

The FASB has also issued SFAS No. 154 - Accounting Changes and Error Corrections
- - A Replacement of APB Opinion No. 20 and FASB Statement No. 3 ("SFAS 154"),
which is effective for fiscal years ending after December 15, 2005. SFAS 154
requires that changes in accounting policy be accounted for on a retroactive
basis. The adoption of SFAS 154 is not expected to have an effect on the
Company's financial position.

EXCHANGE RATE HISTORY

The following table sets forth the average exchange rate for one Canadian dollar
expressed in terms of one US dollar for the fiscal years ended August 31, 2005,
2004, 2003, 2002 and 2001.

-----------------------------------------------------------
PERIOD AVERAGE
-----------------------------------------------------------
September 1, 2004 - August 31, 2005 0.8160
September 1, 2003 - August 31, 2004 0.7518
September 1, 2002 - August 31, 2003 0.6767
September 1, 2001 - August 31, 2002 0.6355
September 1, 2000 - August 31, 2001 0.6537

The following table sets forth high and low exchange rates for one Canadian
dollar expressed in terms of one US dollar for the six-month period ended
February 28, 2006.

----------------------------------------------------------
MONTH HIGH LOW
----------------------------------------------------------
February 2006 0.8788 0.8638
January 2006 0.8744 0.8526
December 2005 0.8690 0.8521
November 2005 0.8579 0.8361
October 2005 0.8579 0.8413
September 2005 0.8615 0.8418

Exchange rates are based upon 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 noon rate of exchange on February 28, 2006, reported by the United States
Federal Reserve Bank of New York for the conversion of Canadian dollars into
United States dollars was CDN $1.1379 (US $0.8788 = CDN $1.00).

-10-

RISK FACTORS

The Company has, in the past, conducted business primarily in the petroleum and
natural gas industry. As of the date of this annual report, the Company no
longer is active in this industry. The Company currently owns or has an interest
in three projects which will result in the Company conducting mineral
exploration activities. See "Item 4. Information on the Company - Principal
Properties". The following risk factors apply to the Company's mineral
exploration activities.

THE COMPANY HAS LIMITED FINANCIAL RESOURCES AND IF THE COMPANY IS UNABLE TO
SECURE ADDITIONAL FUNDING AND/OR IF THE COMPANY'S EXPLORATION PROGRAMS ARE
UNSUCCESSFUL, THE COMPANY MAY FAIL.

Mineral exploration involves significant risk and few properties that are
explored are ultimately developed into producing mines. Substantial expenditures
may be required to establish ore reserves through drilling, to develop
metallurgical processes to extract the metals from the ore and to construct the
mining and processing facilities at any site chosen for mining. The Company's
proposed exploration programs may not result in any commercial mining operation.
The Company's interests relate to unproved mineral claims which are without a
known body of commercial ore and the proposed programs are an exploratory search
for ore. The Company intends to carry out exploration with the objective of
establishing an economic body of ore. If the Company's proposed exploration
programs are successful, additional funds will be required for the development
of an economic ore body and to place it into commercial production. The only
sources of future funds presently available to the Company are the sale of
equity capital, the exercise of warrants and options or the offering by the
Company of an interest in the mineral claim to be earned to another party or
parties. If the Company is unable to secure additional funding, the Company may
lose its interest in one or more of its mineral claims and/or may be required to
cease operations.

IT IS UNLIKELY THAT ANY OF THE PROPERTY INTERESTS OWNED BY THE COMPANY WILL
CONTAIN "RESERVES"; THEREFORE, IT IS LIKELY THAT THE FUNDS SPENT BY THE COMPANY
ON ITS EXPLORATION ACTIVITIES WILL BE LOST.

All of the Company's property interests are in the exploration stage and do not
contain any "reserves", as that term is defined in Industry Guide 7 adopted by
the SEC. The term "reserves" is defined in Industry Guide 7 as "that part of a
mineral deposit which could be economically and legally extracted or produced at
the time of the reserve determination." Industry Guide 7 is available from the
SEC's website at HTTP://WWW.SEC.GOV/DIVISIONS/CORPFIN/forms/
industry.htm#secguide7.

Mineral exploration involves significant risk and few properties that are
explored are ultimately developed into producing mines. The probability of an
individual prospect ever having reserves that meet the requirements of Industry
Guide 7 is extremely remote. The Company's property interests, in all
probability, do not contain any reserves and any funds spent on exploration of
the Company's property interests will probably be lost. If any of the Company's
exploration programs are successful, the Company will require additional funds
to advance the property beyond the exploration stage. Substantial expenditures
are required to establish reserves through drilling, to develop metallurgical
processes to extract the metal from the ore and, in the case of new properties,
to develop the mining and processing facilities and infrastructure at any site
chosen for mining. If the Company is unable to secure additional funding, the
Company may lose its interest in one or more of its mineral claims and/or may be
required to cease all activities.

IF THE COMPANY ISSUES SHARES OR OPTIONS TO ITS OFFICERS, DIRECTORS OR KEY
EMPLOYEES, OR IF THE COMPANY OBTAINS FUNDING THROUGH THE SALE OF ADDITIONAL
COMMON SHARES, THE SHAREHOLDERS WILL EXPERIENCE DILUTION.

The Company may in the future grant to some or all of its directors, officers,
insiders and key employees options to purchase the Company's common shares as
non-cash incentives to those employees. Such options may be granted at exercise
prices equal to market prices, or at prices as allowable under the policies of
the TSX Venture Exchange ("TSXV"), when the public market is depressed. To the
extent that significant numbers of such options may be granted and exercised,
the interests of then existing shareholders of the Company will be subject to
additional dilution.

The Company is currently without a source of revenue and will most likely be
required to issue additional shares to settle its debentures, to pay the
interest on the preferred stock and/or to redeem or retract the preferred stock
issued in connection with the Duport Property acquisition, to make any bonus
payments in connection with the Bachelor Lake transaction, to finance its
activities and, depending on the outcome of its proposed exploration programs,
may issue additional shares to finance additional exploration programs on any or
all of its projects or to acquire additional properties. The issuance of
additional shares will cause the Company's existing shareholders to experience
dilution of their ownership interests.

-11-

THE PRICE OF THE COMPANY'S COMMON SHARES IS SUBJECT TO MARKET FLUCTUATIONS AND
VOLATILITY WHICH MAY NOT BE RELATED TO THE COMPANY'S OPERATIONS AND SUCH
FLUCTUATIONS MAY IMPACT THE COMPANY'S ABILITY TO COMPLETE EQUITY FINANCINGS; IF
THE COMPANY CANNOT COMPLETE ADDITIONAL EQUITY FINANCINGS, IT MAY NOT BE ABLE TO
CONTINUE ITS OPERATIONS.

In recent years, the securities markets in Canada have experienced a high level
of price and volume volatility, and the market price of securities of many
companies, particularly junior natural resources exploration companies, have
experienced wide fluctuations in price which have not necessarily been related
to the operating performance, underlying asset values or prospects of such
companies. In particular, the per share price of the Company's common shares
fluctuated from a low of $0.38 to a high of $1.59 during the 12-month period
ending February 28, 2006. Continued price fluctuations will have a significant
impact on the Company's ability to complete equity financings.

THE COMPANY'S OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATIONS WHICH MAY SUBJECT
THE COMPANY TO PENALTIES FOR FAILURE TO COMPLY AND MAY LIMIT THE COMPANY'S
ABILITY TO CONDUCT EXPLORATION ACTIVITIES AND COULD CAUSE THE COMPANY TO DELAY
OR ABANDON ITS PROJECTS.

Exploration activities are also subject to national and local laws and
regulations governing prospecting, taxes, labor standards, occupational health,
land use, environmental protection, mine safety, and others which currently or
in the future may have a substantial adverse impact on the Company. In order to
comply with applicable laws, the Company may be required to make capital
expenditures until a particular problem is remedied. Existing and possible
future environmental legislation, regulation and action could cause additional
expense, capital expenditures, restriction and delays in the activities of the
Company, the extent of which cannot be reasonably predicted. Violators may be
required to compensate those suffering loss or damage by reason of their mining
activities and may be fined if convicted of an offence under such legislation.

Amendments to current laws, regulations and permits governing activities of
mineral exploration companies or more stringent implementation thereof could
require increases in exploration expenditures, or require delays in exploration
or abandonment of new mineral properties.

The Company's proposed exploration activities may be subject to federal,
provincial and local laws and regulations governing the protection of the
environment, including laws and regulations relating to air and water quality,
waste disposal, and the protection of endangered or threatened species.

The Company may be required to obtain pre-construction environmental and land
use review and comply with permitting, control and mitigation requirements of
the jurisdictions in which the projects are located. Compliance with these
requirements could impose costs on the Company in the future, the materiality of
which cannot reasonably be predicted at this time. Any change in the applicable
laws or regulations could have an adverse effect on any project in which the
Company might have an interest. Also, the Company may require additional permits
for its future operations, which may or may not be obtainable on reasonable
terms. It is unlikely that the Company will not be able to obtain the required
permitting. If the permitting process becomes extended the Company may be
required to obtain additional financial resources.

If the Company is unable to obtain the necessary permits, the Company might have
to change its planned exploration for such non-permitted properties and/or to
seek other joint venture arrangements. If the Company were unable to mitigate
the problem, the Company might not be able to proceed with exploration. In this
event, the Company might seek to mitigate any losses through sale of the
property, prior to abandonment.

BECAUSE THE COMPANY IS SUBJECT TO COMPLIANCE WITH GOVERNMENTAL REGULATION, THE
COST OF ITS PROPOSED EXPLORATION PROGRAMS MAY INCREASE, WHICH MAY CAUSE THE
COMPANY TO HAVE TO ABANDON SUCH PROGRAMS.

The Company's activities will be subject to environmental regulations
promulgated by government agencies from time to time. Environmental legislation
provides for restrictions and prohibitions on spills, releases or emissions of
various substances produced in association with certain mining industry
operations, such as seepage from tailings disposal areas, which would result in
environmental pollution. A breach of such legislation may result in the
imposition of fines and penalties. In addition, certain types of operations
require the submission and approval of environmental impact assessments.
Environmental legislation is evolving in a manner which means stricter
standards, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and directors, officers and employees.
The cost of compliance with changes in governmental regulations has a potential
to reduce the profitability of operations.

-12-

EXPLORATION FOR MINERALS ON THE COMPANY'S PROJECTS IS SUBJECT TO SIGNIFICANT
RISKS WHICH COULD INCREASE THE COSTS OF EXPLORATION AND COULD CAUSE THE COMPANY
TO DELAY OR ABANDON ITS PROJECTS.

The Company's projects are without a known ore body of commercial ore and its
proposed programs are exploratory in nature. Mineral exploration involves a high
degree of risk and few properties which are explored are ultimately developed
into producing mines. The long-term profitability of the Company's activities
will be, in part, directly related to the cost and success of its proposed
exploration programs, which may be affected by a number of factors beyond the
Company's control.

Mineral exploration involves many risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in
which the Company has a direct or indirect interest will be subject to all the
hazards and risks normally incidental to exploration for gold (also "Au"), and
other metals, any of which could result in work stoppages, damage to property,
and possible environmental damage.

The Company will rely upon consultants and others for exploration expertise. If
any of the Company's property interests or option interests merit development,
substantial expenditures will be required to advance the projects beyond the
exploration stage. The Company may not discover minerals in sufficient
quantities to justify commercial operations and the Company may not be able to
obtain the funds required for its activities on a timely basis. The economics of
exploring for gold, silver and other mineral properties is affected by many
factors including the cost of operations, variations in the grade of ore,
fluctuations in metal markets, costs of processing equipment and such other
factors as government regulations, including regulations relating to royalties,
allowable production, importing and exporting of minerals and environmental
protection.

THE COMPANY MAY INCUR LIABILITY FOR CERTAIN RISKS AGAINST WHICH THE COMPANY DOES
NOT HAVE INSURANCE, WHICH COULD REDUCE OR ELIMINATE ANY FUTURE PROFITABILITY AND
NEGATIVELY IMPACT THE PRICE OF THE COMPANY'S SHARES.

In the course of exploration of mineral concessions, certain risks, and in
particular, unexpected or unusual geological operating conditions including rock
bursts, cave-ins, fires, flooding and earthquakes may occur. It is not always
possible to fully insure against such risks and the Company may decide not to
take out insurance against such risks as a result of high premiums or other
reasons. Should such liabilities arise, they could reduce or eliminate any
future profitability and result in increasing costs and a decline in the value
of the securities of the Company. The Company currently does not have any
insurance coverage on its property holdings or its mineral option interests.

THE COMPANY (OR THE OPTIONOR OF THE PROPERTY) MAY NOT HAVE PROPER TITLE TO ITS
PROPERTIES AND, AS A RESULT, THE COMPANY MAY INCUR SIGNIFICANT EXPENSES TO
OBTAIN PROPER TITLE, OR MAY HAVE TO ABANDON ANY SUCH PROPERTIES.

The Company owns and has under option, unpatented and patented mining claims,
mineral claims or concessions which constitute the Company's property holdings.
The ownership and validity of unpatented mining claims and concessions are often
uncertain and may be contested.

In those jurisdictions where the Company has property interests, the Company
makes a search of mining records in accordance with mining industry practices to
confirm that it has acquired, or upon exercise of any option, can acquire,
satisfactory title to the properties but does not intend to obtain title
insurance with respect to such properties. The possibility exists that title to
one or more of the concessions in which the Company has an interest,
particularly title to undeveloped claims, might be defective because of errors
or omissions in the chain of title, including defects in conveyances and defects
in locating or maintaining such claims, or concessions.

The boundaries of some of the Company's property interests have not been
surveyed and, therefore, the precise location and area of these mining
properties may be in doubt. The Company is not aware of challenges to the
location or area of the unpatented mining claims in which the Company has
acquired an interest.

IF THE COMPANY IS UNABLE TO EFFECTIVELY COMPETE AGAINST OTHER COMPANIES, OR IF
THE COMPANY CANNOT MARKET ANY MINERALS DISCOVERED ON THE PROPERTIES IN WHICH THE
COMPANY HAS AN INTEREST, THE COMPANY MAY HAVE TO CEASE OPERATIONS.

The mineral industry is intensely competitive in all its phases. The Company
competes with many companies possessing greater financial resources and
technical facilities than itself for the acquisition of mineral concessions,
claims, leases and other mineral interests as well as for the recruitment and
retention of qualified employees.

-13-

Factors beyond the control of the Company may affect the marketability of any
substances discovered. These factors include market fluctuations, the proximity
and capacity of natural resource markets and processing equipment, government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in the Company not receiving an
adequate return on invested capital or losing its investment capital.

CONFLICTS OF INTEREST MAY ARISE AMONG THE MEMBERS OF OUR BOARD OF DIRECTORS AND
SUCH CONFLICTS MAY CAUSE THE COMPANY TO ENTER INTO TRANSACTIONS ON TERMS WHICH
ARE NOT BENEFICIAL TO THE COMPANY.

Several of the Company's directors are also directors, officers or shareholders
of other companies. Some of the directors and officers are engaged and will
continue to be engaged in the search for additional business opportunities on
behalf of other corporations, and situations may arise where these directors and
officers will be in direct competition with the Company. Such associations may
give rise to conflicts of interest from time to time. Such a conflict poses the
risk that the Company may enter into a transaction on terms which could place
the Company in a worse position than if no conflict existed. Conflicts, if any,
will be dealt with in accordance with the relevant provisions of the BUSINESS
CORPORATIONS ACT (British Columbia) (the "BCBCA"). 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 which they many have in
any project or opportunity of the Company. However, each director has a similar
obligation to other companies for which such director serves as an officer or
director. In order to avoid the possible conflict of interest which may arise
between the directors' duties to the Company and their duties to the other
companies on whose boards they serve, the directors and officers of the Company
have agreed to the following:

1. participation in other business ventures offered to the directors will
be allocated between the various companies and on the basis of prudent
business judgment and the relative financial abilities and needs of the
companies to participate;

2. no commissions or other extraordinary consideration will be paid to
such directors and officers; and

3. business opportunities formulated by or through other companies in
which the directors and officers are involved will not be offered to
the Company except on the same or better terms than the basis on which
they are offered to third party participants.

See "Item 7. Major Shareholders and Related Party Transactions - Related Party
Transactions - Conflicts of Interest". As of the date of this annual report all
material conflicts of interests which have arisen since September 1, 2003, have
been described in "Item 7. Major Shareholders and Related Party Transactions."

If a conflict of interest arises at a meeting of the board of directors, any
director in a conflict will disclose his interest and abstain from voting on
such matter, and the minutes of the meeting will reflect such disclosure and
abstention from voting. In determining whether or not the Company will
participate in any project or opportunity, the board of directors will primarily
consider the degree of risk to which the Company may be exposed and its
financial position at that time.

THE PRICES OF METALS FLUCTUATE IN THE MARKET AND SUCH FLUCTUATIONS COULD
NEGATIVELY IMPACT THE COMPANY'S ABILITY TO RAISE FUNDING AND MAY CAUSE CERTAIN
ACTIVITIES TO BECOME UNECONOMIC.

Factors beyond the control of the Company may affect the marketability of any
substances discovered. The prices of various metals have experienced significant
movement over short periods of time, and are affected by numerous factors beyond
the control of the Company, including international economic and political
trends, expectations of inflation, currency exchange fluctuations, interest
rates and global or regional consumption patterns, speculative activities and
increased production due to improved mining and production methods. The supply
of and demand for metals are affected by various factors, including political
events, economic conditions and production costs in major mineral producing
regions. Variations in the market prices of metals may impact on the Company's
ability to raise funding to conduct exploration of its properties. In addition,
any significant fluctuations in metal prices will impact on the Company's
decision to accelerate or reduce its proposed exploration activities.

-14-

THE COMPANY DOES NOT PAY DIVIDENDS ON ITS COMMON SHARES; THEREFORE, INVESTORS
SEEKING DIVIDEND INCOME SHOULD NOT PURCHASE THE COMMON SHARES.

The Company has never declared or paid cash dividends on its common shares and
does not anticipate doing so in the foreseeable future. Additionally, the
determination as to the declaration of dividends is within the discretion of the
Company's Board of Directors, which may never declare cash dividends on the
Company's common stock. Investors cannot expect to receive a dividend on the
Company's common shares in the foreseeable future, if at all.

THE COMPANY IS DEPENDENT UPON ITS MANAGEMENT AND THE LOSS OF ANY OF ITS
MANAGEMENT AND/OR IF THE COMPANY IS UNABLE TO RECRUIT ADDITIONAL MANAGERS COULD
NEGATIVELY IMPACT THE COMPANY'S ABILITY TO CONTINUE ITS OPERATIONS.

The success of the operations and activities of the Company is dependent to a
significant extent on the efforts and abilities of its key officers, Mr. Marc
Cernovitch, a director, President, and Chief Executive Officer of the Company,
Mr. Nick DeMare, Chairman and Chief Financial Officer of the Company and Mr. Tom
Healy, a director, Senior Vice-President and Chief Operating Officer for the
Company. The loss of services of Messrs. DeMare, Cernovitch or Healy,
respectively, could have a material adverse effect on the Company. The Company
has not obtained key-man life insurance on any of its officers or directors. The
Company's ability to recruit and retain highly qualified management personnel is
critical to its success; if it is unable to do so this may materially affect the
Company's financial performance.

THE MAJORITY OF THE COMPANY'S CURRENT CORPORATE OPERATIONS ARE PERFORMED BY
OTHER THAN COMPANY PERSONNEL AND IF SUCH PERSONNEL ARE NOT AVAILABLE IN THE
FUTURE, THE COMPANY MAY INCUR SIGNIFICANT EXPENSES TO FIND SUITABLE REPLACEMENTS
AND/OR TO HIRE OTHER PERSONNEL.

Corporate accounting, management and administration are provided, in part, by
Chase Management Ltd. ("Chase"), a company owned by Mr. Nick DeMare, Chairman
and Chief Financial Officer of the Company. In the event the Company needs to
employ additional personnel, it will need to recruit qualified personnel to
staff its operations. The Company believes that such personnel currently are
available at reasonable salaries and wages in the geographic areas in which the
Company operates. There can be no assurance, however, that such personnel will
be available in the future. In addition, it cannot be predicted whether the
labor staffing at any of the Company's projects will be unionized, which may
result in potentially higher operating costs.

THE COMPANY'S SHARES ARE SUBJECT TO THE SEC'S PENNY STOCK RULES, WHICH MAY
RESTRICT THE ABILITY OF BROKERS TO SELL THE COMPANY'S COMMON STOCK AND MAY
REDUCE THE SECONDARY MARKET FOR THE COMMON STOCK.

The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stock". Generally, penny stocks are equity
securities with a price of less than US $5.00 (other than securities registered
on certain national securities exchanges or quoted on the NASDAQ system). If the
Company's shares are traded for less than US $5 per share, as they currently
are, the shares will be subject to the SEC's penny stock rules unless (1) the
Company's net tangible assets exceed US $5,000,000 during the Company's first
three years of continuous operations or US $2,000,000 after the Company's first
three years of continuous operations; or (2) the Company has had average revenue
of at least US $6,000,000 for the last three years. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prescribed by the SEC that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. Since the Company's shares are traded for less
than US $5.00 per share, the Company's common stock is subject to the penny
stock rules. Therefore, the holders of the common stock may find it difficult to
sell the common stock of the Company. These rules may restrict the ability of
brokers to sell the common stock and may reduce the secondary market for the
common stock. A limited secondary market may result in a decrease in the value
of the shares and/or a partial or total loss of an investor's investment.

-15-

THE COMPANY AND/OR ITS SUBSIDIARIES (IF ANY) MAY BE DEEMED TO BE A "PASSIVE
FOREIGN INVESTMENT COMPANY" FOR U.S. TAX PURPOSES WHICH COULD SUBJECT U.S.
SHAREHOLDERS TO INCREASED TAX LIABILITY.

The Company and/or its subsidiaries may be deemed to be a "Passive Foreign
Investment Company". See "Item 10. Additional Information - Taxation." If the
Company or any of its subsidiaries is deemed to be a Passive Foreign Investment
Company, a United States holder of the Company's common shares would be required
to pay an interest charge together with tax calculated at maximum tax rates on
certain "excess distributions" (defined to include certain dividends from a
Passive Foreign Investment Company and any gain on the sale of stock of a
Passive Foreign Investment Company) unless such holder made an election either
to (1) include in his or her taxable income his or her pro rata share of the
Passive Foreign Investment Company's ordinary earnings and net capital gains
under the Qualified Electing Fund rules or (2) mark to market his or her Company
common shares at the end of each taxable year as set forth in Section 1296 of
the Internal Revenue Code of 1986, as amended. The elections require certain
conditions be met such as filing on or before the due date, as extended, for
filing the shareholder's income tax return for the first taxable year to which
the election will apply.

THIS ANNUAL REPORT CONTAINS STATEMENTS ABOUT FUTURE EVENTS AND RESULTS WHICH MAY
NOT BE ACCURATE.

Statements contained in this annual report that are not historical facts are
forward-looking statements that involve risks and uncertainties. Such statements
may not prove to be accurate as actual results and future events could differ
materially from those anticipated in such statements. Without limiting the
generality of the foregoing, such risks and uncertainties include interpretation
of results and geology, results of pre-feasibility and feasibility studies,
recovery, accidents, equipment breakdowns, labor disputes or other unanticipated
difficulties with or interruptions in production, delays in exploration
activities, the inherent uncertainty of production fluctuations and failure to
obtain adequate financing on a timely basis.

INVESTORS IN THE UNITED STATES MAY NOT BE ABLE TO ENFORCE THEIR CIVIL
LIABILITIES AGAINST THE COMPANY OR ITS DIRECTORS AND OFFICERS.

It may be difficult to bring and enforce suits against the Company. The Company
is a corporation domiciled in British Columbia. None of the Company's directors
and officers are residents of the United States, and all or a substantial
portion of their assets are located outside of the United States. As a result,
it may be difficult for U.S. holders of the Company's common shares to effect
service of process on these persons within the United States or to enforce
judgments obtained in the U.S. based on the civil liability provisions of the
U.S. federal securities laws against the Company or its officers and directors.
In addition, a shareholder should not assume that the courts of Canada (i) would
enforce judgments of U.S. courts obtained in actions against the Company, its
officers or directors predicated upon the civil liability provisions of the U.S.
federal securities laws or other laws of the United States, or (ii) would
enforce, in original actions, liabilities against the Company, its officers or
directors predicated upon the U.S. federal securities laws or other laws of the
United States.

However, U.S. laws would generally be enforced by a Canadian court provided that
those laws are not contrary to Canadian public policy, are not foreign penal
laws or laws that deal with taxation or the taking of property by a foreign
government and provided that they are in compliance with applicable Canadian
legislation regarding the limitation of actions. Also, a judgment obtained in a
U.S. court would generally be recognized by a Canadian court except, for
example:

a) where the U.S. court where the judgment was rendered had no
jurisdiction according to applicable Canadian law;

b) the judgment was subject to ordinary remedy (appeal, judicial
review and any other judicial proceeding which renders the
judgment not final, conclusive or enforceable under the laws
of the applicable state) or not final, conclusive or
enforceable under the laws of the applicable state;

c) the judgment was obtained by fraud or in any manner contrary
to natural justice or rendered in contravention of fundamental
principles of procedure;

d) a dispute between the same parties, based on the same subject
matter has given rise to a judgment rendered in a Canadian
court or has been decided in a third country and the judgment
meets the necessary conditions for recognition in a Canadian
court;

-16-

e) the outcome of the judgment of the U.S. court was inconsistent
with Canadian public policy;

f) the judgment enforces obligations arising from foreign penal
laws or laws that deal with taxation or the taking of property
by a foreign government; or

g) there has not been compliance with applicable Canadian law
dealing with the limitation of actions.

ITEM 4. INFORMATION ON THE COMPANY.
- --------------------------------------------------------------------------------

HISTORY AND DEVELOPMENT OF THE COMPANY

NAME AND INCORPORATION

The Company was incorporated under the laws of British Columbia, Canada, under
the name of Golden Chance Resources Inc. on June 16, 1983. On October 15, 1990,
the Company's name was changed to Trimark Resources Ltd. On December 14, 1993,
the Company was continued under the BUSINESS CORPORATIONS ACT (Yukon Territory).
On the continuance the Company changed its authorized capital into "unlimited
common shares without par value." On December 13, 1996, the Company's name was
changed to International Trimark Resources Ltd. On June 16, 1997, the Company
changed its name to Trimark Oil & Gas Ltd. On March 21, 2002, the Company
changed its name to Trimark Energy Ltd. On February 23, 2004, the Company
changed its name to its current name, Halo Resources Ltd.

On March 29, 2004, the British Columbia legislature enacted the BCBCA and
repealed the BC Company Act. At the Company's special meeting of shareholders
held on November 2, 2004, the Company received shareholder approval to continue
its corporate jurisdiction into British Columbia under the BCBCA. See "Item 10.
Additional Information - Memorandum and Articles of Association". Effective
November 16, 2004, the Company changed its domicile through continuation from
the Yukon Territory to British Columbia under the BCBCA.

The primary market for the Company's common stock is the TSXV, which classifies
listed companies into two different tiers based on standards, which include
historical financial performance, stage of development, and financial resources
of the listed company. Tier 1 is the TSXV's premier tier and is reserved for the
TSXV's most advanced issuers with the most significant financial resources. Tier
1 issuers benefit from decreased filing requirements and improved service
standards. The majority of the companies listed on the TSXV are Tier 2
companies. The Company trades on the TSXV under the symbol "HLO" and is
classified as a Tier 2 company.

Effective November 23, 2005, the Company's Series A Warrants and Series B
Warrants were listed and posted for trading on the TSXV under the symbols
"HLO.WT.A" and "HLO.WT.B", respectively.

Effective August 7, 2000, the Company's common stock was listed for quotation on
the Over-the-Counter Bulletin Board (the "OTC Bulletin Board") operated by the
National Association of Securities Dealers, where it currently trades under the
symbol "HLOSF.OB".

In addition, since February 2005, the Company's common stock has been listed on
the Frankfurt Stock Exchange ("FSE") and XETRA (Electronic Dealing System) under
the trading symbol "HRL".

The Company's executive and principal business office is located at Suite 1280,
625 Howe Street, Vancouver, British Columbia, V6C 2T6. The contact person is
Marc Cernovitch, President and Chief Executive Officer of the Company. The
telephone number is (604) 484-0068 and the facsimile number is (604) 484-0069.
The Company's registered office is located at Suite 1305, 1090 West Georgia
Street, Vancouver, British Columbia, V6E 3V7. The Company does not have a
registered agent in the United States.

BUSINESS OVERVIEW

Beginning October 1990, the Company was active in the business of acquiring,
exploring and developing oil and gas prospects in the United States. Over the
past years the Company's main focus were its interests in the East Lost Hills
Joint Venture and the San Joaquin Joint Venture. These ventures were
unsuccessful and the Company ceased participation in these activities in
February 2002. During fiscal 2002, the Company also participated in the drilling

-17-

of an exploratory well in regional California. A side-track well was
subsequently drilled and determined to be uneconomic. The well was plugged and
abandoned in September 2002.

Effective March 1, 2004, the Company sold its remaining interests in certain oil
and gas leases in the West Ranch Field. The Company no longer holds any oil and
gas interests, nor is it conducting any further activities in the oil and gas
industry.

On July 5, 2004, the Company entered into an agreement to acquire a 100%
interest in the Duport Property (the "Duport HOA") with the Sheridan Platinum
Group and Mr. Pat Sheridan (collectively, the "Sheridan Group"). Under the
Duport HOA, the Company had the right to acquire a 100% interest in the property
by paying $250,000 on closing, together with the issuance of one million common
shares and $8 million in series 1 preferred shares (the "Series 1 Preferred
Shares") and the grant of a 2.5% net smelter return royalty ("NSR") on the first
1.5 million ounces of gold produced and a 5% NSR on all amounts in excess
thereof. The transaction received shareholder approval at the Company's November
2, 2004 special meeting of shareholders and the February 9, 2005 annual and
special meeting of shareholders. The option was exercised pursuant to the
execution of a definitive agreement between Halo and The Sheridan Group dated
February 18, 2005 (the "Duport Agreement") and the transaction closed effective
March 24, 2005. The Series 1 Preferred Shares have a term of five years and are
subject to the dividend, redemption, retraction and voting privileges set forth
below. See "Item 4. Information on the Company - Principal Properties".

On November 12, 2004, the Company entered into an option agreement to earn a 50%
interest in the Bachelor Lake Property with Wolfden Resources Inc. ("Wolfden").
A definitive agreement (the "Assignment and Assumption Agreement") was
subsequently executed on April 15, 2005. Under the terms of the Assignment and
Assumption Agreement, Wolfden assigned to the Company its option to earn a 50%
interest in the Bachelor Lake Property from Metanor Resources Inc. ("Metanor")
by paying to Wolfden an aggregate of $1,943,123 (comprised of $650,000 in
acquisition costs and $1,293,123 in reimbursement of exploration expenditures)
and issuing 2.1 million common shares subject to a 12-month contractual hold
period. Upon securing project financing and the commencement of commercial
production on the property resulting in a minimum of 50,000 ounces of gold or
silver equivalent being produced, the Company will pay a bonus payment to
Wolfden in the amount of $250,000 cash and 250,000 common shares. The Company
has also agreed to pay Wolfden a net smelter return royalty of 0.5% on the
Company's share of the net smelter return. The Company also assumed Wolfden's $3
million exploration funding commitment at Bachelor Lake. Effective May 18, 2005,
the Company and Metanor entered into an agreement whereby Metanor acknowledged
the Assignment and Assumption Agreement and the terms of the underlying option
agreement on the Bachelor Lake Property were amended. Under the amendment, the
Company could exercise its option to earn the 50% interest in the Bachelor Lake
Property by spending a minimum of $500,000 of exploration on the Bachelor Lake
Property and paying $100,000 to Metanor. All of the required exploration funding
has subsequently been expended. On September 21, 2005, the Company exercised its
option and paid $100,000 to Metanor. The Company and Metanor subsequently
executed a definitive joint venture agreement (the "Bachelor Lake JV Agreement")
setting forth the terms and conditions governing the relationship between the
parties and providing for the means by which each of them shall participate in
the exploration, development and mining activities on the Bachelor Lake Property
dated July 1, 2005. See "Item 4. Information on the Company - Principal
Properties".

On February 9, 2005, the Company signed a letter of intent (the "Quarter Moon
LOI") with Endowment Lakes (2002) Limited Partnership ("Endowment Lakes")
granting the Company the option to earn up to an 80% interest in the Quarter
Moon Lake Gold Property in north-central Manitoba. Under the Quarter Moon LOI,
the Company was granted the right to acquire an initial 51% interest in the
property by paying $40,000 and issuing 50,000 common shares upon regulatory
approval of the transaction, completing a $250,000 minimum work commitment in
the first year, paying a further $40,000 and issuing 50,000 common shares on the
first anniversary and completing a further $300,000 minimum work commitment in
the second year. The Company was granted the further option to earn an
additional 29% interest by completing an additional $1.5 million in exploration
and development over a subsequent two year period and paying an additional
$40,000 and issuing 50,000 common shares on or before the third anniversary of
the Quarter Moon LOI. The Company is responsible for advancing the property to
production and will recover all costs out of production prior to sharing in
profits on an 80:20 basis. Endowment Lakes will hold a 1% net smelter returns
royalty on production from the property which may be purchased at any time by
the Company for $1 million. See "Item 4. Information on the Company - Principal
Properties".

During the period from October 14 to November 30, 2005, the Company staked and
submitted for recording a total of 51 mining claims comprising approximately
9,500 hectares in the Sherridon area in north-central Manitoba (the "Sherridon
Property"). The claims were subsequently accepted by the Mining Recorder's
office. The claims are located approximately 70 kilometres north of Flin Flon
Manitoba in the immediate vicinity of the historic Sherritt Gordon Mine and also

-18-

the Quarter Moon Lake Gold Property where the Company has an option to acquire
an 80% interest in five additional claims bringing the total in the area to 56
claims and 10,972 hectares. See "Item 4. Information on the Company - Principal
Properties".

On December 23, 2004, the Company completed a brokered private placement whereby
it issued 4,317,951 flow-through units at a price of $0.95 per flow-through unit
and 2,673,530 non flow-through units at a price of $0.85 per unit for aggregate
gross proceeds of $6.4 million. Each flow-through unit was comprised of one
flow-through common share and one-half of one common share purchase warrant
(each whole warrant a "Series A Warrant"), with each Series A Warrant
exercisable to purchase one additional non flow-through common share for a
period of two years at a price of $1.25 during the first year and $1.50 during
the second year. Each non flow-through unit is comprised of one common share and
one common share purchase warrant ("Series B Warrant") exercisable to purchase
one additional common share for a period of two years at a price of $1.10 during
the first year and $1.35 during the second year. The proceeds were used for
exploration and development and for general corporate purposes.

On January 20, 2005, the Company issued an additional 151,834 flow-through units
and 25,000 non flow-through units on a non-brokered private placement basis on
substantially similar terms as described above for aggregate gross proceeds of
$165,492.

On February 3, 2005, the Company completed a further non-brokered private
placement of 131,579 flow-through units at a price of $0.95 per unit on
substantially similar terms as described above for aggregate gross proceeds of
$125,000.

On September 14, 2005, the Company completed a non-brokered private placement
whereby it issued 2,319,642 flow-through common shares at $0.70 per share and
1,675,500 non flow-through units at $0.60 per share, for aggregate gross
proceeds of $2,629,049. Each unit was comprised of one common share and one
common share purchase warrant exercisable to purchase one additional common
share for a period of two years at a price of $0.70. On September 29, 2005, the
Company issued an additional 973,428 flow-through common shares and 304,666
units on substantially similar terms as described above for aggregate gross
proceeds of $864,200.

DISPOSITIONS

During fiscal 2005, the Company did not conduct any disposition of its unproven
mineral interests.

During fiscal 2004, the Company sold its 3% working interest in the West Ranch
Field for $78,630. On August 31, 2004, the Company formally abandoned its
investments in its wholly-owned subsidiaries, Safari Petroleum LLC ("Safari")
and TMK Oil and Gas Inc. ("TMK"). Both of these companies were inactive at the
time of abandonment.

During fiscal 2003, the Company wrote-off its net investment in its wholly-owned
subsidiary, Trimark Resources Inc. ("Trimark Inc."), which held substantially
all of the Company's petroleum and natural gas interests at that time.
Accordingly, it recorded a net charge of $1,240,794 for depreciation, depletion
and impairment to reflect the abandonment of Trimark Inc.

EXPLORATION EXPENDITURES

During fiscal 2005, the Company incurred $17,690,832 for mineral property
acquisition costs and $4,992,595 for exploration on the unproven mineral
properties. During fiscal 2004, the Company incurred $75,906 for mineral
property acquisition costs and $23,935 for development of petroleum interests.
During fiscal 2003 the Company incurred $319,757 on the acquisition, exploration
and development of its petroleum interests. No mineral property acquisitions or
exploration expenditures were made in fiscal 2003.

2006 EXPLORATION BUDGET

The total staged work programs for the Company's mineral exploration projects,
as recommended by the NI 43-101 technical reports for the Duport, Bachelor Lake
and Sherridon properties amount to approximately $11 million. Using these
recommendations as a basis, the Company has budgeted total expenditures of
approximately $2.5 million for the remainder of calendar 2006. The Company will
assess the results of its 2006 exploration activities before committing to the
balance of the recommended work programs

-19-

SALES AND REVENUE DISTRIBUTION

As of the date of this annual report, the Company has not generated any revenues
from its mineral properties.

The Company's share of petroleum, natural gas and natural gas liquids produced
from its wells was sold to a variety of purchasers at the wellhead in the United
States. All of its sales were conducted with unaffiliated customers. These
purchasers provided a ready market for all of the Company's production and paid
the local market price, which fluctuated based upon prevailing market
conditions. Due to the number of purchasers in each area, the loss of one or a
number of purchasers did not pose a significant risk to the continuity of the
Company's operations. During fiscal 2004, the Company sold its remaining
interest in oil and natural gas properties. As of the date of this annual
report, the Company does not generate any petroleum, natural gas and natural gas
liquids revenue.

Total revenues, interest and other income reported for fiscal 2005, 2004 and
2003, were as follows:

($ IN 000)
------------------------------------
YEARS ENDED AUGUST 31,
------------------------------------
2005 2004 2003
Petroleum and Natural Gas Sales
- United States $ - $ 81 $ 45
---------- ---------- ----------
Interest and Other Income
- United States - - 23
- Canada 31 1 1
---------- ---------- ----------
31 1 24
---------- ---------- ----------
Total Revenue, Interest and Other Income $ 31 $ 82 $ 69
========== ========== ==========

PRINCIPAL PROPERTIES

DUPORT PROPERTY, ONTARIO

The following information on the Duport Property is derived from the report
dated January 31, 2006 entitled "Technical Report on the Duport Project,
Northwest Ontario, Canada" (the "Duport Report") prepared by Roscoe Postle
Associates Inc. ("RPA"). Each of the individuals who contributed to the Duport
Report was, or was supervised by a Qualified Person Messrs. Graham C. Clow, P.
Eng and Wayne W. Valliant, P. Geo were the Qualified Persons who authored the
Duport Report. RPA prepared a previous NI43-101 report for the Duport Property
dated November 8, 2004. The purpose of the updated Duport Report was to review
the additional exploration data compiled in 2005, prepare a revised mineral
resource estimate, and provide recommendations as to future work programs on the
property.

