prem14a

/s/ John M. Leask

/s/ Megan Cameron-Jones

John M. Leask

Megan Cameron-Jones

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

þ Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material Pursuant to Rule 14a-12

U.S. GOLD CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):


o	No fee required.
þ	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.


(1)	Title of each class of securities to which transaction applies: Coral Gold Resources Ltd. common shares; Nevada Pacific Gold Ltd. common shares; Tone Resources Limited common shares; and White Knight Resources Ltd. common shares.


(2)	Aggregate number of securities to which transaction applies: 185,070,539(1)

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 0.63 of an exchangeable share of US Gold Canadian Acquisition Corporation for each Coral Gold Resources Ltd. common share; 0.23 of an exchangeable share of US Gold Canadian Acquisition Corporation for each Nevada Pacific Gold Ltd. common share; 0.26 of an exchangeable share of US Gold Canadian Acquisition Corporation for each Tone Resources Limited common share; and 0.35 of an exchangeable share of US Gold Canadian Acquisition Corporation for each White Knight Resources Ltd. common share.


(4)	Proposed maximum aggregate value of transaction:

$238,343,639(2)


(5)	Total fee paid:

$25,502.77

o Fee paid previously with preliminary materials.


þ	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.


	(1)	Amount Previously Paid:

$58,446.36


	(2)	Form, Schedule or Registration Statement No.: Registration Statement No. 333-133726(3)


	(3)	Filing Party:

U.S. Gold Corporation and US Gold Holdings Corporation, a wholly-owned subsidiary of U.S. Gold Corporation


	(4)	Date Filed:

May 2, 2006


(1)		This amount is comprised of the following: 8,017,744, the number of issued and outstanding common shares of Coral Gold Resources Ltd. on a fully-diluted basis, as of October 16, 2006, based on information provided by Coral Gold Resources Ltd. to U.S. Gold Corporation on October 20, 2006; 86,345,171, the number of issued and outstanding common shares of Nevada Pacific Gold Ltd. on a fully-diluted basis, as of October 20, 2006, based on information provided by Nevada Pacific Gold Ltd. to U.S. Gold Corporation on October 20, 2006; 24,702,652, the number of issued and outstanding common shares of Tone Resources Limited on a fully-diluted basis, as of October 20, 2006, based on information provided by Tone Resources Limited to U.S. Gold Corporation on October 20, 2006; and 66,004,972, the number of issued and outstanding common shares of White Knight Resources Ltd. on a fully-diluted basis, as of October 19, 2006, based on information provided by White Knight Resources Ltd. to U.S. Gold Corporation on October 19, 2006.
(2)		This total represents $4.17, the average of the high and low sales price of common stock of U.S. Gold Corporation into which the exchangeable share of US Gold Canadian Acquisition Corporation are exchangeable, on the OTCBB on October 23, 2006, multiplied by 57,156,748, the maximum total number of exchangeable shares of US Gold Canadian Acquisition Corporation that could be issued in the exchange offers described herein.
(3)		Pursuant to Rule 0-11(a)(2), $10,452.55 of the fee required to be paid in connection with the filing of this proxy statement is being reduced by the fee paid in connection with the registration statement on Form S-4 (Registration No. 333-138233) filed by U.S. Gold Corporation and US Gold Canadian Acquisition Corporation on October 26, 2006, which fee was offset pursuant to Rule 457(p) by a portion of the registration fee associated with a registration statement on Form S-4 (Registration No. 333-133726) originally filed on May 2, 2006 by US Gold Holdings Corporation and U.S. Gold Corporation, or the prior registration statement. The remaining $15,050.22 of the fee required to be paid in connection with the filing of this proxy statement is being offset by a portion of the registration fee associated with the prior registration statement. This reduces the unused portion of the registration fee for the prior registration statement to $38,572.59.

U.S. GOLD CORPORATION
2201 Kipling Street, Suite 100
Lakewood, Colorado 80215-1545

[ • ], 2006

Dear U.S. Gold Shareholder,

You are cordially invited to attend a special meeting of shareholders of U.S. Gold Corporation, which we refer to as U.S. Gold, to be held at [ • ] at [ • ], local time, on [ • ], 2006.

At the special meeting, U.S. Gold shareholders will be asked to vote on matters necessary to enable U.S. Gold to acquire four Canadian gold exploration companies, which we refer to collectively as the Target Companies. The Target Companies are White Knight Resources Ltd., which we refer to as White Knight, Nevada Pacific Gold Ltd., which we refer to as Nevada Pacific, Coral Gold Resources Ltd., which we refer to as Coral Gold, and Tone Resources Limited, which we refer to as Tone Resources. We refer to the contemplated acquisitions as the Proposed Acquisitions. Your board of directors believes that the Target Companies are desirable because each of them is exploring in the Cortez Trend in Nevada and owns and operates exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs property and because the acquisition of any or all of them would result in U.S. Gold having a larger position within the Cortez Trend. In addition, your board of directors believes that combining U.S. Gold’s resources with one or more of the Target Companies would result in a larger exploration program, a stronger combined cash position, reduced costs, an increased marked capitalization enhancing trading liquidity, better market focus and additional technical expertise. The accompanying proxy statement and the documents and information incorporated by reference in the proxy statement contain detailed information about the offers to purchase and other important information concerning the Proposed Acquisitions.

The Proposed Acquisitions would be undertaken pursuant to four separate offers to purchase all outstanding common shares of each of the Target Companies, in exchange for exchangeable shares of our wholly-owned subsidiary, US Gold Canadian Acquisition Corporation, which we refer to as Canadian Exchange Co., at the following exchange ratios:


	•	0.63 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Coral Gold;

	•	0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific;

	•	0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone Resources; and

	•	0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight.

We are effecting the offers to purchase by offering exchangeable shares of Canadian Exchange Co. instead of shares of U.S. Gold because such exchangeable shares may provide a more favorable tax treatment to the Target Company shareholders. The exchangeable shares issued by Canadian Exchange Co. in the Proposed Acquisitions would be exchangeable on a one-for-one basis for shares of U.S. Gold common stock at any time at the option of the holder. We will implement a structure that will give holders of Canadian Exchange Co. the same voting and economic rights as holders of U.S. Gold common stock.

At the special meeting, U.S. Gold shareholders will be asked to:

Proposal 1 — approve amendments to U.S. Gold’s Articles of Incorporation that:

A. create a new class of U.S. Gold stock comprised of one share of preferred stock, designated Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions and for the purposes further described in the proxy statement;

B. remove provisions related to corporate opportunity to allow your board of directors to adopt and maintain an updated corporate opportunity policy; and

C. update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions.

Proposal 2 — approve the issuance of up to 5,303,738 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Coral Gold;

Proposal 3 — approve the issuance of up to 20,852,358 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific;

Proposal 4 — approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources;

Proposal 5 — approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight; and

Proposal 6 — approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 5.

U.S. Gold shareholders may cast separate votes on each proposal and, in the case of the amendments to the Articles of Incorporation, each subproposal.

Our board of directors has approved the proposed amendments to our Articles of Incorporation, in connection with which we will restate our Articles of Incorporation to consolidate those amendments and previous amendments. Our board of directors has also approved the issuance of the exchangeable shares of Canadian Exchange Co., the issuance of the U.S. Gold shares of common stock issuable upon exchange of Canadian Exchange Co. shares, and the issuance of Series A Special Voting Preferred Stock of U.S. Gold in connection with the Proposed Acquisitions, and believes that the Proposed Acquisitions are advisable, fair to you and in your best interests.

Accordingly, our board of directors, by unanimous vote of all directors voting, recommends that all U.S. Gold shareholders vote “FOR” Proposals 2, 3, 4 and 5. Mr. Robert R. McEwen, the Chairman of our board of directors, abstained from the vote of the board of directors on Proposals 2, 3, 4 and 5 because of his equity interest in each of the Target Companies. Our board of directors, by unanimous vote, recommends that all U.S. Gold shareholders also vote “FOR” Proposals 1 and 6. A vote against the amendment to our Articles of Incorporation relating to the creation of preferred stock would have the effect of preventing us from completing the Proposed Acquisitions as currently contemplated. A vote against any of Proposals 2, 3, 4, and 5 would have the effect of preventing us from completing the Proposed Acquisition described in the proposal that is not approved.

Our board of directors hopes that you will attend the special meeting. Whether or not you plan to attend the meeting, however, please sign, date and return the accompanying proxy card in the enclosed, postage paid,

PRELIMINARY COPIES

U.S. GOLD CORPORATION
2201 Kipling Street, Suite 100
Lakewood, Colorado 80215-1545

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

Notice is hereby given of a special meeting of shareholders of U.S. Gold Corporation, a Colorado corporation, to be held at [ • ] at [ • ], local time, on [ • ], 2006.

U.S. Gold shareholders will be asked at the special meeting to vote on:

Proposal 1 — approve amendments to U.S. Gold’s Articles of Incorporation that:

B. remove provisions related to corporate opportunity to allow your board of directors to adopt and maintain an updated corporate opportunity policy; and

C. update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions.

The Proposed Acquisitions involve risks that are described in the accompanying proxy statement under the heading “Risk Factors,” beginning on page 14 . You should read and carefully consider such risk factors before you vote for or grant your proxy as requested herein and in the proxy. The proxy statement and accompanying proxy card are dated [ • ], and are first being mailed or given to U.S. Gold shareholders on or about [ • ].

U.S. Gold’s board of directors has fixed the close of business on [ • ], 2006, as the record date for determining the U.S. Gold shareholders entitled to notice of, and to vote at, the special meeting or any adjournments or postponements thereof. Whether or not you plan to attend the meeting, however, please sign, date and return the accompanying proxy card in the enclosed, postage paid, pre-addressed envelope, or otherwise return your proxy in a manner described in the accompanying proxy card, as soon as possible. Your vote is important, regardless of the number of shares you own, so please return your proxy card TODAY.

By Order of the Board of Directors,

/s/ Robert R. McEwen

ROBERT R. McEWEN

Chairman of the Board and Chief Executive Officer

Lakewood, Colorado

[ • ], 2006

TERMINOLOGY

Throughout this proxy statement, we refer to White Knight Resources Ltd. as White Knight, we refer to Nevada Pacific Gold Ltd. as Nevada Pacific, we refer to Coral Gold Resources Ltd. as Coral Gold, and we refer to Tone Resources Limited as Tone Resources. We refer to White Knight, Nevada Pacific, Coral Gold and Tone Resources collectively as the Target Companies, and we refer to the contemplated acquisitions of the Target Companies as the Proposed Acquisitions.

Additionally, because the Proposed Acquisitions are being made pursuant to applicable Canadian and United States law, certain terms we use may be unfamiliar to you. In particular, the Canadian term “take up” is equivalent to “accept for purchase” in United States tender offer terminology; shares “deposited under” the offer to purchase is the Canadian equivalent of the United States concept of “tendered pursuant to” the offer to purchase; and an “amalgamation” is the Canadian equivalent to the United States concept of a “merger.”

IMPORTANT NOTES

In deciding how to vote on the proposals described in this proxy statement, U.S. Gold shareholders should rely only on the information contained in or incorporated by reference into this proxy statement. U.S. Gold has not authorized any person to provide U.S. Gold shareholders with any information that is different from such information. The information contained in or incorporated by reference into this proxy statement speaks only as of the date of this proxy statement, unless otherwise specified.

As of the date of this proxy statement, U.S. Gold and its affiliates have not had complete access to the non-public books and records of White Knight, Coral Gold, Nevada Pacific or Tone Resources. U.S. Gold, however, has obtained the information contained in this proxy statement relating to the Target Companies from the Target Companies and from publicly available sources, including all historical financial information used in the preparation of the pro forma financial information reflecting the pro forma effects of a combination of (i) U.S. Gold and each of the Target Companies separately, and (ii) U.S. Gold and all of the Target Companies on a combined basis. Although U.S. Gold has no reason to doubt the accuracy or completeness of the information relating to the Target Companies, U.S. Gold is not in a position to independently assess or verify such information, including any financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” beginning on page 14.

FORWARD-LOOKING INFORMATION

Some of the information included in this proxy statement and certain other documents filed or to be filed with the SEC by U.S. Gold (as well as information included in other statements made by U.S. Gold or its representatives, and information about each of the four Target Companies or their businesses), may contain forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts, often will be phrased in the future-tense, and may include the words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or other words or expressions of similar meaning. Forward-looking statements that relate to U.S. Gold or its business are based on U.S. Gold’s current beliefs and expectations about future events, and include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to U.S. Gold’s financial condition, results of operations, future performance and business, including statements relating to U.S. Gold’s business strategy and U.S. Gold’s current and future development plans.

Uncertainties that could affect the accuracy of forward-looking statements, besides the specific risk factors identified in “Risk Factors” beginning on page 14, include:


	•	decisions of foreign countries and banks within those countries;

	•	technological changes in the mining industry;

	•	the level of demand for our products;


	•	changes in our business strategy;

	•	interpretation of drill hole results and the geology, grade and continuity of mineralization;

	•	the uncertainty of reserve estimates and timing of development expenditures;

	•	unexpected changes in business and economic conditions;

	•	changes in interest rates and currency exchange rates;

	•	timing and amount of production;

	•	changes in mining, processing and overhead costs;

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

	•	results of current and future exploration activities;

	•	results of pending and future feasibility studies;

	•	local and community impacts and issues;

	•	accidents and labor disputes; and

	•	commodity price fluctuations.

Although U.S. Gold believes that the expectations reflected in its forward-looking statements are reasonable, any or all of the forward-looking statements contained in this proxy statement or in U.S. Gold’s public reports and securities filings may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in the offers to purchase the Target Companies’ shares, described in this proxy statement, some of which are beyond U.S. Gold’s control, will be important in determining U.S. Gold’s future performance if any of the businesses or assets of U.S. Gold or the Target Companies are combined. Consequently, actual results may differ materially from those predicted in or that might be anticipated from forward-looking statements. Therefore, shareholders should not regard such forward-looking statements as a representation that the predictions or expectations reflected in the forward-looking statements will be achieved, and should not place undue reliance on such forward-looking statements.

U.S. Gold undertakes no obligation to publicly update or revise any information in this proxy statement, whether as a result of new information, future events or otherwise, other than to reflect a material change in the information previously disclosed, as required by applicable law. Shareholders should review U.S. Gold’s subsequent reports filed from time to time with the SEC on Forms 10-KSB, 10-QSB and 8-K, and any amendments thereto. As noted in “Incorporation of Certain Documents by Reference” on page 85, several such reports are incorporated by reference into this proxy statement.

REPORTING CURRENCIES AND FINANCIAL PRINCIPLES

All references to “$” or “dollars” in this document refer to United States dollars, unless otherwise indicated. All financial information contained in this proxy statement is reported in U.S. dollars unless otherwise noted. We abbreviate Canadian Dollars as Cdn$.

U.S. Gold’s financial statements are prepared in accordance with US GAAP. The Target Companies’ consolidated financial statements and the notes thereto have been prepared in accordance with either US or Canadian GAAP, as noted in each Target Company’s financial statements, and all reconciliations of Canadian GAAP information to U.S. GAAP are based on information taken directly from the applicable Target Company’s public reports and filings or provided to us by the applicable Target Company.


		Articles of Incorporation, we will restate our Articles of Incorporation to consolidate the amendments being voted on at the special meeting and previous amendments approved by our shareholders and our board of directors.

Q:		Why are you asking shareholders to approve the amendments to U.S. Gold’s Articles of Incorporation to remove the corporate opportunity provisions from the Articles of Incorporation and to update references to statutory provisions?

A:		The corporate opportunity provisions in the Articles of Incorporation govern the conduct of directors, officers and managers in respect of business opportunities that are made available to those individuals. Your board of directors believes that the amendment to remove the corporate opportunity provisions from the Articles of Incorporation is necessary to allow your board to maintain an updated corporate opportunity policy without seeking shareholder approval in the future. The amendment to update vague and outdated references to statutory provisions is being proposed simply to keep our Articles of Incorporation up to date. Because these amendments cannot be made without shareholder approval, we are seeking shareholder approval of these amendments at the special meeting. See “Proposal 1 — Amendments to Articles of Incorporation” beginning on page 22. In connection with these amendments to the Articles of Incorporation and the amendment relating to the creation of preferred stock described above, we will restate our Articles of Incorporation to consolidate the amendments being voted on at the special meeting and previous amendments approved by our shareholders and our board of directors.

Q:		Why are you asking the shareholders to approve in connection with the Proposed Acquisitions the issuance of exchangeable shares of Canadian Exchange Co. and the issuance of shares of U.S. Gold common stock issuable upon exchange of the exchangeable shares?

A:		It is a condition to our offers to purchase the outstanding shares of the Target Companies that our common stock be listed on the American Stock Exchange (AMEX). Section 712 of the AMEX Company Guide requires shareholder approval before the issuance of shares of common stock or securities convertible into or exercisable for shares of common stock as consideration for the acquisition of the stock of another company where the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding common shares of 20% or more, or when any individual director, officer or substantial shareholder of the acquiring company has a 5% or greater interest (or when such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction and the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding common shares of the acquiring company of 5% or more. Because the shares of Canadian Exchange Co. that we expect to issue in the proposed acquisitions of the Target Companies are exchangeable, upon the terms and conditions described herein, into 54,434,998 shares of U.S. Gold, which represents approximately 109% of the shares of U.S. Gold that are currently issued and outstanding, the AMEX listing standards would require that holders of U.S. Gold common stock approve the issuance, in connection with the Proposed Acquisitions, of exchangeable shares of Canadian Exchange Co. and an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares. Further, because Robert R. McEwen, our Chairman and Chief Executive Officer and our largest shareholder, holds greater than 5% of the outstanding common shares of each of the Target Companies as of the date of this proxy statement, the AMEX listing standards would require us to obtain shareholder approval of the issuances. Although U.S. Gold is not currently listed on the AMEX, U.S. Gold has elected to comply with the AMEX rules pending final approval of its listing application and submit these proposed issuances to U.S. Gold shareholders for approval as a matter of corporate governance to provide U.S. Gold shareholders with the ability to vote on the Proposed Acquisitions. See Proposal 2 through Proposal 5 beginning on page 24.

Q:		How many shares of U.S. Gold common stock will be issued if the Proposed Acquisitions are completed?

A:		No shares of U.S. Gold common stock will be issued initially upon the consummation of the Proposed Acquisitions. However, if we complete all of the Proposed Acquisitions and acquire all of the outstanding common shares of all four Target Companies, we currently estimate that in the future we would issue a total of approximately 54,434,998 shares of our common stock to shareholders of the Target Companies upon exchange of the exchangeable shares of Canadian Exchange Co. As of the date of this proxy statement,


		we have approximately 49,996,755 shares of common stock issued and outstanding, options and warrants to purchase up to 11,259,500 shares of common stock, and 5,000,000 shares reserved for issuance pursuant to our Non-Qualified Stock Option and Stock Grant Plan, out of 250,000,000 shares of common stock currently authorized under U.S. Gold’s current Articles of Incorporation. Accordingly, U.S. Gold has adequate shares of its common stock authorized and available for issuance in the Proposed Acquisitions without needing to authorize additional shares of U.S. Gold common stock.

Q:		What will happen to my ownership percentage in U.S. Gold?

A:		In connection with the Proposed Acquisitions, Canadian Exchange Co. will issue exchangeable shares to the shareholders of the Target Companies that we acquire. Your ownership percentage in U.S. Gold will be reduced when the exchangeable shares are exchanged into shares of U.S. Gold common stock. Holders of exchangeable shares, so long as such shares are outstanding, will have the option to exchange their exchangeable shares for shares of common stock of U.S. Gold at any time, will have their exchangeable shares automatically exchanged for shares of common stock of U.S. Gold in the event of a liquidation of U.S. Gold, and will have the right to receive dividends equivalent to dividends paid to holders of common stock of U.S. Gold, among other rights.

Q:		What will happen to my voting power in U.S. Gold?

A:		If any of the Proposed Acquisitions is completed, U.S. Gold would issue to the voting and exchange trustee, under the voting and exchange trust agreement, one share of Series A Special Voting Preferred Stock to be held by the trustee for the benefit of the registered holders of the exchangeable shares of Canadian Exchange Co. The share of Series A Special Voting Preferred Stock would be entitled to a number of votes equal to the number of outstanding exchangeable shares of Canadian Exchange Co. (other than those owned by U.S. Gold or its subsidiaries), and, except as otherwise required by law or by U.S. Gold’s Articles of Incorporation, the holders of U.S. Gold common stock and the holder of the Series A Special Voting Preferred Stock would vote together as a single class on all matters properly submitted to a vote of the shareholders of U.S. Gold, including the election of directors. If any of the Proposed Acquisitions is completed, the voting power of the existing U.S. Gold shareholders, excluding any current U.S. Gold shareholders who will acquire shares of U.S. Gold for their shares of the Target Companies, will be reduced by an amount proportionate to the number of shares issued in such acquisition or acquisitions. If all of the Proposed Acquisitions are completed, existing U.S. Gold shareholders, excluding any current U.S. Gold shareholders who will acquire shares of U.S. Gold for their shares of the Target Companies, would hold shares representing, in the aggregate, less than 50% of the number of votes required to be cast on any matter submitted to a vote of the shareholders of U.S. Gold, including the election of directors.

Q:		Is U.S. Gold common stock listed on a stock exchange?

A:		Shares of U.S. Gold common stock are currently listed on the Toronto Stock Exchange (TSX), under the symbol “UXG” and are traded on the Over-the-Counter Bulletin Board under the symbol “USGL.” It is a condition to our offers to purchase the outstanding shares of the Target Companies that U.S. Gold’s common shares be listed on the AMEX. U.S. Gold has filed a listing application with the AMEX.

Q:		Are Canadian Exchange Co.’s exchangeable shares listed on a stock exchange?

A:		The exchangeable shares of Canadian Exchange Co. are not currently listed on a securities exchange. It is a condition to our offers to purchase the outstanding shares of the Target Companies that the exchangeable shares be listed on the TSX and on the AMEX. We intend to take all necessary steps to list the exchangeable shares on the TSX and the AMEX.

Q:		What impact will the Proposed Acquisitions have on U.S. Gold’s business?

A:		We believe our business will expand as a result of the Proposed Acquisitions. The U.S. Gold board of directors believes that the Target Companies are desirable because each of them is exploring in the Cortez Trend in Nevada and owns and operates exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs property and because the acquisition of any or all of them would result in U.S. Gold having a larger position in the Cortez Trend, an expanded exploration program, a stronger combined cash position, reduced costs, an increased market capitalization enhancing trading liquidity, better market focus and additional technical expertise. If we complete


		all four of the Proposed Acquisitions, our land position in Nevada would increase by approximately 344% to approximately 160 square miles, and we would acquire exploration property in Mexico.

Q:		Do U.S. Gold’s directors support the Proposals and the Proposed Acquisitions?

A:		Our board of directors, by unanimous vote (other than the vote of Robert R. McEwen, who abstained from voting on Proposals 2, 3, 4 and 5 because of his ownership interest in each of the Target Companies) approved each of the Proposals and the commencement of the offers to purchase the outstanding shares of the Target Companies. Our board of directors recommends that you vote “FOR” each of the Proposals. In addition, on March 6, 2006, Mr. McEwen announced that in his capacity as Chairman, Chief Executive Officer and a shareholder of U.S Gold, and as a shareholder of White Knight, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies. On March 7, 2006, Mr. McEwen announced that in his capacity as a shareholder of Coral Gold, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies.

		When considering the recommendation of our board of directors with respect to the amendment of our Articles of Incorporation, the issuance of exchangeable shares of Canadian Exchange Co. and the issuance of U.S. Gold common stock upon exchange of the exchangeable shares, you should be aware that certain of our directors and executive officers may have interests in the Proposed Acquisitions that may be different from, or in addition to, the interests of U.S. Gold shareholders generally. Specifically, Mr. McEwen, who serves as our Chairman and Chief Executive Officer and is also our largest shareholder, owns securities in each of the four Target Companies. For a more detailed description of these interests, see “The Proposed Acquisitions — Background of the Proposed Acquisitions” on page 37.

Q:		What percentage of the outstanding shares of U.S. Gold do directors and executive officers hold?

A:		As of October 23, 2006, directors and executive officers of U.S. Gold and their affiliates beneficially owned approximately 25.5% of our issued and outstanding shares of common stock entitled to vote at the special meeting.

Q:		Who is entitled to attend and vote at the meeting?

A:		Any holder of record of U.S. Gold common stock at the close of business on [ • ], the record date, is entitled to attend and vote at the meeting. On the record date, U.S. Gold had [ • ] shares of common stock outstanding.

Q:		What will constitute a quorum at the meeting?

A:		Holders of one-third of our common stock issued, outstanding and entitled to vote on the record date must be present at the meeting, either in person or by proxy, to establish a quorum. Proxies that we receive that are marked “abstain” will be considered present at the meeting for purposes of establishing a quorum.

Q:		Do I need to attend the special meeting in person?

A:		No. It is not necessary for you to attend the meeting to vote your shares, although we invite you to attend.

Q:		How do I cast my vote?

A:		After carefully reading and considering the information contained and incorporated by reference in this proxy statement, you can vote in any one of the following ways:

		• by signing and returning the proxy card in the enclosed postage pre-paid envelope;

		• on the Internet by following the instructions on the enclosed proxy card; or

		• by attending the special meeting and voting in person.

		Shares of U.S. Gold common stock represented by properly executed proxies received before the special meeting will be voted at the special meeting in the manner specified on the proxies. Physical proxies that are properly executed and timely submitted but which do not contain specific voting instructions will be voted “FOR” each of the proposals presented at the special meeting.


Q:		May I change my vote after I have mailed my signed proxy card?

A:		You may change your vote at any time before your shares are voted at the special meeting. This proxy statement contains instructions on how to change your vote. If you have instructed your broker to vote your shares, you must follow directions received from your broker to change those instructions.

Q:		If my shares are held in “street name” by my broker, will my broker vote my shares for me?

A:		Your broker will vote your shares only if you provide your broker with instructions on how to vote. You should instruct your broker to vote your shares, following the directions provided by your broker. If you fail to instruct your broker on any of the proposals to be considered at the special meeting, your shares will not be voted with respect to such matter. Abstentions and broker non-votes will not be counted for purposes of determining whether a proposal has been approved.

Q:		What vote is required to approve the proposals?

A:		All of the Proposals require the affirmative vote of a majority of the votes cast at the special meeting. Abstentions and broker non-votes will have no effect on the outcome of any of the proposals voted at the meeting.

Q:		Am I entitled to vote on the Proposed Acquisitions?

A:		No. However, although we are not asking for your vote directly on the Proposed Acquisitions, we are asking you to vote to approve the amendment of U.S. Gold’s Articles of Incorporation, the issuances of exchangeable shares of Canadian Exchange Co., the issuance of shares of U.S. Gold common stock issuable upon exchange of the exchangeable shares and such other matters as may be brought before the meeting in connection with the Proposed Acquisitions. A vote against the amendment to our Articles of Incorporation relating to the creation of preferred stock would have the effect of preventing us from completing the Proposed Acquisitions as currently contemplated. Further, because each of the acquisitions described in Proposals 2, 3, 4, and 5 is conditioned upon the approval of the proposal authorizing the issuance of shares in connection with that acquisition, if U.S. Gold shareholders do not approve any of Proposals 2, 3, 4, or 5, U.S. Gold will not complete the acquisition described in the proposal or proposals not approved.

Q:		Do I have dissenters’ (or appraisal) rights?

A:		No. Holders of U.S. Gold common stock do not have dissenters’ rights under Colorado law in connection with any of the matters to be acted on at the special meeting.

Q:		Whom do I contact if I have questions about the special meeting?

A:		You may contact our information agent at:

SUMMARY

The following is a brief summary of the material facts regarding the proposals being voted on at the special meeting. These and other related matters are discussed in greater detail elsewhere in this proxy statement.

The Special Meeting


Purpose of the Special Meeting		To present proposals for the approval by U.S. Gold shareholders of the following:

Proposal 1		To approve amendments to U.S. Gold’s Articles of Incorporation that (A) create a new class of U.S. Gold stock comprised of one share of preferred stock, designated Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions; (B) remove provisions related to corporate opportunity to allow your board of directors to adopt and maintain an updated corporate opportunity policy; and (C) update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions. The full text of the Amended and Restated Articles of Incorporation showing the proposed amendments to the Articles of Incorporation are attached as Annex A to this proxy statement. For additional information, see “Proposal 1 — Amendments to Articles of Incorporation” beginning on page 22.

Proposal 2		To approve the issuance of up to 5,303,738 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Coral Gold. For additional information, see “Proposal 2 — Issuance of Stock in Connection with the Acquisition of Coral Gold” beginning on page 24.

Proposal 3		To approve the issuance of up to 20,852,358 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific. For additional information, see “Proposal 3 — Issuance of Stock in Connection with the Acquisition of Nevada Pacific” beginning on page 26.

Proposal 4		To approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources. For additional information, see “Proposal 4 — Issuance of Stock in Connection with the Acquisition of Tone Resources” beginning on page 27.

Proposal 5		To approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight. For additional information, see “Proposal 5 — Issuance of Stock in Connection with the Acquisition of White Knight” beginning on page 28.


Proposal 6		To approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 5. For additional information, see “Proposal 6 — Adjournment or Postponement of the Special Meeting to Solicit Additional Proxies” beginning on page 29.

Conditions to the Effectiveness of Proposals 1, 2, 3, 4 and 5		If approved by the shareholders, Proposals 1 and 6 shall be effective regardless of the outcome of the other proposals. Proposals 2, 3, 4 and 5 shall be effective only if the U.S. Gold shareholders approve the amendment to our Articles of Incorporation related to the creation of preferred stock. For additional information, see “The Special Meeting — Conditions to the Proposals” on page 20.

Votes Required		Each Proposal requires the affirmative vote of a majority of the votes cast at the special meeting. As of the record date, U.S. Gold’s officers and directors own approximately [ • ]% of the U.S. Gold common stock outstanding and entitled to vote. See “The Special Meeting — Votes Required” beginning on page 20.

No Dissenters’ or Appraisal Rights		Under Colorado law, holders of U.S. Gold common stock are not entitled to dissenters’ rights of appraisal in connection with any of the matters to be acted upon at the special meeting. For additional information, see “No Dissenters’ or Appraisal Rights” on page 84.

Voting		U.S. Gold shareholders may vote by mail, telephone or the Internet, each in the manner described in the accompanying proxy card, or by voting in person at the special meeting. Additional information about voting and other procedures relevant to the special meeting is set forth in “The Special Meeting” beginning on page 19.

Additional Information		Additional information regarding each Proposal is set forth in “Proposal 1 — Amendments to Articles of Incorporation” beginning on page 22, “Proposal 2 — Issuance of Stock in Connection with the Acquisition of Coral Gold” beginning on page 24, “Proposal 3 — Issuance of Stock in Connection with the Acquisition of Nevada Pacific” beginning on page 26, “Proposal 4 — Issuance of Stock in Connection with the Acquisition of Tone Resources” beginning on page 27, “Proposal 5 — Issuance of Stock in Connection with the Acquisition of White Knight” beginning on page 28, and “Proposal 6 — Adjournment or Postponement of the Special Meeting to Solicit Additional Proxies” beginning on page 29.

The Proposed Acquisitions


Reasons for the Proposed Acquisitions		U.S. Gold’s board of directors believes that the Target Companies are desirable because each of them is exploring in the Cortez Trend in Nevada and owns and operates exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs property and because following completion of the Proposed Acquisitions or the acquisition of any one or more of the Target Companies, U.S. Gold would have:

		• a larger land position in the Cortez Trend;

		• an expanded exploration program;


		• a stronger combined cash position;

		• reduced costs;

		• an increased market capitalization enhancing trading liquidity in the common stock of the combined company;

		• better market focus; and

		• additional technical expertise.

		For a more detailed discussion of the advantages to U.S. Gold shareholders that U.S. Gold believes would result from the Proposed Acquisitions, see “The Proposed Acquisitions — Reasons for the Proposed Acquisitions” on page 30.

Target Companies		Coral Gold. Coral Gold is a natural resource company based in Vancouver, British Columbia primarily engaged in the exploration and development of natural resource properties. Coral Gold’s principal business activities are the exploration of certain mineral properties located in Nevada and California. Since Coral Gold’s 2002 fiscal year, Coral Gold has made aggregate principal expenditures of Cdn$2,498,084 on the Robertson mining claims in Nevada. We intend to offer to purchase all of the outstanding shares of Coral Gold on the basis of 0.63 of an exchangeable share for each common share of Coral Gold. Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR-V” and on the Over-the-Counter Bulletin Board, or OTCBB, under the symbol “CGREF.”

		Nevada Pacific. Nevada Pacific owns an exploratory property portfolio covering approximately 890 square miles of mineral rights in Mexico, including the Magistral Gold Mine, ten properties in Nevada and one in Utah. The Nevada property portfolio covers approximately 85 square miles, including portions of two significant gold producing regions: the Battle Mountain/Eureka Trend/Cortez Trend and the Carlin Trend. We intend to offer to purchase all of the outstanding shares of Nevada Pacific on the basis of 0.23 of an exchangeable share for each common share of Nevada Pacific. Nevada Pacific’s common shares are listed on the TSX-V under the symbol “NPG-V.”

		Tone Resources. Tone Resources is an exploration stage company based in Vancouver, British Columbia, engaged in the acquisition and exploration of mineral properties primarily located on the major gold trend in the north-central region of Nevada. Tone Resources is focused on gold and holds substantially all interests in eight properties in Elko, Eureka, Lander, and Pershing counties in Nevada. Tone Resources holds 410 mining claims in Nevada. All of Tone Resource’s properties are located near infrastructure facilities of currently producing gold mines. We intend to offer to purchase all of the outstanding shares of Tone Resources on the basis of 0.26 of an exchangeable share for each common share of Tone Resources. Tone Resources’ common shares are listed on the TSX-V under the symbol “TNS-V” and quoted on the Pink Sheets under the symbol “TONRF.”


		White Knight. White Knight is engaged in the acquisition and exploration of precious metals properties, primarily gold. In 1993, White Knight began to acquire gold exploration properties in Nevada and has focused solely on exploration and operation of properties in Nevada since that time. Currently, White Knight’s efforts are exploratory in nature in each of the 18 Nevada properties where it holds an interest. White Knight continues to investigate for projects to acquire in Nevada. We intend to offer to purchase all of the outstanding shares of White Knight on the basis of 0.35 of an exchangeable share for each common share of White Knight. White Knight’s common shares are listed on the TSX-V under the symbol “WKR-V.”

Effecting the Proposed Acquisitions		U.S. Gold and Canadian Exchange Co. propose to acquire each of the Target Companies through an offer to purchase all outstanding common shares of each of the Target Companies in exchange for exchangeable shares of Canadian Exchange Co. Each of the offers to purchase is separate and completion of each offer is not subject to completion of any of the other offers to purchase. Following the completion, satisfaction or waiver of the applicable conditions of the offers to purchase, U.S. Gold and Canadian Exchange Co. plan to acquire any common shares of each of the Target Companies not purchased pursuant to the offers to purchase through a statutory plan of arrangement or similar transaction providing for a mandatory exchange of all remaining outstanding common shares of the Target Company for additional exchangeable shares of Canadian Exchange Co., which we expect we would structure so that warrants to purchase the Target Company’s common shares would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and U.S. Gold would assume or adopt the Target Company stock option plan so that options under that plan would be exercisable for shares of common stock of U.S. Gold.

The Offers to Purchase		U.S. Gold and Canadian Exchange Co. intend to offer to purchase all outstanding common shares of each of the Target Companies for the following consideration:

		• 0.63 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Coral Gold;

		• 0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific;

		• 0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone Resources; and

		• 0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight.

Effect of the Proposed Acquisitions on U.S. Gold Shareholders		Assuming that all of the Proposed Acquisitions are completed and that all of the exchangeable shares issued in the Proposed Acquisitions are exchanged for shares of U.S. Gold common stock, current U.S. Gold shareholders would hold approximately 52% of U.S. Gold’s outstanding common stock on an undiluted basis, and approximately 53% of U.S. Gold’s outstanding common stock on a fully diluted basis, current shareholders of the four Target Companies would hold, in the


		aggregate, approximately 48% of U.S. Gold’s outstanding common stock on an undiluted basis, and approximately 47% of U.S. Gold’s outstanding common stock on a fully diluted basis, and Robert R. McEwen would own approximately 20% of U.S. Gold’s outstanding common stock on an undiluted basis and approximately 20% of U.S. Gold’s common stock on a fully diluted basis.

Pro Forma Financial Information		Pro forma financial information for (1) each of the Proposed Acquisitions separately, and (2) all of the Proposed Acquisitions presented on a combined basis, is included in Annex F to this proxy statement. For selected pro forma consolidated financial information, see “Selected Unaudited Pro Forma Consolidated Financial Data” on page 67.

Opinion of Financial Advisor		On March 2, 2006, the board of directors of U.S. Gold established a special committee to evaluate the terms of the Proposed Acquisitions and the process of determining those terms. On March 27, 2006, the special committee of the board of directors of U.S. Gold retained Wellington West Capital Markets Inc., or Wellington West, to provide financial advice and assistance to the special committee including providing its opinion as to the fairness of the consideration offered under the offers to purchase, from a financial point of view, to U.S. Gold and its shareholders. Based upon and subject to the matters described in its fairness opinion dated April 6, 2006, Wellington West concluded that, as at the date of its opinion, the consideration offered under the offers to purchase is fair, from a financial point of view, to U.S. Gold and its shareholders. For additional information, see “The Proposed Acquisitions — Opinion of U.S. Gold Financial Advisor” beginning on page 41 and the full text of the fairness opinion included in Annex H to this proxy statement.

Risk Factors		There are certain risks associated with the Proposed Acquisitions and related matters as described in “Risk Factors” beginning on page 14. U.S. Gold shareholders should consider these risks in determining how to vote on the proposals to be brought before the special meeting. Additional risk factors are described in some of the documents incorporated by reference into this proxy statement.

Conditions to the Proposed Acquisitions		U.S. Gold’s and Canadian Exchange Co.’s obligation to complete the offers to purchase for each of the Target Companies is subject to various conditions. Included among these are conditions that:

		• there shall have been properly deposited and not withdrawn that number of shares of the relevant Target Company that constitutes at least the greater of (i) 66-2/3% of the outstanding common shares of that Target Company, calculated on a fully diluted basis or (ii) 80% of the issued and outstanding common shares of that Target Company;

		• each of the Target Companies shall not have entered into or effectuated any other agreement or transaction with any person or entity having the effect of impairing U.S. Gold’s or Canadian Exchange Co.’s ability to acquire such Target Company or otherwise diminishing the expected economic value to U.S. Gold and Canadian Exchange Co. of the acquisition of such Target Company including, but not limited to, any material issuance of new securities of the


		Target Company, the declaration of any extraordinary dividend, the disposition of any material assets, the adoption of a shareholder rights plan or any other transaction not in the ordinary course of the Target Company’s business;

		• the shares of our common stock shall have been approved for listing on the AMEX, the additional shares of common stock of U.S. Gold issuable upon exchange of the exchangeable shares offered under this offer shall have been approved for listing on the TSX, and the exchangeable shares shall have been approved for listing on the TSX and on the AMEX; and

		• U.S. Gold’s shareholders shall have approved the amendment to the U.S. Gold Articles of Incorporation related to the creation of preferred stock and Proposals 2, 3, 4 and 5.

		For additional information on the conditions to the offers to purchase, see “The Proposed Acquisitions — Conditions to the Proposed Acquisitions” beginning on page 34.

Additional Information		Additional information regarding the Proposed Acquisitions is set forth in “The Proposed Acquisitions” beginning on page 30.

RISK FACTORS

The information set forth below sets forth risks and uncertainties relating to the proposals described in this proxy statement that could materially adversely affect U.S. Gold’s business, financial condition and/or operating results. This information should be read in conjunction with U.S. Gold’s Annual Report on Form 10-KSB for the year ended December 31, 2005, which is incorporated by reference herein and sets forth additional important risks and uncertainties that could materially adversely affect U.S. Gold’s business, financial condition and/or operating results. You should carefully consider these risks in determining whether to vote in favor of the proposals described herein. Additional risks and uncertainties that U.S. Gold does not presently know or that U.S. Gold currently deems immaterial may also impair U.S. Gold’s business operations.

We may not be successful in completing any or all of the four Proposed Acquisitions, which could lead to adverse consequences.

On March 5, 2006, we announced our intention to acquire the Target Companies and on May 1, 2006, we formally commenced our offer to purchase all of the outstanding common shares of White Knight. On June 5, 2006, we announced the termination of our offer to purchase the common shares of White Knight. We intend to re-commence our offer to purchase all of the outstanding common shares of White Knight and commence offers to purchase all of the outstanding shares of each of the other Target Companies. However, as of the date of this proxy statement, we have not entered into an acquisition agreement with any of the Target Companies. We are unable to predict when, if ever, our acquisitions of White Knight, Coral Gold, Tone Resources and Nevada Pacific will be completed. Further, management of one or more of the companies may resist our efforts to complete those acquisitions, or shareholders of one or more of the Target Companies may not tender their shares in sufficient numbers to enable us to complete any or all of the offers to purchase. In addition, our current estimates of the value of these entities is based only on publicly available information, and we may determine through due diligence investigation of any or all of these companies that acquiring one or more of them would be less advantageous than we currently believe. As a result of these or other factors, we may choose to terminate our acquisition efforts with, or be unable for other reasons to complete our acquisition of, one or more of the target companies. If we do not consummate the acquisition of one or more of those companies, the benefits of the acquisitions described in this proxy may not be realized.

If less than 100% of the shares of common stock of any of the Target Companies are purchased pursuant to the offers to purchase, Canadian Exchange Co. will need to undertake a subsequent acquisition transaction to acquire any common shares of the Target Companies remaining outstanding. Failure to accomplish such a subsequent acquisition transaction in a timely manner, or at all, could have adverse consequences on the business, operations and financial condition of U.S. Gold, including:


	•	Canadian Exchange Co., as the majority shareholder of the Target Company and our wholly-owned subsidiary, may owe fiduciary duties to the minority shareholders of the Target Company, whose interests may diverge from the interests of U.S. Gold and Canadian Exchange Co.; and

	•	Canadian Exchange Co. may not have access to cash flow generated by the Target Company, except to the extent it is distributed to all the Target Company shareholders proportionately in the form of dividends.

In addition, while it is a condition to each of the offers to purchase that at least the greater of 80% of the particular Target Company common shares, or 66-2/3% calculated on a fully diluted basis, are validly tendered, U.S. Gold could waive that condition. U.S. Gold has not yet determined whether it would waive this condition if less than the required number of any Target Company’s common shares are tendered. If the condition is waived, Canadian Exchange Co. may have more difficulty completing the Target Company acquisition through a subsequent acquisition transaction.

We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources.

We have not had complete access to the non-public books and records of White Knight, Coral Gold, Nevada Pacific or Tone Resources. As a result, all historical information regarding White Knight, Coral Gold, Nevada

Pacific and Tone Resources contained in this proxy statement, including all historical financial information used in connection with the preparation of the pro forma financial information reflecting the pro forma effects of a combination of (i) U.S. Gold and each of the Target Companies and (ii) U.S. Gold and all of Target Companies, has been derived from publicly-available documents and certain information the target companies have provided to us. We have no reason to doubt the accuracy or completeness of these publicly-available documents or other information. Nevertheless, there could be inaccuracies or material omissions in the publicly-available or other information about or relating to White Knight, Coral Gold, Nevada Pacific or Tone Resources. If such inaccuracies or material omissions exist, this proxy statement may also contain inaccuracies or material omissions, which could result in unanticipated liabilities or expenses for us, and may increase the cost of integrating the companies. This would likely adversely affect the operational plans of the combined company and its results of operations and financial condition.

Annex B, Annex C, Annex D and Annex E to this proxy statement contain certain financial information of each of the Target Companies. U.S. Gold has sought and expects to obtain permission from each of the Target Companies’ auditors to include their respective audit reports on the respective Target Company financial statements in this proxy statement. Notwithstanding our obtaining that permission, we are unable to independently assess or verify the information regarding each of the Target Companies’ which we have obtained, including the Target Companies’ financial statements. Although U.S. Gold has no reason to doubt the accuracy or completeness of the information regarding each of the Target Companies, any inaccuracy or material omission in such information, including the information contained in this proxy statement, could result in unanticipated liabilities or expenses, increase the cost of integrating the Target Companies, or adversely affect the operational plans of the combined company and its results of operations and financial condition.

The Target Companies’ public filings are subject to Canadian disclosure standards, which differ from SEC requirements.

Each of the Target Companies is a Canadian issuer that is required to prepare and file its periodic and other filings in accordance with the disclosure requirements of Canada. As a result, certain of the information about the Target Companies that is contained in this proxy statement was prepared with a view to Canadian GAAP and other Canadian disclosure regulations, rather than the requirements that would apply in the United States. Because Canadian disclosure requirements are different from SEC requirements, the information about the Target Companies contained in this proxy statement may not be comparable to similar information available about U.S. Gold or other U.S. issuers.

Directors and executive officers of U.S. Gold may have interests in the Proposed Acquisitions that are different from those of U.S. Gold shareholders generally.

Certain executive officers and directors of U.S. Gold may have interests in the Proposed Acquisitions that may be different from, or in addition to, the interests of U.S. Gold shareholders generally. Specifically, Robert R. McEwen, our Chairman of the Board and Chief Executive Officer, owns securities of each of the four Target Companies. You should consider these interests in connection with your vote on the proposals described in this proxy statement, including whether these interests may have influenced U.S. Gold’s directors and executive officers to recommend or support the proposals.

Change of control provisions in agreements triggered upon the acquisition of White Knight, Coral Gold, Nevada Pacific or Tone Resources may lead to adverse business or financial consequences.

Any of White Knight, Coral Gold, Nevada Pacific or Tone Resources may be a party to agreements that contain change of control provisions that may be triggered following our acquisition of the majority of the common shares of those companies. These change of control provisions, if triggered and not waived by any beneficiaries of those provisions, could result in termination of an agreement or in unanticipated expenses following our acquisition of shares of the relevant company and could adversely affect that company’s results of operations and financial condition. As mentioned above, we have not had complete access to the non-public books and records of White Knight, Coral Gold, Nevada Pacific or Tone Resources and do not know whether there are any change of control

agreements or provisions in the agreements of those companies, or the magnitude of payments or expenses or other adverse consequences, if any.

The integration of any of the Target Companies that we acquire will present significant challenges and may disrupt and adversely impact our business or may not occur as planned.

We expect that the successful completion of the Proposed Acquisitions will result in improved operations by taking advantage of the synergies of consolidation and enhanced growth opportunities of the combined company. These anticipated benefits will depend in part on whether our operations can be integrated with the Target Companies’ operations in an efficient and effective manner. These integration efforts will require the dedication of management resources, which will temporarily divert attention from the day-to-day business of the combined company. Most operational and strategic decisions, and certain staffing decisions, with respect to the combined company have not yet been made. These decisions and the integration of our company with the Target Companies will present challenges to management, including the integration of systems and personnel, and special risks, including possible unanticipated liabilities, unanticipated costs, including costs associated with complying with regulatory requirements we are not currently subject to, and the loss of key employees. The process of combining the organizations may cause an interruption of, or a loss of momentum in, the activities of any or all of the combined company’s business, which could have an adverse effect on the revenues and operating results of the combined company for an indeterminate period of time. The failure to successfully complete this integration process may prevent us from achieving the anticipated potential benefits of any such acquisition. If we fail to realize the anticipated benefits of any acquisition, the market value of our stock may be adversely affected.

We will incur substantial costs in connection with the Proposed Acquisitions, even if they are never completed.

We expect to incur acquisition-related expenses of approximately $6.5 million, consisting of investment banking, legal and accounting fees and financial printing and other related charges in connection with the Proposed Acquisitions. These amounts are preliminary estimates and the actual amounts may be higher or lower. Moreover, we are likely to incur additional expenses in future periods in connection with the integration of any Acquired Companies’ businesses with our business. Some of these expenses will be incurred even if we do not complete the Proposed Acquisitions.

Completion of one or more of the Proposed Acquisitions would result in the issuance of a significant amount of additional common stock, which may in turn depress the trading price of our common stock.

While no formal agreement has been reached with regard to the acquisition of one or more of the Target Companies, completion of one or more of those acquisitions would result in the issuance of a significant amount of our common stock. If all of the offers were completed on the terms currently proposed, of which there is no assurance, we expect that Canadian Exchange Co. would issue up to approximately 46,520,683 exchangeable shares in consideration for the currently outstanding shares of the Target Companies, or up to approximately 54,434,998 exchangeable shares, if currently outstanding options and warrants of the Target Companies are exercised and the underlying common shares tendered in accordance with the offer. If all of the exchangeable shares that may be issued in the offers are exchanged for our common stock, it would represent an increase in the outstanding shares of U.S. Gold common stock of approximately 93% of the common stock we presently have outstanding, or 109% if all outstanding options and warrants of the Target Companies are exercised. The issuance of such a significant amount of common stock could depress the trading price of our common stock and you may lose all or a part of your investment.

The Target Companies may be less valuable to us than expected.

The value of the Target Companies to us is based in large part on the potential production of the Target Companies’ “reserves.” A “reserve,” as defined by regulation of the SEC, is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Only one of the Target Companies, Nevada Pacific, has any reserves. Substantial expenditures are required to establish reserves through drilling and there is no assurance that additional reserves will be established. Whether a mineral deposit can

be commercially viable depends upon a number of factors, including the particular attributes of the deposit, including size, grade and proximity to infrastructure; metal prices, which can be highly variable; and government regulations, including environmental and reclamation obligations. If, after our acquisition of one or more of the Target Companies, we are unable to establish some or all of the mineralized material as proven or probable reserves in sufficient quantities to justify commercial operations, we may not be able to raise sufficient capital to develop a mine, even if one is warranted. If we are unable to establish such reserves, the market value of our securities may decline, and you may lose some or all of your investment.

Further, title to mineral properties can be uncertain, and the title to the mineral properties that the Target Companies have is at risk of loss of ownership. Our ability to explore and operate the properties of the Target Properties depends on the validity of title to that property. Mineral properties typically consist of leases of unpatented mining claims and unpatented millsite claims. Unpatented mining claims are unique property interests and are generally considered to be subject to greater risk than other real property interests because the validity of unpatented mining claims is often uncertain. Unpatented mining claims provide only possessory title and their validity is often subject to contest by third parties or the United States federal government. These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of boundaries, assessment work and possible conflicts with other claims not determinable from descriptions of record. Since a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry. If there are such uncertainties concerning the validity of the title to the property of the Target Companies, there may be valid challenges to the title to property we acquire in the Proposed Transactions which, if successful, could impair development and/or operations.

We will require significant additional capital to continue our exploration activities, and, if warranted, to develop mining operations.

Upon completion of any of the acquisitions of White Knight, Coral Gold, Nevada Pacific or Tone Resources, substantial expenditures will be required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes to extract metal or develop the mining and processing facilities and infrastructure at any of our newly-acquired properties or mine sites. We will be required to expend significant amounts for geological and geochemical analysis, assaying, and, if warranted, feasibility studies with regard to the results of our exploration. We may not benefit from these investments if we are unable to identify commercially exploitable mineralized material. If we are successful in identifying reserves, we will require significant additional capital to construct a mill and other facilities necessary to extract those reserves. Our ability to obtain necessary funding, in turn, depends upon a number of factors, including the state of the national and worldwide economy and the price of gold. We may not be successful in obtaining the required financing for these or other purposes on terms that are favorable to us or at all, in which case, our ability to continue operating would be adversely affected. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration or potential development and the possible partial or total loss of our potential interest in certain properties.

The ongoing operations and past mining activities of the Target Companies are subject to environmental risks, which we will assume after our acquisition of those companies and which could expose us to significant liability and delay, suspension or termination of our operations.

All phases of the operations of the Target Companies are subject to federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. Future changes in environmental regulation, if any, may adversely affect our operations, make our operations prohibitively expensive, or prohibit them altogether. Environmental hazards may exist on the properties in which we may hold interests in the future, including the properties of the Target Companies, that are unknown to us at the present and that have been caused by us, one of the Target Companies, or previous owners or operators, or that may have occurred naturally. Under applicable federal and state environmental laws, prior property owners may

be liable for remediating any damage that those owners may have caused. Mining properties that the Target Companies may have transferred may cause us to be liable for remediating any damage that those companies may have caused. The liability could include response costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties.

We may overpay for the shares of the Target Companies.

U.S. Gold is offering to exchange shares of Canadian Exchange Co. for shares of the Target Companies at fixed ratios that vary by target. In each case, based on the market price of U.S. Gold shares, into which shares of Canadian Exchange Co. are exchangeable, these exchange ratios represent a premium to the market price of the shares of the Target Companies prior to the announcement of our offer. If the market price of the shares of the Target Companies declines and/or if the market price of U.S. Gold shares increases, the value of the consideration and the premium over the market price of the securities paid by us will increase. Variations in market prices of our common stock and the common stock of the Target Companies may occur as a result of changes in, or market perceptions of changes in, the business, operations or prospects of U.S. Gold, market assessments of the likelihood the offer will be consummated, regulatory considerations, general market and economic conditions and other factors over which U.S. Gold has no control.

We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock.

Under Section 404 of the Sarbanes-Oxley Act of 2002, we expect that we will be required to furnish a report by our management on internal control over financial reporting for the fiscal year ending December 31, 2007. Such a report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management. This report must also contain a statement that our auditors have issued an attestation report on our management’s assessment of such internal control over financial reporting. While we believe our internal control over financial reporting is effective, we are still constructing the system and processing documentation and performing the evaluations needed to comply with Section 404, which is both costly and challenging. The completion of the Proposed Acquisitions and the subsequent integration of the Target Companies into our operations may make it more difficult for us to comply with Section 404. We may not be able to complete our evaluation, testing and required remediation, if any, in a timely fashion. If we are unable to assert that our internal control over financial reporting is effective, or if we disclose significant deficiencies or material weaknesses in our internal control over financial reporting, investors could lose confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on our stock price.

Internet and Telephone Voting

U.S. Gold shareholders whose shares are registered in the name of a bank or brokerage firm may be eligible to vote electronically through the Internet or by telephone. A large number of banks and brokerage firms are participating in the ADP Investor Communication Services online program. This program provides eligible U.S. Gold shareholders the opportunity to vote via the Internet or by telephone. Voting forms will provide instructions for U.S. Gold shareholders whose bank or brokerage firm is participating in ADP’s program.

Registered U.S. Gold shareholders may vote electronically through the Internet by following the instructions included with their proxy card. U.S. Gold shareholders not wishing to vote electronically through the Internet or whose form does not reference Internet or telephone voting information should complete and return the enclosed paper proxy card by mail. Signing and returning the proxy card or submitting the proxy via the Internet or by telephone does not affect the right to vote in person at the special meeting.

The deadline for voting by telephone or via the Internet is 12:00 midnight, Eastern Time, on [ • ], 2006.

Vote Tabulation

Votes cast in person or by proxy at the special meeting will be tabulated by the inspectors of election appointed by our board of directors for the special meeting.

Quorum; Abstentions and Broker Non-Votes

The presence in person or by proxy of U.S. Gold shareholders entitled to cast at least one-third of the votes at the special meeting will constitute a quorum. Abstentions will be counted for purposes of determining the presence of a quorum. Broker non-votes, which result when a broker, bank or other institutional record shareholder casts votes (whether at the instruction of the beneficial owner or by exercising discretionary voting authority) with respect to one or more proposals to be considered at a meeting but does not have discretionary voting authority with respect to other proposals and has not received voting instructions from the beneficial owner of the shares with respect to such proposals and is therefore unable to cast votes in respect thereof, are not relevant for purposes of determining the presence of a quorum at the meeting.

Abstentions and broker non-votes will not be counted for purposes of determining whether a proposal has been approved.

Costs of Solicitation

This solicitation is being made on behalf of U.S. Gold by the board of directors of U.S. Gold, and U.S. Gold will bear the cost of soliciting proxies for the special meeting. Proxies may be solicited by directors, officers or regular employees in person, by telephone or via the internet. None of U.S. Gold’s directors, officers or employees will receive any additional compensation for soliciting proxies on behalf of the board of directors.

U.S. Gold has retained Kingsdale Shareholder Services, Inc., which we refer to as Kingsdale, to assist in soliciting proxies for the special meeting and to serve as U.S. Gold’s information agent for the special meeting.

U.S. Gold has entered into an agreement in customary form with Kingsdale for such services, which provides for fees of Cdn$200,000, plus reimbursement of out-of-pocket expenses incurred in providing the services. Solicitation may be conducted via the telephone in addition to through the use of the mails. Kingsdale will be entitled to receive an additional fee of Cdn$15,000 for each Target Company whose board of directors recommends to the shareholders of that Target Company that they not tender their shares to us in our offer.

PROPOSAL 1 — AMENDMENTS TO ARTICLES OF INCORPORATION

Your board of directors has approved several amendments to our Articles of Incorporation. Some of these amendments do not require shareholder approval. The following three amendments do, however, require shareholder approval:

A. An amendment to create a new class of U.S. Gold stock comprised of one share of preferred stock, designated Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions;

B. An amendment to remove provisions related to corporate opportunity to allow your board of directors to adopt and maintain an updated corporate opportunity policy; and

C. An amendment to update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions.

In connection with the adoption of these and other amendments, we will file Amended and Restated Articles of Incorporation with the Colorado Secretary of State. The following summaries of the three amendments requiring shareholder approval are qualified in their entirety by the text of the Amended and Restated Articles of Incorporation, which are attached as Annex A to this proxy statement.

A. Creation of Preferred Stock

U.S. Gold proposes to undertake four separate offers to purchase, whereby it will offer to acquire all of the outstanding common shares of the Target Companies in exchange for exchangeable shares of Canadian Exchange Co. The exchangeable shares are intended to provide their holders with rights which are correlative to holders of shares of U.S. Gold’s common stock. To accomplish this, U.S. Gold will be required to authorize and issue to the exchange and voting trustee one share of preferred stock, which preferred stock will enable the exchange and voting trustee to fulfill its obligation to the holders of exchangeable shares of Canadian Exchange Co. An amendment to U.S. Gold’s Articles of Incorporation will be required to authorize and issue this preferred stock.

The amendment to U.S. Gold’s Articles of Incorporation, if approved, would authorize the creation of a new class of preferred stock, no par value, to be designated Series A Special Voting Preferred Stock. If approved, a single share of Series A Special Voting Preferred Stock would be authorized and following completion of the Proposed Acquisitions, outstanding. The share of Series A Special Voting Preferred Stock would be entitled to a number of votes with respect to any matter properly submitted to a vote of the holders of U.S. Gold common stock equal to the number of outstanding exchangeable shares of Canadian Exchange Co. (other than those owned by U.S. Gold or its subsidiaries) at the time of such vote, and except as otherwise required by law, the holders of U.S. Gold’s common stock and the holders of the Series A Special Voting Preferred Stock will vote together as a single class on all matters properly submitted to a vote of the holders of U.S. Gold common stock, including the election of directors. In the event of any liquidation, dissolution or winding up of U.S. Gold, the holder of the share of Series A Special Voting Preferred Stock will not be entitled to receive any assets of U.S. Gold available for distribution to U.S. Gold’s shareholders. The share of Series A Special Voting Preferred Stock is not redeemable. The holder of the share of Series A Special Voting Preferred Stock will not be entitled to receive dividends. However, holders of exchangeable shares will be afforded substantially similar rights as holders of U.S. Gold common stock in connection with any liquidation, dissolution or winding up of U.S. Gold, and in the event that dividends are declared and paid with respect to shares of U.S. Gold common stock. At such time as the Series A Special Voting Preferred Stock has no votes attached to it because there are no exchangeable shares of Canadian Exchange Co. outstanding not owned by U.S. Gold or its subsidiaries, and there are no shares of stock, debt, options or other agreements of Canadian Exchange Co. that could give rise to the issuance of exchangeable shares of Canadian Exchange Co. to any person other than U.S. Gold or its subsidiaries, the share of Series A Special Voting Preferred Stock will be cancelled. For additional information concerning the terms of the exchangeable shares, see “The Structure of the Proposed Acquisitions — Description of Exchangeable Shares” beginning on page 50.

B. Deletion of Corporate Opportunity Provisions

Our Articles of Incorporation currently contain a provision detailing the rights and duties of officers, directors and other members of our management for dealing with certain business opportunities that become available to those individuals. These provisions cannot be changed without shareholder approval, which makes it difficult for your board of directors to maintain an updated corporate opportunity policy. Further, because your board of directors adopted a similar corporate opportunity policy by resolution in February 2006, these provisions in our Articles of Incorporation are unnecessary. The Colorado Business Corporation Act does not require this information to be included in the articles of incorporation of a Colorado corporation, and your board of directors believes that removing it from our Articles of Incorporation is in the best interests of U.S. Gold


C.	Updating Statutory References

Our Articles of Incorporation currently contain general references to the laws of the State of Colorado and more specific references to the Colorado Corporation Code to refer to laws that are contained in the Colorado Business Corporation Act. We believe that the reference to the Colorado Corporation Code is obsolete, since that code was replaced many years ago with the Colorado Business Corporation Act. For the sake of clarity, your board of directors believes that revising our Articles of Incorporation to make clear that these references are to the Colorado Business Corporation Act is in the best interest of U.S. Gold.

U.S. Gold’s board of directors, by unanimous vote,
recommends that U.S. Gold shareholders vote “FOR”
the amendments to our Articles of Incorporation.

PROPOSAL 2 — ISSUANCE OF STOCK IN CONNECTION
WITH THE ACQUISITION OF CORAL GOLD

U.S. Gold common stock is traded on the Toronto Stock Exchange under the symbol “UXG” and quoted on the Over-the-Counter Bulletin Board under the symbol “USGL.” U.S. Gold has applied for listing of the U.S. Gold common stock on the AMEX, and we expect that the shares of U.S. Gold common stock will be listed on the AMEX prior to the taking up of the common shares of the Target Companies, as described below.

Section 712 of the AMEX Company Guide requires shareholder approval before the issuance of shares of common stock or securities convertible into or exercisable for shares of common stock as consideration for the acquisition of the stock of another company where the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding common shares of 20% or more, or when any individual director, officer or substantial shareholder of the acquiring company has a 5% or greater interest (or when such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction and the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding common shares of the acquiring company of 5% or more.

Because the exchangeable shares that will be issued in the proposed acquisition of Coral Gold are exchangeable, upon the terms and conditions described herein, into a maximum of approximately 5,303,738 shares of U.S. Gold, which represents approximately 11% of the shares of U.S. Gold that are currently issued and outstanding, and because Robert R. McEwen, our Chief Executive Officer and the Chairman of our board of directors, holds more than 5% of the outstanding common shares of Coral Gold, applying the AMEX listing standards to the proposed acquisition of Coral Gold requires that holders of U.S. Gold common stock approve the issuance of exchangeable shares of Canadian Exchange Co. in connection with the proposed acquisition of Coral Gold.

We currently estimate that, in connection with the proposed acquisition of Coral Gold, an aggregate of up to approximately 5,303,738 exchangeable shares will be issued by Canadian Exchange Co. and the same amount of shares of U.S. Gold common stock will be reserved for issuance in connection with the exchange of exchangeable shares of Canadian Exchange Co. These estimated aggregate numbers of shares include:


	•	Up to approximately 4,506,443 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the Coral Gold tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 4,506,443 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and

	•	Up to approximately 797,295 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of Coral Gold that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 797,295 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction.

The foregoing calculations (i) assume that consideration to be paid for the common shares of Coral Gold will be as set forth under the heading “The Proposed Acquisitions — The Offers to Purchase,” and (ii) are based on the number of outstanding common shares, warrants and options of Coral Gold as reported by such company as of October 20, 2006. The actual number of shares issued and reserved for issuance in connection with the acquisition of Coral Gold will be impacted by a number of circumstances and variables that U.S. Gold cannot predict or control, for example, the number of shares of Coral Gold outstanding at the time of the Proposed Acquisitions.

Our board of directors has approved, on behalf of U.S. Gold as the sole shareholder of Canadian Exchange Co., the acquisition of all of the outstanding common shares of Coral Gold pursuant to the offers to purchase and any subsequent acquisition transaction, the issuance, in connection with the acquisition of Coral Gold, of exchangeable shares of Canadian Exchange Co., which exchangeable shares are immediately exchangeable at the holders’ option on a one-for-one basis into shares of common stock of U.S. Gold and the issuance of the shares of common stock

PROPOSAL 3 — ISSUANCE OF STOCK IN CONNECTION
WITH THE ACQUISITION OF NEVADA PACIFIC

Because the exchangeable shares that will be issued in the proposed acquisition of Nevada Pacific are exchangeable, upon the terms and conditions described herein, into a maximum of approximately 20,852,358 shares of U.S. Gold, which represents approximately 42% of the shares of U.S. Gold that are currently issued and outstanding, and because Robert R. McEwen, our Chief Executive Officer and the Chairman of our board of directors, holds more than 5% of the outstanding common shares of Nevada Pacific, applying the AMEX listing standards described in Proposal 2 above to the proposed acquisition of Nevada Pacific requires that holders of U.S. Gold common stock approve the issuance of exchangeable shares of Canadian Exchange Co. in connection with the proposed acquisition of Nevada Pacific.

We currently estimate that, in connection with the proposed acquisition of Nevada Pacific, an aggregate of up to approximately 20,852,358 exchangeable shares will be issued by Canadian Exchange Co. and the same amount of shares of U.S. Gold common stock will be reserved for issuance in connection with the exchange of exchangeable shares of Canadian Exchange Co. These estimated aggregate numbers of shares include:


	•	Up to approximately 17,041,488 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the Nevada Pacific tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 17,041,488 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and

	•	Up to approximately 3,810,870 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of Nevada Pacific that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 3,810,870 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction.

The foregoing calculations (i) assume that consideration to be paid for the common shares of Nevada Pacific will be as set forth under the heading “The Proposed Acquisitions — The Offers to Purchase,” and (ii) are based on the number of outstanding common shares, warrants and options of Nevada Pacific as reported by such company as of October 20, 2006. The actual number of shares issued and reserved for issuance in connection with the acquisition of Nevada Pacific will be impacted by a number of circumstances and variables that U.S. Gold cannot predict or control, for example, the number of shares of Nevada Pacific outstanding at the time of the Proposed Acquisitions.

Our board of directors has approved, on behalf of U.S. Gold as the sole shareholder of Canadian Exchange Co., the acquisition of all of the outstanding common shares of Nevada Pacific pursuant to the offers to purchase and any subsequent acquisition transaction, the issuance, in connection with the acquisition of Nevada Pacific, of exchangeable shares of Canadian Exchange Co., which exchangeable shares are immediately exchangeable at the holders’ option on a one-for-one basis into shares of common stock of U.S. Gold and the issuance of the shares of common stock issuable upon exchange of the exchangeable shares. Additional information regarding the offers to purchase and related matters is included in this proxy statement under “The Proposed Acquisitions” and additional information regarding the proposed acquisition of Nevada Pacific is included in Annex C to this proxy statement.

U.S. Gold’s board of directors, by unanimous vote of the directors voting, recommends that

U.S. Gold shareholders vote “FOR” Proposal 3, approving the issuance of up to 20,852,358 shares

of Canadian Exchange Co., and the issuance of an equivalent number of shares of

common stock of U.S. Gold issuable upon exchange of such exchangeable shares,

in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific.

PROPOSAL 4 — ISSUANCE OF STOCK IN CONNECTION
WITH THE ACQUISITION OF TONE RESOURCES

Because the exchangeable shares that will be issued in the proposed acquisition of Tone Resources are exchangeable, upon the terms and conditions described herein, into a maximum of approximately 6,743,825 shares of U.S. Gold, which represents approximately 13% of the shares of U.S. Gold that are currently issued and outstanding, and because Robert R. McEwen, our Chief Executive Officer and the Chairman of our board of directors, holds more than 5% of the outstanding common shares of Tone Resources, applying the AMEX listing standards described in Proposal 2 above to the proposed acquisition of Tone Resources requires that holders of U.S. Gold common stock approve the issuance of exchangeable shares of Canadian Exchange Co. in connection with the proposed acquisition of Tone Resources.

We currently estimate that, in connection with the proposed acquisition of Tone Resources, an aggregate of up to approximately 6,743,825 exchangeable shares will be issued by Canadian Exchange Co. and the same amount of shares of U.S. Gold common stock will be reserved for issuance in connection with the exchange of exchangeable shares of Canadian Exchange Co. These estimated aggregate numbers of shares include:


	•	Up to approximately 5,474,810 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the Tone Resources tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 5,474,810 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and

	•	Up to approximately 1,269,015 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of Tone Resources that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 1,269,015 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction.

The foregoing calculations (i) assume that consideration to be paid for the common shares of Tone Resources will be as set forth under the heading “The Proposed Acquisitions — The Offers to Purchase,” and (ii) are based on the number of outstanding common shares, warrants and options of Tone Resources as reported by such company as of October 20, 2006. The actual number of shares issued and reserved for issuance in connection with the acquisition of Tone Resources will be impacted by a number of circumstances and variables that U.S. Gold cannot predict or control, for example, the number of shares of Tone Resources outstanding at the time of the Proposed Acquisitions.

Our board of directors has approved, on behalf of U.S. Gold as the sole shareholder of Canadian Exchange Co., the acquisition of all of the outstanding common shares of Tone Resources pursuant to the offers to purchase and any subsequent acquisition transaction, the issuance, in connection with the acquisition of Tone Resources, of exchangeable shares of Canadian Exchange Co., which exchangeable shares are immediately exchangeable at the holders’ option on a one-for-one basis into shares of common stock of U.S. Gold and the issuance of the shares of common stock issuable upon exchange of the exchangeable shares. Additional information regarding the offers to purchase and related matters is included in this proxy statement under “The Proposed Acquisitions” and additional information regarding the proposed acquisition of Tone Resources is included in Annex D to this proxy statement.

U.S. Gold’s board of directors, by unanimous vote of the directors voting, recommends that

U.S. Gold shareholders vote “FOR” Proposal 4, approving the issuance of up to 6,743,825 shares

of Canadian Exchange Co., and the issuance of an equivalent number of shares of

common stock of U.S. Gold issuable upon exchange of such exchangeable shares,

in connection with the offer to purchase all of the outstanding common shares of Tone Resources.

PROPOSAL 5 — ISSUANCE OF STOCK IN CONNECTION
WITH THE ACQUISITION OF WHITE KNIGHT

Because the exchangeable shares that will be issued in the proposed acquisition of White Knight are exchangeable, upon the terms and conditions described herein, into a maximum of approximately 24,256,827 shares of U.S. Gold, which represents approximately 49% of the shares of U.S. Gold that are currently issued and outstanding, and because Robert R. McEwen, our Chief Executive Officer and the Chairman of our board of directors, holds more than 5% of the outstanding common shares of White Knight, applying the AMEX listing standards described in Proposal 2 above to the proposed acquisition of White Knight requires that holders of U.S. Gold common stock approve the issuance of exchangeable shares of Canadian Exchange Co. in connection with the proposed acquisition of White Knight.

We currently estimate that, in connection with the proposed acquisition of White Knight, an aggregate of up to approximately 24,256,827 exchangeable shares will be issued by Canadian Exchange Co. and the same amount of shares of U.S. Gold common stock will be reserved for issuance in connection with the exchange of exchangeable shares of Canadian Exchange Co. These estimated aggregate numbers of shares include:


	•	Up to approximately 21,823,977 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the White Knight tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 21,823,977 million shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and

	•	Up to approximately 2,432,850 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of White Knight that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 2,432,850 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction.

The foregoing calculations (i) assume that consideration to be paid for the common shares of White Knight will be as set forth under the heading “The Proposed Acquisitions — The Offers to Purchase,” and (ii) are based on the number of outstanding common shares, warrants and options of White Knight as reported by such company as of October 19, 2006. The actual number of shares issued and reserved for issuance in connection with the acquisition of White Knight will be impacted by a number of circumstances and variables that U.S. Gold cannot predict or control, for example, the number of shares of White Knight outstanding at the time of the Proposed Acquisitions.

Our board of directors has approved, on behalf of U.S. Gold as the sole shareholder of Canadian Exchange Co., the acquisition of all of the outstanding common shares of White Knight pursuant to the offers to purchase and any subsequent acquisition transaction, the issuance, in connection with the acquisition of White Knight, of exchangeable shares of Canadian Exchange Co., which exchangeable shares are immediately exchangeable at the holders’ option on a one-for-one basis into shares of common stock of U.S. Gold and the issuance of the shares of common stock issuable upon exchange of the exchangeable shares. Additional information regarding the offers to purchase and related matters is included in this proxy statement under “The Proposed Acquisitions” and additional information regarding the proposed acquisition of White Knight is included in Annex E to this proxy statement.

U.S. Gold’s board of directors, by unanimous vote of the directors voting, recommends that

U.S. Gold shareholders vote “FOR” Proposal 5, approving the issuance of up to 24,256,827 shares of

common stock of Canadian Exchange Co., and the issuance of an equivalent number of shares of

common stock of U.S. Gold issuable upon exchange of such exchangeable shares,

in connection with the offer to purchase all of the outstanding common shares of White Knight.

PROPOSAL 6 — ADJOURNMENT OR POSTPONEMENT OF THE
SPECIAL MEETING TO SOLICIT ADDITIONAL PROXIES

Any adjournment or postponement may be made without notice by an announcement made at the special meeting by the chairman of the meeting. If persons named as proxies by you are asked to vote for one or more adjournments or postponements of the meeting for matters incidental to the conduct of the meeting, such persons will have the authority to vote in their discretion on such matters. However, if persons named as proxies by you are asked to vote for one or more adjournments or postponements of the meeting to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement, such persons will only have the authority to vote on such matter as instructed by you or your proxy, or, if no instructions are provided on your signed proxy card, in favor of such adjournment or postponement. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow U.S. Gold’s shareholders who have already sent in their proxies to revoke them at any time prior to their use.

U.S. Gold’s board of directors, by unanimous vote, recommends that U.S. Gold shareholders vote “FOR” Proposal 6, approving the adjournment or postponement of the special meeting,

if necessary or appropriate, to solicit additional proxies if there are insufficient

votes at the time of the meeting to approve and adopt any of Proposals 1 through 5.

THE PROPOSED ACQUISITIONS

Reasons for the Proposed Acquisitions

The creation and issuance of the Series A Special Voting Preferred Stock, the issuance of the exchangeable shares of Canadian Exchange Co., and the issuance of U.S. Gold common stock upon exchange of the exchangeable shares are necessary in order to effect the Proposed Acquisition of each of the Target Companies. U.S. Gold believes that the Target Companies are desirable because each of them is exploring in the Cortez Trend in Nevada and owns and operates exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs property and because the acquisition of any or all of them would result in U.S. Gold having a larger position within the Cortez Trend. In addition, U.S. Gold believes that combining U.S. Gold’s resources with one or more of the Target Companies would result in:


	•	A larger land position within the Cortez Trend and a larger exploration program. U.S. Gold holds a 100% interest in the Tonkin Springs exploration gold property in Eureka County, Nevada, subject to paramount title in the United States. This property consists of approximately 36 square miles of unpatented lode mining claims and millsite claims located on the Battle Mountain-Eureka Trend, approximately 45 miles northwest of the town of Eureka, in north-central Nevada. Upon successful completion of the Proposed Acquisitions, U.S. Gold’s land position would increase by approximately 344% to approximately 160 square miles. Over the next two years, U.S. Gold has planned 400,000 feet of exploration drilling on its Tonkin Springs property at a cost of $30 million. If the Proposed Acquisitions are successfully completed, U.S. Gold intends to aggressively explore the properties of Nevada Pacific, Coral Gold, Tone Resources and White Knight over the next two years to coincide with its exploration program at its Tonkin Springs property.

	•	A stronger cash position and reduced costs. On February 22, 2006, U.S. Gold completed a private placement of 16,700,000 subscription receipts, with gross proceeds to us of $75,150,000. Of the intermediate exploration companies currently exploring for gold in Nevada, U.S. Gold has one of the strongest cash positions. Successful completion of one or more of the Proposed Acquisitions will also give U.S. Gold access to any additional cash resources of the Target Companies acquired. Due to the strategic locations in Nevada of the assets of each of Nevada Pacific, Coral Gold, Tone Resources and White Knight and the elimination of redundant fees and costs, U.S. Gold and Canadian Exchange Co. expect that U.S. Gold would realize lower total costs than if each company were to remain a separate entity.

	•	Enhanced trading liquidity and better market focus. U.S. Gold and Canadian Exchange Co. expect that the successful completion of the Proposed Acquisitions would result in increased market capitalization and trading liquidity of the combined company, resulting in better market focus. Because of the increased market capitalization and liquidity of the combined company, U.S. Gold and Canadian Exchange Co. expect that the combined company will have greater access to equity and debt capital markets than U.S. Gold currently does, and greater appeal to institutional investors. It is a condition to the offers to purchase that the shares of common stock of U.S. Gold shall have been approved for listing on the AMEX and the exchangeable shares shall have been approved for listing on the TSX and on the AMEX. U.S. Gold and Canadian Exchange Co. expect that the enhanced access to the equity and debt capital markets resulting from the Proposed Acquisitions would provide management of the combined company greater flexibility to execute its business plan under various financial market conditions.

	•	Additional technical expertise. U.S. Gold and Canadian Exchange Co. believe that one or more of Nevada Pacific, Coral Gold, Tone Resources and White Knight has quality employees with good technical expertise. U.S. Gold and Canadian Exchange Co. hope to retain at least some of these key employees following the successful completion of the Proposed Acquisitions to assist in U.S. Gold’s business and operations going forward.

Upon successful completion of the Proposed Acquisitions, the combined company would strive to become the premier exploration company in Nevada. However, you should be aware that U.S. Gold’s and Canadian Exchange Co.’s offer to purchase with respect to each Target Company is not conditioned on the completion of any of the other offers to purchase.

The board of directors urges all U.S. Gold shareholders to vote “FOR” Proposals 1, 2, 3, 4, 5 and 6.

About the Target Companies

Coral Gold

Coral Gold is a natural resource company primarily engaged in the exploration of natural resource properties. Coral Gold’s principal business activities are the exploration of certain mineral properties located in Nevada and California. Since its 2002 fiscal year, Coral Gold has made aggregate principal expenditures of Cdn$2,498,084 on the Robertson Mining Claims in Nevada.

Coral Gold was organized under The Company Act (British Columbia) on January 22, 1981 under the name of Carol Energy Corporation. Coral Gold’s name was changed to Coral Energy Corporation on March 3, 1982, to Coral Gold Corp. on September 9, 1987, and to Coral Gold Resources Ltd. on September 14, 2004 in conjunction with a 10 to 1 share consolidation. On July 15, 2005, Coral Gold transitioned under the Business Corporations Act (British Columbia) which came into effect on March 29, 2004. The principal place of business of Coral Gold is located at 455 Granville Street, Suite 400, Vancouver, British Columbia V6C 1T1, and its telephone number is (604) 682-3701. Coral Gold is a reporting issuer in the provinces of British Columbia, Alberta and Ontario and files its continuous disclosure documents with the securities regulatory authorities in those provinces. Such documents are available without charge at www.sedar.com. Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR” and quoted on the Over-the-Counter Bulletin Board under the symbol “CGREF.” Additional information regarding Coral Gold is included in Annex B to this proxy statement.

Nevada Pacific

Nevada Pacific owns an exploratory property portfolio covering approximately 890 square miles of mineral rights in Mexico, including the Magistral Gold Mine, ten properties in Nevada and one in Utah. The Nevada property portfolio covers approximately 85 square miles, including portions of two significant gold producing regions: the Battle Mountain/Eureka Trend/Cortez Trend and the Carlin Trend.

Nevada Pacific was incorporated on March 11, 1997 under the Company Act (British Columbia). Nevada Pacific completed a mandatory transition to the Business Corporations Act (British Columbia) on September 3, 2005. Nevada Pacific’s registered office is located at 19th Floor, 885 West Georgia Street, Vancouver, British Columbia, Canada V6C 3H4 and its head office is located at Suite 750 — 625 Howe Street Vancouver, British Columbia, Canada V6C 2T6. Nevada Pacific is a reporting issuer in the provinces of British Columbia and Alberta and files its continuous disclosure documents with the securities regulatory authorities in those provinces. Such documents are available without charge at www.sedar.com. Nevada Pacific’s common shares are listed on the TSX-V under the symbol “NPG.” Additional information regarding Nevada Pacific is included in Annex C to this proxy statement.

Tone Resources

Tone Resources is an exploration stage company engaged in the acquisition and exploration of mineral properties primarily located on the major gold trends in the north-central region of Nevada, Tone Resources’ activities are focused on gold and Tone Resources controls substantially all interests in eight properties in Elko, Eureka, Lander, and Pershing counties in Nevada. All of Tone Resources’ properties are located near infrastructure facilities of currently producing gold mines.

Tone Resources’ mineral properties were acquired from KM Exploration Ltd., a private company with a common director, or were staked by that director. The properties are subject to a royalty of 1 per cent of net smelter returns, excepting the Red Ridge property, portions of which are subject to a royalty of 4 per cent of net smelter returns.

Tone Resources was incorporated on October 31, 2001 in the Yukon Territory and was continued to British Columbia from the Yukon Territory on March 1, 2005. The address and telephone number of its principal executive offices are 3374 West 19th Avenue, Vancouver, British Columbia, V6S 1C2, Canada, telephone (604) 263-5614. Its registered and records office is located at 10th Floor, 595 Howe Street, Vancouver, British Columbia, V6C 2T5, Canada. Tone Resources is a reporting issuer in British Columbia, Alberta, Ontario and the Yukon Territory and files its continuous disclosure documents with the securities regulatory authorities in those provinces. These

documents are available without charge on SEDAR, at www.sedar.com. Tone Resources’ common shares trade on the TSX-V under the symbol “TNS-V”. Additional information regarding Coral Gold is included in Annex D to this proxy statement.

White Knight

White Knight is an exploration company active in identifying and generating new mineral prospects. White Knight has been exploring for gold deposits in Nevada since 1993 and currently controls the second largest land holding in the Cortez Trend. Its portfolio includes 18 properties (over 68,000 acres), 15 of which are located in the Cortez Trend. Five are joint ventures subject to earn-in agreements with the remaining 100% held by White Knight (with White Knight having a net ownership position of between 46,000 and 50,000 acres).

White Knight was incorporated on December 18, 1986 under the Company Act (British Columbia). On March 29, 2004, the Company Act (British Columbia) was replaced by the Business Corporations Act (British Columbia). White Knight completed a mandatory transition to the Business Corporations Act (British Columbia) on December 21, 2005. White Knight’s registered office is located at Suite 3350, 1055 Dunsmuir Street, Vancouver, British Columbia, Canada V7X 1L2 and its head office is located at 922, 510 West Hastings Street, Vancouver, British Columbia, Canada V6B 1L8. White Knight is a reporting issuer in the provinces of British Columbia and Alberta and files its continuous disclosure documents with the securities regulatory authorities in those provinces. Such documents are available without charge at www.sedar.com. White Knight’s common shares are listed on the TSX-V under the symbol “WKR.” Additional information regarding White Knight is included in Annex E.

Effecting the Proposed Acquisitions

U.S. Gold proposes to acquire each of the Target Companies through an offer to exchange all outstanding common shares of each of the Target Companies for exchangeable shares of Canadian Exchange Co. Each of the offers to purchase is separate and completion of each offer is not subject to completion of any of the other offers to purchase. Following the completion of any such offer to purchase, U.S. Gold and Canadian Exchange Co. plan to acquire any common shares of each of the Target Companies not purchased pursuant to the offers to purchase through a statutory plan of arrangement or similar transaction providing for a mandatory exchange of all remaining outstanding common shares of the Target Company for additional exchangeable shares of Canadian Exchange Co., which we expect we would structure so that warrants to purchase the Target Company’s common shares would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and U.S. Gold would assume or adopt the Target Company stock option plan so that options under that plan would be exercisable for shares of common stock of U.S. Gold.

The Offers to Purchase

Common Shares

U.S. Gold and Canadian Exchange Co. intend to offer to purchase all outstanding common shares of each of the Target Companies for the following consideration:


	•	0.63 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Coral Gold;

	•	0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific;

	•	0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone Resources; and

	•	0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight.

Warrants, Options or Other Securities

The offers will be made only for the common shares of each Target Company and will not be made for any warrants, options or other securities that may entitle the holder to acquire common shares of any Target Company.

Any holder of such securities who wishes to accept the offer will be required to exercise those securities and deposit common shares of the applicable Target Company in accordance with the offer. Any such exercise must be sufficiently in advance of the expiry time of the offer to permit the Target Company common shares acquired on the exercise of those securities to be tendered pursuant to the offer. However, after completion of the offers, we may implement a statutory plan of arrangement or similar transaction providing for a mandatory exchange of all remaining outstanding common shares of the Target Company for additional exchangeable shares of Canadian Exchange Co. in order to acquire full ownership of the Target Company, which we expect we would structure so that warrants to purchase the Target Company’s common shares would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and U.S. Gold would assume or adopt the Target Company stock option plan so that options under that plan would be exercisable for shares of common stock of U.S. Gold.

Fractional Shares

Fractional exchangeable shares will not be issued pursuant to the offer. Instead, the number of exchangeable shares to be issued to each tendering shareholder will be either rounded up (if the fractional interest is 0.5 or more) or down (if the fractional interest is less than 0.5) to the next whole number. For purposes of such rounding, all of the common shares of each Target Company deposited by a shareholder will be aggregated.

Total Expected Issuance of U.S. Gold Shares

Based upon information provided to us by the Target Companies, we expect to issue a total of up to approximately 54,434,998 exchangeable shares of Canadian Exchange Co. in connection with the Proposed Acquisitions. In anticipation of the potential that the actual number of exchangeable shares of Canadian Exchange Co. that we may issue to the shareholders of any particular Target Company may exceed our current expectations, we are seeking shareholder approval of the issuance of up to 57,156,748 exchangeable shares of Canadian Exchange Co. and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of each of the Target Companies. Nevertheless, in calculating the effects of the Proposed Acquisitions on voting power and ownership after giving effect to the Proposed Acquisitions, we have assumed that we will issue approximately 54,434,998 exchangeable shares of Canadian Exchange Co., rather than the higher number for which we are seeking shareholder approval.

Shares to be Issued

The following chart summarizes the U.S. Gold common shares that we expect will be issued upon exchange of the exchangeable shares of Canadian Exchange Co. in connection with each of the Proposed Acquisitions. It also shows the approximate percentage of U.S. Gold common shares that would be held by current shareholders of U.S. Gold and each of the Target Companies, assuming all of the Proposed Acquisitions are completed. Share information for U.S. Gold is as of October 23, 2006, share information for Coral Gold is as of October 16, 2006, share information for White Knight is as of October 19, 2006, and share information for Nevada Pacific and Tone Resources is as of October 20, 2006, as provided to us by the Target Companies.


			Total		Total
			U.S. Gold		U.S. Gold		Percentage
	U.S. Gold		Shares Giving		Shares Giving		of			Percentage of
	Shares Issuable		Effect to		Effect to		Undiluted			Fully Diluted
	per Share		Proposed		Proposed		U.S. Gold			U.S. Gold
	of Target		Acquisitions		Acquisitions		Shares Held			Shares Held
	Company		(undiluted)		(fully diluted)		(1)			(1)

Existing U.S. Gold Shareholders		—		49,996,755		61,256,255		51.8	%		52.9	%
White Knight		0.35		20,784,740		23,101,740		21.5	%		20.0	%
Nevada Pacific		0.23		16,229,989		19,589,389		16.8	%		17.2	%
Coral Gold		0.63		4,291,850		5,051,179		4.5	%		4.4	%
Tone Resources		0.26		5,214,104		6,422,690		5.4	%		5.5	%
Total for all Target Companies		—		46,520,683		54,434,998		48.2	%		47.1	%
Total for U.S. Gold and all Target Companies		—		96,517,438		115,691,253		100.00	%		100.00	%


(1)		Securities of the Target Companies held by Robert R. McEwen that would be exchangeable into exchangeable shares of Canadian Exchange Co. in the Proposed Acquisitions are included in the Target Company ownership percentages.

Pro Forma Financial Information

Pro forma financial information for each of the Proposed Acquisitions, and all of the Proposed Acquisitions combined, is included in Annex F to this proxy statement.

Risks Relating to the Proposed Acquisitions

There are certain risks associated with the Proposed Acquisitions and related matters as described in “Risk Factors” beginning on page 14. U.S. Gold shareholders should consider these risks in determining how to vote on the proposals to be brought before the special meeting and should also consider the other risks described in U.S. Gold’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with the SEC on April 7, 2006.

Conditions to the Proposed Acquisitions

We may withdraw the offer (in which event Canadian Exchange Co. shall not be required to accept for purchase and/or pay for any common shares of the Target Companies tendered in the offer) or extend the period of time during which the offer is open (in which event the offerors may postpone accepting for purchase and paying for any common shares of the Target Companies tendered in the offer), unless each of the following conditions has been satisfied or has been waived by us at or prior to the expiry time:

(a) there shall have been properly deposited and not withdrawn that number of shares of the relevant Target Company that constitutes at least the greater of (i) 66-2/3 of the outstanding common shares of that Target Company, calculated on a fully diluted basis or (ii) 80% of the issued and outstanding common shares of that Target Company;

(b) each of the Target Companies shall not have entered into or effectuated any other agreement or transaction with any person or entity having the effect of impairing our ability to acquire such Target Company or otherwise diminishing the expected economic value to us of the acquisition of such Target Company including, but not limited to, any material issuance of securities of the Target Company, transfer of assets, the declaration of any extraordinary dividend, the adoption of a shareholder rights plan or any other transaction not in the ordinary course of the Target Company’s business;

(c) the shares of our common stock shall have been approved for listing on AMEX, the additional shares of our common stock issuable upon exchange of the exchangeable shares offered under the offers shall have been approved for listing on the TSX and AMEX and the exchangeable shares shall have been approved for listing on the TSX and on the AMEX;

(d) the registration statement for the exchangeable shares of Canadian Exchange Co. to be issued in the Proposed Acquisitions and the shares of our common stock that may be issued upon the exchange of any exchangeable shares shall have become effective under the Securities Act and no stop order suspending the effectiveness of the registration statement or a proceeding seeking a stop order shall have been issued nor shall there have been proceedings for that purpose initiated or threatened by the SEC and U.S. Gold and Canadian Exchange Co. shall have received all necessary state securities law or blue sky authorizations;

(e) all necessary orders shall have been obtained from relevant Canadian securities regulatory authorities in respect of the exchangeable shares to be issued in the Proposed Acquisitions, the shares of our common stock that may be issued upon the exchange of any such exchangeable shares and the resale of any such exchangeable shares or shares of our common stock;

(f) U.S. Gold and Canadian Exchange Co. shall have received waivers relating to any change of control provisions in any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which we or any of the Target Companies or any of their respective subsidiaries is a party or by which any of them or any of their properties or assets may be bound, except such waivers the absence of which would not in the aggregate materially adversely affect us, or subsidiaries, or a Target Company or its respective subsidiaries;

(g) the holders of our shares of common stock, voting at the special meeting, shall have approved the amendment to our Articles of Incorporation related to the creation of preferred stock, and Proposals 2, 3, 4, and 5 in order for the offers described in each of those proposals to be taken up, as further described in this proxy statement;

(h) the directors of each of the Target Companies will have made commitments reasonably satisfactory to U.S. Gold and Canadian Exchange Co. to (i) effect an orderly transition of the board of directors of each of the Target Companies contemporaneously with or promptly after Canadian Exchange Co. takes up and pays for the common shares of each of the Target Companies deposited under the offers to purchase, including, if requested, resigning in favor of such nominees as may be specified by U.S. Gold and Canadian Exchange Co. and (ii) release the Target Company from all claims as directors, other than existing rights to indemnification and insurance and customary directors fees and expenses for attendance at meetings of the board of directors;

(i) there shall not be in effect or threatened as of the expiry time, as it may be extended, any temporary restraining order, preliminary or permanent injunction or other order or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition challenging the offers to purchase or preventing the completion of the offers to purchase or any of the other transactions described in the offers to purchase, and there shall be no statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any court, administrative agency or commission or other governmental authority or instrumentality which requires consent or approval or challenges, prohibits, restricts or makes illegal the completion of the offers to purchase or any subsequent acquisition transaction;

(j) there shall not be pending or threatened any suit, action or proceeding by any governmental entity:

(i) challenging the offers to purchase, seeking to restrain or prohibit the completion of the offers to purchase or seeking to obtain from us or any of the Target Companies or their respective subsidiaries any damages that are material in relation to any of the Target Companies and their respective subsidiaries, on a consolidated basis, or to us and our subsidiaries, on a consolidated basis;

(ii) seeking to prohibit or limit the ownership or operation by us or any of the Target Companies or any of our subsidiaries of any material portion of the business or assets of any of the Target Companies or us or any of our subsidiaries or to compel any of the Target Companies or us or any of our subsidiaries to dispose of or hold separate any material portion of the business or assets of us or any of the Target Companies or any of our subsidiaries as a result of the offers to purchase;

(iii) seeking to prohibit us from effectively controlling in any material respect the business or operations of any of the Target Companies; or

(iv) which otherwise is reasonably likely to have a material adverse effect on us and our subsidiaries, on a consolidated basis, or any of the Target Companies and their respective subsidiaries, on a consolidated basis;

(k) there shall be no change or threatened change in the business, properties, assets, liabilities, capitalization, shareholders’ equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of any of the Target Companies or any of their respective subsidiaries, on a consolidated basis, that, in our reasonable judgment, has or may have a material adverse effect on any of the Target Companies and their respective subsidiaries, on a consolidated basis, and we shall not have become aware of any fact that, in our reasonable judgment, has or may have a material adverse effect on any of the Target Companies and their respective subsidiaries or their business or prospects or the value to us of the common shares of any of the Target Companies;

(l) U.S. Gold and Canadian Exchange Co. shall have obtained or received all approvals, consents, clearances or waivers required to be obtained or received from any governmental regulatory agency, authority or commission in connection with the offers to purchase and any subsequent acquisition transaction; and

(m) there shall not have occurred or been threatened:

(i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States or Canada;

(ii) any extraordinary or material adverse change in the financial markets or major stock exchange indices in the United States or Canada or in the market price of the common shares of any of the Target Companies;

(iii) any change in the general political, market, economic or financial conditions in the U.S. or Canada that could, in our reasonable judgment, have a material adverse effect upon the business, properties, assets, liabilities, capitalization, shareholders equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of any of the Target Companies or any of their respective subsidiaries;

(iv) any material change in U.S. dollar or Canadian dollar exchange rates or a suspension of, or limitation on, the markets therefor;

(v) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or Canada;

(vi) any limitation (whether or not mandatory) by any government, domestic, foreign or supranational, or governmental entity on, or other event that, in the reasonable judgment of U.S. Gold, might affect the extension of credit by banks or other lending institutions;

(vii) a commencement of war or armed hostilities or other national or international calamity involving the United States of America or Canada; or

(viii) in the case of any of the foregoing existing at the time of the commencement of the offers, a material acceleration or worsening thereof.

The conditions listed above are for the exclusive benefit of us and Canadian Exchange Co., and we may assert them regardless of the circumstances giving rise to any of the conditions. Unless precluded from doing so by applicable law, we may, in our sole discretion, waive any of these conditions in whole or in part. The determination as to whether any condition has been satisfied shall be final and binding on all parties.

U.S. Gold and Canadian Exchange Co. reserve the right to terminate any of the offers to purchase before their expiration if any condition to such offer to purchase remains unsatisfied or has not been waived or to comply with any applicable law.

Background of the Proposed Acquisitions

Coral Gold

On November 15, 2005 and November 16, 2005, Messrs. McEwen and Ball, a consultant to U.S. Gold, met with Mr. Louis Wolfin, a director and the former President and Chief Executive Officer of Coral Gold, in Vancouver, British Columbia. During their visit to Coral Gold’s head office, Messrs. McEwen and Ball received a presentation about Coral Gold’s properties in Nevada.

On December 9, 2005, Coral Gold announced the appointment of Mr. McEwen to the board of directors and as Executive Chairman of Coral Gold.

On March 5, 2006, U.S. Gold announced that it intended to acquire in unsolicited stock transactions, all of the outstanding common shares of White Knight, Nevada Pacific, Coral Gold and Tone Resources, each of which is exploring in the Cortez Trend in Nevada. These proposals were made in letters sent on March 5, 2006 by Mr. McEwen to the Chief Executive Officers of each of the Target Companies. U.S. Gold announced that its proposal represented a premium of 25% to the closing stock prices of each Target Company’s shares on March 3, 2006 and that the board of directors of U.S. Gold had formed a special committee to evaluate the terms of each of the transactions in recognition of, among other things, the equity interests held by Mr. McEwen in each of the four Target Companies. On March 6, 2006, Coral Gold announced that management would take the proposed offer by U.S. Gold under consideration.

On March 6, 2006, Mr. McEwen purchased 1,250,000 common shares pursuant to a non-brokered private placement for a purchase price of Cdn$3.00 per share.

On March 7, 2006, Mr. McEwen announced that in his capacity as a holder of common shares of Coral Gold, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies.

On March 23, 2006, Coral Gold announced that the board of directors of Coral Gold had formed a special committee to consider U.S. Gold’s unsolicited offer. The special committee has engaged Roman Friedrich & Company Ltd. to act as financial advisor, to assist in responding to the offer to purchase and to investigate other alternatives that may be available to maximize Coral Gold’s shareholder value.

On May 18, 2006, Mr. McEwen resigned as a director and as Executive Chairman of Coral Gold.

On June 5, 2006, U.S. Gold announced that, in view of certain United States securities regulatory requirements, it had terminated its previously announced offer to purchase all of the common shares of White Knight. U.S. Gold stated that it intended to recommence its offer for White Knight and to commence offers for Nevada Pacific, Coral Gold and Tone Resources by mailing new offer documents as soon as regulatory requirements could be satisfied, including the receipt of necessary information from each of the Target Companies.

During the months of August and September 2006, U.S. Gold’s management, with the assistance of its financial and legal advisors, obtained and analyzed certain publicly available information regarding Coral Gold to evaluate the proposed acquisition of Coral Gold. Management also worked with its financial and legal advisors to consider various structuring and transaction alternatives for the Proposed Acquisitions.

On September 28, 2006, the law firm of Hogan & Hartson L.L.P., U.S. Gold’s United States securities counsel, sent a written request to Coral Gold’s outside counsel to provide U.S. Gold and their advisors with certain due diligence materials, including financial statements for the most recent completed fiscal period, and requested that Coral Gold instruct their independent auditors to provide a consent to the inclusion of Coral Gold’s financial statements in this proxy statement. On October 3, 2006, U.S. Gold sent a follow-up request to Coral Gold requesting the same information and consent.

Nevada Pacific

On November 21, 2005, Messrs. McEwen and Ball, met with Mr. David Hottman, the Chairman, Chief Executive Officer and President and a director of Nevada Pacific, to discuss financing for Nevada Pacific.

On December 9, 2005, Nevada Pacific announced that, subject to regulatory approval, it had entered into an agreement with Mr. McEwen to issue to him, pursuant to a private placement, 12,500,000 units at a price of Cdn$0.40 per unit. Each unit would be comprised of one common share of Nevada Pacific and one warrant, each warrant exercisable to acquire one common share of Nevada Pacific at an exercise price of Cdn$0.50 per common share for a term of two years. Nevada Pacific announced that, in accordance with the rules of the TSX-V, the private placement would close in two tranches and that the company had called an extraordinary general meeting of its shareholders to be held January 23, 2006 for the purpose of approving the second tranche. Nevada Pacific also announced that Mr. McEwen would join the board of directors of Nevada Pacific.

On December 14, 2005, Nevada Pacific announced that it had closed the first tranche of the private placement to Mr. McEwen, consisting of 6,921,213 units of Nevada Pacific.

On December 22, 2005, Nevada Pacific announced the appointment of Mr. McEwen to the board of directors of Nevada Pacific.

On January 25, 2006, Nevada Pacific announced that the shareholders had approved the second tranche of the private placement and the closing of the second tranche of the private placement to Mr. McEwen, consisting of 5,578,787 units of Nevada Pacific.

Following U.S. Gold’s March 5, 2006 announcement that it intended to acquire in stock transactions, all of the outstanding common shares of White Knight, Nevada Pacific, Coral Gold and Tone Resources, on March 6, 2006, Nevada Pacific announced that its board of directors would meet to consider and evaluate U.S. Gold’s proposed offer to purchase and would advise its shareholders of the board’s position following that meeting.

On March 20, 2006, Nevada Pacific announced that its board of directors had met to consider U.S. Gold’s unsolicited offer. A special committee of the board of directors of Nevada Pacific was appointed to consider the unsolicited offer. The special committee selected Capital West Partners of Vancouver, British Columbia, to act as financial advisor and to assist in responding to the offer to purchase. The special committee, with its financial advisor, would consider the offer to purchase and investigate other alternatives available to maximize shareholder value. Nevada Pacific advised its shareholders that the Nevada Pacific special committee would report to the board of directors with its views and a recommendation regarding the offer to purchase after receiving advice from its financial advisors.

On May 18, 2006, Mr. McEwen resigned as a director of Nevada Pacific.

During the months of August and September 2006, U.S. Gold’s management, with the assistance of its financial and legal advisors, obtained and analyzed certain publicly available information regarding Nevada Pacific to evaluate the proposed acquisition of Nevada Pacific. Management also worked with its financial and legal advisors to consider various structuring and transaction alternatives for the Proposed Acquisitions.

On September 28, 2006, the law firm of Hogan & Hartson L.L.P., U.S. Gold’s United States securities counsel, sent a written request to Nevada Pacific’s outside counsel to provide U.S. Gold and their advisors with certain due diligence materials, including financial statements for the most recent completed fiscal period, and requested that Nevada Pacific instruct their independent auditors to provide a consent to the inclusion of Nevada Pacific’s financial statements in this proxy statement. On October 3, 2006, U.S. Gold sent a follow-up request to Nevada Pacific requesting the same information and consent.

Tone Resources

On November 30, 2005, Tone Resources announced that it was using its best efforts to undertake a private placement of 3,300,000 units at a price of Cdn$0.20 per unit. Each unit would be comprised of one common share of Tone Resources and one transferable warrant exercisable to acquire one common share of Tone Resources at an exercise price of Cdn$0.25 for a period of two years from closing.

On December 15, 2005, Tone Resources announced that Mr. McEwen had agreed to subscribe for 2,500,000 units pursuant to the private placement, that the private placement was subject to regulatory approval and that Mr. McEwen would join Tone Resources’ board of directors.

On December 21, 2005, Tone Resources announced that it had completed the first closing of the private placement, in which Mr. McEwen subscribed for 1,770,000 units and that Tone Resources had scheduled a meeting of shareholders to be held on February 10, 2006 to approve, among other things, the issuance of an additional 730,000 units to Mr. McEwen in a second closing.

On March 3, 2006, Tone Resources announced that the shareholders of Tone Resources had approved the issuance of the additional 730,000 units to Mr. McEwen pursuant to the private placement and that the closing of the issuance of the 730,000 units had been completed on March 3, 2006. Tone Resources also announced that the shareholders had appointed Mr. McEwen to the board of directors of the company.

Following U.S. Gold’s March 5, 2006 announcement that it intended to acquire in stock transactions, all of the outstanding common shares of White Knight, Nevada Pacific, Coral Gold and Tone Resources, on March 23, 2006, Tone Resources announced that the board of directors had established a special committee to evaluate the unsolicited offer and make recommendations to the board of directors and that the special committee would appoint a financial advisor in the immediate future to assist it in evaluating the offer and other alternatives that may be available to maximize shareholder value.

Since March 5, 2006, Mr. Scott D. Baxter, the Chief Executive Officer of Tone Resources and Mr. McEwen have had a number of telephone conversations regarding the proposed timing and structure of the offer to purchase Tone Resources.

On May 18, 2006, Mr. McEwen resigned as a director of Tone Resources.

On June 13, 2006, in response to U.S. Gold’s announcement on June 5, 2006, Tone Resources announced that it believed that it had done everything it could do to assist U.S. Gold in making a formal offer to its shareholders.

During the months of August and September 2006, U.S. Gold’s management, with the assistance of its financial and legal advisors, obtained and analyzed certain publicly available information regarding Tone Resources to evaluate the proposed acquisition of Tone Resources. Management also worked with its financial and legal advisors to consider various structuring and transaction alternatives for the Proposed Acquisitions.

On September 28, 2006, the law firm of Hogan & Hartson L.L.P., U.S. Gold’s United States securities counsel, sent a written request to Tone Resources’ outside counsel to provide U.S. Gold and their advisors with certain due diligence materials, including financial statements for the most recent completed fiscal period, and requested that Tone Resources instruct their independent auditors to provide a consent to the inclusion of Tone Resources’ financial statements in this proxy statement. On October 3, 2006, U.S. Gold sent a follow-up request to Tone Resources requesting the same information and consent.

White Knight

On June 28, 2005, Robert R. McEwen, prior to the time he became the Chairman and Chief Executive Officer of U.S. Gold, purchased 5,681,705 common shares of White Knight representing a 10.5% ownership in White Knight. Mr. McEwen purchased these common shares in a private purchase from Goldcorp Inc. for an average purchase price of Cdn$0.81 per share.

On July 5, 2005, Mr. McEwen purchased 2,270,700 common shares of White Knight representing a 4.2% ownership in White Knight. Following this purchase, Mr. McEwen held 7,952,427 common shares of White Knight (or 14.7% of the outstanding common shares of White Knight). Mr. McEwen purchased these common shares on the TSX-V for an average purchase price of Cdn$0.91 per share.

In July, 2005, Mr. McEwen was given a tour of certain of the White Knight properties in Nevada by Mr. John M. Leask, the Chairman of White Knight, Mr. Gordon P. Leask, a director of White Knight, and certain members of White Knight management. During this tour, Mr. McEwen engaged in preliminary discussions with Messrs. Leask and Leask about the potential for consolidating properties located along the Cortez Trend in Nevada.

On July 22, 2005, Mr. McEwen purchased 1,600,000 common shares of White Knight representing a 2.9% ownership in White Knight. Following this purchase, Mr. McEwen held 9,552,427 common shares of White Knight

(or 17.1% of the outstanding common shares of White Knight on a partially diluted basis). Mr. McEwen purchased these common shares on the TSX-V for an average purchase price of Cdn$1.26 per share.

On August 11, 2005, Mr. McEwen, Mr. Ian Ball, and Mr. Stefan Spears, both consultants to U.S. Gold, met with Messrs. Leask and Leask and Mr. Brian Edgar, a director of White Knight, at U.S. Gold’s office in Toronto, Ontario. On November 16, 2005, Messrs. McEwen and Ball met with Mr. John M. Leask and Mr. William Rand, an advisor to White Knight and partner of Mr. Edgar, in Vancouver, British Columbia. In addition, during the summer and fall of 2005, Mr. McEwen and the representatives of White Knight engaged in several telephone conversations. During these meetings and telephone conversations, the representatives of each company continued their earlier discussions about consolidating the companies’ properties located along the Cortez Trend in Nevada.

On March 6, 2006, Mr. McEwen announced that in his capacity as a holder of common shares of White Knight, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies.

On March 22, 2006, White Knight announced that the board of directors of White Knight had engaged Genuity Capital Markets, or “Genuity,” to act as financial advisor, to provide a fairness opinion and to assist in responding to U.S. Gold’s offer to purchase.

During the week of April 24, 2006, there were a number of discussions among Genuity, GMP Securities L.P., or “GMP,” and Canadian counsel to U.S. Gold and White Knight regarding, among other things, the proposed timing and structure of the offer to purchase and whether U.S. Gold would be prepared to enter into a support agreement with White Knight in relation to the offer to purchase. U.S. Gold responded through GMP that it would proceed with the offer to purchase as originally contemplated.

On May 1, 2006, U.S. Gold announced the commencement of its offer to purchase all of the outstanding common shares of White Knight. U.S. Gold also announced that it intended to make formal offers to the shareholders of Tone Resources, Coral Gold and Nevada Pacific based on the same per share exchange ratios announced by U.S. Gold on March 5, 2006 as soon as practicable following the completion of by each of the foregoing companies of formal valuations required under applicable law.

On May 16, 2006, White Knight announced that it had filed its directors’ circular with Canadian securities authorities in response to U.S. Gold’s offer to purchase and mailed the directors’ circular to holders of White Knight’s issued and outstanding common shares. At the time, the board of directors of White Knight made no recommendations to shareholders regarding the offer in the directors’ circular. White Knight stated that while its board of directors was generally supportive of the business proposition of consolidating the land positions within the Cortez Trend, aggressively pursuing exploration programs, the enhanced trading liquidity and the stronger cash position for White Knight, based on advice from its financial and legal advisors, the board of directors would reserve judgment until issues were resolved with respect to the timing of the offer to purchase, particularly with respect to the timing of receiving appropriate clearances from the SEC and the completion of satisfactory due diligence on U.S. Gold.

On June 5, 2006, U.S. Gold announced that, in view of certain United States securities regulatory requirements, it had terminated its offer to purchase all of the common shares of White Knight. U.S. Gold stated that it intended to recommence its offer for White Knight and to commence offers for Nevada Pacific, Coral Gold and Tone Resources by mailing new offer documents as soon as regulatory requirements could be satisfied, including the receipt of necessary information from each of the Target Companies.

During the months of August and September 2006, U.S. Gold’s management, with the assistance of its financial and legal advisors, obtained and analyzed certain publicly available information regarding White Knight to evaluate the proposed acquisition of White Knight. Management also worked with its financial and legal advisors to consider various structuring and transaction alternatives for the Proposed Acquisitions.

On September 28, 2006, the law firm of Hogan & Hartson L.L.P., U.S. Gold’s United States securities counsel, sent a written request to White Knight’s outside counsel to provide U.S. Gold and their advisors with certain due

diligence materials, including financial statements for the most recent completed fiscal period, and requested that White Knight instruct their independent auditors to provide a consent to the inclusion of White Knight’s financial statements in this proxy statement. On October 3, 2006, U.S. Gold sent a follow-up request to White Knight requesting the same information and consent.

Opinion of U.S. Gold Financial Advisor

On March 2, 2006, our board of directors established a special committee to evaluate the terms of the Proposed Acquisitions and the process of determining those terms. After interviewing various financial advisors, the special committee of the board of directors of U.S. Gold retained Wellington West Capital Markets Inc. on March 27, 2006, to act as its financial advisor in connection with the Proposed Acquisitions. Wellington West is a Canadian investment banking firm, with operations including corporate finance, mergers and acquisitions, equity sales and trading and investment research.

On April 6, 2006, at a meeting of the special committee held to evaluate the Proposed Acquisitions, Wellington West delivered its oral opinion to the special committee, subsequently confirmed in writing as of that date, to the effect that, as of that date and based on and subject to the matters described in its opinion, the aggregate consideration payable by U.S. Gold in the Proposed Acquisitions, and the exchange ratio for each of the Proposed Acquisitions, were fair, from a financial point of view, to U.S. Gold and its shareholders.

The full text of Wellington West’s written opinion to the special committee dated April 6, 2006, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex H to this proxy. You should read the full text of Wellington West’s opinion in conjunction with the following summary of the opinion. Wellington West’s opinion to the special committee does not constitute a recommendation to any security holder as to how to vote in respect of any of the proposals set forth in this proxy statement.

In connection with delivering its opinion, Wellington West reviewed and relied upon or carried out, among other things, the following:

1. Audited financial statements of White Knight for the years ended June 30, 1997, through June 30, 2005; unaudited quarterly financial statements for the second quarter ended December 31, 2005;

2. Audited financial statements of Coral Gold for the years ended January 31, 1997 through January 31, 2005; unaudited quarterly financial statements for the third quarter ended October 31, 2005;

3. Audited financial statements of Tone Resources for the years ended August 31, 2003 through August 31, 2005; unaudited quarterly financial statements for the first quarter ended November 30, 2005;

4. Audited financial statements of Nevada Pacific for the years ended June 30, 1998 through June 30, 2005; unaudited quarterly financial statements for the second quarter ended December 31, 2005;

5. Audited financial statements of U.S. Gold for the years ended December 31, 1995 through December 31, 2005; unaudited quarterly financials for the third quarter ended September 30, 2005;

6. Annual information form of Nevada Pacific dated February 24, 2005;

7. Final Long Form Prospectus of Tone Resources dated February 10, 2003;

8. 2005 annual report of Coral Gold;

9. Management information circular of Coral Gold dated May 6, 2005;

10. Management information circular of Nevada Pacific dated October 27, 2005;

11. Management information circular of Tone Resources dated January 6, 2006;

12. Management information circular of White Knight dated October 24, 2005;

13. Technical Report on the Roberts Mountain Project, Roberts Mountain, Eureka County, Nevada USA prepared by Marvin A. Mitchell P. Eng., Mitchell Geological Services Inc., October 21, 2002;

14. Technical Report for the Slaven Canyon Property, Lander County, Nevada, USA prepared by Timothy D. Jefferson, P.G., and Arthur R. Leger, P.G., November 16, 2005;

15. Summary Report for the Celt Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc., September 23, 2005;

16. Technical Report on the Cottonwood Property, Eureka County, Nevada, USA prepared by John M. Leask, P. Eng., July 11, 2005;

17. Summary Report for the McClusky-Tonkin Summit Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc., September 22, 2005;

18. Technical Report on the Fye Canyon Property, Eureka County, Nevada prepared by John M. Leask, P. Eng., April 15, 2005;

19. NI 43-101 Technical Report on the New Pass Property, Churchill County, Nevada prepared by Paul A. Pelke, California Registered Geologist, October 2004;

20. Technical Report on the Indian Ranch Property, Eureka County, Nevada, USA prepared by John M. Leask, P. Eng., December 20, 2004;

21. Amended Technical Report for the Magistral Gold Project, Sinaloa State, Mexico, prepared by Pincock Allen & Holt, January 6, 2005;

22. Technical Report on the Tonkin Springs Project, Nevada, USA, May 2004;

23. Filings on the System for Electronic Disclosure by Insiders (SEDI) for Coral Gold, Nevada Pacific, Tone Resources, and White Knight;

24. March 6, 2006 Corporate Presentation of U.S. Gold;

25. Spring 2006 Corporate Presentation of Nevada Pacific;

26. Press releases for U.S. Gold, White Knight, Nevada Pacific, Coral Gold and Tone Resources since January 1, 2005;

27. Public information relating to the business, operations, financial performance and stock trading history of U.S. Gold, White Knight, Nevada Pacific, Coral Gold, Tone Resources and other selected public companies considered by us to be relevant;

28. Public information with respect to other transactions of a comparable nature considered by us to be relevant;

29. Public information regarding the industries in which U.S. Gold and the Target Companies operate;

30. Representations contained in a certificate addressed to us, dated as of the date hereof, from senior officers of U.S. Gold as to the completeness and accuracy of the information upon which the fairness opinion is based; and

31. Such other corporate, industry and financial market information, investigations and analyses as Wellington West considered necessary or appropriate in the circumstances.

In rendering its opinion, Wellington West relied, without independent verification, upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions or representations obtained by it from public sources, senior management of U.S. Gold and its respective associates, affiliates, consultants and advisors or otherwise and Wellington West assumed that this information did not omit to state any material fact or any fact necessary to be stated to make this information not misleading. Wellington West’s opinion is conditional upon such completeness, accuracy and fair presentation of this information. Subject to the exercise of professional judgment, Wellington West did not attempt to verify independently the completeness, accuracy or fair presentation of any of the information. In preparing its opinion, Wellington West has not been provided with direct access to the Target Companies or their respective managements and has relied solely on publicly available information relating to the Target Companies.

Wellington West’s opinion was rendered on the basis of securities markets, economic, financial and general business conditions prevailing as at the date of the opinion and the condition and prospects, financial and otherwise, of U.S. Gold, the Target Companies and their respective associates and affiliates, as they were reflected in the information obtained by Wellington West and as they were represented to Wellington West in discussions with management of U.S. Gold. In its analyses and in preparing the opinion, Wellington West made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Wellington West or any party involved in the Proposed Acquisitions.

For purposes of rendering its opinion, Wellington West also assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the Proposed Acquisitions would be obtained without any adverse effect on U.S. Gold or the Target Companies or on the contemplated benefits of the Proposed Acquisitions to U.S. Gold. No limitations were imposed by the special committee upon Wellington West with respect to the investigations made or procedures followed by it in rendering its opinions.

Set forth below is a summary of certain financial analyses performed by Wellington West in connection with its opinion and reviewed with the special committee at its meeting on April 6, 2006.

Historical Stock Performance

Wellington West reviewed and analyzed recent and historical market prices and trading volume for the Target Companies’ common shares and shares of U.S. Gold common stock and compared such market prices to each other and to certain stock market and industry indices. The historical stock performance review was undertaken for the periods both prior and subsequent to the involvement of Mr. McEwen with U.S. Gold.

Analysis of Selected Publicly Traded Companies

Wellington West compared certain financial information and valuation measurements for the Target Companies and U.S. Gold to corresponding information and measurements for a group of 13 comparable publicly traded Nevada gold exploration companies (consisting of Atna Resources Ltd., Bravo Venture Group Inc., CMQ Resources Inc., Duncan Park Holdings Corp., J-Pacific Gold Inc., Klondex Mines Ltd., Metallic Ventures Gold Inc., Mill City Gold Corp., Minterra Resource Group, Miranda Gold Corp., Staccato Gold Resources Ltd., Victoria Resources Corp. and X-Cal Resources Ltd.), which we refer to as the “Selected Companies.” Such financial information and valuation measurements were obtained from publicly available information concerning historical and projected exploration expenditure and assets, including published historical financial information, published National Instrument 43-101 (Canada) compliant technical reports, and published corporate presentations. Wellington West determined that, based on the closing market prices of the Target Companies as at April 5, 2006, the proposed exchange ratios for the Target Companies reflect trading multiples that are within the range of multiples calculated for the Selected Companies.

Wellington West also compared certain financial information and commonly used valuation measurements for a group of 36 publicly traded companies in the gold exploration/development and production industries. Analysis of comparable trading multiples for mining companies conventionally focuses on valuations per ounce of reserve, resource, production, price to net asset value, or price to earnings or cash flow per share. These metrics are of little value in assessing the Proposed Acquisitions as the Target Companies are too early stage to have meaningful operating statistics. The valuations of the Target Companies are based upon their exploration potential and we have accordingly evaluated and relied upon the metrics which measure this potential.

None of the companies utilized as a comparison are identical to the Target Companies or U.S. Gold. Accordingly, Wellington West believes the analysis of publicly traded comparable companies is not simply mathematical. Rather, it involves complex considerations and qualitative judgments, reflected in Wellington West’s opinion, concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading value of the comparable companies.

Analysis of Selected Precedent Transactions

Wellington West reviewed the financial terms, to the extent publicly available, of 42 proposed, pending or completed mergers and acquisition transactions since June 2000 involving companies in the gold exploration, development and/or production industries, which we refer to as the “Selected Transactions.” Wellington West calculated premiums over market value based on certain publicly available information for each of the Selected Transactions and compared them to the corresponding premiums over market value for the Proposed Acquisitions, based on the exchange ratios. Wellington West calculated that the multiple of offer price to pre-announcement price of 25% for the Proposed Acquisitions compared to a range of 3% to 64%, with a mean of 26% for the Selected Transactions. Wellington West also calculated that the Selected Transactions were effected at a premium to the acquired companies’ per share volume weighted average market price for the 10 trading days prior to the announcement of the transaction ranging from 0% to 108%, with a mean of 31% compared to premiums of 20% for Coral Gold, 56% for Nevada Pacific, 68% for Tone, and 32% for White Knight. The Selected Transactions were effected at a premium to the companies’ per share volume weighted average market price for the 30 trading days prior to announcement of the transaction ranging from -1% to 168%, with a mean of 37%, compared to premiums of 19% for Coral Gold, 44% for Nevada Pacific, 85% for Tone and 38% for White Knight. (The foregoing premiums are based on the volume weighted average prices 10 trading days and 30 trading days prior to the March 6, 2006 announcement of the Proposed Acquisitions). All multiples for the Selected Transactions were based on public information available at the time of announcement of such transaction, without taking into account differing market and other conditions during the 6-year period during which the Selected Transactions occurred.

Because the reasons for, and circumstances surrounding, each of the Selected Transactions analyzed were so diverse, and due to the inherent differences between the operations and financial conditions of the Target Companies and U.S. Gold and the companies involved in the Selected Transactions, Wellington West believes that a comparable transaction analysis is not simply mathematical. Rather, it involves complex considerations and qualitative judgments, reflected in Wellington West’s opinion, concerning differences between the characteristics of these transactions and the Proposed Acquisitions that could affect the value of the subject companies and businesses and the Target Companies and U.S. Gold.

Historical Exchange Ratio Analysis

Wellington West reviewed the historical ratio of the daily per share market closing prices of the common shares of the Target Companies divided by the corresponding prices of U.S. Gold common stock over the 180-day, 90 day and 30 day periods prior to April 5, 2006 and as of March 3, 2006 (the last business day prior to announcement of the Proposed Acquisitions). The average exchange ratios for these time periods and as of such date were 0.60, 0.59, 0.55 and 0.51 respectively for Coral Gold; 0.18, 0.18, 0.18 and 0.19 respectively for Nevada Pacific; 0.14, 0.17, 0.20 and 0.21 respectively for Tone Resources; and 0.40, 0.29, 0.25 and 0.28 for respectively for White Knight; Wellington West then calculated the respective premiums over such average daily exchange ratios represented by the applicable exchange ratio, which for the same time periods and as of such date were 6%, 8%, 16% and 25%, respectively for Coral Gold; 29%, 28%, 40% and 25%, respectively for Nevada Pacific; 85%, 57%, 33% and 25%, respectively for Tone Resources; and 86%, 22%, 39% and 25%, respectively for White Knight.

Wellington West also compared the proposed exchange ratios for the Target Companies to the prevailing exchange ratios before Robert R. McEwen made his investment in U.S. Gold (announced after market close on July 29, 2005) and determined that the proposed exchange ratios were within a reasonable range on that basis as well.

Contribution Analysis

Wellington West analyzed the relative ownership of U.S. Gold shareholders and the current shareholders of the Target Companies of the pro forma outstanding capital of the combined company. This analysis showed that on a pro forma combined basis, U.S. Gold shareholders, Coral Gold shareholders, Nevada Pacific shareholders, Tone Resources shareholders and White Knight shareholders would own approximately 52.1%, 4.6%, 17.7%%, 5.6% and 20.0% respectively, of the combined company’s pro forma share capital on a fully diluted basis. Wellington West then analyzed the relative contribution of U.S. Gold and the Target Companies of exploration properties as

well as advanced exploration/development properties and developed mining properties to the combined company, and compared such relative contribution to the pro forma ownership of the combined company.

The foregoing summary describes the analyses and factors that Wellington West deemed material in its presentation to the special committee, but is not a comprehensive description of all analyses performed and factors considered by Wellington West in connection with preparing its opinion. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant assumptions and methods of financial analysis and the application of these methods to the particular circumstances and, therefore, a fairness opinion is not necessarily susceptible to partial analysis or summary description. Qualitative judgments were made based upon Wellington West’s assessment of the surrounding factual circumstances relating to the Proposed Acquisitions and Wellington West’s analysis of such factual circumstances in its best judgment. Wellington West believes that its analyses must be considered as a whole and that considering any portion of such analyses and of the factors considered without considering all analyses and factors would likely create a misleading view of the process underlying its fairness opinion. In arriving at its fairness determination, Wellington West did not assign specific weights to any particular analyses.

In conducting its analyses and arriving at its opinions, Wellington West utilized a variety of generally accepted valuation methods. The analyses were prepared solely for the purpose of enabling Wellington West to provide its opinion to the special committee as to the fairness, from a financial point of view, to U.S. Gold of the aggregate consideration payable in the Proposed Acquisitions and each exchange ratio and does not purport to be an appraisal or necessarily reflect the prices at which businesses or securities actually may be sold, which are inherently subject to uncertainty.

In its analyses and in preparing its fairness opinion, Wellington West made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Wellington West or any party involved in the Proposed Acquisitions. Analyses based on estimates or forecasts of future results are not necessarily indicative of actual past or future values or results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of U.S. Gold, the Target Companies or their respective advisors, neither U.S. Gold nor Wellington West nor any other person assumes responsibility if future results or actual values are materially different from these forecasts or assumptions.

The terms of the Proposed Acquisitions were determined by U.S. Gold and were approved by the special committee. The decision to enter into the Proposed Acquisitions was solely that of U.S. Gold, its board of directors and special committee. The opinion and presentation of Wellington West to the special committee were only one of a number of factors taken into consideration by the special committee in making its determination to recommend the Proposed Acquisitions. Wellington West’s opinion was provided to the special committee to assist it in connection with its consideration of the Proposed Acquisitions and does not constitute a recommendation to any security holder as to whether to vote or tender in respect to the proposals set forth in this proxy statement.

The special committee selected Wellington West as financial advisor in connection with the Proposed Acquisitions based on Wellington West’s qualifications, expertise, reputation and experience in mining transactions involving Canadian companies. The special committee retained Wellington West pursuant to a letter agreement dated March 27, 2006 between U.S. Gold and Wellington West. The terms of the engagement provide that Wellington West is to be paid an aggregate fee of Cdn$200,000 for its services for rendering its fairness opinion. The fees payable to Wellington West are not contingent in whole or in part upon the completion of the Proposed Acquisitions or on the conclusions reached in the fairness opinion.

In addition, U.S. Gold has agreed to reimburse Wellington West for its reasonable out-of-pocket expenses incurred in connection with its engagement, including the reasonable fees and disbursements of Wellington West’s counsel and Wellington West’s reasonable travel and communication expenses. U.S. Gold has also agreed to indemnify Wellington West and certain related persons to the full extent lawful against certain liabilities, including certain liabilities under the applicable securities laws arising out of its engagement or the Proposed Acquisitions.

Wellington West is not an insider, associate, or affiliate of U.S. Gold or any of the Target Companies and is not an advisor to any person or company other than U.S. Gold with respect to the Proposed Acquisitions. Wellington

STRUCTURE OF THE PROPOSED ACQUISITIONS

Description of the Structure of the Proposed Acquisitions

The Proposed Acquisitions have been structured with the intent to make it possible to provide favorable tax treatment to Target Company shareholders who tender their Target Company common shares pursuant to the offers to purchase. U.S. Gold believes that the expectation of favorable tax treatment will encourage more Target Company shareholders to participate in the offers to purchase and therefore increases the prospects for successfully completing the Proposed Acquisitions. In order to effect the Proposed Acquisitions, Canadian Exchange Co. was formed as a wholly-owned subsidiary of U.S. Gold in order that holders of common shares of the Target Companies will receive exchangeable shares of Canadian Exchange Co. pursuant to the offers to purchase. As a result, we expect that Target Company shareholders residing in Canada who receive exchangeable shares in exchange for their Target Company common shares will be able to do so on a Canadian tax deferred basis. If Target Company shareholders residing in Canada were not allowed to receive exchangeable shares in exchange for their Target Company common shares pursuant to the offers to purchase, a Canadian tax deferral would not be available, and U.S. Gold believes such shareholders would be less likely to participate in the offers to purchase or any subsequent acquisition transaction. Provided that certain conditions and requirements are met, each of the offers is structured with the intent to qualify as a tax-deferred exchange under Sections 368 or 351 of the Code, pursuant to which Target Company shareholders residing in the United States will generally also receive exchangeable shares on a United States tax-deferred basis. However, if a Target Company is considered to be a passive foreign investment company within the meaning of Section 1297 of the Code, referred to as a “PFIC,” a United States shareholder of such Target Company who has not made certain elections under the PFIC rules will be subject to tax under a special tax regime applicable to PFICs on gain realized with respect to the exchange of such United States shareholder’s Target Company shares for exchangeable shares and will not be eligible for tax-deferred treatment. White Knight and Coral Gold disclose in their public filings that they believe themselves to be PFICs; Tone Resources and Nevada Pacific have not publicly disclosed whether they believe themselves to be PFICs. We have not independently assessed the PFIC status of any of the Target Companies.

Subsequent Acquisition Transactions

If U.S. Gold and Canadian Exchange Co. take up and pay for common shares of any or all of the Target Companies validly deposited under the offers to purchase, U.S. Gold and Canadian Exchange Co. currently intend to take such action as is necessary or advisable to acquire all common shares not acquired pursuant to the offers to purchase. Such action may include causing a special meeting of shareholders to be called to consider a subsequent acquisition transaction involving the relevant Target Companies and Canadian Exchange Co. or an affiliate of Canadian Exchange Co., for the purpose of enabling Canadian Exchange Co. or an affiliate of Canadian Exchange Co. to acquire all common shares not acquired pursuant to the offers to purchase. In the event that a subsequent acquisition transaction is necessary, U.S. Gold and Canadian Exchange Co. intend to cause a special meeting of shareholders of the applicable Target Company to be called to consider a statutory arrangement whereby:

(i) all of the remaining outstanding shares of the Target Company would be exchanged on a mandatory basis for additional exchangeable shares of Canadian Exchange Co. in the same exchange ratio offered pursuant to the offer to purchase;

(ii) in connection with the statutory arrangement, warrants of the Target Company would be exchangeable for warrants to purchase exchangeable shares, with appropriate adjustments to the exercise prices of these warrants; and

(iii) such Target Company’s stock option plan would be adopted by U.S. Gold so that options under that plan would be exercisable for shares of U.S. Gold common stock with appropriate adjustments to the exercise prices of these options.

The timing and details of any such transaction will depend on a number of factors, including the number of common shares acquired pursuant to the offer to purchase with respect to each Target Company and the terms of such Target Company’s warrant indentures and stock option plan and there can be no assurance that any such

If U.S. Gold and Canadian Exchange Co. are unable to or decide not to propose a subsequent acquisition transaction, or propose a subsequent acquisition transaction but cannot obtain any required approvals or exemptions promptly, U.S. Gold and Canadian Exchange Co. will evaluate their other alternatives. Such alternatives could include, to the extent permitted by applicable law, purchasing additional common shares in the open market, in privately negotiated transactions, in another take-over bid or exchange offer or otherwise, or from the Target Companies, or taking no actions to acquire additional common shares. Subject to applicable law, any additional purchases of common shares could be at a price greater than, equal to, or less than the price to be paid for common shares under the offers to purchase and could be for cash, securities and/or other consideration. Alternatively, U.S. Gold and Canadian Exchange Co. may take no action to acquire additional common shares, or may even sell or otherwise dispose of any or all common shares acquired pursuant to the offers to purchase, on terms and at prices then determined by U.S. Gold and Canadian Exchange Co., which may vary from the price paid for common shares under the offers to purchase.

Our principal executive offices are located at 2201 Kipling Street, Suite 100, Lakewood, Colorado, 80215 and our telephone number is (303) 238-1438. Our website is www.usgold.com. Information contained on the website is not incorporated by reference into this proxy statement and you should not consider information contained on the website as part of this proxy statement. Our common stock is listed on the Toronto Stock Exchange, or TSX under the symbol “UXG” and is quoted on the Over-the-Counter Bulletin Board under the symbol “USGL.” It is a condition of the offer that our common stock also be approved for listing on AMEX, with respect to which application has been made. We are subject to the reporting requirements of the Exchange Act and, as such, file or furnish reports and other information with the SEC from time to time. More information about U.S. Gold is available and incorporated by reference into this proxy statement as described in the sections below entitled “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference” on page 84.

Subject to the retraction call right described below, holders of exchangeable shares will be entitled at any time to retract (i.e., to require Canadian Exchange Co. to redeem) any or all exchangeable shares held by them and to receive the retraction price per exchangeable share to be satisfied by issuance of one share of common stock of U.S. Gold, plus the dividend amount, which for purposes of this proxy statement we define as the full amount of all declared and unpaid dividends on the exchangeable shares and all dividends and distributions declared on a share of common stock of U.S. Gold that have not yet been declared on the exchangeable shares. Holders of exchangeable shares may effect a retraction by presenting to Canadian Exchange Co. or its transfer agent the certificate(s) representing the exchangeable shares the holder desires to have Canadian Exchange Co. redeem, together with such other documents and instruments as may be required under the Business Corporation Act (Alberta), the articles of Canadian Exchange Co. or by its transfer agent, and a duly executed retraction request specifying that the holder desires to have the number of retracted shares specified therein redeemed by Canadian Exchange Co.

Unless the relevant Canadian tax legislation is amended, any Canadian tax deferral obtained by a shareholder who receives exchangeable shares under the offer will end on the exchange or redemption of exchangeable shares for shares of our common stock. Moreover, if our rights or the rights of Alberta ULC to acquire exchangeable shares from the holders of exchangeable shares, which we refer to as our or its call rights, are not exercised upon a redemption (including a retraction) of the exchangeable shares by Canadian Exchange Co., a holder of exchangeable shares may realize a dividend for Canadian tax purposes that may exceed the holder’s economic gain. A holder of exchangeable shares will be subject to different Canadian federal income tax consequences depending upon whether the call rights are exercised or whether the relevant exchangeable shares are redeemed by Canadian Exchange Co. under the share provisions if the call rights are not exercised. Subject to applicable law, and provided that we and Alberta ULC have not exercised the redemption call right, Canadian Exchange Co. will redeem all of the outstanding exchangeable shares upon at least 60 days prior notice to the holders of the exchangeable shares

Under the share provisions, each of we and Alberta ULC have an overriding liquidation call right, in the event of and notwithstanding a proposed liquidation, dissolution or winding up of Canadian Exchange Co., to acquire all but not less than all of the exchangeable shares then outstanding. Alberta ULC is only entitled to exercise its liquidation call right with respect to those holders of exchangeable shares, if any, for which we have not exercised our liquidation call right. The purchase price under the liquidation call right is equal to the liquidation call exercise price per share, which is the current market price of a share of our common stock, calculated as provided in the share provisions included in Articles of Incorporation of Canadian Exchange Co., on the last business day prior to the effective date of such voluntary or involuntary liquidation, dissolution or winding up, or the liquidation date. The purchase price will be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any. Upon the exercise by us or Alberta ULC of the liquidation call right, the holders will be obligated to transfer their exchangeable shares to us or Alberta ULC, as the case may be. The acquisition by us or Alberta ULC of all of

Under the share provisions, each of we and Alberta ULC have an overriding redemption call right, notwithstanding the proposed automatic redemption of the exchangeable shares by Canadian Exchange Co. in the share provisions, to acquire all but not less than all of the exchangeable shares then outstanding. Alberta ULC is only entitled to exercise its redemption call right with respect to those holders of exchangeable shares, if any, for which we have not exercised our redemption call right. The purchase price under the redemption call right is equal to the redemption call purchase price, which is the current market price of a share of our common stock, calculated as provided in the share provisions included in Articles of Incorporation of Canadian Exchange Co., on the last business day prior to the redemption date. The purchase price will be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any. Upon the exercise by us or Alberta ULC of the redemption call right, the holders will be obligated to transfer their exchangeable shares to us or Alberta ULC, as the case may be.

meeting of the shareholders of Canadian Exchange Co. or to vote at any meeting held for any other purpose than the annual election of directors.

Ranking

Holders of exchangeable shares will be entitled to a preference over holders of any other common shares of Canadian Exchange Co. and any other shares ranking junior to the exchangeable shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of Canadian Exchange Co., whether voluntary or involuntary, or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs.

Dividends

Holders of exchangeable shares will be entitled to receive dividends equivalent to the dividends, if any, paid from time to time by us on shares of our common stock. The declaration date, record date and payment date for dividends on the exchangeable shares will be the same as that for any corresponding dividends on shares of our common stock.

Certain Restrictions

Except with the approval of the holders of the exchangeable shares, Canadian Exchange Co. will not be permitted to:


	•	pay any dividends on common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, other than stock dividends payable in common shares or any such other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, as the case may be;

	•	redeem or purchase or make any capital distribution in respect of common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares;

	•	redeem or purchase any other shares of Canadian Exchange Co. ranking equally with the exchangeable shares with respect to the payment of dividends or the distribution of assets in the event of the liquidation, dissolution or winding up of Canadian Exchange Co., whether voluntary or involuntary, or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs; or

	•	issue any shares of stock other than exchangeable shares and any other shares not ranking superior to the exchangeable shares,

unless, in the case of the first three bullet points above, all dividends on the outstanding exchangeable shares corresponding to dividends declared and paid to date on the shares of our common stock have been declared and paid on the exchangeable shares.

Amendment and Approval

Any approval required to be given by the holders of the exchangeable shares to add to, change or remove any right, privilege, restriction or condition attaching to the exchangeable shares or any other matter requiring the approval or consent of the holders of the exchangeable shares in accordance with applicable law shall be deemed to have been sufficiently given if it has been given in accordance with applicable law, subject to a minimum requirement that such approval be evidenced by a resolution passed by not less than 662/3% of the votes cast on such resolution at a meeting of holders of exchangeable shares duly called and held, excluding exchangeable shares beneficially owned by us or any of our subsidiaries.

Description of U.S. Gold Common Stock

The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to stockholders, including the election of directors. Cumulative voting for directors is not permitted. Except as provided by special agreement, the holders of common stock are not entitled to any preemptive rights and the shares

are not redeemable or convertible. All outstanding common stock is, when issued and paid for, fully paid and nonassessable. The number of authorized shares of common stock may be increased or decreased (but not below the number of shares then outstanding or otherwise reserved under obligations for issuance by us) by the affirmative vote of a majority of shares cast at a meeting of our security holders at which a quorum is present.

Our Articles of Incorporation and bylaws do not include any provision that would delay, defer or prevent a change in control of our company. However, pursuant to the laws of the State of Colorado, certain significant transactions would require the affirmative vote of a majority of the shares eligible to vote at a meeting of shareholders, which requirement could result in delays to or greater cost associated with a change in control of the company.

The holders of our common stock are entitled to dividends if, as and when declared by our Board of Directors from legally available funds. Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of our common stock are entitled to share, on a pro rata basis, all assets remaining after payment to creditors and prior to distribution rights, if any, of any series of outstanding preferred stock.

The Voting and Exchange Trust Agreement

The purpose of the Voting and Exchange Trust Agreement will be to create a trust for the benefit of the registered holders from time to time of exchangeable shares (other than U.S. Gold and its subsidiaries). The voting and exchange trustee will hold the one issued and outstanding share of special voting stock of U.S. Gold, to be designated “Series A Special Voting Preferred Stock,” in order to enable the voting and exchange trustee to exercise the voting rights attached thereto and will hold exchange rights in order to enable the voting and exchange trustee to exercise such rights, in each case as trustee for and on behalf of such registered holders.

Voting Rights in U.S. Gold

Under the Voting and Exchange Trust Agreement, we will issue to the voting and exchange trustee one share of Series A Special Voting Preferred Stock to be held of record by the voting and exchange trustee as trustee for and on behalf of, and for the use and benefit of, the registered holders from time to time of exchangeable shares (other than us or our subsidiaries) and in accordance with the provisions of the Voting and Exchange Trust Agreement. During the term of the Voting and Exchange Trust Agreement, and under the terms of the Support Agreement, we will not be permitted to issue any additional shares of Series A Special Voting Preferred Stock without the consent of the holders of exchangeable shares.

Under the Voting and Exchange Trust Agreement, the voting and exchange trustee will be entitled to all of the voting rights, including the right to vote in person or by proxy, attaching to the one share of Series A Special Voting Preferred Stock on all matters that may properly come before our shareholders at a meeting of shareholders. The share of Series A Special Voting Preferred Stock will have that number of votes, which may be cast by the voting and exchange trustee at any meeting at which our shareholders are entitled to vote, equal to the number of outstanding exchangeable shares (other than shares held by us or our subsidiaries).

Each holder of an exchangeable share (other than us or our subsidiaries) on the record date for any meeting at which our shareholders are entitled to vote will be entitled to instruct the voting and exchange trustee to exercise one of the votes attached to the share of Series A Special Voting Preferred Stock for that exchangeable share. The voting and exchange trustee will exercise each vote attached to the share of Series A Special Voting Preferred Stock only as directed by the relevant holder and, in the absence of instructions from a holder as to voting, the voting and exchange trustee will not have voting rights with respect to such exchangeable share. A holder of an exchangeable share may, upon instructing the voting and exchange trustee, obtain a proxy from the voting and exchange trustee entitling the holder to vote directly at the relevant meeting the votes attached to the share of Series A Special Voting Preferred Stock to which the holder is entitled.

The voting and exchange trustee will send to the holders of the exchangeable shares the notice of each meeting at which our shareholders are entitled to vote, together with the related meeting materials and a statement as to the manner in which the holder may instruct the voting and exchange trustee to exercise the votes attaching to the share of Series A Special Voting Preferred Stock, at the same time as we send the notice and materials to our shareholders.

The voting and exchange trustee will also send to the holders of exchangeable shares copies of all information statements, interim and annual financial statements, reports and other materials we send to our shareholders at the same time we send those materials to our shareholders. We will endeavor to obtain copies of materials sent by third parties to our shareholders generally, including dissident proxy circulars and tender and exchange offer circulars, as soon as possible after those materials are first sent to our shareholders and to deliver those materials to the voting and exchange trustee, which will send those materials to holders of exchangeable shares.

All rights of a holder of exchangeable shares to exercise votes attached to the share of Series A Special Voting Preferred Stock will cease upon the exchange of that holder’s exchangeable shares for shares of our common stock.

Optional Exchange Upon Canadian Exchange Co. Insolvency Event

We and Alberta ULC will agree in the Voting and Exchange Trust Agreement that, upon the insolvency of Canadian Exchange Co., a holder of exchangeable shares will be entitled to instruct the voting and exchange trustee to exercise an exchange right with respect to any or all of the exchangeable shares held by the holder, thereby requiring us or Alberta ULC to purchase the exchangeable shares from the holder. The purchase price payable for each exchangeable share purchased upon the insolvency of Canadian Exchange Co. will be satisfied by the issuance of one share of our common stock plus an additional amount equivalent to the full amount of all declared and unpaid dividends, if any, on the exchangeable share and all dividends and distributions declared on a share of common stock that have not yet been declared on the exchangeable shares.

As soon as practicable following an event of insolvency of Canadian Exchange Co. or any event that may, with the passage of time or the giving of notice or both, result in the insolvency of Canadian Exchange Co., Canadian Exchange Co. and we will give written notice of the insolvency or other event to the voting and exchange trustee. As soon as practicable after receiving the notice, the voting and exchange trustee will give notice to each holder of exchangeable shares of the event or potential event and will advise the holder of its rights with respect to the exchange right.

If, as a result of solvency provisions of applicable law, Canadian Exchange Co. is unable to redeem all of a holder’s exchangeable shares which the holder is entitled to have redeemed in accordance with the share provisions, the holder will be deemed to have exercised the optional exchange right with respect to the unredeemed exchangeable shares and we or Alberta ULC will be required to purchase those shares from the holder in the manner set forth above.

Automatic Exchange Right Upon U.S. Gold Liquidation Event

We will agree in the Voting and Exchange Trust Agreement that we will notify the voting and exchange trustee, upon the occurrence of either (a) a determination by our board of directors to institute voluntary liquidation, dissolution or winding up proceedings with respect to U.S. Gold or to affect any other distribution of our assets among our shareholders for the purpose of winding up our affairs, such notice to be given at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding up or other distribution, or (b) the earlier of (i) receipt by us of notice of, and (ii) we otherwise become aware of any threatened or instituted claim, suit, petition or other proceeding with respect to involuntary liquidation, dissolution or winding up or to effect any other distribution of our assets among our shareholders for the purpose of winding up our affairs.

Immediately following receipt by the voting and exchange trustee of notice of such an event or potential event of insolvency, the voting and exchange trustee will give notice to each holder of exchangeable shares of such event or potential event and will advise the holder of its rights with respect to the automatic exchange right.

On the fifth business day prior to the effective date of such event of insolvency, we will automatically exchange all of the then outstanding exchangeable shares (other than exchangeable shares held by us or our subsidiaries) for a purchase price per exchangeable share of one share equal to our common stock plus the dividend amount.

The Support Agreement

Under the Support Agreement, we will covenant that, so long as exchangeable shares not owned by us or our subsidiaries are outstanding, we will, among other things:

(a) not declare or pay any dividend on the shares of our common stock of unless (i) on the same day Canadian Exchange Co. declares or pays, as the case may be, an equivalent dividend on the exchangeable shares and (ii) Canadian Exchange Co. has sufficient money or other assets or authorized but unissued securities available to enable the due declaration and the due and punctual payment, in accordance with applicable law, of an equivalent dividend on the exchangeable shares;

(b) advise Canadian Exchange Co. in advance of the declaration of any dividend on the shares of our common stock and take other actions reasonably necessary to ensure that the declaration date, record date and payment date for dividends on the exchangeable shares are the same as those for any corresponding dividends on the shares of our common stock;

(c) ensure that the record date for any dividend declared on the shares of our common stock is not less than ten (10) business days after the declaration date of such dividend; and

(d) take all actions and do all things reasonably necessary or desirable to enable and permit Canadian Exchange Co., in accordance with applicable law, to pay the liquidation amount, the retraction price or the redemption price to the holders of the exchangeable shares in the event of a liquidation, dissolution or winding up of Canadian Exchange Co., a retraction request by a holder of exchangeable shares or a redemption of exchangeable shares by Canadian Exchange Co., as the case may be.

The Support Agreement will also provide that, without the prior approval of Canadian Exchange Co. and the holders of exchangeable shares, we will not distribute additional shares of common stock of U.S. Gold or rights to subscribe therefor or other property or assets to all or substantially all holders of shares of our common stock, nor change any of the rights, privileges or other terms of our common stock, unless the same or an equivalent distribution on, or change to, the exchangeable shares (or in the rights of the holders thereof) is made simultaneously. In the event of any proposed tender offer, share exchange offer, issuer bid, take-over bid or similar transaction affecting our common stock, we will use reasonable efforts to take all actions necessary or desirable to enable holders of exchangeable shares to participate in such transaction to the same extent and on an economically equivalent basis as the holders of our common stock.

The Support Agreement will also provide that, as long as any outstanding exchangeable shares are owned by any person or entity other than us or any of our subsidiaries, we will, unless approval to do otherwise is obtained from the holders of the exchangeable shares, remain the direct or indirect beneficial owner of all of the issued and outstanding common shares of Canadian Exchange Co. and of all of the issued and outstanding voting shares of Canadian Exchange Co. and Alberta ULC.