PROPERTY AGREEMENTS

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PROPERTY DESCRIPTION AND LOCATION

The Duport Property is located on Stevens Island in Shoal Lake. Shoal Lake is on
the border of Ontario and Manitoba and is 45 km southwest of the City of Kenora.
The Duport Property consists of 104 mineral claims over an area of approximately
5,201 hectares in the Kenora Mining Division.

A significant amount of environmental work was carried out in the Duport
Property area by a former owner of the property. AMEC Earth & Environmental
("AMEC") reviewed environmental aspects of the Duport Property in connection
with an ongoing scoping study. AMEC and its predecessor companies have
undertaken all previous major environmental studies associated with the
property. The most important environmental considerations for the Duport
Property relate to permitting, the application of progressive technologies to
limit adverse environmental effects, considerations related to the Winnipeg
water supply intake and cottage and other recreational developments and
activities on Shoal Lake, First Nations and traditional land uses, the potential
for spills and accidents, and reclamation at closure. The land use surrounding
the Duport Property area is characterized by forestry activity and mineral
exploration, two First Nations reserves situated near Indian Bay, and cottage
recreation. Shoal Lake itself provides important resources including drinking
water, fisheries, wild rice harvests, and recreation. The water supply intake
for the City of Winnipeg is located in Indian Bay, in the western reaches of
Shoal Lake. In RPA's opinion, the public perceptions concerning the Duport
Property can be overcome through diligent and thorough technical studies
combined with significant and detailed public information and consultation,
including a special emphasis on gaining and maintaining the support of First
Nations residents on Shoal Lake.

The following map identifies the location of the Duport Property:

[GRAPHIC OMITTED][GRAPHIC OMITTED][OBJECT OMITTED]

Omitted Graphic is a Property Location Map of the Duport
Property showing the property location in respect to Kenora,
Red Lake, Pickle Lake Sioux Lookout, Thunder Bay, Timmins,
Toronto,and Ottawa, Ontario

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The Duport Property is accessed from Kenora, Ontario, west along the
Trans-Canada Highway, a distance of 40 km, south by gravel road for 14 km, and
then 8 km by boat. The property may also be reached by float-equipped aircraft.

-21-

The Shoal Lake area terrain is generally flat with numerous low rolling hills
which are typical of glaciated Pre-Cambrian Shield areas. Overburden is thin and
rock outcrop is abundant. The area is covered with growths of white spruce,
balsam, white birch, and aspen. Ground cover varies according to slope and soil
buildup. Cedar is abundant along the shorelines.

The Shoal Lake area experiences long, cold winters and warm, humid summers. Mean
daily temperatures range from -17.8(0)C in January to 19.6(0)C in July. Winter
temperatures (December-February) range from -14.1(0)C to -17.8(0)C, with minimum
mean daily temperatures occurring in January (-22.7(0)C). Average summer
temperatures (June-August) range from 16(0)C to 20(0)C, with maximum mean daily
temperatures reaching 24.7(0)C in July. Extremes of -43.9(0)C in January and
35.8(0)C in July have been recorded in Kenora. Total annual precipitation
averages 632 mm of which 473 mm falls as rain and the remaining 159 mm (water
equivalent) as snow. Snowfall occurs mostly from November to March.

There are two First Nations communities with land holdings and residents on
Shoal Lake - Iskutewisakaygun #39 Independent First Nation and Shoal Lake #40
First Nation. The First Nations residents collectively number approximately 700.
In addition to the resident First Nations, two other First Nations have land
holdings on Shoal Lake but do not reside there.

HISTORY

Exploration and mining activities have been carried out on the Duport Property
at various times since 1897. The original discovery of a gold bearing sulphide
zone was made on Cameron Island, where a small exploratory inclined shaft was
sunk in 1899. Limited bulk sampling and mining by the Duport Mining Company
("DMC") produced 1,100 tonnes of material, grading 115 g/t, which was shipped to
smelters at Tacoma, Washington and Flin Flon, Manitoba for processing during the
period 1934-1936. Matachewan Consolidated Mines Ltd., (1950) and Westfield
Minerals Ltd. (1965) extended the known gold bearing zone both laterally and
vertically by diamond drilling.

Consolidated Professor Mines Ltd. ("CPM") obtained an option on the Duport
Property in 1973 and carried out an initial program of exploration and sampling.
CPM acquired a 100% interest in the Duport Property by amalgamating with DMC in
1981. During joint venture arrangements with Selco Inc. in 1982 and with Union
Carbide Corporation from 1983-1985, drilling and underground exploration took
place from a new 1,100 m underground decline on Stevens Island. The program
confirmed the presence of a mineral resource and led to the extension of known
geological structures along strike to the northeast and southwest. Prior to
1983, underground development consisted of approximately 104 m of shaft and
winzes and 664 m of lateral development. From 1984 to 1987 inclusive a 1,360 m
decline was completed as well as 1,463 m of lateral development and 112 m of
raising.

CPM continued underground development on the Duport Property during 1986 and
1987 with a program to further define the extent of the gold bearing horizon.
The program included extending the existing decline to a vertical depth of 200
m, and diamond drilling, to establish continuity of the gold bearing horizon to
500 m below surface. Three raises were driven in mineralized material and a 90
tonne bulk sample was mined and shipped to Lakefield Research for pilot plant
metallurgical testing. Based on the resultant resource estimate and
metallurgical work, CPM commissioned Wright Engineers Ltd. ("Wright") to conduct
a feasibility study in 1988.

During the time the Wright study was being prepared, CPM commenced the formal
permitting process. The most important aspect of the potential environmental
impact of proposed mine development is its location on Shoal Lake. CPM
recognized very early during its ownership of the Duport Property that
environmental concerns regarding development and operation of the property were
important. Between 1979 and 1988, CPM collected baseline environmental data and
commissioned Agra Earth and Environmental to study the issues and prepare an
environmental impact study. The design for plant and infrastructure was intended
to mitigate any environmental effects of the operation. Despite the fact that
the technical aspects of the environmental management plan were relatively
straightforward, the Duport Property received considerable scrutiny from the
local cottagers and, eventually, the City of Winnipeg and the Province of
Manitoba. The public perceptions were such that in 1989 the Ontario permitting
process was stopped and the Duport Property was designated for review under the
CANADIAN ENVIRONMENTAL ASSESSMENT ACT. From 1989 to 1993, essentially no
activity took place on any aspect of the Duport Property.

Commencing in 1993, CPM reactivated the environmental aspects of the Duport
Property with the objective of restarting the approval process. As a first step,
the property development plan was significantly revised from the Wright study in
that all processing was moved to a location outside the Shoal Lake watershed.
Ore was to be mined on Stevens Island and hauled by truck to the proposed plant
site approximately 10 km away on the mainland. Two processing options were
considered - production of concentrate at the plant followed by gold recovery at
Placer Dome's Campbell Mine in Red Lake, and production of gold at the plant.
The former option had the advantage of eliminating the use of cyanide in the

-22-

Shoal Lake area. No physical or technical work was carried out on the Duport
Property during this time other than environmental baseline work and minor
fieldwork in support of the revised property development plan. During this time,
CPM re-established a working relationship with the two First Nations on Shoal
Lake. An extensive program of community relations was carried out including
workshops and public consultation sessions in the communities. Impact and
benefit agreements were signed with both communities. CPM also implemented a
buyout program with affected cottagers on Shoal Lake. Outside the area, CPM
carried out extensive consultations with key officials at the City of Winnipeg,
the Provinces of Manitoba and Ontario, and the federal government in order to
describe the revised project and to establish the process for formal
environmental approval.

In 1996, Royal Oak Mines Inc. ("ROM") made a successful takeover bid for all the
shares of CPM, whereupon CPM became a wholly owned subsidiary of ROM. ROM
updated the CPM work and initiated an internal feasibility study based on the
revised development plan instituted by CPM previously, but rather than using the
Campbell Red Lake option, concentrate was to be railed to the ROM plant in
Timmins, Ontario, where it would be treated using a bio-oxidation process. ROM
did not carry out any physical work on the site other than a limited diamond
drilling program during 1996-1997. RPA was unable to locate ROM diamond drill
logs. In 1997, ROM filed for bankruptcy and the Duport Property became inactive.

Subsequent to the ROM bankruptcy, the Duport Property was purchased by the
Sheridan Group. No site work was carried out by the Sheridan Group during its
ownership period. In July 2004, Halo negotiated the acquisition of the Duport
Property from the Sheridan Group, as described above.

REGIONAL GEOLOGY

The Shoal Lake area is underlain by Precambrian (Archean) volcanic and
sedimentary rocks, which are part of a broad greenstone belt striking in a
general east-west direction across the northern end of the Lake of the Woods
district. It extends for a distance of several hundreds of kilometres from
Savant Lake to the east to beyond the Manitoba border to the west. Stocks and
dykes of acid and basic rocks intrude these older rocks. The belt is within the
Wabigoon Sub-province of the Superior Province.

LOCAL GEOLOGY

In the northern part of the Shoal Lake area there are two principal granodiorite
intrusives, identified as the Canoe Lake and Snowshoe Bay stocks, each several
kilometers in diameter, separated by a northeasterly trending volcanic series
some seven kilometers wide. The series includes steeply dipping felsic to
ultramafic flows and fragmentals, tops facing west, minor clastic sediments, and
sulphide facies iron formations. Also present are coarse anorthosites, gabbros,
diorites and quartz-diorites, some of which may represent volcanic flows. Within
this extrusive-intrusive assemblage are irregular dykes and/or sills of
quartz-feldspar porphyry, quartz diorite, and lamprophyre. All the rock types
have been exposed to regional and local dynamic and thermal metamorphism, which
has altered the intermediate, mafic, and ultramafic lavas to the greenschist and
/or amphibolite facies.

The deposit lies within a northeast trending band of mafic volcanics flanked to
the northwest and southeast by a sequence of intermediate to felsic volcanics
and related volcanoclastic sediments, which may be correlated through folding.
The Cameron Island volcanic sequence forms the west limb of one of a number of
relatively small anticlines whose axes strike northeast. The core of the
anticline is the Stevens Island anorthosite-diorite complex. A major zone of
deformation, which hosts the Duport deposit follows the same general strike and
is characterized by strongly developed foliation or fracturing.

PROPERTY GEOLOGY

The predominant rock types on Cameron and Stevens Islands and the mine area are
andesites, amphibolites, tholeiitic and komatiitic basalts and porphyritic
basalts, talc-chlorite schist and narrow sheared horizons of felsic and
intermediate tuffs and interflow material with buff colored cherty sections.
Dykes and sills of various thicknesses are comprised of feldspar porphyry,
quartz feldspar porphyry, quartz diorite, diorite, and lamprophyre. The dykes
and sills cut, separate, or replace the gold-bearing mineralized horizons.

Gold mineralization strikes N30-35(Degree)E and dips 65-75(Degree) west. Grades
of possible economic interest have been intersected to a depth of approximately
600m. The mineralization has been subdivided into three zones. The "Main Zone"
is approximately 800 m long, strikes N30oE, dips 70o west, and extends to 300m
below surface. Grade-thickness contours of the Main Zone indicate the
mineralization plunges north at about 30(Degree). However, within the
mineralization there appears to be several local areas that plunge 45(Degree) to
75(Degree) south. The secondary plunge has important exploration implications.

-23-

The mineralization extends over a drill indicated strike length of 1,200 m and
is associated with highly sheared, narrow, thinly bedded, conformable felsic and
intermediate tuffs and cherty units that contain sulphide mineralization,
generally in the range of 5-10%. These mineralized tuffs are identified as the
"Main Zone" and the parallel "East Zone," plus a number of en-echelon and
parallel associated units in the hangingwall and footwall of each of these
principal horizons. The Main Zone is between massive chloritic and amphibolitic
basalts while the northern section of the Main Zone is at the contact between
basaltic flows and amphibolites, or within the amphibolites further north. The
East Zone is approximately 450 m long, extends from 10m to 250m below surface
and is hosted by intensely sheared ultramafics altered to talc schists. The
favorable tuffs range in thickness from one to ten metres and dip steeply west.
Talc schist occurs in two prominent zones of shearing and alteration, which
parallel the footwall of both the Main and East Zones over widths of up to
twenty metres. The schist below the East Zone footwall has an average thickness
of eight metres and is more persistent than the Main Zone schist. The
"Hangingwall Zone" is parallel and west of the Main Zone. It is the smallest of
the three zones at 150m long and extends from 150m to 300m below surface.

The principal Duport gold zones are sheared, fractured, narrow, and often highly
silicified felsic and intermediate tuffs and/or interflow material which has
cherty sections and sulphide mineralization consisting of pyrite, arsenopyrite,
and lesser amounts of pyrrhotite. Less frequently, gold occurs in association
with sulphides within thick sections of felsite, close to or within the
gold-bearing tuff units. The mineralized horizons are persistent along strike
and down dip although they may change mineralogically, including variations in
gold and sulphide content. The horizons are frequently separated or split into
several narrower units by the intercalation of narrow sheared chloritized and
silicified basalt sections. These separated gold bearing lenses often exhibit an
en-echelon configuration. Also felsite dykes occasionally cut the mineralized
horizon at a low angle. These and other minor variable characteristics often
make correlation problematic. Numerous faults cut and occasionally displace the
mineralized horizon.

EXPLORATION

In 2005, the Company completed a ground magnetometer survey, airborne
geophysical surveys and a diamond drilling program.

GROUND MAGNETOMETER SURVEY

The surface magnetometer survey was conducted from February 18 to March 28,
2005, over three grids, by JVX Limited using a Scintrex ENVIMAG proton
precession magnetometer. Total field magnetometer readings were taken on 15 m
(50 ft.) intervals on a 60 m (200 ft.) line spacing. The total survey covered 70
line-km. A portion of the planned work was stopped prematurely due to poor ice
conditions. The objective of the survey was to gain geological and structural
information for the purpose of locating drill targets along the strike of
lithological units known to host significant gold mineralization.

The grids are an extension of the original Duport grid and utilize the same
co-ordinate system. The baseline trends northeast at 032(degree) azimuth and was
re-established at the north end of Cameron Island. The East Grid is connected to
the North and South Grids by a tie line (TL 14000E). The North Grid shows
positive, elongate magnetic responses as defined by an nT isoanomaly contour
centered over two following areas: the "10500E" anomoly and the "12250E"
anomoly.

The "10500E" anomaly is, in part, coincident with a sheared pyroxenite unit
found on the eastern shore of Cameron Island. This unit may correlate with
talc-chlorite schist intersected in the footwall of the Main Zone by drill
holes. The "10500E" anomaly represents the northern portion of a more extensive
magnetic high response that is located over the Duport deposit. The deposit is
underlain by tholeiitic and komatiitic basalts as well as intrusive derivatives
containing pyrrhotite and magnetite. One drill hole tested a magnetic high
response defined by an arcuate nT isoanomaly contour. The area shows some
structural discontinuity and a discrete "bull's-eye" pattern. The hole
intersected altered quartz dioritic rocks containing disseminated pyrrhotite. A
sheared, sulphide-bearing, silicified zone encountered approximately 232 m down
the hole returned only low gold values.

The "12250E" anomaly parallels the "10500E" anomaly and extends north of Stevens
Island to the limit of ground coverage. The anomaly is underlain by anorthositic
gabbro containing disseminated magnetite and pyrrhotite. This unit comprises the
Stevens Island subvolcanic intrusive and is spatially associated with the
Stevens Island Deformation Zone, a high strain zone in which the rocks show a
pervasive shear fabric relative to the enclosing stratigraphy. The contours are

-24-

disrupted, folded and show bull's-eye patterns. A series of intersecting fault
structures trending east-west and northwest-southeast occur north of Cameron
Island and are responsible for the discontinuous magnetic patterns exhibited in
this area.

The East Grid lies immediately east of Stevens Island and covers the historic
Golden Reef gold showing. The anomalies are conspicuously folded and disrupted
since faults extending northwest across Stevens Island pass through this area
that is underlain by anorthositic gabbro and undifferentiated ultramafic rocks.

The coverage proposed for the South Grid remains incomplete. The stratigraphy
west of Dominique Island shows a definite, irregular contact between tholeiitic
basalts and anorthositic gabbro of the Stevens Island Complex. Several lines
show a narrow segment of the strong, irregular contact between these contrasting
rock types.

The magnetometer survey was successful in delineating irregular contacts between
contrasting lithologies in areas of known gold mineralization. However, the
survey did not include the Duport deposit and was insufficient in covering
potential targets east of the North Grid and in the vicinity of Dominique Island
covered by the South Grid.

AIRBORNE GEOPHYSICAL SURVEYS

The Company contracted Fugro Airborne Surveys to conduct 2,743 line-km of
coverage at 50 m and 100 m line spacing between August 15 and September 2, 2005.
This was accomplished by using a DIGHEM multi-coil, multifrequency
electromagnetic system, supplemented by a high-sensitivity cesium magnetometer.
The information from these sensors was processed to produce maps that display
the magnetic and conductive properties of the survey area. A GPS electronic
navigation system was used for accurate positioning of the geophysical data with
respect to the base maps.

The main objective of the program was to identify additional, untested,
Duport-style gold targets, i.e., altered shear zones containing sulphides
related to fault structures, intrusive bodies, and competency contrasts between
different lithologies. The total field and vertical gradient magnetic maps
outlined several significant structural and lithological features very similar
to those observed at the Duport deposit. Halo geological staff interpreted a
series of ovoid or annular features as buried intrusive bodies that are aligned
through the central portion of the property. These intrusive features modify the
strong linear northeast fabric of the enclosing volcanic stratigraphy. The
Duport deposit is situated on the western flank of the second most southerly of
these bodies that correlates to an anorthosite complex. Halo staff also conclude
that the trends on the magnetic maps represent regional ENE faults. The
prominent fault that trends through the southernmost and largest circular
feature abruptly truncates roof pendants capping this intrusive and demarcates
two structural domains. One domain, to the south, demonstrates more regular
magnetic patterns and the other, to the north, elicits patterns that are
noticeably more discontinuous and broken up.

A considerable number of weak to moderate EM conductive features were detected
and delineated by the DIGHEM data, mostly displaying a NNE orientation aligned
with the regional fabric.

Jerry Roth, Senior Geophysicist with Stratagex Ltd., conducted a preliminary
review of the survey results and noted that the contoured aeromagnetic data are
discerned to outline a predominantly NNE fabric to the structural and lithologic
components of the Shoal Lake greenstone assemblage. The rather striking NNE
trend of distinct lenticular to elongate magnetic lows that extends across the
centre of the survey area could reflect felsic lithologies in the core of the
assemblage or a thick sequence of dominantly metasediments. Roth proposes that
features previously interpreted as a concealed felsic are more likely folded and
faulted metavolcanics. Roth also notes that the three broadly drawn, NE to NNE
trending deformation zones are locally inconsistent with the detailed
aeromagnetic data, suggesting that they are complex, variable structural
features, with splays and en echelon elements.

Halo selected fifteen targets for follow-up, consisting of conductive features
within a one kilometre wide band extending NNE and SSW of the Duport Deposit.
Roth conducted a preliminary review of the targets and proposed that six of the
fifteen conductors are of probable bedrock origin and warrant follow-up diamond
drilling. Roth further advised additional interpretation and verification,
consisting of examination of the actual EM profiles as well as ground MaxMin
HLEM and magnetometer surveys prior to drilling.

The remaining nine conductors require further interpretation of the airborne
geophysics and further ground geophysical surveys prior to a diamond drilling
decision.

In addition to the fifteen anomalies selected for follow-up, RPA advised that
consideration should be given to a comprehensive evaluation of the entire
airborne geophysical survey. In view of the importance of weakly to

-25-

non-conductive Au-sulphide mineralization, IP/resistivity surveys are
recommended to delineate chargeability and resistivity trends in geologically
favourable sectors.

The Company is currently conducting a thorough compilation of previous work to
ensure that the anomalies have not been previously tested by diamond drilling.

DEPOSIT TYPES AND MINERALIZATION

The Duport deposit is related to an epigenetic, hydrothermal system. The
lithology and structural setting of the deposit is broadly similar to most of
the gold deposits in the Red Lake and Timmins areas, in that they are shear
hosted in mafic to ultramafic volcanic rocks and spatially associated with
granitoid batholiths.

Gold in the Duport deposit occurs both as fine grains of free gold, less than
0.05 mm, and in association with grains of arsenopyrite and pyrite. Gold is
found within narrow often highly silicified felsic and intermediate shear zones
that have recognizable cherty mylonotized sections and sulphide mineralization
consisting of pyrite, arsenopyrite and minor pyrrhotite and chalcopyrite. The
mineralization often exhibits a banded or laminated appearance, which parallels
the tuff pseudobedding and shearing. The gold grade is proportional to the
percentage of arsenopyrite and associated pyrite, the degree of silicification
and to a lesser extent the incidence of mariposite. A combination of
arsenopyrite with one or both of these secondary conditions usually results in
high grade intersection, while the lack of arsenopyrite usually indicates
negligible gold.

DRILLING

In 2005, the Company completed a 23-hole, 7,053 m diamond drilling program from
the ice on Shoal Lake. The drilling was performed by Cyr International Drilling
using two Longyear 38 drills and one Boyles 37 drill, both machines drilling NQ
size core (476 mm). Drill hole collars were planned and surveyed with a Garmin
GPS unit. Downhole surveys were taken at approximately 60 m intervals using a
Reflex EZ Shot or Maxibor directional instrument. On average, the mineralization
strikes 030(Degree)-35(Degree) azimuth and dips 70(Degree) west. Therefore the
holes were drilled at 122(Degree) azimuth to intersect the mineralization as
close as possible to normal to the strike. Similarly, the inclination of the
holes was planned to optimize both hole length and the angle at which the holes
intersected the dip of the mineralization. Inclinations ranged from -45(Degree)
to -67(Degree); hence, the true width of the mineralized intersections was
approximately 70% to 90% of the core length.

Core recovery was not recorded although the project geologists report that it
was very high. Wayne Valliant inspected 50 m sections of three holes as well
mineralized sections of ten holes and concurs with the assessment of very high
core recovery. Rock quality designation was not recorded.

Two holes were drilled to verify historical resources. Nineteen holes were
drilled on a 30 m to 100 m spacing over a strike extension of approximately one
km to test the possible downward and/or southern extension of historical
resources. One hole was drilled to test for possible mineralization in a
structural feature indicated by the ground magnetometer survey.

SAMPLING METHOD AND APPROACH

Diamond drill core was logged based on lithology, alteration, and
mineralization. Logging was done on-site, manually, by four project geologists.
Collar data, down-hole survey data, major lithologies, and assay results were
converted to spreadsheet format.

Core sampling intervals were determined by the project geologist according to
lithology, mineralization type, and visually anticipated grade. Thus, 1,859
intervals were selected for sampling. The nominal maximum sample interval was
0.91 m (3 ft.); however, a few samples in barren or poorly mineralized sections
were 1.21 m (4 ft.). Barren core on the margins of mineralized zones was also
sampled. Although mineralized zones are occasionally greater than ten metres
wide, the grade variance within the zone can be very high. Therefore, the
minimum sample interval was 0.30 m (one foot) to ensure sufficient detail was
assembled for realistic grade correlation.

Core selected for sampling was halved with a diamond saw, and one half was
placed in a plastic sample bag. Sample tags were in duplicate, with one half
inserted into the sample bag and the other half remaining in the sample book as
a permanent record. The sample number was written on the outside of the plastic
bags with indelible marker. Metal tags, stamped with the sample number, were
stapled to the wooden core boxes. The remaining half of the core from 24

-26-

samples, or approximately 20 percent of the samples in mineralized zones, were
quartered with the diamond saw and submitted as duplicates with different sample
numbers from the original. Five percent of the samples submitted were control
blanks, comprised of barren core or a blank pulp, to test for contamination in
the assay lab. In order to test for assay precision and accuracy, an additional
five percent of the samples were reference control standards. These procedures
are discussed further in Section 13.

Plastic bags were placed in rice bags, sealed with fibre tape, and delivered to
Greyhound Bus Lines in Kenora by the project manager for shipment to Accurassay
Laboratories in Thunder Bay.

In RPA's opinion, the sampling was of high quality, representative, and did not
introduce any bias into the database.

SAMPLING PREPARATION, ANALYSIS AND SECURITY

Sample preparation and gold analyses were done at Accurassay Laboratories in
Thunder Bay, Ontario ("Accurassay"). The lab is accredited by the Standards
Council of Canada to ISO/IEC 17025 Guidelines. Accurassay employs an internal
quality control system that tracks certified reference materials and in-house
quality assurance standards. Accurassay uses a combination of reference
materials, including standard samples purchased from CANMET Energy Technology
Centre, the research arm of Natural Resources Canada, standards created in-house
by the laboratory, and certified calibration standards.

The sample information was entered into the Accurassay Local Information System
("LIMS"). The samples were dried, if necessary, jaw crushed to -8 mesh, and then
riffle split. A 250 g to 400 g cut was taken and pulverized to 90% passing -150
mesh, and then matted to ensure homogeneity. Silica sand was used to clean out
the pulverizing dishes between each sample to prevent cross contamination.
Analysis for gold was by standard fire assay procedures using a 30 g sample with
an atomic absorption ("AA") finish.

Assay results were forwarded to the Company by email, followed later by a hard
copy. No aspect of the preparation or analyses was conducted by Halo employees.

In RPA's opinion, the sample preparation and analyses were adequate for use in
mineral resource estimation.

CONFIRMATION HOLES

Two holes were drilled to verify historical data. The location of the first hole
was selected to verify narrow, high grade gold mineralization in a section of
the Main Zone. The hole was designed to intersect mineralization within 10 m of
two previously drilled holes that intersected 15.92 g/t Au over a true width of
1.0 m, and 40.42 g/t Au over a true width of 1.2 m. This first confirmation hole
intersected 34.55 g/t Au over a true width of 0.6 m.

A second hole was drilled to verify wide, low grade gold mineralization in
another section of the Main Zone. The hole was designed to intersect the Main
Zone within 25 m of a hole which previously cut 9.12 g/t gold over a true width
of 7.4 m. This second confirmation hole returned 8.16 g/t gold over 9.5 m and
therefore, in RPA's opinion, verifies the presence of wide, low grade gold
mineralization as previously reported.

Given the nature of the mineralization, i.e., coarse gold in shear zones, the
results of the twinned holes compare well with the previous drill in both grade
range and width.

BLANK SAMPLES

Ninety-seven, or five percent, of the samples submitted to Accurassay were
control blanks, comprised of barren core (22) or a blank pulp (75) to test for
contamination in the assay lab. The blank pulps were purchased from CDN
Laboratories Ltd. in Delta, BC. Two of the results were above a maximum
acceptance threshold of three times the detection limit of 0.03 g/t. The results
indicate that there was no problem with contamination or drift in the Accurassay
lab.

STANDARD CONTROL SAMPLES

In order to test for assay precision and accuracy, five percent of the samples
were reference control standards, prepared by and purchased from CDN
Laboratories Ltd. in Delta, BC. Reference standard CDN-GS-5A has a recommended
gold concentration of 5.10 g/t +/- 0.27 g/t (+/-2SD). Reference standard
CDN-GS-12 has a recommended gold concentration of 9.98 g/t +/- 0.37 g/t
(+/-2SD). Approximately 50% of the Accurassay results were greater than the

-27-

control limits recommended by CDN Laboratories Ltd. The average of the
Accurassay results was three percent less than the mean value of the standard
samples. The results of the standard control sample program did not materially
affect the resource estimation. RPA has recommended that in subsequent drill
programs Halo geological staff should request that sample batches be repeated
when standards begin to show a trend outside the recommended limits.

DUPLICATE SAMPLES

Diamond drill core selected for sampling was halved with a diamond saw, and half
the core was submitted to Accurassay. The remaining half of the core from 24
samples, or approximately 20 percent of the samples in mineralized zones, was
quartered with the diamond saw and submitted as duplicates to Accurassay, using
different sample numbers from the original. For the most part, the duplicates
show a reasonable agreement with the original samples. However, the duplicate
pairs from two holes display a wide variance, likely due to the high effect of
the mineralization.

EXTERNAL CHECK ASSAYS

Duport selected 170 pulps of samples originally assayed at Accurassay. The
samples were split and renumbered. One half of the sample was returned to
Accurassay for analysis by fire assay and the other half of the sample was
delivered to Acme Analytical Laboratories Ltd. ("Acme") for analysis by fire
assay. RPA prepared relative difference plots wherein the difference of each
duplicate pair is compared to the mean of the duplicate pair. RPA also conducted
relative standard deviation analyses to test for assay precision. The results
indicate that the assay precision for assays less than 10 g/t is poor, but the
precision for assays greater than 10 g/t is acceptable. The resource estimate is
heavily dependent on assays greater than 10 g/t. Therefore, RPA considers the
overall precision acceptable.

DATA CHECKS

RPA checked approximately five percent of the original assay certificates
against the resource database. RPA also checked approximately five percent of
the sample intervals and lengths from the diamond drill logs against the
resource database. Some problems were discovered in the digital update of the
historical diamond drill information. Any errors were corrected.

RPA SAMPLES

Wayne Valliant collected ten samples of quartered core from mineralized zones
from the first ten diamond drill holes of the 2005 program. He also collected
half core from two holes drilled during the 1987 underground program. The latter
were selected only for convenience as most of the core was not accessible during
the site visit. He also collected one grab sample from a muck pile from the
underground bulk sample program. The results confirm the presence of gold
mineralization in the diamond drilling. Given the small sample size and coarse
nature of the gold mineralization, the results show reasonable agreement.

ACCURASSAY INTERNAL QA/QC SYSTEM

A certified standard and a blank sample were run with each batch of samples. In
addition, a replicate assay was run on every 10th sample to be used for checking
the reproducibility of the assays. All standards were graphed to monitor the
performance of the laboratory. The warning limit was two times the standard
deviation and the control limit was three times the standard deviation. Any work
order with a standard running outside the warning limit had selected reassays
performed, and any work order with a standard running outside the control limit
had the entire batch of samples reanalysed. All QC/QA data run with each work
order was kept with the clients file. In the sample preparation area, samples
were randomly selected for screen analysis to ensure grain size was achieved
(90% passing -150 mesh). The AA instrument was calibrated using ISO traceable
calibration standards. The instrument is directly tied to the LIMS program
eliminating the need for manual data entry, hence, reducing human error.

MINERAL PROCESSING AND METALLURGICAL TESTING

In 1988, SMS supervised a program of bench testing and a pilot plant at
Lakefield Research, Lakefield, Ontario, to determine the optimum method for
concentration of the arsenical gold deposit. The gold is considered to be
refractory, and testwork demonstrated that oxidation of the arsenopyrite would
be necessary for optimum gold extraction. Based on the foregoing testwork, the
1988 Wright feasibility study recommended a flowsheet including crushing,
grinding, gravity gold separation, bulk flotation, pressure oxidation,

-28-

cyanidation of the oxidation product, carbon adsorption, hot caustic cyanide
stripping, electrowinning, and refining. Gold recovery to flotation concentrate
was estimated at 93.7%, followed by a 97% recovery in the pressure oxidation
through refining stages, for an overall estimated recovery of approximately 90%.

A subsequent study by Kilborn Engineering Pacific Ltd. in 1996, for Royal Oak
Mines Ltd., recommended bio-oxidation as the preferred method of treating the
flotation concentrate. The study, although order of magnitude, concluded that
bio-oxidation would obtain similar gold recovery as pressure oxidation, but at
lower capital and operating costs.

In 2005, RPA reviewed the process options as part of an economic review filed by
Halo on the SEDAR website. RPA assumed that a mill would be located near Love
Lake, approximately ten kilometres from the mainland ferry landing at Starting
Point. The site is outside the Shoal Lake watershed. The mill would consist of
crushing, grinding, flotation, and gravity concentration circuits. Mill recovery
is anticipated to be 91%. High-grade gravity concentrates and lower-grade
flotation concentrates would be shipped by highway truck to Placer Dome's
facility at Red Lake for refining. Tailings would be stored in a facility near
the mill site.

Based on historical data and the 2005 drilling program, RPA estimated mineral
resources, reviewed mining and processing methods, environmental considerations
and conducted a preliminary financial analysis. RPA concluded that a larger,
higher grade resource is required to generate positive economic results at a
gold price of US$400 per ounce.

MINERAL RESOURCE ESTIMATES

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INDICATED AND INFERRED
RESOURCES. THIS SECTION USES THE TERMS "INDICATED" AND "INFERRED" RESOURCES. THE
COMPANY ADVISES U.S. INVESTORS THAT WHILE THOSE TERMS ARE RECOGNIZED AND
REQUIRED BY CANADIAN REGULATIONS, THESE DEFINITIONS HAVE NOT BEEN ADOPTED FOR
USE BY THE SEC. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ANY PART OR ALL
OF MINERAL DEPOSITS IN THESE CATEGORIES WILL EVER BE CONVERTED INTO RESERVES.
"INFERRED" 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 ANY PART OF AN INFERRED RESOURCE WILL EVER BE UPGRADED TO A
HIGHER CATEGORY. UNDER CANADIAN RULES, ESTIMATES OF INFERRED RESOURCES MAY NOT
FORM THE BASIS OF FEASIBILITY OR PRE-FEASIBILITY STUDIES, EXCEPT IN RARE CASES.
U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ALL OR PART OF AN INFERRED
RESOURCE EXISTS, OR IS ECONOMICALLY MINEABLE.

The resources are summarized in the following table. Given the precision of the
data, nugget effect, and methodology, resource tonnes are rounded to the nearest
thousand and grades, expressed in g/t, are rounded to two decimal points.

-29-

MINERAL RESOURCE SUMMARY
DUPORT PROPERTY

ZONE SUB-ZONE INDICATED INFERRED
TONNES GRADE (G/T) CONT. AU (OZ) TONNES GRADE (G/T) CONT. AU (OZ)
- ----------------------------------------------------------------------------------------------------------

MAIN 1 159,000 10.12 51,000
2 84,000 15.21 41,000 15,000 7.29 3,000
3 10,000 9.96 3,000
4 107,000 13.43 46,000
5 30,000 13.11 13,000
6 84,000 12.66 34,000
7 15,000 8.92 4,000
8 14,000 14.48 6,000
9 18,000 8.31 5,000
10 27,000 8.55 7,000
- ----------------------------------------------------------------------------------------------------------
SUBTOTAL 315,000 13.56 137,000 248,000 9.81 76,000

EAST 1 58,000 14.05 26,000 14,000 8.57 4,000
2 38,000 11.31 14,000
3 75,000 9.94 24,000
- ----------------------------------------------------------------------------------------------------------
SUBTOTAL 96,000 12.97 40,000 89,000 9.73 28,000

HANGINGWALL 1 13,000 12.82 5,000
2 50,000 16.77 27,000
- ----------------------------------------------------------------------------------------------------------
SUBTOTAL 13,000 12.82 5,000 50,000 16.77 27,000

- ----------------------------------------------------------------------------------------------------------
TOTAL 424,000 13.40 182,000 387,000 10.69 131,000
- ----------------------------------------------------------------------------------------------------------

Notes:

1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at cut-off grades of 6.9 g/t Au.
3. Mineral Resources are estimated using an average long-term gold price
of US$400 per ounce, and a US$/C$ exchange rate of 1.25.
4. A minimum mining width of 1.5 metres was used.

DATABASE

All the available data regarding the Duport Property was stored at the Company's
office in Kenora. Technical data included diamond drill logs, original assay
certificates, geological reports, historical resource calculations, diamond
drill cross sections, mineral resource longitudinal sections, and survey log
books. Unfortunately, level plans with geological mapping, and underground
sampling, were incomplete. The pre-2005 database was in Imperial units, and the
Company elected to continue the 2005 diamond drill program using the same
system. Hence RPA received the database with distances expressed in feet (ft.)
and gold grades expressed as troy ounces per short ton (opt).

The resource estimate is based on 74,337 m of historical drilling and 7,054 m of
drilling performed by the Company in 2005. Buhlmann and Associates Inc., Flin
Flon, Manitoba, was contracted to assemble the historical diamond drill data
(1951 to 1988 inclusive) into spreadsheet format. Data fields included collar
information, downhole survey data, lithology, sample interval, sample length,
and gold assays. RPA revised various sections of the lithological data for
consistency with the correlation methodology. Halo and RPA performed the data
entry for the 2005 diamond drilling program. The spreadsheet data was converted
to Gemcom format for subsequent plotting and modeling.

-30-

CUTTING

The gold grade distribution was studied to determine whether anomalous high
grade gold assays affected the mean disproportionately. The Main, Footwall, and
Hangingwall mineralized zones are spatially divided and possibly represent
different mineralizing events, and were therefore analyzed independently. The
"Footwall" zone lies in the structural footwall below the Main Zone. It
comprises up to three sub-zones, similar in appearance to the Main Zone although
somewhat weaker and discontinuous in nature.

The histograms prepared to illustrate the gold distribution in each of the zones
indicate that appropriate cutting factors for the Main, Footwall, and Hanging
Wall mineralized zones are 68.6 g/t (2.0 opt), 85.7 g/t (2.5 opt), and 51.4 g/t
(1.5 opt) respectively. Given that the Main Zone is volumetrically greater than
the other two zones combined, a cutting factor of 68.6 g/t was chosen for all
three zones.

METHODOLOGY

Vertical cross sections, including diamond drill hole trace, lithology and gold
values, were plotted at a scale of 1:600, on 30 m spacing. In some areas the
data was obscured due to an excess of information and additional sections were
plotted at a scale of 1:300 on 15 m spacing.

The shear zones were previously identified as tuffaceous units and classified
based on the degree of silicification, i.e., felsic tuff, high silicification;
intermediate tuff, medium silicification; and mafic tuff, low silicification.
The shear zones host virtually all the gold mineralization in the deposit and
were therefore modeled as the initial step in the resource estimation. The shear
zones were correlated on both cross sections and plans to ensure continuity. The
zones often include two or more narrower shears and hence many intersections of
a shear zone include sections of unsheared, apparently barren material.
Wireframes were constructed for three principal shear zones, i.e., Main Zone,
East Zone, and Hangingwall Zone. These domains were used to constrain subsequent
resource estimations. They were also used for structural interpretation. The
mineralized zones are planar, and high values produce a nugget effect. The
contour method was chosen as the most effective method of estimating mineral
resources.

Intersections of potential economic mineralization were also correlated on
vertical cross sections, incorporating a cut-off gold grade of 6.9 g/t gold
(0.20 opt) and a minimum horizontal thickness of 1.5 m. The cut-off grade is
based on the following assumptions.

Gold Price US $400
Exchange Rate (US$/CDN$) 1.25
Metallurgical Recovery 95%
Operating Cost CDN $120
Incremental/Breakeven Cut-off 80%

The mid-points of the intersections were transferred to vertical longitudinal
sections for each of the three zones. The longitudinal sections displayed the
diamond drill pierce points, with associated horizontal thickness and average
cut grade ("G"), as well as the width x grade ("GT").

GT values were contoured on the longitudinal sections. The gold grade
distribution is lognormal, showing a large number of low assay values and few
high values. The same applies to the average intersection values. Therefore, the
contours were drawn on a geometric basis as opposed to linearly. The outermost
contour defined the economic cut-off, and therefore delineated several economic
subzones within each mineralized zone. The Main, East, and Hangingwall Zones
were subdivided into 10, 3, and 2 subzones respectively. As the work was
performed in Imperial units the outermost GT contour was 1.0 opt-ft (10.28
g/t-m), i.e. 0.20 opt x 5.0 ft. Successive contours were 2.0 opt-ft , 4.0 opt-ft
, 8.0 opt-ft, etc. Figure 16-4, Figure 16-5, and Figure 16-6 illustrate the 1.0
opt-ft GT contour in the Main, East, and Hangingwall Zones, respectively.

Thickness contours were also drawn on longitudinal sections. The outermost
boundary was the economic limit, established by the previously drawn 1.0 opt-ft.
GT contour. Contours inside the economic subzones were drawn on a linear basis.
The total volume of each subzone is the sum of the area between each contour
multiplied by the average thickness represented by that area. Volume was
converted to tonnage using a factor of 11.0 ft.(3)/ton (Specific Gravity =
2.92), which was established by tests conducted during the Wright feasibility
study in 1988. A similar exercise was undertaken to determine total "GV", i.e.,
the sum of the areas between each GT contour multiplied by the corresponding
area. The average grade was estimated by dividing the total GV by the total
volume.

-31-

The resource classification of each subzone was determined based on the drill
hole density and grade continuity. A minor tonnage, immediately above and below
some of the underground workings, may have qualified as measured resources based
on closely spaced underground sampling and diamond drilling. However, since the
economics of the Project will be based on the sum of measured plus indicated
resources, the measured category was not estimated.

MINERAL RESERVES

There are no mineral reserves estimated for the Duport Property.

EXPLORATION AND DEVELOPMENT

The Duport Report recommended a two-phase work plan for the Duport Property. The
overall objectives of the work are to expand the resource base of the property
by testing airborne electromagnetic anomalies with IP surveys and diamond
drilling. The proposed work plan has been divided into two phases, with the
second phase contingent on success in the first. The estimated total cost of the
first phase is $435,000. The second phase is estimated to cost $467,000,
consisting of data compilation, geophysics, surface diamond drilling, community
relations, environmental monitoring, resource estimation, and a scoping study.
The estimated cost of the program was $2.3 million. The costs for each phase are
broken down as follows:

- -------------------------------------------------------------------------------------------------
PROPOSED PHASE 1 WORK PROGRAM AND BUDGET
- -------------------------------------------------------------------------------------------------
PHASE 1 WORK PLAN UNITS UNIT COSTS TOTAL COST
($) ($)
- -------------------------------------------------------------------------------------------------

IP SURVEYS
Site prep/line cutting 45 line-km 500 23,000
45 line-km 1,500 68,000
-------
SUBTOTAL 91,000
-------
Diamond Drilling
Contractor 3,400 77 262,000
Board & Lodging 72 250 18,000
Geology Staff 72 300 22,000
Expenses-vehicle, communications, supplies 72 400 29,000
Assays 1,000 13 13,000
-------
SUBTOTAL 344,000
- -------------------------------------------------------------------------------------------------
TOTAL PHASE 1 $435,000
=======

- -------------------------------------------------------------------------------------------------
PROPOSED PHASE 2 WORK PROGRAM AND BUDGET
- -------------------------------------------------------------------------------------------------
PHASE 2 WORK PLAN UNITS UNIT COSTS TOTAL COST
($) ($)
- -------------------------------------------------------------------------------------------------

DIAMOND DRILLING
Contractor 5,000 77 385,000
Board & Lodging 72 250 18,000
Geology Staff 72 300 22,000
Expenses-vehicle, communications, supplies 72 400 29,000
Assays 1,000 13 13,000
- --------------------------------------------------------------------------------------------------
TOTAL PHASE 2 $467,000
=======

-32-

BACHELOR LAKE PROPERTY, QUEBEC

PROPERTY AGREEMENTS

On November 12, 2004, the Company entered into an option agreement to earn a 50%
interest in the Bachelor Lake Property with Wolfden Resources Inc. ("Wolfden").
A definitive agreement (the "Assignment and Assumption Agreement") was
subsequently executed on April 15, 2005. Under the terms of the Assignment and
Assumption Agreement, Wolfden assigned to the Company its option to earn a 50%
interest in the Bachelor Lake Property from Metanor Resources Inc. ("Metanor")
by paying to Wolfden an aggregate of $1,943,123 (comprised of $650,000 in
acquisition costs and $1,293,123 in reimbursement of exploration expenditures)
and issuing 2.1 million common shares subject to a 12-month contractual hold
period. Upon securing project financing and the commencement of commercial
production on the property resulting in a minimum of 50,000 ounces of gold or
silver equivalent being produced, the Company will pay a bonus payment to
Wolfden in the amount of $250,000 cash and 250,000 common shares. The Company
has also agreed to pay Wolfden a net smelter return royalty of 0.5% on the
Company's share of the net smelter return. The Company also assumed Wolfden's $3
million exploration funding commitment at Bachelor Lake. All of the required
exploration funding has subsequently been expended. The transaction closed on
May 18, 2005. The Company and Metanor subsequently executed a definitive joint
venture agreement dated effective July 1, 2005 (the "Bachelor Lake JV
Agreement") setting forth the terms and conditions governing the relationship
between the parties and providing for the means by which each of them shall
participate in the exploration, development and mining activities on the
Bachelor Lake Property.

The following information on the Bachelor Lake Property is derived from the
report dated December 15, 2005 entitled "NI 43-101 Technical Report on the 2005
Drilling Program and Mineral Resource Estimate for the Bachelor Lake Property"
(the "Bachelor Lake Report") prepared by InnovExplo Inc. ("InnovExplo"). Each of
the individuals who contributed to the Bachelor Lake Report was, or was
supervised by a Qualified Person. Messrs. Alain Carrier, MSc., P. Geo and Julien
Davy, MSc., P. Geo were the Qualified Persons who authored the report.

PROPERTY DESCRIPTION AND LOCATION

The property is located within the Abitibi Greenstone Belt (Northwestern Quebec,
Canada) in the Township of Le Sueur, approximately 225 km north of the town of
Val-d'Or. The mine site is situated 3.5 km east of the village of Desmaraisville
and 30 km south of the Cree community of Waswanipi. Desmaraisville is serviced
by bus and truck transport, and is connected to the 113 Provincial highway,
railroad, power grid and telecommunication systems. An experienced labour force
in the mining industry is available within a 240-km radius of the project site
(Val-d'Or, Lebel-sur-Quevillon, Chapais, Chibougamau). Val-d'Or is a major full
service centre for exploration, mining and economic activity in Northwestern
Quebec. The following map identifies the location of the Bachelor Lake property:

-33-

[GRAPHIC OMITTED][GRAPHIC OMITTED][OBJECT OMITTED]

Omitted graphic is Location Map of Bachelor Lake showing location of
Bachelor Lake Joint Venture in respect to the Provinces of
Quebec and Ontario and distance from the city of Val d'Or quebec.

-34-

The property of the BLJV consists in two claim blocks: the eastern block (the
"Bachelor Claims"), comprising 51 claims and two mining concessions covering an
area of 1,867.67 ha; and the western block (the "Hewfran Claims"), comprising 38
claims covering 683.5 hectares. With the addition of the Hewfran Claims, the
property now comprises eighty-nine (89) mining claims and two mining concessions
for a total area of 2,551.17 hectares. Since December 2004, the Bachelor Claims
have been registered 100% to Metanor. These claims were acquired from
Exploration GeoNova Inc. ("GeoNova"), MSV Resources Inc. ("MSV") and Campbell
Resources Inc. ("Campbell"). The Bachelor Lake JV has the right to acquire 100%
of the Hewfran claims from Aur Resources Inc. ("Aur") upon satisfying a work
commitment of $1.6 million in mineral exploration over a 3-year period ($200,000
in the first year, $400,000 in the second year and $1 million in the third
year). The Bachelor Lake JV will also have to pay to Aur a total amount of
$375,000 over the course of those three years ($75,000 upon signing, $100,000
after 24 months and $200,000 after 36 months), payable in cash or shares. The
transaction also includes a 2% NSR, of which 1% can be repurchased in
counterpart for the sum of $1,000,000. Metanor, for the first payment, will
issue 99,180 common shares (which represent the amount of $75,000) according to
the calculation method agreed upon in the option agreement with Aur.

For the Bachelor Claims, an NSR royalty is owned by Concopper Enterprise Ltd.
("Concopper"). A maximum sum of $1,750,000 is payable on ore derived from the
Bachelor Lake Property and from other ore bodies controlled by the Bachelor Lake
JV and processed at the Bachelor Lake Property, to be calculated as follows:

On ore from the Bachelor Lake Property:

(a) 0.50% NSR for a price of gold (b) between $425 and $450 per ounce
(c) 1.00% NSR for a price of gold (d) between $450 and $485 per ounce
(e) 1.50% NSR for a price of gold (f) between $485 and $560 per ounce
(g) 2.00% NSR for a price of gold (h) greater than $560 per ounce

On ore originating from other ore bodies controlled by the Bachelor Lake JV and
processed at the mill located at the Bachelor Lake Property:

(i) 0.25% NSR for a price of gold (j) between $425 and $450 per ounce
(k) 0.50% NSR for a price of gold (l) between $450 and $485 per ounce
(m) 0.75% NSR for a price of gold (n) between $485 and $560 per ounce
(o) 1.00% NSR for a price of gold (p) greater than $560 per ounce

The agreement on the Hewfran Claims between Aur and Metanor also included a 2%
NSR royalty, of which 1% can be repurchased for the sum of $1,000,000.

The claims were not surveyed with the exception of the two mining concessions.
The Bachelor Lake JV has the mining rights on the entire claims, and both the
mining and surface rights on the two mining concessions. There are no land claim
issues, ownership disputes pending on the property or major environmental
issues.

Adjacent and contiguous to the property, to the North and to the West, the
Bachelor Lake JV also holds 88 claims covering 2,287.69 hectares including 74
claims for 1,975.36 hectares (the "MJL Claims") and 14 claims for 311.33
hectares (the "Hansen Claims"), currently registered 100% to Metanor. These
claims host the Coniagas polymetallic past producer.

The status of the mining titles was verified by InnovExplo on October 3, 2005
using the GESTIM system from the Ministere des Ressources Naturelles, de la
Faune et des Parcs ("MRNFP"), the Quebec government claim management system,
accessible online at: HTTP://GESTIM.MRNFP.GOUV.QC.CA. On the property, two
blocks of claims are presently in process for permit renewal. Communications
between InnovExplo and the Litigation Office of the MRNFP confirmed a temporary
renewal status. These claims correspond to four claims on Hewfran and three
claims on Bachelor. The Company believes that the current landholdings are
sufficient in size to adequately test all known targets at this time.

-35-

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The property is easily accessible by a 3-hour drive (225 km) on the Provincial
highway 113 from Val-d'Or to Chibougamau in the Province of Quebec. From
Val-d'Or, the access is via the 117 provincial highway heading east and then
heading north on the highway 113 and by driving through to Senneterre,
Lebel-sur-Quevillon and Desmaraisville. At Desmaraisville, a 3.5-km gravel road
heads east to the property.

The area is relatively flat (maximum elevation variation of 20 m) and lies at a
general elevation of 295 metres above sea level. Coarse and sandy glacial
deposits cover the area. Outcrop exposure is less than 2% and swampy areas are
prevalent in the central and southern portions of the property. The area is
characterized by a continental climate. Winter temperatures range from
- -10(degree)C to -35(degree)C with an average snow accumulation of 83 cm. Summer
temperatures range from 10(degree)C to 22(degree)C with an average rainfall of
115 mm. No rivers cross the immediate mining site area and the closest water
source is Lake Bachelor approximately 3 km to the north. Access to a drinking
water source is possible with a well and pumping station located on one of the
mining concessions.

Production at the Bachelor mine terminated in 1989 after seven years of
operation. Desmaraisville significantly decreased in population and in services
after the mine closure. However, the area is still well provided with public
services as it lies directly on a regional highway with power and telephone
lines. The proximity of an active mining centre such as Val-d'Or still
guarantees the availability of material and manpower for exploration and mining.

The mine site includes surface infrastructure, hoist room, shaft house, mill
(500 tonnes per day), tailing pond, and core shack. The infrastructure is in
good condition but will require upgrading and rehabilitation if future
exploration programs require underground work, particularly the mill, hoist and
headframe. The Bachelor gold deposit was mined by underground mining methods,
mainly by shrinkage stopping. The mine was dewatered during the winter of
2004-2005 for the realization of an underground drilling program in 2005. The
mine is currently accessible by a three-compartment shaft to the 7th Level and a
four-compartment shaft beyond the 7th Level. The shaft sump is at a depth of
562.66m. Twelve levels, with ventilation and egress, have been developed.
Underground access from the Bachelor mine on the Hewfran Claims already exists
on the 4th, 6th and 8th Levels. Recent engineering assessments are in progress.

HISTORY

The Bachelor Lake Property was originally staked by O'Brien Gold Mines Ltd.
("O'Brien") in 1946 following to the discovery of the "Main" Zone on the eastern
part of the O'Brien pluton. This discovery rapidly led to trenching, geophysical
surveys and numerous drill holes. In the 1960s, Sturgeon River Mines Ltd.
("Sturgeon") sank a shaft and drilled underground to the 7th Level (1961-64).
From 1972 to 1975, 739,000 short tons at a grade of 0.18 oz/t Au were outlined.
In the 1980's, Bachelor Lake Gold Mines, a subsidiary of Sturgeon, conducted
several underground development work phases in order to start mining in 1982.
They deepened the shaft to the 12th Level in 1987, and stopped production in
1989. Approximately 958,368 short tons at a grade of 0.136 oz/t Au were mined,
for a total of 131,029 oz of refined gold.

Since the mine closure, several resource estimates were published on the
Bachelor Claims and the Hewfran Claims. On the Bachelor Claims, InnovExplo
estimated in 2004 that the claims contained an estimated measured resource of
204,454 short tonnes at 0.257 oz/t Au; an indicated resource of 216,685 short
tonnes at 0.315 oz/t Au; and an inferred resource of 256,285 short tonnes at
0.304 oz/t Au. On the Hewfran Claims, after several exploration drilling
programs in June 1989, Aur reported an estimated gold resource of 594,000 short
tonnes at 0.170 oz/t Au for the West Zone (100,900 ounces of gold). The East
Zone resource has been recently re-evaluated and downsized from 120,000 short
tonnes at 0.210 oz/t to 68,000 short tonnes 0.259 oz/t.

The mine was flooded in 1992, and dewatered in November 2004 in anticipation of
the underground drilling program. The mining contractor's employees are
presently keeping the mine dewatered. In 1990, under a joint venture agreement
with Acadia Mineral Venture Ltd. ("Acadia"), controlled by Hecla Mining Company
of Canada ("Hecla"), 34 drill holes were drilled from the 12th Level and 5 drill
holes from the 11th Level. In 1994, Espalau Mining ("Espalau") acquired 100% of
the property and 10 surface drill holes were drilled in 1995.

Since December 2004, the Bachelor Claims have been registered 100% to Metanor,
after acquiring the property from GeoNova, MSV and Campbell. Since September
2005, Halo satisfied its work agreement on the property and acquired a 50%
interest which has led to the formation of the Bachelor Lake JV. In 2004-2005,
Halo dewatered the Bachelor mine and initiated a 13,346 m (69 hole) underground
drilling program in order to fulfill its option agreement.

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Additional details concerning the exploration history of the Bachelor Claims and
Hewfran Claims based on compilation work previously provided by InnovExplo, as
well as information from an internal report prepared by Aur and from the SIGEOM
database of the "Ministere des Ressources Naturelles, de la Faune et des Parcs"
database is presented in the Bachelor Lake Report filed on SEDAR at
www.sedar.com.

REGIONAL GEOLOGY

The Bachelor Lake area is located within the Northern Volcanic Zone of the
Abitibi Subprovince, Superior Province. The Bachelor Lake area is situated near
the western limit of the Chibougamau-Chapais greenstone belt. The mafic to
felsic volcanic and volcaniclastic rocks of the Bachelor Lake area are part of
the basal mafic-dominated sequence referred to as the Volcanic Cycle I. The
Volcanic Cycle I formed between 2730 and 2720 Ma, and is composed of massive,
pillowed and brecciated, tholeiitic basalt flows with local felsic and
sedimentary units. The Northern Volcanic Zone of the Abitibi Subprovince is
interpreted as a diffuse arc passing laterally into a back-arc environment with
numerous felsic and mafic-felsic edifices and intra-arc sedimentary basins. The
Bachelor Lake property lies along a local northeast-trend which is deviated from
the general east-west pattern of the Abitibi Subprovince due to significant
synvolcanic pluton emplacement and the influence of the major northeast-trending
Wedding-Lamarck fault in the Bachelor Lake area.

LOCAL GEOLOGY

The property is underlain by Archean volcanic rocks of the Obatogamau Formation
in a poorly known and poorly explored area of the Abitibi greenstone belt.
Because of the absence of marker horizons and the paucity of outcrops, it is
difficult to establish a well-defined rock sequence in the Coniagas-Bachelor
Lake area. The Obatogamau Formation includes mafic, intermediate and felsic
flows and their synvolcanic intrusive equivalents which are the host for the
volcanogenic massive sulphide occurrences. A local composite stratigraphic
section shows a typical complex volcano-sedimentary assemblage. This
stratigraphic sequence includes the 280 m thick Coniagas mine sequence
represented by a mafic-dominated volcanoclastic sequence. Porphyritic lava
flows, prominent in the immediate area of the Coniagas zinc-lead-silver deposit
(1.5 km west of Bachelor Lake deposit), cover the volcanoclastic unit. A
significant 500-700 m thick, lenticular and dome-shaped felsic unit composed of
massive to brecciated rhyolitic to rhyodacitic lava flows occurs up-section.
This felsic-dominated unit corresponds to the Bachelor Lake gold deposit host
rocks. Mafic volcanic and volcanoclastic rocks make up the upper part of the
sequence. The Auger Lake and Bachelor Lake sedimentary rocks remain enigmatic
but probably mark the top of the sequence. The late emplacement of several
plutons (e.g. O'Brien granodiorititic pluton located east of the Bachelor Lake
deposit), adds to the complexity of the region. Gold mineralization at Bachelor
Lake has been interpreted to be related to the late granodioritic O'Brien
pluton. Intrusive rocks related to the O'Brien pluton include granitic porphyry
and biotite-hornblende granodiorite. Post-tectonic lamprophyre dykes are also
common at the Bachelor Lake mine and kimberlitic dykes were documented in the
Desmaraisville area. This later intrusive phase has recently been investigated
for their diamond potential in the Desmaraisville area.

The local northeast-trending sequence deviates from the general east-west
pattern of the Abitibi Subprovince due to the presence of significant pluton
emplacement and the influence of the major northeast-trending Wedding-Lamarck
fault. The folded volcanic rock sequence shows local changes in trend from
N025(degree) to N065(degree), with vertical to steep northwest dips (60(degree)
to 77(degree)). Folding and faulting are responsible for stratigraphic
repetition and disruption of the volcano-sedimentary sequence. Foliation
relationships indicate a possible third phase of deformation .

PROPERTY GEOLOGY

At the Bachelor Lake mine, most deformational features are brittle (faults,
fractures, veinlets) to brittle-ductile (shear zone). Based on previous studies
and the last drilling program, five (5) post-ore fault systems striking
N110(degree) are recognized on the property and affect the gold-bearing zones at
Bachelor Lake:

- Flat-lying faults, generally small displacement which appears to be
along strike of Main Zone. These veins are well illustrated on level
plan views where mineralized zones show local metric discontinuities.
- ENE brittle-ductile, rotational faults moderately dipping at
60(degree), namely the WAC (Waconichi faults system) and showing an
oblique slip with dextral and reverse movement.
- ENE brittle-ductile rotational faults steeply dipping at 80(degree),
namely the WAC and which could be interpreted as a conjugate to the
WAC.

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- NNE to NE late brittle faults steeply dipping to the NW, transverse
faults. A good example of this fault is shown on the 12th level plan
view between sections 50 W and 1+00 E where the "Main", "B" and "A"
zones are all dislocated as blocks in a late brittle fault corridor.
- NW brittle faults moderately to steeply dipping (65(degree) to
90(degree)), could be interpreted as conjugates to the brittle fault
system.

In the Waconichi fault system, the Big WAC fault is one of the most significant
and, according to the upper description, should be related to the WAC fault
system. The last underground drilling campaign demonstrates that the Big WAC may
have two major impacts at Bachelor: (i) by locally remobilizing gold (higher
grade) and (ii) by dislocating or displacing the "Main" and "B" Zones (missing
in the footwall of the Big WAC fault). The movement on it may be approximately
15 m (50'), it often tends to be adjacent to the "Main" Zone (10th to 12th
Levels) and, at depth, on 13th to 15th Levels, it tends to occur between the
"Main" and "B" zones. Interpretation also demonstrates that when faults cross
the "Main" and "B" zones, thickening of the zones occurs.

EXPLORATION

The most recent exploration work program was executed from May to August 2005,
by InnovExplo for Halo and then for the Bachelor Lake JV. The program consisted
in 13,345 m of underground drilling, described in detail below under the heading
"Drilling." Metanor and Halo have not conducted any other exploration program on
the property. Previous exploration programs are discussed above under the
heading "History".

DEPOSIT TYPES

The property hosts a wide variety of deposit types from volcanogenic
polymetallic type to syn- to late-orogenic gold mineralization. On the property,
volcanic-hosted massive sulphide potential is illustrated by the Coniagas
Horizon, Zinc showing #1 and #2, Area-Opawica showings and by the Coniagas
deposit located on the adjacent property.

The Bachelor Lake gold mineralization is related to brittle deformational
features and dilatational zones (stockwork) and to brittle-ductile shear zones.
The Bachelor gold deposit can be either classified an "orogenic lode gold
deposit" or an "intrusion-related gold deposit". The gold distribution appears
to be controlled by both structural and lithological features (e.g. the rhyolite
being more fractured compared to the agglomerate). The Bachelor Lake gold
mineralization has also been interpreted to be associated with the late-tectonic
granitic to granodioritic intrusion (O'Brien pluton located east of the deposit
and associated dykes documented at the mine). The link between the late
intrusive rocks and the gold distribution can be interpreted as either the
result of a litho-structural relationship (i.e. lithological contrasts) or as a
magmatic process (intrusion-related, oxydized magma). The O'Brien granodioritic
stock probably provided the concentrating mechanisms through heat and
hydrothermal solutions. The late phase dykes related to the O'Brien stock were
introduced later than the shearing event, and the gold mineralization event has
been bracketed between the occurrence of these late dykes and the earlier
granodioritic phase. The high fluorine content of the hydrothermal biotite in
the ore zone alteration correlates with that of magmatic biotite within the
intrusive phases. There is probably a direct genetic link between the O'Brien
stock and the gold mineralization. In this perspective, the Bachelor Lake gold
deposit may well correspond to the new class of gold deposits in the southern
Abitibi Belt known as a "Syenite-Associated Disseminated Gold Deposit". In this
class of deposits, the ore bodies usually consist of zones of disseminated
sulphides and variably developed stockworks associated with intensely altered
wallrocks. The mineralization, with sharp to diffuse limits, is defined by a
decrease in sulphide content, gold grades and intensity of stockwork fracturing.
The more appropriate class heading to describe the Bachelor Lake gold deposit
may be an "Intrusion-Related Disseminated Gold Deposit", rather than
Syenite-Associated Disseminated Gold Deposit. Gold remobilization along the "A"
shear and mineralized zone may well represent another event.

From a descriptive point of view, two main types of gold mineralization
occurring in the Bachelor Lake area and in the Wachigamau Member: gold-bearing
quartz veins with gold disseminated sulphides in wallrocks; and disseminated
gold-bearing sulphide zones.

During the last drilling program, these differences have been recognized and can
be illustrated as the "B" and "Main" zones. They were interpreted as
contemporaneous disseminated gold-bearing sulphide zones, the B Zone just
superseding the Main Zone formation. In both types, the mineralization is
characterized and dominated by pyrite. Gold is either: (i) native and is in
close association with pyrite or, (ii) free in quartz predominant veins. The
mineralization is found in close association with hydrothermal alteration zones
(silica-hematite alteration) which have been superimposed on the regional
metamorphic minerals.

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PROPERTY SURFACE SHOWINGS

Mineralization on the property was discovered from surface exploration in 1946.
The property hosts several gold and base metal showings occurring on surface and
illustrated by numerous showings. The property also hosts the eastern extension
of the Coniagas marker horizon (zinc-lead-silver).

BACHELOR-TYPE GOLD-BEARING ZONES

The property hosts six gold-bearing zones ("Main", "A", "B", "C", "A West" and
"B West" zones) which were all included in the 2005 resource estimate.

The Bachelor Lake gold deposit is located along an ESE-trending, SW-dipping,
silicified shear zone with hematitic alteration. It transects NE-trending,
steeply dipping volcanic rocks and the O'Brien granitic to granodioritic pluton.
Major W-SW and N-NE trending faults have affected the ore zone and the
emplacement of the granite intrusions. Movements along the WSW set may have
opened the fractures filled by mineralization. Two types of gold-bearing zones
have been identified at Bachelor Lake: silica-flooding and hematite-altered
stockwork zones, illustrated by the "Main Zone" and the "B Zone". In both cases,
gold is spatially associated with pyrite and the gold content correlates well
with the pyrite content. Gold mineralization at Bachelor occurs predominately
within the pyrite (>70%), as grains attached to the pyrite (-18%) or as free
gold enclosed in the gangue (-10%). This was demonstrated in a polished-thin
section examination done on the Hewfran Claims. The gold is fine grained with an
average diameter between 6 to 8 mm, and visible gold is more characteristic of
the "B Zone". Pyrite is usually finely disseminated (2 to 10%) hosted in
strongly altered rocks, often brecciated and occasionally injected by
quartz/carbonate veins and veinlets. At surface, traces of gold, chalcopyrite
and ilmenite occurrences have been observed. Gold has been introduced late in
the paragenetic sequence as were fluorite and some of the carbonates.

THE MAIN ZONE

The "Main Zone" has contributed 90% of the ore derived from the Bachelor Lake
mine. The Main Zone is characterized by pervasive moderate to strong
silicification and hematitization with 2-10% pyrite generally associated with
hematite alteration. It is cross-cut by quartz-carbonate veinlets usually less
than 2 cm, and some local narrow late siliceous hydraulic breccias are
described. Some intense altered zone intersections show association with
ankeritisation. The Main Zone contains also minor amounts of epidote, chlorite,
amethyst, micas, magnetite and base metal sulphides. A distinctive deep brick
red hematite alteration characterizes the zone.

The Main Zone trends N110(degree), dipping at 55(degree) southwest near the
surface, steepens to near vertical at the 12th Level, and changes to 60(degree)
to 75(degree) at depth. The Main Zone alteration envelope increases in width
with depth below the 12th Level, while ore values are not uniformly distributed
within the zone, which results in an anastomosing mineralized pattern. The last
drilling program also demonstrated the recurrent presence of a weaker and
narrower alteration zone of 3 to 5 m in the foot wall of the Main Zone. This
"northern branch" is clearly related to the same event but rarely shows economic
interest. The average width of the Main Zone above the 6th Level was 1.82 m
(6'), and increased to an average of 2.44 m (8') below this level. The 2005
drilling program below the 12th Level has confirmed that the average width of
the Main Zone increased. Based on the 2005 resource database, the Main Zone has
an average horizontal width of 2.8m (9.2') (median at 2.1m (7')) and reached a
maximum horizontal width of 12.8m (42'). This alteration system, which
constitutes the main mineralized zone, is recognized over 1,150 m (N110(degree)-
N290(degree) trend) and was mined over 335 m from the western limit of the
Bachelor Claims to the western contact of the O'Brien pluton. The new
interpretation proved the Main Zone continuity, with the drill hole
intersections, to be over 488 m (from section 1,000' W to 600' E) horizontally
and 900 m vertically (from surface to the elevation 7,000').

THE B ZONE

The "B Zone" was recognized on the 11th and the 12th Levels and may also
represent a potential for additional resources, but until now very little mining
has taken place in this zone. It was previously described as being similar to
the Main Zone but the last drilling campaign illustrated their differences. Test
mining has also indicated that the B Zone has competent walls. Based on the
resource database, the B Zone has an average horizontal width of 3.1 m (10.3')
(median at 2.1 m (7')) and reaches a maximum horizontal width of 10.5 m (34.5').
The B Zone was previously considered to be generally narrower than the Main Zone
but the 2005 drill program confirmed that this zone has similar width. The B
Zone dips generally steeper than the Main Zone, at about 75(degree) to
85(degree) to the south-southwest. The B Zone is interpreted to be the result of

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a younger geological event and formed after the Main Zone mineralization. It is
characterized by a hydraulic glassy to white silica breccia with angular
fragments of the altered unit and cut by quartz veins. Its alteration is similar
to the Main Zone and is represented by strong to intense silicification and
hematitization and generally by moderate ankeritization. Mineralization is
characterized by 2% to 7% pyrite generally associated with the late quartz
breccias. The presence of visible gold is often seen in this alteration zone and
especially in the sections east of the T1 fault.

THE A ZONE

The "A Zone" was discovered by drilling from the 9th Level and has been traced
up to the 4th Level. Test mining at the Bachelor Lake mine, using shrinkage
techniques, has shown an unacceptable level of dilution on this zone. The A Zone
is visually distinct from the "Main" and "B" zones. It is a highly altered and
sheared zone which strikes N060-070(degree) and dips 45(degree) to 50(degree) to
the southeast and cross-cuts the "Main" and "B" zones. It has previously been
interpreted as a gold-bearing zone as well, but the last underground drilling
campaign demonstrated a poor grade development of this zone when alone. The best
values in the A Zone are related to its junction with other zones. Significant
intersections have been documented while crossing the "Main" or "B" zones,
probably due to gold remobilization. The last interpretation showed increases in
thickness at these junctions, especially around section 100' E. The general
aspect and trend of the A Zone could lead to a correlation interpretation
between the A Zone and the Waconichi fault system.

THE C ZONE

The newly interpreted "C Zone" has been incorporated into the updated resource
estimate. This zone has similar characteristics to the Main Zone and it appears
that it can be a branch of the Main Zone. The C Zone actually seems to be less
continuous than the Main Zone. The C Zone has been documented in the Bachelor
Lake mine area between the sections 150' E and 600' E, in the eastern portion of
the 2005 interpretation.

THE A WEST AND B WEST ZONES

The "A West Zone" and "B West Zone" have been delineated in the West Zone area
of the Hewfran Claims. These zones are interpreted to be the continuity of the
"A" and "B" zones identified at the Bachelor mine area. The A West Zone lies
within the western extension of the "A" shear and the mineralized zone
documented at the Bachelor Lake mine. A discovery hole (0.168 oz/t Au over 6 ft)
intersected the zone, 487 m (1,600') west of the last encountered ore grade
within the "A" Zone at 13,500 E. The hole was drilled to test the eastern
extension of the mineralized shear structure (N080(degree)) identified in the
Agar #1 outcrop which had been mechanically stripped, washed and channel sampled
during the summer of 1987. Most of the ore grade intersects occur along two
converging subhorizontally plunging ore shoots. Several spectacular
intersections were encountered within these ore shoots which indicate that the
West Zone is laterally continuous for more than 800 ft, and remains untested to
the west. However, sub-economic intersections above and below the ore shoots
suggest the ore lenses are vertically discontinuous. Lateral continuity of the
structure from section to section is obvious but gold mineralization appears
sporadic and essentially concentrated in the vicinity of Sections 12,100E and
12,300E. The B West Zone seems to be the extension of the B Zone documented at
the Bachelor Lake mine. The zone dips at about 80 to 85(degree) (almost
vertically) and shows only very sporadic grades over a cut-off grade of 3.43 g/t
Au (0.10 oz/t Au). This zone is characterized by a strong silica and hematite
alteration, and by local brecciation.

DRILLING

On the Hewfran Claims, the last drilling campaign was done between 1987 and 1989
by Aur. Their program has included 47 surface holes for 14,255.5 m (46 770`) and
96 underground holes for 10,401 m (34 125`). Between 1990 and the 2005
underground drilling program, two drilling programs were completed on the
Bachelor Claims. In 1990, Acadia Mineral Ventures Ltd, a subsidiary of Hecla,
drilled 34 holes for a total of 4,807m (15,722') from the underground workings
at various locations on the 11th and 12th Levels. In 1995, Espalau drilled 10
holes from surface for a total of 2,572m (8,438'). This surface drilling program
was executed by Geospex Sciences Inc. ("Geospex"). From 1987 to 1989, the
western block of the property (Hewfran Claims) was the site of a major drilling
program: 47 holes drilled from surface for a total of 14,259 m (46,770'), and 96
holes drilled from underground for a total of 10,404 m (34,125').

In 2005, the Bachelor Lake JV conducted a major underground drilling program
comprised of 69 holes for a total of 13,345 m. This program was initiated by
Halo and later followed by Metanor and the Bachelor Lake JV. A surface drilling
program is presently underway by the Bachelor Lake JV on the property. The main
goals of the 2005 underground drilling program were to upgrade and increase the
resources. The drilling program was originally designed by Yves A. Buro,
geological consultant for Wolfden and was initiated by Y. Buro for Halo. The
complete 2005 drilling program (69 holes) was finally performed from two fixed
drill stations located on the 12th Level by performing azimuth drilling. The
drill program was initiated with the objective of upgrading the resources by
performing 20-25 m (75') drill centers on the Main Zone and to some extents on

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the "B" and "A" zones, which are located closer to the two drill stations. The
2005 drilling program was also designed to further define and build tonnage, and
to improve the understanding of the geological setting and the continuity of the
ore lenses. Despite the fact that this program was performed in restricted area,
it successfully:

- filled the central gap between the T1 fault and the A Zone and also
between the two main ore shoots with seventeen holes;
- infilled the gaps left with the previous exploration programs (the 1990
Hecla program) with twenty-four drill holes;
- extended the mineralized zones laterally to the west, on the footwall
of the Waconichi fault and at depth with nineteen holes;
- extended and connected the Bachelor resources to the west with the
Hewfran Claims with six holes; and
- extended the mineralized zones to the east side with three holes.

Initially, the underground program (dewatering and drilling) was carried out to
complete the work requirement of Wolfden (later transferred to Halo) for the
acquisition of 50% of the property. During the fall of 2004, the dewatering of
the Bachelor Lake mine was initiated by Wolfden in order to facilitate the
underground drilling program. The dewatering of the mine was performed by CMAC
and was completed during the winter of 2005. From April 6 to July 26, 2005,
sixty-nine holes (BQ size) were drilled by Forage Orbit of Val-d'Or for a total
of 13,345.55 m (44,977.36').

At the beginning and for the period from April 6 to May 2, 2005, the drilling
program was completed, planned and logged by Yves A. Buro (for Halo). At the end
of April, Halo mandated InnovExplo to continue the drilling program already in
progress. A meeting between Y. Buro, A. Carrier and J. Davy (InnovExplo) was
organized at Bachelor Lake Property on April 27, 2005. The local geology, main
geological features, sampling protocol and drilling parameters were then
transmitted. These parameters could be summarized as follows:

- core logging, sample intervals, RQD in meters on Excel spreadsheets;
- deviation tests were obtained from a Flex-It instrument;
- planning was done on the Bachelor Lake local grid in feet and oriented
24(degree) east from the geographic North;
- drill holes were planned using quick logs (brief descriptive
follow-up), plotted on plan views and azimuth sections (usually without
assay results);
- holes were stopped generally 6m (20') after the targeted alteration
zones; no exploration holes were then attempted;
- pictures of the entire core were taken systematically;
- three standards were used and inserted in each batch of 20 samples;
- blanks were taken from an "assumed" barren local rock source
(homogeneous intermediate volcanic tuff between 108 and 132m and
inserted into regular sample sequence every 20 to 30 samples,
preferentially after a mineralized zone;
- no visible gold documented and no special treatment for sample with
visible gold; and
- samples were sawed in halves and sent by bus to ALS Chemex laboratory
in Val d'Or.

On May 2, 2005, more than 25% of the entire program was already drilled (3,500 m
with 22 holes). Some of these holes were twinning historic drill holes and
others were following a 20-25 m (75') centers infill program with the Main Zone
as the principal target. The three mineralized zones ("Main", "A" and "B" zones)
were usually intersected in each hole. Nine holes out of twenty-two were already
logged by Yves Buro. Thirteen holes were not described (back log) and fifteen
holes were not sampled. Logging and sampling of these holes were performed by
InnovExplo.

From May 2, 2005, to July 26, 2005, InnovExplo's geologists and Qualified
Persons, Julien Davy, P.Geo, M.Sc. and Eddy Canova, P.Geo, B.Sc., were on site,
on scheduled rotations of 7 days in and 7 days out (12 hours per day) for
planning, interpretation, follow-up and core logging. During this period, Alain
Carrier, P.Geo, M.Sc. (InnovExplo) made about ten visits on site to follow up
and supervise as a Qualified Person for the program. Sampling, core moving and
technical support were performed by InnovExplo's exploration technicians, also
on a rotation schedule of 7 days in and 7 days out (12 hours per day). On site,
InnovExplo had the support of Halo's geologist, Patrick McLaughlin, B.Sc., to
catch up with the logging. InnovExplo also logged drill holes during P.
McLaughlin's vacation. To catch up with the sampling, some of the core was sent
to Val-d'Or and sampled at Metanor's core shack and at InnovExplo's core shack.
Data management (core logging database, assay tables, data entry and validation
for 2005 drill holes) was performed by InnovExplo in collaboration with
Tech2Mine Inc. During the drilling program, discussions were held periodically

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with Tom Healy (Halo). Follow-ups and press releases were accomplished in
collaboration between InnovExplo and the Company. Denis Blais, Yves Buro
(consultants for Halo) and Andre Tremblay (Metanor) were also involved in the
drilling program.

Some logistical aspects of the drilling program were changed. Core logging was
done using "access format" logging software (Geotic Log). Sampling, security and
sample shipping and laboratory protocols were established or changed during May
2005. Deviation tests obtained from the Flex-It instrument and assay results
from ALS-Chemex were electronically transferred in the Geotic Log database. By
June 23, 2005, all the holes in the back log were completed and the geologists
were following the production of the two rigs. By the end of the program, in
July 2005, all the collar locations were surveyed and all the assay results were
received within fifteen days after the end of the program.