With the exception of changes for the purpose of:

(a) adding to the covenants of any or all of the parties;

(b) evidencing successors of U.S. Gold;

(d) curing ambiguities or clerical errors (provided, in each case, that our board of directors and the boards of directors of each of Canadian Exchange Co. and Alberta ULC are of the opinion that such amendments are not prejudicial to the interests of the holders of the exchangeable shares),

the Support Agreement may not be amended without the approval of the holders of the exchangeable shares.

Under the Support Agreement, each of us and Alberta ULC will not exercise, and will prevent their affiliates from exercising, any voting rights attached to the exchangeable shares owned by us or Alberta ULC or their affiliates on any matter considered at meetings of holders of exchangeable shares (including any approval sought from such holders in respect of matters arising under the Support Agreement).

Effect of the Proposed Acquisitions on U.S. Gold Shareholders

If all the Proposed Acquisitions are completed, it is expected that the former shareholders of the Target Companies will control up to approximately 48% of the voting power of U.S. Gold, or approximately 47% on a fully-diluted basis, and will own the same proportions of U.S. Gold’s common stock upon exchange of the exchangeable shares of Canadian Exchange Co. that they receive in the Proposed Acquisitions. Robert R. McEwen would own approximately 20% of U.S. Gold’s outstanding common stock on an undiluted basis and approximately 20% of U.S. Gold’s common stock on a fully diluted basis. For additional information, see “The Proposed Acquisitions — Shares to Be Issued” on page 33.

Accounting Treatment

If consummated, the Proposed Acquisitions will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of each of the Target Companies. The offer is being made only for the common shares of each of the Target Companies and is not being made for any warrants, options or other securities that may entitle the holder to acquire common shares of the Target Companies. Nevertheless, if after completion of the offer, we implement the subsequent acquisition transaction described in the section entitled “Structure of the Proposed Acquisitions — Subsequent Acquisition Transaction,” we intend to structure such transaction so that such warrants would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. at the appropriate exchange rate for each Target Company’s warrant holders. Each Target Company’s stock option plan would be assumed or adopted by U.S. Gold. As a result, for purposes of preparing Annex F (Unaudited Pro forma Consolidated Financial Statements), the exchange ratio was determined on a fully-diluted basis, assuming that all outstanding warrants and options of each of the Target Companies, as disclosed in their respective most recent publicly available financial statements, had been exercised.

Additional Information

U.S. Gold and Canadian Exchange Co. have filed or will file registration statements on Form S-4 with the SEC to register the exchangeable shares of Canadian Exchange Co. issuable to the shareholders of each of the Target Companies in the offers to purchase and any subsequent acquisition transactions and shares of common stock of U.S. Gold issuable upon exchange of such exchangeable shares. Portions of these filings that contain information not otherwise addressed in this proxy statement are included as Annex B, Annex C, Annex D and Annex E to this proxy statement.

This proxy statement is not an offer to purchase or a solicitation of an offer to purchase shares of common stock of any of the Target Companies. The offers to purchase the outstanding shares of common stock of the Target Companies are being made solely by the offers to purchase contained in the registration statements on Forms S-4 filed with the SEC described immediately above.

SELECTED HISTORICAL FINANCIAL DATA OF U.S. GOLD

The following are selected consolidated financial data for U.S. Gold for each of the years in the five-year period ended December 31, 2005 and for the six months ended June 30, 2006 and 2005. The information with respect each of the years in the five-year period ended December 31, 2005 has been derived from and should be read in conjunction with the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Reports on Form 10-KSB for the fiscal years ended December 31, 2005 and December 31, 2004, filed with the SEC on April 7, 2006 and March 30, 2005, respectively. The information with respect to the six-month periods ended June 30, 2006 and 2005 has been derived from and should be read in conjunction with the unaudited consolidated financial statements and related notes included in U.S. Gold’s Quarterly Report on Form 10-QSB for the quarters ended June 30, 2006 filed with the SEC on August 24, 2006 and incorporated by reference in this proxy statement. The information with respect to each of the years in the three-year period ended December 31, 2003 has been derived from audited consolidated financials not included in this proxy statement. All historical financial data presented with respect to U.S. Gold is in accordance with US GAAP. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.

This selected historical financial data should be read together with the selected unaudited pro forma consolidated financial information beginning on page 67.


	Six Months Ended						Fiscal Year Ended
	June 30,						December 31,
	2006			2005			2005			2004			2003			2002			2001
	($ In thousands except share data)

Operating data
Other revenue	$	488		$	526		$	1,052		$	39		$	636		$	56		$	560
Net loss from operations before cumulative-effect gain on accounting change	$	(66,070	)	$	(431	)	$	(2,991	)	$	(794	)	$	(1,027	)	$	(1,375	)	$	(136	)
Net loss	$	(66,070	)	$	(431	)	$	(2,991	)	$	(794	)	$	(623	)	$	(1,375	)	$	(136	)
Basic and diluted loss per share	$	(1.98	)	$	(0.02	)	$	(0.12	)	$	(0.04	)	$	(0.04	)	$	(0.09	)	$	(0.01	)
Weighted average shares		33,296,755			20,485,915			25,931,172			20,028,173			17,696,098			15,334,157			14,011,400
Balance sheet data
Cash, cash equivalents and short term investments	$	30,066		$	107		$	678		$	75		$	198		$	4		$	72
Inventories		0			0			0			0			0			0			0
Property, plant and equipment		102			90			53			104			8			15			25
Other assets		46,159			2,712			4,810			1,256			1,595			3,455			3,406

Total assets	$	76,327		$	2,909		$	5,541		$	1,435		$	1,801		$	3,474		$	3,503

Current liabilities	$	3,245		$	137		$	1,791		$	35		$	80		$	434		$	29
Long-term obligations		10			557			16			570			545			545			420
Other long-term liabilities and deferred gain		136,073			1,760			1,201			0			0			1,826			1,826
Shareholders’ equity	$	(63,001	)	$	455		$	2,533		$	830		$	1,176		$	669		$	1,228

Total liabilities and shareholders’ equity	$	76,327		$	2,909		$	5,541		$	1,435		$	1,801		$	3,474		$	3,503

SELECTED HISTORICAL FINANCIAL DATA OF
THE TARGET COMPANIES

Coral Gold

The following selected historical financial data of Coral Gold is derived from Coral Gold’s audited consolidated financial statements for each of the years in the five-year period ended January 31, 2006 and the unaudited consolidated financial statements for the six months ended July 31, 2006 and July 31, 2005. This data should be read together with Coral Gold’s financial statements and the accompanying notes included in Annex B to this proxy statement. See the note entitled “Important Notes” on page 1. The following selected historical financial data with respect to Coral Gold is presented in accordance with US GAAP in Canadian dollars. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.

This selected historical financial data should be read together with the unaudited pro forma consolidated financial data included in Annex F to this proxy statement and the unaudited interim financial data included in Annex B to this proxy statement.


	*Coral Gold Selected Historical Financial Data()**
	Six Months Ended						Fiscal Year Ended
	July 31,						January 31,
Canadian GAAP	2006			2005			2006			2005			2004			2003			2002
	(Cdn$ In thousands except share data)

Operating data
Other revenue	$	71		$	6		$	20		$	34		$	15		$	11		$	1
Net loss	$	(587	)	$	(330	)	$	(3,067	)	$	(879	)	$	(754	)	$	(756	)	$	(1,128	)
Basic and diluted loss per share	$	(0.09	)	$	(0.07	)	$	(0.64	)	$	(0.19	)	$	(0.20	)	$	(0.27	)	$	(0.54	)
Balance sheet data
Cash, cash equivalents and short term investments	$	3,975		$	970		$	663		$	1,472		$	2,625		$	393		$	154
Inventories		0			0			0			0			0			0			0
Property, plant and equipment		3			4			4			5			6			4			0
Mineral properties and deferred exploration costs		10,633			8,758			10,096			8,472			7,574			7,159			5,877
Other assets		660			770			623			789			691			1,332			533

Total assets	$	15,271		$	10,502		$	11,386		$	10,738		$	10,896		$	8,888		$	6,564

Current liabilities	$	437		$	208		$	759		$	163		$	161		$	387		$	260
Long-term obligations		0			0			0			0			0			0			0
Other long-term liabilities		1,175			0			1,475			318			318			318			217
Shareholders’ equity	$	13,359		$	10,294		$	9,152		$	10,257		$	10,417		$	8,183		$	6,087

Total liabilities and shareholders’ equity	$	15,271		$	10,502		$	11,386		$	10,738		$	10,896		$	8,888		$	6,564


(*)		Coral Gold’s balance sheets and annual and interim operating data for the fiscal years and the six month periods reflected above have been expressed in Canadian dollars only. The information presented here is derived from the financial statements of Coral Gold and may be translated into United States dollars using the Canadian dollar exchange rate at January 31, 2002 in respect of the balance sheet at January 31, 2002, the Canadian dollar exchange rate at January 31, 2003 in respect of the balance sheet at January 31, 2003, the Canadian dollar exchange rate at January 31, 2004 in respect of the balance sheet at January 31, 2004, the Canadian dollar exchange rate at January 31, 2005 in respect of the balance sheet at January 31, 2005, the Canadian dollar exchange rate at January 31, 2006 in respect of the balance sheet at January 31, 2006, the Canadian dollar exchange rate at July 31, 2005 in respect of the balance sheet at July 31, 2005 and the Canadian dollar exchange rate at July 31, 2006 in respect of the balance sheet at July 31, 2006. The operating data for each of the fiscal years ended January 31, 2002, 2003, 2004, 2005 and 2006, and for each of the six month periods ended July 31, 2005 and 2006 may be translated


		into United States dollars using the Canadian dollar average exchange rate for each of the fiscal years, or six month periods then ended using the Canadian dollar average exchange rate for each of the fiscal years, or six month periods then ended, as applicable. The exchange rates that may be used for the conversion of Canadian dollars to United States dollars in the summary selected historical financial data of Coral Gold above are set forth immediately below.


	Cdn$

January 31, 2002		1.5915
January 31, 2003		1.5286
January 31, 2004		1.3265
January 31, 2005		1.2396
January 31, 2006		1.1436
July 31, 2005		1.2257
July 31, 2006		1.1309
Average for the period February 1, 2001 to January 31, 2002		1.5318
Average for the period February 1, 2002 to January 31, 2003		1.5658
Average for the period February 1, 2003 to January 31, 2004		1.3805
Average for the period February 1, 2004 to January 31, 2005		1.2960
Average for the period February 1, 2005 to January 31, 2006		1.2061
Average for the period February 1, 2005 to July 31, 2005		1.2348
Average for the period February 1, 2006 to July 31, 2006		1.1336

For additional information concerning currency exchange rates, see “Currency Exchange Rates” on page 79.

Nevada Pacific

The following selected historical financial data of Nevada Pacific is derived from Nevada Pacific’s audited consolidated financial statements for each of the years in the five-year period ended June 30, 2006. This data should be read together with Nevada Pacific’s financial statements and the accompanying notes included in Annex C to this proxy statement. See the note entitled “Important Notes” on page 1. The following selected historical financial data with respect to Nevada Pacific is presented in accordance with US GAAP in United States dollars. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.


	For the Years Ended June 30
Canadian GAAP	2006			2005			2004			2003			2002

Operating data
Gold sales revenue	$	6,649		$	5,175		$	—		$	—		$	—
Mine operating earnings (loss)		(2,371	)		838		$	—		$	—		$	—
Net income (loss)	$	(5,021	)	$	(2,382	)	$	(1,937	)	$	(1,092	)	$	(440	)
Basic and diluted earnings (loss) per share	$	(0.08	)	$	(0.05	)	$	(0.06	)	$	(0.06	)	$	(0.03	)
Balance sheet data
Cash and cash equivalents	$	3,660		$	957		$	598		$	88		$	923
Inventories		394			4,527			2,448			—			—
Property, plant and equipment		13,306			13,389			10,560			11			14
Mineral properties		4,662			3,106			2,455			1,487			1,413
Other assets		517			590			786			95			188

Total assets	$	22,539		$	22,569		$	16,847		$	1,681		$	2,538

Total current liabilities	$	1,195		$	1,783		$	5,211		$	96		$	171
Total long-term liabilities		1,797			1,742			1,632			—			—
Shareholders’ equity	$	19,547		$	19,044		$	10,004		$	1,585		$	2,367

Total liabilities and shareholders’ equity	$	22,539		$	22,569		$	16,847		$	1,681		$	2,538

Tone Resources

The following selected historical financial data of Tone Resources is derived from Tone Resources’ audited consolidated financial statements for each of the years in the five-year period ended August 31, 2005. This data should be read together with Tone Resources’ financial statements and the accompanying notes included in Annex D to this proxy statement. See the note entitled “Important Notes” on page 1. The following selected historical financial data with respect to Tone Resources is presented in accordance with US GAAP in Canadian dollars. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.


	*Tone Resources Historical Financial Data()**
	Nine Months Ended May 31,						Fiscal Year Ended August 31,
Canadian GAAP	2006			2005			2005			2004			2003			2002			2001(1)
	(Cdn$ In thousands except per share data)

Operating data
Other revenue	$	0		$	0		$	1		$	1		$	3		$	0		$	—
Net loss	$	(799	)	$	(520	)	$	(856	)	$	(1,083	)	$	(438	)	$	(129	)	$	—
Basic and diluted loss per share	$	(0.05	)	$	(0.04	)	$	(0.06	)	$	(0.09	)	$	(0.07	)	$	(0.03	)		—
Balance sheet data
Cash, cash equivalents and short term investments	$	1,304		$	93		$	5		$	373		$	290		$	153		$	—
Inventories		0			0			0			0			0			0			—
Property, plant and equipment		0			0			0			0			0			0			—
Mineral properties and deferred exploration costs		1,255			1,140			1,124			906			450			102			—
Other assets		58			41			44			57			67			69			—

Total assets	$	2,617		$	1,274		$	1,173		$	1,336		$	807		$	324		$	—

Current liabilities	$	133		$	56		$	129		$	42		$	79		$	6		$	—
Long-term obligations		0			0			0			0			0			0			—
Other long-term liabilities		0			0			0			0			0			0			—
Shareholders’ equity	$	2,484		$	1,218		$	1,044		$	1,293		$	728		$	318		$	—

Total liabilities and shareholders’ equity	$	2,617		$	1,274		$	1,173		$	1,336		$	807		$	324		$	—


(*)		Tone Resources’ balance sheets and annual and interim operating data for the fiscal years reflected above have been expressed in Canadian dollars only. The information presented here is derived from the financial statements of Tone Resources and may be translated into United States dollars using the Canadian dollar exchange rate at August 31, 2002 in respect of the balance sheet at August 31, 2002, the Canadian dollar exchange rate at August 31, 2003 in respect of the balance sheet at August 31, 2003, the Canadian dollar exchange rate at August 31, 2004 in respect of the balance sheet at August 31, 2004, the Canadian dollar exchange rate at August 31, 2005 in respect of the balance sheet at August 31, 2005, the Canadian exchange rate at May 31, 2005 in respect of the balance sheet at May 31, 2005, and the Canadian dollar exchange rate at May 31, 2006 in respect of the balance sheet at May 31, 2006. The operating data for each of the fiscal years ended August 31, 2002, 2003, 2004 and 2005, and for the nine month periods ended May 31, 2005 and May 31, 2006, may be translated into United States dollars using the Canadian dollar average exchange rate for each of the fiscal years or nine month periods then ended using the Canadian dollar average exchange rate for each of the fiscal years then ended, as applicable. The exchange rates that may be used for the

White Knight

The following selected historical financial data of White Knight is derived from White Knight’s audited consolidated financial statements for each of the years in the five-year period ended June 30, 2006. This data should be read together with White Knight’s financial statements and the accompanying notes included in Annex E to this proxy statement. See the note entitled “Important Notes” on page 1. The following selected historical financial data with respect to White Knight is presented in accordance with US GAAP in Canadian dollars. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.


	*White Knight Historical Financial Data()**
	Fiscal Year Ended June 30,
Canadian GAAP	2006			2005			2004			2003			2002
	(Cdn$ In thousands except per share data)

Operating data
Other revenue	$	266		$	262		$	98		$	8		$	24
Net loss	$	(3,307	)	$	(1,063	)	$	(1,664	)	$	(358	)	$	(1,679	)
Basic and diluted loss per share	$	(0.06	)		(0.02	)		(0.04	)		(0.01	)		(0.06	)
Balance sheet data
Cash, cash equivalents and short term investments	$	13,506		$	11,178		$	9,846		$	133		$	509
Inventories		0			0			0			0			0
Property, plant and equipment		931			139			86			7			9
Mineral properties and deferred exploration costs		6,664			3,965			2,487			1,611			1,367
Other assets		401			415			301			161			249

Total assets	$	21,502		$	15,697		$	12,720		$	1,912		$	2,134

Current liabilities	$	433		$	180		$	130		$	234		$	140
Long-term obligations		0			0			0			0			0
Other long-term liabilities		166			0			0			0			0
Shareholders’ equity	$	20,903		$	15,517		$	12,590		$	1,678		$	1,994

Total liabilities and shareholders’ equity	$	21,502		$	15,697		$	12,720		$	1,912		$	2,134


(*)		White Knight’s publicly filed balance sheets and annual and interim operating data for the fiscal years reflected above have been expressed in Canadian dollars only. The information presented here is derived from the financial statements of White Knight and may be translated into United States dollars using the Canadian dollar exchange rate at June 30, 2002 in respect of the balance sheet at June 30, 2002, the Canadian dollar exchange rate at June 30, 2003 in respect of the balance sheet at June 30, 2003, the Canadian dollar exchange rate at June 30, 2004 in respect of the balance sheet at June 30, 2004, the Canadian dollar exchange rate at June 30, 2005 in respect of the balance sheet at June 30, 2005 and the Canadian dollar exchange rate at June 30, 2006 in respect of the balance sheet at June 30, 2006. The operating data for each of the fiscal years ended June 30, 2002, 2003, 2004, 2005 and 2006 may be translated into United States dollars using the Canadian dollar average exchange rate for each of the fiscal years then ended using the Canadian dollar average exchange rate for each of the fiscal

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following selected unaudited pro forma consolidated financial data has been prepared to give effect to U.S. Gold’s acquisition of (i) each of the Target Companies separately, and (ii) all of the Target Companies combined in transactions accounted for as purchases in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” as if each Proposed Acquisition occurred as of December 31, 2005, and June 30, 2006 and reflecting only pro forma adjustments expected to have a continuing impact on the combined results.

The selected unaudited pro forma consolidated financial data presented below are presented in accordance with US GAAP and in U.S. dollars and are constructed as a result of each of the Target Companies having different fiscal year ends than U.S. Gold. The selected unaudited pro forma consolidated financial data presented below are for illustrative purposes only and are not necessarily indicative of the actual operating results or financial position that would have resulted if U.S. Gold and any or all of the Target Companies had combined at the beginning of the periods presented, nor is it necessarily indicative of any future operating results or financial position of U.S. Gold if combined with one or more of the Target Companies. To construct the pro forma financial information, we allocated the proposed purchase price of each Target Company using our best estimates of fair value. These estimates are based on the most recently available information. To the extent there are significant changes to the business of each Target Company, the assumptions and estimates reflected herein could change significantly. Accordingly, the purchase accounting adjustments reflected in the unaudited pro forma consolidated financial data below are preliminary and subject to change. In addition, the selected unaudited pro forma consolidated financial data presented below does not reflect any potential operating efficiencies of the combined entities. For additional information concerning the basis of presentation of the pro forma consolidated financial information, see the notes to the unaudited pro forma consolidated financial statements set forth in Annex F to this proxy statement.

U.S. Gold has not had complete access to the non-public books and records of the Target Companies. U.S. Gold has, however, obtained the information contained in this proxy statement relating to the Target Companies from the Target Companies and from publicly available sources, including all historical financial information regarding the Target Companies used in the preparation of this selected unaudited pro forma consolidated financial data. Although U.S. Gold has no reason to doubt the accuracy or completeness of such information, U.S. Gold is not in a position to independently assess or verify accuracy or completeness of such information, including any financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 14.

U.S. Gold and Coral Gold

The following unaudited pro forma consolidated financial data gives effect to the combination of U.S. Gold and Coral Gold. This data should be read in conjunction with the information set forth in Annex F and Annex B to this proxy statement.


	U.S. Gold and Coral Gold
	Summary Selected Unaudited Pro Forma
	Consolidated Financial Data
	Year Ended			Six Months Ended
	December 31,			June 30,
U.S. GAAP	2005			2006
	($ In thousands except per share data)

Operating data
Other revenue	$	1,049		$	545
Net loss from operations before cumulative-effect gain on accounting change	$	(4,430	)	$	(68,614	)
Net loss	$	(4,430	)	$	(68,614	)
Basic and diluted loss per share	$	(0.15	)	$	(1.83	)
Weighted average shares		30,137,668			37,503,251
Balance sheet data
Cash, cash equivalents and short term investments				$	34,218
Inventories				$	0
Property, plant and equipment				$	105
Mineral properties and deferred exploration costs				$	33,617
Other assets				$	46,861
Total assets				$	114,801
Current liabilities				$	5,061
Long-term obligations				$	10
Other long-term liabilities and deferred gain				$	144,590
Shareholders’ equity				$	(34,860	)
Total liabilities and shareholders’ equity				$	114,801

U.S. Gold and Nevada Pacific

The following unaudited pro forma consolidated financial data gives effect to the combination of U.S. Gold and Nevada Pacific. This data should be read in conjunction with the information set forth in Annex F and Annex C to this proxy statement.


	U.S. Gold and Nevada Pacific
	Summary Selected Unaudited Pro Forma
	Consolidated Financial Data
	Year Ended			Six Months Ended
	December 31,			June 30,
U.S. GAAP	2005			2006
	($ In thousands except per share data)

Operating data
Mining revenue	$	8,881		$	2,943
Other revenue	$	1,168		$	503
Net loss from operations before cumulative-effect gain on accounting change	$	(7,607	)	$	(69,399	)
Net loss	$	(7,607	)	$	(69,399	)
Basic and diluted loss per share	$	(0.18	)	$	(1.41	)
Weighted average shares		41,794,737			49,160,320
Balance sheet data
Cash, cash equivalents and short term investments				$	33,725
Inventories				$	394
Property, plant and equipment				$	8,750
Mineral properties and deferred exploration costs				$	136,711
Other assets				$	46,678
Total assets				$	226,258
Current liabilities				$	10,005
Long-term obligations				$	10
Other long-term liabilities and deferred gain				$	167,944
Shareholders’ equity				$	48,299
Total liabilities and shareholders’ equity				$	226,258

U.S. Gold and Tone Resources

The following unaudited pro forma consolidated financial data gives effect to the combination of U.S. Gold and Tone Resources. This data should be read in conjunction with the information set forth in Annex F and Annex D to this proxy statement.


	U.S. Gold and Tone Resources
	Summary Selected Unaudited Pro Forma
	Consolidated Financial Data
	Year Ended			Six Months Ended
	December 31,			June 30,
U.S. GAAP	2005			2006
	($ In thousands except per share data)

Operating data
Other revenue	$	1,051		$	479
Net loss from operations before cumulative-effect gain on accounting change	$	(3,693	)	$	(66,750	)
Net loss	$	(3,693	)	$	(66,750	)
Basic and diluted loss per share	$	(0.12	)	$	(1.74	)
Weighted average shares		31,003,316			38,368,899
Balance sheet data
Cash, cash equivalents and short term investments				$	31,253
Inventories				$	0
Property, plant and equipment				$	102
Mineral properties and deferred exploration costs				$	48,235
Other assets				$	46,213
Total assets				$	125,803
Current liabilities				$	5,212
Long-term obligations				$	10
Other long-term liabilities and deferred gain				$	146,684
Shareholders’ equity				$	(26,103	)
Total liabilities and shareholders’ equity				$	125,803

U.S. Gold and White Knight

The following unaudited pro forma consolidated financial data gives effect to the combination of U.S. Gold and White Knight. This data should be read in conjunction with the information set forth in Annex F and Annex E to this proxy statement.


	U.S. Gold and White Knight
	Summary Selected Unaudited Pro Forma
	Consolidated Financial Data
	Year Ended			Six Months Ended
	December 31,			June 30,
U.S. GAAP	2005			2006
	($ In thousands except per share data)

Operating data
Other revenue	$	1,400		$	682
Net loss from operations before cumulative-effect gain on accounting change	$	(5,648	)	$	(69,037	)
Net loss	$	(5,648	)	$	(69,037	)
Basic and diluted loss per share	$	(0.12	)	$	(1.28	)
Weighted average shares		46,715,912			54,081,495
Balance sheet data
Cash, cash equivalents and short term investments		—			42,264
Inventories				$	0
Property, plant and equipment				$	939
Mineral properties and deferred exploration costs				$	160,965
Other assets				$	46,522
Total assets				$	250,690
Current liabilities				$	10,234
Long-term debt				$	10
Other long-term liabilities and deferred gain				$	171,480
Shareholders’ equity				$	68,966
Total liabilities and shareholders’ equity				$	250,690

U.S. Gold and All Four Target Companies

The following unaudited pro forma consolidated financial data gives effect to the combination of U.S. Gold and all four of the Target Companies. This data should be read in conjunction with the information set forth in Annex F, Annex B, Annex C, Annex D, and Annex E to this proxy statement.


	Unaudited Pro Forma
	Consolidated Supplementary
	for U.S. Gold and White Knight, Coral Gold,
	Nevada Pacific and Tone Resources
	Year Ended			Six Months Ended
	December 31,			June 30,
U.S. GAAP	2005			2006
	($ In thousands except per share data)

Operating data
Mining revenue	$	8,881		$	2,943
Other revenue	$	1,511		$	743
Net loss from operations before cumulative-effect gain on accounting change	$	(12,407	)	$	(75,588	)
Net loss	$	(12,407	)	$	(75,588	)
Basic and diluted loss per share	$	(0.17	)	$	(0.95	)
Weighted average shares		71,858,117			79,223,700
Balance sheet data
Cash, cash equivalents and short term investments				$	51,263
Inventories					394
Property, plant and equipment					9,591
Mineral properties and deferred exploration costs					379,528
Other assets					47,793
Total assets				$	488,569
Current liabilities				$	20,776
Long-term debt					10
Other long-term liabilities and deferred gain					222,478
Shareholders’ equity				$	245,305
Total liabilities and shareholders’ equity				$	488,569

COMPARATIVE PER SHARE INFORMATION

The following table summarizes unaudited per share information for:


	•	U.S. Gold and each of the Target Companies separately on a historical basis;

	•	U.S. Gold and each of the Target Companies separately on an equivalent unaudited pro forma condensed combined basis; and

	•	U.S. Gold and all of the Target Companies combined on an equivalent unaudited pro forma condensed combined basis.

This information should be read in conjunction with the audited and unaudited consolidated financial statements of U.S. Gold and each of the Target Companies included in the Annex B, Annex C, Annex D, and Annex E to this proxy statement, and the unaudited pro forma consolidated financial statements of U.S. Gold included in Annex F to this proxy statement. The pro forma information presented below is presented in accordance with US GAAP and in U.S. dollars and is constructed as a result of each of the Target Companies having different fiscal year ends than U.S. Gold. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the actual operating results or financial position that would have resulted if U.S. Gold and any or all of the Target Companies had combined at the beginning of the period presented, nor is it necessarily indicative of any future operating results or financial position of U.S. Gold if combined with one or more of the Target Companies. For additional information concerning the basis of presentation of the pro forma consolidated financial information, see the notes to the unaudited pro forma consolidated financial statements set forth in Annex F to this proxy statement.

The historical book value per share is computed by dividing total shareholders’ equity by the number of shares outstanding at the end of the period. The unaudited pro forma combined income per share is computed by dividing the unaudited pro forma combined income from continuing operations available to holders of common stock by the unaudited pro forma combined weighted average number of shares outstanding. The unaudited pro forma combined book value per share is computed by dividing total unaudited pro forma combined shareholders’ equity by the unaudited pro forma combined number of common shares outstanding at the end of the period. The historical per share information of U.S. Gold and the Target Companies was derived from U.S. Gold’s and the Target Companies’ respective historical annual financial statements.

As of the date of this document, U.S. Gold and its affiliates have not had complete access to the non-public books and records of the Target Companies. U.S. Gold has, however, obtained the information contained in this proxy statement relating to the Target Companies from the Target Companies and from publicly available sources. Although U.S. Gold has no reason to doubt the accuracy or completeness of such information, U.S. Gold is not in a position to independently assess or verify the accuracy or completeness of the information, including any financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 14.

For information on applicable currency exchange rates, see the footnotes to summary selected financial data of White Knight, Coral Gold and Tone Resources presented in “Selected Historical Financial Data of the Target Companies” beginning on page 60.

Data for Canadian Exchange Co. has not been included because it has not conducted business during any of the periods discussed below.


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005

U.S. Gold — Historical
Historical per common share:
Income per basic share	$	(1.98	)	$	(0.12	)
Income per diluted share	$	(1.98	)	$	(0.12	)
Dividends declared	$	0		$	0
Book value per share	$	(1.89	)	$	0.08


	Six Months Ended			Year Ended
	July 31,			January 31,
	2006			2006

Coral Gold — Historical (Canadian GAAP and Cdn$)
Historical per common share:
Income per basic share	$	(0.09	)	$	(0.64	)
Income per diluted share	$	(0.09	)	$	(0.64	)
Dividends declared	$	0		$	0
Book value per share	$	1.98		$	1.79


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005

*Unaudited Pro forma* Condensed Combined**
U.S. Gold and Coral Gold (U.S. GAAP)
Unaudited pro forma condensed combined per common share of U.S. Gold:
Income per basic share	$	(1.83	)	$	(0.15	)
Income per diluted share	$	(1.83	)	$	(0.15	)
Dividends declared	$	0		$	0
Book value per share	$	(0.93	)	$	—


	Six Months Ended	Year Ended
	June 30,	December 31,
	2006	2005

Nevada Pacific — Historical (Canadian GAAP and Cdn$)
Historical per common share:
Income per basic share	$	$	(0.08	)
Income per diluted share	$	$	(0.08	)
Dividends declared	$	$	0
Book value per share	$	$	0.28


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005

*Unaudited Pro forma* Condensed Combined**
U.S. Gold and Nevada Pacific (U.S. GAAP)
Unaudited pro forma condensed combined per common share of U.S. Gold:
Income per basic share	$	(1.41	)	$	(0.18	)
Income per diluted share	$	(1.41	)	$	(0.18	)
Dividends declared	$	0		$	0
Book value per share	$	0.98		$	—


	Nine Months Ended			Year Ended
	May 31,			August 31,
	2006			2005

Tone Resources — Historical (Canadian GAAP and Cdn$)
Historical per common share:
Income per basic share	$	(0.05	)	$	(0.06	)
Income per diluted share	$	(0.05	)	$	(0.06	)
Dividends declared	$	0		$	0
Book value per share	$	0.13		$	0.08


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005

*Unaudited Pro forma* Condensed Combined**
U.S. Gold and Tone Resources (U.S. GAAP)
Unaudited pro forma condensed combined per common share of U.S. Gold:
Income per basic share	$	(1.74	)	$	(0.12	)
Income per diluted share	$	(1.74	)	$	(0.12	)
Dividends declared	$	0		$	0
Book value per share	$	(0.68	)	$	—


	Year Ended
	June 30,
	2006

White Knight — Historical (Canadian GAAP and Cdn $)
Historical per common share:
Income per basic share	$	(0.06	)
Income per diluted share	$	(0.06	)
Dividends declared	$	0
Book value per share	$	0.35


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005

*Unaudited Pro forma* Condensed Combined**
U.S. Gold and White Knight (U.S. GAAP)
Unaudited pro forma condensed combined per common share of U.S. Gold:
Income per basic share	$	(1.28	)	$	(0.12	)
Income per diluted share	$	(1.28	)	$	(0.12	)
Dividends declared	$	0		$	0
Book value per share	$	1.28		$	—


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005

*Unaudited Pro forma* Condensed Combined**
U.S. Gold and White Knight, Coral Gold, Tone
Resources and Nevada Pacific (U.S. GAAP)
Unaudited pro forma condensed combined per common share of U.S. Gold:
Income per basic share	$	(0.95	)	$	(0.17	)
Income per diluted share	$	(0.95	)	$	(0.17	)
Dividends declared	$	0		$	0
Book value per share	$	3.10		$	—

COMPARATIVE MARKET DATA

Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR” and on the Over-the-Counter Bulletin Board under the symbol “CGREF.” Nevada Pacific common shares are listed on the TSX-V under the symbol “NPG.” Tone Resources common shares are currently traded on the TSX-V under the symbol “TNS.” White Knight common shares are listed on the TSX-V under the symbol “WKR.” U.S. Gold common stock is currently listed on the Toronto Stock Exchange, or the TSX, under the symbol “UXG” and is quoted on the Over-the-Counter Bulletin Board under the symbol “USGL.” U.S. Gold has applied for listing of the U.S. Gold common stock on the AMEX. U.S. Gold also intends to apply for listing of the exchangeable shares of Canadian Exchange Co. on the TSX.

The following table sets forth the closing prices per common share of each of the Target Companies as reported on the TSX-V and, if applicable, the Over-the-Counter Bulletin Board, and of U.S. Gold as reported on the Over-the-Counter Bulletin Board and on the TSX on March 3, 2006, the last trading day preceding the public announcement of the commencement of U.S. Gold’s proposed business combination with the Target Companies, and on October 23, 2006, the most recent trading day practicable before the filing of this proxy statement. This information should be read in conjunction with the “Comparative Per Share Market Price and Dividend Information” below.


	TSX-V
	or				Over-the-Counter
	TSX				Bulletin Board
	March 3,		October 23,		March 3,		October 23,
Issuer	2006		2006		2006		2006
	(Cdn$)				($)

Coral Gold		3.25		3.06		2.85		2.69
Nevada Pacific		1.20		0.99		—		—
Tone Resources		—		1.17		—		—
U.S. Gold		—		4.70		5.65		4.25
White Knight		1.77		1.53		—		—

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

The following table sets forth, for each of the calendar quarters indicated, the reported high and low sale prices per common share of each of the Target Companies and of U.S. Gold as reported by the TSX-V, the TSX and the Over-the-Counter Bulletin Board, as applicable. Neither U.S. Gold nor any of the Target Companies declared dividends on their respective common shares during such periods.


	U.S. Gold						U.S. Gold						Tone Resources						Nevada Pacific						White Knight						Coral Gold						Coral Gold
	OTCBB						TSX						TSX-V						TSX-V						TSX-V						OTCBB						TSX-V
					Avg.						Avg.						Avg.						Avg.						Avg.						Avg.						Avg.
					Daily						Daily						Daily						Daily						Daily						Daily						Daily
	High		Low		Volume		High		Low		Volume		High		Low		Volume		High		Low		Volume		High		Low		Volume		High		Low		Volume		High		Low		Volume
	($)						(Cdn$)						(Cdn$)						(Cdn$)						(Cdn$)						($)						(Cdn$)

2004
March 31		1.85		0.81		77,486		—		—		—		—		—		—		1.60		0.92		213,531		0.92		0.55		89,475		0.42		0.22		6,053		0.55		0.29		9,757
June 30		1.06		0.61		42,638		—		—		—		—		—		—		1.50		0.85		70,741		1.61		0.50		238,603		0.29		0.13		4,149		0.36		0.19		6,338
September 30		0.75		0.40		44,432		—		—		—		—		—		—		1.12		0.83		95,818		1.49		0.87		190,026		1.30		0.14		6,042		1.70		0.19		10,517
December 31		0.57		0.40		24,155		—		—		—		—		—		—		1.11		0.74		139,839		1.20		0.70		114,153		1.60		0.90		8,748		1.95		1.12		7,381
2005
March 31		0.44		0.37		44,061		—		—		—		—		—		—		0.96		0.75		102,858		0.93		0.60		74,462		2.00		0.92		5,807		2.40		1.12		6,743
June 30		0.60		0.30		24,751		—		—		—		—		—		—		0.96		0.51		71,957		0.92		0.55		28,696		1.49		1.06		3,112		1.89		1.31		2,480
September 30		2.82		0.35		304,298		—		—		—		—		—		—		0.91		0.55		151,524		1.80		0.85		319,662		1.78		1.08		5,874		2.10		1.31		6,079
December 31		3.96		1.94		243,627		—		—		—		—		—		—		0.90		0.34		392,056		2.10		1.31		158,204		3.63		0.76		19,001		4.17		.090		17,600
2006
March 31		9.09		3.48		276,535		—		—		—		2.13		1.25		108,710		1.65		0.81		351,113		2.39		1.40		260,589		5.45		2.61		31,020		6.34		3.06		20,318
June 30		10.30		5.75		310,081		—		—		—		2.39		1.18		72,195		2.10		1.00		281,621		3.10		1.66		234,505		5.96		2.55		19,630		6.99		2.87		16,125
September 30		9.20		3.95		242,550		7.50		4.48		18,005		1.90		1.01		32,351		1.51		0.94		88,052		2.45		1.46		82,446		4.05		2.75		6,482		4.29		3.08		11,362
Through October 23		5.10		4.05		187,600		6.06		4.61		12,640		1.34		1.12		14,553		1.20		0.93		53,606		1.80		1.39		46,353		3.33		2.51		4,562		3.40		3.02		8,246


(1)		Coral Gold effected a 1-for-10 stock split on September 14, 2004. All prices for periods before the split have been adjusted to reflect the split.

CURRENCY EXCHANGE RATES

The following table sets forth the rate of exchange for one U.S. dollar expressed in Canadian dollars, for each period indicated: (i) the exchange rate at the end of the period; (ii) the average rate; and (iii) the high and low rates for each year. For the purposes of this section, rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.


	Six Months
	Ended
	June 30,				Year Ended December 31,
	2006		2005		2005		2004		2003		2002		2001
							(Cdn$)

High rate during year		—		—		1.2703		1.3970		1.5750		1.6128		1.5849
Low rate during year		—		—		1.1560		1.1775		1.2923		1.5108		1.4933
Rate at end of period		1.1150		1.2256		1.1656		1.2034		1.2923		1.5800		1.5925
Average rate for period		1.1311		1.2354		1.2083		1.2984		1.3916		1.5702		1.5519

On March 3, 2006, the last trading day before the announcement of our proposed business combination with White Knight, the exchange rate for one U.S. dollar expressed in Canadian dollars was Cdn$1.1352. On October 23, 2006, the most recent trading day practicable before the filing of this proxy statement, the exchange rate for one U.S. dollar expressed in Canadian dollars was Cdn$1.1281. The table below sets forth the high and low exchange rate for one U.S. dollar expressed in Canadian dollars for each month during the past six months preceding the date of this proxy statement.


	High		Low
	(Cdn$)

April 2006		1.1718		1.1203
May 2006		1.1233		1.0989
June 2006		1.1240		1.0991
July 2006		1.1514		1.1112
August 2006		1.1312		1.1078
September 2006		1.1272		1.1056
October 1, 2006 to October 23, 2006		1.1384		1.1154

INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

Beneficial Ownership of and Trading in Securities of the Target Companies

Mr. McEwen, our Chairman and Chief Executive Officer, purchased securities of each of the four Target Companies in the transactions described under the heading “The Proposed Acquisitions — Background of the Proposed Acquisitions” beginning on page 37. Mr. McEwen first offered these opportunities to purchase Target Company securities to U.S. Gold, except for the securities of White Knight, which Mr. McEwen acquired before becoming a director, officer and significant shareholder of U.S. Gold.

As at the date of this proxy statement, Mr. McEwen beneficially owns:


	•	9,552,427 common shares of White Knight, which, based on information provided to us by White Knight, means that Mr. McEwen beneficially owns approximately 16% of its outstanding common shares as of October 19, 2006;

	•	12,500,000 common shares of Nevada Pacific and warrants exercisable to acquire 12,500,000 common shares of Nevada Pacific, which, based on information provided to us by Nevada Pacific, means that Mr. McEwen beneficially owns approximately 30% of its outstanding common shares as of October 20, 2006;

	•	1,250,000 common shares of Coral Gold, which, based on information provided to us by Coral Gold, means that Mr. McEwen beneficially owns approximately 18% of its outstanding common shares as of October 16, 2006; and

	•	2,500,000 common shares of Tone Resources and warrants to acquire 2,500,000 common shares of Tone Resources, which, based on information provided to us by Tone Resources, means that Mr. McEwen beneficially owns approximately 22% of its outstanding common shares as of October 20, 2006.

Other than as described in the preceding paragraphs, no securities of any of the Target Companies are owned beneficially, directly or indirectly, nor is control or direction exercised over any securities of any of the Target Companies, by U.S. Gold or Canadian Exchange Co. or their directors or executive officers or, to the knowledge of such directors and executive officers after reasonable inquiry, by any of U.S. Gold’s or Canadian Exchange Co.’s associates or affiliates, by any associate of U.S. Gold’s or Canadian Exchange Co.’s directors or executive officers or by any person or company owning, directly or indirectly, more than 10% of any class of securities of U.S. Gold or Canadian Exchange Co. No person is acting jointly or in concert with U.S. Gold or Canadian Exchange Co. with respect to the offers to purchase.

Except for the purchases by Mr. McEwen of securities described in the section entitled “The Proposed Acquisitions — Background of the Proposed Acquisitions” beginning on page 37 of this proxy statement, no securities of any of the Target Companies have been purchased or sold during the 12-month period preceding the date of the offers to purchase by U.S. Gold or Canadian Exchange Co. or U.S. Gold’s or Canadian Exchange Co.’s directors or executive officers or, to the knowledge of such directors and executive officers after reasonable inquiry, by any of U.S. Gold’s or Canadian Exchange Co.’s associates or affiliates, by any associate of U.S. Gold’s or Canadian Exchange Co.’s directors or executive officers or by any person or company owning, directly or indirectly, more than 10% of any class of securities of U.S. Gold or Canadian Exchange Co.

Board Positions with the Target Companies

Mr. McEwen was the Executive Chairman of Coral Gold, and he was also a member of the boards of directors of Nevada Pacific and Tone Resources, as described in more detail under the heading “The Proposed Acquisitions — Background of the Proposed Acquisitions” beginning on page 37. Mr. McEwen resigned from all of his positions with the Target Companies on May 18, 2006. Mr. McEwen has the right until March 2011 to nominate one individual to the board of directors of Nevada Pacific, Coral Gold and Tone Resources, as long as he owns at least 10% of the issued an outstanding shares of the respective Target Company for which he nominates a director.

Commitments to Acquire Securities of the Target Companies

Except pursuant to the offers to purchase, neither U.S. Gold nor Canadian Exchange Co. nor any of their directors or executive officers, nor to the knowledge of U.S. Gold’s or Canadian Exchange Co.’s directors and executive officers after reasonable inquiry, any of U.S. Gold’s and Canadian Exchange Co.’s associates or affiliates, any associate of any of U.S. Gold’s and Canadian Exchange Co.’s directors or executive officers or any person or company owning, directly or indirectly, more than 10% of any class of securities of U.S. Gold and Canadian Exchange Co. has entered into any commitments to acquire any equity securities of the Target Companies.

Arrangements, Agreements or Understandings

Except as described herein or in the appendices or documents attached hereto or incorporated by reference herein, neither U.S. Gold nor Canadian Exchange Co. nor, to the best of their knowledge, any of their directors, executive officers or other affiliates has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Target Companies, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as described in this proxy statement, there have been no contacts, negotiations or transactions between U.S. Gold and Canadian Exchange Co. or, to the best of their knowledge, any of their directors, executive officers or other affiliates on the one hand, and the Target Companies or their affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer to purchase or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of assets. Neither U.S. Gold nor Canadian Exchange Co., nor, to the best of their knowledge, any of their directors, executive officers or other affiliates has had any transaction with the Target Companies or any of their executive officers, directors or affiliates that would require disclosure under the rules and regulations of the SEC applicable to the offers to purchase.

There are no arrangements or agreements made or proposed to be made between U.S. Gold or Canadian Exchange Co. and any of the directors or executive officers of the Target Companies and no payments or other benefits are proposed to be made or given by U.S. Gold or Canadian Exchange Co. to such directors or executive officers as compensation for loss of office or as compensation for remaining in or retiring from office if any of the offers to purchase described herein are consummated.

Acceptance of the Offer

To U.S. Gold’s and Canadian Exchange Co.’s knowledge, after reasonable inquiry, none of their directors or senior officers nor any associate of U.S. Gold’s or Canadian Exchange Co.’s directors or senior officers, nor any person or company holding more than 10% of any class of equity securities of any of U.S. Gold or Canadian Exchange Co., nor any person or company acting jointly or in concert with the U.S. Gold or Canadian Exchange Co., propose to accept the offers to purchase, except Robert R. McEwen. On March 6, 2006, Mr. McEwen announced that in his capacity as Chairman, Chief Executive Officer and a shareholder of U.S Gold, and as a shareholder of White Knight, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies. On March 7, 2006, Mr. McEwen announced that in his capacity as a shareholder of Coral Gold, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies.

Material Changes and Other Information

Except for the offers to purchase and as otherwise disclosed publicly by any of the Target Companies, U.S. Gold is not aware of any information which indicates that any material change has occurred in the affairs of any Target Company since the date of the last available published financial statements of such Target Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of October 23, 2006, there were a total of 49,996,755 shares of our common stock outstanding, our only class of voting securities currently outstanding. The amount of common stock outstanding excludes any shares issuable upon exercise of outstanding warrants or options, except as set forth below.

The following table describes the ownership of our voting securities as of October 23, 2006 by: (i) each of our officers and directors; (ii) all of our officers and directors as a group; and (iii) each shareholder known to us to own beneficially more than 5% of our common stock. Unless otherwise stated, the address of each individual is the address of our executive office, 2201 Kipling Street, Suite 100, Lakewood, Colorado 80215-1545. All ownership is direct, unless otherwise stated.


	Shares Beneficially Owned
Name and Address of Beneficial Owner	Number			Percentage

Robert R. McEwen(1)		12,100,500	(2)		24.0	%
Peter Bojtos(1)		148,333	(3)		*
Declan Costelloe(1)		38,333	(3)		*
Michele L. Ashby(1)		33,333	(3)		*
Leanne M. Baker(1)		33,333	(3)		*
Ann S. Carpenter(1)		166,666	(5)		*
William F. Pass(1)		413,741	(4)		*
NovaGold Resources, Inc.(6)		5,374,544			10.7	%
P.O. Box 24, Suite 2300 200 Granville Street Vancouver, British Columbia V6C 1S4, Canada
All officers and directors as a group (eight individuals)		12,934,239	(2)(3)(5)		25.5	%


*		Less than one percent.

(1)		Officer or Director.

(2)		Includes 333,500 shares of common stock issuable upon warrants that are immediately exercisable.

(3)		Includes 33,333 shares underlying stock options which may become exercisable within 60 days of the date of this proxy statement.

(4)		Includes 66,666 shares underlying stock options which may become exercisable within 60 days of the date of this proxy statement.

(5)		Includes 166,666 shares underlying options of which 100,000 are immediately exercisable and 66,666 may become exercisable within 60 days of the date of this proxy statement.

(6)		As reported in a Schedule 13D filed with the SEC on August 3, 2005.

Changes in Control

On July 29, 2005, Robert McEwen purchased 11,100,000 shares of our common stock and became our largest shareholder with an equity interest of 33.3%. On August 18, 2005, Mr. McEwen was elected Chairman of our Board of Directors and appointed as our Chief Executive Officer. In November 2005, directors nominated by Mr. McEwen were elected as a majority of our Board of Directors. On February 22, 2006, Mr. McEwen purchased an additional 667,000 common shares and warrants to acquire 333,500 additional common shares, and currently beneficially owns 12,100,500 shares, or approximately 24%, of our common stock. Mr. McEwen has used personal funds to purchase all his shares of common stock of U.S. Gold.

In a filing with the SEC, NovaGold Resources Inc. (NovaGold), a corporation existing under the laws of the Province of Nova Scotia, Canada and with securities listed on the AMEX and TSX, reported that it had purchased 5,374,544 shares of our common stock in two separate private transactions effective July 27, 2005. NovaGold is a natural resource company engaged in the exploration and development of gold properties in North America. As a

result of these transactions, NovaGold owns approximately 10.7% of our outstanding common stock as of August 24, 2006.

On March 5, 2006, we announced our intention to acquire the Target Companies. Our intention is to acquire all of these companies in exchange for the issuance of our common stock. As of October 23, 2006, only one formal offer has been commenced, and it was subsequently terminated. We intend to recommence that offer and commence the other three offers as described in this proxy statement, but there is no assurance that any acquisition will be completed. However, if all of these acquisitions were completed on the previously announced terms, we expect to issue up to approximately 54,434,998 additional shares of our common stock to these companies, including shares issuable upon exercise of options and warrants. As a result of this issuance, we may experience a change in control, although it appears unlikely that will be the case upon issuance of the shares due to Mr. McEwen’s ownership in the Target Companies.

We know of no other arrangement or events, the happening of which may result in a change in control.

NO DISSENTERS’ OR APPRAISAL RIGHTS

Under Colorado law, holders of shares of U.S. Gold common stock are not entitled to dissenters’ rights of appraisal in connection with any of the matters to be acted on at the special meeting.

YEAR 2007 SHAREHOLDER PROPOSALS

We currently expect that U.S. Gold will hold an annual meeting of shareholders in June of 2007. Shareholder proposals for the 2007 annual meeting of U.S. Gold shareholders are required to be received at 2201 Kipling Street, Suite 100, Lakewood, Colorado 80215-1545 a reasonable time prior to the mailing of the proxy statement in order to be voted on or considered for inclusion in the proxy statement for U.S. Gold’s 2007 annual meeting of shareholders. Failure to comply with that advance notice requirement will result in the shareholder proposal being considered untimely and will permit U.S. Gold’s management to use its discretionary voting authority if the proposal is raised at the 2007 annual meeting without including any discussion of the proposal in the 2007 annual meeting proxy statement.

OTHER MATTERS

As of the date of this proxy statement, U.S. Gold’s board of directors does not intend to present any matters for action at the special meeting other than those specifically referred to herein, nor is U.S. Gold aware that other persons intend to present any other matters at the special meeting. If any other matters properly come before the meeting, the persons named in the enclosed proxy will vote all proxies in accordance with the board of directors’ recommendation on such matters, or, in the absence of a board recommendation, in the discretion of the proxy holder.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

U.S. Gold files annual, quarterly and special reports, proxy statements and other information with the SEC. Shareholders may read and copy this information at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Shareholders may obtain information on the operation of the Public Reference Rooms by calling the SEC at 1-800-SEC-0330. Shareholders may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. The SEC also maintains a website at www.sec.gov from which any electronic filings made by U.S. Gold may be obtained without charge.

Each of White Knight, Coral Gold, Nevada Pacific and Tone Resources file audited annual financial statements and management’s discussion and analysis related thereto, unaudited interim financial statements and management’s discussion and analysis related thereto, information circulars and other information with the Canadian Securities Administrators on the System for Electronic Document Analysis and Retrieval, or SEDAR. The Canadian Securities Administrators maintain a website at www.sedar.com from which any electronic filings made by White Knight, Coral Gold, Nevada Pacific and Tone Resources may be obtained without charge. In addition, White Knight and Coral Gold are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, applicable to foreign private issuers and accordingly file or furnish reports, including annual reports on Form 20-F, reports on Form 6-K and other information with the SEC, which may be obtained in the manner described in the immediately preceding paragraph.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows U.S. Gold to “incorporate by reference” information into this proxy statement. This means that U.S. Gold can disclose important information about U.S. Gold and U.S. Gold’s financial condition to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement, except for any information that is superseded by information that is included directly in this document. The following documents filed with the SEC are incorporated by reference into this proxy statement:


	•	U.S. Gold’s Annual Report on Form 10-KSB for the fiscal years ended December 31, 2005 filed with the SEC on April 7, 2006;

	•	U.S. Gold’s Quarterly Report on Form 10-QSB/A for the quarterly period ended June 30, 2006 filed with the SEC on August 24, 2006: and

	•	U.S. Gold’s Current Reports on Form 8-K filed with the SEC on February 27, March 6, March 31, May 1, June 30, July 6, July 7, July 25, August 8, August 9, August 29, September 6, and October 20, 2006.

Whenever U.S. Gold files reports or documents under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this proxy statement, those reports and documents will be deemed to automatically be incorporated into and become a part of this proxy statement; provided that no documents that U.S. Gold furnishes under Items 2.02 or 7.01 of Form 8-K will be incorporated into this proxy statement. Any information contained in such subsequently filed reports that updates, modifies, supplements or replaces information contained in this proxy statement automatically shall supersede and replace such information. Any information that is modified or superseded by a subsequently filed report or document shall not be deemed, except as so modified or superseded, to constitute a part of this proxy statement.

U.S. Gold will provide copies of any documents incorporated by reference into this proxy statement upon request submitted to the following address and telephone number:

Corporate Secretary
U.S. Gold Corporation
2201 Kipling Street, Suite 1000
Lakewood, Colorado 80215-1545
303-238-1438

To receive documents before the special meeting, your request must be received by [ • ], 2006.

By order of the Board of Directors,

U.S. GOLD CORPORATION

/s/ Robert R. McEwen

ROBERT R. MCEWEN

Chairman of the Board and Chief Executive Officer

Lakewood, Colorado

[ • ], 2006

ANNEX A

Amended and Restated Articles of Incorporation

As describe under the section entitled “Proposal 1 — Amendment to Articles of Incorporation,” the shareholders of U.S. Gold are not voting to approve the amendments to the Articles of Incorporation that may be made without shareholder approval. The text of the Articles of Incorporation below that relates to issues upon which the shareholders of U.S. Gold are voting have been shown in bold type. Thus, the changes to the Articles of Incorporation of U.S. Gold are shown using the following conventions:


Legend:
Changes not being voted upon by shareholders:
		Insertion
		~~Deletion~~
Changes being voted upon by shareholders:
		Insertion
		~~Deletion~~

AMENDED AND RESTATED

ARTICLES OF INCORPORATION
OF
~~U.S.~~US GOLD CORPORATION

~~KNOW ALL MEN BY THESE PRESENTS:~~ That the undersigned incorporator being a natural person of the age of eighteen years or more and desiring to form a body corporate under the laws of the State of Colorado does hereby sign, verify and deliver in duplicate to the Secretary of State of the State of Colorado these Articles of Incorporation:

Pursuant to § 7-110-107 and part 3 of article 90 of title 7, Colorado Revised Statutes, the undersigned corporation hereby adopts the following Amended and Restated Articles of Incorporation and certifies that (1) these Amended and Restated Articles of Incorporation correctly set forth provisions of the Articles of Incorporation, as amended and supersede the original Articles of Incorporation and all amendments heretofore, and (2) the Amended and Restated Articles of Incorporation as set forth herein were duly adopted by the board of directors and the shareholders on , 2006:

ARTICLE I

NAME

The name of the corporation ~~shall be:~~ is ~~U.S.~~US GOLD CORPORATION, (hereinafter referred to as the “Corporation”).

ARTICLE II

PERIOD OF DURATION

This Corporation shall exist in perpetuity, from and after the date of filing these Amended and RestatedArticles of Incorporation with the Secretary of State of Colorado unless dissolved according to law.

ARTICLE III

OBJECTS AND PURPOSES

The objects and purposes for which the ~~said~~ Corporation is organized and the nature of the business to be carried on by it are ~~as follows: 1. In general to carry on~~ any lawful business or activity and to have and exercise all of

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the powers and rights conferred by the ~~laws of the State of Colorado upon corporations formed under such laws~~ Colorado Business Corporation Act (“Act”).

ARTICLE IV

CAPITAL

The aggregate number of shares which this Corporation shall have authority to issue is two hundred fifty million (250,000,000), all of which shall be designated common stock without par value; and further A. Classes of Stock. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is 250,000,001 shares, of which (i) 250,000,000 shares, no par value, shall be Common Stock and (ii) one share, no par value, shall be Preferred Stock (which share shall be designated the Special Voting Share (as defined in Part C of this Article)). The consideration for the issuance of the shares shall be paid to or received by the Corporation in full before their issuance.

B. Common Stock.

1.(1) Dividends. Dividends in cash, property, or shares of the Corporation may be paid upon the Common Stock, as and when declared by the board of directors, out of funds of the Corporation to the extent and in the manner permitted by law.

2.(2) Distribution in Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, and after paying or adequately providing for the payment of all its obligations, the remainder of the assets of the Corporation shall be distributed, either in cash or in kind, pro rata to the holders of Common Stock. The board of directors may, from time to time, distribute to the shareholders in partial liquidation, out of stated capital or capital surplus of the Corporation, a portion of its assets, in cash or property, in the manner permitted and upon compliance with limitations imposed by law.

3.(3) Voting Rights; Cumulative Voting. Each outstanding share of Common stock shall be entitled to one vote and each fractional share of Common Stock shall be entitled to a corresponding fractional vote on each matter submitted to a vote of shareholders. Cumulative voting shall not be allowed in the election of directors of the Corporation.

C. Series A Special Voting Preferred Stock.

(1) Designation and Amount. One share of Preferred Stock is hereby constituted as a series of Preferred Stock of the Corporation which shall be designated as the “Series A Special Voting Preferred Stock” (the “Special Voting Share”), the preferences and relative, optional and other special rights of which and the qualifications, limitations or restrictions of which shall be as set forth herein.

(2) Dividends. The holder of the Special Voting Share shall not be entitled to receive any portion of any dividend or distribution at any time.

(3) Voting Rights. The holder of the Special Voting Share shall have the following voting rights:

(i) The Special Voting Share shall entitle the holder thereof to an aggregate number of votes equal to the number of exchangeable shares (“Exchangeable Shares”) of US Gold Canadian Acquisition Corporation, a corporation existing under and governed by the Business Corporations Act of Alberta, Canada (“Canadian Exchange Co.”), issued and outstanding from time to time and which are not owned by the Corporation or any company more than 50% of the outstanding stock of which is owned, directly or indirectly, by the Corporation, by one or more other subsidiaries of the Corporation, or by the Corporation and one or more other subsidiaries of the Corporation (such company, a “Subsidiary”).

(ii) Except as otherwise provided herein or by law, the holder of the Special Voting Share and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation.

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(iii) Except as set forth herein, the holder of the Special Voting Share shall have no special voting rights, and its consent shall not be required (except to the extent it is entitled to vote with the holders of shares of Common Stock as set forth herein) for taking any corporate action.

(4) Additional Provisions.

(i) The holder of the Special Voting Share is entitled to exercise the voting rights attendant thereto in such manner as such holder desires.

(ii) At such time as (A) the Special Voting Share entitles its holder to a number of votes equal to zero because there are no Exchangeable Shares of Canadian Exchange Co. issued and outstanding that are not owned by the Corporation or any Subsidiary, and (B) there is no share of stock, debt, option or other agreement, obligation or commitment of Canadian Exchange Co. which could by its terms require Canadian Exchange Co. to issue any Exchangeable Shares to any person other than the Corporation or any of its Subsidiaries, then the Special Voting Share shall thereupon be retired and cancelled promptly thereafter. Such Special Voting Share shall upon its cancellation, and upon the taking of any action required by applicable law, become an authorized but unissued share of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the board of directors, subject to the conditions and restrictions on issuance set forth herein.

(5) Reacquired share. If the Special Voting Share should be purchased or otherwise acquired by the Corporation in any manner whatsoever, then the Special Voting Share shall be retired and cancelled promptly after the acquisition thereof. Such share shall upon its cancellation, and upon the taking of any action required by applicable law, become an authorized but unissued share of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the board of directors, subject to the conditions and restrictions on issuance set forth herein.

(6) Redemption. The Special Voting Share is not redeemable.

(7) Dissolution, Liquidation or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, the holder of the Special Voting Share shall not be entitled to any portion of any related distribution.

4. D. Denial of Preemptive Rights. No holder of any shares of the Corporation, whether now or hereafter authorized, shall have any preemptive or preferential right to acquire any shares or securities of the corporation, including shares or securities held in the treasury of the Corporation.

ARTICLE V

RIGHT OF DIRECTORS TO

CONTRACT WITH CORPORATION

No contract or other transaction between the Corporation and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested shall be either void or voidable solely because of such relationship or interest or solely because such directors are present at the meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction or solely because their votes are counted for such purpose if:

(a) The fact of such relationship or interest is disclosed or known to the board of directors or committee which authorizes, approves, or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or

(b) The fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; or

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction.

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ARTICLE VI

~~CORPORATE OPPORTUNITY~~

The officers, directors and other members of management of this corporation shall be subject to the doctrine of “corporate opportunities” only insofar as it applies to business opportunities in which this Corporation has expressed an interest as determined from time to time by this Corporation’s board of directors as evidenced by resolutions appearing in the Corporation’s minutes. Once such areas of interest are delineated, all such business opportunities within such areas of interest which come to the attention of the officers, directors, and other members of management of this Corporation shall be disclosed promptly to this Corporation and made available to it. The board of directors may reject any business opportunity presented to it and thereafter any officer, director or other member of management may avail himself of such opportunity. Until such time as this Corporation, through its board of directors, has designated an area of interest, the officers, directors and other members of management of this Corporation shall be free to engage in such areas of interest on their own and this doctrine shall not limit the rights of any officer, director or other member of management of this Corporation to continue a business existing prior to the time that such area of interest is designated by the Corporation. This provision shall not be construed to release any employee of this Corporation (other than an officer, director or member of management) from any duties which he may have to this Corporation.

~~ARTICLE VII~~

INDEMNIFICATION OF OFFICERS

DIRECTORS AND OTHERS

The Corporation may indemnify each director, officer and any employee or agent of the Corporation, his heirs, executors and administrators, against expenses reasonably incurred or any amounts paid by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer, employee or agent of the Corporation to the full extent permitted by the ~~law of the State of Colorado~~ Act as now existing or as ~~such law may~~ hereafter be amended.

ARTICLE ~~VIII~~VII

SHAREHOLDER VOTING

One-third of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders.

~~ARTICLE IX~~

~~REGISTERED OFFICE AND REGISTERED AGENT~~

The address of the registered office of the Corporation is 1700 Broadway, Suite 2100, Denver, Colorado 80290, and the name of the registered agent at such address is David J. Babiarz. Either the registered office or the registered agent may be changed in the manner permitted by law.

ARTICLE XVIII

~~INITIAL BOARD~~LIMITATION ON LIABILITY OF DIRECTORS

The number of directors of the Corporation shall be fixed by the bylaws of the Corporation, except the initial board of directors of the Corporation shall consist of three directors. The names and addresses of the persons who

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~~shall serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are as follows:~~


~~NAME~~		~~ADDRESS~~
~~John B. Wills~~		2600 Energy Center One 717 Seventeenth Street Denver, Colorado 80202
~~Stanley F. Freedman~~		2600 Energy Center One 717 Seventeenth Street Denver, Colorado 80202
~~Daniel B. Matter~~		2600 Energy Center One 717 Seventeenth Street Denver, Colorado 80202

ARTICLE XI
INCORPORATOR

~~The name and address of the incorporator is as follows:~~


~~NAME~~		~~ADDRESS~~
~~Daniel B. Matter~~		2600 Energy Center One 717 Seventeenth Street Denver, Colorado 80202

~~ARTICLE XII~~ To the fullest extent permitted by the ~~Colorado Corporation Code~~Act, as the same exists or may hereafter be amended, a director of this Corporation shall not be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director.

~~ARTICLE XIII~~
ARTICLE IX

VOTING REQUIREMENTS

When, with respect to any action to be taken by the shareholders of the Corporation, the ~~Colorado Business Corporation Act (“Act”)~~Act requires the vote or concurrence of a greater number of shares, or of any class or series entitled to vote thereon for an “existing corporation” (as defined in the Act) than would otherwise be required, any and all such action shall be taken as required by the ~~act~~Act, as the same may be amended from time to time, as if the Corporation were organized on or after July 1, 1994. This provision is intended to eliminate the two-thirds voting requirement imposed by Section 7-117-101 of the Act on corporations organized before June 30, 1994.

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ANNEX B — INFORMATION REGARDING CORAL GOLD

Overview

In addition to the information filed by Coral Gold with the SEC under the Exchange Act, Coral Gold files audited annual financial statements, unaudited interim financial statements, management’s discussion and analysis, proxy statements or information circulars and other information with the SEDAR. The information concerning Coral Gold contained in this Annex B has been taken from Coral Gold’s annual report on Form 20-F for the fiscal year ended January 31, 2006 filed on July 31, 2006. Although we have no reason to doubt the accuracy or completeness of the information relating to Coral Gold, we are is not in a position to independently assess or verify this information, including Coral Gold’s financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources.” on page 14 of this proxy statement.

Some terms used in this Annex B may be unfamiliar to you. We have provided a Glossary of Terms beginning on page B-21 for your reference.

Authorized and Outstanding Share Capital of Coral Gold

Coral Gold is authorized to issue an unlimited number of common shares without par value. The number of issued and outstanding securities of Coral Gold as of October 16, 2006 are as follows:


	•	6,812,460 Coral Gold common shares issued and outstanding as of October 16, 2006;

	•	405,634 Coral Gold common shares issuable upon exercise of outstanding warrants as of October 16, 2006; and

	•	799,650 Coral Gold common shares issuable upon exercise of outstanding options as of October 16, 2006.

Coral Gold shareholders are entitled to receive notice of and attend any meetings of shareholders and to one vote per common share at all such meetings. Shareholders are entitled to receive such dividends as Coral Gold’s board of directors may declare from time to time, according to the number of shares held and subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of Coral Gold.

Dividends and Dividend Policy

Based on publicly-available information, Coral Gold has never declared any dividends on Coral Gold common shares. Further, Coral Gold has not publicly stated that it has the intention to pay dividends in the future.

History and Development of Coral Gold

Coral Gold was organized under The Company Act — British Columbia, Canada on January 22, 1981 under the name of Carol Energy Corporation. Coral Gold’s name was changed to Coral Energy Corporation on March 3, 1982, to Coral Gold Corp. on September 9, 1987, and to Coral Gold Resources Ltd. on September 14, 2004 in conjunction with a 10 to 1 share consolidation. On July 15, 2005, Coral Gold transitioned under the British Columbia Business Corporations Act which came into effect on March 29, 2004. The principal place of business of Coral Gold is located at 455 Granville Street, Suite 400, Vancouver, British Columbia V6C 1T1, and its telephone number is (604) 682-3701. Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR” and quoted on the Over-the-Counter Bulletin Board under the symbol “CGREF.”

Business Overview of Coral Gold

The legal and commercial name of Coral Gold is Coral Gold Resources Ltd. Coral Gold is a natural resource company primarily engaged in the exploration and development of natural resource properties. Since its fiscal year

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2004, Coral Gold has made aggregate principal capital expenditures of Cdn$2,936,348 on its properties known as the Robertson Mining Claims located in the State of Nevada.

Presently, Coral Gold’s principal business activity is the exploration of mineral properties. Coral Gold is in the process of exploring its mineral properties and has not yet determined whether its mineral properties contain ore reserves that are economically recoverable. There is no assurance that a commercially viable mineral deposit exists on any of Coral Gold’s properties, and future exploration will be required before final evaluation as to the economic and legal feasibility is determined.

Coral Gold’s mining claims are located in Nevada and California. Coral Gold’s present principal exploration activities have been focused on the Robertson Mining Claims located in Crescent Valley, Nevada. The Robertson Mining Claims comprise three separate claim groups known as: (i) the Robertson Property; (ii) the Carve Out Claims, and (iii) the Norma Sass and Ruf Claims. Of the aggregate capital expenditures of Cdn$2,936,348, Cdn$2,894,520 was spent on the Robertson Property and Cdn$41,828 was spent on the Norma Sass and Ruf Claims.

Robertson Property — Operations and Activities

Coral Gold entered into an option agreement dated October 8, 1998, which we refer to as the “Option Agreement”, with Placer Dome U.S. Inc., referred to as “Placer”, which was later assigned by Placer to the Cortez Joint Venture, doing business as Cortez Gold Mines (a joint venture owned by Placer and Kennecott Minerals), which we refer to as “Cortez.”

Effective December 30, 1999, pursuant to the terms of the Option Agreement, Cortez elected to terminate the Option Agreement. This required Coral Gold to post its own security for the reclamation bond for the Robertson Property and obtain a full release of Placer’s guarantee of the original reclamation bond. In order to satisfy its obligations under the Option Agreement, Coral Gold spent a large portion of its fiscal year 2003 conducting reclamation on the Robertson Property to reduce its reclamation bond that Placer had guaranteed for Coral Gold. Coral Gold was able to obtain a release of Placer’s guarantee by conducting sufficient reclamation work to reduce the bonding requirement, and by raising sufficient funds to provide satisfactory alternative security of the reclamation bond. The reclamation bond was reduced to $786,100 during Coral Gold’s fiscal year ended 2003, for which Coral Gold posted cash. In Coral Gold’s fiscal year ended 2006, with more reclamation work having been completed and accounted for, the reclamation bond was further reduced to $228,205. Due to additional subsequent exploration, the reclamation bond was then increased to $282,268. The cost to Coral Gold to conduct the reclamation, prepare an updated reclamation plan, and other associated costs was approximately $28,156 for the year ending January 31, 2006 and $237,130 since 2003).

In its 2006 fiscal year, Coral Gold completed the purchase of 1,391,860 shares of Marcus Corporation, referred to as “Marcus”, representing 98.49% of the total issued shares of Marcus. Marcus is a non-reporting Nevada corporation, which owns the Marcus mining claims, consisting of 39 unpatented lode claims and two placer claims, and which comprise a portion of Coral Gold’s Robertson Property. By acquiring Marcus, Coral Gold now controls Marcus and owns an indirect interest in the mining lease between Coral Gold and Marcus, which provides for an annual advanced royalty to Marcus of $12,000, and a 5% net smelter returns royalty up to a maximum payment of $2.5 million.

In consideration of the acquisition, Coral Gold issued one common share of Coral Gold for every four common shares of Marcus, for a total of 347,964 common shares of Coral Gold. In addition, each tendering Marcus shareholder received a non-transferable share purchase warrant, permitting such shareholders to purchase one additional common share of Coral Gold at an exercise price of Cdn$2.00 per share for a period of up to two years from the closing date of the acquisition, for every two shares of Coral Gold received on the share exchange.

The 2005 drilling program began on June 15, 2005 and was completed August 10, 2005, consisting of 12 vertical reverse-circulation drill holes, totaling 10,540 feet. The depth of the holes ranged from 500 feet to 1,200 feet. All twelve holes returned ore-grade intervals ranging in thickness from 10 feet to 150 feet.

Two holes were aimed at assessing the potential westward extension of stratiform 39A-type mineralization in to the so-called “distal target” area, located approximately 1,500 feet northwest of the 39A Zone. Both holes were completed to a depth of 1,200 feet. This mineralized area is currently defined by six widely spaced reverse

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circulation drill holes covering an area roughly 2,000 feet in a northwesterly direction by 900 feet in a southwesterly direction.

In the Gold Pan zone, four holes were collared roughly 400 feet apart in an area 500 to 1,000 feet east of the 39A Zone, to test the potential for deep 39A-type mineralization beneath the near-surface mineral resource. These holes were located at possible structural intersections that appear to exert control on the distribution of near-surface gold. Three of the holes encountered strong retrograde alteration at the projected depth where the stratiform 39A-type mineralization was expected.

The 2005 drilling identified much stronger mineralization than previously encountered in the “distal target” area suggesting potential for developing new mineral resources in this area with additional drilling. In the 39A Zone, drilling indicates that the southern portion remains open for limited expansion to the southeast. However, results from drilling at the extreme north end of the zone suggests good potential for discovering additional higher grade resources in that area with continued drilling. Results from three of the four wide spaced drill holes collared in the Gold Pan zone, identified a widespread zone of strongly developed retrograde alteration carrying local ore-grade values at depths (850 – 1,045 feet) where the 39A zone was projected to be.

Currently, Coral Gold’s initial drilling program for the 2006 calendar year, a Cdn$4 million exploration and evaluation program is underway. Drilling on the property began on April 30, 2006 after a series of weather related delays. The program is designed to expand the 39A/Gold Pan mineral resource and test a number of new targets. On June 28, 2006 and July 12, 2006, Coral Gold announced further drill results from certain holes on the Robertson property.

Norma Sass and Ruf Claims — Operations and Activities

Effective December 31, 1999, Coral Gold and Levon Resources Ltd., referred to as “Levon”, entered into a fourth amending agreement whereby Levon could earn an undivided 50% interest in the Norma Sass and Ruf Claims upon completion of certain terms. This agreement was further amended effective December 31, 2001 (but signed on October 3, 2002), whereby Levon was transferred a 331/3% interest in Coral Gold’s interest in the Norma Sass and Ruf claims, in consideration of 300,000 common shares of Levon previously issued to Coral Gold and the prior payment of Cdn$350,294 for exploration work. Coral Gold currently owns a 66-2/3% interest in the Norma Sass and Ruf claims (subject to certain royalties to underlying property owners, as described below), following the execution of the December 2001 fifth amending agreement with Levon.

On December 4, 2002, Coral Gold granted an option to acquire 331/3% of Coral Gold’s interest in the Norma Sass and Ruf Claims to Goldfranchise Corporation, referred to as “Goldfranchise.” In order to earn the interest, Goldfranchise must:

(a) Pay Coral Gold $38,391.50, which has been received by Coral Gold;

(b) Incur a minimum of $300,000 in exploration work on the Norma Sass and Ruf Claims, of which $100,000 had to be incurred on or before December 4, 2003, and the balance of $200,000 incurred on or before December 4, 2004; and

(c) Pay Coral Gold 33 1/3% of all annual land fees, taxes, advance royalties required to keep the claims in good standing, until Goldfranchise has exercised the option.