From April to July, 2005, a total of 13,345.55 m (44,977.36') was drilled from
69 holes (BQ size). A total of 3,555 samples were taken from these holes.
Approximately 24.8% of the total drilled length was sampled for an amount of
3,307.63 m. Drilling was performed by Forage Orbit of Val-d'Or, on a basis of
two 12-hour shifts per day using two rotating crews per drill to ensure non-stop
drilling during the program. The program was performed with azimuth holes
drilled from two fixed drill stations located on the 12th Level of the Bachelor
Lake. The two drill stations were located 45 m (150') apart. From the total of
13,345.55 m, 6,854.55 m were drilled from drill station #1 and 6,496.00 m from
drill station #2. The whole program was drilled from the deepest level of the
Bachelor Lake mine, 12th Level (level at 8,328' elevation). The 12th Level is at
- -516 meters (1,692') below the surface level.

The entire drill campaign was logged using Geotic Log core logging software. All
sample results were regularly imported to this database which also contains
collar location, deviation test, assay results, RQD and recovery information
that were measured during logging by the geologists. The program was conducted
while taking into account all the recent MRNFP environmental standards and
procedures. All holes (collars) were identified using aluminium ID tags.

It should be noted that neither the recent underground holes nor the historic
underground drill holes have been cemented. All the underground diamond drill
holes must be cemented before any further underground works are performed.

Plan views, azimuth cross-section and longitudinal views were used as follow-up
and planning purposes, using final logs when available or more often quick logs
results. Regular north-south cross-sections (grid 24(degree)E) were drafted
occasionally during the program in order to help with the planning aspect. Final
interpretation was realized on north-south cross-sections. Reaching a specific
target (every 20-25 m (75')) with an azimuth hole was challenging, especially
when the mineralized zones showed changes in strike and dip. With azimuth
drilling, thicknesses are apparent and the real picture of the geology is
difficult to establish. Core lengths of a zone can be four times its true width.
Estimated horizontal widths for the mineralized zones were obtained on the
north-south cross-sections. A slight deviation of 2(degree) has a real impact on
the final locations of a drill intercept when the hole is drilled with an
azimuth in the range 60(degree) to 75(degree). Furthermore, the mineralized
zones at Bachelor Lake are discordant (in plan and in section) to the
volcano-sedimentary sequence (stratigraphy is folded and overturned); in this
particular case, the deviation of a hole is hard to predict.

Underground, the planned holes were spotted using front sight and back sight
aluminium ID tag ("spade") each 10(degree) by a surveyor crew (using the
Bachelor mine grid at 24(degree)E of the true north). Drill hole planning
(collar azimuth and plunge) was prepared to fit either these 10(degree) surveyed
tags or their mid-distance. The planning indications were transferred to the
drilling team using a single information sheet per drill rig with the hole
number, azimuth and plunge at the collar and planned length. Holes were spotted
by Forage Orbit's driller under the supervision of Francois Faucher (foreman).
The method was to bring the drill rig parallel to a rope attached from the front
to the back sight tags. No central point was used as a rotation point for the
drill rig which resulted in the variation of the collar location in the drill
stations. Each collar location was later surveyed by the surveyor crew.

Deviation tests for the drilled holes were obtained from down-hole surveys with
Flex-It instrument rented from Fordia Canada and used by the drilling
contractor. Measurements (azimuth, dip, and magnetism) were taken every 3m when
the hole was completed while pulling out the rods. In some long holes,
measurements were taken several times to be able to follow the deviation of the
hole during its progression and to ensure that the target would be attained.
Strong magnetism associated with some of the volcanic units may have influenced
the electronic multi-shot instrument. A statistical mean for non-magnetic rocks
at Bachelor has been determined to calibrate the instrument. Twenty-three
multi-shot surveys representing 379 non-magnetic measurements have been used for
the mean of 56,279 nano tesla ("nt") with outer limits of +/- 1,500nt. This
value was used for all down-hole surveys completed during the 2005 drilling
program. The azimuth and dip surveys for each hole have been compiled, checked
and transferred in the database.

-42-

RESULTS AND HIGHLIGHTS OF THE 2005 DRILL PROGRAM

Out of the 69 holes drilled during the 2005 drill campaign, 40 holes intercepted
composite grades over a cut-off of 3.43 g/t Au (0.10 oz/t Au) on a minimum
horizontal width of 1.5 m (5'). Eight holes intercepted a mineralized interval
having a horizontal width over 6m (20'): 6.97 g/t Au over 7.92m; 13.08 g/t Au
over 7.62m; 7.03 g/t Au over 6.40m; 9.72 g/t Au over 7.92m; 12.62 over 6.10m;
9.88 g/t Au over 7.92m; 10.35 g/t Au over 8.53m; and 7.40 g/t Au over 8.23m.
Fourteen composite mineralized intervals have a grade higher than 10 g/t Au
(0.29 oz/t Au): 14.84 g/t Au over 1.98m; 14.31 g/t Au over 5.64m; 17.76 g/t Au
over 3.66m; 16.83 g/t Au over 3.05m; 14.22 g/t Au over 4.57m; 16.36 g/t Au over
1.52m; 16.00 g/t Au over 2.29m; 10.35 g/t Au over 8.53m; and 26.47 g/t Au over
1.52m.

For the overall program and from the 29 holes that did not intercept a
significant grade, nine holes do not seem to have reached the targeted area.
From these nine holes: two holes ended in the O'Brien granite; one hole was
dyked out (porphyritic monzonite intercepted at the location of the "Main"
zone); one hole was planned to reach the O'Brien granite contact at depth and
not the "Main" zone; two holes were planned using a natural deviation which did
not happen; and three holes appeared to be too short according to the final
geological interpretation.

The drill program has greatly enhanced the understanding of the geological
structure at depth and has led to the generation of significant new drill
targets. This knowledge has the potential to significantly increase resource
tonnage. Geological review has demonstrated that significant increase in both
gold grade and thicknesses appeared particularly at the intersection between
major structures.

Sampling Method and Approach

Sampling method and approach for both historic and new exploration are
considered by InnovExplo to be appropriate and accurate.

SAMPLING METHOD BEFORE 2005 UNDERGROUND DRILLING PROGRAM

Met-Chem Canada Inc. ("Met-Chem") completed a review of the sampling protocol
employed at the Bachelor Lake Mine during the production period. Sampling of the
drill holes (BQ and AQ size) is very regular with geology being the first
criteria to determine the sample length and that did not exceed 1.5 m (5').
During the Hecla drilling program, some gaps were noted in the sampling. Except
for the Met-Chem review, there was no systematic review of the sampling method
and approach in the historical assessment works. However, it can be stated that
the sampling method and approach used were essentially core samples, chip
samples and muck samples from underground development at the Bachelor Lake mine
and the Hewfran East area. During the Aur drilling program on the Hewfran
Claims, similar sampling protocols were used with the AQ and BQ size core. For
Hewfran, the zones were either sawed or split in half for the sampling. Aur has
also used chip and muck samples from underground levels. Moreover, Aur did a
bulk sample test on the Hewfran Claims. Prior to the publication of NI 43-101
standards, it was generally assumed that the data provided was accurate and
reproducible.

2005 DRILLING SAMPLING METHOD

From April 6 to July 26, 2005, 69 BQ size (36.5 mm diameter) drill holes were
performed by Forage Orbit Inc., for a total of 13,345.55m (44,977.36') using the
industry standard wire line methods. All of them were drilled from two
underground drill stations at the 12th Level. Fifty-two reached the mineralized
zones in the Bachelor Claims, while 17 reached the mineralized zones in the
Hewfran Claims. Holes were planned using the Main Zone longitudinal section with
intercepts every 22.8 m (75'). The 2005 drill hole database contains a total of
3,555 samples. One hundred percent of the 2005 drilling program was stored and
categorized for future reference purposes in the core library located at the
Bachelor Lake site. Due to limited access, the 2005 drilling was performed with
azimuth holes from two drill stations. For azimuth holes, the difference between
the core length and true thickness could be considerable (core length can be 10
times the true thickness for drilled holes at 85(degree) azimuth). All
thicknesses are horizontal width and were calculated on sections. For the 2005
drilling program, the core sampling protocol was established by InnovExplo.

CORE SAMPLE QUALITY AND REPRESENTATIVENESS

During the 2005 drilling, 3,251 samples were submitted for gold analysis,
representing 3,347.63m (24.4% of total drilled length). Inserted throughout
these samples, 304 blanks and standards (8.55%) were also shipped for a
controlled follow-up for a total of 3,555 samples. Every altered zone containing
pyrite or every wide altered zone was considered potentially mineralized and
therefore sampled. This systematic exploration sampling allowed to confirm the
attitude of mineralization within the altered zones as well as other lateral
small mineralized zones. Samples collected through the diamond drilling are of

-43-

good quality. The mineralization in the core is generally intact with no
possibility of loss due to wash out. The hardness nature of the mineralized
zones (hematization and silicification) explains the excellent recovery for the
mineralized zones. The core was rarely ground on short distances (less than 0.5
m). Overall, the drill core sample recovery from the mineralized zones can be
considered to be representative.

SAMPLE PREPARATION, ANALYSIS AND SECURITY

Sampling, preparation, security and analytical procedures used on the property
were judged to be adequate. Results from the pre-2005 sampling and assaying are
considered to be good. The performance of the laboratory during the 2005
drilling program was good.

SAMPLE PREPARATION AND ANALYSIS BEFORE 2005

During the mine operation, assays were performed at the local laboratory of the
Bachelor Lake mill. This local laboratory did not have any accreditation and the
method used to determine the primary gold assays was by atomic absorption ("AA")
and not by fire assay ("FA"). Check assays were occasionally made by fire assay
in an independent and accredited laboratory (Bourlamaque Laboratory in Val-d'Or,
Quebec). There was clearly a positive correlation between the AA assay values
and the FA check assay values. Furthermore, a total of 46 samples selected from
five holes showed a direct correlation between original and check assay values
from the Hecla drilling program. Met-Chem cited that no problems were reported
for the in situ analyses. Sampling protocol employed at the mine during the
production period was reviewed by Met-Chem in 2001.

SAMPLE PREPARATION AND ANALYSIS DURING 2005 UNDERGROUND DRILLING

Sampling and laboratory protocol for the 2005 drilling program were defined by
InnovExplo. During the program, core samples were sent to ALS Chemex Chimitec in
Val-d'Or. At the laboratory, all the bags were opened and conformed to the
laboratory protocols. The laboratory delivered results in electronic format
through the ALS Chemex webtrieve Internet access as well as an e-mail sent to
the data manager. Assay results were reported in grams per tonne and transferred
directly in the central assay data base (GeoticLog and Gems).

QUALITY ASSURANCE / QUALITY CONTROL (QA/QC) PROGRAM

No contamination was discovered during the 2005 drill program. The good
performance of the laboratory for external standards (field standard) is an
evidence of accurate determinations being made by the laboratory. The QA/QC
analysis of the pulp duplicate demonstrates a reasonable level of precision with
overall approximate errors of 12%. This level of error is not uncommon for
Archean gold deposits where the principal component of the ore is often "freely"
liberated gold. In fact, many coarse "nuggety" gold deposits demonstrate much
poorer levels of precision in pulp duplicate sample results. Precision of
metallic screen assay (150 mesh pulp duplicate) was analyzed. The metallic sieve
method incorporates duplicate fire assay determinations of the -150 mesh
fraction of the screened pulp. The results demonstrate that precision levels of
the screened pulp duplicate assays are overall approximately 6.5%. A 5% residual
"nugget" effect at 150 mesh is quite acceptable for this type of gold
mineralization. The result for the coarse duplicate was not that good. The
extremely large introduction of error between coarse and pulp duplicates is
clearly indicative of unrepresentative 1 kg coarse crush sample splits. The
cause may be inappropriate crush/splitting specifications or related to original
field sample size, while this type of error may not result in any global change
in resource estimation.

DATA VERIFICATION

The Gemcom (GEMS 5.51) database used for the 2005 resource estimation included
15,192 assay results from 394 diamond drill hole records (each having hole ID,
collar location, deviation test, geology, assay result, etc.). From the total,
325 were historical holes that were compiled and 69 holes were new. Both the
historical and the new data acquired were validated.

DATA ENTRY AND VALIDATION

On the Bachelor Claims, 80 underground drill holes from the Bachelor Lake mine
and 2,315 assays have been compiled by Halo. No original assay certificates were
available but 100% of the assay results were checked against the original logs
by Tech2Mine, an independent database management firm. Tech2Mine has compiled
and entered some surface holes and underground drill holes located below the 9th
Level of the Bachelor Lake mine.
Sixty drill holes and 1,978

-44-

assay results were added to the database. Forty-two assays have been checked
against original assay certificates and all the others were checked against the
original logs.

InnovExplo reviewed the geological setting of the gold mineralization at
Bachelor Lake. Selected intervals from the hole 12-33 were examined. Core from
mineralized intervals in seven other holes were reviewed . On the Hewfran
Claims, 185 holes and 7,650 assay results were transferred from the Aur Gemcom
database into the new database. Verification by Tech2Mine has included the
verification of assay results against original assay certificates (for 2,557
results) and all other results were checked against the original logs.
Verification has also included the 2005 drilling program, where nine holes were
checked and transferred from logging in Excel to the new logging software
GeoticLog. All the assay results obtained during the 2005 campaign were checked
against the original assay certificates for the 69 new holes. Existing maps with
stopes and drifts were used by Tech2Mine to support new drilling information.
This data was provided to InnovExplo by Genivar (formerly Leandre Gervais &
Associes Inc.) in AutoCad format. Tech2Mine has also validated collar location
and surveys when available for the data from 9th to 12th Levels. Numerous holes
did not have deviation data and were then plotted linearly. Bachelor grid
orientation appears on several plans at 24(degree) east of true north. A grid
orientation of 24(degree) east was used for data entry and during the whole 2005
program. Some deviation, typically related to grid variation as collar holes in
the drift wall, appears. Until now, no adjustment has been made to correct this
deviation, but the author recommended fixing this situation by rotating the
whole database 0.5(degree) to the west. The real Bachelor Lake grid orientation
is more likely to be at 23.5(degree) east and not 24(degree) east.

2004-2005 CHECK ASSAYING RESULTS

In 2004, Wolfden, in the course of their due diligence, took some check samples
and assaying of selected intervals from drill core. In October, 2005, InnovExplo
re-sampled 24 samples within the "A West" mineralized zones from six drill holes
on the Hewfran Claims. Fifteen samples were coming from the Hewfran West area
and nine from the Hewfran East area. Core boxes containing mineralized zones
intersections were already in Val d'Or, at the Alexis Minerals Corporation core
shack. Selected cores were transported at Metanor's core shack where they were
examined and re-sampled by InnovExplo's team. Quarter splitting was then
performed by Metanor's technician for the fifteen Hewfran West BQ core samples
while the other nine were entirely sampled because of their AQ size. Two high
grade certified standards were also inserted into sequences, and samples were
sent to ALS Chemex laboratory in Val d'Or. The same analytical package as the
last underground drilling program was requested. Focus was made on several high
grade assay results obtained by Aur.

All check samples were assembled and separated into 4 groups:

- 2 samples below the cut-off grade (under 0.1 oz/t Au) have a difference
of 0.003 oz/t Au;
- 6 samples close to the cut-off grade (from 0.1 to 0.15 oz/t Au) have an
average difference of 0.004 oz/t Au. This important verification
minimized the risk associated to misclassification of ore and waste
block material;
- 10 samples close to the resource average grade (from 0.15 to 0.3 oz/t
Au) have an average difference of 0.015 oz/t Au. This significant low
difference also means that the overall average may not change
drastically. Although some absolute difference can be as high as 0.284
oz/t Au, meaning that on a local basis, some ore blocks may have been
overestimated or underestimated; and
- 10 samples with high grade assay results (over 0.3 oz/t Au) have a
greater average grade difference (0.043 oz/t Au). Locally, some grade
can be either over or underestimated.

CONFIRMATION DRILL HOLE FROM CURRENT BACHELOR LAKE JV EXPLORATION PROGRAM

The Bachelor Lake JV is presently realizing a surface exploration program at
Bachelor. The current drilling exploration program includes one confirmation
drill hole located in the Hewfran East area in order to confirm Aur results. The
drilling program is performed by the geologist, Patrick McLaughlin (Halo), under
the supervision of Kevin Leonard (Halo). The mineralized zone has been confirmed
in the hole B05-117A and the Main Zone was intercepted between 366.1m and 373.2m
with results of 9.27 g/t Au over 1.8 m (0.27 oz/t Au over 5.9') contained within
3.56 g/t Au over 7.1 m (0.10 oz/t Au over 23.62').

MINERAL RESOURCE ESTIMATES

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED
AND INFERRED RESOURCES. THIS SECTION USES THE TERMS "MEASURED", "INDICATED" AND
"INFERRED" RESOURCES. THE COMPANY ADVISES U.S. INVESTORS THAT WHILE THOSE TERMS
ARE RECOGNIZED AND REQUIRED BY CANADIAN REGULATIONS, THESE DEFINITIONS HAVE NOT
BEEN ADOPTED FOR USE BY THE SEC. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT

-45-

ANY PART OR ALL OF MINERAL DEPOSITS IN THESE CATEGORIES WILL EVER BE CONVERTED
INTO RESERVES. "INFERRED" 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 ANY PART OF AN INFERRED RESOURCE
WILL EVER BE UPGRADED TO A HIGHER CATEGORY. UNDER CANADIAN RULES, ESTIMATES OF
INFERRED RESOURCES MAY NOT FORM THE BASIS OF FEASIBILITY OR PRE-FEASIBILITY
STUDIES, EXCEPT IN RARE CASES. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT
ALL OR PART OF AN INFERRED RESOURCE EXISTS, OR IS ECONOMICALLY MINEABLE.

The following table sets forth the estimated mineral resources at Bachelor Lake
as of October 5, 2005.

- --------------------------------------------------------------------------------
BACHELOR LAKE MAINERAL RESORUCES (METRIC UNITS) (1)(2)(3)(4)(5)(6)(7)(8)
- --------------------------------------------------------------------------------
BACHELOR HEWFRAN TOTAL
- --------------------------------------------------------------------------------
Measured Metric Tons(t) 177,898 14,696 192,594
Grade (g/t) 8.83 8.50 8.80
----------------------------------------------------------------
Oz. of Gold 50,487 4,018 54,504
----------------------------------------------------------------
kg of Gold 1,570 125 1,695
----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Indicated Metric Tons(t) 465,928 183,069 648,997
Grade (g/t) 7.63 7.14 7.49
----------------------------------------------------------------
Oz. of Gold 114,329 42,024 156,352
----------------------------------------------------------------
kg of Gold 3,556 1,307 4,861
----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Measured + Metric Tons(t) 643,826 197,765 841,591
Indicated Grade (g/t) 7.96 7.24 7.79
----------------------------------------------------------------
Oz. of Gold 164,815 46,042 210,857
----------------------------------------------------------------
kg of Gold 5,126 1,432 6,556
----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Inferred Metric Tons(t) 207,517 218,630 426,148
Grade (g/t) 6.76 6.30 6.52
----------------------------------------------------------------
Oz. of Gold 45,083 44,283 89,366
----------------------------------------------------------------
kg of Gold 1,402 1,377 2,778
----------------------------------------------------------------
- --------------------------------------------------------------------------------

1.) The Qualified Persons for the mineral resource estimate were Alain
Carrier, M.Sc., P.Geo. and Julien Davy, M.Sc., P.Geo. (InnovExplo
Inc.), and the effective date of the estimate is October 5, 2005.
2.) Mineral resources are not mineral reserves and do not have demonstrated
economic viability. Due to the uncertainty which may attach to inferred
mineral resources, there is no assurance that inferred mineral
resources will be upgraded to proven and probable mineral reserves as a
result of continued exploration.
3.) Results are presented undiluted and in situ, and some resource blocks
may be locked in pillars. The estimate included six (6) gold-bearing
zones ("Main", "A", "B", "C", "A West" and "B West") and covers the
Bachelor Lake, Hewfran East and West areas.
4.) The resources were compiled using a cut-off grade of 3.43g/t Au. This
cut-off must be re-evaluated in the light of the present market
conditions: gold price, exchange rate and mining cost. A fixed density
of 2.755g/cm(3) was used. A minimum of 1.5m horizontal width was
applied, using the grade of the adjacent material when assayed, or a
value of zero when not assayed. High grade capping were fixed at
51.4g/t Au for the "Main" zone, and to 34.3g/t Au for the "A", "B",
"C", "A" West and "B" West zones and were done on 0.75 m drill hole
composite interval.
5.) Measured resources were evaluated from a polygonal method using
underground geological mapping and face sampling assay results.
6.) Indicated and inferred resources were evaluated from drill hole results
using a block model approach (inverse distance squared interpolation)
constrained within six (6) individual 3D wire frames ("Main", "A", "B",
"C", "A West" and "B West" zones).
7.) Calculations used Imperial units (feet, short tons and oz/short ton Au)
and results were rounded to reflect their "estimate" nature. These
results were later converted into Metric using a factor of 0.90178 for
the conversion of short tons into tonnes and a factor of 34.2865 for
the conversion of oz/t Au into g/t Au.
8.) The Company is not aware of any known environmental, permitting, legal,
title, taxation, socio-political, marketing, or other relevant issues
that could materially affect the mineral resource estimates.

-46-

MINERAL RESERVES

There are no mineral reserves estimated for the Bachelor Lake property.

MINERAL PROCESSING AND METALLURGICAL TESTING

Results from previous metallurgical testing were not available for Bachelor.
InnovExplo presumed that metallurgical tests were conducted prior to the mill
opening. The historic mill recovery rate during a period of seven years (between
1982 and 1989) ranges from 91.8% to 93.7% (refer to the Table below). The
average gold recovery rate of 93.0% obtained from historic milling at Bachelor
Lake may be an appropriate estimate for the Bachelor Lake resources.

- --------------------------------------------------------------------------------
BACHELOR MILL OPERATING STATISTIC
- --------------------------------------------------------------------------------
YEAR MILLED HEAD GRADE RECOVERY RATE MILL AVAIL. OUNCES PRODUCED
(SHORT TONS) (OZ/T) (%) (%)
- --------------------------------------------------------------------------------

1982 73,178 0.124 - - 8,077
1983 166,894 0.166 92.0 91.0 25,627
1984 156,086 0.140 92.4 85.5 20,104
1985 164,081 0.141 93.6 87.1 21,729
1986 136,520 0.158 93.7 83.3 20,140
1987 31,650 0.151 91.8 92.2 4,391
1988 144,298 0.146 92.7 86.9 19,516
1989 85,661 0.141 92.7 93.1 11,445
- --------------------------------------------------------------------------------
TOTAL 958,368 0.147 93.0 88.4 131,029
================================================================================

The Bachelor Lake JV is presently revising the actual conditions of the Bachelor
Lake mill. This mandate has been given to Genivar (formerly Leandre Gervais &
associes engineering firm) and will include a review of adequate mineral
processing for the Bachelor Lake gold mineralization.

In September 1988, Aur performed a mill test from a bulk sampling from their 6th
and 8th Level in the Hewfran east area. According to Aur memorandums, +/- 3,300
tons (784 skips @ 4.0 tons per skip) were taken from the "Main" zone at the 8th
Level and +/- 2,300 tons (601 skips at 4.0 tons per skip) were taken from the
"A" zone at the 6th Level. Bulk samples were milled at the Bachelor mill under
the supervision of Aur engineers. No official final report on the mill test was
found by InnovExplo. However, several memorandums indicated that they first
milled the A Zone but also mixed it with the Main Zone muck samples. This mix
was proposed to avoid documented dilution problems on the "A" zone (probably due
to the presence of a chlorite rich footwall as suggested by Aur's geologists).
Before the mill test, Aur anticipated 2,800 to 3,300 st at 0.148oz/t Au (from
the Main Zone at the 8th Level) and 2,300 st at 0.091oz/t Au (from the "A" zone
at the 6th Level) for a total of 5,600 st at 0.123oz/t Au (underground mucking
sampling average).

The last daily report from the Bachelor mill (September 25, 1988) stated that
5,783 short dry tons were milled at an average of 0.1094 oz/t Au, and yielded a
bullion bar of 736.46 ounces, of which 632.84 ounces were gold. The calculated
mill recovery was 91.96 %. The results correspond to a discrepancy with the Aur
calculated stock pile grades (0.123 oz/t Au). The extra 175 to 200 tons of waste
(0.001 oz/t Au) was explained by surface pod scraping, in view of the large
surface area covered by the muck and was even considered as an excellent
execution by scoop operators. However, these added waste tons did not explain
the discrepancy (11%).

Following operation at the Bachelor Lake underground mine, the owner at that
time, Espalau, gave Geospex the mandate to prepare a restoration plan proposal
(phase 1) for the Bachelor Lake mining site. The restoration plan proposal was
described in a report dated January 1997 and submitted for approval to the
Service du developpement et du milieu miniers of Quebec government for which no
offical response was given because of the "temporary closing" status of the
site. However, the property was considered conform in the conclusion of a
preliminary report in February 1998. This report also mentioned that the

-47-

Ministere de l'Environnement did not add any recommendations. The mining
contrator on site is currently keeping the mine dewatered. The water is pumped
from the underground workings into the tailing pond in conformity with the
Certificate of Authorization delivered by the Ministere de l'Environnement du
Quebec on June 28th, 2004. Exploration activities on the property conform to the
Quebec regulations.

EXPLORATION AND DEVELOPMENT

The Bachelor Lake JV is obligated to satisfy a $1.6 million work commitment to
acquire a 100% interest in the Hewfran Claims from Aur. In addition, the
Bachelor Lake Report recommended a two-phase work program for the Bachelor Lake
Property comprised of: (1) expansion of the underground mineral resource base
and completion of a pre-feasibility study; and (2) improving the knowledge and
definition of the mineral resources on the property and the preparation of a
feasibility study. The pre-feasibility study will have to demonstrate the
economic viability of the mine as a justification for proceeding with the second
phase of the work program. The second phase activities will lead to the
preparation of a feasibility study that will confirm that the economic viability
of the mineral resources is suitable to solicit funds from external sources. The
costs of the first phase work program is estimated at $4.9 million and the
second phase is estimated at $8.5 million. The costs of each phase are broken
down as follows:

- ------------------------------------------------------------------------------------------------------------
PHASE I - UNDERGROUND EXPLORATION PROGRAM AND PRE-FEASIBILITY STUDY
- ------------------------------------------------------------------------------------------------------------
PHASE I WORK PLAN AND BUDGET UNITS UNIT COST TOTAL COST
$ $
- ------------------------------------------------------------------------------------------------------------

1.) SURFACE EXPLORATION PROGRAM
- ------------------------------------------------------------------------------------------------------------
Test the West extension and develop
underground targets 7,500 m $ 100 $ 750,000
- ------------------------------------------------------------------------------------------------------------
Compile regional and local data base Lump sum $ 30,000 $ 30,000
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL $ 780,000
- ------------------------------------------------------------------------------------------------------------
2.) UNDERGROUND EXPLORATION PROGRAM
- ------------------------------------------------------------------------------------------------------------
Planning and design of the program Lump sum $ 30,000 $ 30,000
- ------------------------------------------------------------------------------------------------------------
Upgrade mine infrastructure Lump sum $ 1,450,000 $ 1,450,000
- ------------------------------------------------------------------------------------------------------------
Underground development 350 m $ 2,600 $ 910,000
- ------------------------------------------------------------------------------------------------------------
Underground diamond drilling program 12 000 m $ 100 $ 1,200,000
- ------------------------------------------------------------------------------------------------------------
Underground support and services 5 months $ 75,000 $ 375,000
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL $ 3,965,000
- ------------------------------------------------------------------------------------------------------------
3.) RESOURCE ESTIMATE AND PRE-FEASIBILITY STUDY
- ------------------------------------------------------------------------------------------------------------
Validation, interpretation, resource estimate Lump sum $ 70,000 $ 70,000
- ------------------------------------------------------------------------------------------------------------
Pre-feasibility study Lump sum $ 70,000 $ 70,000
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL $ 140,000
- ------------------------------------------------------------------------------------------------------------
4.) ENVIRONMENTAL AND PERMITTING
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL Lump sum $ 70,000 $ 70,000
- ------------------------------------------------------------------------------------------------------------
5.) INFORMATION PROGRAM
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL Lump sum $ 15,000 $ 15,000
- ------------------------------------------------------------------------------------------------------------
TOTAL PHASE I $ 4,970,000
- ------------------------------------------------------------------------------------------------------------

-48-

- ------------------------------------------------------------------------------------------------------------
PHASE II - UNDERGROUND EXPLORATION PROGRAM AND FEASIBILITY STUDY
- ------------------------------------------------------------------------------------------------------------
PHASE II WORK PLAN AND BUDGET UNITS UNIT COST TOTAL COST
$ $
- ------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------
1.) UNDERGROUND PROGRAM
- ------------------------------------------------------------------------------------------------------------
Infrastructure work and shaft rehabilitation Lump sum $ 460,000 $ 460,000
- ------------------------------------------------------------------------------------------------------------
Shaft extension 200 m $ 12,000 $ 2,400,000
- ------------------------------------------------------------------------------------------------------------
Underground development 300 m $ 2,600 $ 780,000
- ------------------------------------------------------------------------------------------------------------
Extraction of a bulk sample Lump sum $ 100,000 $ 100,000
- ------------------------------------------------------------------------------------------------------------
Underground development for drill program 800 m $ 2,600 $ 2,080,000
- ------------------------------------------------------------------------------------------------------------
Underground support services 13 months $ 75,000 $ 975,000
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL $ 6,795,000
- ------------------------------------------------------------------------------------------------------------
2.) RESOURCE INFILL AND EXPANSION DRILLING
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL 15 000 m $ 100 $ 1,500,000
- ------------------------------------------------------------------------------------------------------------
3.) FEASIBILITY STUDY
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL Lump sum $ 200,000 $ 200,000
- ------------------------------------------------------------------------------------------------------------
4.) CONTINUE ENVIRONMENTAL AND PERMITTING
- ------------------------------------------------------------------------------------------------------------
SUB-TOTAL Lump sum $ 50,000 $ 50,000
- ------------------------------------------------------------------------------------------------------------
TOTAL PHASE II $ 8,545,000
- ------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------
TOTAL PHASE I AND PHASE II $ 13,515,000
- ------------------------------------------------------------------------------------------------------------

ADJACENT PROPERTIES

The Bachelor Lake JV also owns claims adjacent and contiguous to the Bachelor
property. Subsequent to August 10th, 2005, Metanor acquired the MJL Claims and
Hansen Claims respectively located adjacent to the north and to the west of its
property from MJL Explorations and J. Hansen. The MJL Claims are comprised of 74
claims (1,976.36 ha) and the Hansen Claims are comprised of 14 claims (311.33
ha). Metanor paid a sum of $10,000 and issued 50,000 common shares from its
capital stock to the vendors. Metanor will pay the same amount to the vendors
every year over a three-year period (2006 to 2008 inclusively). The acquisition
amounts to $40,000 and 200,000 Shares. The vendors were also granted a 2% NSR,
redeemable under certain conditions.

QUARTER MOON LAKE PROPERTY, MANITOBA

On February 9, 2005, the Company signed a letter of intent (the "Quarter Moon
LOI") with Endowment Lakes (2002) Limited Partnership ("Endowment Lakes")
granting the Company the option to earn up to an 80% interest in the Quarter
Moon Lake Gold Property in north-central Manitoba. Under the Quarter Moon LOI,
the Company was granted the right to acquire an initial 51% interest in the
property by paying $40,000 and issuing 50,000 common shares upon regulatory
approval of the transaction, completing a $250,000 minimum work commitment in
the first year, paying a further $40,000 and issuing 50,000 common shares on the
first anniversary and completing a further $300,000 minimum work commitment in
the second year. The Company was granted the further option to earn an
additional 29% interest by completing an additional $1.5 million in exploration
and development over a subsequent two-year period and paying an additional
$40,000 and issuing 50,000 common shares on or before the third anniversary of
the Quarter Moon LOI. The Company is responsible for advancing the property to
production and will recover all costs out of production prior to sharing in
profits on an 80:20 basis. Endowment Lakes will hold a 1% net smelter returns
royalty on production from the property which may be purchased at any time by
the Company for $1 million.

-49-

SHERRIDON PROPERTY

The following information on the Sherridon Property is derived from the report
dated January 31, 2006 entitled "Technical Report on the Sherridon VMS Property,
North-Central Manitoba, Canada (the "Sherridon Report") prepared by Karen J.
Ferreira, M.Sc., P.Geo., who is a qualified person as defined in NI 43-101.

PROPERTY DESCRIPTION AND LOCATION

The Sherridon Property includes 56 mineral claims that total 10,972 hectares.
The Sherridon Property holdings are informally subdivided by the company in four
groups: the Sherridon, Sherridon East, Meat Lake, and Quarter Moon Lake. These
subdivisions are for the convenience of the Company only, and do not reflect any
regulatory designation by the Manitoba Government. The Sherridon and Sherridon
East claims are contiguous. The Meat Lake and Quarter Moon Lake claims are
contiguous. The Sherridon East claims are separated from the Quarter Moon Lake
claims by a distance of 1 km.

The Sherridon Property is in The Pas Mining Division of Manitoba, in NTS areas
63N/02 NW and 63N/03 NE, with a small portion of the claims extending into
63N/02SW and 63N/03SE. The main shaft of the past-producing Sherridon Mine is
located at 55(0)08'22"N 101(0)06'25"W. The centre of the Meat Lake claims is
located at about 55(0)08'N 100(0)48'W.

The Sherridon East and Meat claims were staked and are held by the Company.
Continued ownership of these claims by The Company is subject to meeting work
commitments set forth by the Mines and Minerals Act of Manitoba and its
accompanying Regulations.

The Quarter Moon Lake claims (i.e., Elm 7, Elm 8, Elm 9, Elm 10 and Elm 12) were
optioned by the Company from Endowment Lakes pursuant to the Quarter Moon LOI.
The Company has the right to acquire up to an 80% interest in the Quarter Moon
Lake claims pursuant to the terms of the Quarter Moon LOI. See "Item 4.
Information on the Company. Principal Properties - Quarter Moon Lake Property,
Mantitoba" for a summary of the terms of the Quarter Moon LOI.

The Crown owns surface rights for the areas covered by all of the claims except
for seven claims within the Sherridon Community Boundary. Within subdivisions of
the Sherridon Community Boundary, surface rights are held by a variety of
parties, including private individuals, commercial enterprises, the community
council; some lots are under the jurisdiction of the Crown Lands Branch.
Ownership, zoning and other matters are covered in the Sherridon Community
Council Land Use Policy, which was implemented in 1991 by Manitoba Northern
Affairs. The Kississing Lake management strategy, implemented in 1986 and
formally supported in the Sherridon Community Council Land Use Policy, was
developed to protect water quality of Kississing Lake and its surrounding
environs in order to encourage and maintain the tourist recreational industry.

The mineral claims have not been legally surveyed. The following map identifies
the location of the Sherridon Property:

-50-

Figure 1: Property Location

[GRAPHIC OMITTED][GRAPHIC OMITTED][OBJECT OMITTED]

Omitted graphic is Location Map of Sherridon Property
on map of the Province of Manitoba
showing location in reference to Flin Flon,
Cranberry Portage, The Pas, and Snow Lake

-51-

The past-producing Sherridon Mine, the Cold Lake deposit, and the Fidelity zone
(also known as Jonah Lake zone) occur on the Company's property. Claims
containing the Park Lake deposit, owned by Hudson Bay Mining & Smelting Co.,
Ltd., are contiguous with the Company's claims in the Sherridon area. The Bob
Lake deposit, owned by W. Bruce Dunlop Limited, is surrounded by the Company
claims. The mineral lease containing the Jungle Lake deposit, owned by Hudson
Bay Mining & Smelting Co., Ltd., is contiguous with the Company ground in the
Sherridon East area. The claim containing the Ake Zone, owned by W. Bruce Dunlop
Limited, is contiguous with the Company ground in the Meat Lake area.

Capped or fenced shafts and mine openings, tailings area, and other relics from
the mining operation that ceased in 1952 are present in and around the community
of Sherridon. The Company is in receipt of a letter of indemnification from the
Manitoba Director of Mines that "confirms that the Company will not be held
liable or responsible for any environmental contamination or degradation of or
alteration to the natural environment which presently exists or can be shown to
exist or to have occurred" prior to the Company's ownership of the claims, under
authority of clause 127(2) of the MINES AND MINERALS ACT (Manitoba) (the "Mines
and Minerals Act"), which provides that where rehabilitation of land is required
in respect of work performed thereon before April 1992 under a mineral lease
that expired or was surrendered or cancelled before that date, the person who
held the mineral lease is as liable for the rehabilitation as he or she would
have been if such legislation had not been enacted; and, where the land or any
part of the land is staked and recorded on or after April 1992, the holder of
the claim or mineral lease issued in respect of the land or any part of the land
is not otherwise liable under the Mines and Minerals Act for the rehabilitation.
The same letter advises that the Company, or its potential development partners,
may use an existing report prepared in November 2004 by UMA Engineering Ltd. and
Senes Consultants Ltd. as a baseline environmental impact study for the purposes
of identifying the existing environmental conditions of the tailings area, but
that the Company may need to update or upgrade the report with additional work
if the Company plans work in the immediate area of the tailings.

Exploration operations on the property are subject to the usual laws that
regulate mineral exploration and development throughout the Province of
Manitoba, including the Mines and Minerals Act and its Regulations and the
ENVIRONMENT ACT. A work permit is required from Manitoba Conservation to
undertake field work. The federal Department of Fisheries and Oceans recommends
that proponents obtain a letter of advice where exploration work is planned in
areas with fish habitat.

Fifteen claims lie within a Sanitary Area designated by Manitoba's chief medical
officer of health under the authority of the Sanitary Areas Regulation of the
PUBLIC HEALTH ACT. Sanitary Areas are designed to ensure water quality in a
community. If a proponent plans to conduct an activity within a Sanitary Area
that may impact water quality by either depositing material into the water or
establishing a camp or buildings for commercial purposes (including mining),
then the proponent must obtain written permission from the Minister of Health or
the chief medical officer of health.

Six claims lie within the Sherridon Community Boundary. Of these claims, three
claims include areas designated as Sherridon Subdivisions. Written consent was
granted prior to staking by the Minister of Mines to stake and apply for mining
claims within the subdivisions of Sherridon and Cold Lake. This written consent,
as well as support for mining exploration and development within the community,
was expressed in a letter from Sherridon Community Council to the Director of
Mines.

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The Sherridon Property is located approximately 65 km northeast of the city of
Flin Flon, Manitoba near the Northern Affairs Community of Sherridon, Manitoba
and the adjacent community of Cold Lake. Year-round access to Sherridon
(population ~115) is by a gravel road that extends 78 km from Provincial Highway
10, from approximately 15 km north of the community of Cranberry Portage. East
of Sherridon, the claims can be accessed in the summer by float plane, and parts
by quad trails and boat. In the winter, these claims are accessible by
snowmobile or ski-plane. Winter roads, logging roads and trails are available
throughout the area.

The Sherridon area is typical of the Precambrian boreal forest in Manitoba.
Relief is generally low, with rolling hills separated by lakes and swamps.
Glacial overburden is relatively thin, generally less than 10 metres. The claims
that constitute the Sherridon Property are located at approximately 300-340 m
above mean sea level. Upland areas are forested by jackpine, poplar and white
spruce; lowlands have abundant black spruce and tamarack. Flin Flon and The Pas
are the nearest places for which climate data are maintained by Environment
Canada; their data are similar, and are averaged here to provide information
about the Sherridon area: Average daily temperatures range from about
18(degree)C in July to -20.5(degree)C in January. Annual rainfall totals about
330 mm; annual snowfall totals about 135 cm. For areas with road

-52-

access, exploration may continue throughout the year. In more remote parts of
the property, exploration may be carried on year-round with interruptions for
freeze-up and spring thaw of the waterways.

Power lines, owned and operated by Manitoba Hydro, and a rail line, operated by
Hudson Bay Railway Company, a subsidiary of OmniTRAX Canada, go through
Sherridon. In addition to the Sherridon road, numerous active logging roads and
trails transect the project area. Sufficient water for exploration, and
potentially for mining, operations is readily available in many lakes in the
area. Flin Flon (population ~6500), Cranberry Portage (population ~1000) and The
Pas (population ~5800) all have well-developed road, rail, and air
transportation and businesses that service the mining, forestry, recreation, and
commercial fishing industries.

HISTORY

Prospecting in the Sherridon area dates back to the early 1920's, not long after
the Flin Flon copper-zinc deposit and other mineralization in the Flin Flon area
was discovered. Many claims were held by various parties through the years.
Claims that were staked, but had no work filed for assessment, are not included
in the exploration history of this report. In the last twenty years, claims of
this nature were held by numerous parties including (but not limited to) Aur
Resources Ltd., Foran Mining Corporation, Esso Minerals Canada, Homestake Mining
(Canada) Limited, Varna Gold Inc., Granges Exploration Ltd., Noranda Exploration
Company Limited, and a number of prospectors.

The Sherritt Gordon deposit was discovered and first staked by prospector Philip
Sherlett in 1922. Claims lapsed in 1924 and were restaked by other parties.
Sherritt Gordon Mines, Limited, was formed in 1927 to explore, develop, and mine
the property. The Sherritt Gordon mine at Sherridon operated from 1931 to 1932
and 1937 to 1951. Production took place from the West Lens from 1931 to 1932 and
1937 to 1951; production took place from the East Lens from 1940 to 1946. A
total of 166,093 tonnes copper, 135,108 tonnes zinc concentrate (50%), 2,867 kg
gold and 91,320 kg silver were extracted from 7,737,936 tonnes mined. As mine
closure at Sherridon became imminent, Sherritt Gordon Mines Limited, began
moving most of the buildings and equipment from Sherridon to Lynn Lake,
Manitoba, approximately 260 km away, where it was opening a nickel mine. From
1946 to 1953, Sherritt Gordon Mines Limited, moved more than 200 buildings via
tractor train over a winter road.

From 1924 to 1977, the ground near the Sherritt Gordon deposit was covered by
mineral leases owned by Sherritt Gordon Mines Limited. Sherritt engaged in
geological mapping, carried out an extensive geophysical survey of the northern
claims, and undertook considerable exploratory diamond drilling. Sherritt's work
is not included in government assessment files. Hudson Bay Exploration &
Development Co. Ltd. restaked the ground in 1977 and held it until 1994. The
ground was open for staking from 1994 to 1997. Peter C. Dunlop staked the ground
in 1997 and held it until 1999. From 1999 to 2002 the area near the deposit was
held by W. Bruce Dunlop (NPL) Limited. Some prospecting work was done adjacent
to the old tailings area. The ground was open for staking from 2002 to 2005,
when the Company staked it.

The Sherridon East and Meat Lake areas had a similar history with many early
prospectors' claims. Parts were covered by Sherritt Gordon Mines Limited mineral
leases, which lapsed at various times in the 1950's and 1970's. Hudson Bay
Exploration & Development Co. Ltd. carried out the most widespread work
throughout the intervening period, mostly by coverage with horizontal loop
electromagnetic and magnetic surveys, generally using coil separations of 400
ft. (120 m) for the HLEM surveys. HBED drilled numerous holes to test conductors
throughout the area. Most of these holes were about 120 m or less in length.
Various other parties held claims in the area throughout the 1980s and 1990s.
Much of the exploration focus during this period was gold exploration.

The area of the Quarter Moon Lake claims was similarly held by numerous
prospectors through the years. Emphasis in this area has traditionally been
toward gold exploration closer to the Nokomis Lake deposit southeast of the
Company's property. On the Quarter Moon Lake property, the most recent work was
done in 2003-2005 by Endowment Lakes, the company from whom the Company optioned
five claims. Geochemical survey work was previously conducted that included
seven lake sediment samples, 1 stream sediment sample from claim, six soil
samples, and 21 lithogeochemical samples. The samples were collected to
follow-up a regional gold-arsenic lake sediment anomaly noted by the Geological
Survey of Canada in 1986. The lithogeochemical samples contained up to 159 ppb
gold, up to 36 ppm tungsten, and up to 14.4% MgO in amphibolite. Further
geochemical work and prospecting in the area of these anomalies led to the
discovery of the Emily gold prospect, 250 m upstream from the stream sediment
anomaly. Further work continued in 2004 with additional soil geochemical
sampling to better characterize the rock units in the area and prepare for
additional ground follow-up. Four cuts were channel sampled (total 24 samples)
with a diamond saw in May 2005; the best values were 8.7 g/t Au over 0.4 m in
one pit and 7.2 g/t Au over 0.5 m in another. Nineteen holes totalling 1215 m
were drilled in May and June 2005 to test the showing at depth; a discontinuous
area, approximately 200 x 30 m, was outlined that contained, on average, about 1
g/t Au over about 1 m. Further drilling on the Emily prospect was not
recommended.

-53-

GEOLOGICAL SETTING

Geologists from the Geological Survey of Canada noted mineralization in the
Sherridon area as early as the late 1920's. The area was first mapped at a scale
of 1:63 360 and 1:31 680 from the mid-1940's to the early-1950's by the
Geological Survey of Canada. Additional geological mapping (mostly 1:50 000
scale) was conducted from the mid-1980s to the mid-1990s. This latter activity
was coordinated with NATMAP (National Mapping Program) multidisciplinary
geological studies throughout the Flin Flon, Snow Lake and Kisseynew regions.
This most recent, comprehensive work included geological mapping, geochemical,
and geochronological work that led to the recognition of their common
stratigraphy and related recognition of tectonic environments that led to the
assemblage of these related terranes.

REGIONAL GEOLOGY

The Sherridon Property is in the south flank of the Kisseynew gneiss belt, a
metasedimentary terrane that is part of the Paleoproterozoic Trans-Hudson
Orogen. The Trans-Hudson Orogen consists of several Proterozoic belts of
metavolcanic, metasedimentary and intrusive rocks that occupy the area between
the Archean Hearne Province to the northwest and the Archean Superior Province
to the southeast. The Kisseynew gneiss belt represents a sedimentary basin
flanked to the north and south by magmatic arc terranes, notably the Flin Flon -
Snow Lake metavolcanic belt to the south and the Lynn Lake - La Ronge
metavolcanic belt to the north. The central part of the Kisseynew basin is
dominated by Burntwood suite migmatized greywacke (~1.86-1.84 Ga). The north and
south flanks of the Kisseynew domain consist of structurally interlayered
gneisses that include rocks directly related to the flanking arc terranes. The
boundary between gneisses of the south flank of the Kisseynew belt, which
includes Sherridon area, and the Flin Flon - Snow Lake belt is transitional. The
adjoining Flin Flon - Snow Lake belt consists of a tectonic collage of volcanic,
volcaniclastic, and related intrusive rocks of the Amisk Group, an unconformably
overlying Missi Suite of mainly clastic and subordinate volcanic rocks, and
plutons of various ages. Gneisses have been thrust faulted over volcanic rocks
along the south flank of the Kisseynew at the Kisseynew - Flin Flon belt margin.

LOCAL GEOLOGY

The south flank of the Kisseynew belt includes the following four major rock
groups:

- Orthogneisses derived from mafic to felsic volcanic, intrusive and
volcaniclastic rocks (1.92-1.85 Ga), which are equivalent to the
Amisk Group of the Flin Flon - Snow Lake belt. Amphibolites are
interlayered with felsic gneisses are interpreted as metagabbros
and Amisk metabasalts.

- Some orthogneisses in the immediate Sherridon area that make up
the crescent-shaped Sherridon structure have an uncertain origin.
The orthogneisses of the Sherridon structure include siliceous,
pelitic and calc-silicate gneisses interlayered with amphibolite,
which are interpreted as being derived from volcanic and plutonic
rocks. The Sherridon gneisses may be an assemblage of metavolcanic
and intrusive rocks equivalent with the Amisk Group.

- Paragneisses derived from marine turbidites (1.866-1.84 Ga) are
assigned to the Burntwood Suite. These paragneisses are generally
graphitic (garnet)-biotite gneisses in the Kisseynew's south
flank.

- Paragneisses derived from terrestrial clastic and volcanic rocks
(1.866-1.84 Ga) are considered equivalent to the Missi Suite of
the Flin Flon - Snow Lake belt. These include mainly
magnetite-bearing quartz-rich gneisses with lesser
volcanic-derived amphibolite and felsic gneiss.

Earlier workers had subdivided rocks of the Kisseynew belt into Nokomis Group
paragneisses and hornblende-plagioclase gneiss and unconformably overlying
Sherridon Group siliceous paragneisses, and post-Sherridon intrusions. Nokomis
Group rocks were correlated with sediments of the Amisk Group from the Flin Flon
belt and Sherridon Group with the Missi Group of the Flin Flon belt, and this
was the usage for other work, with some acknowledged unresolved difficulties in
correlation, for some time. As work continued and understanding improved for
both and Flin Flon and Kisseynew domains and relationships between the two, the
use of "Nokomis Group" and "Sherridon Group" terminology for rocks of the
Kisseynew has been replaced with the Flin Flon belt's "Amisk Group" and "Missi
Suite" terminology in more recent literature. This change was significant, not

-54-

only because of this recognition of equivalency, but also because geologists
recognized the ample presence of felsic volcanic rocks, with calc-alkaline
composition, in the area directly around Sherridon; this has positive
implications for VMS mineralization potential. Structural, geochronologic and
geochemical studies support the validity of considering units of the Flin Flon -
Snow Lake belt as stratigraphic equivalents of the south flank of the Kisseyne.
This equivalency in stratigraphy between parts of the Kisseynew south flank and
the Flin Flon - Snow Lake belt has particular relevance for mineral exploration,
because the Flin Flon - Snow Lake belt is a well-known host to many
past-producing, producing and subeconomic copper-zinc deposits.

Upper amphibolite facies metamorphism resulted in extensive destruction of
primary structures and extensive granitization in the Kisseynew gneisses. Five
deformational stages have complexly deformed the Kisseynew belt into refolded
recumbent-fold packages. Two interfering fold events yielded the notable hook
shapes that characterize the map view of rocks in the Sherridon area and in the
Meat Lake area. Rocks in the Sherridon region have experienced notable
attenuation parallel to compositional layering.

Cordierite-anthophyllite and garnet-anthophyllite assemblages in various places
throughout the south flank of the Kisseynew belt represent hydrothermally
altered rocks. Some of this alteration accompanies sulphide mineralization. Some
alteration assemblages do not have an apparent relationship with sulphide
mineralization. This may represent hydrothermal alteration material that was
clastically transported paleotopographically down-slope from its initial source
in the basin. Alternatively, it has been suggested that the attenuation due to
the extreme strain that affected Kisseynew rocks may have transposed alteration
zones along strike from massive sulphide mineralization, dislocated from a more
typical original orientation where the alteration assemblages represent a
crosscutting pipe-like feeder beneath a sulphide zone.

PROPERTY GEOLOGY

The Company's land holdings are centred on the Sherridon - Hutchinson Lake
Complex and the Walton Lake nappe. Both structural complexes include gneisses
derived from various Amisk Group juvenile arc volcanic rocks, mainly felsic
volcanic and intrusive with a lesser interlayered mafic component. In the core
of the Sherridon complex, gneisses with an uncertain origin (see "Sherridon
gneisses" above) comprise interlayered graphitic volcaniclastic wackes,
quartz-carbonate rock (an impure marble), and calc-silicate rock. Smaller plugs
of gabbro and amphibolite occur near the centre of the structural complex, and
amphibolite forms a "rim" around the western part. The latter is correlated with
the Amisk Group. Porphyroblastic garnet-anthophyllite +/- cordierite gneiss and
sillimanite gneiss in the Star Lake area (i.e., near the Company's Sherridon
East claims) and in the Sherridon area are strongly foliated and are associated
with shear zones. These rocks are interpreted as hydrothermal alteration
assemblages.

The Walton - Meat Lake area, centred on the Walton Lake nappe, consists of Amisk
Group volcanic arc assemblage rocks of the Batty Lake - Meat Lake Sequence.
Dominant lithologies are various amphibolites and felsic gneisses that are
interpreted as metamorphosed mafic and felsic volcanic flows and fragmental
rocks, felsic volcanic and subvolcanic rocks; calc-silicate rocks interpreted as
altered felsic volcanic breccia; and cordierite-garnet +/- sillimanite +/-
hercynite +/- anthophyllite gneiss and biotite-garnet +/- hornblende gneiss
interlayered with garnetiferous felsic gneiss interpreted as extensive,
prominent, hydrothermal alteration assemblages.

DEPOSIT TYPES

Volcanogenic copper-zinc-(gold)-(silver) massive sulphide (VMS) deposits are the
main mineral deposits in the Kisseynew domain. This style of deposit is the
major target for exploration on the Company's Sherridon property. Gold
mineralization also is known at a number of locations in the south flank of the
Kisseynew. The Company's Quarter Moon Lake claims are primarily a gold
exploration property, however this deposit type is of secondary importance for
the Company in its current exploration outlook.

MINERALIZATION

Massive sulphides including copper- and zinc-bearing sulphides are known to
occur as discontinuous lenses in Sherridon Suite quartz-rich gneisses (felsic
volcanic and volcanic-derived rocks) near the contact with
hornblende-plagioclase gneisses (intermediate to mafic metavolcanic rocks) in
the Sherridon - Hutchinson Lake complex and in garnet-biotite +/- cordierite +/-
sillimanite gneiss on the east limb of the Meat Lake synform. Known deposits
with this style of mineralization in the area include the past-producing
Sherritt Gordon Mine (West and East Lenses), the Cold Lake deposit, and the
Fidelity zone, all discussed below, as well as the Park Lake, Bob Lake, Jungle
Lake, and Ake Zone deposits. The past-producing Sherridon Mine, the Cold Lake
deposit, and the Fidelity zone occur on the Company's property.

An association has been identified between mineralization known in the area at
the time, which included both the Sherritt Gordon Mine and the Bob Lake deposit,
their stratigraphic position between a quartz-rich gneiss and hornblende

-55-

amphibolite (metabasalt), and the multiple folds. Their findings have been
confirmed by later work. An association has also been identified between
mineralization and pegmatites, which particularly occur along zones of weakness
such as lithologic contacts.

Cordierite-anthophyllite or garnet-anthophyllite rocks likely represent
metamorphosed equivalents of chloritic hydrothermal alteration zones in the
Sherridon area. Some of the altered rocks are known to be associated with
sulphide mineralization, while others do not show an apparent association with
sulphides.

The Sherritt Gordon mine has been described as having consisted of two zones,
the West and East Lenses, with a combined length of almost 4900 m; of this
total, 1100 m of barren rock separated the two zones. The average width was
about 4.6 m. The East Lens was about 75 m deep, and the West Lens was about
150-245 m deep. The West Lens rakes north, flattening with depth, to about 460 m
maximum depth. The ore was in sharp contact with enclosing rocks. The structural
footwall (which is the overturned stratigraphic hanging wall) to the deposit is
quartz-rich gneiss; the structural hanging wall is hornblende gneiss. They
describe "bulges or offsets" (up to ~0.5 Mt) composed of pegmatite in the
hanging wall of the West Lens that were sufficiently mineralized to make
subsidiary orebodies. Mineralization from these folded pegmatite offshoots
provided 25% of the Sherritt Gordon Mine's production. Mineralization was mostly
pyrrhotite, with pyrite, chalcopyrite and sphalerite and rarely magnetite. The
East Lens was more zinc-rich than the West Lens. Uncommon to rare occurrences
have been identified of cubanite, arsenopyrite, and gahnite in the Sherritt
Gordon ore. Gangue minerals include the constituents of the host quartz-rich
gneiss, I.E., quartz, plagioclase and biotite, with minor to rare hornblende,
clinopyroxene, scapolite and calcite.

Other styles of mineralization known from outcrop or drill core have been
identified in the area:

- Zones of disseminated pyrrhotite +/- pyrite that are barren or
have low-grade chalcopyrite and sphalerite are present in similar
settings throughout the area representing sulphide facies iron
formations.

- Calc-silicate gneisses contain cherty sections that include
disseminated pyrrhotite, but have not been known to contain
appreciable copper and zinc.

- Gold is structurally controlled in the Nokomis Lake area. Recent
exploration on the Quarter Moon Lake portion of the property was
directed toward gold exploration.

On one of the Meat claims, a series of altered mineralized outcrops and trenches
constitute a mineral occurrence known as the Douglas claims since the late
1920's. The occurrence has been summarized as consisting of disseminated to
near-massive pyrrhotite +/- pyrite. The mineralization is associated with layers
of very fine-grained, highly siliceous, garnetiferous quartzofeldspathic gneiss
and garnet-anthophyllite gneiss.

Along and near the southwest shore of Star Lake on one of the present-day East
claims, several mineral occurrences are known. Along the southwest shore of Star
Lake, a minor occurrence of pyrite has been known since the 1950's as the Star
Lake sulphide occurrence. The host rocks are calc-silicate gneiss, more
specifically hornblende-rich gneiss with interbeds rich in diopside and
clinozoisite. At another occurrence approximately 400 m to the southwest, a
cordierite-anthophyllite sequence includes the following layers:
quartz-garnet-anthophyllite-biotite, garnet-anthophyllite +/- cordierite, and
anthophyllite-cordierite. Previous work included a geochemical analysis of the
anthophyllite-cordierite layer with 5660 ppb Au, 3220 ppm Te and 4400 ppm Zn.

On another East claim, a mineral occurrence known simply as the "Cu-sulphide
property" consists of pyrrhotite, minor chalcopyrite, and variable alteration
(chlorite, sericite, sillimanite, graphite, carbonate, garnet) in quartzite
(metamorphosed chert) in outcrop, trenches, and drillcore.

The Elken Lake area is now covered by some of the East claims as well as part by
claims owned by Hudson Bay Exploration & Development Co. Ltd. Trenches blasted
in the late 1920's by Phillip Sherlett and Sherritt Gordon Mines Limited exposed
pyrrhotite, minor chalcopyrite, galena and sphalerite in garnetiferous
quart-biotite gneiss, a 60 cm wide shear zone, and narrow quartz veins. Over the
years, this area has been tested by various geological and geophysical surveys
and shallow drill holes.

The Nokomis Lake deposit located on the southeast side of Nokomis Lake is ~4 km
southeast of the Quarter Moon Lake claims. Its owner, Pioneer Metals
Corporation, categorizes the deposit as a "shear-related intrusive-hosted
(tonalite) lode gold system. This style of deposit is the model for exploration
on the Quarter Moon Lake claims previously undertaken by the Company and
Endowment Lakes.

-56-

EXPLORATION

On the Quarter Moon Lake claims, channel sampling and diamond drilling were
carried out by Buhlmann and Associates Ltd. for the Company. Four cuts were
channel sampled (total 24 samples) with a diamond saw in May 2005. The best
values were 8.7 g/t Au over 0.4 m in one pit and 7.2 g/t Au over 0.5 m in
another. Nineteen holes were drilled to test the showing at depth in May and
June of 2005. A discontinuous area, approximately 200 x 30 m, which contained,
on average, about 1 g/t Au over about 1 m, was outlined by drilling.

Howard Poulsen, consulting geologist, was engaged by the Company to prepare a
provisional "desktop analysis" of structural data from previously published maps
and reports on the Sherridon area. Dr. Poulsen used SpheriStatTM software in
processing ~2400 structural measurements compiled from literature. From his
analysis, Poulsen notes several issues for practical consideration: (1)
Hydrothermal alteration and their accompanying sulphide deposits are expected to
be attenuated and transposed from their original stratigraphic positions because
of the high strain they experienced during deformation. (2) Recumbent folds are
dominant with shallow east dips or plunges. (3) Two stratigraphic horizons have
particular interest for mineral exploration; these horizons may be
stratigraphically separate or may represent a single horizon repeated by
folding. (4) The lack of stratigraphic facing indicators is problematic to
resolving some structural questions. Lithogeochemistry is suggested as a
possible tool to help answer these questions.

DRILLING

The Company drilled nineteen diamond drill holes totalling 1215 metres on two
Elm claims from June 30 to July 14, 2005 to test the Emily gold prospect at
depth. Drilling was done by Forage Orbit Inc., Val-d'Or, Quebec. Core was logged
and sampled by geologist Slobodan Jankovic, P.Geo. of Edmonton, Alberta. Drill
core was logged in detail in the field, with lithologic, structural,
mineralogic, and alteration characteristics reported on standardized logging
sheets. Core axis angle measurements were made at all lithologic contacts, and
varied from 50(degree) to 85(degree), roughly averaging 70(degree). Drill holes
ranged from 42 to 105 m in length, average 63 m. All holes were drilled
vertically. Drill hole collar locations were located with reference to a cut
grid. The core size is BQ. Downhole surveys were not done. A discontinuous area,
approximately 200 x 30 m at 20-28 m depth, which contained, on average, about 1
g/t Au over about 1 m, was outlined by drilling. Mineralization was present in a
silicified +/- carbonatized granodiorite to tonalite to ferrodiorite with minor
disseminated pyrite, pyrrhotite, +/- arsenopyrite.

SAMPLING AND ANALYSIS

Sixty-five drill core rock samples of the mineralized granodiorite - tonalite -
ferrodiorite from the nineteen drillholes were collected for analysis of Au, in
ppb and g/t, and As, in ppm and per cent. All drill core sections with visible
sulphide mineralization were sampled continuously. Individual samples were
collected in 0.25 to 1.90 m widths, with individual sample intervals chosen to
correspond to similar quantities of sulphide minerals or some other lithologic
inhomogeneity. The Company is not aware of any drilling, sampling or recovery
factors that could have materially impacted the accuracy and reliability of the
results. Standard procedures for handling core in the field were used by the
diamond drill contractors and the field geologist. Drill core recovery was
typically quite high, with virtually 100% recovery. The sample quality of the
samples for assay was excellent; where sulphide mineralization was observed in
drill core, it was apparently evenly distributed through both halves of the
split core.

Drill core was placed in wooden core trays, logged, marked and sampled on the
property. Drill core is stored on the property. Diamond drill core to be
analysed was split so that half of the core was retained as a permanent sample
record and the other half was sent for assay. The core was split using a core
splitter in the drill camp. Rock and drill core samples were transported from
the field camp by the field crew to Sherridon, where they were shipped by bus to
the analytical laboratory in Saskatoon, Saskatchewan. Field geologist S.
Jankovic was responsible for sample selection, splitting, bagging, and
recording. TSL Laboratories of Saskatoon, Saskatchewan carried out sample
preparation and ICP analysis of the drill core and channel-cut samples. Pulps
and rejects are retained in storage by TSL Laboratories. For drill core, Au
(ppb) was analyzed by fire assay and atomic absorption; Au (g/t) was fire
assayed. Samples with >1000 ppb Au were assayed for Au (g/t). Arsenic, both ppm
and per cent measurements, were done by atomic absorption after an HCl-HNO3
digestion. The channel-cut samples were also subjected to aqua regia digestion,
then analyzed by ICP-MS for a standard packaged range of elements and by atomic
absorption for Au (ppb). The sampling methods, sample preparation procedures,
security procedures, and analytical techniques employed are all standard
techniques within Canada's mineral exploration industry and are considered
adequate and acceptable.

-57-

MINERAL RESOURCE ESTIMATE

There are no NI 43-101 compliant mineral resources on the Sherridon Property.

EXPLORATION PROGRAM

The Sherridon Report concluded that the property holds potential for the
discovery of additional volcanogenic massive sulphide mineralization and that
additional exploration work is warranted. The Company plans a multifaceted
approach to integrate new deeper penetrating geophysical data with new and
existing surface and near-surface geological information. The goal of this
geological modeling combined with information from deeper-coverage,
high-resolution geophysical data is to identify both potential extensions to
known deposits and new "grass roots" drill targets.

A modern, deep-penetrating airborne electromagnetic survey would provide
complete coverage for the entire Sherridon Property. A high-resolution
aeromagnetic survey in the Sherridon area would offer additional geological and
structural control over the main Sherridon structural complex. Gravity surveys
would be done in selected areas of the property to test suitable conductivity
anomalies for coincident gravity anomalies. A combination of geological
techniques including detailed structural geology analysis, lithogeochemistry,
and targeted stratigraphic mapping would be used to interpret the targets for
preference in drill testing. The geological analysis would be done to resolve
the effects of multiple deformation and metamorphism on the rocks, and to trace
favourable stratigraphic horizons.

The Sherridon Report recommended a two-phase exploration program on the
Sherridon property. In Phase One, specific exploration targets are identified by
a combination of geophysical and geological methods. Proposed costs for Phase
One activities total $1,120,000. Phase One would include the following
components:

1. (a) Modern deep-penetrating airborne electromagnetic and
magnetic geophysical surveys to locate deeper, high-quality
exploration targets.

(b) High-resolution dedicated airborne magnetic geophysical
surveys to locate deeper, high-quality exploration targets.
This survey is to be done over the Sherridon area in Phase
One; a decision to extend the survey over other parts of the
property would be made later, contingent on results from
this survey.

2. Gravity surveys would be done in selected areas of the property
to test suitable conductivity anomalies for coincident gravity
anomalies.

3. Detailed structural analysis using compiled structural geology
measurements from previous mapping surveys to trace continuation
of deformed strata favourable for VMS exploration.

4. Lithostratigraphic mapping in selected areas to confirm presence
and determine continuation of strata favourable for VMS
exploration.

5. Geochemical surveys in selected areas as an extension of
lithostratigraphic mapping to determine locations of favourable
stratigraphic horizons. Choices of lithogeochemical or soil
geochemical surveys, and potentially lake sediment geochemical
surveys or overburden drilling, would depend on the availability
of sampling media in the specific areas needing to be sampled.

6. Integration of results of the new geophysical surveys with other
geological information to develop and prioritize drill targets
with favourable stratigraphic and structural attributes.

Phase Two involves drill testing of the exploration targets, subject to
definition in Phase One. A drill program totalling approximately 20,000 metres,
would likely be carried out over at least two exploration seasons, subject to
definition/revision upon completion of Phase One. Proposed costs for Phase Two
activities total $4,110,000. Phase Two would include the following components:

1. Linecutting and ground geophysical follow-up surveys to
ground-truth the airborne anomalies. Ground geophysical work
would include transient electromagnetic and magnetic surveys
capable of detecting deeper targets than traditional horizontal
loop electromagnetic methods.

-58-

2. Exploration diamond drilling totalling approximately 20,000
metres. Part of this drilling would be allocated to identifying
potential extensions to known deposits and part to "grass roots"
targets. This allocation would be made as a consequence of Phase
One work and on an ongoing basis as Phase Two progresses.

3. Geological and geophysical data analysis and interpretation
throughout Phase Two to manage the project effectively and
integrate results as exploration proceeds.

The budget for the exploration program is summarized as follows:

- --------------------------------------------------------------------------------
PHASE ONE:
- --------------------------------------------------------------------------------

1. AIRBORNE ELECTROMAGNETIC & MAGNETIC SURVEYS
~1,750 LINE KM
Airborne electromagnetic survey $ 250,000
Aeromagnetic survey of Sherridon area 210,000
Mobilization and demobilization 80,000
Geophysical data analysis, additional processing,
interpretation 210,000
----------
$ 750,000

2. (GROUND) GRAVITY SURVEYS ON SELECTED TARGETS 125,000

3. STRUCTURAL GEOLOGY ANALYSIS 30,000

4. SELECTED GEOCHEMICAL SAMPLING, ANALYSIS 30,000

5. SELECTED LITHOSTRATIGRAPHIC MAPPING, SITE VISITS 75,000

6. DATA ANALYSIS, INTERPRETATION 110,000
----------

TOTAL FOR PHASE ONE $1,120,000
----------

- --------------------------------------------------------------------------------
PHASE TWO:
- --------------------------------------------------------------------------------
1. GROUND GEOPHYSICAL SURVEYS
Linecutting $ 130,000
TEM survey 320,000
Magnetic survey 30,000
Data analysis, map and report preparation 20,000
----------
$ 500,000

2. EXPLORATION DIAMOND DRILLING
20,000 metres 2,000,000
Mobilization, demobilization 30,000
Downhole PULSEM geophysical surveys 300,000
Assays, geochemical analyses 100,000
Geologist, technician 500,000
Transportation, board, communications, supplies 225,000
Environmental monitoring and compliance 80,000
Map and report preparation 100,000
----------
$3,335,000

3. DATA ANALYSIS, INTERPRETATION, PROJECT MANAGEMENT $275,000
----------
TOTAL FOR PHASE TWO $4,110,000
----------

- --------------------------------------------------------------------------------
TOTAL FOR PHASES ONE AND TWO $5,230,000
================================================================================

-59-

GOVERNMENT REGULATIONS

The Company's proposed exploration and development activities will be subject to
extensive Canadian federal, provincial, and local laws and regulations governing
various matters, including:

- environmental protection;
- management and use of toxic substances and explosives;
- management of natural resources;
- exploration, development of mines, production and post-closure
reclamation;
- taxation;
- labour standards and occupational health and safety, including
mine safety; and
- historic and cultural preservation.

The costs associated with compliance with these laws and regulations are
substantial and possible future laws and regulations, or more stringent
enforcement of current laws and regulations by governmental authorities, could
cause additional expense, capital expenditures, restrictions on or suspensions
of the Company's activities and delays in the development of its properties.

OTHER ASSETS

As at the date of this annual report, the Company does not hold any material
assets other than its property, option and mineral claim interests described
above.

EMPLOYEES

As of the date of this annual report the Company has one full-time employee,
Marc Cernovitch, the Company's President and CEO. The majority of the Company's
management functions are provided by private companies owned by officers and
directors of the Company. See "Item 7. Major Shareholders and Related Party
Transactions - Related Party Transactions." In addition, the Company employs a
number of consultants to perform specific functions, on an as needed basis.

ORGANIZATIONAL STRUCTURE

Effective November 30, 2002, the Company wrote off its investment in its
wholly-owned subsidiary, Trimark Inc., which was engaged in the petroleum and
natural gas operations in the United States. Accordingly, the Company ceased to
record the activities of Trimark Inc. Effective August 31, 2004, the Company
wrote-off Safari, which was inactive throughout the 2004 fiscal year, and TMK,
which had sold its remaining asset.

As of the date of this annual report, the Company has no subsidiaries.

PRINCIPAL OFFICES

The Company's executive and principal office is located at Suite 1280, 625 Howe
Street, Vancouver, British Columbia, Canada. The executive office comprises
1,017 square feet and is rented from an unrelated third party for an initial
term ending February 29, 2008. The Company currently is paying approximately
$2,500 per month for base rent, property taxes and occupancy costs. The
Company's registered office is located at Suite #1305, 1090 West Georgia Street,
Vancouver, British Columbia, Canada.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
- --------------------------------------------------------------------------------

The following discussion of the results of operations of the Company for the
fiscal years ended August 31, 2005, 2004, and 2003 should be read in conjunction
with the consolidated financial statements of the Company and related notes
included therein.

The Company's consolidated financial statements are prepared in accordance with
Canadian GAAP, the application of which, in the case of the Company, conforms in
all material respects for the periods presented with US GAAP except for the
differences referred to in Note 16 of the consolidated financial statements of
the Company included herein. The noon rate of exchange on February 28, 2006,
reported by the United States Federal Reserve Bank of New York, for the

-60-

conversion of Canadian dollars into United States dollars was CDN $1.1379 (US
$0.8788 = CDN $1.00). The effects of inflation and price changes have not had a
material impact on the Company's income or net sales revenues during the past
three years. To date, the Company has not engaged in any formal hedging program.

OVERVIEW

Since inception the Company has primarily been engaged in the mineral resource
and petroleum and natural gas industries. Most recently it had been engaged in
the acquisition, exploration for and development of crude oil and natural gas
interests in the United States. The Company entered into a series of agreements
in the 2004 and 2005 fiscal years as described in Item 4 above. The Company is
now considered to be a junior mineral exploration company engaged in the
acquisition of and exploration for precious metals on mineral interests located
in Canada.

At this stage of development, the Company has no producing properties and,
consequently, has no current operating income or cash flow. The Company has not
yet determined whether the properties owned by the Company or in which the
Company has an option to acquire an interest have ore reserves that are
economically recoverable. As a result, the Company is considered an exploration
stage company.

The Company is actively reviewing additional resource properties at various
stages of development and may make additional acquisitions through staking,
options, purchases or joint ventures. If so, significant additional financing
may be required, and there is no assurance that funds would be available on
terms acceptable to the Company or at all.

The Company expects the properties which it owns and in which it has option
interests will be moved toward determining individual viability over the next
two to three years. There is no assurance that any property will prove to be
mineable or, that if such a determination is made, that the Company will be able
to secure financing for capital costs.

Nearly all of the Company's activities are directed to such exploration
programs. Yearly variations in individual property expenditures generally
reflect increases or decreases in specific exploration and development costs
based on previous results and the Company's decisions regarding the allocation
of exploration expenditures between its projects.

The Company intends to conduct exploration activities on both its owned and
optioned properties. None of the properties in which the Company has interests
are in production and, consequently, the properties 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 the Company
discovers sufficient mineralization on a property to advance the property beyond
the exploration stage. The Company's level of exploration expenditures is
dependent upon exploration results and the Company's ability to maintain
sufficient financial resources.

The Company derives interest income on its bank deposits and other short-term
deposits, which depend on the Company's ability to raise funds. Of most
significance would be further cash received from issuance of shares to fund
ongoing operations.

Through the exploration process, management intends to periodically reviews
results, both internally and externally, through mining related professionals.
Decisions to abandon, reduce or expand exploration efforts are 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. Geological and/or economic circumstances render each property
unique. Consequently, it is not possible to have any predetermined hold period
for a specific property interest.

Costs incurred for general exploration that do not result in the acquisition of
mineral properties with ongoing exploration or developmental potential are
charged to operations. Exploration costs relating to the Company's property
interests are capitalized as mineral properties and deferred costs. Should the
Company abandon a property interest or project, the related deferred costs will
be charged to operations.

The recoverability of amounts shown for mineral properties and deferred costs is
dependent upon the discovery of economically recoverable reserves, completion of
positive feasibility studies, confirmation of the Company's interest in the
underlying mineral claims, the ability of the Company to obtain necessary
financing to complete exploration and development and future profitable
production, or from the disposition of such properties.

-61-

To the best of the Company's knowledge, there are no governmental economic,
fiscal, monetary, or political policies or factors that have materially
affected, or could materially affect, directly or indirectly, the Company's
operations or investments by U.S. shareholders.

RESULTS OF OPERATIONS

YEAR ENDED AUGUST 31, 2005 COMPARED TO YEAR ENDED AUGUST 31, 2004

During the 2005 fiscal year, the Company reported a net loss of $368,110, an
increase in net loss of $111,088 from the $257,022 loss reported during the 2004
fiscal year. Although there was no significant overall increase in the net loss,
fiscal 2005 reflects a $1,329,000 future income tax recovery ($nil in 2004)
offsetting the $379,420 increase in stock-based compensation and $876,737
increase in general and administrative expenses experienced in fiscal 2005.

During fiscal 2004, the Company recorded $81,347 in oil and gas revenues.
Production costs of $21,832 were incurred and depletion of $10,441 was recorded
for fiscal 2004. Effective March 1, 2004, the Company sold its 3% interest in
the West Ranch Field and with the sale of the Company's working interest in the
West Ranch Field, the Company no longer holds any oil and gas interests.
Accordingly, no oil and gas activities occurred in fiscal 2005.

General and administration expenses increased in fiscal 2005 due to increased
activities relating to the Company's property acquisitions and financing
activities and increased shareholder communications and investor relations
activities. Significant expenditures in fiscal 2005 include $60,571 (2004 -
$23,324) for legal costs incurred, primarily for the continuance of the
Company's domicile from the Yukon Territory to British Columbia,
extra-provincial registrations and preparation of the Company's information
circular and regulatory filings and $27,847 (2004 - $11,000) for audit related
costs; $38,220 (2004 - $27,077) for transfer agent and regulatory filings for
the Company's Annual General Meeting and various financing and property filings;
$192,534 (2004 - $27,500) for consulting and professional fees provided on
corporate development and services to introduce the Company to the investment
community in Canada, United States and Europe; $162,259 (2004 - $5,386) for
shareholder communications costs; $169,776 (2004 - $2,248) for attendance and
presentations at numerous investment conferences in Canada and the United
States; $13,563 (2004 - $3,217) for website design and maintenance costs;
$72,521 (2004 - $2,614) for travel and related costs, primarily to attend
investment conferences and meetings with the investment community; $71,477 (2004
- - $2,845) for office and miscellaneous; and $89,864 (2004 - $3,217) for salaries
and benefits paid to the President of the Company. Commencing July 2004, the
Company rented office space to accommodate its personnel. In fiscal 2005, the
Company paid $29,760 (2004 - $3,367) for the office rent and occupancy costs.
Accounting and administration expenses of $81,450 (2004 - $63,638) was billed by
Chase Management Ltd. ("Chase"), a private company owned by Nick DeMare,
Chairman and CFO of the Company. Chase is currently paid a base amount of $3,000
per month for bookkeeping, accounting, administration and corporate filing
services provided by Chase personnel, exclusive of Mr. DeMare, and $2,000 per
month related to Mr. DeMare's services as the CFO of the Company.

In fiscal 2005, the Company recorded a non cash stock-based compensation charge
of $559,031, compared to $179,611 in fiscal 2004. The calculation is based on
the fair value of stock options granted by the Company using the Black-Scholes
option pricing model, which uses estimates and assumptions. It does not
necessarily provide a reliable measure of the fair value of the Company's stock
options. During fiscal 2005, the Company granted 1,078,000 options with a
weighted average exercise price of $0.92 per share, compared to fiscal 2004 when
the Company granted 810,000 options with a weighted average exercise price of
$0.61 per share.

During fiscal 2005, the Company completed a number of private placement
financings whereby it issued a total of 7,324,894 common shares for $6,688,797
cash proceeds. Of the total financings, 4,626,364 common shares were conducted
on a flow-through share basis. Resource expenditure deductions for income tax
purposes related to exploration and development activities funded by
flow-through share arrangements have been renounced by the Company to investors
in accordance with Canadian income tax legislation. The renunciation of such
expenditures is accounted for as a financing cost related to the flow-through
issuance and resulted in a $1,566,000 reduction in share capital with a
corresponding increase in the Company's future tax liability.