Goldfranchise failed to incur the exploration work required or to pay Coral Gold 33 1/3% of all annual land fees, taxes and advance royalties under the option, and the option has since been terminated.

In January 2005 Coral Gold announced the formation of an exploration agreement with Agnico-Eagle Mines Limited, referred to as “Agnico-Eagle.” The agreement covers Coral Gold’s Norma Sass, Blue Nugget and Lander Ranch claims. The Norma Sass agreement also includes Coral Gold’s partnership with Levon. Under the agreement, Agnico-Eagle can earn a 51% interest in the Norma Sass, Blue Nugget and Lander Ranch claims by completing at least 45,000 feet of exploration drilling and paying certain advance royalties. At its option, Agnico-Eagle may acquire the claim leases from the underlying owners for its benefit and Agnico-Eagle shall be deemed to have earned an additional 24% interest. Agnico-Eagle will then have the option of acquiring the remaining 25% interest by producing a positive feasibility study and making a positive production decision.

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Agnico-Eagle completed 13,980 feet of drilling in 2005 on the Norma Sass and Lander Ranch property. The Norma Sass program consisted of six drill holes, varying from 1,665 to 1,975 feet in depth. All six holes encountered alteration, silification and sulfidation in Lower Plate rocks. Two holes in the northeast corner of the property intersected gold. In the 2006 calendar year, Agnico-Eagle intends to drill another 15,000 feet in 12 to 15 holes. Agnico-Eagle is prepared to extend the program if favorable results are obtained.

Reclamation Activities

Coral Gold spent approximately Cdn$24,166 on reclamation and maintenance in its fiscal year 2006 on the Robertson Property. Coral Gold is reclaiming past mining and exploration related disturbances to public lands as required by the Bureau of Land Management and the Nevada Department of Environmental Protection.

Competition

The mining industry in which Coral Gold is engaged is highly competitive. Competitors include well-capitalized mining companies, independent mining companies and other companies having financial and other resources far greater than those of Coral Gold. The companies compete with other mining companies in connection with the acquisition of gold and other precious metal properties. In general, properties with a higher grade of recoverable mineral and/or which are more readily minable afford the owners a competitive advantage in that the cost of production of the final mineral product is lower. Thus, a degree of competition exists between those engaged in the mining industries to acquire the most valuable properties. As a result, Coral Gold may eventually be unable to acquire attractive gold mining properties.

Dependence on Customers and Suppliers

Coral Gold is not dependent upon a single or few customers or suppliers for revenues or its operations.

Environmental Regulations

Coral Gold’s exploration programs in Nevada and California are subject to state and federal environmental regulations. All operations involving the exploration for the production of minerals are subject to existing laws and regulations relating to exploration procedures, safety precautions, employee health and safety, air quality standards, pollution of streams and fresh water sources, odor, noise, dust and other environmental protection controls adopted by federal, state and local governmental authorities as well as the rights of adjoining property owners. Coral Gold may be required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. All requirements imposed by any such authorities may be costly, time consuming and may delay commencement or continuation of exploration or production operations. Future legislation may significantly emphasize the protection of the environment, and, as a consequence, the activities of Coral Gold may be more closely regulated to further the cause of environmental protection. Such legislation, as well as further interpretation of existing laws in the United States, may require substantial increases in equipment and operating costs to Coral Gold and delays, interruptions, or a termination of operations, the extent of which cannot be predicted. Environmental problems known to exist at this time in the United States may not be in compliance with regulations that may come into existence in the future. This may have a substantial impact upon the capital expenditures required of Coral Gold in order to deal with such problem and could substantially reduce earnings. At the present time, Coral Gold’s exploration activities in Nevada are in compliance with all known environmental requirements.

The regulatory bodies that directly regulate Coral Gold’s activities are the Bureau of Land Management (Federal) and the Nevada Department of Environmental Protection (State).

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Coral Gold’s Organizational Structure

Coral Gold has two wholly-owned subsidiaries, Coral Energy Corporation of California, a California corporation which holds title to Coral Gold’s California property, and Coral Resources, Inc., a Nevada corporation, which holds title to Coral Gold’s mining claims located in Nevada. In its 2006 fiscal year, Coral Gold completed the purchase of 1,391,860 shares, representing 98.49% of the issued shares, of Marcus, a Nevada Corporation that owns the Marcus mining claims, consisting of 39 unpatented lode claims and two placer claims, and which comprise a portion of Coral Gold’s Robertson Property.

Coral Gold’s Mineral Properties

Presently, Coral Gold is an “exploration stage company”, as all of Coral Gold’s properties are currently in the exploratory stage of development. In order to determine if a commercially viable mineral deposit exists in any of Coral Gold’s properties, further geological work will need to be done and a final evaluation based upon the results obtained to conclude economic and legal feasibility.

Coral Gold’s primary focus has been on the Robertson Mining Claims in Nevada. The Robertson Mining Claims are located in Crescent Valley, Nevada on the western flanks of the Shoshone Range, 28 miles to the southeast of Battle Mountain, Nevada, which lies some 230 miles northeast of Reno, Nevada. The Robertson Mining Claims comprise approximately 11,000 acres in the Bullion Mining District, Lander County, Nevada, and currently include 724 unpatented and patented lode and placer mining claims. The Robertson Mining Claims are recorded under three separate claim groups known as: (i) the Robertson Property; (ii) the Carve-Out Claims; and (iii) the Norma Sass and Ruf Claims, as described more particularly below.

These mining claims have been acquired over a period of several years from different sources. The entire Robertson Mining Claims are subject to a 3% net smelter royalty to Geomex Development Eighth Partnership, referred to as “Geomex 8”, which royalty shall cease at such time as the sum of $1,250,000 has been paid to Geomex 8, and various mining leases requiring minimum annual advanced royalties ranging from 2% to 8% of net smelter returns.

There is no underground or surface plant or equipment located on the Robertson Mining Claims.

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Description and Location of Robertson Property

The Robertson Property is located in eastern Lander County, Nevada, on public lands administered by the Bureau of Land Management, referred to as the “BLM.” The property is situated in Sections 2 – 10, 15 – 18, 20, 21, Township 28 North, Range 47 East and Sections 26, 32 and 34, Township 29 North, Range 47 East, Mt. Diablo Baseline & Meridian.

The Robertson Property is 27 air miles southeast of Battle Mountain and 60 miles southwest of Elko, Nevada. From Battle Mountain, the county seat, the property is reached by traveling 28 miles east on Interstate Highway 80, then 29 miles south on Nevada Highway 306 to the property turn off. The property is reached by driving two miles west on a well maintained gravel road. A network of unimproved dirt roads and tracks provide access to the remainder of the property.

The Robertson Property consists of 428 unpatented federal lode claims, 94 placer claims, nine patented lode claims and one unpatented mill site, covering over 4,500 acres. Two groups of claims totaling 82 claims are non-contiguous with the core group of claims. Coral Gold controls the surface and mineral tenures within the project area through recorded title, or through mining lease and mining lease with option to purchase agreements of the patented and unpatented mining claims. Coral Gold’s wholly-owned subsidiary, Coral Resources, Inc., is the owner of record with 100% interest in 359 claims and controls an additional 173 claims through a variety of mineral leases, as more particularly described below.

In 2001, a boundary agreement between Coral Gold and the Cortez resolved claim boundary overlaps and seniority issues along the east and south sides of the Robertson claim block. This agreement required both parties to amend and/or abandon certain claims in order to achieve the agreed upon boundary. This was completed during the 2002 — 03 assessment year.

Approximately 173 of the 532 claims that comprise the Robertson Property are controlled by Coral Gold through six mining leases and option agreements. The claims held by Coral Gold under lease or option agreements require minimum advance royalty payments and production royalties in the event of production. Total annual payments for the various leases and minimum advance royalties are $55,800. A summary compilation of the terms of these agreements are presented in the table below:

Mining Lease and Option Agreements

Number of

Cash Buyout

Production

Advance Royalty

Company/Date

Claims

of Lease

Royalty

Payment

Tenabo Gold Mining Co.

Cdn$2M

8% NSR

Cdn$12,000/yr

Nov. 30, 1975

Fannie Komp

Cdn$1M

5% NSR

Cdn$24,000/yr

Sept. 16, 1986

Florence Johnson

Cdn$50,000

5% GSR

Cdn$1,800/yr

Nov. 5, 1986

Northern Nevada Au, Inc.

Cdn$0.3M

4% GSR

Cdn$9,600/yr

Sept. 30, 1986

Albany Gold Corp.

All

Cdn$1.25M

3% NSR

None/yr

(Geomex)

Mauzy, et al

Cdn$0.75M

2% NSR

Cdn$14,400/yr

Apr. 21, 1989

Annual federal rental fees of $44,300, payable to the BLM, and Notice of Intent to Hold Mining Claims have been filed for the 2005 — 06 assessment year.

Environmental Liabilities of Robertson Property

In 1988 — 89, Coral Gold operated a small open pit gold mining operation and heap leach facility on the Robertson Property. The resulting disturbances include three small open pit mines, waste dumps, haul roads, drill

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roads, open drill holes, and a 350,000 ton heap leach facility and related recovery plant. In 1994, a reclamation plan was prepared by Amax Gold Exploration Inc., referred to as “Amax”, and submitted to the Battle Mountain office of the BLM. The cost to perform the reclamation of the Robertson mine site was estimated at that time to be $2,000,000. In 2001, Coral Gold began reclamation activities which were accelerated in 2002, with the recontouring of waste dumps, reclamation of the leach pad, haul roads and the filling of all open drill holes. As a result of this activity, in June 2003, the BLM reduced the bonding requirements for the project to $406,000. Coral Gold currently maintains a required performance bond with the Nevada State Office of the BLM. Coral Gold is working with the BLM and the United States Department of Interior in efforts to further reduce the bond.

In March 2003, on behalf of Coral Gold, SRK Consulting submitted a final plan for permanent closure with the BLM and Nevada Division of Environmental Protection, referred to as the “NDEP.” The closure plan was approved by both agencies. The major component of the closure plan was the installation of a site fluid management system. As a result of this work during 2004, the BLM lowered the bonding requirements to Cdn$228,205. Subsequently, due to additional exploration work, the reclamation bond was increased to $282,268. Coral Gold currently maintains a required performance bond with the Nevada State Office of the BLM.

Permitting on Robertson Property

In 2002, Coral Gold submitted and was granted a five year renewal of Water Pollution Control Permit (NEV60035) by the NDEP for the Robertson Property. In addition, Coral Gold continues to conduct reclamation and exploration activities under a plan of operation (NV067688) approved in 1989 by the Bureau of Land Management, which we refer to as the “Plan of Operation.”

During the period 2000 through 2003, no exploration activity was conducted on the Robertson Property. However, during that period a significant amount of surface reclamation was completed on the property. As a result, new exploration activities in reclaimed areas will require submission and approval of an amendment to the Plan of Operation. Additionally, the National Historic Preservation Act requires that all operators on public lands conduct an archeological survey of the proposed sites of new disturbance. Much of the Robertson Property has been previously cleared under various surveys conducted by Amax. Recent and planned future exploration activities by Coral Gold have moved outside the area covered by previous archeological surveys. It is possible that future exploration will experience delays in receiving approval because additional surveys will be required by state and federal agencies. In 2004 – 05, Coral Gold conducted exploratory drilling under a series of amendments to the Plan of Operation which were approved by the Battle Mountain office of the BLM and NDEP.

There are no known environmental or threatened and endangered species issues at the Robertson Property that would provide grounds for denial of approval of an Amended Plan of Operation.

History and Exploration of Robertson Property

The Robertson Property is located in the Tenabo area, a sub-district of the Bullion mining district. Historic lode mining in this district dates from 1905 and Placer gold was discovered in many of the dry washes in the Tenabo area in 1916. Between 1937 – 39, a small dragline dredge and washing plant operated in the district, and a dredge was reported by Humphrey to be operating in lower Mill Gulch in 1945.

During the period 1966 – 70, a number of companies explored the district in search of porphyry copper-style mineralization. In 1968, while drilling a series of shallow rotary holes near the Gold Pan mine, Superior Oil discovered a small, but relatively high-grade zone of gold at shallow depths in what is now known as the Gold Pan zone. However, with additional drilling, Superior Oil quickly lost interest in the district. They were soon followed by a number of mainly Vancouver-based junior mining companies, including Placer Development (1974 – 75), Teck Corporation (1977), Aaron Mining Ltd. (1975 – 86), and E & B Exploration Ltd. (1980 – 81), all of whom

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sporadically explored the Tenabo area with limited success. A summary of the drilling completed by these companies prior to Coral Gold’s involvement (1986) is presented in the table below:

Summary of Pre-Coral Gold Drilling Activities at Robertson Property


		Number and Type of
Company	Date of Activity	Holes Drilled	Drill Footage(ft)	Target

Superior Oil	1968 – 70	92 Conv. Rotary	c. 32,000	Gold Pan
Placer Development	1973 – 74	23 Conv. Rotary	c. 3,500	none
Teck Corporation	1977	none	none	none
Aaron Mining Ltd.	1977	7 Conv. Rotary	c.300	Gold Quartz
E & B Exploration Ltd.	1980 – 81	148 Rev. Circlulation	30,807	Gold Pan
Totals		270	66,607

Modern open pit mining and heap leaching began as early as 1974, when Aaron Mining Ltd., referred to as “Aaron”, initiated a pilot leach operation on the Robertson Property. During the period 1978 – 80, Aaron expanded its leaching operations and continued exploration and began consolidating and acquiring claims in the district.

In 1986, Coral Gold acquired Aaron’s interest in the Robertson Property and immediately began a series of major drilling programs beginning in 1986 and continuing until 1989. Mining operations on the Robertson Property commenced in 1988, but were suspended less than one year later. During the operating life of the Robertson Property mine, approximately 350,000 tons of low-grade material was placed on leach pads from which about 6,200 ounces of gold were recovered.

During the period 1986 through 1989, Coral Gold completed approximately 380 reverse circulation drill holes and seven diamond drill holes, totaling about 109,377 ft. Much of this drilling was focused in four resources areas including the Gold Pan, Gold Quartz, Gold Quartz extension (also called Gold Quartz West) and the Triplet Gulch areas. The purpose of this drilling was to determine the limits and continuity of mineralization within these zones. Nearly all of the reverse circulation holes were drilled vertically to an average depth of about 300 ft.

During the later stages of Coral Gold’s exploration program, they completed two “deep” reverse circulation holes that reached depths of 1,400 ft and 1,810 ft, respectively. In addition to resource definition, Coral Gold also embarked on a program of district-wide exploratory and follow-up drilling of numerous surface anomalies.

In 1990, Coral Gold and Amax entered into an amended and restated option and earn-in agreement in which Amax could earn a 60% interest in the Robertson Property by producing a bankable feasibility study. From 1990, until they withdrew from the venture in 1996, Amax completed an exploration program that included drilling 338 reverse circulation holes and 62 diamond drill holes, totaling over 176,000 ft.

In 1998, Cortez, entered into an option and earn-in agreement with Coral Gold in which Cortez could earn a 70% interest in the Robertson Property by producing a bankable feasibility study. The focus of their exploration was to expand the 39A zone and test a number of outlying targets. During 1999, Cortez completed 46 reverse circulation drill holes and a single flood rotary hole, totaling 57,000 feet. Of the 13 holes directed at expanding the 39A zone, only two holes, 99401 and 99413, encountered significant mineralization. This drilling program did little to expand the resource. Of the remaining holes drilled by Cortez, only two holes (99406 and 99419) encountered significant mineralization. Both holes were designed to offset and/or follow up existing drill intersections and surface gold anomalies.

After completing this drilling program, Cortez declared its interest in renegotiating the terms of the Option Agreement with Coral Gold. When Coral Gold declined, Cortez subsequently terminated the Option Agreement on December 30, 1999, and did not earn an interest in the Robertson Property.

During 2004 and 2005, Coral Gold conducted three drilling programs consisting of 32 reverse circulation holes totaling 24,020 feet on the Robertson Property. The focus of this exploration was to expand and further define the 39A Zone, test the “deep” Gold Pan Zone for extensions of the 39A Zone and offset previous ore-grade intersections in the “distal target area.”

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Geological Setting of Robertson Property

Geologically, the Robertson Property consists of a series of relatively flat-lying, vertically stacked thrust sheets that form part of the Roberts Mountain allochthon, which is composed of siliciclastic rocks of Ordovician through Devonian age. The district is dominated by a very thick sequence of middle to late Devonian Slaven Chert composed mainly of argillite, chert, lesser siltstone and shale, and minor intermediate volcanic rocks. Structurally overlying the Slaven Chert along the north and east sides of the district are a sequence of rusty brown weathering siltstone, sandstone and very minor limestone of the Silurian Elder Sandstone.

Intruding the thick Paleozoic sequence is an elliptical-shaped, composite granodiorite stock (or lacolith) of Eocene age. The orientation of the principal axis of the stock is approximately east-west. Associated with it are numerous dikes, sills and plugs that vary in composition from diorite, the earliest known intrusion, to rhyolite, the latest. Most of the identified gold resources, including the Porphyry, Gold Pan and 39A zones, lie along or near the northern contact of the composite stock. A series of narrow and laterally continuous (up to 1,600 ft) intrusive “pebble” dikes extend northward from the northern contact of the granodiorite stock. Near contacts with the Tertiary intrusions, many of the sedimentary and volcanic rocks, and early phases of the stock, have undergone significant thermal metamorphism, intense recrystallization, bleaching and pervasive metasomatism. Many of these rocks have been converted to layered sequences of biotite, “quartz” and calc-silicate hornfels, marble, exoskarn and endoskarn.

Mineralization at the Robertson Property is strongly controlled by a system of low and high-angle faults and related fracture zones. Less commonly, brecciation associated with axial plane shear zones developed in isoclinal folds are also important hosts for mineralization, locally. Although individual structures host ore-grade gold, higher grades commonly occur where one or more structures intersect.

Deposit Types and Mineralization in Robertson Property

Coral Gold has been focusing its exploration activities on four zones localized along the northern contact of the Tenabo stock forming the general east-west trend. These zones are the Porphyry, Gold Pan, Altenburg Hill and 39A zones. The Porphyry, Gold Pan and Altenburg Hill zones occur in highly fractured hornfels and skarn units at the contact of the granodiorite stock, whereas the 39A zone is localized at the intersection of two high-angle faults in retrograde-altered hornfels.

The following is a summary of the main minerals identified at the Robertson Property:


Native gold	Native silver	Electrum	Pyrite
Pyrrhotite	Marcasite	Arsenopyrite	Stibnite
Chalcopyrite	Sphalerite	Galena	Bournonite
Acanthite	Loellingite	Gersdorffite	Tetradymite
Petzite	Hessite	Hedleyite	Tellurobismuthite
Altaite	Tetrhedrite	Bornite	Chalcocite
Covellite	Digenite	Native copper	Cuprite
Chysocolla	Azurite	Goethite	Magnetite
Hematite	Illmenite	Scorodite

Mineral Resource Estimates at Robertson Property

In late 2005, an independent third party was contracted by Coral Gold to undertake a preliminary assessment of the currently defined mineral resources at the Robertson Property. The results of this study are reported in a NI 43-101 compliant technical report dated April 25, 2006 prepared by R. T. McCusker entitled “Update of the Geological Report on the Robertson Property.” The purpose for this study was to update the 2001 resource estimate, include results from the 2004 — 05 drilling programs in the estimate and examine the effect of higher gold price on the economics of the existing resources. The mineral resource estimates of the Porphyry and combined 39A/Gold Pan Zones were conducted by an independent third party and a qualified person pursuant to NI 43-101. The Altenburg Hill and distal Target inferred mineral resources were estimated by R. T. McCusker, a qualified person

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pursuant to NI 43-101. A summary of the mineral resources estimated to be present on the Robertson Property are presented in the following table.

It should be noted that the resource classifications applied by an independent third party and R. T. McCusker conform to the Canadian Institute of Mining, Metallurgy and Petroleum definitions for measured, indicated and inferred mineral resources, respectively, pursuant to usage under NI 43-101. Further, it should also be noted that mineral resources that are not mineral reserves do not have demonstrated economic viability.

Cautionary Note to U.S. Investors concerning Estimates of Measured, Indicated and Inferred Resources

This section uses the terms “measured resources,” “inferred resources” and “indicated resources.” We advise United States investors that while those terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. United States 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 Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. United States investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable.

Robertson Mineral Resource 2006 (by R.T. McCusker)


	Measured Mineral Resources						Indicated Mineral Resources						Total Measured and Indicated						Inferred Mineral Resources
	Short		Gold				Short		Gold		Contained		Short		Gold		Contained		Short		Gold		Contained
Zone	Tons		Grade		Contained		Tons		Grade		Ozs		Tons		Grade		Ozs		Tons		Grade		Ozs
	(000s)		(oz/ton)		(000s)		(000s)		(oz/ton)		(000s)		(000s)		(oz/ton)		(000s)		(000s)		(oz/ton)		(000s)

Porphyry(1)		10,600		0.020		212		2,100		0.018		37		12,700		0.020		249
39A/Gold Pan(1)								10,200		0.044		450		10,200		0.044		450		4,900		0.039		192
Altenburg Hill(1)																				3,500		0.018		63
Distal Target(1)																				1,008		0.178		179
Total		10,600		0.020		212		12,300		0.040		487		22,900		0.031		699		9,408		0.046		434


(1)		Estimated using a 0.01 oz Au/t cutoff grade.

An independent study prepared by a third party indicates that due to the low-grade nature of the Robertson mineral resources, they are sensitive to a number of parameters including gold recovery, operating costs, capital cost and gold price. Estimated net revenue generated by the 39A/Gold Pan and Porphyry resources at a gold price of Cdn$550/ounce and 683,000 ounces of recoverable gold generates a net revenue of Cdn$97.5 million, which makes the resources uneconomic as evaluated.

Proposed Exploration of Robertson Property

Coral Gold believes that there is a potential for discovery of additional mineral resources on the Robertson Property. Coral Gold plans to continue to explore the Robertson Property or seek third party partners for further exploration.

Carve-Out Claims

Under the terms of an Exploration and Mining Venture Agreement dated July 11, 1997, Placer holds an undivided 61% interest, and Coral Gold has a 39% interest carried to production in the Carve-Out Claims.

Beginning in 1997 and continuing through 1998, Cortez conducted a series of exploratory drilling programs on the Carve-Out Claims with limited success. In 2002, Coral Gold conducted a drilling program on the Carve-Out Claims with follow-up drilling in the immediate vicinity of existing drill holes with mixed results. To date, no

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significant mineral resources have been discovered on the Carve-Out Claims. However, the wide-space deep drilling has established the presence of scattered significant gold values, anomalous levels of Carlin-type trace elements, key structural components and the occurrence of a preferred host strata.

Coral Gold plans to rely on Cortez to further explore the property for mineral resources.

There is no underground or surface plant or equipment located on the Carve-Out Claims, nor any known body of commercial ore.

Norma Sass and Ruf Claims

Coral Gold currently owns a 66-2/3% interest in the Norma Sass and Ruf Claims, which originally were a part of the Carve-Out Claims, after an option agreement with Levon was amended on October 3, 2002 transferring to Levon a 331/3 percent interest in the Norma Sass and Ruf Claims. Levon is a British Columbia company also engaged in the exploration of precious minerals and has four directors in common to Coral Gold.

In January 2005 Coral Gold announced the formation of an exploration agreement with Agnico-Eagle. The agreement covers Coral Gold’s Norma Sass, Blue Nugget and Lander Ranch claims. The Norma Sass agreement also includes Coral Gold’s partnership with Levon. Under the agreement, Agnico-Eagle can earn a 51% interest in the Norma Sass, Blue Nugget and Lander Ranch claims by completing at least 45,000 feet of exploration drilling and paying certain advance royalties. At its option, Agnico-Eagle may acquire the claim leases from the underlying owners for its benefit and Agnico-Eagle shall be deemed to have earned an additional 24% interest. Agnico-Eagle will then have the option of acquiring the remaining 25% interest by producing a positive feasibility study and making a positive production decision.

At the fifth anniversary and every year thereafter until production occurs, the advance royalty payment will be $150,000 per annum. All advance royalty payments will be credited towards Agnico-Eagle’s payment of a royalty of 2.5% net smelter returns from production to Coral Gold and Levon. Agnico-Eagle has reserved the right to purchase 1% of this net smelter returns royalty (to reduce the royalty to Coral Gold and Levon to 1.5%) for a cash payment of $1.0 million. Coral Gold and Levon have agreed to share in any benefits from the agreement with Agnico-Eagle in proportion to their current respective interests in the Norma Sass Property.

There is no underground or surface plant or equipment located on the Norma Sass and Ruf Claims, nor any known body of commercial ore.

JDN Claims (formerly known as the JD Mining Claim)

On December 16, 1986, Coral Gold acquired six mining claims on 550 acres of land near Crescent Valley (Lander County), Nevada for $10,000. Coral Gold located an additional 28 unpatented lode mining claims covering some 30 acres in May 1996 and acquired a 100% interest by staking the “JDN Claims.” The JDN Claims are located approximately three miles north of the Robertson Mining Claims. In 1987, geological mapping was conducted. In its fiscal year 1994, Coral Gold optioned a 50% interest in the JDN claims to Mill Bay Ventures Inc., formerly First International Metals Corp., referred to as “Mill Bay”, a company with two directors in common to Coral Gold, for Cdn$10,000 and an initial installment of 50,000 common shares of Mill Bay. On February 5, 1997, Mill Bay exercised the option by issuing to Coral Gold an additional 50,000 common shares and completion of specified exploration work.

Access to the JDN Claims from Elko, Nevada, a regional mining supply center, is via Highways 80 and 306, a distance of approximately 102 kilometers to the community of Crescent Valley and then an additional 18 kilometers on a gravel access road from the community of Crescent Valley. A four-wheel drive vehicle is usually necessary to access all roads on the property. As of its fiscal year 2001, Coral Gold has written down the JDN Claims to a nominal value. There is no underground or surface plant or equipment located on the JDN Claims, nor any known body of commercial ore.

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C-Eagle Claims

In 1987, Coral Gold acquired a 100% interest in the C-Eagle Claims. The C-Eagle Claims consist of 15 lode mineral claims, and are located at Corral Canyon, in Lander County, Nevada, approximately 16 kilometers north-northwest of Placer’s Cortez gold mine and comprises a total of approximately 646 acres. The C-Eagle Claims are approximately three miles west of Crescent Valley, Nevada, and approximately 18 miles southeast of Battle Mountain, Nevada. Access to the C-Eagle Claims from Elko, Nevada, a regional mining supply center, is via Highways 80 and 306, a distance of approximately 90 kilometers and then an additional 13 kilometers on a gravel access road from the community of Crescent Valley. A four-wheel drive vehicle is usually necessary to access all roads on the property.

The C-Eagle Claims are subject to a 3% net smelter royalty to Geomex 8, which royalty shall cease at such time as the sum of $1,250,000 has been paid to Geomex 8.

In its fiscal year 1994, Coral Gold optioned a 50% interest in these claims to Levon for Cdn$10,000 and 100,000 Levon common shares. During 1996, Levon exercised its option and holds a 50% interest in the C-Eagle Claims with Coral Gold. During Coral Gold’s fiscal year 2000, no substantial work at the C-Eagle Claims was conducted and as of its fiscal year 2001, Coral Gold has written down the C-Eagle Claims to a nominal value. There is no underground or surface plant or equipment on the C-Eagle Claims, nor any known body of commercial ore.

Ludlow Property

Coral Gold owns certain mining property consisting of approximately 128 acres in San Bernardino County, California, referred to as the “Ludlow Property.” The purchase price for the Ludlow Property was Cdn$28,187, and as of January 31, 2000, Coral Gold expended Cdn$36,885 on exploration costs. The property is located approximately six miles south of Ludlow, California, and is readily accessible by dirt road from Ludlow. Ludlow lies at the western junction of U.S. Highway 40 and Route 66. Old wagon roads allow any part of the property to be reached by an easy walk. The Ludlow property has previously been explored as evidenced by trenches, pits and shallow shafts and adits. The only recorded data relating to previous exploration applies to the Baghdad-Chase Mine which lies approximately two kilometers to the south of the Ludlow Property.

There has been no underground exploration or development work done on the claims by Coral Gold other than geochemical soil sampling and, to Coral Gold’s knowledge, there is no record of the previous work carried out on the claims as indicated by the evidence of trenches, pits and shallow shafts and adits that are located thereon. No exploration work has been performed on the property for Coral Gold’s past five fiscal years. In order to keep the mining title to the Ludlow Property in good standing, Coral Gold is required to pay property taxes. As of its fiscal year 2001, Coral Gold wrote down the Ludlow Property to a nominal value. There is no surface or underground plant or equipment on the Ludlow Property, nor any known body of commercial ore.

Legal Proceedings

Coral Gold is not and has not been, since July 1, 2004, a party to any material legal or arbitration proceeding, nor is any material governmental proceeding involving Coral Gold pending or known to be contemplated.

Exchange Controls

There is no law, governmental decree or regulation in Canada that restricts the export or import of capital or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares other than withholding tax requirements. Any such remittances to United States residents are subject to withholding tax. See the section entitled “Taxation.”

There is no limitation imposed by the laws of Canada or by the charter or other constituent documents of Coral Gold on the right of a non-resident to hold or vote the common shares, other than as provided in the Investment Act. The following discussion summarizes the principal features of the Investment Act for a non-resident who proposes to acquire the common shares of Coral Gold.

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The Investment 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 Act (a “non-Canadian”), unless after review, the Director of Investments appointed by the minister responsible for the Investment 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 Act, and which term includes entities which are nationals of or are controlled by nationals of member states of the World Trade Organization) when Coral Gold was not controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of Coral Gold and the value of the assets of Coral Gold, as determined in accordance with the regulations promulgated under the Investment Act, equals or exceeds Cdn$5 million for direct acquisition and over Cdn$50 million for 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 Coral Gold. An investment in the common shares by a WTO Investor, or by a non-Canadian when Coral Gold was controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of Coral Gold and the value of the assets of Coral Gold, as determined in accordance with the regulations promulgated under the Investment Act was not less than a specified amount, which for 2004 is any amount in excess of Cdn$137 million. A non-Canadian would acquire control of Coral Gold for the purposes of the Investment 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 Coral Gold unless it could be established that, on the acquisition, Coral Gold was not controlled in fact by the acquirer through the ownership of the common shares.

Certain transactions relating to the common shares would be exempt from the Investment 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 Coral Gold 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 Act; and (c) an acquisition of control of Coral Gold by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of Coral Gold, through the ownership of the common shares, remained unchanged.

Operating and Financial Review and Prospects of Coral Gold

This discussion and analysis of the operating results and the financial position of Coral Gold is for the years ended January 31, 2006, 2005 and 2004 and for the six months ended July 31, 2006 and 2005 and should be read in conjunction with the consolidated financial statements and the related notes attached hereto.

Operating Results

The principal business of Coral Gold has been the acquisition and exploration of precious mineral properties and, where warranted, developing and mining such properties, particularly those judged by Coral Gold to be potentially valuable for gold. Coral Gold’s mining claims are located in the states of Nevada and California in the United States. None of Coral Gold’s mineral properties are in production and Coral Gold has received no revenues.

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Selected Financial Information

The following financial data is derived from Coral Gold’s financial statements for the three most recently completed financial years and the six month periods ending July 31, 2005 and 2006.


	July 31,			July 31,			January 31,			January 31,			January 31,
	2006			2005			2006			2005			2004
	(Unaudited)			(Unaudited)						Restated			Restated
	Cdn$			Cdn$						Cdn$			Cdn$
							Cdn$

Loss before other items		(655,705	)		(329,443	)		(2,301,983	)		(866,085	)		(640,502	)
Loss for the period		(586,683	)		(330,286	)		(3,067,474	)		(878,819	)		(753,596	)
Loss per share		(0.09	)		(0.07	)		(0.64	)		(0.19	)		(0.20	)
Total assets		15,270,553			10,501,557			11,385,912			10,737,683			10,896,355
Total liabilities		1,911,918			207,204			2,233,748			480,289			479,095
Working capital		3,703,767			863,870			36,519			1,400,605			2,601,586

During the six month period ended July 31, 2006, Coral Gold incurred a loss of Cdn$586,683 compared with a loss of Cdn$330,286 for the six month period ended July 31, 2005, an increase of Cdn$256,397, and a net loss per share of Cdn$0.09 compared to Cdn$0.07 in 2005. The primary reasons for the increase in the loss for the current six month period are the increased administrative expenses of approximately Cdn$326,262 offset by an increase in interest revenue of Cdn$65,071. Other items, which consist of a bad debt recovery of Cdn$3,464 and a decrease in foreign exchange losses of Cdn$1,327, helped to reduce the overall increase in loss for the period.

During its 2006 fiscal year, Coral Gold incurred a loss of Cdn$3,067,474 compared to Cdn$878,819 in 2005, and a net loss per share of Cdn$0.64 compared to Cdn$0.19 in 2005. The 2006 loss includes a future income tax expense of Cdn$778,000 compared to Cdn$nil in 2005. The 2006 loss also includes interest income of Cdn$20,454, a decrease of Cdn$13,332 from 2005, a foreign exchange loss of Cdn$20,401, a decrease of Cdn$26,119 from 2005, and a Cdn$12,467 recovery of written off advances receivable compared to Cdn$nil in 2005. The decrease in interest income was due to the maturing of short term guaranteed investment certificates during the year and some cash being used in operations instead of the full amount being rolled over into new investment certificates.

Total assets during the period from January 31, 2006 to July 31, 2006 increased from Cdn$11,385,912 to Cdn$15,270,553 primarily due to cash raised from the exercising of stock options and warrants. The total assets have decreased in the quarter ended July 31, 2006 compared to the immediately preceding quarter due to significant exploration activities and this is expected to continue until such time that additional funds are raised.

Total assets have risen from Coral Gold’s 2005 fiscal year to Coral Gold’s 2006 fiscal year due to the increase in mineral property expenditures in Coral Gold’s 2006 fiscal year. Mineral property expenditures were Cdn$584,880 in fiscal 2006, representing a Cdn$313,028 decrease over 2005. Actual net cash raised through the issuance of shares was Cdn$189,194 during the current year compared to Cdn$316,720 in 2005, a decrease of Cdn$127,526. In 2006 there were only options and warrants exercised compared to proceeds from private placements raised in 2005.

Coral Gold remains free of long term interest bearing debt and the total liabilities include current liabilities of Cdn$758,766 in 2006 which is Cdn$596,477 higher than 2005. This increase is largely due to a Cdn$525,000 bonus payable to a Director of Coral Gold. Long term liabilities increased from Cdn$318,000 in 2005 to Cdn$1,474,982 in 2006, a difference of Cdn$1,156,982. The entire 2005 long term liability amount was due to a future income tax liability whereas in 2006 the future income tax liability was Cdn$1,448,662, an increase of Cdn$1,130,662. This was a result of the valuation process in regards to the purchase of Marcus and United States tax loss carry-forwards that expired in the current year. Coral Gold has also recorded in 2006 an asset retirement obligation of Cdn$16,000 regarding reclamation of mineral properties and a non-controlling interest amount of Cdn$10,320 which contributed to the increase in total liabilities.

Coral Gold continues to have a reclamation bond as an asset with the State of Nevada however it has been lowered from Cdn$518,057 in 2005 to Cdn$260,976 in 2006. Management will continue to assess their asset retirement obligations and the associated liability will be adjusted in the period accordingly.

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Six months ended July 31, 2006 compared with the six months ended July 31, 2005.

Coral Gold’s general and administrative expenses totaled Cdn$655,705 for the six month period ended July 31, 2006 compared with Cdn$329,443 for the six month period ended July 31, 2005, an increase of Cdn$326,262. The overall increase in expenses is primarily due to the same reasons as noted in the quarterly comparison above. Additional items that contributed to the increase in loss were Cdn$50,000 in directors’ fees and an increase of Cdn$23,830 in listing and filing fees. The directors’ fees were a result of the extra time and effort required of the special committee members in addressing our buyout offer. Higher listing and filing fees were a direct result of the private placement that was closed and sustaining fees to the TSX Venture Exchange. There was also a Cdn$36,400 stock based compensation expense that was recorded in the six month period ended July 31, 2005 compared to Cdn$nil in the current period which helped lessen the overall increase in costs.

Loss for the period

Coral Gold’s loss for the six months ended July 31, 2006 was Cdn$586,683 compared with a loss of Cdn$330,286 for the six months ended July 31, 2005, an increase of Cdn$256,397. The primary reasons for the increase in the loss for the current six month period are the increased administrative expenses of approximately Cdn$326,262 as discussed above offset by an increase in interest revenue of Cdn$65,071. Other items, which consist of a bad debt recovery of Cdn$3,464 and a decrease in foreign exchange losses of Cdn$1,327, helped to reduce the overall increase in loss for the period.

Summary of Quarterly Results


	2006			2006			2006			2005			2005			2005			2005			2004
	Jul. 31			Apr. 30			Jan. 31			Oct. 31			Jul. 31			Apr. 30			Jan. 31			Oct. 31
Period Ended	Q2			Q1			Q4			Q3			Q2			Q1			Q4			Q3
	Cdn$

Loss for the period		(363,147	)		(223,536	)		(2,568,935	)		(168,253	)		(149,817	)		(180,467	)		(472,890	)		(195,850	)

Loss per share		(0.05	)		(0.04	)		(0.51	)		(0.03	)		(0.03	)		(0.04	)		(0.10	)		(0.04	)

Total assets		15,270,553			15,458,354			11,385,912			10,804,393			10,501,557			10,591,164			10,749,628			10,730,245

The general trend has been an increase in overall expenses because of the increase in exploration activities, the associated support staff, continuing efforts to promote company awareness, and the change in accounting policy for stock-based compensation. Most recently, general and administrative expenses have risen due to the review of the Robertson property and due diligence conducted in response to our offer. This is most apparent in the increase in loss from Q1-April 30, 2006 to Q2-July 31, 2006. The quarter ending January 31, 2006 also rose sharply due to future income tax expense which were either not present or much less in the prior quarters. The quarters that stock-based compensation significantly impacts are Q4-January 31, 2005 for Cdn$343,000, Q1-April 30, 2005 for Cdn$36,400 and Q4-2006 for Cdn$1,019,700.

Total assets generally trend downward during the periods when there are no funds raised through private placements. Total assets started increasing in Q3-October 31, 2005 due to the purchase of Marcus Corporation with common shares, followed by cash raised from the exercising of stock options and warrants and a private placement in the next two quarters. The most recent quarter has resumed the downward trend due to significant exploration activities and is expected to continue until such time that additional funds are raised.

Year ended January 31, 2006 compared to Year ended January 31, 2005.

General and administrative expenses totaled Cdn$2,301,983 for the year ended January 31, 2006 compared with Cdn$866,085 for the year ended January 31, 2005, an increase of Cdn$1,435,898. As was the case with the fourth quarter comparison, the primary sources of the increase in costs were stock-based compensation and salaries and benefits which accounted for Cdn$712,567 and Cdn$545,422 of the Cdn$1,435,898 increase respectively. The balance of the increase in general and administrative expenses is due to increases of Cdn$11,208 in investor relations and shareholder information, Cdn$134,006 in legal and accounting, Cdn$30,000 in management fees and Cdn$23,944 in travel. The process of fulfilling SEC filing requirements, the purchase of Marcus and the property review for the Robertson property resulted in legal and accounting costs being higher in 2006. There was also an

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increase in effort to promote company awareness and investigate financing possibilities which contributed to the increase in costs. The increase in management fees is due to a timing difference as discussed above.

There were decreases in consulting fees, director’s fees, listing and filing fees, office and administration and transfer agent fees of Cdn$877, Cdn$2,000, Cdn$2,896, Cdn$11,903 and Cdn$3,346 respectively. The decrease in office and administration costs is due to a switch from contractors to in-house staff to fulfill various administrative functions. Overall staffing levels were higher for the year ended January 31, 2006 in order to handle the increase in activities to administer and promote Coral Gold.

Loss for the year ended January 31, 2006 was Cdn$3,067,474 compared with a loss of Cdn$878,819 for the year ended January 31, 2005, for an increase of Cdn$2,188,655. The primary reasons for the increase are increased administrative expenses of Cdn$1,435,898 as discussed above and a future income tax expense of Cdn$778,000 in 2006. A decrease of Cdn$13,332 in interest income was more than offset by increases of foreign exchange gains of Cdn$26,119 and the partial recovery of a previously written down advances receivable of Cdn$12,467.

Year ended January 31, 2005 compared to Year ended January 31, 2004.

The loss for the twelve months ended January 31, 2005 was Cdn$878,819 compared with a loss of Cdn$753,596 for the twelve months ended January 31, 2004, an increase of Cdn$125,223. The main reason for the increase is the stock-based compensation expense of Cdn$343,533 as discussed above. There were no write downs of investments or mineral properties during Coral Gold’s 2005 fiscal year as there were in its 2004 fiscal year. The foreign exchange loss decreased from Cdn$140,623 to Cdn$46,520 in the current year due to the stronger Canadian dollar and the reclamation bond remaining at $406,000. The reclamation bond is converted to Canadian currency using the exchange rate as of the balance sheet date. The change in the exchange rate from January 31, 2004 to January 31, 2005 resulted in a decrease of Cdn$33,662 to the reclamation bond and comprises the majority of the foreign exchange loss for the year.

General and administrative expenses totaled Cdn$866,085 for the year ended January 31, 2005 compared with Cdn$640,502 for the year ended January 31, 2004, an increase of Cdn$225,583. As noted earlier this increase is due to a stock-based compensation expense of Cdn$343,533 in the current year as compared to Cdn$nil for Coral Gold’s 2004 fiscal year. Due to the increase in mineral property related activities and support staff, consulting fees and salaries and benefits increased by Cdn$12,218 and Cdn$24,492 respectively. Coral Gold’s 2005 fiscal year has benefited from the efforts in its 2004 fiscal year to promote company awareness, establish a web site, and meet filing and listing requirements. The results are decreases in investor relations and shareholder information costs of Cdn$69,142, listing and filings fees of Cdn$23,198, office and miscellaneous expenses of Cdn$24,962 and legal and accounting fees of Cdn$6,263. Travel expenditures, directors’ fees, and management fees also experienced a decrease in Coral Gold’s 2005 fiscal year.

During its 2005 fiscal year, Coral Gold incurred a loss of Cdn$878,819 (in 2004 the loss was Cdn$753,596) and a net loss per share of Cdn$0.19 (in 2004 the net loss per share was Cdn$0.20). The 2005 loss includes interest income of Cdn$33,786, an increase of Cdn$18,602 from 2004 and a foreign exchange loss of Cdn$46,520, a decrease of Cdn$94,103 from 2004. The increase in interest income was due to a short term guaranteed investment certificate ranging from Cdn$1,350,000 to Cdn$2,000,000 being held through the year.

Total assets stayed relatively stable from Coral Gold’s 2004 fiscal year to its 2005 fiscal year due to the increase in mineral property expenditures offsetting the fewer funds being raised from private placements in Coral Gold’s 2005 fiscal year. Mineral property expenditures increased by Cdn$897,908 compared to an increase of Cdn$420,054 in 2004. The net issuance of shares for cash raised Cdn$316,720 during the current year compared to Cdn$2,196,541 in 2004, a decrease of Cdn$1,879,821. This resulted in the working capital being reduced by Cdn$1,200,981 over the course of 2005.

Currency Fluctuations

Currency fluctuations have had the most impact on current US$ assets and current US$ liabilities. A significant increase in value of the CDN$ compared to the US$ results in a foreign exchange loss when reporting in CDN$. A

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significant decrease in value of the CDN$ compared to the US$ results in a foreign exchange gain when reporting in CDN$.

Inflation

Historically, inflation has not affected Coral Gold’s business in the current locations where it is doing business and Coral Gold does not expect it to affect Coral Gold’s operations in the future.

Government Regulation

Coral Gold is subject to various federal and state laws and regulations including environmental laws and regulations. Environmental regulations impose, among other things, restrictions, liabilities and obligations in connection with the generation, handling, use, storage, transportation, treatment and disposal of hazardous substances and waste and in connection with spills, releases and emissions of various substances to the environment. Environmental regulation also requires that facility sites and other properties associated with Coral Gold’s operations be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. In addition, certain types of operations, including exploration and development projects and changes to certain existing projects, may require the submission and approval of environmental impact assessments or permit applications. Compliance with environmental regulation can require significant expenditures, including expenditures for clean up costs and damages arising out of contaminated properties and failure to comply with environmental regulations may result in the imposition of fines and penalties. Coral Gold believes that it is in substantial compliance with such laws and regulations. However, such laws and regulations may change in the future in a manner which will increase the burden and cost of compliance.

Certain laws and governmental regulations may impose liability on Coral Gold for personal injuries, clean-up costs, environmental damages and property damages, as well as administrative, civil and criminal penalties. Coral Gold maintains limited insurance coverage for sudden and accidental environmental damages, but do not maintain insurance coverage for the full potential liability that could be caused by sudden and accidental environmental damage. Accordingly, Coral Gold may be subject to liability or may be required to cease production from properties in the event of such damages.

Liquidity and Capital Resources

At July 31, 2006, Coral Gold had cash and cash equivalents of Cdn$3,974,850 and working capital of Cdn$3,703,767. During the six month period ended July 31, 2006, Coral Gold raised gross proceeds of Cdn$4,500,000 through a private placement of 1,500,000 shares at a price of Cdn$3.00 per share. Coral Gold also raised proceeds of Cdn$322,688 from the exercising of 123,444 warrants and Cdn$47,475 from the exercising of 11,250 stock options. Coral Gold’s management feels it has sufficient cash on hand at this time to finance limited exploration work on its mineral properties and maintain operations. Mineral exploration and development is capital intensive and in order to maintain its interests and expand on its exploration program, Coral Gold will likely be required to raise new equity capital in the future. Coral Gold invested Cdn$537,376 during the six months ended July 31, 2006 on mineral exploration, of which the entire amount was expended on its Robertson property. There is no assurance that Coral Gold will be successful in raising new equity capital.

At this time, Coral Gold has no operating revenues, and does not anticipate any operating revenues until Coral Gold is able to find, acquire, place in production and operate a resource property. Historically, Coral Gold has raised funds through equity financing and the exercise of options and warrants to fund its operations.

The market price of natural resources is highly speculative and volatile. Instability in prices may affect the interest in resource properties and the development of and production from such properties. This may adversely affect Coral Gold’s ability to raise capital to acquire and explore resource properties.

Investor Relations

On October 4, 2006 Coral Gold also renewed a 12 month Investor Relations Agreement with Investor Relations Group Inc., formerly called Investors Relations Services Group John Mullen & Partners (“IRS”), to

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provide investor relations services in Europe. In consideration for the services rendered, Coral Gold has agreed to pay IRS fees totaling Cdn$24,000 plus expenses.

Subsequent to the period ending July 31, 2006, Coral Gold granted incentive stock options for the purchase of up to 280,000 shares at a price of Cdn$3.92 per share exercisable on or before September 5, 2011 to directors, officers, employees and consultants of Coral Gold.

Coral Gold entered into a three (3) month Investor Relations Agreement on August 30, 2006 with Agoracom Investor Relations Corp. (“Agoracom”) to provide online marketing services. In consideration for the services rendered, Coral Gold has agreed to pay Agoracom fees totaling Cdn$9,000 and grant Agoracom the option to purchase 20,000 common shares at a price of Cdn$3.92 per share.

Subsequent Events

On March 15, 2006 Coral Gold appointed Mr. Lindsay Gorrill as the Company’s Chief Financial Officer.

On May 18, 2006 Mr. Robert McEwen also resigned as a director and as the Executive Chairman of Coral Gold.

On July 11, 2006, Mr. Louis Wolfin was appointed President of Coral Gold.

Research and development, patents and licenses, etc.

Coral Gold does not engage in any research and development and does not, therefore, have any plans related to research and development or expend any resources on research and development.

Trend information

Coral Gold is not producing any commercially marketable minerals from its mineral properties and therefore is not aware of any trends related to production, sales, or inventory.

Off-balance sheet arrangements

Coral Gold has no off-balance sheet arrangements.

Tabular disclosure of contractual obligations

As at October 13, 2006, Coral Gold had the following contractual obligations:


									More Than
	Total		< 1 Year		1 - 3 Years		3 - 5 Years		5 Years

Investor relations contract (Cdn$)		24,000		24,000		—		—		—
Site restoration liability (Cdn$)		16,000		—		16,000		—		—
Total (Cdn$)		40,000		24,000		16,000		—		—

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Glossary

The following glossary and metric equivalents have been taken from Coral Gold’s annual report on Form 20-F for its fiscal year ended January 31, 2005, filed on July 31, 2006. This information should be read in conjunction with this section entitled “Coral Gold,” and does not apply to other sections of this proxy statement.


Au		The elemental symbol for gold.

*chalcopyrite*		Copper sulphide mineral.

*Chert*		A rock resembling flint and consisting essentially of crypto-crystalline quartz or fibrous chalcedony.

*cretaceous*		The geologic period extending from 135 million to 65 million years ago.

*epidote*		Calcium, aluminum, iron silicate mineral commonly occurring in hydrothermally altered carbonate-bearing rocks.

*fault*		A fracture in a rock where there has been displacement of the two sides.

*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 gpt) 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.

*GSR*		Payment of a percentage of gross mining profits commonly known as gross smelter return royalty.

*hydrothermal*		Hot fluids, usually mainly water, in the earth’s crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.

*intrusive*		A rock mass formed below earth’s surface from magma which has intruded into a pre-existing rock mass.

*lode claim*		A mining claim on an area containing a known vein or lode.

*mineralization*		Usually implies minerals of value occurring in rocks.

*net smelter or NSR Royalty*		Payment of a percentage of net mining profits after deducting applicable smelter charges.

*placer claim*		A mining claim located upon gravel or ground whose mineral contents are extracted by the use of water, by sluicing, hydraulicking, etc.

*porphyry*		Rock type with mixed crystal sizes, i.e. containing larger crystals of one or more minerals.

*pyrrhotite*		A bronze coloured mineral of metallic lustre that consists of ferrous sulphide and is attracted by a magnet.

*pyrite*		Iron sulphide mineral.

*quartz*		Silica or SiO₂, a common constituent of veins, especially those containing gold and silver mineralization.

*silification*		A process of fossilization whereby the original organic components of an organism are replaced by silica, as quartz, chalcedony, or opal.

B-21


*sulfidation*		In conditioning a flotation pulp, addition of soluble alkaline sulfides in aqueous solution to produce a sulfide-metal layer on an oxidized ore surface.

*veins*		The mineral deposits that are found filling openings in rocks created by faults or replacing rocks on either side of faults.

Terms Relating to Mineral Reserves and Resources

The following terms used in this section entitled “Coral Gold” are Canadian mining terms as defined in accordance with National Instrument 43-101 under the guidelines set out in Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines. The definitions of the terms mineral reserve, proven mineral reserve and probable mineral reserve under Canadian standards are different than the definitions adopted by the SEC and applicable to U.S. companies filing reports with the SEC. It is the view of the SEC’s staff that:


	•	A final or bankable feasibility study is required to meet the requirements to designate reserves.

	•	A historic three year average price must be used in any reserve or cash flow analysis to designate reserves.

	•	To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities.

In addition, while the terms mineral resource, measured mineral resource, indicated mineral resource, and inferred mineral resource are recognized and required to be reported by Canadian regulations, SEC does not recognize these terms. Information contained in this section entitled “Coral Gold” concerning descriptions of mineralization, resources and reserves may not be comparable to similar information made public by U.S. companies. Resources classified as indicated mineral resource and inferred mineral resource have an uncertain existence and uncertain as to their economic and legal feasibility. You should not assume that any part or all of an inferred resource exists, or is economically mineable.


Mineral reserve		The economically mineable part of a measured or indicated mineral resource demonstrated by a preliminary feasibility study. The 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 might occur when the material is mined. Mineral reserves are categorized on the basis of the degree of confidence in the estimate of the quantity and grade of the deposit:

Proven mineral reserve		For the part of a deposit which is being mined, or which is being developed and for which there is a detailed mining plan, the estimated quantity and grade or quality of that part of a measured mineral resource for which the size, configuration and grade or quality and distribution of values are so well established, and for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, so that there is the highest degree of confidence in the estimate.

Probable mineral reserve		The estimated quantity and grade or quality of that part of an indicated mineral resource for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, at a confidence level which would serve as a basis for decisions on major expenditures. The degree of assurance, although lower than that for proven mineral reserves, is high enough to assume continuity between points of observation.

B-22


Mineral resource		A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge.

Measured mineral resource		Part of a mineral resource for which a quantity grade or quality, density, 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.

Indicated mineral resource		Part of a mineral resource for which quantity grade or quality, density, 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.

Inferred mineral resource		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.

Metric Equivalents

The following formulas may be used to convert between metric equivalents:


		Multiply Metric
Metric Measurement	U.S. Equivalent	Figure by:

Hectares	Acres		2.471
Meters	Feet (ft.)		3.281
Kilometers (km)	Miles		0.621
Tons	Tons (2000 pounds)		1.102
Grams/tonne	Ounces (troy/tonne)		0.029

B-23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Coral Gold Resources Ltd.

We have audited the accompanying consolidated balance sheet of Coral Gold Resources Ltd. (an exploration stage enterprise) as of January 31, 2006, and the related consolidated statements of operations and deficit, cash flows and mineral properties for the year then ended, and for the period January 22, 1981 (inception) through January 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements as of January 31, 2005, and for the period January 22, 1981 (inception) through January 31, 2005, were audited by other auditors whose report dated April 13, 2005 except note 14, which is as of July 21, 2005 expressed an unqualified opinion on those statements. The consolidated financial statements for the period January 22, 1981 (inception) through January 31, 2005 prior to restatement, as described below, included total revenues and net loss of $2,176,079 and $20,510,872, respectively. Our opinion on the consolidated statements of operations and deficit, and cash flows for the period January 22, 1981 (inception) through January 31, 2006, insofar as it relates to amounts for prior periods through January 31, 2005 before restatement is based solely on the report of other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Coral Gold Resources Ltd., at January 31, 2006, and the results of its operations and its cash flows for the year then ended and the period from January 22, 1981 (inception) through January 31, 2006, in conformity with accounting principles generally accepted in the United States.

The consolidated financial statements of Coral Gold Resources Ltd. as of January 31, 2005 and for the years ended January 31, 2005 and 2004 were audited by other auditors who have ceased operations and whose report dated April 13, 2005 except note 14, which is as of July 21, 2005 expressed an unqualified opinion on those statements before the restatement adjustment described in Note 2.

As discussed above, the consolidated financial statements of Coral Gold Resources Ltd. as of January 31, 2005 and for the years ended January 31, 2005 and 2004 were audited by other auditors who have ceased operations. As described in Note 2, the Company recorded a prior period adjustment to account for an unrecorded future income tax liability arising from prior years. We audited the adjustment that was applied to restate the future income tax liability and deficit. Our procedures included (a) agreeing the future income tax liability recorded to a computation obtained from management and to underlying tax documents, and (b) testing the mathematical accuracy of the restated future income tax liability and deficit. In our opinion, such adjustment is appropriate and has been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2005 consolidated financial statements of the Company other than with respect to such adjustment and, accordingly, we do not express an opinion or any other form of assurance on the 2005 consolidated financial statements taken as a whole.

/s/ Ernst & Young LLP

Chartered Accountants

Vancouver, Canada,

May 31, 2006

B-26

CORAL GOLD RESOURCES LTD.

Consolidated Balance Sheets
January 31, 2006 and 2005


	2006			2005
				Restated
				(Note 2)
	(In Canadian Dollars)

ASSETS
Current
Cash and cash equivalents	$	663,071		$	1,472,146
Advances receivable (note 13(a))		62,358			78,101
Prepaid expenses		69,856			12,647

		795,285			1,562,894
Investment securities (note 5)		147,408			129,934
Loan receivable (note 13(g))		83,000			50,000
Equipment (note 6)		3,634			4,543
Mineral properties (note 7)		10,095,609			8,472,255
Reclamation deposit (note 8)		260,976			518,057

	$	11,385,912		$	10,737,683


LIABILITIES
Current
Accounts payable and accrued liabilities (note 13(h))	$	696,810		$	85,937
Advances payable to related parties (note 13(b))		61,956			76,352

		758,766			162,289

Site restoration obligation (note 14)		16,000			—

Future income tax liability (notes 3 and 15)		1,448,662			318,000

Non-controlling interest		10,320			—


SHAREHOLDERS’ EQUITY
Subscriptions received in advance (note 9)		60,000			—
Share subscriptions receivable		—			(11,945	)
Share capital (note 10)		31,560,337			30,754,678
Contributed surplus (note 11)		1,428,173			343,533
Deficit		(23,896,346	)		(20,828,872	)

		9,152,164			10,257,394

	$	11,385,912		$	10,737,683


Commitments (note 12)
Approved by the Directors:	/s/ Matthew Wayrynen	/s/ Louis Wolfin
	Matthew Wayrynen	Louis Wolfin

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

B-27

CORAL GOLD RESOURCES LTD.

Consolidated Statements of Operations and Deficit

Years Ended January 31, 2006, 2005 and 2004


	For the Period
	January 22,
	1981
	(Inception) to
	January 31,
	2006			2006			2005			2004
							Restated			Restated
							(Note 2)			(Note 2)
	(In Canadian Dollars)

Revenue
Sales	$	2,176,079		$	—		$	—		$	—
Cost of Sales		(5,383,348	)		—			—			—

		(3,207,269	)		—			—			—

Expenses
Administrative services		1,058,598			—			—			—
Amortization		2,728			909			1,136			684
Consulting fees (note 13(c))		227,528			40,603			41,480			29,262
Directors fees (note 13(e))		75,763			12,000			14,000			24,000
Investor relations and shareholder Information		1,901,480			85,283			74,075			143,217
Legal and accounting		2,599,764			208,314			74,308			80,571
Listing and filing fees		137,275			17,532			20,428			43,626
Management fees (note 13(d))		354,500			105,000			75,000			90,000
Office and miscellaneous		2,036,612			82,007			93,910			118,872
Salaries and benefits		921,759			625,351			79,929			55,437
Stock-based compensation		1,399,633			1,056,100			343,533			—
Transfer agent fees		52,056			9,124			12,470			11,437
Travel		931,194			59,760			35,816			43,396

		11,698,890			2,301,983			866,085			640,502

Loss before the following		(14,906,159	)		(2,301,983	)		(866,085	)		(640,502	)
Other items
Interest income		854,290			20,454			33,786			15,184
Foreign exchange gain (loss)		(251,286	)		(20,401	)		(46,520	)		(140,623	)
Gain realized on disposition of option on property		143,552			—			—			—
Gain on sale of investment		17,692			—			—			—
Recovery (writedown) of advances receivable		(348,323	)		12,467			—			36,320
Financing costs		(341,006	)		—			—			—
Writedown of investment securities		(809,828	)		—			—			(19,007	)
Loss on equipment disposals		(32,784	)		—			—			—
Writedown of equipment		(16,335	)		—			—			—
Writedown of mineral properties		(7,110,148	)		—			—			(4,968	)

Loss for the year before future income taxes and non-controlling interest (balance carried forward)	$	(22,800,335	)	$	(2,289,463	)	$	(878,819	)	$	(753,596	)
Loss for the year before future income taxes and non-controlling interest (balance carried forward)	$	(22,800,335	)	$	(2,289,463	)	$	(878,819	)	$	(753,596	)
Future income tax expense (note 15)		1,096,000			778,000			—			—
Non-controlling interest loss		11			11			—			—

Loss for the period	$	(23,896,346	)		(3,067,474	)		(878,819	)		(753,596	)

Deficit, beginning of the period					(20,828,872	)		(19,950,053	)		(19,196,457	)

Deficit, end of the period				$	(23,896,346	)	$	(20,828,872	)	$	(19,950,053	)

Basic and diluted:
Loss per share				$	(0.64	)	$	(0.19	)	$	(0.20	)

Weighted average number of common shares outstanding					4,789,881			4,629,892			3,686,398

B-28

CORAL GOLD RESOURCES LTD.

Consolidated Statements of Cash Flows

Years Ended January 31, 2006, 2005 and 2004


	For the Period
	January 22,
	1981
	(Inception) to
	January 31,
	2006			2006			2005			2004
							Restated
							(Note 2)
	(In Canadian Dollars)

Cash flows from (used in) operating activities
Loss for the period	$	(23,896,346	)	$	(3,067,474	)	$	(878,819	)	$	(753,596	)
Adjustments for items not involving cash:
— amortization		2,728			909			1,136			684
— writedown of equipment		16,335			—			—			—
— stock based compensation		1,399,633			1,056,100			343,533			—
— non-controlling interest		11			11			—			—
— future income tax expense		1,096,000			778,000			—			—
— writedown of investment securities		809,828			—			—			19,007
— writedown of mineral properties		7,110,148			—			—			4,968
— writedown of advances receivable		348,323			12,467			—			(36,320	)
— loss on equipment disposals		32,784			—			—			—
— gain on sales of investments		(17,692	)		—			—			—
— gain realized on disposition of option on property		(143,552	)		—			—			—
Change in non-cash working capital:
— (increase) decrease in advances receivable		(410,681	)		3,276			(21,556	)		(19,258	)
— (increase) decrease prepaid expenses		(69,856	)		(57,209	)		(1,671	)		(10,976	)
— investment securities		(119,174	)		—			—			—
— increase (decrease) in accounts payable and accrued liabilities		696,810			610,873			7,590			(152,419	)
— (decrease) increase in advances payable		61,956			(14,396	)		(6,397	)		(73,985	)

		(13,082,745	)		(677,443	)		(556,184	)		(1,021,895	)

Cash flows from (used in) investing activities
Mineral properties acquisition and exploration expenditures incurred		(16,023,742	)		(584,880	)		(897,908	)		(420,054	)
Acquisition of Marcus Corporation		(14,498	)		(14,498	)		—			—
Proceeds on sale of equipment		92,732			—			—			—
Loan receivable		(83,000	)		(33,000	)		(50,000	)		—
Purchase of equipment		(145,485	)		—			—			(2,943	)
Purchase of investments		(939,776	)		(17,474	)		—			—
Advances receivable recovered		—			—			—			36,320
Decrease (increase) in reclamation deposit amounts		(260,976	)		257,081			33,662			651,433

		(17,374,745	)		(392,771	)		(914,246	)		264,756

Cash flows from financing activities
Subscriptions received in advance		60,000			60,000			—			791,720
Cash from share subscriptions receivable		—			11,945			58,700			—
Issuance of shares for cash, net		31,031,432			189,194			316,720			2,196,541

		31,091,432			261,139			375,420			2,988,261

Net increase (decrease) in cash and cash equivalents		633,942			(809,075	)		(1,095,010	)		2,231,122
Cash and cash equivalents, beginning of year		29,129			1,472,146			2,567,156			336,034

Cash and cash equivalents, end of year	$	663,071		$	663,071		$	1,472,146		$	2,567,156

Supplementary disclosure of cash flow information:


Cash Paid during the Year for:	2006		2005		2004

Interest	$	40	$	145	$	730
Income taxes		—		—		—

B-29

CORAL GOLD RESOURCES LTD.

Consolidated Statements of Mineral Properties

Years Ended January 31, 2006, 2005 and 2004


					Proceeds of
	Acquisition		Exploration		Interest
	Cost		Expenditures		Disposed of			Total
	(In Canadian Dollars)

Robertson Property (note 7(a) (i) and 7(a)(iii))
Balance, January 31, 2004	$	801,956	$	8,675,800	$	(1,937,625	)	$	7,540,131
2005 transactions, net		—		890,292		—			890,292

Balance, January 31, 2005		801,956		9,566,092		(1,937,625	)		8,430,423
2006 transactions, net		—		1,623,354		—			1,623,354

Balance, January 31, 2006	$	801,956	$	11,189,446	$	(1,937,625	)	$	10,053,777

Ruf and Norma Sass Properties (note 7(a)(ii))
Balance, January 31, 2004	$	—	$	73,514	$	(39,301	)	$	34,213
2005 transactions, net		—		7,616		—			7,616

Balance, January 31, 2005		—		81,130		(39,301	)		41,829
2006 transactions, net		—		—		—			—

Balance, January 31, 2006	$	—	$	81,130	$	(39,301	)	$	41,829

Eagle Property (note 7(b))
Balance, January 31, 2004, 2005 and 2006	$	1	$	—	$	—		$	1

Ludlow Property (note 7(c))
Balance, January 31, 2004, 2005 and 2006	$	1	$	—	$	—		$	1

JDN Property (note 7(d))
Balance, January 31, 2004, 2005 and 2006	$	1	$	—	$	—		$	1

Total Properties	$	801,959	$	11,270,576	$	(1,976,926	)	$	10,095,609

B-30

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements

Years Ended January 31, 2006, 2005 and 2004

(In Canadian Dollars)


1.	Nature of Business and Going Concern

These consolidated financial statements have been prepared on a going-concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. The Company is in the process of exploring its mineral interests and has not yet determined whether these properties contain ore reserves that are economically recoverable. The continued operations of the Company and the recoverability of mineral property costs is dependent upon the discovery of economically recoverable mineral reserves, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production. Management’s plan in this regard is to raise equity financing as required.


2.	Prior Period Adjustment

During the year the Company recorded a prior period adjustment to account for an unrecorded future income tax liability arising from prior years. The effect of the restatement is that future income tax liability and deficit increased by $318,000 at January 31, 2005. The unrecorded future income tax liability pertained to periods prior to February 1, 2003, and as a result, the deficit, beginning of the period as disclosed in the consolidated statements of operations and deficit for the years ended January 31, 2005 and 2004 also increased by $318,000. The unrecorded future income tax liability did not change the Company’s loss for the period for either of the years ended January 31, 2005 or 2004.


3.	Marcus Corporation Acquisition

During the year ended January 31, 2006, the Company completed the following acquisition which was accounted for by the purchase method with effect from the date of acquisition.

On September 15, 2005, the Company acquired 98.49% of the issued and outstanding capital of Marcus Corporation (“Marcus”). The Company acquired the shares at a total cost, including costs of acquisition of $15,992, of $660,997. Consideration for the acquisition was paid through the issuance of common shares of the Company totalling 347,964, and 173,975 common share purchase warrants. The common shares were valued at $1.52 per share. The warrants were valued at $116,100 using the Black-Scholes option pricing model. The consideration has been allocated to identifiable assets acquired and liabilities assumed based on their estimated fair values with the excess consideration recorded to goodwill, as follows:


Cash	$	1,494
Mineral Properties		1,022,231
Future Income taxes		(352,662	)
Non-controlling interest		(10,066	)

	$	660,997


4.	Significant Accounting Policies


*(a)*	*Basis of Consolidation*

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Coral Resources, Inc. and Coral Energy Corporation of California and its 98.49% owned subsidiary Marcus. Significant inter-company accounts and transactions have been eliminated.

These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which are in conformity with United States generally accepted

B-31

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

accounting principles (“US GAAP”), except as described in note 18 to these consolidated financial statements. All figures are in Canadian dollars unless otherwise stated.


*(b)*	*Mineral Properties*

The Company is in the exploration stage and defers all expenditures related to its mineral properties until such time as the properties are put into commercial production, sold or abandoned. Under this method, all amounts shown as mineral properties represent costs incurred to date less amounts amortized and/or written off and do not necessarily represent present or future values.

If the properties are put into commercial production, the expenditures will be depleted based upon the proven and probable reserves available. If the properties are sold or abandoned, the expenditures will be charged to operations. The Company does not accrue the estimated future costs, such as land taxes, of maintaining in good standing its mineral properties.

The carrying values of mineral interests, on a property-by-property basis, will be reviewed by management at least annually to determine if they have become impaired. If impairment is deemed to exist, the mineral property will be written down to its fair value. The ultimate recoverability of the amounts capitalized for the mineral properties is dependent upon the delineation of economically recoverable ore reserves, the Company’s ability to obtain the necessary financing to complete their development and realize profitable production or proceeds from the disposition thereof. Management’s estimates of recoverability of the Company’s investment in various projects have been based on current conditions. However, it is reasonably possible that changes could occur in the near term which could adversely affect management’s estimates and may result in future writedowns of capitalized property carrying values.


*(c)*	*Investment Securities*

The investments in Mill Bay Ventures Inc. (formerly First International Metals Corp.) and Levon Resources Ltd. are carried at cost less writedowns determined to be other than temporary. They will be written down to their net realizable value if and when it has been determined that an other than temporary impairment to their value has occurred.


*(d)*	*Fair Value of Financial Instruments*

The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and cash equivalents, advances receivable, share subscriptions receivable, accounts payable and accrued liabilities and advances payable to related parties. Fair values were assumed to approximate carrying values for these financial instruments, except where noted, since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Management is of the opinion that the Company is not exposed to significant interest, credit or currency risks arising from these financial instruments.

At January 31, 2006 and 2005, the Company had approximately $nil and $nil, respectively, in cash balances at financial institutions which were in excess of the insured limits. Therefore, the company is not exposed to significant concentrations of credit risk.


*(e)*	*Foreign Currency Translation*

Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at exchange rates in effect at the balance sheet date for monetary items and at exchange rates prevailing at the transaction dates for non-monetary items. Revenues and expenses are translated at the average exchange rates prevailing during the year except for amortization, which is translated at historical exchange rates. Gains and losses on translation is included as income (loss) for the year.

B-32

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

(f) Use of Estimates

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


*(g)*	*Impairment of Long-term Assets*

The Company re-evaluates the recoverability of long-term assets, including loan receivable, equipment, mineral properties, and investment securities, based upon estimates using factors such as future asset utilization, business climate and future undiscounted cash flows expected to result from the use of the related assets or be realized on sale. The Company’s policy is to write-down assets to their fair value in the period when it is determined that the carrying amount of the asset is not likely to be recovered.


*(h)*	*Equipment*

Equipment is recorded at historical cost less accumulated amortization. Amortization is charged to earnings in amounts sufficient to allocate the costs over their estimated useful lives on a straight-line basis using the following annual rates pro-rated from initial utilization:


Computer hardware	20	%
Equipment	20	%


*(i)*	*Cash and Cash Equivalents*

Cash and cash equivalents include cash on deposit with banks, and highly liquid short-term interest bearing securities with maturities at the purchase date of three months or less.


	2006		2005

Cash	$	663,071	$	122,146
Cash equivalents		—		1,350,000

	$	663,071	$	1,472,146


*(j)*	*Loss per Share*

Diluted loss per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method is used to determine the dilutive effect of stock options and other dilutive instruments. The treasury stock method assumes that proceeds received from the exercise of stock options and warrants are used to repurchase common shares at the prevailing market rate.

Basic loss per share is computed using the weighted average number of common shares outstanding during the year.


*(k)*	*Income Taxes*

Income taxes are accounted for using the liability method pursuant to Section 3465, Income Taxes, of The Handbook of the Canadian Institute of Chartered Accountants. Future taxes are recognized for the tax consequences of “temporary differences” by applying enacted or substantively enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on future taxes for a change in tax rates is recognized in income in the period that includes the

B-33

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

date of enactment or substantive enactment. In addition, Section 3465 requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not.


*(l)*	*Asset Retirement Obligation*

Asset retirement obligations are accounted for pursuant to Section 3110, of the Handbook of the Canadian Institute of Chartered Accountants. It requires the recognition of the fair value of a liability for asset retirement obligations in the year in which such a liability is incurred; when a reasonable estimate can be made. At such time the present value of the asset retirement obligation (referred to as “site restoration obligations”) are to be added to the capitalized cost of the mineral property, and recorded as a liability at the equivalent amount. In periods subsequent to initial measurement, the asset retirement obligation is adjusted for both the passage of time and revisions to the original estimate. The site restoration obligations included in the capitalized cost of the property, as adjusted from time to time, are to be amortized to operations on the unit-of-production basis together with total mineral property costs capitalized.


*(m)*	*Stock-Based Compensation*

The Company adopted Section 3870 (“CICA 3870”), Stock-based compensation and other stock-based payments, of the Handbook of the Canadian Institute of Chartered Accountants, which establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. Section 3870 sets out a fair value based method of accounting that is required for all stock-based transactions. Under the recommendation, direct awards of stock granted to employees and directors are recorded at fair value on the date of grant and the associated expense is amortized over the vesting period.


5.	Investment Securities


	2006		2005

Levon Resources Ltd.
967,571 common shares (2005 — 967,571)	$	77,117	$	77,117
Mill Bay Ventures Inc. (formerly First International Metals Corp.)
518,731 common shares (2005 — 324,565)		70,291		52,817

	$	147,408	$	129,934

Levon Resources Ltd. (“Levon”) and Mill Bay Ventures Inc. (“Mill Bay”) are related to the Company by way of common management and directors. The fair market value of the Mill Bay and Levon common shares as at January 31, 2006 were $46,688 (2005 — $38,948), and $91,910 (2005 — $96,757), respectively.


6.	Equipment


	2006
			Accumulated		Net Book
	Cost		Amortization		Value

Computer hardware	$	5,926	$	2,536	$	3,390
Equipment		436		192		244

	$	6,362	$	2,728	$	3,634

B-34

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

2005

Accumulated
Net Book

Cost Amortization Value

Computer hardware
$ 5,926 $ 1,688 $ 4,238

Equipment
436 131 305

$ 6,362 $ 1,819 $ 4,543


7.	Mineral Properties


*(a)*	*Robertson Property*

The Company has certain interests in 724 patented and unpatented load mining claims located in the Bullion Mining District, Lander County, Nevada, subject to NSR’s ranging from 4% to 10%, and which certain leases provide for advance royalty payments. The Robertson group is recorded under three separate claims groups known as the Core Claims (100% owned), the Carve-out Claims (39% carried interest) and the Norma Sass/Ruff Claims (66.67% owned).