The Company is permitted under Canadian income tax legislation to renounce
flow-through related resource expenditures to investors in advance of the
Company incurring the expenditure. In accordance with this legislation the
Company has twelve months following the effective date of renunciation to incur
the expenditures. The Company begins incurring interest charges for unspent
funds after one month and fees for unspent funds at the end of the calendar year
following the effective date of renunciation, and until such time as funds are

-62-

fully expended. During fiscal 2005, the Company incurred a $40,000 Part XII.6
tax expense on the monthly unspent balance of flow-through funds. All of the
flow-through funds were spent by May 31, 2005.

The Company also received a further $253,100 from the exercise of warrants to
purchase 1,048,500 common shares.

YEAR ENDED AUGUST 31, 2004 COMPARED TO YEAR ENDED AUGUST 31, 2003

The Company received oil and gas sales from its remaining oil and gas property
until March 1, 2004, the effective date of the sale of the West Ranch Field.

During fiscal 2004, the Company reported a net loss of $257,022, an improvement
of $1,215,620 from the $1,472,642 loss reported during fiscal 2003. During
fiscal 2003, the Company recorded an impairment charge of $1,240,794,
representing the Company's net investment in its wholly-owned subsidiary,
Trimark Inc., which held the Company's East Lost Hills and regional California
petroleum interests. During fiscal 2004, the Company recorded $81,347 in oil and
gas revenues, comprising of $15,447 of oil (378 barrels) and $65,900 of gas
(8,921 mcf). Production costs of $21,832 were incurred and depletion of $10,441
was recorded for 2004. Effective March 1, 2004, the Company sold its 3% interest
in the West Ranch Field for $78,630, recording a net loss of $11,031. With the
sale of the Company's working interest in the West Ranch Field, the Company no
longer holds any oil and gas interests.

General and administrative costs increased in fiscal 2004 by $6,592, from
$176,947 in 2003 to $183,539 in fiscal 2004. Expenses incurred in fiscal 2004
includes $11,000 for audit fees, $23,324 for legal costs incurred for
preparation of the Company's year-end Form 20-F and regulatory filings; $27,077
for transfer agent and regulatory filings for the Company's name change and
financing filings; $27,500 for consulting services with respect to the Company's
restructuring, name change and financing plans; $5,386 for shareholder
communications costs; $11,025 for investment conference, website designs and
maintenance cost; $2,165 for travel costs; and $16,125 for office and
miscellaneous. Included in general and administration expenses was $63,638
charged by Chase for bookkeeping, accounting, administration and corporate
filing services provided. See "Item 7. Major Shareholders and Related Party
Transactions - Related Party Transactions." During fiscal 2004, the Company
recorded a non-cash compensation expense of $179,611 relating to stock options
granted to the Company's directors, officers and consultants. No stock options
were granted during fiscal 2003.

During fiscal 2004, the Company negotiated settlements with certain arms-length
and related parties in which it paid $951,622 to settle a total of $1,048,829
owed, which was recorded as advances payable, resulting in a gain of $97,207.
See "Item 7. Major Shareholders and Related Party Transactions".

During fiscal 2004, the Company recorded interest expense of $29,817, compared
to $60,741 in fiscal 2004. The decrease in fiscal 2004 occurred as a result of
the retirement of the advances.

As of August 31, 2004, the Company had incurred $75,906 for staking, due
diligence, professional and legal costs pertaining to the purchase of the Duport
Property.

LIQUIDITY AND CAPITAL RESOURCES

The Company's practice is to proceed with staged exploration, where each stage
is dependent on the successful results of the preceding stage. To date the
Company has not received any revenues from its mining activities and has relied
on equity financing to fund its commitments and discharge its liabilities as
they come due. As at August 31, 2005, the Company had working capital of
$506,811.

The Company has financed a significant portion of its exploration activities
through the issue of flow-through shares, which transfer the tax deductibility
of exploration expenditures to the investor. Proceeds received on the issue of
such shares have been credited to stock capital and the related exploration
costs have been charged to resource properties. Resource expenditure deductions
for income tax purposes related to exploration and development activities funded
by flow-through share arrangements are renounced to investors in accordance with
income tax legislation. When these expenditures are made, temporary taxable
differences created by the renunciation will reduce share capital. As of August
31, 2005, the Company had incurred all of its $4.4 million spending commitment
related to flow-through shares issuances made. During September 2005, the
Company completed a further private placement of 3,293,070 flow-through units,
comprising of flow-through common shares and warrants, for $2,305,149 and
1,980,166 units, comprising of common shares and warrants, for $1,188,100. The
Company anticipates that further exploration on its mineral properties will
enable the Company to satisfy 100% of the spending commitment.

-63-

As at August 31, 2005, the Company had received $958,950 relating to the
September 2005 private placement. Accordingly, the remaining $2,534,299 was
received in September 2005. Although final budgets have not been completed, the
Company expects to continue significant exploration work on its Bachelor Lake
and Duport Properties and commence exploration activities on its newly acquired
Sheridan Property. Total anticipated exploration costs and corporate overhead
for fiscal 2006 are expected to be approximately $2.5 million and $852,000,
respectively. The Company will require additional financings to maintain its
core operations and planned exploration. In addition, results from its
exploration programs and/or additional mineral property acquisitions may result
in additional financial requirements. There is no assurance that funding will be
available on terms acceptable to the Company or at all. If such funds cannot be
secured, the Company may be forced to curtail additional exploration efforts to
a level for which funding can be secured.

The Company does not have any loans or bank debt and there are no restrictions
on the use of its cash resources.

There are no material commitments for capital expenditures during fiscal 2006.

The Company holds the majority of its cash and cash equivalents in Canadian
funds.

TREND INFORMATION

The Company is not aware of any trends which might affect its financial results
or business.

RESEARCH AND DEVELOPMENT

During fiscal 2005 and 2004, the Company incurred $17,690,832 and $75,906 for
mineral property acquisition costs, respectively. During fiscal 2005 the Company
incurred $4,992,595 for exploration expenditures on its mineral properties. No
exploration expenditures were made in fiscal 2004. No mineral property
acquisitions or exploration expenditures were made in fiscal 2003.

No petroleum interest acquisitions or exploration and development occurred in
fiscal 2005. During fiscal 2004,and 2003 the Company incurred $23,935 and
$319,757 respectively, on the acquisition, exploration and development of its
petroleum interests.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any material off balance sheet arrangements that have
or are reasonably likely to have a current or future effect on the Company's
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS

The Company does not have any contractual obligations.

-64-

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

DIRECTORS AND SENIOR MANAGEMENT

The names, positions held with the Company and terms of office of each director
and officer of the Company as of the date of this annual report, are as follows:

- ----------------------------------------------------------------------------------------------------
NAME POSITION WITH THE COMPANY TERM OF OFFICE (FOR EACH OFFICE HELD)
- --------------- ------------------------------------- -------------------------------------

MARC CERNOVITCH President and Chief Executive Officer February 2005 to present
Director February 2005 to present
Vice-President, Corporate Development September 2004 to February 2005
- ----------------------------------------------------------------------------------------------------
NICK DEMARE(1) Chairman February 2005 to present
Chief Financial Officer July 2003 to present
Director January 1996 to Present
President, Chief Executive Officer July 2003 to February 2005
- ----------------------------------------------------------------------------------------------------
ANDREW CARTER(1) Director February 2004 to present
- ----------------------------------------------------------------------------------------------------
EWAN DOWNIE Director May 2004 to present
- ----------------------------------------------------------------------------------------------------
WILLIAM LEE(1) Director February 2004 to present
- ----------------------------------------------------------------------------------------------------
HARVEY LIM Corporate Secretary December 1998 to present
- ----------------------------------------------------------------------------------------------------
TOM HEALY Senior Vice President, Chief February 2005 to present
Operating Officer and Director
- ----------------------------------------------------------------------------------------------------

(1) Member of the Audit Committee.

Each officer's and director's term of office shall expire at the Company's next
annual general meeting. The Company does not have an executive committee or a
compensation committee. The Company's audit committee is responsible for
reviewing the Company's financial statements before they are approved by the
Company's directors.

There are no family relationships between any directors or executive officers of
the Company. To the best of the Company's knowledge, there are no arrangements
or understandings with major shareholders, customers, suppliers, or others,
pursuant to which any of the Company's officers or directors was selected as an
officer or director of the Company.

Set forth below are brief descriptions of recent employment and business
experience of the Company's officers and directors.

Marc Cernovitch (Age 32), Director, President and Chief Executive Officer

Mr. Cernovitch holds a bachelors degree in Economics from McGill University. Mr.
Cernovitch started his career in the financial sector as an investment advisor
and has lived and worked in Montreal, Calgary, Vancouver and New York. Mr.
Cernovitch currently resides in Vancouver and, since September 2004, has been
employed by the Company as Vice-President, Corporate Development. Mr. Cernovitch
has focused on corporate development, funding and building companies primarily
in the resource and energy technology fields.

Nick DeMare (Age 51), Chairman and Chief Financial Officer

Mr. DeMare holds a Bachelor of Commerce degree from the University of British
Columbia and is a member in good standing of the Institute of Chartered
Accountants of British Columbia. Since May, 1991, Mr. DeMare has been the
President of Chase, a private company which provides a broad range of
administrative, management and financial services to private and public
companies engaged in mineral exploration and development, gold and silver

-65-

production, oil and gas exploration and production and venture capital. Mr.
DeMare indirectly owns 100% of Chase. Mr. DeMare currently serves as an officer
and director of other public reporting companies. See "Item 7. Major
Shareholders and Related Party Transactions - Related Party Transactions -
Conflicts of Interest."

Andrew Carter (Age 58), Director

Mr. Carter obtained a certificate in accounting from the Midland College of TAFE
(Western Australia) in 1987. Since 1992, Mr. Carter has been a member of the
Australian Institute of Credit Management. Mr. Carter has an extensive
background in the mining industry and as a commercial finance executive. During
the 1970's, Mr. Carter was involved in the mining industry, where he managed
exploration crews in the Leonora and Kimberly regions in Western Australia. In
1988, he was appointed Chief Executive of RAC Finance Limited, a non-bank owned
commercial financier in Western Australia. During this time, he was appointed
Chairman and Director of Australian Finance Conference Limited and represented
the industry as a panel member of the Commercial Tribunal for Western Australia.
Since 1999, Mr. Carter has been providing services as an independent corporate
consultant based in Vancouver. Mr. Carter is currently the President of Tinka
Resources Ltd., a public company trading on the TSXV, and serves as an officer
and director of other public reporting companies. See "Item 7.Major Shareholders
and Related Party Transactions - Related Party Transactions - Conflicts of
Interest".

Ewan Downie (Age 39), Director

President, CEO and a director of Wolfden Resources Inc., a TSX Exchange traded
company, and Vice-President of Sabina Silver Corporation, a TSXV traded company.
Since 1989, Mr. Downie has been the owner of Vytyl Exploration Services, a
contracting business in mineral development and exploration for a wide variety
of major and junior mining companies. Mr. Downie currently serves as an officer
and director of other public reporting companies. See "Item 7. Major
Shareholders and Related Party Transactions - Related Party Transactions -
Conflicts of Interest".

William Lee (Age 52), Director

Mr. Lee holds a Bachelor of Commerce degree from the University of British
Columbia and is a member in good standing of the Institute of Chartered
Accountants of British Columbia. He has been a financial officer or controller
of several public and private companies since 1986 and, prior, thereto, was a
Senior Audit Manager at Deloitte & Touche. Prior to March, 1995, Mr. Lee was
employed as the Chief Financial Officer of Sanctuary Woods Multimedia Corp. From
March 1995 to June 1996, Mr. Lee was employed as the Chief Financial Officer of
Wildwood Interactive Inc. From June, 1996 to March, 2004, Mr. Lee was employed
as the Chief Financial Officer of IMA Exploration Inc., a public company engaged
in the exploration of mineral properties. From July 2004 to January 2006, Mr.
Lee was employed as a business analyst of Ivanhoe Energy Inc., a public company
engaged in the exploration for and production of oil and natural gas. In January
2006, Mr. Lee was appointed CFO of Jinshan Gold Mines Inc., a public company
engaged in the exploration for and development of gold and copper projects in
China. Mr. Lee currently serves as an officer and director of other public
reporting companies. See "Item 7. Major Shareholders and Related Party
Transactions - Related Party Transactions - Conflicts of Interest".

Harvey Lim (Age 47), Corporate Secretary

Mr. Lim holds a Bachelor of Commerce degree from the University of British
Columbia and is a member in good standing of the Institute of Chartered
Accountants of British Columbia. Mr. Lim was employed by Coopers & Lybrand (now
PricewaterhouseCoopers LLP) from 1981 to 1988. From 1988 to 1991, Mr. Lim was
employed as a controller with Ingot Management Ltd. Since 1991, Mr. Lim has been
employed by Chase as a controller. Mr. Lim currently serves as an officer and
director of other public reporting companies. See "Item 7. Major Shareholders
and Related Party Transactions - Related Party Transactions - Conflicts of
Interest".

Tom Healy (Age 61), Senior Vice President, Chief Operating Officer and Director

Mr. Healy is a professional mining engineer, a graduate of the University of
Melbourne and holds a post graduate degree from the Royal School of Mines. He
has 30 years' of open pit and underground mine design, operations, and
management experience for base and precious metals, coal, oil sands, diamonds
and industrial minerals projects. Mr. Healy is also President of Kamcot
International Ltd., an independent company providing management and engineering
services to the international mining community.

-66-

COMPENSATION

During fiscal 2005, the directors and officers of the Company, as a group, had
received or charged the Company a total of $158,350 (fiscal 2004 - $69,638) for
services rendered by the directors and officers or companies owned by the
individuals. As of August 31, 2005, accounts payable and accrued liabilities
include $24,369 due to these related parties.

The Company is required, under applicable securities legislation in Canada, to
disclose to its shareholders details of compensation paid to its directors and
officers. The following fairly reflects all material information regarding
compensation paid by the Company to its directors and officers, which
information has been disclosed to the Company's shareholders in accordance with
applicable Canadian law.

"Named Executive Officers" means the Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO") of the Company, regardless of the amount of
compensation of those individuals, and each of the Company's three most highly
compensated executive officers, other than the CEO, who were serving as
executive officers at the end of the most recent fiscal year and whose total
salary and bonus amounted to $150,000 or more. In addition, disclosure is also
required for any individuals whose total salary and bonus during the most recent
fiscal year was $150,000 whether or not they are an executive officer at the end
of the fiscal year.

During fiscal 2005, the Company had two Named Executive Officers, Mr. Marc
Cernovitch, the Company's President and CEO, and Mr. Nick DeMare, the Company's
Chairman and CFO. The following table sets forth the compensation awarded, paid
to or earned by the Named Executive Officers during fiscal 2005, 2004 and 2003:

--------------------------- ----------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- ----------------------------------
AWARDS PAYOUTS
------------------------ -------
SECURITIES RESTRICTED ---------
OTHER UNDER SHARES OR ALL
- ------------------ ----- ANNUAL OPTIONS/ RESTRICTED OTHER
NAME AND PRINCIPAL COMPEN- SARS SHARE LTIP COMPEN-
POSITION YEAR(1) SALARY BONUS SATION GRANTED UNITS PAYOUTS SATION
($) ($) ($) (#)(2) ($) ($) ($)
- ------------------ ----- --------------------------- ------------------------ ------- ---------

Marc Cernovitch(3) 2005 51,500 Nil Nil 275,000 N/A N/A Nil
President, CEO and 2004 N/A N/A N/A N/A N/A N/A N/A
Director 2003 N/A N/A N/A N/A N/A N/A N/A
- ------------------ ----- --------------------------- ------------------------ ------- ---------
Nick DeMare 2005 Nil Nil 28,000(4) 73,000 N/A N/A 62,450(4)
Chairman, CFO and 2004 Nil Nil 8,000(4) 150,000(5) N/A N/A 55,638(4)
Director 2003 Nil Nil Nil Nil/Nil N/A N/A 52,215(4)
- ------------------ ----- --------------------------- ------------------------ ------- ---------

NOTES:
(1) Financial years ended August 31, 2003, 2004 and 2005.
(2) Figures represent options granted during a particular year; see "Aggregate
Option" table for the aggregate number of options outstanding at year end.
(3) Mr. Cernovitch was appointed on February 9, 2005 as the President and CEO
of the Company.
(4) Paid to Chase Management Ltd. ("Chase"), a private company owned by Mr.
DeMare, for accounting, administration, management and professional
services rendered by Mr. DeMare and Chase personnel. See "Management
Contracts".
(5) Includes 50,000 options granted to Chase.

LONG TERM INCENTIVE PLAN AWARDS

The Company has no long-term incentive plans in place and therefore there were
no awards made under any long-term incentive plan to the Name Executive Officers
during the Company's most recently completed financial year. A "Long-Term
Incentive Plan" is a plan under which awards are made based on performance over
a period longer than one financial year, other than a plan for options, stock
appreciation rights ("SARs") or restricted share compensation.

-67-

OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR

The following table sets forth stock options granted to the Named Executive
Officers during fiscal 2005:

- --------------- ------------ -------------- ------------ ----------------- ----------
% OF TOTAL MARKET VALUE OF
SECURITIES OPTIONS/SARS SECURITIES
UNDER GRANTED TO UNDERLYING
OPTIONS/SARS EMPLOYEES IN EXERCISE OR OPTIONS/SARS ON EXPIRATION
NAME GRANTED FINANCIAL YEAR BASE PRICE THE DATE OF GRANT DATE
(#) (%) ($/SECURITY) ($/SECURITY)
- --------------- ------------ -------------- ------------ ----------------- ----------

Marc Cernovitch 150,000 13.91% 0.70 0.86 Sept. 27/07
125,000 11.60% 0.96 1.20 Feb. 17/08
------- -----
275,000 25.51%
======= =====
- --------------- ------------ -------------- ------------ ----------------- ----------
Nick DeMare 73,000 6.8% 0.96 1.20 Feb. 17/08
======= =====
- --------------- ------------ -------------- ------------ ----------------- ----------

AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION/SAR VALUES

The following table sets out details of all the incentive stock options, both
exercised and unexercised, for the Named Executive Officers during fiscal 2005:

- --------------- ----------- --------------- ------------------------- -------------------------
UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS AT IN THE MONEY OPTIONS AT
ACQUIRED ON AGGREGATE VALUE FINANCIAL YEAR -END FINANCIAL YEAR -END (1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(#) ($) (#) ($)
- --------------- ----------- --------------- ------------------------- -------------------------

Marc Cernovitch Nil N/A 275,000/N/A Nil/N/A
- --------------- ----------- --------------- ------------------------- -------------------------
Nick DeMare Nil N/A 223,000(2)/N/A Nil/N/A
- --------------- ----------- --------------- ------------------------- -------------------------

NOTES:

(1) The closing price of the Company's common shares on August 31, 2005 was
$0.60.
(2) Includes 50,000 options granted to Chase.

TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS

The Company does not have any compensatory plan(s), contract(s) or
arrangement(s) with respect to the resignation, retirement or any other
termination of the Named Executive Officers' employment, a change of control of
our Company or a change in the Named Executive Officers' responsibilities
following a change in control, which entitle a Named Executive Officer to
receive from the Company an amount, including all period payments or
installments, exceeding $100,000.

DIRECTOR COMPENSATION

CASH COMPENSATION

During fiscal 2005, the Company paid $67,900 for professional fees to a director
who is not a Named Executive Officer of the Company. See "Item 7. Major
Shareholders and Related Party Transactions - Related Party Transactions."

-68-

NON-CASH COMPENSATION

The following table sets forth stock options granted by the Company during
fiscal 2005 to the directors who are not the Named Executive Officers of the
Company:

- ---------------------------------------------------------------------------------------------------------------------
% OF TOTAL MARKET VALUE OF
SECURITIES OPTIONS/SARS SECURITIES
UNDER GRANTED TO UNDERLYING
OPTIONS/SARS EMPLOYEES IN EXERCISE OR OPTIONS/SARS ON EXPIRATION
NAME GRANTED FINANCIAL YEAR BASE PRICE THE DATE OF GRANT DATE
(#) (%) ($/SECURITY) ($/SECURITY)
- ---------------------------------------------------------------------------------------------------------------------

Directors as a group 270,000 25.05% $0.96 $1.20 Feb. 17/08
who are not Named
Executive Officers
- ---------------------------------------------------------------------------------------------------------------------

The following table sets forth details of all exercises of stock options during
fiscal 2005 by the directors who are not the Named Executive Officers of the
Company, and the financial year end value of unexercised options:

- ----------------------------------------------------------------------------------------------------------------------
UNEXERCISED VALUE OF UNEXERCISED IN THE
SECURITIES OPTIONS/SARS AT MONEY OPTIONS AT
ACQUIRED ON AGGREGATE VALUE FINANCIAL YEAR -END FINANCIAL YEAR -END (1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(#) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------------------------

Directors as a group Nil N/A 730,000 / N/A Nil / N/A
who are not Named
Executive Officers
- ----------------------------------------------------------------------------------------------------------------------

NOTE:
(1) The closing price of the Company's common shares on August 31, 2005 was
$0.60.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table sets out, as of the end of the Company's financial year
ended August 31, 2005, all information required with respect to compensation
plans under which equity securities of the Company are authorized for issuance:

- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO BE AVAILABLE FOR FUTURE ISSUANCE
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, PRICE OF OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
- -----------------------------------------------------------------------------------------------------------------------

Plan Category (a) (b) (c)
- -----------------------------------------------------------------------------------------------------------------------

Equity compensation 1,688,000(1) $0.80 See Note (1)
plans approved by
securityholders
- -----------------------------------------------------------------------------------------------------------------------
Equity compensation N/A N/A N/A
plans not approved by
securityholders
- -----------------------------------------------------------------------------------------------------------------------
Total 1,688,000 $0.80 See Note (1)
- -----------------------------------------------------------------------------------------------------------------------

NOTE:
(1) The Company has in place a "rolling" stock option plan (the "Plan") whereby
the maximum number of common shares that may be reserved for issuance
pursuant to the Plan will not exceed 10% of the issued shares of the
Company at the time of the stock option grant. As of the date hereof,
common shares may be reserved for issuance pursuant to the Plan.

-69-

INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS OF THE COMPANY

No executive officers, directors, employees or former executive officers and
directors of the Company are indebted to the Company. None of the directors,
executive officers or proposed nominees of the Company nor any associate or
affiliate of these individuals is or has been indebted to the Company since
September 1, 2004.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

Other than as disclosed in "Item 7. Major Shareholders and Related Party
Transactions - Related Party Transactions", no informed person of the Company,
any proposed director of the Company, or any associate or affiliate of any
informed person or proposed director has any material interest, direct or
indirect, in any transaction since the commencement of our most recently
completed financial year or in any proposed transaction which has materially
affected or would materially affect the Company. An "informed person" means a
director or executive office of a reporting issuer; a director or executive
officer of a person or company that is itself an informed person or subsidiary
of a reporting issuer; any person or company who beneficially owns, directly or
indirectly, voting shares of a reporting issuer or who exercises control or
direction over shares of the reporting issuer or a combination of both carrying
more than 10% of the voting rights attached to all outstanding voting securities
of the reporting issuer; and a reporting issuer that has purchased, redeemed or
otherwise acquired any of its securities, for so long as it holds any of its
securities.

EMPLOYMENT / MANAGEMENT AGREEMENTS

The Company has a management contract with Chase, whereby the Company has
retained Chase to provide ongoing administrative, accounting, professional and
management services. In return for providing such services, Chase is paid a
monthly fee of $3,000 plus any out-of-pocket disbursements made by Chase on the
Company's behalf. In addition, the Company may engage Chase to perform extra
services in which case Chase will charge the Company for its employees at
competitive rates. The Company is also paying Chase $2,000 per month for the
services of Mr. DeMare in his capacity as Chairman and CFO of the Company.
Payment for these services have been included as part of "Other Annual
Compensation" and "All Other Compensation" of the Summary Compensation Table for
Mr. DeMare. See "Item 7. Major Shareholders and Related Party Transactions -
Related Party Transactions".

There are no service contracts with the Company providing for benefits upon
termination of employment of any director of the Company.

BOARD PRACTICES

AUDIT COMMITTEE

THE AUDIT COMMITTEE'S CHARTER

MANDATE

The primary function of the audit committee (the "Committee") is to assist the
board of directors in fulfilling its financial oversight responsibilities by
reviewing the financial reports and other financial information provided by the
Company to regulatory authorities and shareholders, the Company's systems of
internal controls regarding finance and accounting and the Company's auditing,
accounting and financial reporting processes. The Committee's primary duties and
responsibilities are to:

- Serve as an independent and objective party to monitor the Company's
financial reporting and internal control system and review the
Company's financial statements.

- Review and appraise the performance of the Company's external
auditors.

- Provide an open avenue of communication among the Company's auditors,
financial and senior management and the Board of Directors.

-70-

COMPOSITION

The Committee shall be comprised of three directors as determined by the Board
of Directors, the majority of whom shall be free from any relationship that, in
the opinion of the Board of Directors, would interfere with the exercise of his
independent judgment as a member of the Committee. At least one member of the
Committee shall have accounting or related financial management expertise. All
members of the Committee that are not financially literate will work towards
becoming financially literate to obtain a working familiarity with basic finance
and accounting practices. For the purposes of the Audit Committee Charter, the
definition of "financially literate" is the ability to read and understand a set
of financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of
the issues that can presumably be expected to be raised by the Company's
financial statements.

The members of the Committee shall be elected by the Board of Directors at its
first meeting following the annual shareholders' meeting. Unless a Chair is
elected by the full Board of Directors, the members of the Committee may
designate a Chair by a majority vote of the full Committee membership. The Chair
shall be financially literate.

MEETINGS

The Committee shall meet a least twice annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee will meet at least annually with the CFO and the external auditors in
separate sessions. Unless all members are present and waive notice, or those
absent waive notice before or after a meeting, the Chairman will give Committee
members 24 hours' advance notice of each meeting and the matters to be discussed
at it. Notice may be given personally, by telephone, facsimile or e-mail.

The Auditor shall be given reasonable notice of, and be entitled to attend and
speak at, each meeting of the Committee concerning the Company's annual
financial statements and, if the Committee feels it is necessary or appropriate,
at any other meeting. On request by the Auditor, the Chair shall call a meeting
of the Committee to consider any matter that the Auditor believes should be
brought to the attention of the Committee, the Board of Directors or the
shareholders of the Company.

At each meeting of the Committee, a quorum shall consist of a majority of
members that are not officers or employees of the Company or of an affiliate of
the Company. A member may participate in a meeting of the Committee in person or
by telephone if all members participating in the meeting, whether in person or
by telephone or other communications medium, are able to communicate with each
other. A member may participate in a meeting of the Committee by a
communications medium other than telephone if all members participating in the
meeting, whether in person or by telephone or other communications medium, are
able to communicate with each other and if all members who wish to participate
in the meeting agree to such participation.

As part of its goal to foster open communication, the Committee may periodically
meet separately with each of management and the Auditor to discuss any matters
that the Committee or any of these groups believes would be appropriate to
discuss privately. In addition, the Committee should meet with the Auditor and
management annually to review the Company's financial statements.

The Committee may invite to its meetings any director, any manager of the
Company, and any other person whom it deems appropriate to consult in order to
carry out its responsibilities. The Committee may also exclude from its meetings
any person it deems appropriate to exclude in order to carry out its
responsibilities.

RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties, the Committee shall:

DOCUMENTS/REPORTS REVIEW

(a) Review and update the Charter annually.

-71-

(b) Review the Company's financial statements, MD&A and any annual and
interim earnings, press releases before the Company publicly discloses
this information and any reports or other financial information
(including quarterly financial statements), which are submitted to any
governmental body, or to the public, including any certification,
report, opinion, or review rendered by the external auditors.

(c) Review and satisfy itself that adequate procedures are in place for the
review of the Company's public disclosure of financial information
extracted or derived from its financial statements, other than
disclosure described in the previous paragraph, and periodically assess
the adequacy of those procedures.

EXTERNAL AUDITORS

(a) Be directly responsible for overseeing the work by the Auditor
(including resolution of disagreements between management and the
Auditor regarding financial reporting) engaged for the purpose of
preparing or issuing an audit report or performing other audit or
review services for the Company.

(b) Require the Auditor to report directly to the Committee.

(c) Review, annually, the performance of the Auditor who shall be
ultimately accountable to the Board of Directors and the Committee as
representatives of the shareholders of the Company.

(d) Review and discuss with the Auditor any disclosed relationships or
services that may impact the objectivity and independence of the
Auditor.

(e) Take, or recommend that the Board of Directors take, appropriate action
to oversee the independence of the Auditor.

(f) Recommend to the Board of Directors the external auditor to be
nominated at the annual general meeting for appointment as the Auditor
for the ensuing year and the compensation for the Auditors, or, if
applicable, the replacement of the Auditor.

(g) Review and approve the Company's hiring policies regarding partners,
employees and former partners and employees of the Auditor and former
independent external auditor of the Company.

(h) Be directly responsible for the oversight of the work by the Auditor
(including resolution of disagreements between management and the
Auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work.

(i) Review with management and the Auditor the audit plan for the annual
financial statements.

(j) Review and pre-approve all audit and audit-related services and the
fees and other compensation related thereto, and any non-audit services
provided by the Auditor. The pre-approval requirement is waived with
respect to the provision of non-audit services if:

(i) the aggregate amount of all such non-audit services that were
not pre-approved is reasonably expected to constitute not more
than 5% of the total amount of fees paid by the Company and
its subsidiary entities to the Auditor during the fiscal year
in which the non-audit services are provided;

(ii) such services were not recognized by the Company at the time
of the engagement to be non-audit services; and

(iii) such services are promptly brought to the attention of the
Committee and approved, prior to the completion of the audit,
by the Committee or by one or more members of the Committee to
whom authority to grant such approvals has been delegated by
the Committee.

-72-

The Committee may delegate to one or more independent members of the Committee
the authority to pre-approve non-audit services in satisfaction of the
pre-approval requirement set out in this section provided the pre-approval of
non-audit services by any member to whom authority has been delegated must be
presented to the Committee at its first scheduled meeting following such
pre-approval.

FINANCIAL REPORTING PROCESSES

(a) In consultation with the Auditor, review with management the integrity
of the Company's financial reporting process, both internal and
external.

(b) Consider the Auditor's judgments about the quality and appropriateness
of the Company's accounting principles as applied in its financial
reporting.

(c) Consider and approve, if appropriate, changes to the Company's auditing
and accounting principles and practices as suggested by the Auditor and
management.

(d) Review significant judgments made by management in the preparation of
the financial statements and the view of the Auditor as to the
appropriateness of such judgments.

(e) Following completion of the annual audit, review separately with
management and the Auditor any significant difficulties encountered
during the course of the audit, including any restrictions on the scope
of work or access to required information.

(f) Review any significant disagreement among management and the Auditor in
connection with the preparation of the financial statements.

(g) Review with the Auditor and management the extent to which changes and
improvements in financial or accounting practices have been
implemented.

(h) Discuss with the Auditor the Auditor's perception of the Company's
financial and accounting personnel, any material recommendations which
the Auditor may have, the level of cooperation which the Auditor
received during the course of their review and the adequacy of their
access to records, data and other requested information.

(i) Review any complaints or concerns about any questionable accounting,
internal accounting controls or auditing matters.

(j) Review certification process.

(k) Establish procedures for:

(i) the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting
controls, or auditing matters; and

(ii) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or
auditing matters.

OTHER

(a) Perform such other duties as may be assigned to it by the Board of
Directors from time to time or as may be required by applicable
regulatory authorities or legislation.

(b) Report regularly and on a timely basis to the Board of Directors on
matters coming before the Committee.

(c) Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board of Directors for approval.

-73-

COMPOSITION OF THE AUDIT COMMITTEE

The following are the members of the Committee (1):

- --------------------------------------------------------------------------------
INDEPENDENT (1) FINANCIALLY LITERATE
- --------------------------------------------------------------------------------
Nick DeMare N Y
- --------------------------------------------------------------------------------
William Lee Y Y
- --------------------------------------------------------------------------------
Andrew Carter Y Y
- --------------------------------------------------------------------------------

NOTE:
(1) As defined by Multilateral Instrument 52-110 ("MI 52-110").

The Company is relying on the exemption provided under Section 6.1 of MI52-110.

AUDIT COMMITTEE OVERSIGHT

At no time since the commencement of the Company's most recently completed
financial year was a recommendation of the Committee to nominate or compensate
an external auditor not adopted by the Board of Directors.

RELIANCE ON CERTAIN EXEMPTIONS

At no time since the commencement of the Company's most recently completed
financial year has the Company relied on the exemption in Section 2.4 of MI
52-110 (De Minimis Non-audit Services), or an exemption from MI 52-110, in whole
or in part, granted under Part 8 of Multilateral Instrument 52-110.

PRE-APPROVAL POLICIES AND PROCEDURES

The Committee has adopted specific policies and procedures for the engagement of
non-audit services as described above under the heading "External Auditors".

REMUNERATION COMMITTEE

The Company does not have a separate Remuneration Committee.

TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL

Other than as described in the Summary Compensation Table and above, the Company
has no plans or arrangements in respect of remuneration received or that may be
received by the Named Executive Officer in the Company's most recently completed
financial year or current financial year in view of compensating such officers
in the event of termination of employment (as a result of resignation,
retirement, change of control, etc.) or a change in responsibilities following a
change of control, where the value of such compensation exceeds $100,000 per
executive officer.

The Company and its subsidiaries do not have any contracts with the directors of
the Company (or any entities controlled by the directors of the Company)
providing for benefits upon termination of employment.

EMPLOYEES

As at August 31, 2005, the Company had one full-time employee, Mr. Cernovitch,
in the area of management and administration. During the year ended August 31,
2004 the Company had two full-time employees in the area of management and
administration, including Mr. Cernovitch. During the year ended August 31, 2003,
the Company had no full-time or part-time employees in the area of management
and administration.

Corporate accounting, management and administration are provided, in part, by
Chase, a company owned by Mr. Nick DeMare. Chase provides its services to a
number of public and private companies and currently employs six full-time
employees, including Mr. Lim (excluding Mr. DeMare). Mr. DeMare provides his
services as Chairman and CFO of the Company. The Company also retains
consultants to handle specific projects on a case by case basis. In the event
the Company needs to employ personnel, it will need to recruit qualified
personnel to staff its operations. The Company believes that such personnel
currently are available at reasonable salaries and wages in the geographic areas
in which the Company and its subsidiaries operate. There can be no assurance,

-74-

however, that such personnel will be available in the future. Exploration
activities are conducted by consultants, laborers and technicians hired for the
duration of the exploration program.

SHARE OWNERSHIP

The following table sets forth certain information regarding ownership of the
Company's common shares by the Company's officers and directors as of February
28, 2006:

SHARES AND RIGHTS BENEFICIALLY
TITLE OF CLASS NAME AND ADDRESS OF OWNER OWNED OR CONTROLLED (1) PERCENT OF CLASS (1)

Common Stock Marc Cernovitch 547,450(2) 1.92%
Vancouver, British Columbia, Canada

Common Stock Nick DeMare 752,028(3) 2.65%
Burnaby, British Columbia, Canada

Common Stock Andrew Carter 174,500(4) 0.62%
North Vancouver,
British Columbia, Canada

Common Stock Ewan Downie 1,707,500(5) 5.90%
Thunder Bay, Ontario, Canada

Common Stock William Lee 157,950(6) 0.56%
Delta, British Columbia, Canada

Common Stock Harvey Lim 160,143(7) 0.57%
Burnaby, British Columbia, Canada

Common Stock Tom Healy 420,000(8) 1.48%
Calgary, Alberta, Canada

NOTES:
(1) Where persons listed on this table have the right to obtain additional
shares of common stock through the exercise of outstanding options or
warrants within 60 days from February 28, 2006, these additional shares
are deemed to be outstanding for the purpose of computing the
percentage of common stock owned by such persons, but are not deemed to
be outstanding for the purpose of computing the percentage owned by any
other person. Based on 28,017,716 shares of common stock outstanding as
of February 28, 2006.
(2) Includes 64,800 common shares held, options to acquire 480,000 common
shares and warrants to acquire 2,650 common shares.
(3) Includes 349,691 common shares held directly by Mr. DeMare, 26,404
common shares held by DNG Capital Corp. ("DNG"), a private corporation
wholly-owned by Mr. DeMare, and 8,866 common shares held by 888 Capital
Corp., a private corporation 50% owned by Mr. DeMare. Also includes
options to acquire 233,000 common shares held by Mr. DeMare directly,
options to acquire 50,000 common shares held by Chase, warrants to
acquire 13,067 common shares held directly by Mr. DeMare and warrants
to acquire 71,000 common shares held by DNG.
(4) Includes 22,000 common shares held, options to acquire 150,000 common
shares and warrants to acquire 2,500 common shares.
(5) Includes 805,000 common shares held, options to acquire 365,000 common
shares and warrants to acquire 537,500 common shares.
(6) Includes 5,300 common shares held, options to acquire 150,000 common
shares and warrants to acquire 2,650 common shares.
(7) Includes 143 common shares held and options to acquire 160,000 common
shares.
(8) Includes 100,000 common shares held by Kamcot International Ltd.
("Kamcot"), a private corporation owned 50% by Mr. Healy and 50% by
Ulrica Healy, Mr. Healy's spouse, options to acquire 210,000 common
shares held directly by Mr. Healy, options to acquire 60,000 common
shares held by Kamcot and warrants to acquire 50,000 common shares held
by Kamcot.

All of the Company's common shareholders have the same voting rights. Holders of
the Company's Series 1 Preferred Shares do not have the right to vote unless the

-75-

Company is in default on the payment of dividends and the dividends remain
unpaid for a period of 60 days. See "Item 10. Additional Information -
Description of Authorized Shares - Preferred Shares."

STOCK OPTION PLAN

The Company has a rolling stock option plan (the "Plan"), which makes a total of
10% of the issued and outstanding common shares of the Company available for
issuance thereunder. The Company's Plan is approved annually by the
shareholders. In accordance with the policies of the TSXV, a rolling plan, which
is the type of plan the Company has adopted, requires the approval of the
shareholders of the Company on an annual basis.

The purpose of the Plan is to provide the Company with a share related mechanism
to enable the Company to attract, retain and motivate qualified directors,
officers, employees and other service providers, to reward directors, officers,
employees and other service providers for their contribution toward the long
term goals of the Company and to enable and encourage such individuals to
acquire shares of the Company as long term investments.

The Plan provides that it is solely within the discretion of the Board to
determine who should receive options and in what amounts. The Board of Directors
may issue a majority of the options to insiders of the Company. However, the
Plan provides that in no case will the Plan or any existing share compensation
arrangement of the Company result, at any time, in the issuance to any option
holder, within a one-year period, of a number of shares exceeding 5% of the
Company's issued and outstanding share capital.