(i) Carve-out Claims — 39% carried interest

By an Agreement dated May 16, 1996, the Company granted Amax Gold Exploration Inc. (“Amax”) an option to purchase a 51% interest in 200 claims. Amax exercised the option by paying twice the amount the Company had incurred in exploration expenditures on the property. Under the terms of the Agreement, the Company could elect, and did elect, to have the 49% of its interest reverted to a 39% carried interest.

The Carve-out Claims Option Agreement was assignable by the Company or Amax. On September 13, 1995, the Company optioned 50% of its interest in 54 claims (subsequent known as the Ruff/Sass Claims — see Note 7(a)(ii)) to Levon Resources Ltd., and on March 24, 1997 Amax assigned it’s Option to Placer Dome Inc. (“Placer”). On July 11, 1997, Placer exercised its right to acquire a 51% interest in the claims by making a payment to the Company of US$615,359. The claims, that Placer had acquired a 51% interest in, excluded the Ruff/Sass claims as these were released back to the Company by Placer. Pursuant to the terms under the option agreement, the parties entered into an Exploration and Mining Venture Agreement dated July 11, 1997, and the Company exercised its right to have Placer advance the Company’s share of venture costs from inception of the Venture to commencement of commercial production in exchange for an additional undivided 10% interest in the properties.

(ii) Ruff/Norma Sass — 66.67% owned

By an amended Option Agreement dated September 13, 1995, the Company had granted Levon Resources Ltd. (“Levon”), a company related by common directors, an option to purchase a 50% interest in 54 claims known as the Ruff/Sass Claims. On December 31, 2002, the Agreement was amended whereby Levon earned a 33.33% interest in the claims by the issuance to the Company of 300,000 common shares in Levon (received during previous fiscal years) and incurring $350,294 in exploration on the Property (incurred during prior years).

A third party holds a 3% net smelter returns royalty on the production from some of these mining claims, up to a limit of USD$1,250,000.

By an Option Agreement dated December 4, 2002 the Company granted Goldfranchise Corporation (“Goldfranchise”) an Option to acquire a 331/3% interest in the Ruff/Norma Sass claims. In order to earn the interest, Goldfranchise must:

a) Pay to Coral US$38,391.50;


	b)	Incur minimum expenditures on the property in the amount of US $300,000, of which $100,000 on or before December 4, 2003, and the balance of $200,000 on or before December 4, 2004; and

	c)	Pay to Coral 331/3% of all land fees, taxes, advance royalties required to keep the claims in good standing.

B-35

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

This Option Agreement with Goldfranchise has been terminated due Goldfranchise not fulfilling their obligations under the Agreement.

By way of an agreement dated December 30, 2004, the Company and Levon have assigned, sub-leased and granted a mining lease to a subsidiary of Agnico-Eagle Mines Ltd. (“AGE”) on the following properties: the Blue Nugget; the Blue Nugget #1 to #8; the Lander Ranch; the Lander Ranch #1 to the Lander Ranch #25 and the Lander Ranch Extension; the Blue Jay; the T and S; the Norma and the Norma #1 to the Norma #23; the Sass and the Sass #1 to the Sass #10; the DM #1 to the DM #8; the BA #1 to the BA #12; the PC #1 to the PC #20; and the PM #1 to the PM #12, in consideration for the following minimum advance royalty payments (in US dollars) and minimum work commitments:


		Advance
		Royalty
Date		(US$)		Minimum Work

Execution of the Agreement	December 30, 2004	$	25,000	—
First Anniversary	December 30, 2005	$	30,000	13,000 ft of drilling
Second Anniversary	December 30, 2006	$	50,000	15,000 ft of drilling
Third Anniversary	December 30, 2007	$	75,000	17,000 ft of drilling
Fourth Anniversary	December 30, 2008	$	75,000	—
Fifth Anniversary	December 30, 2009	$	150,000	—

A minimum of 13,000 ft of exploration drilling was completed as part of the first year’s minimum work commitment. The initial advance royalty payment has been paid and received and the first anniversary payment has been received as well. Upon making the second and third year’s anniversary advance royalty payments, AGE will be obligated to complete the associated minimum work commitment for that year. After the third anniversary, or at anytime after the completion of at least 45,000 ft of drilling, AGE will have earned a 51% interest in the Norma Sass Property.

AGE, at its option, may provide the funds to acquire the leased claims from the underlying owners of such claims for the benefit of AGE, the Company and Levon, to earn an additional 24% interest (bringing AGE’s total interest to 75%). AGE will then have the option of acquiring the remaining 25% interest by producing a positive feasibility study and making a positive production decision.

At the fifth anniversary and every year thereafter until production occurs, the advance royalty payment will be $150,000 per annum. All advance royalty payments will be credited towards AGE’s payment of a royalty of 2.5% net smelter returns from production to the Company and Levon. AGE has reserved the right to purchase 1% of this net smelter returns royalty (to reduce the royalty to the Company and Levon to 1.5%) for a cash payment of USD$1.0 million. The Company and Levon have agreed to share in any benefits from the agreement with AGE in proportion to their current respective interests in the Norma Sass Property.

(iii) Core claims — 100% owned

By an Option Agreement dated January 31, 1999 the Company granted Placer an option to acquire up to a 70% interest in the entire Robertson Property’s 724 claims. Under the terms of the Option, Placer guaranteed a Reclamation Bond required to be posted by the Company for previous exploration work on the Core Claims. The Option Agreement terminated on December 31, 1999. The Company was obligated under the terms of the Option to replace Placer’s guarantee. Subsequent to January 31, 2004, the Company replaced the guarantee by posting a cash bond (note 8).

(iv) Marcus Corporation

By way of an agreement dated September 15, 2005, the Company has purchased 1,391,860 shares of Marcus Corporation (“Marcus”), representing 98.49% of the total issued shares of Marcus. Marcus owns the Marcus mining

B-36

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

claims, consisting of 39 unpatented lode claims and two Placer claims, and which comprise a portion of the Company’s Robertson Property. By acquiring Marcus, the Company will control Marcus, and own an indirect interest in the mining lease between the Company and Marcus, which provides for an annual advanced royalty to Marcus of US$12,000, and a 5% net smelter returns royalty up to a maximum payment of US$2.5 million. The mining lease with Marcus expires in 2007.


*(b)*	*Eagle Property*

The Company holds a 50% interest in 45 lode mineral claims located at Corral Canyon in Lander County, Nevada, USA. During the year ended January 31, 2001, the Company decided to defer exploration on the property and to reduce the carrying value to a nominal amount.


*(c)*	*Ludlow Property*

The Company owns a mineral property consisting of approximately 128 acres in the San Bernadino County, California, USA. During the year ended January 31, 2001, the Company decided to defer exploration on the property and to reduce the carrying value to a nominal amount.


*(d)*	*JDN Property*

The Company holds a 50% interest in 34 lode mineral claims located in Lander County, Nevada USA. The JDN claims are located approximately three miles north of the Robertson Property. During the year ended January 31, 2001, the Company decided to defer exploration on the property and to reduce the carrying value to a nominal amount.

Ownership in mineral properties involves certain inherent risks due to the difficulties in determining the validity of certain claims, as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristics of many mineral interests. The Company has investigated ownership of its mineral interests and, to the best of its knowledge, ownership of its properties is in good standing.


8.	Reclamation Deposit

Under the laws of the State of Nevada, the Company is required to have a reclamation deposit which covers the cost to reclaim the ground disturbed. The Company’s obligation at January 31, 1999 had been assumed by Placer as part of the Exploration and Development Option Agreement [note 7(a)]. As the Agreement was terminated on December 31, 1999, the Company was required to post its own security to guarantee performance under the Reclamation Bond.

During the year, a revised Reclamation Plan for the purposes of reducing the performance bond was approved by the Bureau of Land Management (the “Bureau”), reducing the required deposit to $260,976 (US$228,205) (2005 — $518,057).

Coral Resources Inc., as principal, placed the funds in trust with a fully secured standby letter of credit lodged as collateral in support of the bond.


9.	Subscriptions Received in Advance

During the year, the Company received $60,000 (2005 — $nil) towards private placements of 20,000 shares (2005 — nil). These shares were issued subsequent to year-end as part of the private placement that closed on March 4, 2006 (note 17(a)).


10.	Share Capital

(a) Authorized: Unlimited common shares without par value.

B-37

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

(b) Issued:


	Shares			Amount			Deficit

Balance, January 31, 2003		3,470,993		$	27,379,052		$	(19,196,457	)
2004 share issuances for cash:
Private placements		721,882			1,897,068
Exercise of warrants		149,310			357,368
Exercise of stock options		19,500			48,750
Share issuance costs		—			(36,000	)
2004 loss								(753,596	)

Balance, January 31, 2004		4,361,685			29,646,238			(19,950,053	)
2005 share issuances for cash:
Private placements		255,220			1,039,464
Exercise of warrants		1,600			4,960
Exercise of stock options		30,400			76,000
Share issuance costs					(11,984	)
2005 loss								(878,819	)

Balance, January 31, 2005		4,648,905			30,754,678			(20,828,872	)
2006 share issuances for cash:
Exercise of warrants		9,397			25,944
Exercise of stock options		102,500			174,250
Shares returned to treasury		(2,500	)		(11,000	)
Fair value of stock options exercised		—			87,560
Shares issued for Marcus Corp purchase		347,964			528,905
2006 loss								(3,067,474	)

Balance, January 31, 2006		5,106,266		$	31,560,337		$	(23,896,346	)

(c) At January 31, 2006, the following director, officer and employee stock options are outstanding and exercisable enabling the holders to acquire additional common shares as follows:


Number of Shares		Exercise Price		Expiry Date

	300,400	$	1.70	December 1, 2009
	32,500	$	1.70	April 12, 2010
	365,000	$	3.55	December 12, 2010

B-38

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

The Company has granted founders, directors, officers and certain employees stock options. Stock option activity is summarized as follows:


				Weighted
				Average
	Number			Exercise
	of Shares			Price

Balance outstanding, January 31, 2003		202,750		$	2.50
2004 — Cancelled		(10,000	)		2.50
2004 — Exercised		(19,500	)		2.50

Balance outstanding, January 31, 2004		173,250			2.50
2005 — Granted		412,900			1.70
2005 — Cancelled		(20,250	)		1.71
2005 — Exercised		(30,400	)		2.50

Balance outstanding, January 31, 2005		535,500			1.91
2006 — Granted		407,500			3.36
2006 — Expired		(142,600	)		2.50
2006 — Exercised		(102,500	)		1.70

Balance outstanding, January 31, 2006		697,900		$	2.67

The Company in fiscal 2005 adopted a formal stock option plan which provides for the granting of options to directors, officers, employees and consultants for a maximum of 706,000 shares (representing approximately 20% of the issued share capital of the Company as at the date of approval of the Plan by the Board). The Company recorded compensation expense of $1,056,100 (2005 — $343,533) with respect to stock options granted. The weighted average fair value of the options granted as at January 31, 2006 was $2.59 per share (2005 — $0.83 per share).

The fair value of options granted was estimated at the date of granting using the Black-Scholes option pricing model with the following assumptions: risk-free interest rates of 4.09% and 4.42%, dividend yield of 0.0%, volatility factors of 104.23% and 101.41, and a life of 5 years.

The Black-Scholes valuation model was developed for use in estimating the fair value of traded options, which are fully transferable and freely traded. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility, changes in the subjective input assumptions can materially affect the fair value estimate.

(d) At January 31, 2006, the Company has outstanding share purchase warrants enabling the holders to acquire additional common shares as follows. Subsequent to year-end, the warrants with expiry dates of February 16 and 17, 2006 expired without being exercised:


Number of Shares		Exercise Price		Expiry Date

	104,380	$	4.80	February 16, 2006
	148,340	$	5.50	February 17, 2006
	391,900	$	3.10	October 12, 2006
	200,000	$	3.60	November 17, 2006
	100,000	$	3.90	December 19, 2006
	171,078	$	2.00	September 15, 2007

	1,115,698

B-39

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

11. Contributed Surplus


	2006			2005

Balance, beginning of the year	$	343,533		$	—
Stock-based compensation expense		1,056,100			343,533
Warrants issued on acquisition of Marcus Corporation		116,100			—
Fair value of stock options exercised		(87,560	)		—

	$	1,428,173		$	343,533


12.	Commitments

(a) The Company entered into a new cost-sharing agreement during 2005 to reimburse a related party for a variable percentage (2005 fixed percentage — 20%; 2004 fixed percentage — 20%) of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the company, and to pay a percentage fee based on the total overhead and corporate expenses referred to above. The agreement may be terminated with one-month notice by either party.

A total of $166,203 (2005 — $135,140; 2004 — $107,393) was charged to operations in relation to the cost sharing agreement.

(b) The Company entered into a 12 month Investor Relations Agreement on July 1, 2005 with Investors Relations Services Group John Mullen & Partners (“IRS”) to provide investor relations services in Europe. In consideration for the services rendered, the Company has agreed to pay IRS fees totalling $18,000 plus expenses (2005 — $nil; 2004 — $nil).


13.	Related Party Transactions

Related party transactions not disclosed elsewhere in the financial statements are as follows:

(a) Included in advances receivable are amounts due from related parties, as well as third party receivables. These amounts due from related parties include $28,003 (2005 — $28,003) due from a joint venture with common management and common directors; $7,850 (2005 — $Nil) from a company controlled by a Director; $1,430 (2005 — $Nil) from a director of the Company and $13,124 (2006: $89,992 less an allowance for bad debt of $76,868; 2005: $122,048 less an allowance for bad debt of $90,621) with two companies with common management and common directors.

(b) Advances payable include $31,620 (2005 — $31,333) due to Directors in regards to past directors’ fees; $26,922 (2005 — $10,695) due to a company with common management in regards to the cost sharing agreement for overhead expenses; $nil (2005 — $32,540) to a company with common management and directors and $3,414 (2005 — $1,784) to a company controlled by a Director.

(d) Management fees of $105,000 (2005 — $75,000; 2004 — $90,000) were paid to a company owned by a director.

(e) Directors’ fees of $12,000 (2005 — $14,000; 2004 — $24,000) were paid to directors of the Company.

(f) An allowance in the amount of $209,840 (2005 — $209,840; 2004 — $209,840) has been accrued in respect of advances made to a Company with common management.

B-40

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

(g) The loan receivable of $83,000 (2005 — $50,000) is due from a subsidiary of a related company with common management that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.

(h) Included in accounts payable and accrued liabilities are bonuses payable to a director of the Company in the amount of $525,000 (2005 — $Nil).

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


14.	Site Restoration Obligation

Management has assessed their site restoration obligations and the associated liability to be recognized in the current period. Management has estimated that the costs would approximate $16,000 (2005 — $nil). Management will continue to assess their site restoration obligations and the associated liability as further information becomes known.


15.	Income Taxes

The reconciliation of the future income tax recovery (expense) rate to the statutory rate is as follows:


	2006			2005			2004
				Restated			Restated
				(Note 2)			(Note 2)

Loss before taxes	$	(2,289,463	)	$	(878,819	)	$	(753,596	)
Income tax rate		34.75	%		35.62	%		35.62	%
Income tax recovery at the statutory rate		795,474			313,035			268,431
Permanent differences		(354,610	)		(166,879	)		(49,269	)
Expiration of losses		(1,018,575	)		(158,065	)		(285,593	)
Share issuance costs		—			4,269			12,823
Changes in income tax rates		(95,008	)		(185	)		(498	)
Foreign exchange differences		86,719			19,125			48,807
Change in the valuation allowance		(192,000	)		(11,300	)		5,299

Net future income tax recovery (expense)	$	(778,000	)	$	—		$	—

The components of the future income tax assets (liabilities) are as follows:


	2006			2005
				Restated
				(Note 2)

Future income assets:
Non-capital loss carry-forwards	$	2,758,000		$	3,351,000
Resource interests		775,000			809,000
Other		112,338			141,000

		3,645,338			4,301,000
Less: valuation allowance		(2,181,000	)		(1,989,000	)

Net future income tax asset	$	1,464,338		$	2,312,000
Future income tax liability:
Resource interests		(2,913,000	)		(2,630,000	)

Net future income tax liability	$	(1,448,662	)	$	(318,000	)

B-41

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

The valuation allowance reflects the Company’s estimate that the tax assets, more likely than not, will not be realized.

At January 31, 2006, the Company had, for Canadian tax purposes, operating losses aggregating approximately $3,798,000. These losses are available to reduce taxable incomes earned by the Canadian operations of future years and expire as follows:


2007	$	420,000
2008		243,000
2009		231,000
2010		527,000
2011		627,000
2015		522,000
2016		1,228,000

	$	3,798,000

The net operating losses available to offset revenues of the US operations are approximately US$3,648,000 (2005 — US$4,700,000) and expire at various times through 2017.


16.	Segmented Information

The Company is involved in mineral exploration and development activities principally in United States. The Company is in the development stage and, accordingly, has no reportable segment revenues or operating results for each of the 2006, 2005 and 2004 fiscal year.


	2006
	Canada		USA		Total

Current assets	$	695,738	$	99,547	$	795,285
Investment in securities		74,833		72,575		147,408
Loan Receivable		83,000		—		83,000
Equipment		3,634		—		3,634
Mineral properties		—		10,095,609		10,095,609
Reclamation deposit		—		260,976		260,976

	$	857,205	$	10,528,707	$	11,385,912


	2005
	Canada		USA		Total

Current assets	$	1,511,905	$	50,989	$	1,562,894
Investment in securities		57,359		72,575		129,934
Loan Receivable		50,000		—		50,000
Equipment		4,543		—		4,543
Mineral properties		—		8,472,255		8,472,255
Reclamation deposit		—		518,057		518,057

	$	1,623,807	$	9,113,876	$	10,737,683

B-42

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

17. Subsequent Events

(a) The Company closed a non-brokered private placement of 1,500,000 shares at a price of $3.00 per share on March 4, 2006.

(b) The Company announced on March 6, 2006 that it has received an offer by U.S. Gold Corporation to acquire all of the Company’s outstanding common shares. Under the proposal, U.S. Gold Corporation would offer 0.63 share of U.S. Gold common stock for each outstanding common share of the Company. To date this transaction has not closed.


18.	Differences Between Canadian And United States Generally Accepted Accounting Principles (Canadian GAAP And U.S. GAAP)

These consolidated financial statements and the selected financial data have been prepared under Canadian GAAP.

For each year of presentation, the modifications necessary in order for these consolidated financial statements to conform to U.S. GAAP have been suitably provided as follows:


*(a)*	*Reconciliation of Consolidated Balance Sheet items:*

(i) Reconciliation of Total Assets and Liabilities


	2006			2005
				Restated
				(Note 2)

Total assets per CDN GAAP	$	11,385,912		$	10,737,683
Mineral properties (note 18(h))		(9,057,135	)		(8,472,255	)
Investment securities		(8,810	)		5,771

Total assets per US GAAP	$	2,319,967		$	2,271,199

Total liabilities per US/CDN GAAP	$	2,233,748		$	450,289

(ii) Reconciliation of Deficit under U.S. GAAP


	2006			2005			2004
				Restated			Restated
				(Note 2)			(Note 2)

Deficit end of year per CDN GAAP	$	(23,896,346	)	$	(20,828,872	)	$	(19,950,053	)
Stock compensation expense		(60,000	)		(60,000	)		(60,000	)
Deferred exploration expenditures, net		(9,057,135	)		(8,472,255	)		(7,574,347	)

Deficit end of year per US GAAP	$	(33,013,481	)	$	(29,361,127	)	$	(27,584,400	)

B-43

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

(b) Reconciliation of Consolidated Statement of Income items:

Reconciliation of Net Loss under U.S. GAAP


	Year Ended			Year Ended			Year Ended
	January 31,			January 31,			January 31,
	2006			2005			2004
				Restated
				(Note 2)

Net loss for the year per CDN GAAP	$	(3,067,474	)	$	(878,819	)	$	(753,596	)
Deferred exploration expenditures		(584,880	)		(897,908	)		(420,054	)
Writedown of deferred exploration expenditures		—			—			4,968

Net loss for the year per U.S. GAAP	$	(3,652,354	)	$	(1,776,727	)	$	(1,168,682	)
Unrealized gain (loss) on investment securities		(14,581	)		5,771			—

Net comprehensive loss for the year per U.S. GAAP	$	(3,696,935	)	$	(1,770,956	)	$	(1,168,682	)


*(c)*	*Loss Per Share U.S. GAAP*


	Year Ended			Year Ended			Year Ended
	January 31,			January 31,			January 31,
	2006			2005			2004

Loss Per Share
— basic and diluted	$	(0.76	)	$	(0.38	)	$	(0.32	)


*(d)*	*Comprehensive Income*

Statement of Financial Accounting Standards No. 130 requires the reporting of comprehensive income in addition to net earnings. Comprehensive income includes net income plus other comprehensive income; specifically, all changes in equity of a company during a period arising from non-owner sources.

B-44

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

Under US GAAP, a statement of changes in shareholders’ equity and comprehensive income in the following format would form a part of the annual consolidated financial statements:

Consolidated Statement of Changes in Shareholders’ Equity


																			Accumulated
																			Other
													Compre-						Compre-			Total
	Share Capital									Additional			hensive						hensive			Share-
	Number of				Share					Paid in			Income						Income			holders’
	Shares		Amount		Subscriptions			Warrants		Capital			(Loss)			Deficit			(Loss)			Equity
																Restated						Restated
																(Note 2)

Balance forward, January 31, 2003		3,470,994	$	27,379,052	$	—		$	—	$	60,000					$	(26,415,718	)	$	—		$	1,023,334
Share subscriptions		—		—		791,720			—		—			—			—			—			791,720
Issuance of shares (see Note 10(b))		890,691		2,267,186		—			—		—			—			—			—			2,267,186
Components of comprehensive income:
— net income (loss)		—		—		—			—		—			(1,168,682	)		(1,168,682	)		—			(1,168,682	)

													$	(1,168,682	)

Balance, January 31, 2004		4,361,685	$	29,646,238	$	791,720		$	—	$	60,000					$	(27,584,400	)	$	—		$	2,913,558

Balance forward, January 31, 2004		4,361,685	$	29,646,238	$	791,720		$	—	$	60,000					$	(27,584,400	)	$	—		$	2,913,558
Share subscriptions		—		—		(791,720	)		—		—			—			—			—			(791,720	)
Issuance of shares (see Note 10(b))		287,220		1,108,440		(11,945	)		—		—			—			—			—			1,096,495
Stock-based compensation expense		—		—		—			—		343,533			—			—			—			343,533
Components of comprehensive income:
— net income (loss)		—		—		—			—		—			(1,776,727	)		(1,776,727	)		—			(1,776,727	)
— change in unrealized gain (loss) of marketable securities		—		—		—			—		—			5,771			—			5,771			5,771

													$	(1,770,956	)

Balance, January 31, 2005		4,648,905	$	30,754,678	$	(11,945	)	$	—	$	403,533					$	(29,361,127	)	$	5,771		$	1,790,910
Share subscriptions		—		—		71,945			—		—			—			—			—			71,945
Issuance of shares (see Note 10(b))		457,361		805,659		—			116,100		—			—			—			—			921,759
Stock-based compensation expense		—		—		—			—		1,056,100			—			—			—			1,056,100
Fair value of stock option exercises		—		—		—			—		(87,560	)		—			—			—			(87,560	)
Components of Comprehensive income:
— net income (loss)		—		—		—			—		—			(3,652,354	)		(3,652,354	)		—			(3,652,354	)
— change in unrealized gain (loss) of marketable securities		—		—		—			—		—			(14,581	)		—			(14,581	)		(14,581	)

													$	(3,696,935	)

Balance, January 31, 2006		5,106,266	$	31,560,337	$	60,000		$	116,100	$	1,372,073					$	(33,013,481	)	$	(8,810	)	$	86,219

B-45

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

(e) Supplemental Financial Information

(i) Reconciliation of Cash Flows Under U.S. GAAP

Cash Flows from Operating Activities


	2006			2005			2004

Cash provided by (used in) operating activities per CDN GAAP	$	(677,443	)	$	(556,184	)	$	(1,021,895	)
Deferred exploration expenditures		(584,880	)		(897,908	)		(420,054	)

Cash provided by (used in) operating activities per US GAAP	$	(1,262,323	)	$	(1,454,092	)	$	(1,441,949	)

Cash Flows from Investing Activities


	2006			2005			2004

Cash provided by (used in) investing activities per CDN GAAP	$	(392,771	)	$	(914,246	)	$	264,756
Deferred exploration expenditures		584,880			897,908			420,054

Cash provided by (used in) investing activities per US GAAP	$	192,109		$	(16,338	)	$	684,810


*(f)*	*Additional Disclosure Required by U.S. GAAP*

(i) Operations in a Foreign Country

The Company is subject to numerous factors relating to conducting business in a foreign country (including, without limitation, economic, political and currency risk), any of which could have a significant impact on the Company’s operation.

The Company’s U.S. subsidiaries, Coral Resources, Inc., Marcus Corporation and Coral Energy Corporation of California are subject to U.S. corporation tax on profits.


*(g)*	*Additional Disclosure Required by SEC*

The SEC requires that related party transactions be disclosed as a separate line in the financial statements. Under this requirement, the following related party transactions would have been shown separately as related party balances in the financial statements:

(i) Included in advances receivable are related party transactions of, $28,003 (2005 — $28,003; 2004 — $28,003) due from a joint venture with common management and common directors; $7,850 (2005 — $Nil; 2004 — $Nil) from a company controlled by a Director; $1,430 (2005 — $Nil; 2004 — $Nil) from a director of the Company and $13,124 (2006: $89,992 less an allowance for bad debt of $76,868; 2005: $122,048 less an allowance for bad debt of $90,621; 2004: $90,621) with two companies with common management and common directors.

(ii) Consulting fees of $30,000 (2005 — $30,000; 2004 — $22,500) were paid to a company owned by a director.

(iii) Management fees of $105,000 (2005 — $75,000; 2004 — $90,000) were paid to a company owned by a director.

(iv) Directors’ fees of $12,000 (2005 — $14,000; 2004 — $24,000) were paid to directors of the Company.

B-46

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Financial Statements — (Continued)

(v) An allowance in the amount of $209,840 (2005 — $209,840) has been accrued in respect of advances made to a company with common management.

(vi) The loan receivable of $83,000 (2005 — $50,000) is due from a subsidiary of a related company that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.

(vii) Included in accounts payable are $525,000 (2005 — $Nil) of amounts due to a Director of the Company, as a bonus.

(viii) Investment securities and marketable securities would be noted as a related party on the balance sheet.


*(h)*	*Deferred Exploration Expenditures*

The Company follows the policy of deferring all acquisition and exploration costs relating to the mineral properties held. Under US GAAP, the deferred exploration expenditures would have been expensed in the year they were incurred (see note 7(a) to 7(d)).

B-47

CORAL GOLD RESOURCES LTD.

Consolidated Balance Sheets

(Prepared by Management)


	July 31,			January 31,
	2006			2006

ASSETS
Current
Cash and cash equivalents	$	3,974,850		$	663,071
Advances receivable (note 7(b))		71,854			62,358
Interest receivable		12,585			—
Prepaid expenses		81,417			69,856

		4,140,706			795,285
Investment securities		147,408			147,408
Loan receivable (note 7(f))		83,000			83,000
Equipment		3,272			3,634
Mineral properties (note 5)		10,632,985			10,095,609
Reclamation deposit		263,182			260,976

	$	15,270,553		$	11,385,912


LIABILITIES
Current
Accounts payable and accrued liabilities (note 7(d))	$	390,902		$	696,810
Advances payable (note 7(c))		46,037			61,956

		436,939			758,766

Site restoration obligation		16,000			16,000

Future income tax liability		1,448,662			1,448,662

Non-controlling interest		10,317			10,320


SHAREHOLDERS’ EQUITY
Subscriptions received in advance		—			60,000
Share capital (note 6)		36,413,491			31,560,337
Contributed surplus		1,428,173			1,428,173
Deficit		(24,483,029	)		(23,896,346	)

		13,358,635			9,152,164

	$	15,270,553		$	11,385,912

NOTE 1 — NATURE OF OPERATIONS

Approved by the Directors:


/s/ Louis Wolfin		Director		/s/ Gary Robertson		Director

B-48

CORAL GOLD RESOURCES LTD.

Consolidated Interim Statements of Operations and Deficit

(Unaudited — Prepared by Management)


	Three Months Ended July 31,						Six Months Ended July 31,
	2006			2005			2006			2005

Revenue
Interest income	$	43,930		$	2,461		$	70,968		$	5,897

Expenses
Amortization		181			159			362			443
Consulting fees		57,500			10,020			92,300			20,020
Directors fees		—			—			50,000			—
Investor relations and shareholder information		53,669			23,089			69,072			39,426
Legal and accounting		188,356			14,922			225,468			51,612
Listing and filing fees		2,440			4,381			31,411			7,581
Management fees		32,800			22,500			60,475			45,000
Office and miscellaneous		18,458			17,137			40,227			34,921
Salaries and benefits		18,071			25,614			37,203			49,735
Stock-based compensation		—			—			—			36,400
Transfer agent fees		6,844			3,136			10,544			4,890
Travel		27,325			17,498			38,643			39,415

		405,644			138,456			655,705			329,443

Operating loss		(361,714	)		(135,995	)		(584,737	)		(323,546	)
Other items
Recovery of bad debt		3,464			—			3,464			—
Foreign exchange gain (loss)		(4,897	)		(13,822	)		(5,413	)		(6,740	)

Loss for the period before non-controlling interest	$	(363,147	)	$	(149,817	)	$	(586,686	)	$	(330,286	)
Non-controlling interest gain		—			—			3			—

Loss for the period		(363,147	)		(149,817	)		(586,683	)		(330,286	)
Deficit, beginning of period		(24,119,882	)		(20,691,341	)		(23,896,346	)		(20,510,872	)

Deficit, end of period	$	(24,483,029	)	$	(20,841,158	)	$	(24,483,029	)	$	(20,841,158	)

Loss per share	$	(0.05	)	$	(0.03	)	$	(0.09	)	$	(0.07	)

Weighted average number of common shares outstanding		6,719,932			4,651,155			6,425,173			4,650,030

B-49

CORAL GOLD RESOURCES LTD.

Consolidated Interim Statements of Cash Flows

(Unaudited — Prepared by Management)


	Three Months Ended July 31,						Six Months Ended July 31,
	2006			2005			2006			2005

Cash flows from (used in) operating activities
Loss for the year	$	(363,147	)	$	(149,817	)	$	(586,683	)	$	(330,286	)
Adjustments for items not involving cash:
— amortization		181			159			362			443
— stock based compensation		—			—			—			36,400
— non-controlling interest		—			—			(3	)		—

		(362,966	)		(149,658	)		(586,324	)		(293,443	)
Change in non-cash working capital:
— increase (decrease) in advances receivable		(19,172	)		(7,779	)		(9,496	)		4,378
— increase (decrease) prepaid expenses		(3,370	)		(18,457	)		(11,561	)		(15,090	)
— (increase) decrease in share subscription receivable		—			11,000			—			11,945
— increase (decrease) in accounts payable and accrued liabilities		17,289			59,673			(305,908	)		51,220
— decrease (increase) in advances payable		(34,692	)		(363	)		(15,919	)		(6,305	)
— increase (decrease) in subscriptions received in advance		—			—			(60,000	)		—

		(402,911	)		(105,584	)		(989,208	)		(247,295	)

Cash flows from (used in) investing activities
Mineral properties acquisition and exploration expenditures incurred		(413,977	)		(206,753	)		(537,376	)		(285,811	)
Interest receivable		(12,585	)		—			(12,585	)		—
Loan receivable		—			—			—			(33,000	)
Decrease (increase) in reclamation deposit amounts		(2,206	)		12,702			(2,206	)		5,315

		(428,768	)		(194,051	)		(552,167	)		(313,496	)

Cash flows from financing activities
Issuance of shares for cash, net		192,749			900			4,853,154			900

Net increase (decrease) in cash and cash equivalents		(638,930	)		(298,735	)		3,311,779			(559,891	)
Cash and cash equivalents, beginning of period		4,613,780			1,210,990			663,071			1,472,146

Cash and cash equivalents, end of period	$	3,974,850		$	912,255		$	3,974,850		$	912,255

B-50

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements

July 31, 2006

(Unaudited — Prepared by Management)


1.	Nature of Operations


2.	Basis of Presentation

These unaudited interim financial statements have been prepared in accordance with the instructions for the preparation of such financial statements contained in the CICA Handbook Section 1751. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such instructions. These unaudited interim financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the fiscal year ended January 31, 2006. These interim financial statements have not been reviewed by an auditor.

In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of these unaudited financial statements have been included and all such adjustments are of a normal recurring nature. Operating results for the six month period ended July 31, 2006 is not necessarily indicative of the results that can be expected for the year ended January 31, 2007.


3.	Basis of Consolidation


4.	Comparative Figures

Certain of the comparative figures for 2005 have been reclassified, where applicable, to conform to the presentation adopted for the current year.

B-51

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements — (Continued)

5. Mineral Properties

The following is a summary of mineral property expenditures for the six months ended July 31, 2006:


Balance, beginning of period			$	10,095,609
Robertson Property
Assays	$	48,950
Consulting		172,140
Drilling		240,671
Field supplies and other		4,999
Lease payments		53,300
Reclamation		9,376
Water analysis		481

Total expenditures for Robertson Property				537,376

Balance, end of period			$	10,632,985


6.	Share Capital


*(a)*	*Authorized Unlimited common shares without par value*


*(b)*	*Issued*


	2006						2005
	Shares			Amount			Shares			Amount

Balance, January 31,		5,106,266		$	31,560,337			4,648,905		$	30,754,678
Private placements		1,500,000			4,500,000			—			—
Exercise of warrants		58,212			160,064			—			—
Exercise of stock options		14,500			28,350			—			—
Warrants returned to treasury		(2,000	)		(11,000	)		—			—
Share issuance costs		—			(17,009	)		—			—

Balance, April 30,		6,676,978		$	36,220,742			4,648,905		$	30,754,678
Exercise of warrants		67,232			173,624			—			—
Exercise of stock options		11,250			19,125			7,000			11,900
Cancelled shares		—			—			(2,500	)		(11,000	)

Balance, July 31,		6,755,460		$	36,413,491			4,653,405		$	30,755,578

B-52

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements — (Continued)

(c) Share Purchase Warrants

A summary of share purchase warrants transactions for the year to date is as follows:


	Number of
	Underlying
	Shares

Balance, January 31, 2006		1,115,698
Granted		—
Exercised		(58,212	)
Returned to treasury		2,000
Expired		(252,720	)

Balance, April 30, 2006		806,766
Granted		—
Exercised		(67,232	)

Balance, July 31, 2006		739,534

As at July 31, 2006, the following share purchase warrants were outstanding:


Number of
Underlying
Shares		Exercise Price		Expiry Date

	333,900	$	3.10	October 12, 2006
	192,500	$	3.60	November 17, 2006
	100,000	$	3.90	December 19, 2006
	113,134	$	2.00	September 15, 2007

	739,534


*(d)*	*Stock Options*

During the six months ended July 31, 2006, there were no stock options granted by the Company.

A summary of the stock options granted and exercised at the period ended July 31, 2006 is as follows:


	Number			Weighted Average
	of Options			Exercise Price

Balance, January 31, 2006		697,900		$	2.67
Exercised		(14,500	)	$	1.96

Balance, April 30, 2006		683,400		$	2.68
Exercised		(11,250	)	$	1.70

Balance, July 31, 2006		672,150		$	2.70

A summary of stock options outstanding and exercisable at the period ended July 31, 2006 is as follows:


			Weighted
			Average		Weighted
			Remaining		Average
Exercise	Number		Contractual		Exercise
Price	Outstanding		Life (yr)		Price

$1.70		309,150		3.37	$	1.70
$3.55		363,000		4.37	$	3.55

B-53

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements — (Continued)

7. Related Party Transactions

Related party transactions not disclosed elsewhere in these statements are as follows:

a) During the six months ended July 31, 2006, the Company paid, or made provision for the future payment, of the following amounts to related parties:

i) $58,281 (2005 — $92,006) for administrative expenses to a private Company beneficially owned by the Company and a number of other public companies related through common Directors;

ii) $45,000 (2005 — $45,000) to a private company controlled by a Director for management fees;

iii) $15,000 (2005 — $15,000) in consulting fees to a private company owned by a Director; and

iv) $50,000 (2005 — $nil) in directors fees to directors of the Company.

b) Included in advances receivable are amounts due from related parties, as well as third party receivables. These amounts due from related parties include $28,003 (2005 — $28,003) due from a joint venture with common management and common directors; $1,414 (2005 — $nil) due from a company controlled by a Director and $13,124 (2005 — $31,427) due from a public company with common management and common directors.

c) Advances payable include $17,000 (2005 — $19,333) due to Directors in regards to past directors’ fees; $22,676 (2005 — $32,540) due to the private company that provides administrative services as disclosed in note 7(a)(i) above; $5,325 (2005 — $nil) to an officer of the Company in regards to management fees and $1,036 (2005 — $nil) due to a private company controlled by a Director of the Company for expense reimbursements.

d) Of the $525,000 included in accounts payable and accrued liabilities as at January 31, 2006 and payable to a director of the Company, $300,000 has been paid to the director in the six month period ending July 31, 2006. The balance still owing and included in accounts payable and accrued liabilities as of July 31, 2006 is $225,000.

e) The loan receivable of $83,000 (2005 — $83,000) is due from a subsidiary of a related company with common management that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.

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


8.	Commitments

The Company entered into a cost-sharing agreement during 2005 to reimburse a related party for a variable percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the company, and to pay a percentage fee based on the total overhead and corporate expenses referred to above. The agreement may be terminated with one-month notice by either party.


9.	Subsequent Events

The Company entered into a 3 month Investor Relations Agreement on August 30, 2006 with Agoracom Investor Relations Corp. (“Agoracom”), to provide online marketing services. In consideration for the services rendered, the Company has agreed to pay Agoracom fees totaling $9,000 and grant Agoracom the option to purchase 20,000 common shares at a price of $3.92 per share.

Subsequent to July 31, 2006 the Company renewed a 12 month Investor Relations Agreement with Investor Relations Group Inc., formerly called Investors Relations Services Group John Mullen & Partners (“IRS”), to

B-54

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements — (Continued)

provide investor relations services in Europe. In consideration for the services rendered, the Company has agreed to pay IRS fees totaling $18,000 plus expenses.

Subsequent to July 31, 2006 the Company granted incentive stock options for the purchase of up to 280,000 shares at a price of $3.92 per share exercisable on or before September 5, 2011 to directors, officers, employees and consultants of the Company.

Subsequent to July 31, 2006 the Company has had 1,000 share purchase warrants exercised for total proceeds of $3,100.


10.	Differences Between Canadian (“CDN”) and United States (“US”) GAAP

These consolidated financial statements and the selected financial data have been prepared under CDN GAAP.

For each period of presentation, the modifications necessary in order for these consolidated financial statements to conform to US GAAP have been suitably provided as follows:


*(a)*	*Reconciliation of Consolidated Balance Sheet items:*

(i) Reconciliation of Total Assets and Liabilities


	July 31,			July 31,
	2006			2005

Total assets per CDN GAAP	$	15,270,553		$	10,501,557
Mineral properties		(9,594,511	)		(7,956,107	)
Investment securities		5,711			(49,160	)

Total assets per US GAAP	$	5,681,753		$	2,496,290

Total liabilities per CDN and US GAAP	$	1,911,918		$	207,204

Total equity per CDN GAAP	$	13,358,635		$	10,294,353
Mineral properties		(9,594,511	)		(7,956,107	)
Investment securities		5,711			(49,160	)

Total equity per US GAAP	$	3,769,835		$	2,289,086

(ii) Reconciliation of Deficit under U.S. GAAP


	July 31,			July 31,
	2006			2005

Deficit end of period per CDN GAAP	$	(24,483,029	)	$	(21,159,158	)
Stock compensation expense		(60,000	)		(60,000	)
Deferred exploration expenditures, net		(9,594,511	)		(7,956,107	)

Deficit end of period per US GAAP	$	(34,137,540	)	$	(29,175,265	)

B-55

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements — (Continued)

(b) Reconciliation of Consolidated Statement of Income items:

Reconciliation of Net Loss under US GAAP


	Three Months Ended July 31,						Six Months Ended July 31,
	2006			2005			2006			2005

Net loss for the period per CDN GAAP	$	(363,147	)	$	(149,817	)	$	(586,683	)	$	(330,286	)
Deferred exploration expenditures		(413,977	)		(206,753	)		(537,376	)		(285,811	)

Net loss for the period under US GAAP		(777,124	)		(356,570	)		(1,124,059	)		(616,097	)
Unrealized gain (loss) on investment securities		(151,721	)		(224,066	)		14,521			(57,824	)

Net comprehensive income (loss) for the period per US GAAP	$	(928,845	)	$	(580,636	)	$	(1,109,538	)	$	(673,921	)

Income (loss) per share under US GAAP	$	(0.14	)	$	(0.12	)	$	(0.17	)	$	(0.14	)


*(c)*	*Supplemental Financial Information*

Reconciliation of Cash Flows under US GAAP


	Three Months Ended July 31,						Six Months Ended July 31,
	2006			2005			2006			2005

Cash Flows from Operating Activities
Cash provided by (used in) operating activities per CDN GAAP	$	(402,911	)	$	(105,584	)	$	(989,208	)	$	(247,295	)
Deferred exploration expenditures		(413,977	)		(206,753	)		(537,376	)		(285,811	)

Cash provided by (used in) operating activities per US GAAP	$	(816,888	)	$	(312,337	)	$	(1,526,584	)	$	(533,106	)

Cash Flows from Investing Activities
Cash provided by (used in) investing activities per CDN GAAP	$	(428,768	)	$	(194,051	)	$	(552,167	)	$	(313,496	)
Deferred exploration expenditures		413,977			206,753			537,376			285,811

Cash provided by (used in) investing activities per US GAAP	$	(14,791	)	$	12,702		$	(14,791	)	$	(27,685	)

Cash provided by financing activities per CDN and US GAAP	$	192,749		$	900		$	4,853,154		$	900


*(d)*	*Additional Disclosure Required by US GAAP*

(i) Operations in a Foreign Country

The Company’s U.S. subsidiaries, Coral Resources, Inc., Marcus Corporation and Coral Energy Corporation of California are subject to U.S. corporation tax on profits.

B-56

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements — (Continued)

(e) Additional Disclosure Required by SEC

(ii) Consulting fees of $15,000 (2005 — $15,000; 2004 — $15,000) were paid to a company owned by a director.

(iii) Management fees of $45,000 (2005 — $45,000; 2004 — $45,000) were paid to a company owned by a director.

(iv) Directors’ fees of $50,000 (2005 — $nil; 2004 — $nil) were paid to directors of the Company.

(v) An allowance in the amount of $209,840 (2005 — $209,840; 2004 — $209,840) has been accrued in respect of advances made to a company with common management.

(vi) The loan receivable of $83,000 (2005 — $50,000; 2004 — $nil) is due from a subsidiary of a related company that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.

(vii) Advances payable include $17,000 (2005 — $19,333) due to Directors in regards to past directors’ fees; $22,676 (2005 — $18,174; 2004 — $nil) due to the private company that provides administrative services; $5,325 (2005 — $nil; 2004 — $nil) to an officer of the Company in regards to management fees and $1,036 (2005 — $nil; 2004 — $nil) due to a private company controlled by a Director of the Company for expense reimbursements.

(viii) Included in accounts payable is $225,000 (2005 — $nil; 2004 — $nil) of amounts due to a Director of the Company, as a bonus.

(ix) Investment securities would be noted as a related party on the balance sheet.

(x) Administrative expenses of $58,281 (2005 — $92,006; 2004 — $46,490) were paid to a private Company beneficially owned by the Company and a number of other public companies related through common Directors

Deferred Exploration Expenditures

B-57

ANNEX C — INFORMATION REGARDING NEVADA PACIFIC

Overview

Nevada Pacific Gold Ltd. is a gold and silver producer and exploration company based in Vancouver, British Columbia. Nevada Pacific’s principal business activities consist of the production of gold and silver in Mexico and the exploration for and development of gold and silver properties in Mexico and the western United States, primarily Nevada. Its Mexican exploration portfolio covers approximately 890 square miles of mineral rights in Mexico, including the Magistral Gold Mine in Sinaloa, Mexico. Its Nevada property portfolio consists of exploration stage properties with over 85 square miles of mineral rights, including portions of the Battle Mountain/ Cortex and Carlin Trends.

Nevada Pacific Gold Ltd. was incorporated under the laws of the Province of British Columbia on March 11, 1997 under the former Company Act (British Columbia). The Business Corporations Act (British Columbia) replaced the Company Act on March 9, 2004. Pacific Nevada completed a mandatory transition to the Business Corporation Act on November 29, 2004. The address and telephone number of its principal offices are Suite 750, 625 Howe Street, Vancouver, British Columbia, V6C 2T6, (604) 646-0188. Its registered office is located at 19th Floor, 885 West Georgia Street, Vancouver, British Columbia, V6C 3H4. Nevada Pacific is a reporting issuer in the Province of British Columbia and files its continuous disclosure documents with the securities regulatory authorities in that province. These documents are available without charge at www.sedar.com.

The terms mineral resource, measured mineral resource, indicated mineral resource and inferred mineral resource are recognized and required to be reported by Canadian regulations, but the SEC does not recognize these terms. As a result, the information contained in this Annex C relating to mineral resources may not be comparable to similar information publicly reported by U.S. companies. See the section entitled “— Terms Relating to Mineral Resources” on page C-50 of this Annex C. Some terms used in this Annex C may be unfamiliar to you. We have provided a Glossary beginning on page D-47 for your reference.

Authorized and Outstanding Share Capital of Nevada Pacific

Nevada Pacific is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value, with rights to be determined upon issue. As reported by Nevada Pacific in its Management’s Discussion and Analysis of Financial Position and Results of Operations for the fiscal year ended June 30, 2006, the outstanding share capital as of September 28, 2006 consisted of:


	•	70,565,171 common shares;

	•	3,665,000 common share purchase options with a weighted average exercise price of Cdn$1.01 expiring at various dates until June 1, 2016; and

	•	12,700,000 share purchase warrants with a weighted average exercise price of Cdn$0.50 expiring between December 14, 2007 and May 11, 2008.

No preferred shares were outstanding as of September 28, 2006.

Subject to the rights of any holders of preferred shares, the common shares of Nevada Pacific rank equally as to dividends, voting rights (one vote per share) and the distribution of assets of Nevada Pacific on the liquidation, dissolution, winding-up of Nevada Pacific after payment of all liabilities and obligations. Holders of common shares have no pre-emptive rights, nor any right to convert their common shares into other securities. The holders of the common shares are entitled to receive notice of and attend any meetings of shareholders and are entitled to one vote for each share entitled to be voted on the matter at such meetings.

Preferred shares may be issued from time to time in one or more series. The directors may by resolution and before the issue of preferred shares of any particular series (i) fix the number of shares in and determine the designation of, the shares of each series; and (ii) create, define and attach special rights and restrictions to the shares of each series. The preferred shares are entitled to priority over the common shares with respect to the payment of dividends and distributions in the event of the dissolution, liquidation or winding up of Nevada Pacific (in that such distributions are limited to the amount paid up in respect of the preferred shares, together with any premium and unpaid dividends thereon, without any further right to participate in the distribution of assets of Nevada Pacific,

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unless specifically provided in the special rights and restrictions attached to that particular series of preferred shares). The holders of the preferred shares as a class are not entitled to receive notice of, to attend or to vote at any meeting of the shareholders of Nevada Pacific.

The common shares of Nevada Pacific are listed and posted for trading on the TSX Venture Exchange under the symbol “NPG-V.”

Dividends and Dividend Policy

Based on publicly available information, since the date of incorporation, Nevada Pacific has not declared or paid any dividends on its common shares, and does not currently intend to pay dividends. Earnings, if any, will be retained to finance future growth and development of the business of Nevada Pacific.

Corporate Structure

The legal and commercial name of Nevada Pacific is Nevada Pacific Gold Ltd. Nevada Pacific was incorporated under the laws of the Province of British Columbia on March 11, 1997 under the former Company Act (British Columbia) (now replaced by the Business Corporations Act (British Columbia)).

On March 29, 2004, the British Columbia legislature enacted the Business Corporations Act (the “New Act”) and repealed the former act, which previously governed Nevada Pacific. The New Act removed many of the restrictions contained in the former act, including restrictions on the residency of directors, the place of annual general meetings and limits on authorized share capital. The New Act also uses new forms and terminology. Under the New Act, every company incorporated, amalgamated or continued under the former act must complete a mandatory transition rollover under the New Act.

On November 29, 2004, Nevada Pacific was transitioned under the New Act and Nevada Pacific replaced its old Articles with new Articles to avail itself of greater flexibility provided under the New Act. On January 14, 2005, Nevada Pacific’s Notice of Articles were amended to increase the authorized capital to an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.

Nevada Pacific is domiciled in British Columbia, Canada and is a valid company in good standing and operating under the Business Corporations Act (British Columbia). Nevada Pacific’s principal place of business is located at Suite 750, 625 Howe Street, Vancouver, British Columbia, V6C 2T6, telephone (604) 646-0188, E-Mail info@nevadapacificgold.com. Nevada Pacific maintains an exploration office in Nevada through its subsidiary, Nevada Pacific Gold US Inc., located at Suite 208-275 Third Street, Elko, Nevada, 89803, Telephone (775) 753-4396, and a mine site office in Mexico through its subsidiary Compania Minera Pangea, S.A. de C.V., located at Conocido s/n El Magistral, Mocorito, Sinaloa 80800, Mexico, Telephone 52 (673) 734-1990 or 52 (673) 734-1991.

Intercorporate Relationships

Unless the context otherwise requires, all references herein to Nevada Pacific include Nevada Pacific and its subsidiaries. The following chart illustrates the inter-corporate relationships of Nevada Pacific and its principal subsidiaries and their jurisdictions of incorporation, together with the ownership of its principal asset, the Magistral Mine.

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GENERAL DEVELOPMENT OF THE BUSINESS

Three Year History

Nevada Pacific is a mining and exploration company based in Vancouver, British Columbia. Nevada Pacific’s principal property is the Magistral Mine, a gold and silver mine located in Sinaloa, Mexico. Nevada Pacific’s non-principal properties are located in the States of Nevada and Utah, U.S.A. and in various states of Mexico.

Nevada Pacific commenced active business in March 1997. Since its inception, Nevada Pacific has been engaged in the business of exploring for minerals, primarily gold and silver, and acquiring, exploring and developing mineral properties.

During the past three years Nevada Pacific has raised gross proceeds from private placements and an underwritten offering of approximately $22.7 million, gross proceeds of $1.6 million from the exercise of share purchase warrants and gross proceeds of $0.9 million from the exercise of stock options. Nevada Pacific also issued shares related to the acquisition of the Magistral Gold Mine valued at approximately $2 million. Subsequent to June 30, 2006, Nevada Pacific has raised gross proceeds of $1.6 million of which $1.5 million was received from the exercise of share purchase warrants.

In December, 2005, Nevada Pacific entered into an agreement with Mr. Robert McEwen to issue 12,500,000 units at a price of Cdn$0.40 per unit for aggregate proceeds of Cdn$5,000,000. Each unit consists of one common share and one common share purchase warrant with each warrant exercisable to acquire one common share of Nevada Pacific at an exercise price of Cdn$0.50 for a term of two years. As a result of the private placement, Mr. McEwen holds approximately 17.71% of the outstanding shares of Nevada Pacific and, in event of the exercise of all the warrants, Mr. McEwen will hold approximately 30.10% of the outstanding common shares of Nevada Pacific. In accordance with the rules of the TSX Venture Exchange, as this constituted a “change in control”, the placement closed in two tranches. The first tranche, consisting of 6,921,213 units was completed on December 14, 2005 for aggregate proceeds of Cdn$2,768,485. The second tranche for the balance of the units was conditional upon receiving disinterested shareholder approval, which was received at an extraordinary general

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meeting of the shareholders on January 23, 2006. The second tranche of the private placement consisting of 5,578,787 units at a price of Cdn$0.40 for aggregate proceeds of Cdn$2,231,515 was completed on May 11, 2006.

On March 5, 2006 US Gold Corporation, whose Chairman is Mr. Robert McEwen, issued a News Release announcing its intent to acquire all of the outstanding common shares of Nevada Pacific. Nevada Pacific responded by forming a Special Committee on March 6, 2006 and hiring financial advisors on March 15, 2006 to assist Nevada Pacific. Over the past several months Nevada Pacific has been working with its legal and financial advisors to ensure that all requests made of them in relation to this intended offer have been fulfilled. The Special Committee, with its financial advisor, will consider any US Gold Corporation offer, if and when it is received, and will investigate alternatives that may be available to maximize shareholder value.

Magistral Gold Mine

On February 2, 2004, Nevada Pacific completed the acquisition of the Magistral Mine (or “Magistral”) and transformed itself into a producer of gold and silver. Nevada Pacific acquired Magistral from Queenstake Resources Ltd. (“Queenstake”) by purchasing all of the outstanding shares of Queenstake’s wholly-owned subsidiary, Pangea Resources, Inc. (“Pangea”), an Arizona company that beneficially owns 100% of Compania Minera Pangea S.A. de C.V. (“Minera Pangea”). Minera Pangea owns and operates the Magistral Mine. From the time of acquisition, the size of the Magistral Gold Mine claim group has been significantly increased.

Since acquiring Magistral, Nevada Pacific has initiated a revitalization program targeted to increase efficiencies, lower operating costs and increase gold and silver production. The operating improvements to the Magistral Mine were essentially completed in the second fiscal quarter 2005 and the Magistral Mine re-commenced commercial production as of January 1, 2005. Mine operations were suspended in July 2005 due to failure to realize planned gold production levels and resulting cash flow problems. The leaching of residual gold on the heap leach pad continued to October 2006, producing over 14,000 ounces of gold and positive cash flow.

In October 2006 Magistral was placed on care and maintenance. Mining equipment remains parked but is maintained in a “ready to use” condition by a small maintenance staff. The addition of cyanide to solutions and the processing of gold-laden solution through carbon columns in the processing plant were curtailed. The pumping of solutions and operation of other plant equipment will continue on an “as needed” basis to maintain safe pond levels and to ensure the plant equipment can be returned to service when a decision to restart the mine is made.

For the year ended June 30, 2006 revenues were $6,649,300 (2005 — $5,175,235) and the loss from mining operations was $2,370,544 (2005 — earnings of $838,070). The earnings (loss) from mining operations for the year ended June 30, 2005 reflect six months of gold sales and the related expenses, the result of the Magistral Mine recommencing commercial production on January 1, 2005, being the start of revenue recognition, whereas the year ended June 30, 2006 include twelve months of gold sales and the related expenses. During fiscal 2006, Nevada Pacific recognized $3,788,972 of stockpiled ore inventory costs which were deferred as at June 30, 2005. All of the mine operating costs for fiscal 2006 were recognized during the year as there were no costs deferred to the stockpiled ore as of June 30, 2006. The loss for the year ended June 30, 2006 also includes a one-time expense of $305,000 in severance payments incurred in the first quarter when the mine was placed in leach-only mode and staff at the mine was reduced to 31 people.

During fiscal 2005, Nevada Pacific commenced an exploration and drilling program consisting of soil and rock chip sampling, ground-based geophysics consisting of induced polarization and resistivity surveys, trenching, and drilling. This program was focused on targets in the immediate area of Magistral. Nevada Pacific drilled 10 holes totalling 997 metres at Lupita, and 7 holes totalling 778 metres at Sagrado Corazon. Both of these areas contain gold resources and reserves that are part of those stated for the property. The objective of this drilling was to increase those resources and reserves. Results from the drilling are consistent with the known mineralization in these areas. The geophysical program demonstrated the high grade mineralization found at the La Prieta vein does have an anomalous response to Induced Polarization techniques. Other areas included in the survey in close proximity to La Prieta also show a similar anomalous response.

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Other properties — Nevada and Utah

Pursuant to two letter agreements dated September 7, 2004, Nevada Pacific granted Placer Dome U.S. Inc (“Placer Dome”) the right to explore the Keystone and Limousine Butte properties and earn an initial 60% interest therein by spending an aggregate of $5,000,000 and $4,000,000, respectively, on exploration over a five-year period. Placer Dome could terminate the Keystone Agreement at any time during the earn-in period upon giving 30 days prior written notice to Nevada Pacific. Placer Dome could earn an additional 15% interest in the property by completing a feasibility study.

In January 2003, Placer Dome terminated their right to earn an interest in Nevada Pacific’s South Carlin project in Nevada and in October 2005, Placer Dome terminated their right to earn an interest in Nevada Pacific’s, BMX project in Nevada. In April 2006, Placer Dome terminated their rights to earn interest in Nevada Pacific’s Limousine Butte and Keystone projects in Nevada. Nevada Pacific maintains a 100% interest in these projects.

During the past three years, in Nevada, Nevada Pacific has conducted a systematic exploration program which includes mapping, sampling, trenching, geophysics and has drilled on the Limousine Butte, BMX, Amador Canyon, Buffalo Canyon, Keystone, Cornerstone and Timber Creek properties. Nevada Pacific has acquired new properties including the Cornerstone (Pat Canyon) property and the Valmy Antler property in Nevada and the Bat Ridge property in Utah. The significant properties abandoned during the same period are the Amador Canyon property in Nevada, which was written off in fiscal 2005 and a portion of the properties included in the South Carlin project, which were written off in fiscal 2004.

Other properties — Mexico

Exploration activity for Nevada Pacific in Mexico has been ongoing since shortly after the acquisition of the Magistral Mine. This activity has been focused primarily on two projects, the Rocio trend project in Sinaloa, and the El Tule project in Nayarit. During the current fiscal year Nevada Pacific has carried out an aggressive, yet systematic surface exploration program in the area that has expanded the geological mapping and sampling from previous campaigns, as well initiated a trenching program.

During the year ended June 30, 2006, Nevada Pacific spent $1,681,428 (2005-$1,493,402, 2004-$1,591,631) on acquisition and exploration expenditures on its exploration properties, inclusive of $461,042 (2005-$532,842, 2004-$168,145) on Mexican properties, and recovered $11,620 (2005-$211,847, 2004-$293,304) of these expenditures from earn in partners. During the year ended June 30, 2006 $114,360 (2005- $630,332, 2004-$330,285) of exploration expenditures were written off.

Narrative Description of the Business

General

Nevada Pacific’s principal business consists of the production of gold and silver in Mexico and the exploration for and development of gold and silver properties in Mexico and in the western United States, primarily Nevada.

The following is a description of the properties in which Nevada Pacific holds an interest. With the exception of the Magistral Mine, all of the mineral properties in which Nevada Pacific holds an interest are in the early exploration stage and are without a known body of commercial ore.

Magistral Project (Magistral Mine)

Pincock, Allen and Holt (“PAH”) was retained by Nevada Pacific in March 2006 to update resources and reserves for the Magistral Mine and prepare a new technical report titled “Technical Report of the Magistral Gold Mine, Sinaloa, Mexico” dated September 13, 2006 (the “2006 Technical Report”) evaluating the viability of resuming mine operations.

PAH previously prepared resource models and mine designs for the Magistral Project Feasibility Study completed in May 2000 (the “Feasibility Study”) which was commissioned by Queenstake. PAH was subsequently retained by Queenstake in 2002 to update the mineral resource model, ultimate pit design and mine production schedule for the Magistral project’s San Rafael and Samaniego Hill areas on the basis of the results obtained from

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additional drilling conducted by Queenstake in the La Prieta zone of the Samaniego Hill deposit during late 2001 and early 2002. In 2002, Queenstake also requested PAH to prepare a second geologic model and resource estimate specific to the La Prieta zone for use in evaluating the potential for mining part of the mineral resource with underground methods. These updates were reflected in a technical report prepared by PAH for Queenstake dated January 16, 2003 (the “2003 Technical Report”).

In 2004, at the request of Nevada Pacific, PAH amended the 2003 Technical Report prepared previously for Queenstake to reflect the change in ownership of the Magistral project and to report the production up to the time of Nevada Pacific’s acquisition of the Magistral project in February 2004. The resulting report dated January 6, 2005 entitled “Amended Technical Report for the Magistral Gold Project, Sinaloa State, Mexico” was filed by Nevada Pacific on Sedar in January 2005 (the “2005 Technical Report”).

The work done by PAH in 2006 began with an April 2006 site visit to the property by four specialists in the areas of geology, mine operations, plant operations and metallurgy and environmental and permitting. PAH conducted a complete review of mine operating permits, production history, additional data relating to new drilling and recent metallurgical testing in an effort to provide a comprehensive update of mine resources and reserves and finally an economic analysis of resuming mine operations. Their report confirmed mine resources and reserves and indicated the mine would be viable if operations were to resume.

Availability of the 2006 Technical Report

The Summary from “the 2006 Technical Report” is reproduced herein, and is qualified in its entirety by the entire “2006 Technical Report” which is available on Sedar at www.sedar.com.

Summary of Magistral Mine (extracted from “the 2006 Technical Report”)

Background

Pincock, Allen and Holt (PAH) were retained by Nevada Pacific to update the mineral resource and mineral reserve estimates and prepare a National Instrument 43-101 (“NI 43-101”) compliant technical report for Magistral, in Sinaloa Mexico. Previously in January 2005, PAH was retained by Minera Pangea (Pangea), a Mexican subsidiary of Nevada Pacific, to update the previous Technical Reports prepared in compliance with the requirements of NI 43-101.

Previous work by PAH on the Magistral Mine includes the preparation of resource models and mine designs for the Magistral Mine Feasibility Study of May 2000 and an update of the resource models and mine designs in June 2002 to incorporate the results of additional drilling conducted in the La Prieta Zone of the Samaniego Hill deposit. A second geologic model and resource estimate specific to the La Prieta Zone was developed for use in evaluating the potential scenario for mining part of the mineral resource with underground methods. In May 2003, PAH personnel visited the Magistral Mine in order to conduct an operations overview. This overview of the project was cursory in nature and did not include a through review of the reconciliation between the model and production, nor did it include an update of the resource and reserve estimate, nor did it include a detailed look at actual production costs. The 2005 Technical Report updated the work done in May 2003. In April 2006 PAH personnel again visited the Magistral Mine which at the time was on care and maintenance and continued to leach gold from the leach pads.

PAH was retained by Nevada Pacific to generate this report in order to update the resource and reserve based on new drilling, historical production, the current operational status, in order to present the mine production compliant with the requirements of NI 43-101. Production from the mine is reported for informational purposes and the resource and reserve estimates that are presented in this report, which PAH prepared in July 2006, have been updated in this update to reflect the actual production. PAH has reviewed the actual production results, production reconciliation, and cost data for the mining operation and believes this information to be credible and reliable for reserves reporting purposes.

Property and Ownership

The Magistral Mine consists of 9,704 hectares of land located in the Sinaloa state, of northwestern Mexico. It is an open pit mining operation, with heap leach processing facilities, that until July 2005 was operating at a

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production rate of 900 thousand ore tonnes per year. Past production has primarily come from the San Rafael and Samaniego Hill deposits, with the San Rafael deposit being completely mined out and presently being backfilled. Future production is scheduled to come from the three deposits during the course of the remaining scheduled mine life. These deposits are Samaniego Hill, Sagrado Corazón, and Lupita. There are additional exploration targets in the area that will be examined during the project life.

The Magistral Mine is located in northwestern México, within Sinaloa state, Mocorito Municipality, México. The project is located approximately 100 kilometres by air northwest of the Sinaloa state capital city of Culiacán in the western foothills of the Sierra Madre Occidental mountain range. The project area is located approximately 22 kilometres from the village of Mocorito, approximately 40 kilometres from the town of Guamuchil, and approximately 150 kilometres from the city of Los Mochis.

Nevada Pacific owns its interest in the Magistral Mine through its 100 percent ownership of Pangea Resources Inc. which in turn holds 100 percent ownership of Minera Pangea S.A. de C.V. (“Minera Pangea”) which owns the Magistral Gold Mine.

Minera Pangea holds seven mining concessions and has option to an additional three concessions. The titles are granted under Mexican mining law and are issued by Secretaria de Economía, Coordinación General de Minera, Dirección General de Minas (Dirección de Minas).

Geology and Resource Estimation

Mineralization in the Magistral area consists of structural zones in stockwork, breccia, and locally quartz vein mineralization occurring within sheared, broken, and propylitically altered volcanic rocks. The Samaniego Hill structural trend consists of a complex set of major and minor structural zones, with a general northwest strike and a moderate dip to the southwest.

More recent mining activities began when Pangea began exploring the project in early 1995, initially for Mogul Mining NL and subsequently for Santa Cruz Gold Inc. From mid-1995 to early 1997 extensive drilling was conducted by Pangea/Santa Cruz Gold on the San Rafael and Samaniego Hill deposit areas, as well as locally extensive drilling on the Sagrado Corazón-Central-Lupita deposit area. In 1998, Santa Cruz conducted a limited amount of additional drilling for metallurgical samples, reverse circulation hole verification, in-fill purposes, and condemnation of potential surface facility locations. In 1999, after a merger with Santa Cruz Gold, Queenstake conducted a further limited drilling program to step-out/in-fill drill in the Samaniego Hill deposit and to obtain pit-slope geotechnical samples from both the San Rafael and Samaniego Hill deposits. Drilling up to 2000 was used as the basis for the May 2000 Feasibility Study. Queenstake subsequently conducted a drilling campaign from late 2001 to early 2002 in the La Prieta Zone of the Samaniego Hill deposit to delineate extensions of the high grade La Prieta zone along strike and down dip. This drilling was used by PAH in a June 2002 resource and reserve update.

Mineral resource block models were created in early 2000 for use in the generation of the May 2000 Magistral Mine Feasibility Study. Modelling was conducted to honour the mineralization in the Magistral Mine area that consists of structural zones in stockwork, breccia, and locally quartz vein mineralization occurring within sheared, broken, and propylitically altered volcanic rocks. The San Rafael structural trend consists of one main structural zone and several minor zones, with a general east-west strike and a moderate dip to the south. The Samaniego Hill structural trend consists of a complex set of major and minor structural zones, with a general northwest strike and a moderate dip to the southwest.

PAH subsequently updated the Samaniego Hill resource in June 2002, from that presented in the May 2000 Feasibility Study, based on the drilling of 45 additional exploration holes that was conducted between late 2001 and early 2002 in the down-dip La Prieta Zone of the Samaniego Hill deposit. Significant widths of the La Prieta Zone were intercepted, with the zone showing a thickening along a nearly horizontal orientation. The update of the mineral resource and mineral reserves was done using an approach similar to the one used in the original Feasibility Study. In July 2006, PAH again updated the Magistral resource model making adjustments to the grade model based on operating experience in the San Rafael and Sanmaniego Hill areas using as mined blasthole and ore block information as well as updates to the Sagrado Corazón and Lupita areas based on limited new drilling. This update

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had the effect of reducing the mineral resource due to adjustments to the exploration based grade model based on Nevada Pacific mining experience.

PAH’s mineral resource estimate includes all material in the model without regard to mineability, based on a density factor of 2.6 tonnes per cubic meter for all rock material and 1.5 tonnes per cubic meter for historical mill tailings. The resource model accounts for known underground workings and stopes, which are not a significant part of the tonnage being considered by the Magistral Mine. The resource and reserve have been adjusted to reflect mining to the end of July 2005. As of the July 2006 resource update, the Magistral Mine measured and indicated mineral resource was 9.30 million tonnes averaging 1.81 g/t Au for a total of 540,000 contained ounces of gold. The resource is summarized in Table 1-1. The mineral resource estimate is compliant with the NI 43-101 requirements for resource and reserve reporting and is consistent with the Standards for Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP, dated December 23, 2005.

Mining and Reserve Estimation

The July 2006 revised resource models for the Samaniego Hill, Sagrado Corazón and Lupita areas were used as the basis for a revised economic pit analysis and update to the respective pit designs and mineral reserves contained within each area. The approach used by PAH for this update was different than in past modelling efforts.

PAH used the Gemcom Software International’s industry standard Whittle Strategic Mine Planning Software version 3.4 (Whittle 3.4) to perform an economic pit analysis and determine the appropriate ultimate pit for each deposit area based on revised cost and recovery information. Whittle 3.4 uses the Lerchs-Grossmann algorithm for determination of an optimum economic pit for each revenue factor or gold price.

Using the Whittle results as a guide, PAH generated revised ultimate pits for all three deposit areas and a two phase pit design for the Samaniego Hill pit. Generally the ultimate pit designs used the same parametres as the 2000 Feasibility, with the only modification being narrower haul road widths, 7.6 metres for single-lane roads and 15.2 metres for two-lane roads.

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Table 1-2 contains the July 2006 reserve estimate for the entire Magistral Mine summarized by mine area (Samaniego Hill, Sagrado Corazón and Lupita). Due to differing economics and recoveries for each of the deposit areas, different gold cutoff grades were applied, as shown in Table 17-8. At respective economic cutoff grades, the total July 2006 Magistral proven and probable reserve consists of 3.02 million tonnes averaging 2.97 g/t Au for a total of 289,000 contained ounces of gold. This mineral reserve estimate is compliant with the NI 43-101 requirements for resource and reserve reporting and is consistent with the Standards for Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP, dated December 23, 2005.

Conclusions and Recommendations

PAH is of the opinion that the estimate of mineral resources and reserves has been prepared according to accepted industry standards using accepted industry practices and that the work completed has been as thorough and accurate as possible given the available database. PAH is also of the opinion that the mineral resources and reserves are compliant with the NI 43-101 requirements for resource and reserve reporting and is consistent with the Standards for Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP, dated December 23, 2005.

The resource and reserve estimates are based on operating Magistral as an open-pit gold mine using a contract mining service employing Nevada Pacific equipment and within the cost structure presented by Nevada Pacific in the life-of-mine plans and achieving the projected gold recoveries.

TABLE 1-2

Nevada Pacific Gold, Ltd.

Magistral Gold Mine

Mineral Reserve Estimate

Internal

Pit Gold

Cutoff

Gold

Contained

Strip

Grade

Gold

Gold Troy

Ratio

Mine Area

(g/t)

Ore Tonnes

(g/t)

(grams)

Ounces

Waste Tonnes

Total Tonnes

w:o

Samaniego Hill

0.96

Proven

1,065,000

3.99

4,251,000

137,000

Probable

272,000

3.79

1,032,000

33,000

Subtotal

1,337,000

3.95

5,283,000

170,000

17,420,000

18,757,000

13.0

Samaniego Hill-Tailings

0.80

Proven

88,000

1.99

175,000

6,000

2,338

90,338

0.03

Probable

Subtotal

88,000

1.99

175,000

6,000

2,338

90,338

Sagrado Corazon

0.82

Proven

385,000

2.06

793,000

25,000

Probable

59,000

1.47

88,000

3,000

Subtotal

444,000

1.98

881,000

28,000

1,039,000

1,483,000

2.3

Lupita

0.80

Proven

700,000

2.39

1,671,000

54,000

Probable

454,000

2.15

975,000

31,000

Subtotal

1,154,000

2.29

2,646,000

85,000

6,031,000

7,185,000

5.2

Totals

Proven

2,238,000

3.08

6,890,000

222,000

Probable

785,000

2.67

2,095,000

67,000

All Categories

3,023,000

2.97

8,985,000

289,000

24,492,338

27,515,338

8.1

The reserve numbers presented in Table 1-2 are based on gold cutoffs developed using a 3-year rolling average gold price of $450 per ounce. Due to the significant difference in the 3-year rolling average gold price and current spot gold prices, which are in the range of $600-$650 per ounce, a substantial amount of subgrade material is excluded from the reserve numbers due to statutory reserve reporting requirements. If the Magistral Mine resumes

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operations and if gold prices remain in the current range, is believed that much of this material will become economic, and will be profitable to mine and process.

The detailed production schedule included in this report is based on the assumption that this material is uneconomic and therefore would be diverted to a waste facility. Prior to the beginning of production a new production schedule should be developed that incorporates this material using a more appropriate gold price given current conditions. This will have the effect of increasing the gold ounces produced and reducing the overall stripping requirements; further enhancing the project’s economics.

The Magistral Gold Mine produces a net cash flow of $17.4 million over the life of mine producing a pre-tax cash flow of $12.7 million at a 5 percent discount rate and $9.3 million at a 10 percent discount rate resulting in a 49 percent Internal Rate of Return (IRR) in the Base Case.

The projects economic sensitivity to major cost and physical variables indicates that the project is highly sensitive to cash operating costs, but in all cases produces an IRR greater than 20 percent.

Additional Disclosure — Update of Magistral Project

Revitalization Program and Commencement of Commercial Production

From the time of acquisition of the Magistral Mine in February 2004 to the end of December 2004, Nevada Pacific considered the Magistral Mine to be in a pre-commercial operating phase. During that period, the Magistral Mine produced 14,465 ounces gold and 13,342 ounces of silver. All expenditures, net of revenue, during that period were capitalized to plant and equipment.

In 2004, Nevada Pacific completed a revitalization program to increase efficiencies, lower operating costs and increase gold and silver production at the Magistral Mine. As a result of the revitalization program, Nevada Pacific re-commenced commercial production at the Magistral Mine on January 1, 2005.