The following information is intended to be a brief description of the Plan:

1. The maximum number of common shares that may be issued upon exercise of
stock options granted under the Plan will be that number of shares
which is 10% of the issued and outstanding shares of the Company. Any
outstanding options will form a part of the foregoing 10%. The exercise
price of the stock options, as determined by the Board of Directors in
its sole discretion, shall not be less than the closing price of the
Company's shares traded through the facilities of the TSXV on the date
prior to the date of grant, less allowable discounts, in accordance
with the policies of the TSXV or, if the shares are no longer listed
for trading on the TSXV, then such other exchange or quotation system
on which the shares are listed and quoted for trading.

2. The Board of Directors will not grant options to any one person which
will, when exercised, exceed 5% of the issued and outstanding shares of
the Company.

3. Upon expiry of the option, or in the event an option is otherwise
terminated for any reason, without having been exercised in full, the
number of shares in respect of the expired or terminated option shall
again be available for the purposes of the Plan. All options granted
under the Plan may not have an expiry date exceeding five years from
the date on which the Board of Directors grant and announce the
granting of the option.

4. If the option holder ceases to be a director of the Company or ceases
to be employed by the Company (other than by reason of death), as the
case may be, then the option granted shall expire on the 90th day
following the date that the option holder ceases to be a director or
ceases to be employed by the Company, subject to the terms and
conditions set out in the Plan.

The Plan may be administered by the Company's secretary or such other senior
officer or employee as may be designated by the Board of Directors from time to
time. Upon the approval of the Plan by the Company's shareholders, shareholder
approval will not be required or sought on a case-by-case basis for the purpose
of the granting of options to and the exercise of options by employees of the
Company regularly employed on a full-time or part-time basis, directors of the
Company and persons who perform services for the Company on an ongoing basis or
who have provided, or are expected to provide, services of value to the Company.

-76-

As of February 28, 2006, an aggregate of 2,703,000 incentive stock options to
purchase shares of the Company's common stock remain outstanding to the
following persons:

- --------------------------------------------------------------------------------
EXERCISE
NATURE NO. OF PRICE/
OPTIONEE OF OPTION OPTIONS SHARE EXPIRY DATE
$
- --------------------------------------------------------------------------------

Ewan Downie Director 300,000 0.60 May 31, 2007
Chase Management Ltd. Consultant 50,000 0.60 May 31, 2007
Nick DeMare Director 100,000 0.60 May 31, 2007
Harvey Lim Officer 50,000 0.60 May 31, 2007
Andrew Carter Director 50,000 0.60 May 31, 2007
William Lee Director 50,000 0.60 May 31, 2007
Kamcot International Ltd. Consultant 60,000 0.75 July 22, 2007
Marc Cernovitch Officer 150,000 0.70 September 27, 2007
Chris Brown Consultant 125,000 0.75 February 17, 2008
Scott Walters Consultant 200,000 0.75 September 29, 2008
Marc Cernovitch Director 80,000 0.75 September 29, 2008
Tom Healy Director 60,000 0.75 September 29, 2008
Nick DeMare Director 60,000 0.75 September 29, 2008
Ewan Downie Director 40,000 0.75 September 29, 2008
Andrew Carter Director 40,000 0.75 September 29, 2008
William Lee Director 40,000 0.75 September 29, 2008
Harvey Lim Officer 50,000 0.75 September 29, 2008
Kevin Leonard Consultant 60,000 0.75 September 29, 2008
Chris Brown Consultant 75,000 0.75 September 29, 2008
Ken Pride Consultant 50,000 0.75 September 29, 2008
Peter Dietrich Consultant 50,000 0.75 September 29, 2008
James Paterson Consultant 50,000 0.75 September 29, 2008
Andrew Carter Director 60,000 0.45 February 2, 2009
David Henstridge Consultant 50,000 0.45 February 2, 2009
Ewan Downie Director 25,000 0.45 February 2, 2009
Harvey Lim Officer 60,000 0.45 February 2, 2009
Kevin Leonard Consultant 60,000 0.45 February 2, 2009
Marc Cernovitch Director 250,000 0.45 February 2, 2009
Nick DeMare Director 73,000 0.45 February 2, 2009
Scott Koyich Consultant 75,000 0.45 February 2, 2009
Tom Healy Director 150,000 0.45 February 2, 2009
Tony Keen Consultant 50,000 0.45 February 2, 2009
William Lee Director 60,000 0.45 February 2, 2009
---------
TOTAL: 2,703,000
=========

As of February 28, 2006, the directors and officers of the Company, as a group
(seven persons), held options to purchase 1,858,000 shares of the Company's
common stock.

-77-

WARRANTS

As of February 28, 2006, there were non-transferable common share purchase
warrants exercisable for the purchase of 11,268,063 common shares, which expire
at various times until October 14, 2007 and may be exercised at various prices
ranging from $0.25 per share to $1.50 per share, as follows:

- --------------------------------------------------------------------------------
COMMON SHARES ISSUABLE ON EXERCISE
EXERCISE OF WARRANTS PRICE/SHARE EXPIRY
$
- --------------------------------------------------------------------------------

550,000 0.25 March 4, 2006
2,395,500 0.40 April 15, 2006
701,647 1.05 December 23, 2006
2,313,182 1.50 December 23, 2006
2,718,530 1.35 December 23, 2006
2,071,015 0.70 September 14, 2007
432,474 0.70 September 29, 2007
85,715 0.75 October 14, 2007
----------
11,268,063
==========

As of February 28, 2006, the directors and officers of the Company, as a group
(seven persons), held warrants to purchase 679,367 shares of the Company's
common stock.

There are no assurances that the options or warrants described above will be
exercised in whole or in part.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

PRINCIPAL HOLDERS OF VOTING SECURITIES

The following table sets forth certain information regarding ownership of the
Company's common shares by the Company's major shareholders as of February 28,
2006.
- --------------------------------------------------------------------------------
SHARES AND RIGHTS
BENEFICIALLY
TITLE OF OWNED OR PERCENT OF
CLASS NAME AND ADDRESS OF OWNER CONTROLLED(1) CLASS (1)
- --------------------------------------------------------------------------------

Common Stock Wolfden Resources Inc.(2) 2,100,000 7.50%
Thunder Bay, Ontario, Canada

Common Stock Ewan Downie 1,707,500(3) 5.90%
Thunder Bay, Ontario, Canada
- --------------------------------------------------------------------------------
NOTES:
(1) Where persons listed on this table have the right to obtain additional
shares of common stock through the exercise of outstanding options or
warrants within 60 days from February 28, 2006, these additional shares are
deemed to be outstanding for the purpose of computing the percentage of
common stock owned by such persons, but are not deemed to be outstanding
for the purpose of computing the percentage owned by any other person.
Based on 28,017,716 shares of common stock outstanding as of February 28,
2006.
(2) Wolfden Resources Inc. ("Wolfden") is a publicly traded company. Mr. Ewan
Downie, a director of the Company, is the President, CEO and a director of
Wolfden.
(3) Includes 805,000 common shares held, options to acquire 365,000 common
shares and warrants to acquire 537,500 common shares.

To the best of the Company's knowledge, it is not directly or indirectly owned
or controlled by another Company or by any foreign government.

None of the Company's common shareholders have different voting rights than any
of the Company's other common shareholders.

ESCROW SHARES

As of the date of this annual report, no shares are held in escrow.

-78-

CHANGES IN SHAREHOLDINGS

As of February 28, 2006, Wolfden Resources Inc. beneficially owned 2,100,000
shares (7.50%) of the Company's common stock. The common shares were issued to
Wolfden on May 18, 2005, by the Company under the Assignment and Assumption
Agreement on the Bachelor Lake Property. See "Item 4. Information on the
Company. Principal Properties - Bachelor Lake Property, Quebec".

As of February 28, 2006, Ewan Downie beneficially owned 1,707,500 shares (5.90%)
of the Company's common stock. Mr. Downie's holdings were comprised of 805,000
shares of common stock, options to acquire 365,000 of common stock and warrants
to acquire 537,500 common shares. As of December 31, 2004, Mr. Downie
beneficially owned 2,012,500 shares (11.41%) of the Company's stock. Mr.
Downie's holdings were comprised of 875,000 of common stock, options to acquire
300,000 common shares and warrants to acquire 837,500 common shares. As of
December 31, 2003, Mr. Downie did not beneficially own any shares of the
Company's common stock.

CHANGE OF CONTROL

As of the date of this annual report, there are no arrangements known to the
Company which may at a subsequent date result in a change of control of the
Company, except the possible issuance of shares to The Sheridan Platinum Group
Ltd. and Pat Sheridan in connection with the redemption or retraction of the
Series 1 Preferred Shares. See "Item 4. Information on the Company - Principal
Properties - Duport Property, Ontario" and "Item 10. Additional Information -
Description of Authorized Shares - Preferred Shares".

In the event that the Company exercises its right to retract or redeem the
Series 1 Preferred Shares in exchange for common shares of the Company, this may
result in a change of control of the Company. Based on the Company's currently
outstanding share capital, if the Company retracted or redeemed the Series 1
Preferred Shares in exchange for common shares, The Sheridan Platinum Group Ltd.
and Pat Sheridan would own in the aggregate approximately 43.73% of the
Company's outstanding common shares, calculated as follows:

Shares currently outstanding (1) 28,017,716
Shares issuable upon retraction (2) 19,277,108
----------
Shares outstanding after retraction 47,294,824
==========

Shares currently held by vendors 1,000,000
Shares acquired by vendors upon retraction 20,000,000
----------
Shares held by vendors after retraction 21,000,000
==========

% of shares held by vendors after retraction 44.4%
==========
NOTES:
(1) As at February 28, 2006.
(2) Calculated as $8 million divided by $0.415 per share, being the
closing price of the Company's common shares on February 28, 2006.

The foregoing calculation is for illustrative purposes only and does not take
account of additional common shares which may be issued by the Company, or any
purchases or sales of shares by The Sheridan Platinum Group Ltd. or Mr.
Sheridan, subsequent to the date hereof but prior to redemption or retraction,
or any change in the market price of the Company's common shares, all of which
may materially change the calculation.

UNITED STATES SHAREHOLDERS

As of February 28, 2006, there were approximately eight registered holders of
the Company's common shares in the United States, with combined holdings of
549,903 shares, representing 1.96% of the issued shares of the Company. The
Company does not know how many beneficial shareholders it has in the United
States, but management believes there are less than 300 such shareholders.

CONTROL BY FOREIGN GOVERNMENT OR OTHER PERSONS

To the best of the Company's knowledge, the Company is not directly or
indirectly owned or controlled by another corporation, any foreign government,
or any other natural or legal person jointly or severally.

-79-

RELATED PARTY TRANSACTIONS

Other than as disclosed below, for the period from September 1, 2003 through
February 28, 2006, the Company has not entered into any transactions or loans
between the Company and any (a) enterprises that directly or indirectly through
one or more intermediaries, control or are controlled by, or are under common
control with, the Company; (b) associates; (c) individuals owning, directly or
indirectly, an interest in the voting power of the Company that gives them
significant influence over the Company, and close members of any such
individuals' family; (d) key management personnel and close members of such
individuals' families; or (e) enterprises in which a substantial interest in the
voting power is owned, directly or indirectly, by any person described in (c) or
(d) or over which such a person is able to exercise significant influence.

1. Mr. Marc Cernovitch provides his services as the Company's President
and CEO on a full-time basis. In consideration therefore, Mr.
Cernovitch is currently paid a monthly salary of $7,750. During the
year ended August 31, 2005 and the period from September 1, 2005 to
February 28, 2006, Mr. Cernovitch was paid $51,500 and $46,500,
respectively.

2. The Company has retained Chase, a company wholly-owned by Mr. Nick
DeMare, the Chairman and Chief Financial Officer of the Company, to
provide office premises, administrative, accounting and management
services. In consideration therefore, Chase is paid a monthly fee of
$3,000. Chase is also reimbursed for out-of-pocket disbursements
incurred on behalf of the Company. In addition, Chase also provides
additional services to the Company which are billed at rates which
Chase charges to unrelated third parties. Management believes the
arrangement with Chase is fair to the Company and similar to terms
which could be obtained from unrelated third parties. During the year
ended August 31, 2005 and the period from September 1, 2005 to February
28, 2006, the Company paid Chase $62,450 and $18,000, respectively.

3. From July 4, 2003 through February 9, 2005, the Company paid Chase a
monthly fee for the services of Mr. Nick DeMare in his former capacity
as President, Chief Executive Officer and Chief Financial Officer of
the Company. Commencing February 9, 2005, the Company paid Chase a
monthly fee for the services of Mr. Nick DeMare in his current capacity
as Chairman and Chief Financial Officer. The Company is currently
paying $2,000 per month. See "Item 6. Directors, Senior Management and
Employees - Compensation." Management believes the arrangement with
Chase for Mr. DeMare's services is fair to the Company. During the year
ended August 31, 2005 and the period from September 1, 2005 to February
28, 2006, the Company paid Chase $28,000 and $38,000, respectively.

4. Mr. Tom Healy was elected as a director of the Company, and appointed
Senior Vice President and Chief Operating Officer on February 9, 2005.
Mr. Healy provides his services on a full-time basis through his
wholly-owned corporation, Kamcot. In consideration therefore, Kamcot is
paid a monthly fee of $9,700. During the period from February 9, 2005
to August 31, 2005, and the period from September 1, 2005 to February
28, 2006, the Company paid Kamcot $67,900 and $58,200 respectively.

5. The Company has completed previous private placements of securities,
the subscribers of which include companies wholly-owned by directors
and officers of the Company. The securities issued pursuant to such
private placements were issued in accordance with the pricing policies
of the TSXV. During the year ended August 31, 2005, and the period from
September 1, 2005 to February 28, 2006, the Company conducted the
following private placements of common stock:

-80-

PARTICIPATION
BY PURCHASE MARKET
INSIDERS PRICE PRICE(1)
PLACEE $ $

PERIOD SEPTEMBER 1, 2005 TO FEBRUARY 28, 2006

3,293,070 flow-through common shares 0.70 0.83
- Ewan Downie 20,000
=======
YEAR ENDED AUGUST 31, 2005

4,342,951 units (one common share and one-half warrant) 0.95 1.05
- Ewan Downie 75,000
- Nick DeMare 26,135
- Judy Eng (spouse of Harvey Lim) 10,000
- William Lee 5,300
- Andrew Carter 5,000
-------
121,435
=======

151,834 units (one common share and one-half warrant) 0.95 0.92
- Marc Cernovitch 5,300
=======

(1) Quoted closing price on date of announcement of private placement.

6. On November 12, 2004, the Company entered into an option agreement to
earn a 50% interest in the Bachelor Lake Property with Wolfden
Resources Inc. ("Wolfden"). A definitive agreement (the "Assignment and
Assumption Agreement") was subsequently executed on April 15, 2005.
Under the terms of the Assignment and Assumption Agreement, Wolfden
assigned to the Company its option to earn a 50% interest in the
Bachelor Lake Property from Metanor Resources Inc. ("Metanor") by
paying to Wolfden an aggregate of $1,943,123 (comprised of $650,000 in
acquisition costs and $1,293,123 in reimbursement of exploration
expenditures) and issuing 2.1 million common shares subject to a
12-month contractual hold period. Upon securing project financing and
the commencement of commercial production on the property resulting in
a minimum of 50,000 ounces of gold or silver equivalent being produced,
the Company will pay a bonus payment to Wolfden in the amount of
$250,000 cash and 250,000 common shares. The Company has also agreed to
pay Wolfden a net smelter return royalty of 0.5% on the Company's share
of the net smelter return. The Company also assumed Wolfden's $3
million exploration funding commitment at Bachelor Lake. The
transaction closed on May 18, 2005. See "Item 4. Information on the
Company - Principal Properties - Bachelor Lake Property, Quebec." Mr.
Ewan Downie, a director of the Company is also the President, Chief
Executive Officer and a director of Wolfden.

7. During the year ended August 31, 2004, the Company negotiated a
settlement with Hilton Resources Ltd., a public corporation which
certain of its directors and officers are also officers and directors
of the Company, in which the Company paid $688,079 to settle $748,687
owed, resulting in a gain of $60,608.

8. During the year ended August 31, 2004, the Company negotiated
settlements with six creditors in which the Company paid $263,543 to
settle a total of $300,142 owed, resulting in a gain of $36,599. The
creditors are corporations owned by current and former officers and
directors of the Company.

9. During the year ended August 31, 2004, the Company paid $1,000 to Ewan
Downie for consulting services.

10. See also "Item 6. Directors, Senior Management and Employees -
Compensation."

INDEBTEDNESS OF DIRECTORS, OFFICERS, PROMOTERS AND OTHER MANAGEMENT

No executive officers, directors, employees or former executive officers and
directors of the Company are indebted to the Company. None of the directors,
executive officers or proposed nominees of the Company nor any associate or
affiliate of these individuals, is or has been indebted to the Company since
September 1, 2003.

-81-

CONFLICTS OF INTEREST

The table below shows that certain officers and directors of the Company are
also directors, officers or shareholders of other companies which are engaged in
the business of acquiring, developing and exploiting natural resource
properties. Such associations may give 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 interest of the Company and to
disclose any interest which they may have in any project or opportunity of the
Company. However, each director has a similar obligation to other companies for
which such director serves as an officer or director. As of the date of this
report, no conflicts of interest have arisen, except as described below and
above. Where conflicts of interests arose, the directors of the Company
disclosed their interests and abstained from voting on the transaction.

The following table identifies the name of each director and officer of the
Company and any company, which is a reporting issuer in Canada or the United
States, and for which such director or officer currently serves as an officer or
director, other than the Company:

DIRECTOR REPORTING ISSUER CAPACITY COMMENCED SERVICE

Marc Cernovitch N/A N/A N/A

Nick DeMare Aguila American Resources Ltd. Director January 2003
Andean American Mining Corp. Director August 2002
Astral Mining Corporation. Director February 2004
Centrasia Mining Corp. Director October 2002
CFO September 2005
GGL Diamond Corp. Director May 1989
Golden Peaks Resources Ltd. Director January 1992
Goldmarca Limited Director September 2000
Gold Point Energy Corp. Director August 2003
CFO June 2005
Kookaburra Resources Ltd. Director June 1988
Lara Exploration Ltd. Director March 2004
Lariat Energy Ltd. Director August 2002
Mawson Resources Limited Director March 2004
Medina International Corp. Director, Secretary & Treasurer May 2002
Mirasol Resources Limited Director February 2005
Tinka Resources Limited Director October 2003
Tumi Resources Limited Director January 2002

Andrew Carter Astral Mining Corporation Director February 2004
Gold Point Energy Corp. Director October 2003
Rochester Resources Ltd. Director July 2003
Tinka Resources Ltd. Director, President & CEO February 2003

Ewan Downie Anaconda Gold Corp. Director May 2003
Benton Resources Corp. Director December 2003
Newstrike Resources Corp. Director July 2005
Pediment Exploration Ltd. Director March 2005
Sabina Silver Corporation Director November 2002
Wolfden Resources Ltd. Director, President & CEO October 1995

William Lee Rochester Resources Ltd. Director September 1995
Jinshan Gold Mines Inc. CFO January 2006
Tinka Resources Limited Director October 2002

Tom Healy N/A N/A N/A

Harvey Lim Astral Mining Corporation Secretary & CFO February 2004
Gold Point Energy Corp. Director & Secretary October 2003
Rochester Resources Ltd. Secretary June 1997
Kookaburra Resources Ltd. Secretary June 2004
Tumi Resources Limited Director January 2002

There are no known existing or potential conflicts of interest among the
Company, promoters, directors, officers, principal holders of securities and
persons providing professional services to the Company which could reasonably be
expected to affect an investor's investment decision except as described in this
section.

-82-

The Company does not have any agreements with its officers or directors,
including any officers or directors with a conflict of interest, with respect to
the amount of time they must spend on the Company's business.

ITEM 8. FINANCIAL INFORMATION.
- --------------------------------------------------------------------------------

DESCRIPTION PAGE
- ----------- -----------

Audited Consolidated Financial Statements for the
Years Ended August 31, 2005, 2004 and 2003 F-1 to F-27

DIVIDEND POLICY

The Company has not paid any dividends on its common shares and does not intend
to pay dividends on its common shares in the immediate future. Any decision to
pay dividends on its common shares in the future will be made by the board of
directors on the Company on the basis of earnings, financial requirements and
other such conditions that may exist at that time.

LEGAL PROCEEDINGS

The Company knows of no material, active or pending legal or arbitration
proceedings against it; nor is the Company involved as a plaintiff in any
material proceeding or pending litigation.

The Company knows of no active or pending proceedings against anyone that might
materially adversely affect an interest of the Company.

There are no legal or arbitration proceedings (including governmental
proceedings pending or known to be contemplated) which may have, or have had in
the recent past, significant effects on the Company's financial position or
profitability.

There are no proceedings in which any director, any member of senior management,
or any affiliate of the Company is a party adverse to the Company or has a
material adverse interest to the Company.

ITEM 9. THE OFFER AND LISTING.
- --------------------------------------------------------------------------------

PRICE HISTORY

The TSXV classifies listed companies into two different tiers based on
standards, which include historical financial performance, stage of development,
and financial resources of the listed company. Tier 1 is the TSXV's premier tier
and is reserved for the TSXV's most advanced issuers with the most significant
financial resources. Tier 1 issuers benefit from decreased filing requirements
and improved service standards. The majority of the companies listed on the TSXV
are Tier 2 companies. The Company trades on the TSXV under the symbol "HLO" and
is classified as a Tier 2 company.

There have been no trading suspensions imposed by the TSXV or any other
regulatory authorities in the past three years.

The following table sets forth the market price ranges and the aggregate volume
of trading of the common shares of the Company on the TSXV, and predecessor
exchanges, for the periods indicated:

TSXV STOCK TRADING ACTIVITY

SALES PRICE
---------------------
YEAR ENDED VOLUME HIGH LOW

August 31, 2005 10,825,208 $1.59 $0.60
August 31, 2004 2,866,231 $0.96 $0.05
August 31, 2003 735,039 $0.18 $0.06
August 31, 2002 934,326 $1.89 $0.12
August 31, 2001 2,925,311 $7.49 $1.40

-83-

SALES PRICE
---------------------
MONTH ENDED VOLUME HIGH LOW

February 28, 2006 11,106,426 $0.61 $0.38
November 30, 2005 6,660,484 $0.92 $0.57
August 31, 2005 3,980,129 $0.81 $0.60
May 31, 2005 3,183,669 $1.59 $0.65
February 28, 2005 2,338,610 $1.37 $0.90
November 30, 2004 1,322,800 $1.09 $0.76
August 31, 2004 1,761,300 $0.96 $0.72
May 31, 2004 512,300 $0.85 $0.50

SALES PRICE
---------------------
MONTH ENDED VOLUME HIGH LOW

February 28, 2006 2,680,100 $0.55 $0.39
January 31, 2006 7,207,517 $0.57 $0.38
December 31, 2005 1,218,809 $0.61 $0.38
November 30, 2005 1,270,701 $0.80 $0.57
October 31, 2005 3,629,359 $0.92 $0.66
September 30, 2005 1,760,424 $0.78 $0.59

TSXV WARRANT TRADING ACTIVITY

Effective November 23, 2005, the Company's Series A and Series B Warrants were
listed and posted for trading on the TSXV under the symbols "HLO.WT.A" and
"HLO.WT.B", respectively. No trading of the Series A or Series B Warrants have
taken place to February 28, 2006.

On August 7, 2000, the Company's common shares were approved for quotation on
the Over-the-Counter Bulletin Board ("OTCBB") system operated by the National
Association of Securities Dealers. The Company currently trades on the OTCBB
under the symbol "HLOSF.OB". The following tables set forth the market price
ranges and the aggregate volume of trading of the common shares of the Company
on the OTCBB system for the periods indicated:

OTCBB TRADING ACTIVITY

BID PRICE (US$)
---------------------
YEAR ENDED VOLUME HIGH LOW

August 31, 2005 1,989,688 $1.18 $0.35
August 31, 2004 109,396 $0.75 $0.05
August 31, 2003 177,000 $0.09 $0.03
August 31, 2002 309,935 $1.19 $0.06
August 31, 2001 504,571 $4.27 $1.12

BID PRICE (US$)
---------------------
QUARTER ENDED VOLUME HIGH LOW

February 28, 2006 518,586 $0.53 $0.34
November 30, 2005 333,743 $0.78 $0.35
August 31, 2005 696,742 $0.70 $0.35
May 31, 2005 475,932 $1.18 $0.52
February 29, 2005 476,287 $1.08 $0.70
November 31, 2004 340,727 $0.90 $0.52
August 31, 2004 59,477 $0.75 $0.50
May 31, 2004 19,240 $0.50 $0.35

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BID PRICE (US$)
---------------------
MONTH ENDED VOLUME HIGH LOW

February 28, 2006 293,920 $0.50 $0.35
January 31, 2006 135,923 $0.53 $0.34
December 31, 2005 88,743 $0.50 $0.35
November 30, 2005 77,500 $0.71 $0.50
October 31, 2005 172,286 $0.78 $0.55
September 30, 2005 83,957 $0.69 $0.35

These above quotations reflect inter-dealer prices without retail mark-up,
markdown, or commissions and may not necessarily represent actual transactions.

The OTCBB is smaller and less liquid than the major securities markets in the
United States. The trading volume of the Company's shares on the OTCBB has been
volatile. Consequently, shareholders in the United States may not be able to
sell their shares at the time and at the price they desire.

Since February 2005, the Company's common stock has been listed on the Frankfurt
Stock Exchange ("FSE") and XETRA (Electronic Dealing System) under the trading
symbol "HRL".

ITEM 10. ADDITIONAL INFORMATION.

ARTICLES OF CONTINUANCE AND ARTICLES

The Company was incorporated under the laws of British Columbia, Canada on June
16, 1983 by registration of its Memorandum and Articles with the B.C. Registrar
of Companies (the "BC Registrar") under the incorporation number 372193. On
December 14, 1993, the Company was continued to the Yukon Territory, Canada by
the registration of its Articles of Continuance with the Yukon Registrar of
Corporations under the access number 29383 (the "Yukon Registrar").

On March 29, 2004, the British Columbia legislature enacted the BCBCA and
repealed the BC COMPANY ACT. The BCBCA removes many of the restrictions
contained in the BC COMPANY ACt, including restrictions on the residency of
directors, the location of annual general meetings and limits on authorized
share capital, as well, the BCBCA uses new forms and terminology and has
replaced the Memorandum with a Notice of Articles.

On November 16, 2004, the Company was continued to British Columbia, Canada by
the registration of a Certificate of Continuance with the BC Registrar under
incorporation number C0708624.

The Company's Articles of Continuance place no restriction upon the Company's
objects and purposes.

The Company is of the view that the BCBCA provides to shareholders of the
Company substantively the same rights as were available to shareholders under
the YBCA, including rights of dissent and appraisal and rights to bring
derivative and oppression actions. The following is a comparison of some of the
principal provisions of the YBCA and the BCBCA that the Company believes may be
relevant to shareholders. This summary is not intended to be exhaustive and
shareholders should consult their legal advisors with respect to the detailed
provisions of the BCBCA and their rights under it. Reference should be made to
the full text of both statutes for particulars of the differences.

Note: Within this summary, the term "Articles" when referring to the BCBCA is
the equivalent to the "by-laws" under the YBCA. The term "Notice of Articles"
when referring to the BCBCA is the equivalent of the "articles" under the YBCA.

SALE OF COMPANY'S UNDERTAKING. Under the BCBCA, a sale of all or substantially
all the property of a corporation, other than in the ordinary course of
business, of the corporation requires approval by special resolution. The
Company's Articles confirm a special resolution, being a resolution passed by a
majority of not less than two-thirds of the votes cast by shareholders who voted
in respect of the resolution (the "Special Resolution"), must be approved in
respect of the proposed sale. The provisions of the YBCA are substantially the
same.

ALTERATION TO NOTICE OF ARTICLES OF THE COMPANY. Under the BCBCA, any
substantive change to the Notice of Articles of a corporation, such as a change
in the name of the corporation and certain changes to the share capital of a

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corporation, require approval of a Special Resolution in respect of the change.
The provisions of the YBCA are substantially the same.

ARTICLE AMENDMENTS. The BCBCA provides that unless the Articles or a unanimous
shareholder agreement otherwise provide, the directors may, by resolution, make,
amend, or repeal any Articles that regulate the business or affairs of a
corporation. However, the directors must submit an Article, or an amendment or a
repeal of an Article, to the shareholders of the corporation, and the
shareholders may, with approval by way of Special Resolution, confirm, reject or
amend the article, amendment or repeal. The provisions of the YBCA are
substantially the same in connection with amendments to the by-laws.

AUTHORIZATION OF UNLIMITED NUMBER OF SHARES. The BCBCA permits a corporation to
have an unlimited number of shares without par value. The provisions of the YBCA
are substantially the same.

RIGHTS OF DISSENT AND APPRAISAL. The BCBCA provides that shareholders who
dissent to certain actions being taken by a corporation may exercise a right of
dissent and require the corporation to purchase the shares held by such
shareholder at the fair value of such shares. The dissent right is applicable
where the corporation proposes to (a) amend its articles to alter the
restrictions on the powers of the corporation or on the business that the
corporation may carry on, (b) adopt an amalgamation agreement, (c) in respect of
a resolution to approve an amalgamation under the BCBCA (d) in respect of a
resolution approving an arrangement, the terms of which arrangement permits
dissent, (e) continue out of the jurisdiction, (f) in respect of a resolution to
authorize and ratify the lease or other disposition of all or substantially all
its undertaking, (g) in respect of any other resolution, if dissent is
authorized by the resolution, or (h) in respect of any court order that permits
dissent. The dissenting shareholder is required to strictly comply with the
provisions of the BCBCA in order to exercise this remedy. The YBCA provides
similar rights to shareholders.

OPPRESSION REMEDIES. Under the BCBCA, a shareholder of a corporation has the
right to apply to a court for an order where the business or affairs are being
or have been conducted, or the exercise of the directors' of the corporation's
or any of its affiliates' powers, in a manner oppressive or unfairly prejudicial
to or would unfairly disregard the interests of any shareholder of the
corporation. On such an application, the court may make any interim or final
order it considers appropriate, including regulating the conduct of the
corporation's affairs. Under the YBCA, the oppression remedy is substantially
the same as that contained in the BCBCA.

SHAREHOLDER DERIVATIVE ACTIONS. Pursuant to the BCBCA, a complainant, which
includes a shareholder, may apply to the court for leave to bring an action in
the name of and on behalf of a corporation or any subsidiary, or to intervene in
an existing action to which the corporation is a party for the purpose of
prosecuting, defending or discontinuing the action on behalf of the corporation.
On such an application, the court may make any order it thinks fit, including an
order authorizing the complainant or any other person to control the conduct of
the action. Pursuant to the YBCA, derivative actions are dealt with in
substantially the same manner as the BCBCA.

FINANCIAL ASSISTANCE. The BCBCA does not restrict a corporation from giving
financial assistance to shareholders or directors of the corporation or an
affiliated corporation. The provisions of the YBCA are substantially the same
except that in certain cases a solvency test is met.

RECORD DATE FOR VOTING. The BCBCA provides the Company with the ability to fix a
record date for voting purposes. Transfers of shares after the record date are
not recognized for voting entitlement purposes. The YBCA also provides for the
setting of a fixed record date for voting purposes but a transferee of shares
requesting to have its name included in the relevant shareholder list at least
ten days (or such shorter time as is provided in the by-laws) prior to the
meeting is entitled to vote, provided that the transferee can establish that the
transferee owns the shares.

REQUISITION OF MEETINGS. The BCBCA provides that holders of not less than five
per cent of the issued shares of a corporation that carry the right to vote at a
meeting sought to be held may requisition the directors to call a meeting of
shareholders for the purposes stated in the requisition. The provisions of the
YBCA are substantially the same.

FORM OF PROXY AND INFORMATION CIRCULAR. The BCBCA requires that management of a
distributing corporation (public company), concurrently with giving notice of a
meeting of shareholders, send a form of proxy in prescribed form to each
shareholder who is entitled to receive notice of the meeting. Where management
of a corporation solicits proxies, an information circular in prescribed form
must also accompany the notice of the meeting. The YBCA contains similar
provisions.

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PLACE OF MEETINGS. The BCBCA provides that meetings of shareholders of a
corporation must be held at the place within the Province of British Columbia
provided in the articles. A meeting of shareholders of a corporation may however
be held at a place outside of British Columbia if the location is approved by
the resolution required by the Articles for the purpose, or if no resolution is
required for that purpose by the Articles, approved by ordinary resolution.
Under the YBCA, meetings of shareholders of a corporation must be held at a
location in the Yukon Territory or, if the articles so provide at one or more
places specified in the articles, or in the absence of such determination, at
the place where the registered office of the corporation is located.

QUORUM OF SHAREHOLDERS. The BCBCA states that the quorum of shareholders of the
corporation at a meeting of shareholders is established in the articles of the
corporation. If no quorum is established by the articles, the quorum is two
shareholders entitled to vote at the meeting whether present in person or by
proxy. Under the YBCA, unless the articles of a corporation otherwise provide, a
quorum of shareholders is present at a meeting of shareholders (irrespective of
the number of persons actually present at the meeting) if holders of a majority
of the shares entitled to vote at the meeting are present in person or
represented by proxy.

SHAREHOLDER PROPOSALS. The BCBCA contains eligibility requirements for
shareholders that wish to submit proposals for inclusion in a corporation's
proxy materials. The YBCA imposes similar requirements.

DUTIES OF DIRECTORS. The BCBCA provides that subject to any unanimous
shareholder agreement, the directors manage, or supervise the management of, the
business and affairs of the Company. The YBCA contains substantially the same
provisions.

REMOVAL OF DIRECTORS. The BCBCA permits the removal of directors by special
resolution. Unless otherwise provided in the articles of a corporation, a quorum
of directors may fill a vacancy among the directors, except for a vacancy
resulting from an increase in the number or the minimum or maximum number of
directors or the failure to elect the number or minimum number of directors
provided for in the articles. The YBCA contains substantially the same
provisions.

The following is a summary of all material provisions of the Company's
Continuation Application and Articles and certain provisions of the BCBCA,
applicable to the Company:

A. DIRECTOR'S POWER TO VOTE ON A PROPOSAL, ARRANGEMENT OR
CONTRACT IN WHICH THE DIRECTOR IS MATERIALLY INTERESTED.

Under the BCBCA, subject to certain exceptions, a director or
senior officer of the Company must disclose any material
interest that he personally has, or that he as a director or
senior officer of another corporation has in a contract or
transaction that is material to the Company and which the
Company has entered into or proposes to enter into.

A director or senior officer of the Company does not hold a
disclosable interest in a contract or transaction if:

1. the situation that would otherwise constitute a
disclosable interest arose before the coming into
force of the BCBCA, and the interest was disclosed
and approved under, or was not required to be
disclosed under legislation that applied to the
Company before the coming into effect of the BCBCA;
2. both the Company and the other party to the contract
or transaction are wholly owned subsidiaries of the
same corporation;
3. the Company is a wholly owned subsidiary of the other
party to the contract or transaction;
4. the other party to the contract or transaction is a
wholly owned subsidiary of the Company; or
5. the director or senior officer is the sole
shareholder of the Company or of a corporation of
which the Company is a wholly owned subsidiary.

A director or senior officer of the Company does not hold a
disclosable interest in a contract or transaction merely
because:

1. the contract or transaction is an arrangement by way
of a security granted by the Company for money loaned
to, or obligations undertaken by, the director or
senior officer, or a person in whom the director or

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senior officer has a material interest, for the
benefit of the Company or an affiliate of the
Company;
2. the contract or transaction relates to an indemnity
or insurance under the BCBCA;
3. the contract or transaction relates to the
remuneration of the director or senior officer, in
that person's capacity as director, officer, employee
or agent of the Company or of an affiliate of the
Company;
4. the contract or transaction relates to a loan to the
Company, and the director or senior officer, or a
person in whom the director or senior officer has a
material interest, is or is to be a guarantor of some
or all of the loan; or
5. the contract or transaction has been or will be made
with or for the benefit of a corporation that is
affiliated with the Company and the director or
senior officer is also a director or senior officer
of that corporation or an affiliate of that
corporation.

A director or senior officer who holds such a material
interest must disclose the nature and extent of such interest
in writing. The disclosure must be evidenced in writing in a
consent resolution, the minutes of a meeting or any other
record deposited with the Company's record office. A director
who has a disclosable interest in a contract or transaction is
not entitled to vote on any directors' resolution to approve
that contract or transaction, but may be counted in the quorum
at the directors' meeting at which such vote is taken.

B. DIRECTORS' POWER, IN THE ABSENCE OF AN INDEPENDENT QUORUM, TO
VOTE COMPENSATION TO THEMSELVES OR ANY MEMBERS OF THEIR BODY.

The compensation of the directors is decided by the directors
unless the Board of Directors specifically requests approval
of the compensation from the shareholders. If the issuance of
compensation to the directors is decided by the directors, a
quorum is the majority of the directors in office.

C. BORROWING POWERS EXERCISABLE BY THE DIRECTORS AND HOW SUCH
BORROWING POWERS MAY BE VARIED.

The Company, if authorized by the directors, may:

1. borrow money in the manner and amount, on the
security, from the sources and on the terms and
conditions that they consider appropriate;
2. issue bonds, debentures and other debt obligations
either outright or as security for any liability or
obligation of the Company or any other person and at
such discounts or premiums and on such other terms as
they consider appropriate;
3. guarantee the repayment of money by any other person
or the performance of any obligation of any other
person; and
4. mortgage, charge, whether by way of specific or
floating charge, grant a security interest in, or
give other security on, the whole or any part of the
present and future assets and undertaking of the
Company.

The borrowing powers may be varied by amendment to the
Articles of the Company which requires approval of the
shareholders of the Company by Special Resolution.

D. RETIREMENT AND NON-RETIREMENT OF DIRECTORS UNDER AN AGE LIMIT
REQUIREMENT.

There are no such provisions applicable to the Company under
the Certificate of Continuance , Notice of Articles, Articles
or the BCBCA.

E. NUMBER OF SHARES REQUIRED FOR A DIRECTOR'S QUALIFICATION.

A director of the Company is not required to hold a share in
the capital of the Company as qualification for his office.

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DESCRIPTION OF AUTHORIZED SHARES

The authorized capital of the Company consists of an unlimited number of common
shares without par value and an unlimited number of preferred shares without par
value. A complete description is contained in the Company's Continuation
Application.

COMMON SHARES

Of the Company's unlimited common share capital, a total of 28,017,716 common
shares were issued and outstanding as of February 28, 2006.

All of the common shares are fully paid and not subject to any future call or
assessment. All of the common shares of the Company rank equally as to voting
rights, participation in a distribution of the assets of the Company on a
liquidation, dissolution or winding-up of the Company and the entitlement to
dividends. The holders of the common shares are entitled to receive notice of
all shareholder meetings and to attend and vote at such meetings. Shareholders
are not entitled to cumulative voting. Each common share carries with it the
right to one vote. The common shares do not have preemptive or conversion
rights. In addition, there are no sinking fund or redemption provisions
applicable to the common shares or any provisions discriminating against any
existing or prospective holders of such securities as a result of a shareholder
owning a substantial number of common shares. The Company's board of directors
does not stand for re-election at staggered intervals.