The following operating improvements to the Magistral Mine were made as part of the 2004 revitalization program:

1. Leach Pad — Nevada Pacific reviewed the efficiency and recovery rates of the leach pad and determined that it was necessary to improve the pH control through the addition of lime in order to optimize precious metals recovery rates. As a consequence, Nevada Pacific restacked an estimated 650,000 tonnes of the 1.1 million tonnes of ore in place.

2. Crushing Circuit — The secondary crusher was reinstalled in early May 2004, having been offsite for retooling and machining. Further modifications to the crushing circuit, including the conversion from a standard cone crusher to a short head configuration and the purchase of a screen with a larger capacity, have been completed. The crushing circuit was reconfigured with new conveyors to operate in a closed circuit mode. These modifications were completed and increased through-put to an average rate of 70,000 plus tonnes per month during 2005. In this new configuration smaller screens were added to consistently produce an average size of the crushed ore of between 1/2” and 3/4”.. The smaller crushed ore size better ensured planned overall gold recoveries could be achieved.

3. Process/Recovery Plant — Three additional carbon columns were added to the recovery plant along with other modifications to increase capacity from 175 cubic metres to 275 cubic metres per hour of solution through-put, thereby improving gold and silver recovery.

4. Mining — Nevada Pacific completed a thorough review of the mine fleet and determined that additions to the mine fleet would be necessary to achieve a peak annual mining rate to 7.0 million tonnes from the historical rate of 4.7 million tones mined in calendar 2003. The additions to the mine fleet were two Caterpillar 777 haul trucks (80 tonne capacity) and one Caterpillar 992 12 cubic yard front end loader. The additions to the mine fleet increased hauling capacity to the ore processing facilities, allowing the facilities to operate at full capacity. In addition, Nevada Pacific utilized new waste rock dumps closer to the pits to shorten haulage distances and improve efficiencies of truck operations.

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Curtailment of Open Pit Mining/Continuance of Leaching

In July 2005 due to increasing costs and gold prices in the low $400 per ounce range, the decision was made to suspend open pit mining operations and the placement of new ore on the heap leach pads. The leaching of existing ore material on the pads continued uninterrupted though early October 2006. During this period of time staffing was reduced and other operational efficiencies were made to lower costs. This coupled with an improving gold price enabled the mine to be cash flow positive during this period. From July 2005 through mid-October 2006 the mine produced an additional 14,000 ounces of gold and 15,000 ounces of silver. Gold sales were at an average price well over $500/ounce.

Care and Maintenance

In October 2006 the mine was placed on care and maintenance. Mining equipment remains parked but is maintained in a “ready to use” condition by a small maintenance staff. The addition of cyanide to solutions and the processing of gold-laden solution through carbon columns in the processing plant were curtailed. The pumping of solutions and operation of other plant equipment will continue on an “as needed” basis to maintain safe pond levels and to ensure the plant equipment can be returned to service when a decision to restart the mine is made.

Staffing levels will be adjusted to the minimum required for these efforts and also to support and active exploration program in the mine area. The mine is serving as a base of operations for this exploration effort and is provided manpower equipment for use in shallow drilling, trenching, and road building programs. In addition, the assay laboratory continues to provide assay support for many of the samples being generated by this ongoing exploration program.

The evaluation of options to restart the mine continue to be examined using “the 2006 Technical Report”. Efforts continue to be made to finalize the elements of a mining contract and to optimize the production schedule.

Carrying on Business in Mexico

Nevada Pacific’s operations in Mexico are governed primarily by the following regulations:

Mexico Foreign Investment Regulations

Foreign investment regulation in Mexico is governed by the Law of Foreign Investment which provides investment rights to investors from all countries on the same basis as granted to investors from the United States and Canada under the North American Free Trade Agreement. Foreign investment of up to 100% in Mexican mining companies is freely permitted with the requirement that such companies must register with the National Registry of Foreign Investment, which is maintained by the Ministry of Commerce and Industrial Development.

Mexico Mining Regulations

Exploration and exploitation of minerals in Mexico may be carried out through Mexican companies incorporated under Mexican law by means of obtaining exploration and exploitation concessions. Exploration concessions are granted by the Mexican government for a period of six years from the date of their recording in the Public Registry of Mining and are not renewable. Holders of exploration concessions may, prior to the expiration of such exploration concessions, apply for one or more exploitation concessions covering all or part of the area covered by an exploration concession. Failure to do so prior to expiration of the term of the exploration concession will result in termination of the concession. An exploitation concession has a term of 50 years, generally renewable for a further 50 years upon application within five years of the expiration of such concession. Both exploration and exploitation concessions are subject to annual work requirements and payment of annual surface taxes which are assessed and levied on a biannual basis. Such concessions may be transferred or assigned by their holders, but such transfers or assignments must be registered in order to be valid against third parties.

The holder of a concession must pay biannual duties in January and July of each year on a per hectare basis. Concessionaires for both exploration and exploitation must perform work each year that must begin within ninety days of the concession being granted. Concessionaires must file each May proof of the work performed. Non-compliance of these requirements is cause for cancellation of the corresponding concessions.

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Foreign citizens or foreign corporations may also obtain mineral exploration and exploitation concessions. Foreign citizens are required to register their investment in the National Registry of Foreign Investment. In the case of foreign corporations, in addition to registration in the National Registry of Foreign Investment, additional authorization from the Ministry of Commerce and Industrial Development is required in order to obtain subsequent registration in the corresponding local Public Registry of Commerce.

Mexican mining law does not require payment of finder’s fees or royalties to the government, except for a discovery premium in connection with national mineral reserves, concessions and claims or allotments contracted directly from the Council of Mineral Resources. None of the claims held by any subsidiaries of Nevada Pacific are under such a discovery premium regime.

There are no limitations on the total amount of surface covered by exploration or exploitation concessions or on the amount of land held by an individual or company. Excessive accumulation of land is regulated indirectly through the duties levied on the property and the production requirements as outlined above.

Mexico — Taxation

The Mexican general corporate tax rate is 30%. The tax procedures allow for the carry-forward of losses for a period of up to 10 years, indexed for inflation. The Magistral Mine is not expected to attract corporate tax for the first several years of production due to loss carry-forwards.

Mexico Environmental Law

The Environmental Law in Mexico called the General Law of Ecological Balance and Protection to the Environment (“General Law”), provides for general environmental policies, with specific requirements set forth in regulations called “Ecological Technical Standards”. Responsibility for enforcement of the General Law, the regulations and the Ecological Technical Standards is with the Ministry of Environment, Natural Resources and Fishing, which regulate all environmental matters with the assistance of the National Institute of Ecology and the Procuraduria Federal de Proteccion al Ambiente.

The primary laws and regulations governing environmental protection for mining in Mexico are found in the General Law, the Ecological Technical Standards and also in the air, water and hazardous waste regulations, among others. In order to comply with the environmental regulations, a concessionaire must obtain a series of permits during the exploration stage. Generally, these permits are issued on a timely basis after the completion of an application by a concession holder. The subsidiaries of Nevada Pacific are currently in full compliance with the General Law and its regulations in relation to their mineral property interests.

Other Properties

Nevada Pacific’s other properties are located in Nevada, Utah and Mexico. The Nevada properties include the Limousine Butte property, BMX property, Keystone property, Cornerstone property, Clover Valley project, Buffalo Canyon property, Timber Creek property, Valmy Antler property and South Carlin property (see Figure A). The sole property in Utah is the Bat Ridge property. The Mexican properties include the Rocio Trend (see Figure B) project and the El Tule project (see Figure C). As stated in its Annual Information Form for the fiscal year ended June 30, 2006 dated October 24, 2006, these properties are considered by Nevada Pacific to be not material. These properties are presently in the exploration stage and are without a known body of commercial ore. None of these properties have any surface plant or equipment.

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Figure A

Nevada Pacific Gold Ltd. — Other Property Locations (Nevada)

Limousine Butte Property

The Limousine Butte property is located in east-central Nevada, along the eastern portion of Butte Valley and along the western edge of the Cherry Creek Range. The property is within White Pine County and about 40 miles northwest of Ely, the county seat. The Limousine Butte property currently consists of 971 unpatented Federal lode mining claims covering an aggregate of approximately 31 square miles (19,420 acres) which were acquired by staking.

The Limousine Butte property was subject to a previous joint venture between Nevada Pacific and Newmont Gold Company (“Newmont”), but in March 2003 Nevada Pacific acquired all of Newmont’s interest in the property in return for a net smelter returns royalty granted to Newmont on a sliding scale of 1.5% to 2.5% on all production from the property and from any claim acquired by Nevada Pacific within one mile of the property, with an advance payment to Newmont of $1.0 million to be made at the commencement of commercial production and credited against future royalty payments.

Pursuant to a letter agreement dated September 7, 2004 (the “Limousine Butte Agreement”) among Nevada Pacific and Placer Dome, Nevada Pacific granted Placer Dome the right to earn a 60% interest in the Limousine Butte project by spending $4,000,000 on exploration over a five-year period. With the exception of initial expenditures during the first year in the amount of $250,000, Placer Dome was not obligated to make any expenditures on the property (although such expenditures are required to maintain Placer Dome’s option to acquire the 60% interest) and Placer Dome could terminate the Limousine Butte Agreement at any time during the earn-in

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period upon giving 30 days prior written notice to Nevada Pacific. Placer Dome could earn an additional 15% interest in the property by completing a feasibility study. As provided in the Limousine Butte Agreement, Placer Dome Inc. (the parent company of Placer Dome) agreed to subscribe for 1,340,825 common shares of Nevada Pacific at the purchase price of Cdn$0.97 per share for gross proceeds of $1,000,000, which shares were issued on September 8, 2004.

As of September 7, 2005, Placer Dome had met its first year expenditure requirement by spending US$512,746 and had paid land holding costs of US$105,466. On April 26, 2006, Nevada Pacific received notification from Placer Dome of its election to terminate the Limousine Butte Agreement and Nevada Pacific maintains a 100% interest in the project.

During fiscal 2006, Placer Dome continued geologic mapping and sampling and completed a total of 2,700 feet of drilling in six holes in the Resurrection Ridge area. Exploration at Limousine Butte has identified a corridor of alteration and mineralization over nine miles in length. Numerous gold-bearing hydrothermal cells have developed along this corridor, where major structural intersections occur in favourable host rocks. Multiple near-surface gold anomalies have now been identified within the corridor. Each of the gold zones has the potential to increase in size with further drilling.

BMX Property

During 2002, Nevada Pacific acquired mineral rights to the Battle Mountain (“BMX”) project. The BMX property consists of 531 unpatented Federal lode mining claims (covering approximately 16.3 square miles) acquired by staking within the Humboldt and Lander Counties and is centered 6 miles northeast of Battle Mountain, Nevada. Interstate 80 forms much of the northeast boundary of the property and the rest is accessible by 4 wheel drive roads.

The exploration model is for copper-gold skarn deposits (comparable to the Copper Basin deposit) or structurally controlled disseminated gold deposits (comparable to those of the Marigold and Lone Tree mines). The BMX property includes five major gold-silver exploration targets and is centered on the northeast segment of the Battle Mountain escarpment. Mineralization consists of epithermal alteration, including quartz stockwork, silicification and skarn associated with strong north/south structural trends.

Pursuant to a letter agreement dated November 27, 2002 (the “BMX Agreement”) between Nevada Pacific and Placer Dome, Nevada Pacific granted Placer Dome the right to earn an initial 60% interest in the BMX project by spending an aggregate of $4,000,000 on exploration on the project over a five-year period. With the exception of initial expenditures in the amount of $250,000, Placer Dome was not obligated to make any expenditures on the property (although such expenditures are required to maintain Placer Dome’s option to acquire the 60% interest) and Placer Dome could terminate the BMX Agreement at any time during the earn-in period upon giving 30 days prior written notice to Nevada Pacific. Placer Dome could earn an additional 10% interest in the property by completing a feasibility study.

On October 21, 2005, Placer Dome gave notice of termination of the agreement and Nevada Pacific now holds a 100% interest in the project.

Bluebird Property

The Bluebird gold property lies within the joint venture area of interest with Placer Dome on Nevada Pacific’s BMX project and is thereby subject to the BMX Agreement. The Bluebird property consists of 10 unpatented mining claims located at the northern end of the Battle Mountain Trend, Lander County, Nevada. By a letter agreement dated December 30, 2002 and a subsequent mining lease agreement dated April 30, 2003 (together, the “Bluebird Lease”) between Nevada Pacific and an individual owner at arms’ length to Nevada Pacific, Nevada Pacific entered into a 10 year mining lease in respect of the Bluebird property with exploration rights renewable in 5 year increments with the property owner retaining a 3% net smelter returns royalty. Nevada Pacific can purchase one-half of the net smelter returns royalty at any time upon payment of $500,000 per percentage point. Advance royalties payable to the owner are $1,500 on signing, $7,500 upon completion of the formal lease, $10,000 on each anniversary of the agreement until the ninth anniversary, and $25,000 on the tenth and subsequent anniversaries.

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A total of 3,410 feet was drilled, on the BMX property, in eight reverse circulation drill holes during the spring of 2006. The following table summaries the results of this drilling:

Drill Hole

interval

thickness

gold (opt)

silver (opt)

arsenic (ppm)

antimony (ppm)

BMXR06-01

NSA

BMXR06-02

445’-450’

5 feet

0.027

NSA

BMXR06-03

15’-20’

5 feet

0.016

NSA

BMXR06-04

110’-175’

65 feet

0.031

1.83

7,236

130

including

110’-120’

10 feet

0.072

6.51

10,000

53.2

including

150’-160’

10 feet

0.05

1.07

10,000

320

205’-215’

10 feet

0.036

10,000

44.2

BMXR06-05

NSA

BMXR06-06

30’-40’

10 feet

0.022

NSA

2,230

15.8

BMXR06-07

NSA

BMXR06-08

200’-215’

15 feet

0.01

NSA

320’-325’

5 feet

0.015

NSA


*		NSA — no significant assays

Keystone Property

The Keystone property is located on the northwest flank of the Simpson Park Mountains, Eureka County, Nevada, approximately 18 miles south of Crescent Valley. The property lies within the Battle Mountain-Eureka Gold Trend that includes the Eureka, Cortez, Gold Acres and Battle Mountain deposits. Nevada Pacific acquired the Keystone project in Nevada through staking and the purchase of two patented claims in 1999, and expanded the property in 2002 through staking of 109 unpatented mining claims. Total holdings consist of 371 unpatented mining claims, for an approximate area of 11.6 square miles.

The Keystone property includes base-and precious-metal mineralization that occurs along the edge of the Keystone Window in both upper and lower plate rock, near the northern contact of a 33.4 million-year-old granodiorite stock.

Pursuant to a letter agreement dated September 7, 2004 (the “Keystone Agreement”) among Nevada Pacific and Placer Dome, Nevada Pacific granted Placer Dome the right to explore the Keystone property and earn an initial 60% interest therein by spending an aggregate of $5,000,000 on exploration over a five-year period. With the exception of initial expenditures during the first year in the amount of $350,000, Placer Dome was not obligated to make any expenditures on the property (although such expenditures are required to maintain Placer Dome’s option to acquire the 60% interest) and Placer Dome could terminate the Keystone Agreement at any time during the earn-in period upon giving 30 days prior written notice to Nevada Pacific. Placer Dome could earn an additional 15% interest in the property by completing a feasibility study.

The terms of the Keystone Agreement will apply and extend to any right, title or interest acquired by Nevada Pacific or Placer Dome within the exterior boundaries of the Keystone property. However, Placer Dome’s option to acquire a 60% interest in the Keystone property did not apply to any silver or base metals (the “reserved minerals”) located on or in the property (other than silver associated with a gold/silver deposit or copper associated with a gold/copper deposit). Nevada Pacific retained the right to enter on the property in order to explore for any reserved minerals; however, if Nevada Pacific’s exploration activities are incompatible with, or interferes with Placer Dome’s activities or operations under the Keystone Agreement, Placer Dome could require Nevada Pacific to terminate its exploration activities for reserved minerals within 120 days notice.

During the first quarter of fiscal 2006, land holding costs for the year of $40,254 were paid by Placer Dome. Three stratigraphic drill holes (total footage of 5,496.2 feet) were drilled to test for the depth to lower plate rocks along the range front. The first drill hole was lost in upper plate siltstones, whereas the other two holes successfully encountered Roberts Mountain lower plate carbonate rocks.

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Hole PKSN0502 encountered the Roberts Mountain Thrust at 1,600 feet and remained in lower plate carbonaceous limestone and locally tremolite-rich garnet skarn to the bottom of the hole (2,520.6 feet). Trace element assays are pending for the zone below 1,700 feet (lower plate rocks); however, the zone above 1,700 feet contained a high value of 187 ppb gold, 1,825 ppm arsenic, 1.97 ppm mercury and 137 ppm antimony.

Hole PKSN0503 encountered the Roberts Mountain Thrust at 600 feet and remained in lower plate limestone to a depth of 1,720 feet where it intersected diorite and granodiorite associated with the Keystone Stock. The hole contained a high gold value over five feet of 27ppb; however, it contained a very anomalous Carlin-style suite of trace elements over the interval from 400 feet to 1,530 feet. This interval averaged 644.3 ppm arsenic, 2.10 ppm mercury, 68.5 ppm antimony and 7.98 ppm thallium.

During the year ended June 30, 2006, Nevada Pacific spent $97,606, net of recoveries, on the Keystone property. Of this amount $80,104 was spent directly on drilling costs. The 2005 drilling program by Nevada Pacific consisted of 3,254 feet drilled in seven holes. Disseminated sulfides and semi-massive to massive sulfides were encountered in all seven drill holes. Zone widths varied from five feet to seventy feet thick, the later being mostly disseminated zones. Garnet skarn zones that contained mineralization on surface also exhibited mineralization at depth. Drilling within the intrusive exhibited broad zones of sulfides ranging from disseminated to semi-massive.

On April 26, 2006, Nevada Pacific received notification from Placer Dome of its election to terminate the Limousine Butte Agreement and Nevada Pacific maintains a 100% interest in the project. Although no currently economic zones were delineated from drilling, trace element values encountered are of interest, and Nevada Pacific intends to review the data generated by Placer Dome in 2005, and retain the property for future exploration. Further drilling is planned during the late fall season of 2006.

Cornerstone (Pat Canyon) Property

The Cornerstone property is located in Eureka County, Nevada less than three miles east of Nevada Pacific’s Keystone project and approximately 12 miles south of Placer Dome’s Cortez Hills and Pediment gold projects. The 4.8 square mile Cornerstone property consists of 156 claims in five separate claim blocks.

In May 2006, Nevada Pacific increased the size of the Cornerstone project through the addition of the Freestone property. The 100% owned Freestone Property consists of 50 claims or 1.5 square miles and lies 12 miles southeast of the 10 million ounce Cortez Hills/Pediment deposit and immediately adjacent to the Tonkin Springs property.

The remainder of Nevada Pacific’s interest is held pursuant to a mining lease made effective as of May 25, 2004 (the “Lease”) which extends for a period of 10 years (renewable in 5-year increments to a maximum term not exceeding 99 years subject to certain conditions) and grants Nevada Pacific the exclusive right to explore and develop the property, including the right to produce and market any minerals thereon with the lessor retaining a sliding scale gross production royalty (in respect of production of gold, silver, platinum or palladium, a 3-4% gross production royalty based on a range of prices per ounce; for production of other minerals, a 2% gross production royalty). In order to maintain the Lease, Nevada Pacific is required to make the following minimum advance royalty payments to the lessor: $10,000 on signing of the Lease; $10,000 in 2005; $20,000 in 2006; $30,000 in 2007; and the greater of $50,000 or the dollar equivalent of 130 ounces of gold in 2008 and annually thereafter for the remaining term of the Lease. In addition, Nevada Pacific is required to make annual work expenditures of $50,000 on the property until the commencement of commercial production on the property.

The first phase drilling and trenching at Cornerstone was completed on September 19, 2005. Mineralization encountered in Trench #1 totalled 180 linear feet of 0.041 opt gold, containing 30 feet of 0.204 opt in a structure located on the eastern edge of the trench. Trench #6 was located 200 feet south of Nevada Pacific’s Trench #1 and contained 205 feet of 0.012 opt gold, including 75 feet of 0.021 opt gold, along with anomalous trace element geochemistry. Drilling permits to drill the Trench #6 area were approved; however, adverse weather conditions pushed the initiation of further drilling of this area to June 2006.

Drilling and trenching to date at Cornerstone has targeted the CSZ Zone as the priority area of interest at this time. Some of the rocks exposed at the surface have tentatively been assigned (by age date relationships and lithology) to the Horse Canyon Formation, which is one of the ore hosts for the mineralization at Cortez Hills. The

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mineralization, in the trenches and drilling, is hosted in intensely altered and brecciated, cherty to silicified, siltstones (and locally limestones and shales) with the high grade mineralization being controlled by north/south and northeast trending silicified structures. Age dating has shown that lower plate rocks are exposed in the Cornerstone area and further studies are on going to better define the aerial extent of these lower plate units.

Nevada Pacific’s geologic team believes that the drilling and trenching in the CSZ Zone has shown the presence of three potentially stacked mineralized zones, of which two of the zones have been cut by trenching and the third intersected in drilling. This theory will be tested in the up-coming drilling which will target three additional drill holes in this area. The main objective of the drilling will be to test for favourable host rock at or near the intersections of the structures that appear to control the higher gold grades. The drilling completed to date in the Flag Zone and the Southern Flag Zone show low ppb gold values in all of the drill holes and increasing trace elements at depth.

Trench #2 and trench#4 returned significant gold numbers that will be followed up on, based on our new understanding of the geology in the CSZ Zone. The increase in Carlin-style trace geochemistry in the bottom of the drill holes may indicate that the mineralization encountered in the CSZ Zone to be faulted downward as you move northward towards the Flag Zone. Deeper drilling is targeted for this area.

In 2004 Nevada Pacific conducted surface exploration on the property, which identified a potentially significant

Clover Valley Project

The Clover Valley project consists of 66 unpatented Federal lode mining claims covering approximately 1,320 acres located along the western edge of the Spruce Mountain mining district approximately 35 miles south of Wells, Elko County, Nevada.

The target area for gold mineralization at Clover Valley is in the lower portion of the Pilot Shale together with related fault structures that is a proven host at the multi-million ounce Alligator Ridge and Rain mines, situated approximately 50 miles to the southwest and west, respectively. The upper portion of the Pilot Shale is a thin bedded, impermeable mudstone that may have acted as a barrier to upward moving mineralizing fluids, thus trapping gold bearing solutions within the lower portion of the Pilot Shale.

Buffalo Canyon Property

The Buffalo Canyon Gold project is located on the west flank of the Shoshone Range, approximately four miles south of the town of Ione, Nye County, Nevada. The project is comprised of 44 lode claims acquired by Nevada Pacific by staking in 2002 and covers an intrusive-related gold system with five known gold targets. Only one of the targets has previously been drill tested.

In 2005, Nevada Pacific completed a 10,520 foot reverse circulation drilling program budgeted at US $250,000. The drill program was designed to further define the potential for this project as a possible bulk tonnage open pit, heap leach, operation. Twenty-three drill holes were drilled, with depths ranging from 215 to 525 feet. The drilling program was designed to test the southern portion of a 1,600 foot by 2,600 foot, open-ended (greater than 50 ppb) gold soil anomaly located over the project area. Drilling shows that the southern portion of this soil anomaly contains a significantly large zone of low-grade gold mineralization. Thicknesses of up to 500 feet, containing 0.012 ounces per ton, occur over an area measuring approximately 300 feet by 500 feet. Drill road sampling in this area has returned gold numbers up to 0.021 ounces per ton over 160 linear feet. Preliminary evaluation of the surface sampling and drilling results, along with additional reconnaissance geology and geophysics, indicates that the project area may lie above a potential porphyry gold/copper system.

Timber Creek Property

The Timber Creek project is comprised of 311 unpatented claims located in Lander County, Nevada on the southwest flank of the Battle Mountain Range. It covers 9.7 square miles in the area of the Battle Mountain/Eureka Trend. The project lies 5 miles to the southwest of Nevada Pacific’s BMX project.

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In April 2006, Phase I drilling commenced on Nevada Pacific’s Timber Creek property located in Lander County, Nevada. The 100% owned property covers approximately 6 square miles on the northern end of the Battle Mountain/Eureka gold trend. The Phase I drilling program consisted of 11,260 feet of drilling in 23 holes at a cost of approximately $240,000. A total of 48 drill pads have been permitted to test seven target areas on the district scale land package.

Assay results showed drill hole TCR06-03 encountering 20 feet of 0.02 opt gold at 130 feet to 150 feet, under 130 feet of pediment cover. This zone appears to be structurally or stratigraphically controlled and further drilling is warranted in this area. Assay results for drill holes TCR06-15 and TCR06-16, located two miles northwest of TCR06-03 returned significant base metal assays. Drill hole TCR06-15 was drilled to 500 feet and bottomed in 100 feet of 0.209% zinc and 910 ppm copper from 400 to 500 feet. Drill hole TCR06-16 was drilled to 540 feet and bottomed in 300 feet of 0.19% zinc (including 100 feet of 0.27% zinc from 440 to 540 feet) and 653 ppm copper. These two holes lie on the southeast edge of what appears to be an area of base-metal zoning related to the copper/moly porphyry which is exposed in trenching 3,000 feet north of the area drilled. Further drilling in this area is warranted and will begin once additional drill sites have been approved.

Valmy Antler Property

This property includes 94 claims (2.9 square miles) in the Battle Mountain District, and lies adjacent to Newmont’s Lone Tree Mine and Glamis Gold’s Marigold Mine, and is thought to have potential for open-pit gold deposits similar to those in the district. There are no historic mine workings. Although there is no outcrop due to alluvial fill, drilling has established the presence of the favourable Antler Formation, which hosts the gold deposits at Lone Tree and Marigold.

Gravity geophysics in the past has assisted in defining target areas and Nevada Pacific has a budget of US$104,645 for Valmy for 2006, to include soil samples, soil-gas surveys, and 2,000 feet of reverse circulation (RC) drilling.

South Carlin Project

The South Carlin gold project is located along the Carlin Trend in Elko County, Nevada. Nevada Pacific’s principal interest in the South Carlin project is Woodruff Creek. Nevada Pacific had interests in the Tomera Ranch and South Carlin properties, which it elected not to continue with in fiscal 2004.

The Woodruff Creek Property Consists Of Contiguous Unpatented Federal Lode Mining Claims Located Within Elko County, South Of The Town Of Carlin, Nevada Covering An Area Of Approximately 640 Acres. Nevada Pacific Acquired The Claims From Kennecott Exploration Company (“Kennecott”) In January 2001 By Incurring Over $500,000 In Exploration Expenditures Over A Four-Year Period And By Paying $50,000 To Kennecott. Kennecott Agreed To Eliminate Its Back-In Right To Reacquire A 51% Interest In Exchange For An Uncapped 1% Net Smelter Return.

Some Of The Past Drilling Demonstrated Deep Exploration Potential. Hole Sc-99-02 Encountered A 750-Foot Zone Of Hydrothermal Alteration From 1.930 To 2,680 Feet. The Upper 200 Feet Of The Zone Contained Moderate/Intense Clay Alteration With Anomalous Gold And Pathfinder Elements: Barium Greater Than 4%; Mercury Up To 5 Ppm; And Arsenic Up To 850 Ppm. The Middle Portion Of The Zone Contained Altered Black Mudstones Including Calcite-Illite-Iron-Dolomite-Pyrite-Barite Matrix Breccia And Crackle Breccia. At The Bottom Of The Hydrothermal Zone, Drilling Encountered A Significant 178-Foot Thick Section Of Calcareous Sedimentary Rock Containing Multiple Breccias, Shearing, Clay Gouge, Abundant Disseminations Of Sulphides (Up To 20%), As Well As Anomalous Gold And Pathfinder Elements.

Bat Ridge Property

The Bat Ridge property, Nevada Pacific’s sole property in Utah, is located eleven miles northwest of Milford, in the Beaver Lake Mountains. The project consists of 169 unpatented claims and one State Lease (523 fee acres). Bat Ridge is a large Tertiary granodiorite intrusion which has resulted in widespread metamorphism and the introduction of base- and precious-metals. The area of interest hosts skarn-related copper, silver and gold

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mineralization. The pediment is bordered to the southwest and south by granodiorite outcrops, and the zone of potential mineralization is covered by what is interpreted to be upper plate rocks to the west.

Past work included mapping, a ground magnetic survey and three drill holes completed within the project area. The results of the historical exploration work indicated the presence of potentially significant copper, silver and gold content within the boundary of the unpatented claim block. A rock chip sampling program in 2004 focused on a one square mile area where a total of 92 samples were taken, defining an area of anomalous values 600 feet wide by 1,500 feet long that extends under pediment cover. Based on a newly completed airborne magnetics survey, the trend of sediments appears to continue eastward, under pediment cover, for approximately 8,000 feet. Highlights of the program included 35 copper values ranging from 0.13% to 8.67%, 27 silver values ranging from 0.16 ounces per ton to 5.43 ounces per ton, and 11 gold values generally ranging from 0.010 ounces per ton to 0.074 ounces per ton (with one sample of 1.232 ounces per ton).

Results from three historic rotary RC holes (completed on Bat Ridge in 1964) included 35 feet (from 10 to 45 feet) grading 0.11 ounces of gold per ton, 2.8 ounces of silver per ton, and 3.40% copper; 60 feet (from 0 to 60 feet) of 0.22 ounces of gold per ton, 1.77 ounces of silver per ton, and 2.85% copper; and 95 feet (from 5 to 100 feet) of 0.36 ounces of gold per ton, 1.66 ounces of silver per ton, and 2.35% copper. These intercepts are of interest for a skarn-hosted, bulk tonnage, copper-gold deposit. For 2006, Nevada Pacific intends to complete rock and soil sampling and 10,000 feet of RC drilling, with an estimated cost of US$411,000.

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Figure B
Nevada Pacific Gold Ltd. — Other Property Locations (Mexico — Rocio Trend project)

Rocio Trend

Exploration on the Rocio Trend has been ongoing since the spring of 2004 when two claims, Rocio and Shakira, were staked. The Rocio Trend is located approximately 15 kilometres west of the Magistral Gold Mine in Mexico. With subsequent staking since that time this claim group now totals more than 168,000 hectares. The claims adjoin the claim group acquired with the purchase of the Magistral Gold Mine, and cover an area primarily to the west and north of the mine. In June and July of 2006 additional claims covering approximately 29,000 hectares were filed to cover mineral occurrences discovered during reconnaissance work and cover areas internal to the current claims that had become open.

Compilation of available historical data, augmented by Nevada Pacific’s fieldwork, has identified numerous northwest trending zones that host mineral occurrences with a variable metal content that includes gold, silver, copper, lead, and zinc. The Rocio Trend has received the majority of the exploration focus within the claim group and covers an area that is at least 16 kilometres long and 5 kilometres wide. Many of the showings have an alteration assemblage and geological characteristics similar to that found with gold mineralization at Magistral, while others such as the more base-metal rich showings may require a different geological model to explain their genesis. The Rocio Trend is not the only area of interest within Nevada Pacific’s claim block. Compilation of data available from historic work by the Mexican Government work shows at least 85 identified showings within our claim group. The systematic review of all of these is not yet complete. Additional reconnaissance work is required to fully demonstrate the potential of the mineral concessions.

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Initial mapping and prospecting has identified numerous showings aligned along this northwest trend. The most significant showings identified thus far are Revancha, Venado, Cobre Lomes, Twin Domes, and Shakira. There is also a significant past producer of silver within the claim, known as Palmarito; where previous drilling has outlined a historical silver resource of approximately 9,900,000 troy ounces. These estimates are not compliant to the current National Instrument 43-101 reporting requirements and are not classified as resources by Nevada Pacific at this time. These estimates mentioned should not be relied upon. In late September of 2006 Nevada Pacific initiated a core drilling program that plans on testing most of the targets described below. The first phase of this core program is scheduled to complete 3,000 metres of drilling with a budgeted cost of approximately $400,000.

A summary of work completed in the current areas of interest is as follows.

Revancha Area

The Revancha area is the southern most mineralized zone identified within the claim package to date. There is historical evidence of mining in the form of underground workings where a gold vein was worked on two levels. There is no record of this production to determine a mined grade or tonnage. These workings that consist of numerous adits and shafts that are currently not accessible. Work completed to date consists of surface grab sampling, completion of a soil sample grid, and trenching and results show potential for both precious and base metals over a strike length of greater than 2 kilometres.

During the year one additional “option to purchase agreement” was signed with a third-party to acquire an additional 93 hectares of mineral concessions internal Nevada Pacific’s concession.

The database collected during the fiscal year includes 63 grab samples and 585 soils samples taken on a grid covering an area 1,500 metres north-south by 1,300 metres east-west. Grab sample values range from not detectable to 9.39 g/t gold and 513 g/t silver. The soil samples returned gold and silver values ranging from not detectable to 0.658 ppm gold and 19 ppm silver. The most significant sample result to date is from a float sample with a silver value of 8.2 kg/t (8,200 g/t).

The trenching program collected 1,029 samples in 29 trenches totalling 2,283 metres. The most significant intercept from recent trenching shows 20 metres of 158.3 g/t silver and 1.55% lead, including 6 metres of 474 g/t silver and 4.31% lead, which includes 2 metres of 1,195 g/t silver and 6.86% lead.

The geology of the area consists primarily of andesite rock units. The only intrusive rocks observed in the area are hypabyssal ryolite stocks and dykes that are unaltered. Mineralization identified is found in the andesite package within vein structures that strike north-northwest and have steep dips to the west. These structures are interpreted to have a strike length of more than 2,000 metres.

Cobre Lomas Area

The Cobre Lomas area is located north of the village of Cerro Agudo. The main showing is located at a small prospect pit where a grab sample returned values of 0.605 g/t gold, 231 g/t silver, 2.21% copper, 22.6% lead, and 0.38% zinc. The database collected during the year consists of 30 grab samples, 158 soil samples covering and area 900 metres north-south by 1,800 metres east-west. A backhoe trenching program was completed and resulted in 59 samples collected in 6 trenches totalling 118 metres. A percussion drill program drilled 54 holes to depth of 27 metres (with the exception of 2 holes that were abandoned after 18 metres) which were sampled on 3 meter intervals. A total of 480 samples have been collected from the 1,440 metres of drilling with all assays pending.

There is very little outcrop exposed in the area. Prospecting in the area continues to identify copper oxides in float and outcrop, along with abundant altered rock that contains a quartz-epidote assemblage. Recent trenching in the pit area has identified a vein 2 metres wide with copper oxide and disseminated lead and zinc, with a strong argillic alteration envelop around the vein. The host rock at the prospect pit is andesite. The prospect pit falls within a copper-lead-zinc soil sample anomaly that is approximately 300m north-south by 300m east-west. A total of 16 percussion drill holes have been completed in this area.

A second area approximately 150 metres southeast of the prospect pit, that falls within the same soil anomaly, has been drill tested with 12 percussion holes. Drilling is focused on surface alteration similar to the main showing that includes copper oxides and secondary calc-silicate minerals.

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Additional soil sampling completed shows another copper-lead-zinc anomaly identified approximately 500 metres to the east of the area trenched. The soil anomaly is currently 500 metres north-south by 300 metres east-west and remains open to the southeast. A road has been constructed to access the area for percussion drilling and trenching along the road is in progress. Initial observations from the trench exposure is that the copper mineralization is located within structures with a similar northeast orientation as the structure found in the prospect pit 500 metres to the west. A total of 26 percussion drill holes have been completed along the recently constructed road.

Twin Domes Area

The Twin Domes area is located in the vicinity of the village Palo de Asta. The zones were discovered through grab sampling of strongly hematite and quartz altered rock that outcrops intermittently on road cuts. The database at Twin Domes currently consists of 54 grab samples, and 210 soil samples covering two areas separated by approximately 1 kilometer. Both areas cover an area 1,000 metres north-south by 500 metres east-west and were sampled along east-west lines on 50 meter centers, with lines spaced 100 metres apart in a north-south direction. Results to date show two separate, parallel gold anomalies that along with grab sampling were the guide for locating the first phase of trenching. This trenching program consisted of 28 trenches totalling 1,458 metres with 729 channel samples collected. Trenching was completed in 3 separate areas.

Trench mapping in the area shows the geology of the area to be primarily a suite of andesites and rhyolites that are moderately to strongly altered. Weak gold mineralization is pervasive, evidenced by the fact that of the 729 samples collected from trenching only 49, or 7% show no detectable gold. Some of the rhyolites may be intrusive, but the alteration makes that determination difficult. Along with the clay alteration there are quartz veinlets that vary in width from 1 to 40 centimetres. The veinlets strike to the north-northwest, north, and northeast, although the north-northwest direction seems to be the better developed orientation. They are typically strongly oxidized with hematite with lesser limonite and specular hematite.

Shakira Area

Located at the northern extent of the Rocio Trend as currently defined is the Shakira area. Six rock chip samples collected show anomalous values of gold-silver-copper-lead-zinc, with values ranging from 0.04 to 0.44 g/t gold, 5.5 to 135 g/t silver, 0.20 to 1.19% Copper, 1.48 to 6.87% lead, and 0.15 to 1.49% zinc. The mineralization is interpreted to be striking east-west with a shallow dip to the north. A soil sampling program and trenching is planned to determine the size potential of the mineralized zone.

Palmarito Area

No expenditures were incurred in this area during the year, but Palmarito remains an important target within the Rocio Trend. RC drilling by previous claimholders in the 1990’s outlined a resource estimated to contain 5,120,000 tonnes with an average silver grade of 60 g/t for a total of 9,900,000 ounces of silver. An additional estimated 442,000 tonnes of tailings and dumps exist on the property estimated to contain an additional 2,800,000 silver ounces. These estimates are not compliant to the current National Instrument 43-101 reporting requirements and are not classified as resources by Nevada Pacific at this time. These estimates mentioned should not be relied upon.

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Figure C

Nevada Pacific Gold Ltd. — Other Property Locations (Mexico — El Tule project)

El Tule Project

The El Tule Project is located in the State of Nayarit, Mexico. A claim application for 13,000 hectares (50 square miles) was filed with the Mexican Secretary of Mines in January of 2006. During the year two additional “option to purchase agreements” were signed with third-parties to acquire an additional 190 hectares of mineral concessions internal Nevada Pacific’s concession. The property has excellent access via the Mexican Federal Highway 15 that transects the property. The area is primarily an agricultural district with elevation ranging from 50 to 200 metres above sea level.

Epithermal gold and silver mineralization is found on the property hosted by a suite of rhyolitic volcanic rocks along with high-level intrusives that are also rhyolitic in composition. The mineralization identified is found in quartz veins, striking both northeast and northwest.

A trenching program is in progress in an area that was identified through surface rock and soil sampling. A total of 94 trenches have been completed with 1,156 channel samples collected. Significant intercepts include 21 metres of 5.03 g/t gold and 15 metres of 0.92 g/t gold that includes an interval of 7 metres with 9.66 g/t gold.

Risk Factors

In evaluating Nevada Pacific and its business, the following risk factors should be considered in addition to the other information contained herein.

Exploration and Mining Risks

The business of exploration for minerals and mining involves a high degree of risk. Very few properties that are explored are ultimately developed into producing mines. Currently, only Nevada Pacific’s Magistral Mine has a known ore body and the other mineral properties in which Nevada Pacific has an interest are without a known body of commercial ore. There is no assurance that mineral exploration activities will result in any additional discoveries of commercial bodies of ore.

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Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explorations, cave-ins, landslides and the inability to obtain suitable and adequate machinery, equipment or labour are other risks involved in the operation of mines and the conduct of exploration programs. Nevada Pacific has relied on and will likely continue in the foreseeable future to rely upon consultants and others for exploration and development expertise. Substantial expenditures are required to establish ore 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. Although substantial benefits may be derived from the discovery of a major mineral deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis. The economics of developing mineral properties are affected by many factors including the cost of operations, variations in the grade of ore mined, 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.

Financing Risks

Nevada Pacific expects to receive revenue from production at the Magistral Mine; however, if production at Magistral is not resumed or is not profitable, then there may be delays in receiving the anticipated income. Nevada Pacific has limited financial resources, has no source of operating cash flow other than from production at the Magistral Mine and has no assurance that additional funding will be available to it for further exploration and development of its projects or to fulfil its obligations under any applicable agreements. Presently, the only source of additional financing for Nevada Pacific is through the sale of its equity securities or the optioning or joint venturing of those properties in which it has the right to earn an interest, and there can be no assurance that it will be able to raise funds in such manner at any given time. Failure to obtain such additional financing in a timely manner could result in the delay or indefinite postponement of further exploration and development of its projects with the possible loss of Nevada Pacific’s interest in such properties.

No Assurance of Titles

Nevada Pacific’s title to its mineral properties may be subject to challenge. Certain of the claims located (staked) by Nevada Pacific under the 1872 Mining Law may overlie senior valid unpatented claims or patented claims, or their location or discovery monuments may be located on state lands or lands not otherwise open to location under the 1872 Mining Law. However, Nevada Pacific does not consider that the invalidity of any such claims will materially affect the exploration potential of the remainder of such properties. While title to the properties has been diligently investigated and, to the best of Nevada Pacific’s knowledge, title to all properties in which it has, or has the right to acquire, an interest is in good standing, this should not be construed as a guarantee of title. The properties may be subject to prior unregistered agreements or transfers or land claims by native, aboriginal or indigenous peoples and title may be affected by undetected defects or governmental actions. None of the unpatented mining claims in which Nevada Pacific has, or has the right to acquire, an interest have been surveyed and accordingly the precise location of the boundaries of the claims and ownership of mineral rights in specific tracts of land comprising the claims may be in doubt.

Foreign Countries and Regulatory Requirements

Nevada Pacific’s exploration activities and mining operations are subject to various laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety and other matters.

Existing and possible future environmental legislation, regulations and government actions could cause additional expense, capital expenditures, restrictions, production delays and delays in other activities of Nevada Pacific, the extent of which cannot be predicted. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of Nevada Pacific’s operations.

Nevada Pacific’s principal property is the Magistral Mine in Mexico. Mineral exploration and mining activities in Mexico may be affected in varying degrees by political stability and government regulations relating to the

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mining industry. Any changes in regulations or shifts in political conditions are beyond the control of Nevada Pacific and may adversely affect its business. Mexico is a developing country, which may make it more difficult for Nevada Pacific to obtain any required exploration, development and production financing for projects located there.

Nevada Pacific believes it is currently in substantial compliance with all material laws and regulations, which currently apply to its activities. There can be no assurance, however, that all permits which Nevada Pacific may require for the exploration of its properties, the construction of future mining facilities and the conduct of mining operations, will be obtainable on reasonable terms, or that such laws and regulations would not have an adverse effect on any mining project which Nevada Pacific might undertake.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Development Risks

The marketability of minerals acquired or discovered by Nevada Pacific may be affected by numerous factors which are beyond the control of Nevada Pacific and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, the state of world mineral markets and the availability and capacity of mineral processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection.

Mineral Prices

The mining industry in general is intensely competitive and there is no assurance that, even if additional commercial quantities of ore are discovered, a profitable market may exist for the sale of minerals produced by Nevada Pacific. Factors beyond the control of Nevada Pacific may affect the marketability of any substances discovered. Mineral prices, in particular gold prices, have fluctuated widely in recent years. Any significant drop in gold prices would have a materially adverse impact on mining production revenue and on the ability of Nevada Pacific to finance and profitably exploit any gold deposits it may discover. The marketability of minerals is also affected by numerous other factors beyond the control of Nevada Pacific. These other factors include government regulations relating to price, royalties, allowable production and importing and exporting of minerals. Since mine production in any single year constitutes a very small portion of the total potential supply of gold, normal variations in current production do not necessarily have a significant effect on the supply of gold or on its price.

Competition

The mineral industry is intensely competitive in all its phases. Nevada Pacific 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.

Environmental and Other Regulatory Requirements

Nevada Pacific’s operations are subject to environmental laws, regulations and rules 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 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

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profitability of operations. Nevada Pacific intends to comply with all environmental regulations in the United States and Mexico.

Currency Fluctuation and Convertibility

The fact that Nevada Pacific’s operations are primarily conducted in U.S. dollars and Mexican pesos and many of Nevada Pacific’s obligations are denominated in United States dollars and Mexican pesos make it subject to foreign currency fluctuation and such fluctuations may adversely affect Nevada Pacific’s financial position and results by significantly increasing the cost of such operations and obligations.

Uninsurable Risks

In the course of exploration, development and production of mineral properties, 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 Nevada Pacific 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 Nevada Pacific.

Conflicts of Interest

Certain directors and officers of Nevada Pacific are also directors, officers or shareholders of other companies that are similarly 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 Nevada Pacific are required by law to act honestly and in good faith with a view to the best interests of Nevada Pacific and to disclose any interest which they may have in any project or opportunity of Nevada Pacific. 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. In determining whether or not Nevada Pacific will participate in any project or opportunity, the director will primarily consider the degree of risk to which Nevada Pacific may be exposed and its financial position at the time.

Legal Proceedings

Nevada Pacific is not a party to any material legal proceedings, and there are no material legal proceedings to which any of Nevada Pacific’s property is subject, and no such proceedings are known to Nevada Pacific to be contemplated.

Interests of Experts

This Annex includes certain technical information contained in the 2006 Technical Report prepared by Pincock Allen & Holt (see the section in this Annex C entitled “Narrative Description of the Business — Magistral Project (Magistral Mine)”). To the knowledge of Nevada Pacific, Pincock Allen & Holt does not beneficially own, directly or indirectly, any of the common shares of Nevada Pacific. As of the date of this proxy statement, Pincock Allen & Holt has not and will not receive any common shares or other property of Nevada Pacific in connection with Pincock Allen & Holt’s preparation of the 2006 Technical Report.

Management’s Discussion and Analysis of Financial Position and Results of Operations for Fiscal Year Ended June 30, 2006

This discussion and analysis of the financial position and results of operations consists of comparisons of the operating results of Nevada Pacific for the fiscal years ended June 30, 2006 and 2005 and has been taken from the Management’s Discussion and Analysis of Financial Position and Results of Operations prepared by Nevada Pacific and filed with SEDAR (available on sedar.com) as of September 28, 2006, and should be read in conjunction with the audited consolidated financial statements of Nevada Pacific for the year ended June 30, 2006 and the notes thereto which are included in this Annex C to this proxy statement. The full text of Management’s Discussion and Analysis of Financial Position and Results of Operations. Nevada Pacific’s consolidated financial statements and

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related notes have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and all amounts are presented in United States dollars unless otherwise noted.

Cautionary Statement on Forward-Looking Information

This Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements about Nevada Pacific Gold Ltd. and its business. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “projects” and similar expressions, or that events or conditions “will,” “may,” “could” or “should” occur.

The forward-looking statements in this MD&A are subject to various risks, uncertainties and other factors that could cause Nevada Pacific’s actual results or achievements to differ materially from those expressed in or implied by forward-looking statements. These risks, uncertainties and other factors include, without limitation, uncertainty as to Nevada Pacific’s ability to achieve the goals and satisfy the assumptions of management; uncertainties as to the availability and cost of financing; uncertainty as to the results of current operation and exploration activities; uncertainty as to market reaction to future operation and exploration activities; significant changes in metal prices; currency fluctuations; increases in production costs; differences and fluctuations in ore grades, recovery rates and tonnes mined from those expected; changes in mining, or heap leaching rates from currently planned rates; the timing and content of work programs; geological interpretations; receipt and security of mineral property titles; general market and industry conditions; and other factors detailed in Nevada Pacific’s public filings.

Forward-looking statements are based on the beliefs, opinions and expectations of Nevada Pacific’s management at the time they are made, and Nevada Pacific does not assume any obligation to update its forward-looking statements if those beliefs, opinions or expectations, or other circumstances, should change. Readers should not place undue reliance on forward-looking statements. Precautionary statements made herein should be read as being applicable to all related forward-looking statements wherever they appear in this MD&A.

Fiscal 2006 Overview

The Company’s principal business activities consist of the production of gold and silver in Mexico and the exploration for and development of gold and silver properties in Mexico and the western United States, primarily Nevada.

Since incorporation on March 11, 1997, the Company has acquired the Magistral Gold Mine in Sinaloa, Mexico. The Company has also evaluated numerous properties of potential merit. Several of the properties evaluated have been acquired by purchase agreement or by staking for further exploration, evaluation and development. Costs directly relating to the identification, exploration and development of projects are capitalized and are either amortized over the life of the project’s, commencing when the property goes into production, written off when the property is sold or released or written down if determined to be impaired.

Mexico

From the acquisition on February 2, 2004 until December 31, 2004, the Magistral Gold Mine underwent a revitalization program and was considered to be in pre-commercial production. During the revitalization period the mine experienced reduced gold production with all production related costs, offset by precious metal sales, being capitalized.

On July 27, 2005, the Company announced that the Magistral Mine would be moved to a leach only mode, effective August 1, 2005, and that mining has been temporarily suspended. By placing the mine in leach only mode the Company was able to reduce costs while continuing to produce gold and silver from the heap leach pad inventory. The Company has continued to monitor industry mining costs and metal prices and will re-commence mining when the proper conditions exist. In addition to mining costs and metal prices the Company is continuing to evaluate sources of funds required to have sufficient working capital to facilitate a restart of mining operations. Because of the inherent delay in producing gold from a heap leach process, working capital needs to be available to fund mining operations for several months before gold production commences.

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During fiscal year 2006 the Company operated the mine at full capacity for only the month of July 2005. Mining from the pits was curtailed the end of July 2005 and crushing and placing ore material in stockpiles was completed in August 2006. 53,571 tonnes of ore and 408,014 tonnes of waste were mined for total material movements of 461,585 tonnes. Ore mined was at a gold ore grade of 1.34 grams per tonne and contained 2,313 ounces of gold. Throughout the fiscal year the mine continued to produce gold, on a cash flow positive basis, from existing leach pad inventories and for the year produced 12,632 ounces of gold and 14,752 ounces of silver. Although the draw down of the recoverable ounces in the pad has been slower than anticipated, recoveries have been higher than budgeted. This coupled with the higher metal prices have justified continued gold production through to the present time.

Production from the pad continues to decline and even with higher gold prices it is estimated that the application of cyanide required for continued gold leaching will not be cost effective by October 2006. At that time costs will be reduced to the minimum required for care and maintenance of the mine plus associated equipment. Solution processing along with gold production will be curtailed.

Management continues to refine plans for a possible resumption of mining at Magistral. To provide third-party support for this effort Pincock Allen & Holt (“PAH”) was contracted to complete a complete review of the Magistral Mine. This review included updating reserves, mine plans, metallurgical recoveries, costs and prices to current levels. The final report from PAH was received in September 2006 and supports resuming full mining operations at gold prices at or above $469/ounce.

Exploration activity for the company in Mexico continued during the year. This activity was focused primarily on two projects, the Rocio project in Sinaloa, and the El Tule project in Nayarit. During the current fiscal year the Company has carried out an aggressive, yet systematic surface exploration program in the area that has expanded the geological mapping and sampling from previous campaigns, as well initiated a trenching program.

Nevada

During the year, Placer Dome U.S. Inc. (“Placer Dome”) terminated their rights to earn interest in the Company’s Limousine Butte, Keystone and BMX projects and the Company maintains a 100% interest in these projects.

The 2006 drilling program commenced with 18,480 feet of drilling completed to date on three of the Company’s projects.

In June 2006, Phase I drilling was completed on the Company’s Timber Creek property located in Lander County, Nevada. The Phase I drilling program consisted of 11,260 feet of drilling in 23 holes. A total of 48 drill pads have been permitted to test seven target areas on the district scale land package. Further drilling is warranted in this area and is dependant on drill rig availability.

In May 2006, the Company increased the size of the Cornerstone project through the addition of the Freestone property, which consists of 50 claims or 1.5 square miles. By July 2006, the Company had completed 3,810 feet of a planned 10,000 foot phase II drill program. Three holes were drilled in the CSZ zone and three holes in the BUTR zone. The Company’s geologic team believes that the drilling and trenching in the CSZ Zone has shown the presence of three potentially stacked mineralized zones, of which two of the zones have been cut by trenching and the third intersected in drilling. This theory will be tested in the up-coming drilling which will target three additional drill holes in this area. Core drilling in this area will commence upon completion of contract negotiations with the drilling company.

At the BMX project, a total of 3,410 feet was drilled in eight reverse circulation drill holes. All eight drill holes contained significant intercepts of disseminated to locally semi-massive sulfide in what appears to be the continuation of structures exposed on the surface. Due to extreme spring run off, access to several drill sites were not possible and will be drilled at a later date, dependant on conditions and drill rig availability.

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U.S. Gold Corporation

On March 5, 2006, US Gold Corporation (“US Gold”) issued a News Release announcing its intent to acquire all of the outstanding common shares of Nevada Pacific (as well as the shares of White Knight Resources Ltd., Coral Gold Resources Ltd. and Tone Resources Ltd. (collectively, the “Target Companies”). Nevada Pacific responded by forming a Special Committee on March 6, 2006 and hiring financial advisors on March 15, 2006 to assist Nevada Pacific.

On April 5, 2006, Nevada Pacific received a copy of US Gold’s application to various Canadian Securities Commissions seeking exemption from the requirement that it obtain a formal valuation of certain of the Target Companies, including Nevada Pacific. On April 12, 2006, the Special Committee of Nevada Pacific, in a submission to the Securities Commissions, stated its unequivocal support for the exemption order.

On April 19, 2006, US Gold requested that Nevada Pacific prepare its financial statements according to US GAAP for the past three years and provide these, together with Nevada Pacific’s auditors’ certification, to US Gold for inclusion in US Gold’s registration statement. On May 18, 2006, the work and fee requirements were settled by US Gold together with a time line confirming a delivery date of June 19, 2006. Nevada Pacific completed the work within the original timeframe provided to US Gold.

On April 26, 2006, Nevada Pacific was advised that US Gold’s application for exemption from the formal valuation requirement had been rejected, and on April 27, 2006, Nevada Pacific was requested by US Gold to proceed with the formal valuation. On May 1, 2006, the terms and conditions for preparation of a combined valuation for both Nevada Pacific and Coral Gold Resources Ltd. were confirmed by US Gold. The valuation work has been completed, several draft reports have been received and reviewed by Nevada Pacific’s Special Committee and a final report was delivered to US Gold in mid June.

The Special Committee, with its financial advisor, will consider any U.S. Gold Corporation offer, if and when it is received, and will investigate alternatives that may be available to maximize shareholder value.

Consolidated Financial Results of Operations — Fiscal Year Ended June 30, 2006 Compared With Fiscal Year Ended June 30, 2005

For the year ended June 30, 2006 the Company incurred a net loss of $5,020,542 ($0.08 per share) as compared to a net loss of $2,381,658 ($0.05 per share) for the year ended June 30, 2005. The loss for the year ended June 30, 2006 includes a loss from mining operations of $2,370,544 (2005 – earnings of $838,070), general and administrative expenses of $1,944,511 (2005 – $2,084,400), stock-based compensation of $611,572 (2005 – $559,963), write-off of mineral property expenses of $114,360 (2005 – $630,332), a foreign exchange loss of $36,904 (2005 – $115,796) interest and financing costs of $Nil (2005 – $22,378) offset by other income of $57,349 (2005 – $37,942) and a gain on disposal of mining equipment of $Nil (2005 – $155,199).

For the year ended June 30, 2006 revenues were $6,649,300 (2005 – $5,175,235) and the loss from mining operations was $2,370,544 (2005 – earnings of $838,070). The earnings (loss) from mining operations for the year ended June 30, 2005 only reflect six months of gold sales and the related expenses, the result of the Magistral Mine recommencing commercial production on January 1, 2005 and therefore the start of revenue recognition, whereas the year ended June 30, 2006 include twelve months of gold sales and the related expenses. During fiscal 2006, the Company recognized $3,788,972 of stockpiled ore inventory costs that were deferred as at June 30, 2005. All of the mine operating costs for the fiscal 2006 were recognized during the year as there were no costs deferred to the stockpiled ore as of June 30, 2006. The loss for the year ended June 30, 2006 also includes a one-time expense of $305,000 in severance payments incurred in the first quarter when the mine was placed in leach only mode and staff at the mine was reduced to 31 people.

The cash cost component of the pad inventory was approximately $300 per ounce. The monthly cash cost of the leach only mode was approximately $275,000 per month.

Expenses and other income decreased by 8% to $2,535,638 for the year compared to $2,744,595 for the same period in 2005. The majority of the decrease was related to general and administrative costs and foreign exchange

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losses. General and administrative costs were $1,944,511 for the year (2005 – $2,084,400), a decrease of $139,889 or 7%. The reduction is primarily due to decreases in consulting fees and travel expenses.

The write-off of mineral property expenses was $114,360 for the year ended June 30, 2006 as compared to $630,332 for the same period of 2005. The write-off for the year ended June 30, 2005 included a write-off of the Amador Canyon property of $451,768.

Selected Annual Information


	For the years ended June 30
	2006			2005			2004

Gold sales revenue	$	6,649,300		$	5,175,235		$	—
Mine operating earnings (loss)	$	(2,370,544	)	$	838,070		$	—
Net income (loss)	$	(5,020,542	)	$	(2,381,658	)	$	(1,936,547	)
Basic and diluted EPS	$	(0.08	)	$	(0.05	)	$	(0.06	)
Total assets	$	22,538,567		$	22,569,326		$	16,847,019
Total long-term liabilities	$	1,797,209		$	1,742,484		$	1,631,704
Cash dividends declared	$	Nil		$	Nil		$	Nil

Fourth Quarter Fiscal Year 2006 Results

For the year three months ended June 30, 2006 the Company incurred a net loss of $1,167,562 ($0.01 per share) as compared to a net loss of $328,1168 ($0.00 per share) for the three months ended June 30, 2005. The loss for the three months ended June 30, 2006 includes a loss from mining operations of $173,392 (2005 – earnings of $545,556), general and administrative expenses of $642,931 (2005 – $675,209), stock-based compensation of $341,377 (2005 – $163,002), write-off of mineral property expenses of $13,154 (2005 – $34,069), a foreign exchange loss of $23,905 (2005 – $10,059) interest and financing costs of Nil (2005 – $52) which is offset by other income of $27,197 (2005 – $8,955).

For the three months ended June 30, 2006 revenues were $1,553,673 (2005 – $3,120,218) and the loss from mining operations was $173,392 (2005 – earnings of $545,556). The decrease in revenues of $1,566,545 is reflective of the mine being in a leach only phase during the three months ended June 30, 2006, whereas the mine was in full production during the same period in 2005. The Company experienced a corresponding decrease of $847,597 in cost of sales, depreciation and depletions and royalties from $2,574,662 for the three months ended June 30, 2005 to $1,727,065 for the same period in 2006 The increase in the stock-based compensation expense for the three months ended June 30, 2006 as compared to the same period in 2005 is a result of additional stock options vesting in the fourth quarter 2006. Stock options were granted later in the fiscal year for 2006, which resulted in the expense being recognized later in the year.

Summary of Unaudited Quarterly Results


	Q4 2006			Q3 2006			Q2 2006			Q1 2006

Gold sales revenue	$	1,553,673		$	1,389,694		$	1,520,420		$	2,185,513
Mine operating earnings (loss)		(173,392	)		(540,282	)		(516,185	)		(1,140,685	)
Net income (loss)		(1,167,562	)		(1,222,450	)		(1,033,586	)		(1,596,944	)
Basic and diluted EPS		(0.01	)		(0.02	)		(0.02	)		(0.03	)
Total assets		22,538,567			20,927,743			21,767,522			20,921,546
Total long-term liabilities		1,797,209			1,765,923			1,749,534			1,776,780
Cash dividends declared		Nil			Nil			Nil			Nil

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	Q4 2005			Q3 2005			Q2 2005			Q1 2005

Gold sales revenue	$	3,120,218		$	2,055,017		$	—		$	—
Mine operating earnings (loss)		545,556			292,514			—			—
Net income (loss)		(328,116	)		(349,690	)		(1,176,755	)		(727,097	)
Basic and diluted EPS		0.00			(0.01	)		(0.02	)		(0.02	)
Total assets		22,569,326			22,352,494			22,359,902			18,959,179
Total long-term liabilities		1,742,484			1,708,716			1,680,991			1,653,711
Cash dividends declared		Nil			Nil			Nil			Nil

The change in gold sales revenues are primarily related to the change in the gold production during each quarter and are also affected by the increased gold price. Commercial production commenced at the Magistral Gold Mine on January 1, 2005 resulting with the reporting of gold sales revenues and mine operating earnings since Q3 of fiscal 2005. The loss for Q2 2005 includes mineral property write-downs of $508,880, which included a write-off of the Amador Canyon property of $451,768 and the increase in assets reflected the capitalization of pre-commercial production expenditures.

Review of Operations — Fiscal Year Ended June 30, 2006 Compared With Fiscal Year Ended June 30, 2005

July 2005 was the final month of open pit mining at the Magistral Gold Mine. In August 2005 the remaining ore in stockpiles was crushed and placed on the leach pad. Mobile mine equipment and the crushing plant were placed in care and maintenance upon completion of crushing and ore rehandling operations.

During the remainder of fiscal year 2006 the mine continued in a leach-only mode. In the processing plant, the cleaning of the intermediate solution and overflow ponds were completed during this period. For the intermediate solution pond an estimated 150 tonnes of gold-bearing carbon fines were recovered. This material was dried, sacked and shipped directly to a gold refinery in Mexico for processing. The processing plant continued to operate normally recovering gold and silver from the leach pad inventory. All equipment remains on site and in excellent condition. The workforce stands at 27 employees as of the end of August 2006.

Following is a summary of selected production statistics for the Magistral Mine:


	2006
	Q4		Q3		Q2		Q1

Ore tonnes mined				—		—		53,571
Grade (grams/tonne)				—		—		1.34
Ounces mined				—		—		2,313
Waste tonnes				—		—		408,014
Total tonnes				—		—		461,585
Strip ratio				—		—		7.6
Tonnes/Ounce				—		—		200
Gold Ounces Produced		2,069		2,793		2,805		4,965


	2005
	Q4		Q3		Q2		Q1

Ore tonnes mined		290,134		206,296		115,307		129,030
Grade (grams/tonne)		2.0		2.0		1.6		1.4
Ounces mined		18,785		13,177		5,751		5,786
Waste tonnes		960,867		1,092,900		1,312,696		826,679
Total tonnes		1,251,001		1,299,196		1,428,003		955,709
Strip ratio		3.3		5.3		11.4		6.4
Tonnes/Ounce		67		99		248		165
Gold Ounces Produced		7,016		5,108		3,860		3,205

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During the year ended June 30, 2006 the Company sold 13,288 ounces of gold at an average price of $500 as compared to 12,069 ounces sold at an average price of $429 for the last two quarters of fiscal 2005. During fiscal 2006, silver production was 14,752 ounces and the Company sold 9,394 ounces of silver at an average price of $7.68, as compared to production of 12,766 ounces and the sale of 13,028 ounces at an average price of $7.50 for the last two quarters of fiscal 2005. Silver is currently being stockpiled and at June 30, 2006 the Company had silver inventory of 8,347 ounces.

Non-GAAP measures — total cash cost per gold ounce calculation

The company reports total cash costs on a sales basis. We have included total cash cost and cash operating cost information to provide investors with information about the cost structure of our mining operations. We use this information for the same purpose and for monitoring the performance of our operations. This information differs from measures of performance determined in accordance with Canadian GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under Canadian GAAP and may not be comparable to similarly titled measures of other companies.

The following table provides a reconciliation of total cash operating and total production costs per ounce to the financial statements:


	For the Year Ended			For the three months ended
	June 30			June 30			March 31			Dec.31			Sept. 30
	2006			2006			2006			2005			2005
	(In thousands, except per ounce amounts)

Cost of sales per financial statements	$	7,903		$	1,571		$	1,655		$	1,763		$	2,914
Non-cash adjustments		(116	)		(29	)		(29	)		(29	)		(29	)

Cash operating costs		7,787			1,542			1,626			1,734			2,885
Royalty expense		382			85			87			89			121

Total cash costs		8,169			1,627			1,713			1,823			3,006
Depreciation, depletion and accretion		851			102			216			213			320

Total production costs		9,020			1,729			1,929			2,036			3,326

Divided by gold ounces sold		13,288			2,604			2,465			3,160			5,059
Cash operating costs per ounce	$	586		$	592		$	659		$	549		$	570	*
Total cash cost per ounce	$	615		$	625		$	695		$	577		$	594
Total production cost per ounce	$	679		$	664		$	782		$	644		$	657

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	Six months			Three months			Three months
	ended June 30/05			ended June 30/05			ended March 31/05
	(In thousands, except per ounce amounts)

Cost of sales per financial statements	$	3,347		$	1,997		$	1,350
Non-cash adjustments		(45	)		(23	)		(22	)

Cash operating costs		3,302			1,974			1,328
Royalty expense		262			161			101

Total cash costs		3,564			2,135		$	1,429
Depreciation, depletion and accretion		772			439			333

Total production costs		4,336			2,574		$	1,762

Divided by gold ounces sold		12,069			7,259			4,810
Cash operating costs per ounce	$	274		$	272		$	276
Total cash cost per ounce	$	295		$	294		$	297
Total production cost per ounce	$	359		$	355		$	366

The term “cash operating costs” is used on a per ounce of gold basis. Cash operating costs per ounce is based on direct operating expense, inclusive of accumulated cash costs in the leach pad inventory, less production royalties, mining taxes and by-product credits for payable silver.

The term “total cash costs” is cash operating costs plus production royalties and mining taxes.

The term “total production costs” is total cash costs plus depreciation and amortization.

These costs are calculated using the standards set out by the Gold Institute.


*		Cash operating costs per ounce for the three months ended September 30, 2005 include a one time severance cost of $62 per ounce

Expenditures on Mineral Exploration Properties — Fourth Quarters and Fiscal Years Ended June 30, 2006 and 2005

During the year ended June 30, 2006, the Company spent $1,681,428 (2005: $1,493,402) on acquisition and exploration expenditures on its exploration properties, inclusive of $461,042 (2005: $532,842) on Mexican properties, and recovered $11,620 (2005: $211,847) of these expenditures from earn in partners. A total of $114,360 (2005: $630,332) of exploration expenditures was written off during the period. The Company capitalizes the portion of the salaries of its personnel that relates to specific mineral properties as deferred exploration expenditures.

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The gross expenditures broken down by expenditure category are as follows:


	Three Months Ended				Year Ended
	June 30,				June 30,
	2006		2005		2006		2005

Exploration salaries & wages	$	123,166	$	72,728	$	307,810	$	262,988
Land holding costs		68,676		22,472		447,443		421,038
Surveying		13,394		6,843		14,399		52,526
Environmental		—		6,714		—		8,410
Geology		4,221		23,370		46,938		79,258
Surface geochemistry		42,824		42,953		61,391		125,387
Geophysics		10,824		111,136		29,774		113,636
Road work & trenching		40,382		32,352		69,619		84,796
Drilling		378,869		264,283		685,012		305,263
Other		1,786		20,224		19,042		40,100

Total expenditures	$	684,142	$	603,075	$	1,681,428	$	1,493,402

The total cumulative deferred property expenditures, after recoveries from earn-in partners, are as follows:


	June 30		June 30
	2006		2005

Limousine Butte	$	747,385	$	744,425
South Carlin Project		541,628		532,012
Keystone		341,666		243,760
BMX		209,744		32,114
Cornerstone (Pat Canyon)		510,086		129,985
Timber Creek		476,086		153,005
Other Nevada Properties		673,181		570,069
Mexican Properties		1,162,029		700,987

	$	4,661,805	$	3,106,357

Financial Position and Liquidity — Fiscal Year Ended June 30, 2006

During the year ended June 30, 2006, the company used $476,138 on net operating activities compared to $4,847,459 for the same period of the prior year. Although there was an increase in the loss for the year from fiscal 2005 to fiscal 2006, during fiscal 2006 there was a non-cash inflow of $3,353,464 from deferred product inventory and stockpiled ore costs and during the year ended June 30, 2005, the Company paid a $2,500,000 note payable relating to the purchase of the Magistral Mine and spent $1,452,205 that was assigned to product inventory and stockpiled ore.

Investing activities

The Company expended $1,733,643 on investing activities during the year ended June 30, 2006 as compared to $5,154,255 during the same period in 2005. For the current fiscal year, the Company expended $1,704,808 on exploration properties and the remainder on property, plant and equipment and reclamation bonds. During the year ended June 30, 2005, the Company expended $3,987,643 on property, plant and equipment at the Magistral Mine, $1,321,555 on exploration properties, $45,256 on reclamation bonds and received $200,1999 on the disposal of equipment.

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Financing activities

During the year ended June 30, 2006, the Company received $4,912,268 on net financing activities compared to $10,361,114 during the same period in 2005. The Company received $5,005,285 through private placements and the exercise of stock options and share purchase warrants during the year ended June 30, 2006 compared to $11,053,855 through private placements, an underwritten offering, the exercise of stock options and the exercise of share purchase warrants during the year ended June 30, 2005. Share issue costs and finder’s fees for the year ended June 30, 2006 were $93,017 as compared to $692,741 for the same period in 2005.

On December 9, 2005, the Company announced that it had entered into an agreement with Mr. Robert McEwen to issue 12,500,000 units at a price of Cdn$0.40 per unit for aggregate proceeds of Cdn$5,000,000. Each unit consists of one common share and one common share purchase warrant with each warrant exercisable to acquire one common share of the Company at an exercise price of Cdn$0.50 for a term of two years. As a result of the private placement, Mr. McEwen will hold approximately 18.12% of the outstanding shares of the Company and, in event of the exercise of all the warrants, Mr. McEwen will hold approximately 30.69% of the outstanding common shares of the Company.

In accordance with the rules of the TSX Venture Exchange, as this constitutes a “change in control”, the placement closed in two tranches. The first tranche, consisting of 6,921,213 units was completed on December 14, 2005 for aggregate proceeds of Cdn$2,768,485. The second tranche for the balance of the units was conditional upon receiving disinterested shareholder approval, which was subsequently received at the extraordinary general meeting of the shareholders on January 23, 2006. The second tranche of the private placement consisting of 5,578,787 units at a price of Cdn$0.40 for aggregate proceeds of Cdn$2,231,515 was completed on May 11, 2006. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees were payable on this placement.

On January 13, 2006, the Company issued 200,000 units to an officer of the Company. Each unit was issued at a price of Cdn$0.64 for gross proceeds of Cdn$128,000. Each unit is comprised of one common share of the Company and one share purchase warrant with each purchase warrant entitling the holder to purchase one common share of the Company at Cdn$0.80 until January 13, 2008. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees were paid on this issue.

During the year ended June 30, 2006, 740,000 common shares were issued pursuant to the exercise of stock options and 89,515 common shares were issued on the exercise of share purchase warrants. The stock options were exercised at weighted-average exercise price of Cdn$0.57 per share for gross proceeds of Cdn$421,800. The share purchase warrants were exercised at weighted-average exercise price of Cdn$1.20 per share for gross proceeds of Cdn$107,418

There were a total of 1,712,500 stock options granted during the year with a weighted-average exercise price of Cdn$1.05. On August 30, 2005, the Company granted to consultants 50,000 stock options with an exercise price of Cdn$0.80. These options have a term of one year and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.16 per option at grant date. On March 2, 2006 the Company granted to directors, employees and consultants 1,462,500 stock options with an exercise price of $0.99 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.45 per option at grant date. On June 1, 2006, the Company granted to a director 200,000 stock options with an exercise price of Cdn$1.54. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.66 per option at grant date.

Cash resources and liquidity

As at June 30, 2006 the Company had cash and cash equivalents of $3,659,738 (June 30, 2005 — $957,251) and working capital of $3,279,590 (June 30, 2005 — $4,197,510). The decrease in working capital of $917,920 is predominately due to an increase of cash of $2,702,487, a decrease of accounts payable and accrued liabilities of $588,782 and a decrease in leach pad inventory of $3,788,972. The decrease in the pad inventory is the result of the decision to move the Magistral mine to a leach only phase effective August 1, 2005.

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As at June 30, 2006 the Company had 3,840,000 options outstanding entitling the holders to purchase common shares of the Company at prices from Cdn$0.53 to Cdn$1.54 with expiry dates from January 22, 2008 to June 1, 2016. The Company also had 14,706,900 warrants outstanding entitling the holders to purchase common shares of the Company between Cdn$0.50 and Cdn$1.20 that expire between August 17, 2006 and January 13, 2008.

The Company’s ability to continue as a going concern is dependent upon the ability of the Company to obtain additional financing to develop its mineral properties, the performance of the Magistral Gold Mine, which is currently in a leach only phase, the existence of economically recoverable reserves, and upon its ability to attain profitable operations. Management continues to seek additional financing necessary to permit the Company to continue operations. There can be no assurance that management will be successful in all these activities. These consolidated financial statements do not give effect to any adjustments that would be necessary should the Company not be able to continue as a going concern.

Subsequent to June 30, 2006, there were 175,000 stock options exercised for gross proceeds of $99,635 and 1,418,150 share purchase warrants exercised for gross proceeds of $1,521,768.

The Magistral Gold Mine is subject to a net smelter return royalty of 1% for the first 30,000 ounces of gold, 3.5% on the next 350,000 ounces of gold and 1% thereafter. The Company is currently paying a net smelter royalty of 3.5%. The royalty requirement is settled from current gold production.

The Company also has minimum lease payment requirements on some of its Nevada exploration properties. These payments are at the discretion of the Company as long as it wants to maintain its interest in the property.

Transactions with Related Parties — Fiscal Year Ended June 30, 2006

During the year ended June 30, 2006, a total of $149,730 (2005 — $129,055) was charged for fees by a legal firm of which Nevada Pacific’s corporate secretary is a partner. At June 30, 2006, $17,352 (June 30, 2005 — $5,112) was owing to this legal firm.

In May, 1999, Nevada Pacific became the leaseholder of the head office premises. During the year ended June 30, 2001, the Company entered into a separate sub-lease agreement with Portal Resources Ltd. of which the Company’s Chairman is a director. During the year ended June 30, 2006, a total of $60,340 (2005 — $47,781) was charged by the Company for rent and common office costs. At June 30, 2006, $nil (June 30, 2005 — $4,425) was receivable from this company.

Financial Instruments and Other Instruments

The Company’s consolidated financial instruments include cash and cash equivalents, accounts receivable, reclamation bonds, and accounts payable. The fair values of these financial instruments approximate their carrying values.

Outlook — Fiscal Year Ended June 30, 2006

Management continues to evaluate projects for potential merit and is assessing options that include the resumption of mining operations, the possible sale of the mine and joint ventures with other mining companies. The Company has plans to attend various national and international mining industry trade shows, which should provide the Company with additional opportunities in the precious metals sector for assessment.

At the Magistral Mine, gold recovery from inventory from the heap leach pad continues with a reduced staff of 27 employees. Gold production continues to decline and resulting gold sales are nearing cash flow neutral. It is anticipated the mine will cease gold production and reduce staffing and costs to a care and maintenance level by October 2006. The equipment required for resumption of mining operations is still on-site and available. Several startup scenarios are being reviewed, including the use of contracted labor to resume open pit mining operations.

Exploration is ongoing in Nevada and Mexico. In Nevada, the remainder of the budgeted 50,000 feet of drilling for the 2006 drilling program will commence based on drill rig availability. In Mexico, drill targets are being developed for the El Tule Gold project located in the state of Nayarit. A drill program has begun on the Revancha

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project, located on the Rocio Trend approximately 15 kilometres southwest of the Company’s Magistral Gold mine in Sinaloa state, Mexico. Drilling is planned for 11 projects this year within the US and Mexico.

Risk Factors — Fiscal Year Ended June 30, 2006

Nevada Pacific is subject to financial and operational risks due to various factors outside of the control of Nevada Pacific. Gold prices are affected by factors such as global supply and demand, expectations of the future rate of inflation, the strength of, and confidence in, the US dollar relative to other currencies, interest rates, and geopolitical events. Should the price of gold drop and the prices realized by Nevada Pacific on gold sales were to decrease significantly and remain at such a level for any substantial period, Nevada Pacific’s cash flow would be negatively affected.

Nevada Pacific has limited financial resources, has no source of operating cash flow other than the Magistral Mine and has no assurance that additional funding will be available to it. The only source of additional financing for Nevada Pacific is through the sale of equity securities or the optioning or joint venturing of its properties. Failure to obtain financing could result in the delay or indefinite postponement of further exploration and development of its projects with the possible loss of Nevada Pacific’s interest in such properties.

Although Nevada Pacific has carefully prepared its gold reserve and resource estimates, no assurance can be given that the indicated mining and processing recoveries of gold from the estimated reserves will be realized over the life of the mine. The business of mining is generally subject to a number of risks including equipment failure, operational accidents, unstable ground conditions and severe weather.

Nevada Pacific’s exploration work involves many risks and may be unsuccessful. Substantial expenditures are required to establish proven and probable reserves and to complete the related mine development. It may take several years from the initial phases of drilling until production is possible. As a result of these uncertainties, there is no assurance that current or future exploration programs will be successful and result in the expansion or replacement of current production with new reserves. The validity of mining claims can also be uncertain. Although Nevada Pacific has attempted to acquire satisfactory title to its properties, some risk exists that some titles may be defective

Additional Information

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of Nevada Pacific’s securities, options to purchase securities and interests of insiders in material transactions is contained in Nevada Pacific’s 2004 annual report, an information circular dated for the annual general meeting of Nevada Pacific held on December 6, 2005 and an information circular dated for the extraordinary general meeting of the shareholders on January 23, 2006. Copies of Nevada Pacific’s filings are available at www.sedar.com.

Recent Canadian Accounting Pronouncements — Fiscal Year Ended June 30, 2006

Derivative Instruments

In April 2005, the Accounting Standards Board issued new accounting standards dealing with the recognition, measurement and disclosure of financial instruments, hedges and comprehensive income. These standards are applicable for fiscal years beginning on or after October 1, 2006. The Company is currently reviewing the impact of these new standards. These standards are as follows:

(i) Financial Instruments — Recognition and Measurement, Section 3855

This standard prescribes when a financial asset, financial liability or non-financial derivative is to be recognized on the balance sheet, whether fair value or cost-based measures are used and specifies how financial instrument gains and losses are to be presented.

(ii) Comprehensive Income, Section 1530

This standard introduces new rules for reporting and display of comprehensive income. Comprehensive income, which is currently reported under US GAAP, is the change in shareholders’ equity of an enterprise

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during a reporting period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investment by owners and distributions to owners. These items include holding gains and losses on certain investments, gain and losses on certain derivative instruments and foreign currency gains and losses related to self — sustaining foreign operations (cumulative translation adjustment).

(iii) Hedges, Section 3865

This standard is applicable when a company chooses to designate a hedging relationship for accounting purposes. It builds on the existing Accounting Guideline AcG-13, Hedging Relationships, and Section 1650 Foreign Currency Translation, by specifying how hedge accounting is applied and what disclosures are necessary when it is applied.

Disclosure Controls and Procedures — Fiscal Year Ended June 30, 2006

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to permit timely decisions regarding public disclosure.

Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2006. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as defined in Multilateral Instrument 52-109 — Certification of Disclosure in Issuer’s Annual and Interim Filings, are effective to ensure that information required to be disclosed in reports that are filed or submitted under Canadian securities legislation are recorded, processed, summarized and reported within the time period specified in those rules.

Management’s Discussion and Analysis of Financial Position and Results of Operations for Fiscal Year Ended June 30, 2005

This discussion and analysis of the financial position and results of operations consists of comparisons of the operating results of Nevada Pacific for the fiscal years ended June 30, 2005 and 2004 and has been taken from the Management’s Discussion and Analysis of Financial Position and Results of Operations prepared by Nevada Pacific and filed with SEDAR as of October 18, 2005, and should be read in conjunction with the audited consolidated financial statements of Nevada Pacific for the year ended June 30, 2005 and the notes thereto as filed with SEDAR. The full text of Management’s Discussion and Analysis of Financial Position and Results of Operations and the audited financial statements for the year ended June 30, 2005 and the notes thereto are available on sedar.com. Nevada Pacific’s consolidated financial statements and related notes have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and all amounts are presented in United States dollars unless otherwise noted.

Fiscal 2005 Description of Business

Since incorporation on March 11, 1997, the Company has acquired the Magistral Gold Mine in Sinaloa, Mexico. The Company has also evaluated numerous properties of potential merit. Several of the properties evaluated have been acquired by purchase agreement or by staking for further exploration, evaluation and development. Costs directly relating to the identification, exploration and development of projects are capitalized and are either amortized over the life of the project’s production when the property goes into production, or written off when the property is sold or released.

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mine experienced reduced gold production with all production related costs, offset by precious metal sales, being capitalized.

On July 27, 2005, the Company announced that the Magistral Mine would be moved to a leach only mode, effective August 1, 2005, and that mining has been temporarily suspended. During this time the Company will continue to produce gold from an existing inventory of approximately 11,000 recoverable ounces of gold on the heap leach pad.

While the mine has been cash flow positive since April 1, 2005, cash flow projections are becoming increasingly difficult to meet given the increases in operational costs impacting the mining industry (fuel, reagents, tires and steel) as well as a dramatic increase in precipitation at the early stages of the rainy season. By placing the mine in leach only mode the Company will be able to reduce costs while continuing to produce gold and silver from the heap leach pad inventory. The Company will monitor industry mining costs and will re-commence mining when conditions are more favorable.

Consolidated Financial Results of Operations — Fiscal Year Ended June 30, 2005 Compared With Fiscal Year Ended June 30, 2004

The loss for fiscal 2005 increased by $445,111 as compared to fiscal 2004. The primary factors for the increase are an increase in general and administrative costs of $546,210, an increase in stock-based compensation costs of $520,843, an increased write-down in deferred mineral property expenditures of $300,047 offset by earnings from mining operations of $838,070 and a gain on disposal of mining equipment of $155,199. The increase in general and administrative costs is due to increased salaries and wages and investor relations expense for the year. Additional personnel were added mid fiscal 2004 and the associated costs were experienced for the full fiscal year 2005. Investor relations expense increased due to

distribution of materials to the expanded shareholder base and the Company’s participation at additional conferences, such as the Denver Gold Show. The increase in stock-based compensation is due to the adoption on July 1, 2004 of CICA Handbook Section 3870 whereby the Company now uses the fair-value method of accounting for all stock-based compensation. The increase in the write-down of deferred mineral properties is due to the write-down of the Amador Canyon property, which was returned to the vendor during the year.

In the quarter ended June 30, 2005, the Company had a loss of $128,116 (2004 — loss of $708,599) and a loss for the year ended June 30, 2005 of $2,381,658 (2004 — $1,936,547). Revenues for the quarter were $3,120,218 (2004 — $Nil) and for the year ended June 30, 2005 were $5,175,235 (2004 — $Nil). The Company’s earnings from mining operations for the quarter were $545,556 (2004 — $Nil) and for the year ended June 30, 2005 were $838,070 (2004 — $Nil). The increase in revenues and earnings from mining operations are a result of the commencement of commercial operations at the Company’s Magistral Mine, effective January 1, 2005. The earnings per share for the quarter was $0.00 per share (2004 — loss of $0.01) and the loss per share for the year ended June 30, 2005 was $0.05 (2004: loss of $0.06).

Selected Annual Information


	For the years ended June 30
	2005			2004			2003

Gold sales revenue	$	5,175,235		$	—		$	—
Net income (loss)	$	(2,381,658	)	$	(1,936,547	)	$	(1,092,306	)
Basic and diluted EPS	$	(0.05	)	$	(0.06	)	$	(0.06	)
Total assets	$	22,569,326		$	16,847,019		$	1,681,421
Total long-term liabilities	$	1,742,484		$	1,631,704			Nil
Cash dividends declared		Nil			Nil			Nil

The increase in the net loss from fiscal 2003 to fiscal 2004 is largely the result of increased human resource costs to support the Company’s expanding operations, primarily due to the acquisition of the Magistral Gold Mine, and increased business development costs associated with new project evaluations.

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Summary of Quarterly Results


	Q4 2005			Q3 2005			Q2 2005			Q1 2005

Gold sales revenue	$	3,120,218		$	2,055,017		$	—		$	—
Net income (loss)	$	(128,116	)	$	(349,690	)	$	(1,176,755	)	$	(727,097	)
Basic and diluted EPS	$	0.00		$	(0.01	)	$	(0.02	)	$	(0.02	)
Total assets	$	22,569,326		$	22,352,494		$	22,359,902		$	18,959,179
Total long-term liabilities	$	1,742,484		$	1,708,716		$	1,680,991		$	1,653,711
Cash dividends declared		Nil			Nil			Nil			Nil


	Q4 2004			Q3 2004			Q2 2004			Q1 2004

Gold sales revenue	$	—		$	—		$	—		$	—
Net income (loss)	$	(708,559	)	$	(866,927	)	$	(229,384	)	$	(131,677	)
Basic and diluted EPS	$	(0.01	)	$	(0.03	)	$	(0.01	)	$	(0.01	)
Total assets	$	16,847,019		$	16,236,542		$	3,894,488		$	3,266,225
Total long-term liabilities	$	1,631,704		$	1,623,533			Nil			Nil
Cash dividends declared		Nil			Nil			Nil			Nil

Commercial production commenced at the Magistral Gold Mine on January 1, 2005 resulting with the reporting of gold sales revenues for Q3 and Q4 of fiscal 2005. The Company experienced a net loss of $128,116 for Q4 2005 due to the earnings from mining operations of $545,556. The loss for Q3 2005 of $349,690 includes the earnings from mining operations of $292,514. The loss for Q2 2005 includes mineral property write-downs of $508,880.

In Q3 2004 the Company acquired the Magistral Gold Mine, resulting in significantly higher total assets as well as long term liabilities primarily associated with an asset retirement obligation of $1,477,593. The loss per quarter increased at this time due to increased general and administrative costs associated with the acquisition as additional resources were required to support the Company’s move from mineral exploration to gold production.

Review of Operations — Fiscal Year Ended June 30, 2005

Magistral Mine

During the first two quarters of fiscal 2005, the Company continued a revitalization program at the Magistral Gold Mine. The program was designed to increase long term operating efficiencies; lower operating costs and to increase annual gold and silver production.

There were several primary components to the revitalization program. A re-mine program that involved re-handling the crushed ore on the leach pad to add lime for pH control and to reduce the effects of solution channelling was completed. Three additional carbon columns, larger pumps and a new boiler were added to provide higher solution flow rates through the processing plant. The secondary crushing circuit was modified to produce a finer product by replacing the standard cone with a short head. Additional mine equipment, consisting of one Cat 992, 12 cubic yard front end loader and two Cat 777, 90 ton trucks, was purchased and placed into service. Modifications to the crushing circuit, including installation of a larger screen with smaller screen openings, new conveyors and a conversion to a closed crushing circuit for the secondary cone crusher, were completed in January.

With the completion of the crushing circuit, followed by a period of operational testing, planned production throughput was achieved by mid-February. Production rates improved during the third quarter achieving an average crushing rate of 216 tonnes per hour (design capacity 250 tonnes per hour) by mid-March 2005. The targeted crush size of 80% finer than1/2 inch was achieved.

In the fourth quarter of the fiscal year the Company reaped the benefits of the additional equipment and a fully operational crushing circuit capable of producing a consistent size of1/2 inch or less. Ore production for the quarter was at record levels; even with longer haul distances as the lowest benches of the San Rafael pit were mined. Production rates improved during the fourth quarter achieving an average crushing rate of 231 tonnes per hour,

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which included two monthly records. In addition mechanical availability for the quarter was excellent pushing the composite average for major mining equipment to 76% for the fiscal year. Monthly production records were set in April for ore tonnes mined and crushed, hourly crusher production rates, as well as gold ounces placed on the leach pad. The 2-stage crushing plant continued to be optimized for production rates and size reduction and by June was producing a crushed ore product at a size of 90% passing1/2 inch and 58% passing1/4 inch.

Of the two main operating pits, mining in the San Rafael pit was completed in the fiscal fourth quarter on June 17, 2005 at which time the focus was on production from the Samaniego pit. By late June pit backfilling into the San Rafael pit with waste rock from the Samaniego pit had begun.

Gold production as of the fiscal year ending June 30, 2005 was 19,189 ounces. The originally forecasted gold output of 30,000 ounces for fiscal 2005 was not achieved due to various factors. A delay was experienced in the completion of the revitalization programs including delays relating to procurement and delivery of equipment of approximately two months. This resulted in a change in the budgeted mine plan for the Samaniego pit for the fiscal year. In addition, lower ore grades (5%) and tonnes (18%) than forecast contributed to the 19% total shortfall in ounces mined and placed on the leach pad. The major component of the shortfall is due to the fact that the mine model did not adequately identify some areas that were previously mined by historical underground mining methods. The historical workings should have a lessening impact as the depth increases at the Samaniego pit. The San Rafael pit was mined to completion as forecast in fiscal 2005 although these ounces were predominately placed in the final quarter of the fiscal year. Finer crushed ore size resulted in longer leach times and the deferral of recovery of these ounces into fiscal 2006. The recoverable gold inventory remaining on the heap at June 30, 2005 was estimated to be 11,053 ounces. The Company anticipates that a significant part of this inventory will be recovered as gold output in the first and second quarters of the fiscal year 2006.

Management completed two versions of the fiscal 2006 budget. The version with continued mining operations was marginally cash flow positive using historic revenues, costs and production projections. However, with more recent operating expenses being negatively impacted by price increases over a broad range of items at the mine, including fuel, tires and reagents and including intermittent shortages of some of these items the decision was made to move to a leach only option effective August 1, 2005. Management is currently evaluating resumption of mining activities and has planned a second phase of exploration activity in fiscal 2006. Gold inventories in the leach pad will continue to be processed for the foreseeable future.

Following is a summary of selected production statistics for the Magistral Mine:


	2005								2004
	Q4		Q3		Q2		Q1		Q4		Q3

Ore tonnes mined		290,134		206,296		115,307		129,030		158,508		129,503
Grade (grams/tonne)		2.0		2.0		1.6		1.4		1.2		1.3
Ounces mined		18,785		13,177		5,751		5,786		5,893		5,247
Waste tonnes		960,867		1,092,900		1,312,696		826,679		1,093,847		594,527
Total tonnes		1,251,001		1,299,196		1,428,003		955,709		1,252,355		724,030
Strip ratio		3.3		5.3		11.4		6.4		6.9		4.6
Tonnes/Ounce		67		99		248		165		213		138
Gold Ounces Produced		7,016		5,108		3,860		3,205		4,150		3,028

During the quarter ended June 30, 2005, the Magistral Gold Mine produced 7,016 gross ounces gold, and sold 7,259 ounces at an average price of US$430 for total revenues of $3.12 million, offsetting operating expenses totalling $2.57 million for a net profit from mining operations of $0.55 million. During the year ended June 30, 2005 a total of 19,189 gross ounces of gold before royalties, have been produced. At total of 12,069 ounces have been sold, since the commencement of commercial production on January 1, 2005, at an average price of $429 for total revenues of $5.2 million. Silver production for the quarter was 4,482 ounces and for the year ended June 30, 2005 totaled 12,766. During the quarter and year ended June 30, 2005 a total of 13,028 ounces of silver were sold at $7.50. Silver continues to be stockpiled and at June 30, 2005 stood at 2,988 ounces. During the 4th quarter a total of 290,134 tonnes of ore and 960,867 tonnes of waste were mined with a waste to ore strip ratio of 3.3:1. The average grade of the mined ore was 2.0 grams gold per tonne for a total of 18,785 ounces of gold placed on the pad. For the

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year ended June 30, 2005 a total of 740,767 tonnes of ore and 4,193,142 tonnes of waste were mined for a strip ratio of 5.7:1. The average grade of mined ore was 1.8 grams gold per tonne for a total of 43,499 ounces of gold mined.

Non-GAAP measures — total cash cost per gold ounce calculation


	Six Months			Three Months			Three Months
	ended June 30/05			ended June 30/05			ended March 31/05
	(In thousands, except per ounce amounts)

Cost of sales per financial statements	$	3,347		$	1,997		$	1,350
Non-cash adjustments		(45	)		(23	)		(22	)

Cash operating costs		3,302			1,974			1,328
Royalty expense		262			161			101

Total cash costs		3,564			2,135		$	1,429
Depreciation, depletion and accretion		772			439			333

Total production costs		4,336			2,574		$	1,762

Divided by gold ounces sold		12,069			7,259			4,810
Cash operating costs per ounce	$	274		$	272		$	276
Total cash cost per ounce	$	295		$	294		$	297
Total production cost per ounce	$	359		$	355		$	366

The term “cash operating costs” is used on a per ounce of gold basis. Cash operating costs per ounce is based on direct operating expense, less production royalties, mining taxes and by-product credits for payable silver.

The term “total cash costs” is cash operating costs plus production royalties and mining taxes.

The term “total production costs” is total cash costs plus depreciation and amortization.

These costs are calculated using the standards set out by the Gold Institute.

Expenditures on Mineral Exploration Properties — Fourth Quarters and Fiscal Years Ended June 30, 2005 and 2004

During the year ended June 30, 2005, the Company spent $1,493,402 (2004: $1,591,631) on acquisition and exploration expenditures on its exploration properties, inclusive of $532,842 (2004: $168,145) on Mexican properties, and recovered $211,847 (2004: $293,304) of these expenditures from earn in partners. A total of $630,332 (2004: $330,285) of exploration expenditures was written off during the year, inclusive of $453,371 written off in relation to the Amador Canyon project. The Company capitalizes the portion of the salaries of its personnel that relates to specific mineral properties as deferred exploration expenditures.

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The gross expenditures broken down by expenditure category are as follows:


	Three months ended June 30,				Year ended June 30,
	2005		2004		2005		2004

Exploration salaries & wages	$	72,728	$	76,666	$	262,988	$	194,778
Land holding costs		22,472		170,721		421,038		420,334
Surveying		6,843		22,485		52,526		47,615
Environmental		6,714		4,951		8,410		19,516
Geology		23,370		38,440		79,258		212,419
Surface geochemistry		42,953		11,795		125,387		35,263
Geophysics		111,136		12,000		113,636		71,935
Road work & trenching		32,352		5,668		84,796		13,109
Drilling		264,283		307,191		305,263		544,380
Other		20,224		8,959		40,100		32,282

Total expenditures	$	603,075	$	658,876	$	1,493,402	$	1,591,631

The total cumulative deferred property expenditures, after recoveries from earn-in partners, are as follows:


	June 30		June 30
	2005		2004

Limousine Butte	$	744,425	$	732,555
South Carlin Project		532,012		522,396
Keystone		243,760		225,003
BMX		32,114		21,629
Amador Canyon		—		420,890
Other Nevada Properties		853,059		364,516
Mexican Properties		700,987		168,145

	$	3,106,357	$	2,455,134

Liquidity and Capital Resources — Fiscal Year Ended June 30, 2005

As at June 30, 2005 the Company had cash and cash equivalents of $957,251 (June 30, 2004 — $597,851) and working capital of $4,197,510 (June 30, 2004 — $1,427,508 working capital deficiency) compared to cash and cash equivalents of $1,308,512 and working capital of $3,903,364 at March 31, 2005.

The Company’s ability to continue as a going concern is dependent upon the performance of the Magistral Gold Mine, which is currently in a leach only phase, the existence of economically recoverable reserves, the ability of the Company to obtain additional financing to develop its mineral properties and upon its ability to attain profitable operations. Management is actively seeking the additional financing necessary to permit the Company to continue operations and to pay its liabilities as they fall due. There can be no assurance that management will be successful in all these activities.

The company expended $4,847,459 on net operating activities during the year compared to $830,574 during fiscal 2004. The Company used $2,927,892 in the reduction of current liabilities, inclusive of a payment of $2,500,000 note payable relating to the purchase of the Magistral Gold Mine and spent $1,452,205 that was assigned to product inventory and stockpiled ore.

During the year ended June 30, 2005, the Company raised gross proceeds of $10,262,635 through private placements and public offerings, settled $500,000 in debt through the issuance of common shares, received $591,200 through the exercise of share purchase warrants and $200,020 through the exercise of incentive stock options. Share issue costs and finder’s fees for the same period were $823,761, inclusive of an assigned value of $131,020 to underwriter’s warrants.

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During the year ended June 30, 2005 the Company expended $5,154,255 on investing activities. The investment in property, plant and equipment for the year was $3,987,643, which was primarily at the Magistral Gold Mine. The Company also spent $1,321,555 on mineral properties of which $532,842 was spent on exploration in Mexico and $788,713 on exploration in Nevada.

As at June 30, 2005 the Company had 3,328,500 options outstanding entitling the holders to purchase common shares of the Company at prices from Cdn$0.30 to Cdn$1.47 with expiry dates from June 13, 2006 to February 17, 2015. The Company also has 6,420,841 warrants outstanding entitling the holders to purchase common shares of the Company between Cdn$1.05 and Cdn$1.20 that expire between November 12, 2005 and September 22, 2006.

Transactions with Related Parties — Fiscal Year Ended June 30, 2006

During the year ended June 30, 2005, a total of $129,055 (2004 — $129,952) was charged for fees by a legal firm of which the Company’s corporate secretary is a partner. At June 30, 2005, $5,112 (2004 — $32,345) was owing to this legal firm.

In May, 1999, the Company became the leaseholder of the head office premises. During the year ended June 30, 2001, the Company entered into a separate sub-lease agreement with Portal Resources Ltd. of which the Company’s Chairman is a director. During the year ended June 30, 2005, a total of $47,781 (2004 — $14,350) was charged by the Company for rent and common office costs. At June 30, 2005, $4,425 (2004 — $13,804) was receivable from this company.

Changes in Accounting Policies — Fiscal Year Ended June 30, 2005

Asset retirement obligations

Effective July 1, 2004, the Company adopted the new CICA Handbook Section 3110 “Asset Retirement Obligations”. The new accounting standard applies to future asset retirement requirements and requires that the fair value of liabilities for asset retirement obligations be recognized when incurred. The liability is accreted over time through periodic charges to earnings. The asset retirement cost is capitalized as part of the carrying value of the asset and is amortized over the useful life of the assets. This standard has been applied to the Magistral Gold Mine with no required retroactive restatement, as the fair value of the asset retirement obligation was recognized on purchase and approximated the fair value of the obligation at June 30, 2004.

Stock-based compensation

Effective July 1, 2004, the Company adopted the provisions of CICA Handbook Section 3870 on “Stock-Based Compensation and Other Stock-Based Payments”. The Company is now required to adopt the fair valued based method of accounting for all stock based awards. The Company has applied the new provisions retroactively, without restatement. The Company has recorded a cumulative decrease to retained earnings and a corresponding increase to contributed capital of $287,376 on July 1, 2004 with respect to stock options granted during the years ended June 30, 2003 and 2004.

Variable interest entities

Effective January 1, 2005, the Company has adopted CICA Accounting Guideline 15 “Consolidation of Variable Interest Entities” (AcG-15). The new standard provides guidance on the application of consolidation principles to certain entities that are subject to control on a basis other than ownership of voting rights. The adoption of this guideline did not have any impact on the consolidated financial statements of the Company.

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Financial Instruments and Other Instruments

The Company’s consolidated financial instruments include cash and cash equivalents, accounts receivable, reclamation bonds, accounts payable and a note payable. The fair values of these financial instruments approximate their carrying values.

Outlook — Fiscal Year Ended June 30, 2005

At the Magistral Mine, gold recovery from inventory in the heap leach pad continues with a reduced staff of 32 employees. From the end of fiscal 2005 to present, the Company has experienced recovery from the heap leach pad as anticipated. The equipment required for resumption of mining operations is still on-site and available. Several startup scenarios are being reviewed, including the use of contracted labor to resume open pit mining operations.

The Company has planned exploration programs for Mexico and Nevada. The Company has agreements with Placer Dome whereby they have agreed to continue exploration on the Company’s BMX, Limousine Butte and Keystone projects.

During the year, the Company attended various national and international mining industry trade shows, including the Denver Gold Show, which provided the Company with several opportunities in the precious metals sector for assessment.

Risk Factors — Fiscal Year Ended June 30, 2005

The Company is subject to financial and operational risks due to various factors outside of the control of the Company. Gold prices are affected by factors such as global supply and demand, expectations of the future rate of inflation, the strength of, and confidence in, the US dollar relative to other currencies, interest rates, and geopolitical events. Should the price of gold drop and the prices realized by the Company on gold sales were to decrease significantly and remain at such a level for any substantial period, the Company’s cash flow would be negatively affected.

The Company has limited financial resources, has no source of operating cash flow other than the Magistral Mine and has no assurance that additional funding will be available to it. The only source of additional financing for the Company is through the sale of equity securities or the optioning or joint venturing of its properties. Failure to obtain financing could result in the delay or indefinite postponement of further exploration and development of its projects with the possible loss of the Company’s interest in such properties.

Although the Company has carefully prepared its gold reserve and resource estimates, no assurance can be given that the indicated mining and processing recoveries of gold from the estimated reserves will be realized over the life of the mine. The business of mining is generally subject to a number of risks including equipment failure, operational accidents, unstable ground conditions and severe weather.

The Company’s exploration work involves many risks and may be unsuccessful. Substantial expenditures are required to establish proven and probable reserves and to complete the related mine development. It may take several years from the initial phases of drilling until production is possible. As a result of these uncertainties, there is no assurance that current or future exploration programs will be successful and result in the expansion or replacement of current production with new reserves. The validity of mining claims can also be uncertain. Although the Company has attempted to acquire satisfactory title to its properties, some risk exists that some titles may be defective.

Cautionary Statement on Forward-Looking Information

Certain information set forth in this report contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties including: the results of current operation and exploration activities; market reaction to future operation and exploration activities; significant changes in metal prices; currency fluctuations; increases in production costs; differences in ore grades; recovery rates; and tonnes mined from those expected; changes in mining, or heap leaching rates from currently planned rates; the timing and

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content of work programs; geological interpretations; receipt and security of mineral property titles; general market and industry conditions; and other factors detailed in the Company’s public filings.

Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise an, as such, undue reliance should not be placed on forward-looking statements. Nevada Pacific Gold Ltd’s actual results, programs and financial position could differ materially from those expressed in or implied by these forward-looking statements, and accordingly, no assurance can be given that the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits Nevada Pacific Gold Ltd. will derive therefrom.

The following glossary has been taken from Nevada Pacific’s Annual Information Form for the fiscal year ended June 30, 2006, filed on October 24, 2006. The terms defined below and used in this Annex do not apply to any other sections of this proxy statement.

Glossary


“alluvial”		Consisting of unconsolidated or poorly consolidated gravels

“anomaly”		A geological feature, especially in the subsurface, distinguished by geological, geophysical or geochemical means, which is different from the general surroundings and is often of potential economic value

“Au”		Gold

“breccia”		A coarse-grained clastic rock, composed of angular broken rock fragments

“carbonate”		A rock consisting of carbonate minerals, such as limestone or dolomite

“Carlin-style”		Mineralization related to deposit types found on the Carlin Trend, Nevada

“deposit”		A mineralized body which has been physically delineated by sufficient drilling, trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures. Such a deposit does not qualify as a commercially mineable ore body or as containing reserves or ore, unless final, legal, technical and economic factors are resolved

“dissemination”		Said of a mineral deposit (esp. of metals) in which the desired minerals occur as scattered particles in the rock

“distal zonation”		Zonation of metals away from the source instrusive

“down-dip”		A direction downwards and parallel to the dip of a structure or rock unit

“EM survey”		An electro-magenetic survey

“fault”		A fracture or a fracture zone in crustal rocks along which there has been displacement of the two sides relative to one another parallel to the fracture. The displacement may be a few inches or many miles long

“flat quartz veins”		Quartz veins horizontal to the earth’s surface

“floating cones”		Used to determine the economics of a deposit, determines the economic value of the rock in the ground

“g/t”		Grams per metric tonne

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“geophysical survey”		The use of one or more geophysical methods such as electrical, gravity or magnetic to determine the physical properties of the rock

“geotechnical drilling”		Drilling method used to help understand the engineering characteristics of the rock

“granodiorite”		A coarse grained rock intermediate in composition between a quartz diorite and a quartz monzonite

“Havallah Formation”		Pennsylvanian to Permian age rocks consisting of sandstone, limestone, cherts and quartzites found near Battle Mountain, Nevada

“hornfelsed”		Fine grained rock formed by contact metamorphism near an intrusive contact

“horst bounding faults”		Outward dipping faults that form an up-thrown block of rock

“hydrothermal”		Pertaining to the deposition or formation by magmatic hot water

“intervals”		A preset selection of units or subdivisions

“intrusive”		An igneous rock formed by magma

“IP survey”		An Induced Polarization geophysical survey

“jasperoid”		A dense, siliceous rock in which quartz has replaced the carbonate minerals of limestone or dolomite; a silicified limestone

“Jory member”		A coarse pebbly sandstone member of the Havallah Formation

“leach pad”		A pad onto which ore is placed for leaching by cyanide

“metallurgical testing”		Testing rock or ore for its mineral content

“mineralization”		The concentration of metals and their chemical compounds within a body of rock

“net smelter returns royalty”		A phrase used to describe a royalty payment made by a producer of metals based on gross metal production from a property, less deduction of certain limited costs including smelting, refining, transportation and insurance costs (often payable by delivery in kind of a percentage of the metal produced)

“opt”		Ounces per tonne

“ore”		A natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit or from which some part may be profitably separated

“pathfinder elements”		A relatively mobile element that serves as an indicator or mineralization

“pediment”		The gravel covered portion between a mountain range and a valley

“pole-dipole”		An electronic array in which one current electrode is placed at infinity while one current electrode and two potential electrodes in close proximity are moved across the area to be tested

“porphyry”		An igneous rock of any composition that contains conspicuous phenocrysts in a fine-grained groundmass; a porphyritic igneous rock

“ppb”		Parts per billion

“ppm”		Parts per million

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“quartzites”		Metamorphosed sandstone

“reverse circulation drilling”		The circulation of bit-coolant and cuttings-removal liquids, drilling fluid, mud, air or gas down the borehole outside the drill rods and upward inside the drill rods

“sedimentary”		Pertaining to or containing sediment; e.g., sedimentary deposit or a sedimentary complex

“silicification”		The introduction of, or replacement by, silica, generally resulting in the formation of fine-grained quartz, chalcedony, or opal, which may fill pores and replace existing minerals

“skarn”		Lime-bearing silicates, of any geological age, derived from nearly pure limestone and dolomite with the introduction of large amounts of Si, Al, Fe and Mg and usually formed near an intrusive contact. “Endoskarn” refers to skarns developed within the intrusive, “exoskarn” refers to skarns developed outside the intrusive contact

“stockwork”		A three dimensional network of closely spaced planar to irregular veinlets

“stopes”		An underground excavation formed by the extraction of ore

“strata”		A sheet like body or layer of sedimentary rock visually separable from other layers above and below

“sulfide”		A mineral compound characterized by the linkage of sulfur with a metal

“tailings”		The washed or milled portion of ore that is uneconomic

“VLF survey”		Very low frequency survey

“waste stripping”		The removal of waste rock in an open pit mine

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Terms Relating to Mineral Reserves and Resources

The following terms which are in this Annex are Canadian mining terms as defined in accordance with National Instrument 43-101 under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines. The definitions of the terms mineral reserve, proven mineral reserve and probable mineral reserve under Canadian standards are different than the definitions adopted by the SEC and applicable to U.S. companies filing reports with the SEC. It is the view of the SEC’s staff that:


	•	A final or bankable feasibility study is required to meet the requirements to designate reserves.

	•	A historic three year average price must be used in any reserve or cash flow analysis to designate reserves.

	•	To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities.

In addition, while the terms mineral resource, measured mineral resource, indicated mineral resource, and inferred mineral resource are recognized and required to be reported by Canadian regulations, the SEC does not recognize these terms. Information contained in this Annex concerning descriptions of mineralization, resources and reserves may not be comparable to similar information made public by U.S. companies. Resources classified as indicated mineral resource and inferred mineral resource have an uncertain existence and are uncertain as to their economic and legal feasibility. You should not assume that any part or all of an inferred resource exists, or is economically mineable.


Mineral reserve		The economically mineable part of a measured or indicated mineral resource demonstrated by a preliminary feasibility study. The 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 might occur when the material is mined. Mineral reserves are categorized on the basis of the degree of confidence in the estimate of the quantity and grade of the deposit:

Proven mineral reserve		For the part of a deposit which is being mined, or which is being developed and for which there is a detailed mining plan, the estimated quantity and grade or quality of that part of a measured mineral resource for which the size, configuration and grade or quality and distribution of values are so well established, and for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, so that there is the highest degree of confidence in the estimate.

Probable mineral reserve		The estimated quantity and grade or quality of that part of an indicated mineral resource for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, at a confidence level which would serve as a basis for decisions on major expenditures. The degree of assurance, although lower than that for proven mineral reserves, is high enough to assume continuity between points of observation.

Mineral resource		A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge.

C-50


Measured mineral resource		Part of a mineral resource for which a quantity grade or quality, density, 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.

Indicated mineral resource		Part of a mineral resource for which quantity grade or quality, density, 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.

Inferred mineral resource		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.

Metric Equivalents

The following formulas may be used to convert between metric equivalents:


				Multiply Metric
Metric Measurement	U.S. Equivalent			Figure by:

Hectares		Acres			2.471
Meters		Feet (ft.	)		3.281
Kilometers (km)		Miles			0.621
Tons		Tons (2000 pounds	)		1.102
Grams/ton		Ounces (troy/ton	)		0.029

C-51

FINANCIAL STATEMENTS OF NEVADA PACIFIC

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements and the information contained in the management discussion and analysis have been prepared by the management of the Company. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and reconciled to United States generally accepted accounting principles as set out in note 17 and, where appropriate, reflect management’s best estimates based on currently available information. A system of internal accounting control is maintained to provide reasonable assurance that financial information is accurate and reliable.

The Company’s independent auditors, PricewaterhouseCoopers LLP, who have been appointed by the shareholders, conduct an audit in accordance with generally accepted auditing standards in Canada to allow them to express an opinion on the financial statements.

The Audit Committee of the Board of Directors meets periodically with management and the independent auditors to review the scope and results of the annual audit, and to review the financial statements and related reporting matters prior to submission to the Board.


/s/ David Hottman		/s/ W.R. (Bill) Franklin
David Hottman,		W. R. (Bill) Franklin,
President & Chief Executive Officer		Chief Financial Officer
September 28, 2006		September 28, 2006

C-52

Report of Independent Registered Public Accounting Firm

To the Shareholders of

Nevada Pacific Gold Ltd.

We have audited the consolidated balance sheets of Nevada Pacific Gold Ltd. (the “Company”) as at June 30, 2006 and 2005 and the consolidated statements of operations, deficit, cash flows and mineral property expenditures for each of the three years ended June 30, 2006. 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 of America). 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 June 30, 2006 and 2005 and the results of its operations and its cash flows for each of the three years ended June 30, 2006 in accordance with Canadian generally accepted accounting principles.

/s/ Pricewaterhouse Coopers LLP

Chartered Accountants

Vancouver, British Columbia

September 28, 2006

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

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by significant 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 consolidated financial statements. Reporting standards for auditors in the United States also require the addition of an explanatory paragraph when there is a change in accounting principle that has a material affect on the comparability of the Company’s financial statements, such as the change in accounting for stock based compensation described in note 2 to the financial statements. Our report to the directors dated September 28, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions and such changes in accounting policy in the auditors’ report when these are adequately disclosed in the financial statements.

/s/ Pricewaterhouse Coopers LLP

Chartered Accountants

Vancouver, British Columbia

September 28, 2006

C-53

NEVADA PACIFIC GOLD LTD.

CONSOLIDATED BALANCE SHEETS

As at June 30^th


	2006			2005
	(Expressed in US Dollars)

ASSETS
Current assets
Cash and cash equivalents	$	3,659,738		$	957,251
Accounts receivable		180,697			273,165
Product inventory and stockpiled ore (Note 4)		109,074			4,112,633
Supplies inventory		285,152			414,366
Prepaid expenses		239,424			223,372

		4,474,085			5,980,787
Property, plant and equipment (Note 5)		13,306,314			13,388,954
Mineral properties (Note 6)		4,661,805			3,106,357
Reclamation bonds		96,363			93,228

	$	22,538,567		$	22,569,326


LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$	1,194,495		$	1,783,277

		1,194,495			1,783,277
Other liabilities		112,397			175,217
Asset retirement obligation (Note 7)		1,684,812			1,567,267

		1,797,209			1,742,484

SHAREHOLDERS’ EQUITY
Share capital (Note 8)		30,955,143			25,920,223
Contributed capital (Note 9)		1,490,594			1,001,674
Deficit		(12,898,874	)		(7,878,332	)

		19,546,863			19,043,565

	$	22,538,567		$	22,569,326

Nature of operations and Going Concern (Note 1)
Commitments (Note 15)
Subsequent Events (Note 18)

Approved by the Board:


/s/ Michael Beley		/s/ Gary Nordin

Michael Beley,		Gary Nordin,
Director		Director

See accompanying notes to consolidated financial statements

C-54

NEVADA PACIFIC GOLD LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended June 30^th


	2006			2005			2004
	(Expressed in US Dollars)

GOLD SALES	$	6,649,300		$	5,175,235		$	—

COST OF SALES		7,903,654			3,347,153			—
DEPRECIATION AND DEPLETION		734,618			727,815			—
ROYALTIES		381,572			262,197			—

		9,019,844			4,337,165			—

EARNINGS (LOSS) FROM MINING OPERATIONS		(2,370,544	)		838,070			—

EXPENSES AND OTHER INCOME
General and administrative		1,944,511			2,084,400			1,538,190
Interest and financing costs		—			22,378			1,159
Stock-based compensation		611,572			559,963			39,120
Foreign exchange losses		36,904			115,796			117,226
Other income		(57,349	)		(37,942	)		(89,433	)

		2,535,638			2,744,595			1,606,262

LOSS BEFORE THE UNDERNOTED ITEMS		4,906,182			1,906,525			1,606,262

Write-down of mineral properties		114,360			630,332			330,285
Gain on disposal of mining equipment		—			(155,199	)		—
								—

LOSS FOR THE YEAR	$	5,020,542		$	2,381,658		$	1,936,547

Basic and diluted loss per share	$	0.08		$	0.05		$	0.06

Weighted average number of shares outstanding		60,304,369			51,295,350			30,305,758

See accompanying notes to consolidated financial statements

C-55

NEVADA PACIFIC GOLD LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended June 30^th


	2006			2005			2004
	(Expressed in US Dollars)

CASH PROVIDED BY (USED FOR) OPERATIONS
Loss for the period	$	(5,020,542	)	$	(2,381,658	)	$	(1,936,547	)
Items not affecting cash
Depreciation, depletion & amortization		758,435			750,867			15,978
Accretion of asset retirement obligation		117,545			44,540			—
Stock based compensation		611,572			559,963			39,120
Write-off of mineral properties		114,360			630,332			330,285
Gain on disposal of mining equipment		—			(155,199	)		—
Severance expense		(27,820	)		61,106			—

		(3,446,450	)		(490,049	)		(1,551,164	)
Changes in non-cash working capital items (Note 12)		2,970,312			(4,357,410	)		720,590

		(476,138	)		(4,847,459	)		(830,574	)

INVESTING ACTIVITIES
Property, plant and equipment		(25,700	)		(3,987,643	)		(1,889,409	)
Proceeds from disposal of equipment		—			200,199			—
Acquisition of Pangea Resources Inc (Note 3)		—			—			(4,323,753	)
Reclamation bonds		(3,135	)		(45,256	)		(47,972	)
Expenditures on mineral properties, net of recoveries		(1,704,808	)		(1,321,555	)		(1,223,327	)

		(1,733,643	)		(5,154,255	)		(7,484,461	)

FINANCING ACTIVITIES
Common shares issued:
On private placements		4,541,507			10,262,635			7,871,295
On warrant conversion		93,952			591,200			920,243
On option exercise		369,826			200,020			343,933
Share issue costs and finder’s fees		(93,017	)		(692,741	)		(310,303	)

		4,912,268			10,361,114			8,825,168

INCREASE IN CASH AND CASH EQUIVALENTS		2,702,487			359,400			510,133
CASH AND CASH EQUIVALENTS, Beginning of year		957,251			597,851			87,718

CASH AND CASH EQUIVALENTS, End of year	$	3,659,738		$	957,251		$	597,851

Supplementary information on non-cash transactions
Shares issued and applied to notes payable (Note 3)	$	—		$	500,000		$	—
Warrants issued to Underwriter (Note 9)	$	—		$	131,020		$	—

See accompanying notes to consolidated financial statements

C-57

NEVADA PACIFIC GOLD LTD.

CONSOLIDATED STATEMENTS OF MINERAL PROPERTY EXPENDITURES

For the years ended June 30^th


				South													Other
	Limousine			Carlin											Timber		Nevada			Mexican
	Butte			Project			Keystone			BMX			Cornerstone		Creek		Properties			Properties		Total
	(Expressed in US Dollars)

Total as at June 30, 2003	$	473,912		$	756,611		$	117,277		$	11,215		$	—	$	40,061	$	88,016		$	—	$	1,487,092
Exploration salaries & wages		45,833			2,927			26,025			9,728			1,612		2,255		87,527			18,871		194,778
Land holding costs		45,900			7,864			52,434			97,306			10,049		37,547		82,836			86,398		420,334
Surveying		—			—			9,480			3,689			—		4,461		18,413			11,572		47,615
Environmental		225			—			14			2,847			—		—		16,430			—		19,516
Geology		3,952			190			2,119			34,949			23		677		135,474			35,035		212,419
Surface geochemistry		1,564			—			643			16,906			—		3,354		3,290			9,506		35,263
Geophysics		—			—			15,835			2,000			—		6,000		48,100			—		71,935
Road work & trenching		3,788			—			—			3,653			—		—		5,668			—		13,109
Drilling		153,386			—			—			126,218			—		—		264,776			—		544,380
Other		3,995			—			1,176			6,422			—		403		13,523			6,763		32,282

Total expenditures		258,643			10,981			107,726			303,718			11,684		54,697		676,037			168,145		1,591,631
Cost recoveries		—			—			—			(293,304	)		—		—		—			—		(293,304	)
Property write-offs		—			(245,196	)		—			—			—		—		(85,089	)		—		(330,285	)

Total as at June 30, 2004		732,555			522,396			225,003			21,629			11,684		94,758		678,964			168,145		2,455,134
Exploration salaries & wages		10,650			—			14,734			2,855			40,824		14,825		155,136			23,964		262,988
Land holding costs		56,678			9,616			68,312			74,662			32,772		37,704		84,217			57,077		421,038
Surveying		—			—			4,028			6,145			11,638		7		23,980			6,728		52,526
Environmental		—			—			—			—			4		8		8,398			—		8,410
Geology		22			—			497			3,450			5,148		2,353		14,181			53,607		79,258
Surface geochemistry		—			—			4,446			—			27,893		—		11,666			81,382		125,387
Geophysics		—			—			—			—			—		3,350		52,550			57,736		113,636
Road work & trenching		—			—			—			—			—		—		23,169			61,627		84,796
Drilling		1,020			—			5,460			—			22		—		148,140			150,621		305,263
Other		—			—			—			—			—		—		—			40,100		40,100

Total expenditures		68,370			9,616			97,477			87,112			118,301		58,247		521,437			532,842		1,493,402
Cost recoveries		(56,500	)		—			(78,720	)		(76,627	)		—		—		—			—		(211,847	)
Property write-offs		—			—			—			—			—		—		(630,332	)		—		(630,332	)

Total as at June 30, 2005		744,425			532,012			243,760			32,114			129,985		153,005		570,069			700,987		3,106,357
Exploration salaries & wages		2,960			—			17,782			15,505			53,181		18,132		93,121			107,129		307,810
Land holding costs		—			9,639			20			80,587			43,009		48,151		58,234			207,803		447,443
Surveying		—			—			—			—			991		6,716		4,966			1,726		14,399
Geology		—			—			—			1,226			212		666		1,453			43,381		46,938
Surface geochemistry		—			—			—			—			2,199		—		3,962			55,230		61,391
Geophysics		—			—			—			—			—		5,300		18,950			5,524		29,774
Road work & trenching		—			—			—			9,110			31,880		7,200		222			21,207		69,619
Drilling		—			—			91,724			71,202			248,629		236,916		36,541			—		685,012
Other		—			—			—			—			—		—		—			19,042		19,042

Total expenditures		2,960			9,639			109,526			177,630			380,101		323,081		217,449			461,042		1,681,428
Cost recoveries		—			—			(11,620	)		—			—		—		—			—		(11,620	)
Property write-offs		—			(23	)		—			—			—		—		(114,337	)		—		(114,360	)

Total as at June 30, 2006	$	747,385		$	541,628		$	341,666		$	209,744		$	510,086	$	476,086	$	673,181		$	1,162,029	$	4,661,805

See accompanying notes to consolidated financial statements

C-58

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30^th 2006 and 2005
(expressed in US Dollars)


1.	Nature of Operations and Going Concern

Nevada Pacific Gold Ltd. (“the Company”) was incorporated under the laws of the Province of British Columbia. Its principal business activities consist of the production of gold and silver in Mexico and exploring for and developing gold and silver properties in Mexico and the western United States, primarily Nevada.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes the realization of assets and discharge of liabilities in the normal course of business. The Company has recorded losses from operations since its inception. The Company’s ability to continue as a going concern is dependent upon the ability of the Company to obtain additional financing to develop its mineral properties, the future performance of the Magistral Gold Mine, which is currently in a leach only phase, the existence of economically recoverable reserves, and upon its ability to attain profitable operations. Management continues to seek additional financing necessary to permit the Company to continue operations. There can be no assurance that management will be successful in all these activities. Because of this uncertainty, there is substantial doubt about the ability of the Company to continue as a going concern. These consolidated financial statements do not give effect to any adjustments that would be necessary should the Company not be able to continue as a going concern. Such adjustments could be material.


2.	Significant Accounting Policies

Basis of presentation and principles of consolidation

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“CDN GAAP”). The significant differences between those principles and those that would be applied under U.S. generally accepted accounting principles (“US GAAP”) are disclosed in Note 17.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Nevada Pacific Gold (US), Inc., Pangea Resources Inc. and Compania Minera Pangea, S.A. de C.V. All inter-company transactions and balances have been eliminated.

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements. Significant estimates by management include the carrying value of property, plant and equipment, useful lives of such assets, reserves and resources, the asset retirement provision, future income tax valuation allowance, inventory valuation and stock-based compensation valuation assumptions. These estimates are reviewed and adjusted regularly to ensure that they are reasonable. The estimates may vary from actual results.

Property, plant and equipment

(a) Plant and equipment

Plant and equipment are depreciated over the estimated lives of the assets on a unit-of-production or straight-line basis as appropriate. Amortization of property, plant and equipment at the Magistral Gold Mine commenced upon commercial production on a unit-of-production basis.

(b) Mineral properties and deferred costs

The acquisition cost of mineral properties and related exploration and development costs, as well as directly attributable general and administrative support costs and salaries, are deferred. When a mineral property is sold,

C-59

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

abandoned, or deemed not to contain economic reserves, all costs are written-off. The amounts shown for mineral properties represent costs to date and do not necessarily reflect present or future values.

Deferred costs include operating costs, net of revenues, prior to the commencement of commercial production of the Magistral Gold Mine. Deferred costs are, upon commencement of commercial production, amortized over the estimated life of the ore body to which they relate, on a unit-of-production basis, or are written off if the property is abandoned or written down if there is considered to be a permanent impairment in value.

Asset retirement obligations

Effective July 1, 2004, the Company adopted CICA Handbook Section 3110 “Asset Retirement Obligations”. The accounting standard applies to future asset retirement requirements and requires that the fair value of liabilities for asset retirement obligations are recorded in the period in which they occur. The liability is accreted over time through periodic charges to earnings. The asset retirement cost is capitalized as part of the carrying value of the asset and is amortized over the useful life of the asset.

Cash and cash equivalents

The Company considers cash and cash equivalents to be cash on deposit and highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less. Interest earned is recognized immediately in operations.

Inventories

Inventories include gold dore, stockpiled ore and supplies inventories. Gold poured, in transit and at refineries, is recorded at the lower of cost and net realizable value, stockpiled ore is valued at the lower of cost and net realizable value and includes amortization, depreciation and depletion and supplies inventory is carried at the lower of cost and replacement cost.

Revenue recognition

Revenue from the sale of metals is recognized in the accounts upon delivery of the product to the customer when title transfers and the rights and obligations of ownership pass to the buyer. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays.

Foreign currency translation

The Company and its subsidiaries are considered to be integrated foreign operations. Their financial statements and transaction amounts denominated in foreign currencies are translated into U.S. dollars as follows:


	•	monetary items are translated at the rate of exchange in effect at the balance sheet date,

	•	non-monetary items are translated at the historical exchange rates,

	•	revenue and expense items are translated at the average rate for the period, except for items for which amortization is charged, and

	•	foreign currency translation gains and losses are included in operations.

Income taxes

The Company follows the liability method of accounting for income taxes. Using this method, income tax liabilities and assets are recognized for the estimated tax consequences attributable to differences between the amounts reported in the financial statements of the Company and their respective tax bases, using substantively enacted income tax rates. The effect of a change in income tax rates on future tax liabilities and assets is recognized

C-60

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in income in the period in which the change occurs. A future income tax asset is recorded when the probability of the realization is more likely than not.

Stock based compensation

Effective July 1, 2004, the Company adopted provisions of CICA Handbook Section 3870 on “Stock-Based Compensation and Other Stock-Based Payments”. The Company is required to employ the fair value method of accounting for all stock based awards. The Company has applied the new provisions retroactively, without restatement. The Company recorded a cumulative increase to deficit and a corresponding increase to contributed capital of $287,376 on July 1, 2004 with respect to stock options granted during the years ended June 30, 2003 and 2004.

Loss per share

Loss per share is calculated using the weighted-average number of shares outstanding during the year. The Company follows the “treasury stock” method in its calculation of diluted earnings per share.

Variable interest entities

Effective January 1, 2005, the Company has adopted CICA Accounting Guideline 15, “Consolidation of Variable Interest Entities” (AcG-15). The new standard provides guidance on the application of consolidation principles to certain entities that are subject to control on a basis other than ownership of voting rights. The adoption of this guideline did not have any impact on the consolidated financial statements of the Company.


3.	Acquisition of Pangea Resources Inc.

On February 2, 2004, the Company acquired all of the outstanding shares of Pangea Resources Inc. (“Pangea”) whereby the Company acquired 100% of the Magistral Gold Mine and related assets beneficially owned by Compania Minera Pangea S.A. de C.V. (“Minera Pangea”) in Mexico, a wholly owned subsidiary of Pangea. Under the purchase agreement, the Company acquired Pangea for $4,000,000 cash and 2,000,000 common shares of the Company with an estimated fair value of $1.00 CDN per share with a further $3,000,000 note payable due on or before August 2, 2004. A general security agreement was put in place on the assets of the Company. The Company incurred acquisition costs of $370,699. The acquisition has been accounted for using the purchase method.

During the year ended June 30, 2005 the Company’s $3,000,000 note payable was settled by the payment of $2,522,116, including $22,116 in accrued interest, and the issuance of 669,485 shares of the Company, valued at $500,000. All security granted by the Company has been returned to the Company.

Management does not consider that the Magistral Gold Mine was operating at commercial levels at the time the mine was acquired. Prior to commercial production, effective January 1, 2005, pre-production expenditures, net of revenue, were capitalized to property. Included in the liabilities assumed on the purchase is an estimated tax liability for the Magistral Gold Mine of $600,000, which is included in accounts payable and accrued liabilities. There is a degree of uncertainty associated with the measurement of this estimated Mexican tax liability. This amount may change as a result of the resolution of certain Mexican tax issues arising from the acquisition.


4.	Product inventory and stockpiled ore


	June 30		June 30
	2006		2005

Stockpiled ore	$	—	$	3,788,972
Gold dore		109,074		323,661

	$	109,074	$	4,112,633

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Property, plant and equipment


	June 30			June 30			June 30
	2006			2005			2004

Magistral Gold Mine
Plant and equipment	$	2,760,526		$	2,760,526		$	1,841,972
Property and deferred costs		10,245,081			10,240,243			7,172,689
Asset retirement obligation asset		1,477,593			1,477,593			1,477,593
Accumulated amortization and depletion		(1,220,546	)		(1,136,023	)		—

		13,262,654			13,342,339			10,492,254

Other equipment		136,776			115,914			114,245
Accumulated amortization		(93,116	)		(69,299	)		(46,247	)

		43,660			46,615			67,998

	$	13,306,314		$	13,388,954		$	10,560,252


6.	Mineral Properties

Limousine Butte

The Limousine Butte property is located northwest of Ely, Nevada in White Pine County, and was staked by the Company such that the Company controls the mineral rights to the property. The property is subject to a sliding scale net smelter return royalty of 1.5% to 2.5% on all production from the property, with an advance payment of $1,000,000 to be made at the commencement of commercial production and to be credited against future royalty payments.

On September 7, 2004, the Company signed a binding letter agreement with Placer Dome U.S. Inc. (“Placer Dome”), a wholly owned subsidiary of Placer Dome Inc., whereby Placer Dome had the right to earn a 60% interest in the Company’s Limousine Butte project by spending $4,000,000 on exploration over a five-year period. On April 26, 2006 the Company received notification from Placer Dome of its election to terminate the letter agreement. All rights to the properties and all exploration data relating to the properties have been returned to the Company.

South Carlin Project

The Company’s principal interest in the South Carlin project is the Woodruff Creek property. The Woodruff Creek property is located within Elko County, Nevada. In January 2001, the Company completed its acquisition of a 100% interest in the property from Kennecott Exploration Company (“Kennecott”) by incurring over $500,000 in exploration expenditures over a four-year period and by paying $50,000 to Kennecott. Kennecott retains an uncapped 1% net smelter return royalty on the project.

Keystone

The Company acquired the Keystone project in Nevada through staking and the purchase of two patented claims in 1999 and expanded the property in 2002 through the staking of 109 unpatented mining claims.

On September 7, 2004, the Company signed a binding letter agreement with Placer Dome, whereby Placer Dome had the right to earn a 60% interest in the Company’s Keystone project by spending $5,000,000 on exploration over a five-year period. On April 26, 2006 the Company received notification from Placer Dome of its election to terminate the letter agreement. All rights to the properties and all exploration data relating to the properties have been returned to the Company.

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BMX

During the year ended June 30, 2003, the Company acquired mineral rights to the Battle Mountain (BMX) project. The project has been staked by the Company, through the location of unpatented Federal lode mining claims and is 100% owned by the Company.

On November 27, 2002, the Company signed a binding letter of agreement with Placer Dome whereby Placer Dome had the right to earn a 60% interest in the BMX project by paying the Company $200,000 on signing and expending $4,000,000 on exploration on the project over a five-year period. On October 21, 2005, the Company received notification from Placer Dome of its election to terminate the letter agreement. All rights to the properties and all exploration data relating to the properties have been returned to the Company.

Bluebird Gold Property

The Bluebird property lies within the area of interest of the Company’s BMX project. On April 30, 2003, the Company signed a 10-year mining lease agreement with exploration rights with the owner of the Bluebird property. The lease is renewable in 5-year increments with the owner retaining a 3% net smelter return. The property is located at the northern end of the Battle Mountain Trend, Lander County, Nevada and consists of 10 unpatented mining claims. The Company can purchase 1.5% of the net smelter return at any time for $500,000 per percentage point. Advanced annual royalties are payable to the owners of $10,000 per year for the first nine years and $25,000 per year for subsequent years.

Cornerstone (Pat Canyon)

In May 2004, the Company signed a 10-year renewable mining lease agreement to acquire the exploration rights to the Cornerstone property, which is located less than three miles east of the Company’s Keystone project in Eureka County, Nevada and consists of 106 mineral claims. The owners retain a 3-4% sliding scale gross production royalty and advanced royalties payable to the owners were $10,000 on signing of the lease. This amount increases annually to a maximum of $50,000 per year over the term of the lease.


7.	Asset retirement obligation


	2006		2005		2004

Asset retirement obligation — beginning of year	$	1,567,267	$	1,477,593	$	—
Obligations incurred during the year		—		—		1,477,593
Accretion expense		117,545		89,674		—

Asset retirement obligation — end of year	$	1,684,812	$	1,567,267	$	1,477,593

The Company’s asset retirement obligation arises from it obligations for site reclamation and remediation in connection with the Magistral Gold Mine. Under Mexican regulations no deposits are required to secure these obligations.

The total undiscounted asset retirement obligation is $2,332,864, which is expected to be expended in 2013. In determining the carrying value of the asset retirement obligation, the Company has assumed a credit-adjusted risk-free rate of 7.5% and an inflation rate of 2.75%.

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Share capital

Authorized

Unlimited Preferred Shares without par value, with rights to be determined upon issue Unlimited Common Shares without par value


Issued and Outstanding	Number of Shares		Amount

Balance as at June 30, 2003		20,142,503	$	4,857,823
Private Placements		13,821,352		7,849,847
On acquisition of Pangea Resources Inc.		2,000,000		1,491,333
On exercise of warrants		2,394,998		920,243
On exercise of options		775,000		343,933
Finder’s fee		80,000		21,448
Share issue costs		—		(310,303	)

Balance as at June 30, 2004		39,213,853	$	15,174,324
Private Placements		5,533,655		4,091,285
Underwritten offering		7,586,712		6,171,350
Issued for payment on note payable		669,485		500,000
On exercise of warrants		1,723,801		591,200
On exercise of options		715,000		200,020
Fair value of options exercised		—		15,805
Finder’s fee		—		(681,734	)
Share issue costs		—		(142,027	)

Balance as at June 30, 2005		55,442,506	$	25,920,223
Private Placement — (i)		12,500,000		4,431,286
Private Placement — (ii)		200,000		110,221
On exercise of warrants		89,515		93,952
On exercise of options		740,000		369,826
Fair value of options exercised		—		122,652
Share issue costs		—		(93,017	)

Balance as at June 30, 2006		68,972,021	$	30,955,143


(i)		On December 9, 2005, the Company announced that it had entered into an agreement with Mr. Robert McEwen to issue 12,500,000 units at a price of $0.40 CDN per unit for aggregate proceeds of $5,000,000 CDN. Each unit consisted of one common share and one common share purchase warrant with each warrant exercisable to acquire one common share of the Company at an exercise price of $0.50 CDN for a term of two years. As a result of the private placement, Mr. McEwen holds approximately 18.2% of the outstanding shares of the Company and, in event of the exercise of all the warrants, Mr. McEwen will hold approximately 30.8% of the outstanding common shares of the Company. In accordance with the rules of the TSX Venture Exchange, as this constitutes a “change in control”, the placement closed in two tranches. The first tranche, consisting of 6,921,213 units was completed on December 14, 2005. The second tranche for the balance of the units was conditional upon receiving shareholder approval. The Company called an extraordinary general meeting of the shareholders on January 23, 2006 and the shareholders approved the transaction, which was completed on May 11, 2006. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees are payable on this placement.

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) On January 13, 2006, the Company issued 200,000 units to an officer of the Company. Each unit was issued at a price of $0.64 CDN for gross proceeds of $128,000 CDN. Each unit is comprised of one common share of the Company and one share purchase warrant with each purchase warrant entitling the holder to purchase one common share of the Company at $0.80 CDN until January 13, 2008. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees were paid on this issue.

Stock options

The Company has a stock option plan (the “Stock Option Plan”) which provides for equity participation in the Company by its directors, officers, employees and consultants through the acquisition of common shares pursuant to the grant of options to purchase common shares. The maximum aggregate number of common shares to be reserved and authorized, to be issued pursuant to options granted under the Stock Option Plan is 5,496,000 common shares.

The exercise price for options granted under the Stock Option Plan is determined by committee upon grant provided the price is not less than the closing trading price on the day immediately preceding the date of grant, less any discounts permitted by the TSX Venture Exchange or such other stock exchange on which the common shares are listed. Options granted under the Stock Option Plan are subject to a minimum one year vesting schedule whereby 25% of each option will vest on each of the three month anniversaries of the date of grant, up to and including the end of the first year after such grant, or such other more restrictive vesting schedule as the administrator of the Stock Option Plan may determine. Options are non-assignable and are exercisable for a period of up to five years from the date the option is granted, or up to ten years from the date of grant if permitted by applicable stock exchanges, subject to earlier termination after certain events such as the optionee’s cessation of service to the Company or death.

The Company accounts for its grants in accordance with the fair value method of accounting for stock-based compensation. For the year ended June 30, 2006, the Company recognized $611,572 in stock based compensation for employees, directors and consultants. For the year ended June 30, 2005, the company recognized $559,963 in stock based compensation for employees, directors and consultants. For the year ended June 30, 2004, the company recognized $39,120 in stock based compensation for consultants. As permitted by Canadian generally accepted accounting principles, the Company did not use the fair value method of accounting for stock options granted to employees and directors for the year ended June 30, 2004. Had the Company followed the fair value method of accounting, the Company would have recorded a compensation expense of $278,002 in respect of its employee and director stock options.

Pro forma earnings for 2004 determined under the fair value method of accounting for stock options are as follows:


	2004

Loss for the year as reported	$	1,936,547
Stock option expense		278,002

Pro forma net loss	$	2,214,549

Loss per share — basic and diluted
As reported	$	0.06
Pro forma	$	0.07

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of the options granted has been calculated using the Black-Scholes option-pricing model, based on the following assumptions:


	2006	2005	2004

Risk free interest rate	3.4 to 4%	4%	4%
Expected life	1 to 3 years	1 to 3 years	3 years
Expected volatility	55% to 77%	55% to 77 %	85% to 97%
Dividend yield rate	nil	nil	nil

Option-pricing models require the input of highly subjective assumptions regarding the expected volatility and expected life. Changes in assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Company’s stock options at the date of grant.

A summary of changes to stock options during the period are as follows:


	June 30, 2006					June 30, 2005					June 30, 2004
				Weighted-					Weighted-					Weighted-
	Number			Average		Number			Average		Number			Average
	of Shares			Exercise Price		of Shares			Exercise Price		of Shares			Exercise Price

Outstanding at beginning of year		3,328,500		$	0.86 CDN		2,965,000		$	0.69 CDN		1,925,000		$	0.43 CDN
Granted(i) (ii) (iii)		1,712,500		$	1.05 CDN		1,223,500		$	1.00 CDN		1,825,000		$	0.91 CDN
Exercised		(740,000	)	$	0.57 CDN		(715,000	)	$	0.34 CDN		(775,000	)	$	0.58 CDN
Forfeited		(461,000	)	$	0.94 CDN		(145,000	)	$	1.01 CDN		(10,000	)	$	0.61 CDN

Outstanding at end of the year		3,840,000		$	0.99 CDN		3,328,500		$	0.86 CDN		2,965,000		$	0.69 CDN

Options exercisable at the end of the year		2,263,750		$	0.95 CDN		1,782,125		$	0.74 CDN		1,355,000		$	0.38 CDN


(i)		On August 30, 2005 the Company granted to consultants 50,000 stock options with an exercise price of $0.80 CDN. These options have a term of one year and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.16 per option at grant date.

(ii)		On March 2, 2006 the Company granted to directors, employees and consultants 1,462,500 stock options with an exercise price of $0.99 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.45 per option at grant date.

(iii)		On June 1, 2006 the Company granted to a director 200,000 stock options with an exercise price of $1.54 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.66 per option at grant date.

Stock options outstanding as at June 30, 2006 are as follows:

Weighted-

Number

Average

Outstanding

Life Remaining

Exercise Price

Range of Exercise Prices ($)

at June 30, 2006

(Years)

($)

0.53 - 1.00 CDN

3,095,000

7.59

0.90 CDN

1.01 - 1.54 CDN

745,000

8.28

1.36 CDN

Total

3,840,000

7.72

0.99 CDN

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Warrants

A summary of changes to warrants during the period are as follows:


	June 30, 2006					June 30, 2005					June 30, 2004
				Weighted-					Weighted-					Weighted-
	Number			Average		Number			Average		Number			Average
	of Warrants			Exercise Price		of Warrants			Exercise Price		of Warrants			Exercise Price

Outstanding at beginning of the year		6,420,841		$	1.19 CDN		5,255,676		$	1.05 CDN		699,998		$	0.65 CDN
Granted		12,700,000		$	0.50 CDN		6,420,841		$	1.19 CDN		6,950,676		$	0.91 CDN
Exercised		(89,515	)	$	1.20 CDN		(1,723,801	)	$	0.45 CDN		(2,394,998	)	$	0.51 CDN
Expired		(4,324,426	)	$	1.18 CDN		(3,531,875	)	$	1.35 CDN		—			—

Outstanding at end of the year		14,706,900		$	0.60 CDN		6,420,841		$	1.19 CDN		5,255,676		$	1.05 CDN

Share purchase warrants outstanding at June 30, 2006 were as follows:


Number		Exercise Price	Expiry Date

	1,874,400	$1.20 CDN	August 17, 2006 (iv)
	132,500	$1.20 CDN	September 22, 2006 (iv)
	6,921,213	$0.50 CDN	December 14, 2007
	200,000	$0.80 CDN	January 13, 2008
	5,578,787	$0.50 CDN	May 11, 2008

	14,706,900


(iv)		On August 9, 2005 these warrants were extended by an additional twelve months. The original expiry date for the 1,936,900 warrants was August 17, 2005 and for the 159,515 was September 22, 2005. (See note 18)


9.	Contributed capital


	2006			2005			2004

Contributed capital — beginning of year	$	1,001,674		$	39,120		$	—
Retained earning adjustment (See Note 2)		—			287,376			—
Fair value of share purchase options vesting during year		611,572			559,963			39,120
Fair value of underwriter’s warrants issued during year		—			131,020			—
Fair value of share purchase options exercised during year		(122,652	)		(15,805	)		—

Contributed capital — end of year	$	1,490,594		$	1,001,674		$	39,120


10.	Related party transactions

Payments to related parties were made in the normal course of operations and were valued at fair value as determined by management. Amounts due to or from related parties are unsecured, non-interest bearing and due on demand.

During the year ended June 30, 2006, a total of $149,730 (2005 — $129,055, 2004 — $129,952) was charged for fees by a legal firm of which the Company’s corporate secretary is a partner. At June 30, 2006, $17,352 (2005 — $5,112, 2004 — $32,345) was owing to this legal firm.

In May, 1999, the Company became the leaseholder of the head office premises. During the year ended June 30, 2001, the Company entered into a separate sub-lease agreement with Portal Resources Ltd. of which the Company’s Chairman is a director. During the year ended June 30, 2006, a total of $60,340 (2005 — $47,781, 2004 — $14,350)

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

was charged by the Company for rent and common office costs. At June 30, 2006, $Nil (2005 — $4,425, 2004 — $13,804) was receivable from this company.


11.	Financial Instruments

The Company’s consolidated financial instruments include cash and cash equivalents, accounts receivable, reclamation bonds and accounts payable. The fair values of these financial instruments approximate their carrying values due to their relatively short periods to maturity.


12.	Supplemental cash flow information


	2006			2005			2004

Changes in non-cash working capital
Accounts receivable	$	92,468		$	238,376		$	90,069
Product inventory and stockpiled ore		3,353,464			(1,452,205	)		(139,417	)
Supplies inventory		129,214			(218,344	)		(21,709	)
Prepaid expenses		(16,052	)		2,655			(184,570	)
Accounts payable and accrued liabilities		(588,782	)		(427,892	)		976,217
Note payable		—			(2,500,000	)		—

	$	2,970,312		$	(4,357,410	)	$	720,590


13.	Segmented information

The Company has reportable segments in three geographic areas: gold mining operations and exploration in Mexico, exploration and development in the United States and corporate in Canada. Gold mining operations consist of the Magistral Gold Mine in Mexico, acquired on February 2, 2004, which commenced commercial production on January 1, 2005.

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Gold Mining

Corporate
Exploration
& Exploration

(Canada) (U. S.) (Mexico) Total

($) ($) ($) ($)

Property, plant and equipment

June 30, 2006
29,610 14,050 13,262,654 13,306,314

June 30, 2005
38,590 8,025 13,342,339 13,388,954

June 30, 2004
56,203 11,795 10,492,254 10,560,252

Property, plant and equipment:

expenditures

June 30, 2006
9,492 11,370 4,838 25,700

June 30, 2005
769 900 3,985,974 3,987,643

June 30, 2004
61,125 11,458 10,492,254 10,564,837

Mineral Properties

June 30, 2006
— 3,499,776 1,162,029 4,661,805

June 30, 2005
— 2,405,370 700,987 3,106,357

June 30, 2004
— 2,286,989 168,145 2,455,134

Mineral Properties: expenditures

June 30, 2006
— 1,243,766 461,042 1,704,808

June 30, 2005
— 788,713 532,842 1,321,555

June 30, 2004
— 1,055,182 168,145 1,223,327

Net income (loss) for the year ended

June 30, 2006
(2,327,532 ) (314,215 ) (2,378,795 ) (5,020,542 )

June 30, 2005
(2,529,225 ) (834,873 ) 982,440 (2,381,658 )

June 30, 2004
(1,475,170 ) (461,377 ) — (1,936,547 )

Gold revenues for the year ended

June 30, 2006
— — 6,649,300 6,649,300

June 30, 2005
— — 5,175,235 5,175,235

June 30, 2004
— — — —

Depreciation, depletion and amortization for the year ended

June 30, 2006
18,472 5,345 734,618 758,435

June 30, 2005
18,382 4,670 1,136,023 1,159,075

June 30, 2004
12,633 3,345 — 15,978

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. Income Taxes

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


	2006			2005			2004

Loss before income taxes	$	(5,020,542	)	$	(2,381,658	)	$	(1,936,547	)
Canadian federal and provincial income tax rates		34.12	%		35.62	%		37.62	%

Expected income taxes (recovery)		(1,713,009	)		(848,347	)		(728,529	)
Non-deductible (deductible) expenses for tax purposes		571,904			291,156			20,438
Foreign exchange		(32,940	)		109,249			84,417
Foreign income subject to different tax rates		6,880			(50,656	)		(12,099	)
Valuation allowance		1,167,165			498,598			635,773

Income tax expense	$	—		$	—		$	—

Future income taxes arise from temporary difference in the recognition of income and expenses for financial reporting and tax purposes. The significant components of the future income tax assets and liabilities are as follows.