PREFERRED SHARES

Of the Company's unlimited preferred share capital, a total of $8,000,000
preferred shares (the "Series 1 Preferred Shares") were issued and outstanding
as of February 28, 2006. The Series 1 Preferred Shares are entitled to a
liquidation preference over the holders of any other shares together with an
amount equal to all accrued and unpaid dividends thereon which for such purpose
shall be calculated as if such dividends were accruing up to the date of such
distribution.

The preference shares of each series rank on a priority with the preference
shares of every other series and are entitled to preference over the common
shares and any other shares ranking subordinate to the preference shares with
respect to priority and payment of dividends and distribution of assets in the
event of liquidation, dissolution or winding-up of the Company.

The holders of the Series 1 Preferred Shares are entitled to receive and the
Company shall pay thereon out of the monies of the Company properly applicable
to the payment of dividends fixed cumulative cash dividends, at the following
rates:

(i) for each of the two years commencing on November 1, 2004, an annual dividend
of $0.00625 per share payable in quarterly installments of $0.0015625 per share
on February 1, May 1, August 1, and November 1 of each year, commencing on
February 1, 2005 and ending on November 1, 2006; and

(ii) for each of the three years commencing on November 1, 2006, an annual
dividend of $0.04 per share payable in quarterly installments of $0.01 per share
on February 1, May 1, August 1, and November 1, of each year, commencing on
February 1, 2007 and ending on November 1, 2009.

The Company may, in its sole discretion, upon written notice given to the
holders of the Series 1 Preferred Shares at least 40 days before a dividend is
due, elect to pay such dividend in common shares of the Company. If the Company
so elects, the number of common shares issuable will be determined by dividing
the amount of the dividend due by the weighted average trading price of the
common shares of the Company on the TSXV for the 15 trading days immediately
prior to the date the dividend is due.

The Company may at any time prior to November 1, 2009, redeem the Series 1
Preferred Shares in whole or in part without the consent of the holders thereof
on payment to the holders thereof of the amount of $1.05 per share plus an
amount equal to all accrued and unpaid dividends thereon which for such purpose
shall be calculated as if such dividends were accruing up to the date of
redemption (collectively the "Redemption Amount"). The Company, in its sole
discretion may elect to pay the Redemption Amount in cash or common shares of
the Company. If the Company elects to the pay the Redemption Amount in common
shares, the number of common shares issuable will be determined by dividing the
Redemption Amount by the weighted average trading price of the common shares of
the Company on the TSXV for the 15 trading days immediately prior to the date
specified for redemption upon notice thereof. Provided all dividends payable on
the Series 1 Preferred Shares have been paid up to date, the Company may at any

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time prior to November 1, 2009, redeem the Series 1 Preferred Shares without the
consent of the holders thereof by transferring to the holders thereof, in
proportion to the percentage of issued and outstanding Series 1 Preferred
Shares, held by each holder, the Company's title to the Duport Property.

If the Series 1 Preferred Shares have not been redeemed by November 1, 2009, the
Company will, effective November 1, 2009, retract the Series 1 Preferred Shares
by payment to the holders thereof of the retraction amount (the "Retraction
Amount") in respect of each Preferred Share, Series 1, which shall be $1.00 per
share plus an amount equal to all accrued and unpaid dividends thereon which for
such purposes shall be calculated as if such dividends were accruing up to the
date of retraction. The Company, in its sole discretion may elect to pay the
Retraction Amount in cash or common shares of the Company. If the Company elects
to the pay the Retraction Amount in common shares, the number of common shares
issuable will be determined by dividing the Retraction Amount by the weighted
average trading price of the common shares of the Company on the TSXV for the 15
trading days immediately prior to the date specified for retraction.

In the event of the liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, or other distribution of its property or
assets among its shareholders for the purpose of winding up its affairs, the
holders of the Series 1 Preferred Shares are entitled to receive, before any
distribution of any part of the property or assets of the Company among the
holders of any other shares, an amount equal to $1.00 per share together with an
amount equal to all accrued and unpaid dividends thereon which for such purpose
shall be calculated as if such dividends were accruing up to the date of such
distribution. Thereafter, the holders of the Series 1 Preferred Shares will not
participate further in the capital of the Company.

The holders of the Series 1 Preferred shares are not entitled to receive notice
of or to attend and vote at any meetings of the shareholders of the Company
unless a dividend payable thereon remains unpaid for a period of 60 days past
the date the dividend was due, in which case the holders of Series 1 Preferred
Shares shall have one vote per share at all meetings of shareholders until such
dividend is paid.

No Series 1 Preferred Shares shall be transferred unless the transferee agrees
in writing to be bound by the provisions of the escrow agreement dated March 24,
2005 among the Company, the Sheridan Platinum Group Ltd. and McLean & Kerr LLP,
as amended from time to time, as if the transferee were the "Vendor" under such
agreement.

The Series 1 Preferred Shares do not carry any pre-emptive, subscription, or
conversion rights, nor do they contain any sinking or purchase fund provisions.

DIVIDEND RECORD

The Company has not paid any dividends on its common shares and has no policy
with respect to the payment of dividends.

OWNERSHIP OF SECURITIES AND CHANGE OF CONTROL

Except for the Investment Canada Act, discussed below, there are no limitations
on the rights to own securities, including the rights of non-resident or foreign
shareholders to hold or exercise voting rights on the securities imposed by
foreign law or by the constituent documents of the Company.

Any person who beneficially owns or controls, directly or indirectly, more than
10% of the Company's voting shares is considered an insider, and must file an
insider report with the British Columbia, Alberta and Ontario Securities
Commissions within ten days of becoming an insider disclosing any direct or
indirect beneficial ownership of, or control over direction over securities of
the Company. In addition, if the Company itself holds any of its own securities,
the Company must disclose such ownership.

There are no provisions in the Company's Continuation Application, Notice of
Articles and Articles that would have an effect of delaying, deferring or
preventing a change in control of the Company operating only with respect to a
merger, acquisition or corporate restructuring involving the Company or its
subsidiaries.

CHANGES TO RIGHTS AND RESTRICTIONS OF SHARES

Under the BCBCA and the Company's Articles, if the Company wishes to change the
rights and restrictions of the common shares or the preferred shares the Company
must obtain the approval of the shareholders by Special Resolution.

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SHAREHOLDER MEETINGS

ANNUAL AND EXTRAORDINARY GENERAL MEETINGS

Under the BCBCA and the Company's Articles, the Company's annual general meeting
is to be held once in each calendar year and not more than 15 months after the
previous meeting. No advance notice will be required to be published at a
meeting where directors are to be elected. The Company, under the BCBCA, must
give shareholders not less than 21 days' notice of any general meeting of the
shareholders.

The Directors may fix in advance a date, which is no fewer than 35 days or no
more than 60 days prior to the date of the meeting, as the record date for the
meeting. All the holders of common shares as at the record date are entitled to
attend and vote at a general meeting.

On a show of hands, every person who is present, a shareholder or proxy holder
and entitled to vote shall have one vote. Whenever a vote by show of hands shall
have been taken upon a question, unless a ballot thereon is so required or
demanded, a declaration by the Chairman of the meeting that the vote upon the
resolution has been carried or carried by the necessary majority or is defeated
must be entered in the minutes of the meeting and shall be conclusive evidence
of the fact without proof of the number or proportion of the votes recorded in
favor of or against the resolution and the result of the vote so taken shall be
the decision of the members upon the said question.

DIFFERENCES FROM REQUIREMENTS IN THE UNITED STATES

Except for the Company's quorum requirements, certain requirements related to
related party transactions, the requirement for notice of shareholder meetings,
the approval of amendments to the Company's articles and disclosures by certain
shareholders of their ownership, which are discussed above, there are no
significant differences in the law applicable to the Company, in the areas
outlined above, in British Columbia versus the United States. In most states in
the United States, a quorum must consist of a majority of the shares entitled to
vote. Some states allow for a reduction of the quorum requirements to less than
a majority of the shares entitled to vote. Having a lower quorum threshold may
allow a minority of the shareholders to make decisions about the Company, its
management and activities. In addition, most states in the United States require
that a notice of meeting be mailed to shareholders prior to the meeting date.
Additionally, in the United States, a director may not be able to vote on the
approval of any transaction in which the director has a interest. Generally,
most states in the United States require amendments to a company's articles of
incorporation to be approved by at least a majority of the votes cast by the
holders of the issued and outstanding shares. Some states, or some older
corporations, may require approval of amendments by 2/3 of the votes cast by the
holders of the issued and outstanding shares. In addition, in the United States
voting by separate voting groups may be required on the approval of any such
amendments. The Company's common shares are registered with the Securities and
Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). As a result, under Section 13 of the Act,
shareholders beneficially owning more than five percent (5%) of the Company's
common shares may be required to make filings with the Securities and Exchange
Commission relating to their ownership of the Company's common shares.

MATERIAL CONTRACTS

The following are material contracts entered into by the Company during the two
years preceding the date of this annual report:

1. Letter of Intent by and among The Company Resources Ltd., The Sheridan
Platinum Group Ltd. and Mr. Pat Sheridan, dated July 5, 2004. See "Item
4. Information on the Company - Principal Properties - Duport
Property".

2. Head of Agreement by and between Halo Resources Ltd. and Wolfden
Resources Inc., dated November 12, 2004. See "Item 4. Information on
the Company - Principal Properties - Bachelor Lake Property".

3. Letter of Intent by and between Halo Resources Ltd. and Endowment Lakes
(2002) Limited Partnership dated February 9, 2005. See "Item 4.
Information on the Company - Principal Properties - Quarter Moon Lake
Property, Manitoba".

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4. Assignment and Assumption Agreement by and among Halo Resources Ltd.,
The Sheridan Platinum Group Ltd. and Mr. Pat Sheridan dated March 24,
2005, whereby the Company acquired a 100% interest in 93 mineral claims
over an area of approximately 5,000 hectares, located near Kenora,
Ontario, for which the Company paid $250,000 cash and issued one
million common shares at a fair value of $1,210,000 and $8 million in
preferred shares; the Company has also agreed to pay a 2.5% net smelter
return royalty ("NSR") on the first 1.5 million ounces of gold produced
and a 5% NSR on the excess. The Company has the right to buy back a
portion of the NSR. See "Item 4. Information on the Company - Principal
Properties - Duport Property".

5. Assignment and Assumption Agreement by and between Halo Resources Ltd.
and Wolfden Resources Inc., executed April 15, 2005, whereby the
Company acquired Wolfden's option to earn a 50% interest in the
Bachelor Lake Property by paying $650,000 cash and issuing 2,100,000
common shares, at a fair value of $1,575,000. The Company also
reimbursed Wolfden $1,293,123 for a portion of exploration costs
incurred by Wolfden from the date of signing the head of agreement; if
the Company exercises the option, and after 50,000 ounces of gold or
gold equivalent have been produced from the Bachelor Lake Property, the
Company shall pay to Wolfden a bonus payment of $250,000 cash and issue
to Wolfden a further 250,000 common shares. The Company also agreed to
pay a 0.5% royalty on the Company's share of the NSR. . See "Item 4.
Information on the Company - Principal Properties - Bachelor Lake
Property".

6. Joint Venture Agreement by and between Halo Resources Ltd. and Metanor
Resources Inc. dated September 28, 2005, whereby the parties have
agreed to jointly explore, develop and operate the Bachelor Lake
Property as a 50:50 joint venture (the "BLJV").

EXCHANGE CONTROLS

There are no governmental laws, decrees, or regulations in Canada relating to
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 stock. Any remittances of dividends to United States residents are,
however, subject to a 15% withholding tax (10% if the shareholder is a
corporation owning at least 10% of the outstanding common stock of the Company)
pursuant to Article X of the reciprocal tax treaty between Canada and the United
States. See "Item 10. Additional Information - Taxation".

Except as provided in the Investment Canada Act, there are no limitations
specific to the rights of non-Canadians to hold or vote the common stock of the
Company under the laws of Canada or the Province of British Columbia or in the
charter documents of the Company.

The following discussion summarizes the principal features of the Investment
Canada Act for a non-resident who proposes to acquire the common shares.

The Investment Canada Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture (each an "entity") that is not a "Canadian"
as defined in the Investment Canada Act (a "non-Canadian"), unless after review,
the Director of Investments appointed by the minister responsible for the
Investment Canada Act is satisfied that the investment is likely to be of net
benefit to Canada. An investment in the common shares by a non-Canadian other
than a "WTO Investor" (as that term is defined by the Investment Canada Act, and
which term includes entities which are nationals of or are controlled by
nationals of member states of the World Trade Organization) when the Company was
not controlled by a WTO Investor, would be reviewable under the Investment
Canada Act if it was an investment to acquire control of the Company and the
value of the assets of the Company, as determined in accordance with the
regulations promulgated under the Investment Canada Act, equals or exceeds $5
million for direct acquisition and over $50 million for an indirect acquisition,
or if an order for review was made by the federal cabinet on the grounds that
the investment related to Canada's cultural heritage or national identity,
regardless of the value of the assets of the Company. An investment in the
common shares by a WTO Investor, or by a non-Canadian when the Company was
controlled by a WTO Investor, would be reviewable under the Investment Canada
Act if it was an investment to acquire control of the Company and the value of
the assets of the Company, as determined in accordance with the regulations
promulgated under the Investment Canada Act was not less than a specified
amount. A non-Canadian would acquire control of the Company for the purposes of
the Investment Canada Act if the non-Canadian acquired a majority of the common
shares. The acquisition of one third or more, but less than a majority of the
common shares would be presumed to be an acquisition of control of the Company
unless it could be established that, on the acquisition, the Company was not
controlled in fact by the acquirer through the ownership of the common shares.

-92-

Certain transactions relating to the common shares would be exempt from the
Investment Canada Act, including: (a) an acquisition of the common shares by a
person in the ordinary course of that person's business as a trader or dealer in
securities; (b) an acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial assistance and not
for a purpose related to the provisions of the Investment Canada Act; and (c) an
acquisition of control of the Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control in fact of the Company, through the ownership of the common
shares, remained unchanged.

TAXATION

MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES

Management of the Company considers that the following discussion fairly
describes the material Canadian federal income tax consequences applicable to a
holder of common stock of the Company who is a resident of the United States and
who is not a resident of Canada and who does not use or hold, and is not deemed
to use or hold, his shares of common stock of the Company in connection with
carrying on a business in Canada (a "non-resident shareholder").

This summary is based upon the current provisions of the Income Tax Act (Canada)
(the "ITA"), the regulations thereunder (the "Regulations"), the current
publicly announced administrative and assessing policies of Revenue Canada,
Taxation and all specific proposals (the "Tax Proposals") to amend the ITA and
Regulations announced by the Minister of Finance (Canada) prior to the date
hereof. This description is not exhaustive of all possible Canadian federal
income tax consequences and, except for the Tax Proposals, does not take into
account or anticipate any changes in law, whether by legislative, governmental
or judicial action.

DIVIDENDS

Dividends paid on the common stock of the Company to a non-resident will be
subject to withholding tax. The Canada-US Income Tax Convention (1980) (the
"Treaty") provides that the normal 25% withholding tax rate is reduced to 15% on
dividends paid on shares of a corporation resident in Canada (such as the
Company) to residents of the United States, and also provides for a further
reduction of this rate to 5% where the beneficial owner of the dividends is a
corporation which is a resident of the United States which owns at least 10% of
the voting shares of the corporation paying the dividend.

CAPITAL GAINS

In general, a non-resident of Canada is not subject to tax under the ITA with
respect to a capital gain realized upon the disposition of a share of a
corporation resident in Canada that is listed on a prescribed stock exchange.
For purposes of the ITA, the Company is listed on a prescribed stock exchange.
Non-residents of Canada who dispose of shares of the Company will be subject to
income tax in Canada with respect to capital gains if:

(a) the non-resident holder;
(b) persons with whom the non-resident holder did not deal at
arm's length; or
(c) the non-resident holder and persons with whom the non-resident
holder did not deal with at arm's length,

owned not less than 25% of the issued shares of any class or series of the
Company at any time during the five-year period preceding the disposition. 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
taxes will be payable on a capital gain realized on such shares by reason of the
Treaty unless the value of such shares is derived principally from real property
situated in Canada. However, in such a case, certain transitional relief under
the Treaty may be available.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes the material United States federal income
tax consequences, under current law, applicable to a US Holder (as defined
below) of the Company's common stock. This discussion does not address
consequences peculiar to 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

-93-

investment companies, broker-dealers, nonresident alien individuals or foreign
corporations, and shareholders owning common stock representing 10% of the vote
and value of the Company. In addition, 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, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial of recently proposed legislation which, if enacted, could
be applied, possibly on a retroactive basis, at any time. Holders and
prospective holders of the Company's common stock should consult their own tax
advisors about the federal, state, local and foreign tax consequences of
purchasing, owning and disposing of shares of common stock of the Company.

US HOLDERS

As used herein, a "US Holder" is defined as (i) citizens or residents of the US,
or any state thereof, (ii) a corporation or other entity created or organized
under the laws of the US, or any political subdivision thereof, (iii) an estate
the income of which is subject to US federal income tax regardless of source or
that is otherwise subject to US federal income tax on a net income basis in
respect of the common stock, or (iv) a trust whose administration is subject to
the primary supervision of a US court and which has one or more US fiduciaries
who have the authority to control all substantial decisions of the trust, whose
ownership of common stock 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 stock options or otherwise as compensation.

DISTRIBUTIONS ON SHARES OF COMMON STOCK

US Holders receiving dividend distributions (including constructive dividends)
with respect to the Company's common stock 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 US Holder's United States federal income tax liability
or, alternatively, may be deducted in computing the US 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 US Holder's adjusted basis in the
common stock and thereafter as gain from the sale or exchange of such shares.
Preferential tax rates for long-term capital gains are applicable to a US Holder
which is an individual, estate or trust. There are currently no preferential tax
rates for long-term capital gains for a US Holder which is a corporation.
Dividends paid on the Company's common stock will not generally be eligible for
the dividends received deduction provided to corporations receiving dividends
from certain United States corporations.

FOREIGN TAX CREDIT

A US Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of the Company's common stock may be entitled, at
the option of the US 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 taxes paid by (or withheld from) the US Holder during that year. Subject
to certain limitations, Canadian taxes withheld will be eligible for credit
against the US Holder's United States federal income taxes. Under the Code, the
limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. Dividends paid by the Company generally
will be either "passive" income or "financial services" income, depending on the
particular US Holder's circumstances. Foreign tax credits allowable with respect
to each class of income cannot exceed the US federal income tax otherwise
payable with respect to such class of income. The consequences of the separate
limitations will depend on the nature and sources of each US Holder's income and
the deductions appropriately allocated or apportioned thereto. 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 stock should
consult their own tax advisors regarding their individual circumstances.

-94-

DISPOSITION OF SHARES OF COMMON STOCK

A US Holder will recognize gain or loss upon the sale of shares of common stock
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 stock. This gain or loss will be capital gain or loss if the shares
are a capital asset in the hands of the US Holder, and such gain or loss will be
long-term capital gain or loss if the US Holder has held the common stock for
more than one year. 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 US Holders who 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 US Holders which are corporations (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

The Company has not determined whether it meets the definition of a "passive
foreign investment company" (a "PFIC"). It is unlikely that the Company meets
the definition of a "foreign personal holding company" (a "FPHC") or a
"controlled foreign corporation" (a "CFC") under current US law.

If more than 50% of the voting power or value of the Company were owned
(actually or constructively) by US Holders who each owned (actually or
constructively) 10% or more of the voting power of the Company's common shares
("10% Shareholders"), then the Company would become a CFC and each 10%
Shareholder would be required to include in its taxable income as a constructive
dividend an amount equal to its share of certain undistributed income of the
Company. If (1) more than 50% of the voting power or value of the Company's
common shares were owned (actually or constructively) by five or fewer
individuals who are citizens or residents of the United States and (2) 60% or
more of the Company's income consisted of certain interest, dividend or other
enumerated types of income, then the Company would be a FPHC. If the Company
were a FPHC, then each US Holder (regardless of the amount of the Company's
common shares owned by such US Holder) would be required to include in its
taxable income as a constructive dividend its share of the Company's
undistributed income of specific types.

If 75% or more of the Company's annual gross income has ever consisted of, or
ever consists of, "passive" income or if 50% or more of the average value of the
Company's assets in any year has ever consisted of, or ever consists of, assets
that produce, or are held for the production of, such "passive" income, then the
Company would be or would become a PFIC. The Company has not provided assurances
that it has not been and does not expect to become a PFIC. Please note that the
application of the PFIC provisions of the Code to resource companies is somewhat
unclear.

If the Company or any of its subsidiaries (if any) is deemed to be a PFIC, a
United States holder of the Company's common shares would be required to pay an
interest charge together with tax calculated at maximum tax rates on certain
"excess distributions" (defined to include certain dividends from a PFIC and any
gain on the sale of stock of a PFIC) unless such holder made an election either
to (1) include in his or her taxable income his or her pro rata share of the
PFIC's ordinary earnings and net capital gains under the Qualified Electing Fund
rules or (2) mark to market his or her Company common shares at the end of each
taxable year as set forth in Section 1296 of the Internal Revenue Code of 1986,
as amended. The elections require certain conditions be met such as filing on or
before the due date, as extended, for filing the shareholder's income tax return
for the first taxable year to which the election will apply.

INFORMATION REPORTING AND BACKUP WITHHOLDING

US information reporting requirements may apply with respect to the payment of
dividends to US Holders of the Company's shares. Under Treasury regulations
currently in effect, non-corporate holders may be subject to backup withholding
at a 31% rate with respect to dividends when such holder (1) fails to furnish or
certify a correct taxpayer identification number to the payor in the required
manner, (2) is notified by the IRS that it has failed to report payments of
interest or dividends properly or (3) fails, under certain circumstances, to
certify that it has been notified by the IRS that it is subject to backup
withholding for failure to report interest and dividend payments.

INSPECTION OF DOCUMENTS

Copies of the documents referred to in this report may be inspected at the
Company's registered office at Suite 1305 - 1090 West Georgia Street, Vancouver,
British Columbia V6E 3V7, during normal business hours.

The Company's documents publicly filed with the SEC may also be viewed and
inspected at the SEC's Public Reference Room located at 450 Fifth Street, NW,
Washington, D.C. 20549. Copies may also be obtained from the SEC at prescribed
rates.

-95-

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- --------------------------------------------------------------------------------

Not applicable.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
- --------------------------------------------------------------------------------

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
- --------------------------------------------------------------------------------

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS.
- --------------------------------------------------------------------------------

The Company has changed its domicile and created Series 1 Preferred Shares. See
"Item 4. Information on the Company - History and Development of the Company",
"Item 10. Additional Information - Articles of Continuance and Articles" and
"Item 10. Additional Information - Description of Authorized Shares - Preferred
Shares". These actions have effected the rights of the Company's common
shareholders.

ITEM 15. CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------

An evaluation was performed under the supervision and with the participation of
the Company's management, including Mr. DeMare, the Company's Chairman and CFO,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) of the
Securities Exchange Act of 1934 (the "Exchange Act") as of August 31, 2005.
Based upon that evaluation, Mr. DeMare, concluded that the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission's rules and forms.

During the fiscal year ended August 31, 2005, there were no changes in the
Company's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

ITEM 16. [RESERVED]
- --------------------------------------------------------------------------------

Not applicable.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
- --------------------------------------------------------------------------------

The Board of Directors has determined that the Company has at least two audit
committee financial experts, Messrs. Nick DeMare and William Lee, who serve on
the Company's audit committee. Mr. Lee is considered to be an "independent
director" and Mr. DeMare is not considered to be an "independent director" as
that term is defined in Rule 4200(a)(15) of the National Association of
Securities Dealers.

ITEM 16B. CODE OF ETHICS.
- --------------------------------------------------------------------------------
The Company has not yet adopted a code of ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer, or controller, or persons performing similar functions. Given the
Company's current operations, management does not believe a code of ethics is
necessary at this stage of the Company's development.

-96-

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- --------------------------------------------------------------------------------

AUDIT FEES

For the fiscal years ended August 31, 2005 and 2004, the Company's principal
accountant billed $13,356 and $11,615, respectively, for the audit of the
Company's annual financial statements or services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for those fiscal years.

AUDIT-RELATED FEES

For the fiscal years ended August 31, 2005 and 2004, the Company's principal
accountant billed $1,419 and $nil, respectively, for assurance and related
services that were reasonably related to the performance of the audit or review
of the Company's financial statements outside of those fees disclosed above
under "Audit Fees".

TAX FEES

For the fiscal years ended August 31, 2005 and 2004, the Company's principal
accountant billed $2,202 and $nil, respectively, for tax compliance, tax advice,
and tax planning services.

ALL OTHER FEES

For the fiscal years ended August 31, 2005 and 2004, the Company's principal
accountant billed $nil and $nil respectively, for products and services other
than those set forth above.

PRE-APPROVAL POLICIES AND PROCEDURES

Prior to engaging the Company's accountants to perform a particular service, the
Company's audit committee obtains an estimate for the service to be performed.
The Company's audit committee reviews and pre-approves all audit and
audit-related services and the fees and other compensation related thereto, and
any non-audit services provided by the Company's external auditors. Provided the
pre-approval of the non-audit services is presented to the audit committee's
first scheduled meeting following such approval such authority may be delegated
by the audit committee to one or more independent members of the audit
committee. The audit committee in accordance with procedures for the Company
approved all of the services described above.

At no time since the commencement of the Company's most recently completed
financial year has the Company relied on the waiver in paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.

PRINCIPAL ACCOUNTANT SERVICES

To the best of the Company's knowledge, the percentage of hours expended on the
Company's principal accountant's engagement to audit the Company's financial
statements for the fiscal year ended August 31, 2005, that were attributed to
work performed by persons other than the principal accountant's full-time
permanent employees was less than fifty percent (50%).

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
- --------------------------------------------------------------------------------
Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS.
- --------------------------------------------------------------------------------
Not applicable.

-97-

PART III

ITEM 17. FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------

See pages F-1 through F-27.

ITEM 18. FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------

Not applicable.

ITEM 19. EXHIBITS.
- --------------------------------------------------------------------------------

EXHIBIT NUMBER DESCRIPTION

1.1 Certificate of Continuation and Notice of Articles for Halo
Resources Ltd. (1)
1.2 Articles for Halo Resources Ltd. (1) Purchase and Sale
Agreement by and between TMK Oil & Gas, Inc. and Westport
Petroleum Inc., dated
4.1 March 1, 2004. (1) Letter of Intent by and among Halo
Resources Ltd., The Sheridan Platinum Group Ltd. and
4.2 Mr. Pat Sheridan, dated July 5, 2004. (1) Heads of Agreement
by and between Halo Resources Ltd. and Wolfden Resources Inc.,
4.3 dated November 12, 2004. (1)
4.4 Stock Option Plan 2004 (2) Letter of Intent by and between
Halo Resources Ltd. and Endowment Lakes (2002) Limited
4.5 Partnership, dated February 9, 2005, and amendment dated
February 9, 2006 Purchase Agreement by and among Halo
Resources Ltd., Sheridan Platinum Group,
4.6 dated February 18, 2005. Assignment and Assumption Agreement
by and between Halo Resources Ltd. and
4.7 Wolfden Resources Inc., dated April 15, 2005. Bachelor Lake
Joint Venture Agreement by and between Halo Resources Ltd. and
4.8 Metanor Resources Inc. dated Sept 8, 2005.
12.1 Certification of Marc Cernovitch Pursuant to Rule 13a-14(a)
12.2 Certification of Nick DeMare Pursuant to Rule 13a-14(a)
13.1 Certification of Marc Cernovitch Pursuant to 18 U.S.C. Section
1350
13.2 Certification of Nick DeMare Pursuant to 18 U.S.C. Section
1350

(1) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
filed with the Commission on February 2, 2005. File number 0-30196.
(2) Previously filed as an exhibit to the Company's Annual Report on Form 20-F,
filed with the Commission on March 12,2004. File number 0-30196.

-98-

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.

HALO RESOURCES LTD.

Dated: MARCH 10, 2006 /s/ MARC CERNOVITCH
-----------------------------------
Marc Cernovitch,
President, Chief Executive Officer,
and Director

-99-

- --------------------------------------------------------------------------------

HALO RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
AUGUST 31, 2005, 2004 AND 2003

- --------------------------------------------------------------------------------

F-1

AUDITORS' REPORT

To the Shareholders of
Halo Resources Ltd.

We have audited the consolidated balance sheets of Halo Resources Ltd. as at
August 31, 2005 and 2004 and the consolidated statements of loss, deficit and
cash flows for the years ended August 31, 2005, 2004 and 2003. 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 audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards and 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at August 31, 2005
and 2004 and the results of its operations and cash flow for the years ended
August 31, 2005, 2004 and 2003 in accordance with Canadian generally accepted
accounting principles.

Canadian generally accepted accounting principles vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected assets, liabilities and shareholders' equity as at August
31, 2005 and 2004 and results of operations for the years ended August 31, 2005,
2004 and 2003 to the extent summarized in Note 16 to the consolidated financial
statements.

On December 1, 2005 we reported separately to the shareholders of Halo Resources
Ltd. on consolidated financial statements as at, and for the years ended, August
31, 2005 and 2004 audited in accordance with Canadian generally accepted
auditing standards.

Vancouver, B.C. /s/ D&H GROUP LLP
December 1, 2005
CHARTERED ACCOUNTANTS

D&H Group LLP
A B.C. LIMITED LIABILITY PARTNERSHIP OF CORPORATIONS
member of BHD Association
with affiliated offices across Canada and Internationally
10th Floor, 1333 West Broadway, Vancouver, B.C. V6H 4C1
www.dhgroup.ca F (604) 731-9923 T (604) 731-5881

F-2

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
December 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.

Vancouver, B.C. /s/ D&H GROUP LLP
December 1, 2005
CHARTERED ACCOUNTANTS

F-3

HALO RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT AUGUST 31

2005 2004
$ $

ASSETS

CURRENT ASSETS

Cash 893,525 329,065
Amounts receivable and prepaids (Note 3) 197,507 12,610
------------ ------------
1,091,032 341,675

CAPITAL ASSETS (Note 4) 32,761 -

UNPROVEN MINERAL INTERESTS (Note 5) 22,759,333 75,906

DEFERRED SHARE ISSUE COSTS (Note 17(a)) 45,556 -
------------ ------------
23,928,682 417,581
============ ============

LIABILITIES

CURRENT LIABILITIES
Accounts payable and accrued liabilities 584,221 62,965

REDEEMABLE PREFERRED SHARES (Note 6) 8,000,000 -

ASSET RETIREMENT OBLIGATION (Note 15) 938,500 -

FUTURE INCOME TAX LIABILITY (Notes 5(a) and 9) 5,328,000 -
------------ ------------
14,850,721 62,965
------------ ------------
COMMITMENT (Note 14)

SHAREHOLDERS' EQUITY

SHARE CAPITAL (Note 7) 28,487,576 20,914,102

CONTRIBUTED SURPLUS (Note 8) 738,642 179,611

SHARE SUBSCRIPTIONS RECEIVED (Note 17(a)) 958,950 -

DEFICIT (21,107,207) (20,739,097)
------------ ------------
9,077,961 354,616
------------ ------------
23,928,682 417,581
============ ============
NATURE OF OPERATIONS (Note 1)

SUBSEQUENT EVENTS (Note 17)

APPROVED BY THE BOARD

/s/ MARC CERNOVITCH , Director
- ---------------------
/s/ NICK DEMARE , Director
- ---------------------

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

F-4

HALO RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
FOR THE YEARS ENDED AUGUST 31

2005 2004 2003
$ $ $

REVENUES

Oil and gas sales - 81,347 45,346
Interest and other 31,331 695 23,878
------------ ------------ ------------
31,331 82,042 69,224
------------ ------------ ------------
EXPENSES

Accretion (Note 15) 38,000 - -
Production - 21,832 16,810
Depreciation, depletion and impairment 4,132 10,441 1,251,882
General exploration 27,002 - -
General and administrative 1,060,276 183,539 176,947
Stock-based compensation 559,031 179,611 -
Part XII.6 tax expense (Note 9) 40,000 - -
------------ ------------ ------------
1,728,441 395,423 1,445,639
------------ ------------ ------------

LOSS BEFORE THE FOLLOWING (1,697,110) (313,381) (1,376,415)

INTEREST EXPENSE - (29,817) (60,741)

LOSS ON SALE OF PETROLEUM AND
NATURAL GAS INTERESTS - (11,031) -

GAIN ON SETTLEMENT OF
ADVANCES (Notes 10(b) and 10(c)) - 97,207 -

WRITE-OFF OF AMOUNTS RECEIVABLE - - (19,959)

LOSS ON SALE OF MARKETABLE SECURITIES - - (15,527)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (1,697,110) (257,022) (1,472,642)

FUTURE INCOME TAX RECOVERY (Note 9) 1,329,000 - -
------------ ------------ ------------
NET LOSS FOR THE YEAR (368,110) (257,022) (1,472,642)

DEFICIT - BEGINNING OF YEAR (20,739,097) (20,482,075) (19,009,433)
------------ ------------ ------------
DEFICIT - END OF YEAR (21,107,207) (20,739,097) (20,482,075)
============ ============ ============

LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.02) $(0.05) $(0.50)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 16,049,812 5,654,354 2,926,859
============ ============ ============

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

F-5

HALO RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED AUGUST 31

2005 2004 2003
$ $ $

CASH PROVIDED FROM (USED FOR)

OPERATING ACTIVITIES

Net loss for the year (368,110) (257,022) (1,472,642)
Items not involving cash
Accretion 38,000 - -
Depreciation, depletion and impairment 4,132 10,441 1,251,882
Stock-based compensation 559,031 179,611 -
Loss on sale of petroleum and natural
gas interests - 11,031 -
Gain on settlement of advances - (97,207) -
Write-off of amounts receivable - - 19,959
Loss on sale of marketable securities - - 15,527
Interest expense - 29,817 60,741
Future income tax recovery (1,329,000) - -
------------ ------------ ------------

(1,095,947) (123,329) (124,533)
Increase in amounts receivable and prepaids (184,897) (5,497) (4,223)
Increase in accounts payable and
accrued liabilities 517,089 43,919 9,197
------------ ------------ ------------
(763,755) (84,907) (119,559)
------------ ------------ ------------
FINANCING ACTIVITIES

Common shares issued for cash 6,941,897 1,377,000 -
Common share subscriptions received 958,950 - -
Common share issue costs (692,979) - -
Repayment of advances - (951,622) (117,405)
------------ ------------ ------------
7,207,868 425,378 (117,405)
------------ ------------ ------------
INVESTING ACTIVITIES

Additions to unproven mineral interests (5,842,760) (75,906) -
Additions to petroleum and natural gas interests - (23,935) (319,757)
Proceeds from sale of petroleum and natural
gas interests - 78,630 84,907
Purchase of capital assets (36,893) - -
Proceeds from sale of marketable securities - - 30,594
Other assets - - 114,843
------------ ------------ ------------
(5,879,653) (21,211) (89,413)
------------ ------------ ------------

INCREASE (DECREASE) IN CASH 564,460 319,260 (326,377)

CASH - BEGINNING OF YEAR 329,065 9,805 336,182
------------ ------------ ------------
CASH - END OF YEAR 893,525 329,065 9,805
============ ============ ============

SUPPLEMENTARY CASH FLOW INFORMATION - See Note 13.

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

F-6

HALO RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED SCHEDULE OF UNPROVEN MINERAL INTERESTS
FOR THE YEARS ENDED AUGUST 31

2005 2004
------------------------------------------------------------ ------------
BACHELOR QUARTER
DUPORT LAKE MOON LAKE
PROPERTY PROPERTY PROPERTY TOTAL TOTAL
$ $ $ $ $

BALANCE - BEGINNING OF YEAR 75,906 - - 75,906 -
------------ ------------ ------------ ------------ ------------
AMOUNTS INCURRED DURING
THE YEAR

EXPLORATION EXPENDITURES

Airborne surveying 250,268 - - 250,268 -
Assays 35,492 19,778 766 56,036 -
Camp and equipment costs 205,343 4,206 - 209,549 -
Consulting 127,925 78,129 95,146 301,200 -
Drilling 690,858 552,289 130,377 1,373,524 -
Due diligence 23,296 - - 23,296 -
Field personnel 153,436 25,817 - 179,253 -
Field supplies 38,888 2,444 - 41,332 -
Filing 3,075 9,663 1,297 14,035 -
Geological 199,030 - - 199,030 -
Miscellaneous 13,572 11,421 25 25,018 -
Mobilization, trucking and backhoe 88,766 - - 88,766 -
Rent and utilities 9,350 21,319 - 30,669 -
Site preparation - 232,706 - 232,706 -
Surveying 16,223 - - 16,223 -
Technical report - 10,000 - 10,000 -
Telephone 1,513 3,334 - 4,847 -
Travel 75,505 39,847 3,368 118,720 -
Reimbursement - 1,818,123 - 1,818,123 -
------------ ------------ ------------ ------------ ------------
1,932,540 2,829,076 230,979 4,992,595 -
------------ ------------ ------------ ------------ ------------
ACQUISITION COSTS
AND OTHER ITEMS

Acquisition costs 9,460,000 1,700,000 100,000 11,260,000 -
Claims staking and lease rental costs 12,458 - - 12,458 2,325
Consulting - - - - 39,037
Legal 221,213 156,380 7,614 385,207 20,944
Others - - - - 13,600
Capitalized dividend on
redeemable preferred shares 41,667 - - 41,667 -
Future income tax adjustment 5,091,000 - - 5,091,000 -
Asset retirement obligation - 900,500 - 900,500 -
------------ ------------ ------------ ------------ ------------
14,826,338 2,756,880 107,614 17,690,832 75,906
------------ ------------ ------------ ------------ ------------
16,758,878 5,585,956 338,593 22,683,427 75,906
------------ ------------ ------------ ------------ ------------
BALANCE - END OF YEAR 16,834,784 5,585,956 338,593 22,759,333 75,906
============ ============ ============ ============ ============

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

F-7

HALO RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2005, 2004 AND 2003

1. NATURE OF OPERATIONS

Halo Resources Ltd. (the "Company") is a resource exploration company
which was previously engaged in the acquisition, exploration and
development of crude oil and natural gas interests in the United
States. Effective March 1, 2004, the Company sold its remaining oil and
natural gas interest. On July 5, 2004, the Company entered into an
agreement to acquire an unproven mineral interest. On November 12, 2004
and February 9, 2005, the Company entered into further option
agreements to acquire additional unproven mineral interests. See also
Note 5.

The Company presently has no proven or probable reserves and on the
basis of information to date, it has not yet determined whether these
unproven mineral interests contain economically recoverable ore
reserves. Consequently the Company considers itself to be an
exploration stage company. The amounts shown as unproven mineral
interests and deferred costs represent costs incurred to date, less
amounts amortized and/or written off, and do not necessarily represent
present or future values. The underlying value of the unproven mineral
interests is entirely dependent on the existence of economically
recoverable reserves, securing and maintaining title and beneficial
interest, the ability of the Company to obtain the necessary financing
to complete development, and future profitable production.