	2006			2005			2004

Future income tax assets
Tax losses	$	8,344,447		$	6,763,379		$	4,550,213
Mineral property expenditures		240,561			176,871			149,388
Other temporary differences		474,112			243,850			65,372

Future income tax assets before valuation allowance		8,922,607			7,184,100			4,764,973
Less: valuation allowance		(8,922,607	)		(7,184,100	)		(4,764,973	)

Net future income tax assets	$	—		$	—		$	—

The Company has estimated tax losses available for Canadian income tax purposes of approximately $7,551447, which expire between 2007 and 2026, $6,310,330 for U.S. tax purposes that expire between 2012 and 2021 and $13,065,607 for Mexican tax purposes that expire between 2006 and 2015.


15.	Commitments

The Company has obligations under operating leases for its corporate offices. Future minimum lease payments for non-cancellable leases with initial or remaining lease terms in excess on one year at June 30, 2006 for the fiscal years ended June 30 are:

2007 — $101,822
2008 — $67,881

The Magistral Gold Mine production is subject to a net smelter return royalty of 1% for the first 30,000 ounces of gold, 3.5% on the next 350,000 ounces of gold and 1% thereafter. The Company is currently paying net smelter royalties at 3.5%. As at June 30, 2006 the life of mine production is not anticipated to exceed 380,000 ounces.


16.	Environmental

The Company’s mining and exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. The

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ultimate amount of reclamation and other future site restoration costs to be incurred for existing mining interests is uncertain.


17.	Differences Between Canadian and United States Generally Accepted Accounting Principles

The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles (“CDN GAAP”) which differ in certain respects from those principles that the Company would have followed had its consolidated financial statements been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

Applying US GAAP, the consolidated balance sheet at June 30, 2006 would be as follows:


	Balance						Balance
	CDN GAAP			Adjustments			U.S. GAAP

ASSETS
Current assets
Cash and cash equivalents	$	3,659,738		$			$	3,659,738
Accounts receivable		180,697						180,697
Product inventory and stockpiled ore		109,074						109,074
Supplies inventory		285,152						285,152
Prepaid expenses		239,424						239,424

		4,474,085			—			4,474,085
Property, plant and equipment[a]		13,306,314			(4,657,846	)		8,648,468
Mineral properties[a]		4,661,805			(4,661,805	)		—
Reclamation bonds		96,363						96,363

	$	22,538,567		$	(9,319,651	)	$	13,218,916


LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$	1,194,495		$			$	1,194,495

		1,194,495						1,194,495

Other liabilities		112,397						112,397
Asset retirement obligation		1,684,812						1,684,812

		1,797,209			—			1,797,209

SHAREHOLDERS’ EQUITY
Share Capital		30,955,143						30,955,143
Contributed capital[b]		1,490,594			(287,376	)		1,203,218
Deficit[a][b]		(12,898,874	)		(9,032,275	)		(21,931,149	)

		19,546,863			(9,319,651	)		10,227,212

	$	22,538,567		$	(9,319,651	)	$	13,218,916

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NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Applying US GAAP, the consolidated balance sheet at June 30, 2005 would be as follows:


	Balance						Balance
	CDN GAAP			Adjustments			U.S. GAAP

ASSETS
Current assets
Cash and cash equivalents	$	957,251		$			$	957,251
Accounts receivable		273,165						273,165
Product inventory and stockpiled ore[a]		4,112,633			(154,743	)		3,957,890
Supplies inventory		414,366						414,366
Prepaid expenses		223,372						223,372

		5,980,787			(154,743	)		5,826,044
Property, plant and equipment[a]		13,388,954			(4,684,518	)		8,704,436
Mineral properties[a]		3,106,357			(3,106,357	)		—
Reclamation bonds		93,228						93,228

	$	22,569,326		$	(7,945,618	)	$	14,623,708


LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$	1,783,277		$			$	1,783,277

		1,783,277			—			1,783,277

Other liabilities		175,217						175,217
Asset retirement obligation		1,567,267						1,567,267

		1,742,484			—			1,742,484

SHAREHOLDERS’ EQUITY
Share Capital		25,920,223						25,920,223
Contributed capital[b]		1,001,674			(287,376	)		714,298
Deficit[a][b]		(7,878,332	)		(7,658,242	)		(15,536,574	)

		19,043,565			(7,945,618	)		11,097,947

	$	22,569,326		$	(7,945,618	)	$	14,623,708

C-72

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s net loss for the year ended June 30, 2006 is summarized below:


	CDN						US
	GAAP			Adjustments			GAAP

GOLD SALES[a]	$	6,649,300		$	—		$	6,649,300

COST OF SALES[a]		7,903,654			55,251			7,958,905
DEPRECIATION AND DEPLETION[a]		734,618			(236,666	)		497,952
ROYALTIES[a]		381,572			—			381,572

		9,019,844			(181,415	)		8,838,429

LOSS FROM MINING OPERATIONS		(2,370,544	)		(181,415	)		(2,189,129	)

EXPENSES AND OTHER INCOME
General and administrative		1,944,511						1,944,511
Interest and financing costs		—						—
Stock-based compensation		611,572						611,572
Foreign exchange losses		36,904						36,904
Other income		(57,349	)					(57,349	)
Write-down of mineral properties[a]		114,360			(114,360	)		—
Exploration cost[a]		—			1,669,808			1,669,808
Gain on disposal of mining equipment		—						—

		2,649,998			1,555,448			4,205,446

LOSS FOR THE YEAR	$	5,020,542		$	1,374,033		$	6,394,575

Basic and diluted loss per share	$	0.08					$	0.11
Weighted average number of common shares outstanding		60,304,369						60,304,369

C-73

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s net loss for the year ended June 30, 2005 is summarized below:


	CDN						US
	GAAP			Adjustments			GAAP

GOLD SALES[a]	$	5,175,235		$	2,915,992		$	8,091,227

COST OF SALES[a]		3,347,153			6,582,479			9,929,632
DEPRECIATION AND DEPLETION [a]		727,815			149,657			877,472
ROYALTIES[a]		262,197			264,729			526,926

		4,337,165			6,996,865			11,334,030

EARNINGS (LOSS) FROM MINING OPERATIONS		838,070			(4,080,873	)		(3,242,803	)

EXPENSES AND OTHER INCOME
General and administrative		2,084,400						2,084,400
Interest and financing costs		22,378						22,378
Stock-based compensation		559,963						559,963
Foreign exchange losses		115,796						115,796
Other income		(37,942	)					(37,942	)
Write-down of mineral properties[a]		630,332			(630,332	)		—
Exploration cost[a]		—			1,281,555			1,281,555
Gain on disposal of mining equipment		(155,199	)					(155,199	)

		3,219,728			651,223			3,870,951

LOSS FOR THE YEAR	$	2,381,658		$	4,732,096		$	7,113,754

Basic and diluted loss per share	$	0.05					$	0.14
Weighted average number of common shares outstanding		51,295,350						51,295,350

C-74

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s net loss for the year ended June 30, 2004 is summarized below.


	CDN						US
	GAAP			Adjustments			GAAP

GOLD SALES[a]	$	—		$	2,654,492		$	2,654,492

COST OF SALES[a]		—			3,145,048			3,145,048
DEPRECIATION AND DEPLETION[a]		—			202,809			202,809
ROYALTIES[a]		—			65,023			65,023

		—			3,412,880			3,412,880

LOSS FROM MINING OPERATIONS		—			(758,388	)		(758,388	)

EXPENSES AND OTHER INCOME
General and administrative		1,538,190						1,538,190
Interest and financing costs		1,159						1,159
Stock-based compensation		39,120						39,120
Foreign exchange losses		117,226						117,226
Other income		(89,433	)					(89,433	)
Write-down of mineral properties[a]		330,285			(330,285	)		—
Exploration cost[a]		—			1,298,327			1,298,327

		1,936,547			968,042			2,904,589

LOSS FOR THE YEAR	$	1,936,547		$	1,726,430		$	3,662,977

Basic and diluted loss per share	$	0.06					$	0.12
Weighted average number of common shares outstanding		30,305,758						30,305,758

C-75

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s cash flow for the year ended June 30, 2006 is summarized below.


	CDN						US
	GAAP			Adjustments			GAAP

CASH PROVIDED BY (USED FOR) OPERATIONS
Loss for the period[a]	$	(5,020,542	)	$	(1,374,033	)	$	(6,394,575	)
Items not affecting cash
Depreciation, depletion & amortization[a]		758,435			(236,666	)		521,769
Accretion of asset retirement obligation[a]		117,545						117,545
Stock based compensation		611,572						611,572
Write-off of mineral properties[a]		114,360			(149,360	)		(35,000	)
Gain on disposal of property, plant & equipment		—						—
Severance expenses		(27,820	)					(27,820	)
Changes in non-cash working capital items[a]		2,970,312			55,251			3,025,563

		(476,138	)		(1,704,808	)		(2,180,946	)

INVESTING ACTIVITIES
Property, plant and equipment[a]		(25,700	)		—			(25,700	)
Proceeds from disposal of equipment		—						—
Reclamation deposits		(3,135	)					(3,135	)
Expenditures on mineral properties, net of recoveries[a]		(1,704,808	)		1,704,808			—

		(1,733,643	)		1,704,808			(28,835	)

FINANCING ACTIVITIES
Common shares issued:
On private placements		4,541,507						4,541,507
On warrant conversion		93,952						93,952
On option exercise		369,826						369,826
Share issue costs and finder’s fees		(93,017	)					(93,017	)

		4,912,268			—			4,912,268

INCREASE IN CASH AND CASH EQUIVALENTS		2,702,487			—			2,702,487

CASH AND CASH EQUIVALENTS, beginning of year		957,251						957,251
CASH AND CASH EQUIVALENTS, end of year	$	3,659,738		$	—		$	3,659,738

C-76

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s cash flow for the year ended June 30, 2005 is summarized below.


	CDN						US
	GAAP			Adjustments			GAAP

CASH PROVIDED BY (USED FOR) OPERATIONS
Loss for the period[a]	$	(2,381,658	)	$	(4,732,096	)	$	(7,113,754	)
Items not affecting cash
Depreciation, depletion & amortization[a]		750,867			149,657			900,524
Accretion of asset retirement obligation[a]		44,540			45,134			89,674
Stock based compensation		559,963						559,963
Write-off of mineral properties[a]		630,332			(670,332	)		(40,000	)
Gain on disposal of property, plant & equipment		(155,199	)					(155,199	)
Severance expenses		61,106						61,106
Changes in non-cash working capital items[a]		(4,357,410	)		872,580			(3,484,830	)

		(4,847,459	)		(4,335,057	)		(9,182,516	)

INVESTING ACTIVITIES
Property, plant and equipment[a]		(3,987,643	)		3,013,502			(974,141	)
Proceeds from disposal of equipment		200,199						200,199
Reclamation deposits		(45,256	)					(45,256	)
Expenditures on mineral properties, net of recoveries[a]		(1,321,555	)		1,321,555			—

		(5,154,255	)		4,335,057			(819,198	)

FINANCING ACTIVITIES
Common shares issued:
On private placements		10,262,635						10,262,635
On warrant conversion		591,200						591,200
On option exercise		200,020						200,020
Share issue costs and finder’s fees		(692,741	)					(692,741	)

		10,361,114			—			10,361,114

INCREASE IN CASH AND CASH EQUIVALENTS		359,400			—			359,400

CASH AND CASH EQUIVALENTS, beginning of year		597,851						597,851
CASH AND CASH EQUIVALENTS, end of year	$	957,251		$	—		$	957,251

C-77

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAPP and US GAAP on the Company’s cash flow for the year ended June 30, 2004 is summarized below.


	CDN						US
	GAAP			Adjustments			GAAP

CASH PROVIDED BY (USED FOR) OPERATIONS
Loss for the period[a]	$	(1,936,547	)	$	(1,726,430	)	$	(3,662,977	)
Items not affecting cash
Depreciation, depletion & amortization[a]		15,978			202,809			218,787
Stock based compensation		39,120						39,120
Write-off of mineral properties[a]		330,285			(255,285	)		75,000
Severance expenses[a]					17,478			17,478
Changes in non-cash working capital items[a]		720,590			(964,479	)		(243,889	)

		(830,574	)		(2,725,907	)		(3,556,481	)

INVESTING ACTIVITIES
Property, plant and equipment[a]		(1,889,409	)		1,502,580			(386,829	)
Acquistion of Pangea Resources Inc.		(4,323,753	)					(4,323,753	)
Reclamation deposits		(47,972	)					(47,972	)
Expenditures on mineral properties, net of recoveries[a]		(1,223,327	)		1,223,327			—

		(7,484,461	)		2,725,907			(4,758,554	)

FINANCING ACTIVITIES
Common shares issued:
On private placements		7,871,295						7,871,295
On warrant conversion		920,243						920,243
On option exercise		343,933						343,933
Share issue costs and finder’s fees		(310,303	)					(310,303	)

		8,825,168			—			8,825,168

INCREASE IN CASH AND CASH EQUIVALENTS		510,133			—			510,133

CASH AND CASH EQUIVALENTS, beginning of year		87,718						87,718
CASH AND CASH EQUIVALENTS, end of year	$	597,851		$	—		$	597,851

[a] Property, plant and equipment/Mineral properties

(i) Under US GAAP, mineral properties and exploration costs related to mineral properties for which commercial feasibility has not yet been established are expensed as incurred. Under CDN GAAP, exploration expenditures may be capitalized as incurred.

(ii) For mineral properties where commercial feasibility has been established, under US GAAP, start-up costs are expensed as incurred in accordance with AICPA Statement of Position 98-5, Reporting on the Cost of Start-up Activities.

C-78

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

abandoned or impaired. Under CDN GAAP, deferred start-up costs include operating costs, net of revenue, prior to the commencement of commercial production.

Under CDN GAAP the Magistral Gold Mine began commercial production on January 1, 2005 and therefore from acquisition on February 2, 2004 to January 1, 2005 all operating costs, net of revenue for the Magistral Gold Mine were deferred to property, plant and equipment.

Accordingly, gold sales, cost of sales, depreciation and depletion and royalties are included in the loss for the year for US GAAP and were deferred to property plant and equipment for CDN GAAP.

The differences in the amounts deferred to pad inventory and property, plant and equipment are cumulative and affect the opening balances for each period following June 30, 2004.

[b] Stock based compensation

Under US GAAP, accounting for stock-based compensation plan is recognized and measured in accordance with FASB Statement No 123, Accounting for Stock-based Compensation (SFAS 123). The statement recommends companies to follow a fair market value based method of accounting for stock-based compensation plan. SFAS 123 also allows companies to continue to measure compensation cost using intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for stock Issued to Employees. Under the fair value based method, compensation cost is measured at the grant date based on value of the award and recognized over the service period, which is usually the vesting period. Under the intrinsic method, cost of stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the option price.

Under CDN GAAP, CICA 3870, Stock-Based Compensation and Other Stock — Based Payments, recommends companies to adopt the fair valued base method of accounting for all stock-based compensation. The section permitted companies to continue to measure stock-based compensation using intrinsic value method of accounting but requires pro-forma disclosure of earnings and earnings per share as if the fair value method had been adopted.

Effective July 1, 2004, the Company adopted the fair value method of accounting for stock-based compensation in accordance with CICA 3870. This change in accounting policy was applied retroactively without restatement of prior years’ financial statements. The Company recorded a cumulative increase of $287,376 to opening deficit and contributed capital.

For US GAAP purposes, the Company has chosen to adopt the fair value based method on a modified prospective basis from July 1, 2004 as permitted by SFAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS 123. The balance sheet difference between US GAAP and CDN GAAP occurs as a result of the modified prospective adoption of the fair value method under SFAS 148.

[c] Comprehensive Income

Under US GAAP, comprehensive income is recognized and measured in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 130 Reporting Comprehensive Income. Comprehensive income includes all changes in equity other than those resulting from investment by owners and distributions to owners. Comprehensive income includes two components, net income and other comprehensive income. Other comprehensive income includes amounts that are recorded as an element of shareholders’ equity but are excluded from net income as these transactions or events are attributable to changes from non-owner sources. These items include holding gains and losses on certain investments, gains and losses on certain derivative instruments and foreign exchange gains and losses related to self-sustaining foreign operations (cumulative translation adjustment). A standard for comprehensive income and other comprehensive income is not yet effective under Canadian GAAP. Under US GAAP comprehensive income is equal to net income for the Company for the years presented.

C-79

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

[d] Recent accounting pronouncements

In June 2005, the AcSB issued CICA 3831, Non-monetary Transactions, replacing the former CICA 3830. This statement will be effective for fiscal periods beginning after January 1, 2006. Earlier application is permitted for non-monetary asset exchanges executed in periods beginning on or after July 1, 2005. Retroactive application is prohibited. The new Canadian standard is, in all material respects, consistent with the related US standard.

In April 2005, the AcSB issued CICA 1530, Comprehensive Income, which introduces new rules for reporting and display of comprehensive income. Comprehensive income, which is currently reported under US GAAP, is the change in shareholders’ equity of an enterprise during a reporting period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investment by owners and distributions to owners. These items include holding gains and losses on certain investments, gain and losses on certain derivative instruments and foreign currency gains and losses related to self — sustaining foreign operations (cumulative translation adjustment). CICA 1530 is effective for fiscal years beginning on or after October 1, 2006.

In April 2005, the AcSB issued CICA 3865, Hedges, which is applicable when a company chooses to designate a hedging relationship for accounting purposes. It builds on the existing Accounting Guideline AcG-13, Hedging Relationships, and Section 1650 Foreign Currency Translation, by specifying how hedge accounting is applied and what disclosures are necessary when it is applied.

In April 2005, the CICA issued Handbook Sections 3855, Financial Instruments — Recognition and Measurement. This standard prescribes when a financial asset, financial liability, or non-financial derivative is to be recognized on the balance sheet and whether fair value or cost-based measures are used. It also specifies how financial instrument gains and losses are to be presented.

On March 30, 2005, the FASB ratified the Emerging Issues Task Force (EITF) consensus in Issue 04-06 that post-production stripping costs are a component of mineral inventory costs subject to provisions of AICPA Accounting Research Bulletin No. 43, Restatement and Revision of Accounting Research Bulletins, Chapter 4, Inventory Pricing (ARB43). In the mining industry, the costs of removing overburden and waste materials to access mineral deposits are referred to as “stripping costs”. It is the accounting for costs incurred during the production stage of the mine, or the post-production stripping costs, that are addressed in Issue 04-06. Based upon this consensus, post production stripping costs should be considered costs of extracted minerals under a full absorption costing system and recognized as a component of inventory to be recognized in costs of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs would be appropriate only to the extent inventory exists at the end of the reporting period. The guidance in this consensus will be effective for financial statements issued for fiscal years beginning after December 15, 2005 with early adoption permitted. The consensus can be adopted either prospectively through a cumulative effect adjustment through opening retained earning or retrospectively by restating prior periods. On March 2, 2005, AcSB issued EIC 160, which addresses the accounting treatment of stripping costs. EIC 160 is applicable to fiscal years beginning on or after July 1, 2006. The Company has not determined the method of adoption or the impact of EITF 04-06 or EIC 160, if any, on the Company’s financial position or results from operation. The Company currently has no deferred stripping costs.

On June 1, 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires retrospective application to prior periods’ financial statements of a change in accounting principles unless it is impracticable to do so. This is a change from the existing practice that requires most accounting changes to be accounted for by including in net income in the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

In July 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and interpretation of FASB Statement No. 108 (FIN 48). FIN 48

C-80

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return (including a decision whether to file or not file a return in a particular jurisdiction). Under the Interpretation, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. The Interpretation also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. It is effective for fiscal years beginning after December 15, 2006.


18.	Subsequent Events

Subsequent to June 30, 2006, there were 1,418,150 warrants exercised at $1.20 CDN for gross proceeds of $1,701,780 CDN and 175,000 stock options exercised at an average price of $0.64 CDN for gross proceeds of $111,500 CDN.

C-81

ANNEX D — INFORMATION REGARDING TONE RESOURCES

INFORMATION CONCERNING TONE RESOURCES LIMITED

Tone Resources Limited, or Tone Resources, files audited consolidated annual financial statements, unaudited consolidated interim financial statements, management’s discussion and analysis, information circulars and other information with the securities regulatory authorities of British Columbia, Alberta, Yukon and Ontario on SEDAR. The information concerning Tone Resources contained in this Annex D has been taken from Tone Resources’ Management’s Discussion and Analysis of Financial Condition and Results of Operations for the nine months ended May 31, 2006 filed on July 31, 2006 and for the fiscal years ended August 31, 2005 and 2004 filed on December 29, 2005 and January 17, 2005, respectively; its unaudited consolidated financial statements for the nine months ended May 31, 2006 filed on July 31, 2006; and its audited consolidated financial statements for the fiscal years ended August 31, 2005 and 2004 filed on December 29, 2005 and January 17, 2005. Although U.S. Gold has no reason to doubt the accuracy or completeness of the information relating to Tone Resources, U.S. Gold is not in a position to independently assess or verify this information, including Tone Resources’ financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 14 of this proxy statement.

The terms mineral resource, measured mineral resource, indicated mineral resource and inferred mineral resource are recognized and required to be reported by Canadian regulations, but the SEC does not recognize these terms. As a result, the information contained in this Annex relating to mineral resources may not be comparable to similar information publicly reported by U.S. companies. See the section entitled “— Terms Relating to Mineral Resources” on page D-25 of this Annex D.

Some terms used in this Annex D may be unfamiliar to you. We have provided a Glossary beginning on page D-24 for your reference.

Overview

Tone Resources is an exploration stage company engaged in the acquisition and exploration of mineral properties primarily located on the major gold trends in the north-central region of Nevada, U.S.A. Tone Resources’ activities are focused on gold and Tone Resources controls substantially all interests in eight properties in Elko, Eureka, Lander, and Pershing counties in Nevada. All of Tone Resources’ properties are located near infrastructure facilities of currently producing gold mines.

Tone Resources was incorporated on October 31, 2001 in the Yukon Territory and was continued to British Columbia from the Yukon Territory on March 1, 2005. The address and telephone number of its principal offices are 3374 West 19th Avenue, Vancouver, British Columbia, V6S 1C2, Canada, telephone (604) 263-5614. Its registered and records office is located at 10th Floor, 595 Howe Street, Vancouver, British Columbia, V6C 2T5, Canada. Tone Resources is a reporting issuer in British Columbia, Alberta, Ontario and the Yukon Territory and files its continuous disclosure documents with the securities regulatory authorities in those provinces. These documents are available without charge on SEDAR, at www.sedar.com. Tone Resources’ common shares trade on the TSX Venture Exchange under the symbol “TNS-V”.

Authorized and Outstanding Share Capital of Tone Resources

Tone Resources is authorized to issue an unlimited number of common shares without par value. As at June 30, 2006, there were 19,590,745 common shares issued and outstanding.

D-1

The following options were outstanding at June 30, 2006:


	Exercise
	Price
Number	(Cdn$)		Expiry Date

1,180,000		0.50	May 16, 2008
50,000		0.50	June 9, 2008
12,500		0.50	July 21, 2008
100,000		0.50	November 14, 2008
12,000		0.30	September 2, 2009
157,732		0.50	February 1, 2010
106,000		0.40	July 26, 2010
40,000		0.20	November 18, 2010
37,500		0.35	December 1, 2010

1,695,732

The following common share purchase warrants are outstanding at June 30, 2006 (each warrant entitling the holder to purchase one common share for each warrant held).


	Exercise
	Price
Number	(Cdn$)		Expiry Date

335,000		0.75	July 5, 2006
41,175		0.60 – 0.80	November 26, 2006
25,000		0.60 – 0.80	December 14, 2006
2,465,000		0.25	December 19, 2007
730,000		0.25	March 3, 2008

3,606,175

The common shares of Tone Resources rank equally as to dividends, voting rights (one vote per share) and the distribution of assets on liquidation, dissolution or winding-up (after payment of Tone Resources’ liabilities and obligations to creditors). Holders of common shares have no pre-emptive rights or rights to convert their common shares into other securities. Holders of the common shares are entitled to receive notice of and attend any meetings of shareholders and are entitled to one vote for each common share entitled to be voted on the matter at such meetings.

Dividends and Dividend Policy

Tone Resources has never declared any dividends on its common shares, and does not currently intend to pay dividends in the future.

History and Development of Tone Resources

Since inception, Tone Resources has been engaged in the business of acquiring and exploring mineral properties primarily located in the major gold trends in the north-central region of Nevada through its wholly-owned subsidiary, Tone Resources (US) Inc., a corporation incorporated under the laws of Nevada. Tone Resources currently controls eight mineral projects.

Tone Resources commenced exploration activity in Nevada on four properties consisting of unpatented lode claims which were acquired by Tone from KM Exploration Ltd., or KM Exploration, by agreement dated July 1, 2002. The agreement terms were claim staking costs and a retained 1% net smelter returns to KM Exploration. These acquisitions included 10 Cabin Creek claims, 54 Cabin Creek South claims, 40 North Kobeh claims, and 28 North Kobeh North claims. Drilling commenced in September, 2002 and 4 holes were drilled on the Cabin Creek claims, resulting in one hole that assayed 80 feet of 0.077 ozAu/st from 75 to 155 feet and 55 feet of 0.049 ozAu/st

D-2

from 160 to 215 feet. Two holes were drilled on the Cabin Creek South claims, 3 holes were drilled on the North Kobeh claims, and 3 holes were drilled on the North Kobeh North claims. The drill results on the Cabin Creek South claims were negative and led to a decision to drop the property. Based on the results obtained on the Cabin Creek, North Kobeh, and North Kobeh North claims, Tone Resources decided to conduct additional drilling on these properties and the North Kobeh and North Kobeh North property position was merged into one and expanded to 133 claims. In addition, based on the negative results on the Cabin Creek South claims and important geologic information obtained in the drill holes, the 50 South Wall claims were staked to cover an evident target opportunity.

Favorable early drill results, an improved gold market, and the collective desire to build a larger company led to further expansions of the Roberts Creek project, or Roberts Creek claims, which included the addition of 44 nearby North Hunter claims. In addition the 75 Fish Creek claims were acquired. The Red Ridge property comprised of two fee sections of 640 acres each and 77 Red Ridge claims, the 8 Big Antelope Springs claims, later expanded to 24 claims, the 10 Kent Springs claims, and the 28 South Keystone claims, and 16 Gold Bar North, later expanded to 19 claims, were also acquired by Tone Resources in 2003 and 2004. All properties were acquired by Tone Resources at cost, plus a retained 1% net smelter returns to KM Exploration or a common director.

The legal and commercial name of Tone Resources is Tone Resources Limited. Tone Resources was incorporated on October 31, 2001 in the Yukon Territory and was continued to British Columbia from the Yukon Territory on March 1, 2005.

Tone Resources is domiciled in British Columbia, Canada and is in good standing under the British Columbia Business Corporations Act. Tone Resources’ principal place of business is located at 3374 West 19th Avenue, Vancouver, British Columbia, V6S 1C2, Canada, telephone: (604) 263-5614, email: scott.baxter@shaw.ca.

Business Overview of Tone Resources

Tone Resources is a gold exploration company designed to seek out, acquire, and test quality gold prospects within the gold-rich region of north-central Nevada. Tone Resources controls eight individual projects (10 individual claim groups) within the heartland of this north-central Nevada gold country. Eight of the projects were acquired from KM Exploration, which began acquiring properties during the lowest gold price and gold interest times of mid-2001. The Red Ridge project is located within the Rain mining district on the Carlin Trend. Drilling in 2004 at Red Ridge intersected significant gold mineralization in three holes. The Fish Creek project, south of Newmont Mining Company’s Phoenix project, is on the Eureka — Battle Mountain Trend. Little previous exploration of this prospect has focused on gold. Two of three holes drilled in 2004 intersected low levels of gold mineralization up to 276 ppb; with one hole intersecting thick intervals of low levels of copper and molybdenum. The Roberts Mountains projects consist of the Kobeh project and the Roberts Creek project, which are located along the southern flank of the Roberts Mountains on the Battle Mountain — Eureka Trend. Other projects controlled by Tone Resources on the Battle Mountain — Eureka Trend include the Gold Bar North project and the South Keystone project. Both of these properties were recently surrounded by Placer Dome staking and lease acquisitions. Tone Resources believes it controls the core and critical property position at both locations. Two other projects include the Big Antelope Springs project and Kent Springs project. These projects are located on the southern extension of the north-south trending Rabbit Creek Trend.

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assay checks, 50 randomly obtained comparison drill samples were assayed for gold; 49 of 50 samples exhibited excellent correspondence. A nine hole drill program in 2003 followed-up on favorable results obtained in 2002. Continued favorable results consisting of permissive host rocks, epithermal-style alteration, weak gold mineralization and associated anomalous pathfinder elements were obtained.

Red Ridge Project, Carlin Trend, Elko Co., Nevada

The Red Ridge properties, acquired by Tone Resources in June 2003, represent a significant unexplored prospect in the Rain mining district on the Carlin Trend. The prospective alteration — structural zone comprising the northwest-trending Red Ridge fault structure can be traced on the surface for a minimum of 7000 feet, and possibly projected under cover for several thousand more feet. Alteration effects along this structural zone are up to several hundred feet wide and are expressed by the presence of silicification, decarbonization, sulfidation or oxidation, and anomalous rock geochemistry. Abundant vein and stringer barite commonly associated with the Rain district gold deposits are also present.

The exploration target opportunity is high-grade mineralization developed adjacent to the Red Ridge structural zone at the Devils Gate — Webb contact. Analogies for this type of underground mineable deposit are present nearby at the Northwest Rain underground deposit comprised of 265K oz at 0.23 ozAu/st, NW Tess and Saddle of 1,475K oz at 0.37 ozAu/st, including a high grade portion of the Saddle deposit of 782K oz at 0.572 ozAu/st.

A gridded, 663 sample soil survey was completed in August, 2003. The survey covers 7500 feet of strike length along the target structural zone and consists of 50 foot sample spacings along lines that cross the structural zone; these lines are spaced at 200 foot intervals along the structure. Coherent and continuous geochemical anomalies indicative of Carlin-style mineralization are present. Results, using the ALS Chemex Au-23 and ME-41 ICP geochemical package, include gold up to 179ppb, arsenic to 625ppm, antimony to 226ppm, mercury to 14ppm, barium to 3730ppm, and zinc to 1650ppm. Float rock samples obtained to follow-up a particular anomalous soil zone yielded up to 1.025ppm gold, 333ppm arsenic, 17ppm antimony, 20.3ppm mercury, and 7450ppm zinc.

In late August and September, 2004, Tone Resources drilled four exploration holes including a fifth, complete re-drill of the first hole. RR04-1 and redrill RR04-1A are vertical holes located at the same site 500 feet north of Tone Resources’ property boundary with Newmont Mining Company to the south. RR04-2 is a vertical hole located approximately 650 feet north of RR04-1 & 1A. RR04-3 is a westward directed, minus 60 degree angle hole, drilled from the same site as RR04-2; the mineralized intercept at the Webb Devils Gate contact within RR04-3, which had a down-hole survey, is approximately 300 feet to the west of the corresponding intercept in RR04-2.

Gold intervals in these holes provided the first indication of significant gold mineralization on Tone Resources’ Red Ridge property. Gold mineralization has a flat-tabular configuration and is located within a 100+foot thick zone of oxided jasperoid alteration located within Webb Formation lying immediately above Devils Gate Limestone; this mineralization is believed to be essentially tabular, dipping gently northward. ALS Chemex provided the assays using their Au-AA23 method for gold and ME-ICP41 for trace elements.

The following summarizes the 2004 Red Ridge drill results:

RR04-1A was a re-drill of RR04-1 because of very poor sample return. A different reverse circulation technique was employed in RR04-1A that provided excellent sample return. RR04-1A included the following results:

From 735 to 815 feet: 80 feet of 1.26ppm gold (0.037 ozAu/st), includes 25 feet of 2.54 ppm Au (0.074 ozAu/st); associated elements: 580 to 850 feet of >100 ppm As, up to 888 ppm As, and 695 to 850 feet of >30 ppm Sb, up to 103 ppm Sb

RR04-2 encountered some drilling difficulty within the zone of mineralization and failed to recover a 20 foot interval of rock material within the mineralized zone. RR04-2 provided the following results:

1035 to 1055 feet/ 20 feet of 0.99 ppm gold, 1055 to 1075 feet/ 20 feet no return, and 1075-1080/ 5 feet 1.17 ppm gold (0.034 ozAu/st); associated elements: 660 to 1120 feet of > 100 ppm As up to 1588 ppm As, and 970 to 1095 feet of > 30 ppm Sb, up to 162 ppm Sb

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RR04-3, an angle hole toward the west from site RR04-2, also intersected base of Webb mineralization and provided the following results:

> 100 ppb Au, up to 870 ppb gold from 1045 to 1115 feet; associated elements: 820 to 1115 feet of > 100 ppm As up to 1060 ppm As, and 1005 to 1115 feet of > 30ppm Sb, up to 206 ppm Sb

RR04-4, located 2200 feet northwest of RR04-2 and 3, failed to reach the Webb-Devils Gate target zone.

The mineralization intersected in holes RR04-1A, RR04-2, and RR04-3 is believed to represent the distal expression of high-grade Rain/Tess/Saddle-style mineralization that is most likely associated with the target Red Ridge fault zone. The target opportunity remains completely open in essentially all directions, and additional exploration is warranted.

Fish Creek Project, Rabbit Creek Trend, Ladner Co., Nevada

The Fish Creek property, consisting of 75 lode claims, is located approximately between Newmont’s Phoenix project and Kinross’ Cove-McCoy project. The Fish Creek property was acquired from KM Exploration in June, 2003. The prospect is comprised of a large zone of mixed epithermal (low temperature) and mesothermal (medium temperature) alteration, including several base and precious metal-bearing skarns, centered near and around multi-phase intrusives The property was explored as a porphyry Cu-Mo system in the 60’s and 70’s by Kennecott and Summa Corp.(Howard Hughes), and then was held by Tenneco and Echo Bay for almost 20 years. It appears evident that very little exploration of the property was specifically directed toward discovery of new gold deposits. Previously drilled copper intercepts on the property include 59 feet of 0.48% Cu, 33 feet of 0.21% Cu, and 100 feet of 0.10% Cu located at shallow depths.

Rock units exposed on the property are believed to be mostly if not entirely Permian Havallah Formation and Cretaceous (one date) and possible Tertiary intrusives. Recent work has returned rock samples containing up to 260ppb gold, 57 ppm silver and 2.5% copper. The target opportunity is Lone Tree (5 million ounces) to Fortitude-style (10 million ounces) — type gold deposits developed within or just above Antler Limestone and Battle Mountain Conglomerate. Tone Resources drilled 3 wide-spaced exploratory holes in May, 2004. Two holes intersected weakly mineralized zones of gold with up to 276 and 234 ppb gold, respectively, and 40 feet of 0.12% copper and 100 feet of 0.10% copper. The property remains open to discovery and additional drilling is warranted.

Gold Bar North Project

The Gold Bar North Project is located northwest of the Gold Bar deposit on strike with the primary northwest trending Gold Bar feeder structure. Similar to the mined out Gold Bar deposit to the south, shallow Paleozoic rocks are present beneath a locally thin veneer of gravel cover. The Gold Bar North prospect, comprised of the Gold Bar North claims, is a bedrock high as indicated by a gravity high. This property was specifically staked for its comparison with the now mined-out Gold Bar Mine deposit. Subsequent to the staking of the Gold Bar North claims, Trend Resources, LLC surrounded the Gold Bar North claims and leased their land position to Placer Dome U.S., Inc. In November, Tone Resources commenced an intended 4-hole drilling program. The first hole was lost in altered siliceous volcanic rocks at 520 feet. Unseasonable weather struck in early November and a decision was made to halt drilling. A detailed gravity survey was conducted jointly with Placer Dome in late November and by pre-arrangement, the data from respective properties has been shared by both Tone Resources and Placer Dome. The detailed gravity became the basis for follow-up drilling late in 2004 and early in 2005. Two follow-up holes drilled intersected what is believed to be altered lower plate rock units at relatively shallow depth.

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Kent Springs Project

The Kent Springs Project is located on the Rabbit Creek gold trend in Pershing County. The prospect consists of a knob of altered Havallah limestones and calcareous siltstones surrounded by a sea of colluvial cover. Alteration consists of decarbonatization, silicification, and sulfidation. Many of the samples, listed below, contain anomalous arsenic. Although no anomalous gold was obtained in the samples, it is believed the presence of quality prospective host rock and associated alteration suggest the possibility of a nearby gold deposit opportunity.

Big Antelope Springs

The Big Antelope Springs property consists of several claims which cover three, low-lying knobs of exposed altered Permian Havallah Fm. Havallah is the primary host of the Lone Tree, Nike-Converse, North Peak, and Buffalo Valley gold deposits. Alteration is comprised of decarbonatization of calcareous rocks, pervasive silicification and quartz veins, all suggestive of a hydrothermal system in the area. Anomalous pathfinder metals also indicate the presence of a hydrothermal system. A program of identifying and qualifying targets for the purpose of designing a drill program is in progress.

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Exchange Controls

Other than as provided in the Investment Canada Act (Canada), or the Investment Act, there are currently no limitations imposed by Canadian laws, decrees or regulations that restrict the import or export of capital, including foreign exchange controls, or that affect the remittance of dividends to non-resident holders of Tone Resources’ securities. However, any such remittances of dividends paid to United States residents are subject to withholding tax at a rate equal to a maximum of 15% of the amount paid. See the section entitled “Taxation” of this Annex D.

The following discussion summarizes the material features of the Investment Act, in its present form, for a non-resident of Canada who proposes to acquire Tone Resources’ common shares.

The Investment Act regulates the acquisition of control of a Canadian business by a “non-Canadian” as defined under the Investment Act. With respect to Tone Resources, an acquisition of control is considered to be the acquisition of the majority of its common shares. However, if a non-Canadian acquires more than one-third of the voting shares of Tone Resources, but less than a majority, there is a presumed acquisition of control unless it can be established that Tone Resources is not controlled in fact by the acquirer. All acquisitions of control of a Canadian business are notifiable (which requires that a notification form be submitted to Investment Canada within thirty days after the implementation of the investment) unless the investment is reviewable. If the investment is reviewable, the investment may not be implemented until the Minister responsible for the Investment Act is, or has been deemed to be, satisfied that the investment is likely to be of net benefit to Canada.

Where either the acquirer is, or Tone Resources is presently controlled by, a WTO investor (as that term is defined in the Investment Act), a direct acquisition of control of Tone Resources will only be reviewable if the value of Tone Resources’ assets, as shown on its audited financial statements for the most recently completed fiscal year, is equal to or greater than Cdn$223 million. This amount varies each year based on the rate of growth in Canadian gross domestic product. Other direct acquisitions of control are reviewable if the value of the assets of Tone Resources, as calculated above, is equal to or greater than Cdn$5 million. The Cdn$5 million threshold for review also applies with respect to the acquisition of control of any Canadian business that provides any financial services or transportation services, is a cultural business, or is engaged in the production of uranium and owns an interest in or producing uranium property in Canada.

Indirect acquisitions of control (acquisitions of control of an entity which in turn controls Tone Resources) are not reviewable under the Investment Act if the acquirer is a WTO investor or if Tone Resources is controlled by a WTO investor. Otherwise, an indirect acquisition will be reviewable if the value of Tone Resources’ assets is Cdn$50 million or more, or if the value of Tone Resources’ assets acquired in the total transaction is in Canada or the acquisition is not effected through the acquisition of control of a foreign corporation.

Certain types of transactions are exempt from application of the Investment Act including acquisitions of control of Tone Resources:

(a) by the acquisition of voting shares or the voting interests by any person in the ordinary course of that person’s business as a trader or dealer in securities;

(b) in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the Investment Act;

(c) for facilitating its financing and not for any purpose related to the Investment Act on the condition that the acquirer divest control within two years after control was acquired; and

(d) by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate or indirect control in fact of Tone Resources through the ownership of voting interests remains unchanged.

There are currently no limitations on the right of foreign or non-resident owners of common shares to hold or vote such securities imposed by Canadian law or Tone Resources’ charter or other constituent documents.

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Selected Financial Data of Tone Resources

The selected financial data of Tone Resources which appears in the table below for the years ended August 31, 2005, 2004, and 2003 were derived from the consolidated annual financial statements of Tone Resources that were audited by Amisano Hanson, Chartered Accountants. The selected financial data for the year ended August 31, 2002 were derived from the consolidated annual financial statements of Tone Resources that were audited by Daniel F. Huber, Chartered Accountant. The selected financial data for the nine-month period ended May 31, 2006 are derived from the unaudited consolidated financial statements of Tone Resources. The selected financial data should be read in conjunction with the consolidated financial statements and other financial information included elsewhere in this registration statement.

Tone Resources has not declared any dividends on its common shares since incorporation and does not anticipate that it will do so in the foreseeable future.

The consolidated financial statements of Tone Resources have been prepared in accordance with Canadian generally accepted accounting principles, or Canadian GAAP. The application of Canadian GAAP in the consolidated financial statements for the nine months ended May 31, 2006 and the years ended August 31, 2005 and 2004 conforms in all material respects with U.S. GAAP, except as disclosed in Note 8 to the consolidated financial statements for the nine months ended May 31, 2006 and Note 10 to the consolidated financial statements for the years ended August 31, 2005 and 2004. See the Financial Statements of Tone Resources in this Annex D.

Unless otherwise specified, all dollar amounts are expressed in Canadian Dollars, or Cdn$.


	Nine Months
	Ended
	May 31,			Fiscal Year Ended August 31,
	2006			2005			2004			2003			2002

Working capital (deficiency)	$	1,196,227		$	(114,930	)	$	349,922		$	242,924		$	199,038
Mineral property costs		1,254,834			1,124,298			905,596			449,726			102,291
Total assets		2,617,238			1,173,017			1,335,652			807,399			324,129
Net loss		(798,608	)		(855,799	)		(1,082,680	)		(437,698	)		(128,982	)
Deficit		(3,303,767	)		(2,505,159	)		(1,649,360	)		(566,680	)		(128,982	)
Net loss per common share	$	(0.05	)	$	(0.06	)	$	(0.09	)	$	(0.07	)	$	(0.03	)

Management’s Discussion and Analysis of Financial Position and Results of Operations

This discussion and analysis of the financial position and results of operations consists of comparisons of the operating results of Tone Resources for the nine-month period ended May 31, 2006 and for the fiscal years ended August 31, 2005, 2004 and 2003 and has been prepared as of July 27, 2006, as applicable, and should be read in conjunction with the consolidated unaudited financial statements for the nine months ended May 31, 2006 and the consolidated audited financial statements of Tone Resources for the years ended August 31, 2005 and 2004. Tone Resources’ financial statements and related notes have been prepared in accordance with Canadian generally accepted accounting principles, or Canadian GAAP, and all amounts are presented in Canadian dollars unless otherwise noted.

Cautionary Statement on Forward-Looking Information

The following discussion contains forward-looking statements regarding events and financial trends which may affect the future operating results and financial position of Tone Resources. Such statements are subject to risks and uncertainties that could cause Tone’s actual results and financial position to differ materially from those anticipated in the forward looking statements. These factors include, but are not limited to, the factors set forth in the sections entitled “Forward-Looking Statements” and “Risk Factors”, on pages 1 and 14, respectively, of this proxy statement.

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Description of Business

Tone Resources Limited is an exploration stage company engaged in the acquisition and exploration of mineral properties primarily located on the major gold trends in the north-central region of Nevada, U.S.A. Tone Resources is focused on gold and controls substantially all interests in eight projects in Elko, Eureka, Lander, and Pershing counties in Nevada. All of Tone Resources’ properties are located near infrastructure facilities of currently producing gold mines.

Tone Resources’ mineral properties were acquired from a company with a common director, or were staked by that director; and are subject to a royalty of 1 per cent of net smelter returns excepting portions of the Red Ridge property which are subject to a royalty of 4 percent of net smelter returns.

Tone Resources is a reporting issuer in British Columbia, Alberta, Ontario and the Yukon Territory, and trades on the TSX Venture Exchange under the symbol TNS-V.

The following discussion and analysis is based upon information available to management as of July 27, 2006.

Significant Accounting Policies

Principles of Consolidation

Tone Resources’ consolidated financial statements include the accounts of Tone Resources and its wholly owned United States subsidiary, Tone Resources (US) Inc., which was incorporated on June 27, 2002 in the State of Nevada. All inter-company transactions and balances have been eliminated.

Mineral Property Costs and Depletion

Property Acquisition Costs

Acquisitions of mineral properties are initially recorded at cost. Producing resource properties are depleted over their estimated useful lives based upon a method relating recoverable resource reserves to production. Non-producing resource properties that Tone Resources abandons interest in are written off in the year of abandonment.

Deferred Exploration Costs

Tone Resources capitalizes all exploration expenses that result in the acquisition and retention of mineral properties or an interest therein. The accumulated costs including applicable exploration expenses relative to non-productive resource properties that Tone Resources abandons its interests in are written off. Otherwise, the exploration expenses are depleted over the estimated useful lives of the producing resource properties on a method relating recoverable reserves to production.

Tone Resources is in the process of exploring and developing its mineral properties and has not yet determined the amount of reserves available. Management reviews the carrying values of mineral properties on a periodic basis and will recognize impairment in value based upon current exploration results, the prospect of further work being carried out by Tone Resources, the assessment of future probability of profitable revenues from the property or from the sale of the property. Write-downs due to impairment in value are charged to operations. Amounts shown for properties represent costs incurred net of write-downs and recoveries, and are not intended to represent present or future values.

Environmental Costs

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or Tone Resources’ commitment to a plan of action based on the then-known facts.

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Financial Instruments

The carrying values of cash, accounts payable and due to related parties approximate fair value because of the short-term maturity of those instruments. It is management’s opinion that Tone Resources is not exposed to significant interest or credit risks arising from these financial instruments.

Foreign Currency Translation

Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars at exchange rates prevailing at the balance sheet date and non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction dates. Foreign currency denominated revenues and expenses are translated at exchange rates prevailing at the transaction dates. Gains or losses arising from the translations are recognized in the current year.

Basic and Diluted Loss Per Share

Basic earnings per share are computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the dilution that would occur if potentially dilutive securities were exercised or converted to common shares. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. Fully diluted amounts are not presented when the effect of the computations are anti-dilutive due to the losses incurred.

Income Taxes

Tone Resources accounts for income taxes by the asset and liability method. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are more likely than not to be realized.

Stock-Based Compensation

Tone Resources has a stock-based compensation plan. During the year ended August 31, 2004, Tone Resources adopted the Canadian Institute of Chartered Accountants, or CICA, Handbook Section 3870 — “Stock-Based Compensation and Other Stock-Based Payments”. This change in accounting policy has been applied prospectively with no restatement of prior periods presented for the statements of loss and cash flows.

Under this standard, Tone Resources must account for compensation expense based on the fair value of options granted under its stock-based compensation plan. Costs attributable to stock options granted to directors, employees or consultants are measured at fair value at the grant date, and expensed when vested with a corresponding increase to contributed surplus. Upon exercise of stock options, consideration paid by the option holder, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital. Previously, Tone Resources accounted for stock-based compensation using the settlement method. No compensation expense was recorded in the financial statements for stock options granted to directors and employees as the options had no intrinsic value at the date of grant. Consideration paid on the exercise of stock options was credited to share capital.

Private Placement and Takeover Bid

During December, 2005, and March, 2006, Mr. Robert McEwen acquired 2.5 million units of Tone Resources, each unit consisting of one common share and one warrant exercisable to acquire an additional common share at a price of $0.25 per share for twenty-four months, at a price of $0.20 per unit. Assuming the exercise of all warrants, Mr. McEwen will hold approximately 25 per cent of the outstanding common shares of Tone Resources.

Mr. McEwen is chairman of U.S. Gold Corporation. On March 5, 2006, U.S. Gold Corporation announced that it proposed to acquire all of the issued common shares of Tone Resources Limited and three other companies. Mr. McEwen has announced that he will support the proposal to acquire these companies. Tone Resources has

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formed an independent takeover bid response committee who will report to the directors their recommendation once the formal offer from U.S. Gold is received. On May 11, 2006, Tone Resources delivered to U.S. Gold Corporation a valuation and fairness opinion concerning the offer which U.S. Gold has announced it intends to make which had been prepared for Tone Resources by Northern Securities Inc. Tone Resources has also delivered to U.S. Gold draft financial statements prepared in accordance with Canadian GAAP and reconciled to U.S. GAAP.

Results of Operations

The following financial data is derived from Tone Resources’ financial statements for the three most recently completed financial years:


	Nine Months Ended			Year Ended August 31,
	May 31, 2006			2005			2004			2003			2002

Loss before other items	$	(786,940	)	$	(756,176	)	$	(1,076,443	)	$	(436,196	)	$	(129,864	)
Loss for the period		(798,608	)		(855,799	)		(1,082,680	)		(437,698	)		(128,982	)
Loss per share		(0.05	)		(0.06	)		(0.09	)		(0.07	)		(0.03	)
Total assets		2,617,238			1,173,017			1,335,652			807,399			324,129
Total liabilities		133,435			129,065			42,269			79,784			6,000
Working capital (deficiency)		1,196,227			(114,930	)		349,922			242,924			199,038
Mineral property acquisitions		—			58,243			27,913			54,480			40,204
Claims maintenance		27,424			112,729			107,721			84,659			22,162
Exploration expenditures		103,112			130,499			320,236			208,296			39,925

During the 2005 fiscal year, Tone Resources incurred a loss of $855,799 (2004: a loss of $1,082,680) and a net loss per share of $0.06 (2004: a net loss per share of $0.09). The 2005 loss includes stock based compensation costs of $282,409 compared to $368,313 in 2004 and $7,938 in 2003; fiscal 2005 also includes a $82,769 write-off of the Crescent Valley North claims.

Total assets have decreased from the 2004 fiscal year to the 2005 fiscal year due to the reduction of cash balance: the cash balance at August 31, 2005, was $5,069 as compared with $372,760 at 2004 fiscal year end

Tone Resources remains free of long term, interest bearing debt. Total liabilities are exclusively current amounts and include $77,204 due to related parties at August 31, 2005, as a result of a number of directors not having been paid fees owing nor having been reimbursed expenses.

During fiscal 2005 directors exercised options to provide $49,850 to help fund operations, and one supplier exchanged $49,944 of drilling services for common shares.

Tone Resources continues to have reclamation bonds as an asset with the State of Nevada; $34,584 at August 31, 2005 and $37,865 at August 31, 2004.

Nine months ended May 31, 2006, compared with the year ended August 31, 2005

During the nine months ended May 31, 2006, Tone Resources issued 5,917,671 common shares for consideration of $2,421,432 including 3,300,000 at $0.20 private placements, 1,069,299 by exercise of options and 1,548,372 by exercise of share purchase warrants (of which 1,148,500 were at $0.75 per share). The increase in total assets of $1,444,221 is substantially the effect of the May 31, 2006, cash balance of $1,304,315.

During the nine months ended May 31, 2006, Tone Resources incurred a loss of $798,608 ($0.06 per share) as compared with a loss of $855,799 during the year ended August 31, 2005 ($0.06 per share).

General and administrative expenses before stock based compensation costs were $663,070 for the nine months ended May 31, 2006, as compared with $473,767 for the twelve months ended August 31, 2005. Legal and accounting costs were $316,719 (including $75,000 paid for the fairness opinion and valuation) for the nine months ended May 31, 2006, as compared with $95,000 for the year ended August 31, 2005; an increase of $221,719, substantially all of which related to the proposed take over offer from U.S. Gold Corporation. Management fees were $130,202 for the nine months ended May 31, 2006, as compared with $151,581 for the year ended August 31,

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2005; during the nine months ended May 31, 2006, $42,000 was paid to the members of the directors’ bid-response committee. Investor relations costs were $67,000 for the nine months ended May 31, 2006, and $68,000 for the year ended August 31, 2005; a second person was hired full-time and the rate of pay increased twice during the nine month period. Advertising and promotion was $82,348 during the nine months ended May 31, 2006, and $70,802 during the year ended August 31, 2005, as Tone Resources endeavored to broaden its shareholder base. All other costs were $66,981 for the nine months ended May 31, 2006, and $88,384 for the year ended August 31, 2005.

Exploration expenditures for the nine months ended May 31 were $103,112 in 2006 as compared with $130,499 in 2005.

Year ended August 31, 2005, compared with the year ended August 31, 2004.

During fiscal 2005 Tone Resources issued 783,098 common shares for consideration of $323,959, including $49,850 as the result of the exercise of options, $49,944 common shares issued in exchange for services, and $54,000 for the acquisition of the Crescent Valley North claims (which were abandoned). During fiscal 2004 Tone Resources issued 2,625,170 common shares for consideration of $1,280,135 all the result of private placements.

During the year ended August 31, 2005, Tone Resources incurred a loss of $855,799 ($0.09 per share) as compared with a loss of $1,082,680 ($0.09 per share).

General and administrative expenses before stock based compensation costs were $473,767 for the year ended August 31, 2005 as compared with $708,130 for the year ended August 31, 2004, which is a $234,363 decrease. Legal and accounting costs were $95,000 in 2005 as compared with $241,403 in 2004. During the 2004 fiscal year Tone Resources incurred $94,000 legal costs for the preparation of a registration statement on Form 20-F, for filing with the Securities and Exchange Commission, which filing was not completed; and in addition, Tone Resources also incurred increased legal costs during 2004 related to the above noted private placements. Travel and promotion expenses were $39,613 greater in 2004 and related primarily to various promotional efforts to solicit private placements. There were also decreases in most other expense categories during 2005 as management reacted to reduced cash resources.

Exploration expenditures were $130,499 in 2005 as compared with $320,236 in 2004, again a reflection of lesser net cash raised through the issuance of privately placed common shares.

Year ended August 31, 2004, compared with the year ended August 31, 2003

Tone Resources was incorporated October, 2001, and completed its initial public offering during May, 2003, issuing 1,532,700 common shares for consideration of $766,350.

During fiscal 2003 Tone Resources added five claim groups to its properties inventory as compared to one property acquisition during 2004. Claims maintenance expense reflects the greater number of claims held.

The increase in total assets is almost exclusively the result of increased mineral property costs, cash balances and capitalized exploration expenditures. During fiscal 2003 exploration expenditures were concentrated on Tone Resources’ Roberts Mountain property as proposed in the initial offering prospectus; during fiscal 2004, Tone Resources continued its work at Roberts Mountain and also furthered exploration on its Red Ridge and Fish Creek claims.

During the 2004 fiscal year Tone Resources incurred a loss of $1,082,680 (2003: a loss of $437,698), including stock based compensation costs of $368,313 (2003: $7,938).

General and administrative costs before stock based compensation were $708,130 during fiscal 2004 as compared with $429,760 during fiscal 2003. Legal and accounting costs were $241,403 in 2004 and $92,412 in 2003, an increase of $148,991, as the result of the not completed Form 20-F filing and increased private placement and other legal costs in 2004. Investor relations expense increased $65,935 as a result of hiring a full time person. Promotion and travel costs increased $46,156 with increased activities related to both promotion and exploration. Filing and transfer fees increased $23,362 as costs for 2003 included a full year, whereas 2003 was only a partial year expense. Office related costs increased $10,753 in 2004 and management fees increased $201,741 during 2004.

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Nine months ended May 31, 2006

Red Ridge Project, Carlin Trend, Elko County, Nevada

The Red Ridge property, mostly acquired in 2002, consists of 2 leased fee sections and 2 staked sections, comprising a total of about 2500 acres located in the Rain mining district on the southern end of the Carlin Trend. The primary target lies along the north-northwest trending Red Ridge structural zone. The structure has a surface expression characterized by locally intense silicification, baritization, dolomitization and iron oxides along a strike length of at least 4 to 5 kilometers. Soil anomalies consisting of gold, arsenic, antimony, barium, and gold up to 179 ppb are present over a length of about 2 kilometers. Follow-up rock samples up to 1 ppm gold were also obtained along the Red Ridge structure. Tone Resources controls about 80% of the target zone. The target is high-grade, underground mineable, gold-bearing oxide and, or sulfide material similar to the Rain fault-related Northwest Rain, Tess and Saddle deposits developed at and near the Webb Devils Gate contact. Potential exists for one, or more, gold deposits of 1 to 3 million ounces at about a one half ounce (15 g/t) grade.

In 2003 and 2004, Tone Resources provided the first drill tests into this highly prospective Carlin Trend target opportunity. Three holes drilled to date have intersected gold in flat-tabular collapse breccias with the best intercept of 80 feet of 0.036 ozAu/st. These holes confirmed the presence of the Rain deposit-style model. Two other holes drilled in 2003 passed prematurely through the Red Ridge structure into the footwall side of the structure. One other hole drilled in 2003 and one in 2004 may have been on target, but failed to reach the prescribed target zone primarily because of difficult drilling conditions.

Permitting is not required for the currently identified targets that are located on the fee sections under Taylor Grazing Act guidelines. Eight holes are recommended to follow-up on the gold mineralization intersected in 2004. The target depth is as shallow as perhaps 800 feet directly to the west of Holes RR04-1A, 2 & 3. The target zone of the Webb-Devils Gate contact juxtaposed against the Red Ridge fault zone dives going northwestward and may be as deep as 2500 feet about a mile to the northwest. At target depths of 1200 feet, or more, pre-collared, core-tailed holes are recommended and essentially requisite to drilling completion through the target zone.

Kobeh Project, Battle Mountain — Eureka Trend, Eureka County, Nevada

The Kobeh prospect consists of two claim groups of 83 North Kobeh and North Kobeh North claims and 50 SW claims staked in 2001 and 2002, respectively, comprising 2600 acres. These claims were staked to cover specific visual target opportunities on the prospective south flank of the Roberts Mountains. Several target horizons exist within the North Kobeh/North Kobeh North claim group including McColley Canyon (Bartine Member) limestone, Denay limestone, and the Webb-Devils Gate contact. Strong, pervasive, widespread alteration, pathfinder elements, and some low- levels of gold have been intersected in all of the 16 holes drilled by Tone. Gold rich mineralized feeder structure targets believed very likely present continue to be sought. Gravity and CSAMT data indicate the presence of an important northwest-trending complex structural zone.

The primary target opportunity on the South Wall claim group is the Webb-Devils Gate contact juxtaposed against the north-northwest trending Wall (feeder) structure. The potential of the Kobeh prospect is for one, or more, 1/2 to 2 million ounce Carlin-style gold deposits.

Four of five permitted and bonded sites on the South Wall claims have been drilled. Two holes, both of which intersected the Webb-Devils Gate contact target zone were drilled February, 2006. Target depths on the South Wall claims is anywhere from less than 500 feet to probable considerable depths. Multiple target horizons exist within this lower plate package of rocks.

All permitted sites on the North Kobeh-North Kobeh North claims except one have been drill tested to depths of 600 to 800 feet. Untested target horizons exist within this very permissive package of rocks. Every hole drilled to date has encountered indications of a gold-bearing type epithermal system. A permitted site in the center of a large zone of moderate to strong pathfinder geochemistry and gold at the surface up to 500 ppb designed as a deep test of multiple target zones within the lower plate stratigraphic section remains to be drilled. A 2000 plus foot deep mud-rotary exploratory hole is recommended at this site.

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Fish Creek Project, Rabbit Creek Trend, Lander County, Nevada

The Fish Creek property consists of 75 lode claims, staked in 2002, comprising 1500 acres covering essentially all of an observable target opportunity located between the Copper Canyon project and the Cove-McCoy project. The prospect, historically referred to as the Fish Creek Porphyry prospect, has previously been explored as a porphyry copper-molybdenum opportunity. The primary gold target is for a Fortitude (Copper Canyon)-style target developed within Antler Limestone and Battle Conglomerate beneath highly altered, but much less permissive, overlying Havallah calcareous siltstones and sandstones. A secondary opportunity of Triassic carbonate-hosted gold targets analogous to the nearby Cove-McCoy deposits is also possible. The potential is for 2 to 5 million high-grade underground mineable ounces. Nearby extraction facilities significantly enhance the economic viability of additional gold discovered in this region.

Results from 3 wide-spaced Tone drilled holes, which include thick intervals of copper in the 0.10% range with anomalous arsenic and low levels of gold up to 200 ppb, confirm the copper and gold potential of the prospect. Several sites remain permitted for drilling.

Target depths are unknown, but are believed to be within reasonable reach of drilling. Future drilling should be designed to go to at least 2000 feet, perhaps more if altered Antler units are encountered. Mud-rotary or pre-collared core-tailed holes is the recommended approach of drilling.

Roberts Creek Project, Battle Mountain — Eureka Trend, Eureka County, Nevada

The Roberts Creek prospects are covered by two claim groups staked in 2001 and 2002, 10 claims and 44 claims, respectively, comprising a total of 1080 acres. The CC claims control the outcropping Cabin Creek gold deposit. The deposit, hosted in Bartine limestone, consists of about 100 thousand ounces at about 0.04 ozAu/st (1.3 g/t) in oxide material. Tone drilling in 2002 expanded the Cabin Creek deposit by 10 to 15 %. One of the Tone holes intersected 165 feet of 0.06 ozAu/st gold in oxide material. The Cabin Creek deposit would make an economic satellite deposit to a nearby larger deposit operation at a reasonably high gold price of at least $400-$450 (USD) per ounce.

The North Hunter claims just to the east of the CC claims includes multiple target zones with a composite potential for 1/2 to one million ounce Carlin style deposits. Extensive alteration of decarbonatization, calcite veins and jasperoids is expressed in permissive host rock units at the surface. Surface geochemistry is very positive, and available data from previously drilled holes shows significant gold mineralization including an intercept of 80 feet of 0.04 ozAu/st (1.3 g/t) oxide material from 120 to 200 feet below the surface. This hole and other holes, and nearby surface gold anomalies provide a compelling justification for follow-up drilling.

Nine sites have been permitted for drilling on the North Hunter claims. The target depths range from the surface to perhaps a maximum, believed at this time, of 800 feet. Vertical and angle reverse circulation drilling is the appropriate means to address these targets. An amended notice of intent to drill for this additional drilling on the new North Hunter claims was approved in May, 2005.

South Keystone Project, Battle Mountain — Eureka Trend, Eureka County, Nevada

The south Keystone prospect is comprised of 28 claims (560 acres) staked in 2003 to cover a specific target area of widespread surface alteration and a distinct gravity high expressing a possible structural dome. These claims were also staked because this is where the northwest extension of the Gold Bar deposit structural zone intersects the Early Tertiary Keystone intrusive alteration aureole. It is believed that Tone Resources controls an important target opportunity within this area. Follow-up ground reconnaissance and soil geochemical results including low levels of gold have confirmed the presence of an epithermal-style gold system in the prospect area. Lower plate carbonate rocks may barely be exposed near the center of the prospect area. The discovery opportunity is for one or more multi-million ounce Carlin or Cortez Hills type gold deposits.

Three drill sites have been permitted for drilling. This area has never previously been drilled. The target depth is unknown and drilling should be prepared to go to depths of perhaps more than 2000 feet. Mud-rotary drilling is recommended for a first pass drill test of the target zone. A notice of intent to drill was approved for the drilling in May of 2005.

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Gold Bar North Project, Battle Mountain — Eureka Trend, Eureka County, Nevada

The Gold Bar North prospect is comprised of 19 claims (380 acres) that were staked in 2002 to cover a very specific target of prospective, uplifted lower plate carbonate and the flank of a gravity high that coincides with the northwest continuation of the Gold Bar feeder fault structural zone. Early in 2005, Tone Resources and Placer Dome conducted a mutually beneficial gravity survey of the broader prospect area. The independent geophysicist who evaluated the gravity data recommended a total of eight drill holes to test multiple target opportunities; six of these holes he located within Tone Resources controlled claims. The target opportunity is for multimillion ounce Carlin or Cortez Hills-type gold deposits in unexposed permissive carbonate host units.

Four sites have been permitted for drilling. Two holes were drilled from one of these four sites in January and February of this year. The target depths are unknown, but a first pass program of 800 foot holes should provide either target tests or an indication of what will be required in a follow-up drill program. It is believed that lower-plate limestone was encountered in at least one of these holes. Weak epithermal-style alteration and associated geochemistry was also intersected. The target area remains wide open with the other three sites spread over a structural strike length of about 2 kilometers.

Big Antelope Springs Project, Southern Rabbit Creek Trend, Lander County, Nevada

The Big Antelope Springs prospect is comprised of 24 claims (480 acres) covering a Lone Tree type discovery opportunity. The surface is comprised of 3 small, widely-spaced, low-lying knobs of altered Havallah limestone, silty limestone, and possible Battle Conglomerate. Phelps Dodge drilled 6 wide-spaced holes into the prospect area. One hole is reported to include a 5 ft intercept of 0.17 ozAu/st (5.8g/t), in addition, thick intervals of trace amounts of gold with strong arsenic, antimony, and mercury geochemistry were also intersected. A gravity high and coinciding IP anomaly falls within Tone Resources claim group. The opportunity is for one or more structurally controlled Lone Tree-type gold deposit in the 1 to 5 million ounce category.

Tone Resources management believes drilling is warranted. Target depths are uncertain. Prospective Antler rocks may be present at an undefined, but reasonable depth. Initial drilling to 800 feet may be by reverse circulation methods to provide a further test of system encountered in the Phelps Dodge holes. A six hole program is recommended. A notice of intent to drill has not yet been submitted.

Kent Springs Project, Rabbit Creek Trend, Pershing County, Nevada

The Kent Springs prospect consists of 10 claims (200 acres) strategically located to cover a small knob of exposed alteration with a weak epithermal signature. The sense of this prospect is that something of interest appears to be in relative proximity to the knob, or at depth. It is proposed to conduct an aggressive regional reconnaissance and gravity search program in the area.

Qualified Person

David C. Mathewson, former Vice President, Exploration of Tone Resources, was the qualified person conducting the exploration and reporting results for Tone Resources. Mr. Mathewson continues to be available to Tone Resources, as needed, for these purposes, for a daily fee. Mr. Mathewson has 35 years of exploration experience including 25 years of gold exploration in Nevada. While with Newmont, Mr. Mathewson was directly responsible for the discoveries of the Northwest Rain, Tess, Saddle, and Emigrant South gold deposits; and from 1994 to 2001 he was Regional Manager in charge of Newmont’s Great Basin and Carlin Trend exploration programs.

Alliance with Teck Cominco

On March 9, 2004 Tone Resources entered into an agreement with Teck Cominco American Incorporated, which included a private placement of 1,000,000 units at $0.50 per unit, each unit comprised of one common share and one warrant exercisable at $0.75 for a period of two years. Under the agreement Teck Cominco has the right to earn interests of fifty-one to seventy-five per cent in a total of two projects. Teck Cominco may elect to earn these rights which may include designating properties expenditure requirements, preparation of a final feasibility report

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and arranging debt financing for the project. Under the terms of the Agreement Teck Cominco also has certain rights to participate in future financings undertaken by Tone Resources.

Overall Performance

When Tone Resources filed it initial public offering prospectus in February, 2003, Tone Resources had 122 claims covering approximately 2,240 acres in Eureka County: the Roberts Creek and Kobeh properties. At July 27, 2006, Tone Resources owns substantially all interests in 410 claims plus two leased sections covering in total approximately 9,160 acres in four counties.

To May 31, 2006, Tone Resources has spent $1,254,834 acquiring and exploring its mineral properties and $2,397,350 administering its business (net of stock based compensation costs).

Of the $5,578,571 equity capital raised, all equity has been arranged without commission, excepting the costs from the initial public offering

Summary of Quarterly Results

The following quarterly summary information has been extracted from Tone Resources’ audited annual and unaudited interim consolidated financial statements issued since August, 2004.


	May 31		Feb 28		Nov 30		Aug 31			May 31		Feb 28		Nov 30		Aug 31
	2006		2006		2005		2005			2005		2005		2004		2004
	(restated)		(restated)		(restated)

Property costs
Claims acquisition and maintenance	$	—	$	11,593	$	15,831	$	69,758		$	7,831	$	10,878	$	83,760	$	54,072
Exploration expenditures		6,378		95,783		951		26,194			1,303		13,188		117,328		86,922
Discontinued project		—		—		—		(82,769	)		—		—		—		—

	$	6,378	$	107,376	$	16,782	$	13,183		$	9,134	$	24,066	$	201,088	$	140,994

Administration costs
Discontinued project	$	—	$	—	$	—	$	82,769		$	—	$	—	$	—	$	—
Accounting and legal		179,275		32,345		30,099		32,504			26,028		27,811		8,657		147,366
Management, director and consulting fees		168,772		16,490		86,940		193,168			96,101		125,656		97,066		270,984
Advertising, promotion and travel		32,208		47,213		2,927		5,581			26,303		13,112		22,581		31,764
All other		28,507		35,002		14,960		21,705			19,705		20,502		36,550		29,190

	$	408,762	$	131,050	$	134,926	$	335,727		$	168,137	$	187,081	$	164,854	$	479,304

Stock-based compensation included in management and other fees	$	36,627	$	44,371	$	42,872	$	121,525		$	48,945	$	71,310	$	40,629	$	246,307

Significant adjustments made at August 31, 2003 through 2005, were as follows.

2005 i) $82,769 Crescent Valley North claims acquisition and maintenance costs expensed as management decided subsequent to year end not to continue with the project.

ii) $36,811 stock based compensation was reclassified from contributed surplus to share capital related to the exercise of incentive stock options.

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2004 i) $58,750 of legal costs associated with preparation of a registration statement on Form 20-F with the United States Securities and Exchange Commission was expensed; whereas prior to the adjustment, the amount was being expensed over twenty-four months.

ii) $286,813 of stock-based compensation was recorded when Tone Resources adopted the CICA Handbook Section 3870 recommendations and expensed prospectively costs associated with options granted to directors and employees.

2003 i) $187,877 of legal and accounting expense was reclassified to costs of issuing (the initial public offering) common shares.

Operations

The availability of funds on hand and financings have substantially influenced the levels of quarterly expenditures and Tone Resources’ ability to plan exploration activities.

Since May 31, 2005, Tone Resources has been focused almost exclusively on obtaining financings; the three quarter periods ended February 28, 2006, were a period of very limited exploration expenditures due to restricted working capital. During the quarter ended May 31, 2006, $6,378 was expended; Tone Resources had expected the that take-over by U.S. Gold Corporation would have been further advanced by this date and has limited exploration activities and expenditures awaiting receipt of the actual take-over offer.

Consulting fees for the quarter ended May 31, 2006, include $75,000 paid to Northern Securities Inc. for the valuation and fairness opinions. Included in management fees is $42,000 paid to the members of the bid-response-committee; legal fees of almost $50,000 were paid and accrued to counsel to the bid-response-committee. Travel and promotion expenses continue to be incurred generally in connection with financing activities.

Management fees are otherwise comprised substantially as follows:


Mr. Scott Baxter	$6,500 per month	President
Mr. David Mathewson	$6,500 per month	Former Vice-president exploration

Mr. Baxter was also paid $1,250 monthly (office in the home) rent; his daughter was paid an hourly amount for secretarial services. Mr. Mathewson was paid a reduced amount of $3,250 per month during the period July to December, 2005, in line with the very limited exploration activities. As of July 1, 2006, Mr. Mathewson has no longer been on the payroll.

Liquidity and Capital Resources

Tone Resources’ contractual obligations are lease payments on its Red Ridge properties, and monthly management fees noted above. Land management fees (paid) are payable annually to maintain legal title to Tone Resources’ mineral properties.

There are no known contingent liabilities; and excepting incentive options and common share purchase warrants, there are no off-balance sheet arrangements likely to affect Tone Resources’ financial position.

Nine-Month Period Ended May 31, 2006

At May 31, 2006, Tone Resources had working capital of almost $1.2 million. Liquidity is not currently an issue as shareholders have been exercising common share purchase warrants, which have been more than sufficient to finance current activities. Management is currently studying the effects of the takeover bid proposal before embarking upon further exploration initiatives.

Fiscal Year Ended August 31, 2005

At December 22, 2005, Tone Resources had working capital roughly estimated to be in excess of $425,000.

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Excluding stock-based compensation costs, administration type expenditures were $39,481 per month for the year ended August 31, 2005. If funds were available, Tone Resources would like to expend greater than $1 million continuing the exploration of its properties during the year ending December 31, 2006; of the funds on hand $350,000 has been tentatively earmarked for the Gold Bar North, South Keystone and Red Ridge projects. Tone Resources is target rich but requires substantial capital to further explore its properties and to adequately assess the worth of its prospects. An exploration budget of at least one million dollars would greatly improve Tone Resources’ efficiency of property to administration costs.

Management proposes to continue to fund its capital requirements through further private placements; or, in the alternative, to joint venture one or more properties with a major gold producing company. Liquidity is an urgent issue and will continue to be of concern if Tone Resources is to continue its exploration programs and fund administration costs.

Risk Factors

In addition to the other information presented in this Annex D, the following should be considered carefully in evaluating Tone Resources and its business. This information contains forward-looking statements that involve risk and uncertainty. Tone Resources’ actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed below and elsewhere in this Annex D.

Tone Resources will be required to raise additional capital.

Tone Resources is currently in the exploration stage with respect to all its properties. Tone Resources’ ability to advance its projects is substantially dependent upon its success at obtaining financing. There can be no assurance Tone Resources will be able to raise sufficient capital to meet its requirements.

Tone Resources’ ability to raise capital is dependent on price of gold.

Tone Resources’ ability to obtain financing is likely to be highly dependent upon the price of gold. The price of gold may be expected to fluctuate over time, and management can offer no assurance as to its future levels or direction.

Tone Resources’ properties are all in the exploration stage and have no proven reserves.

All of Tone Resources’ interests in mineral claims are in the exploration stage only and are without a known body of ore. Development of Tone Resources’ properties would follow only if favorable exploration results are obtained.

Tone Resources’ exploration may be unsuccessful.

The business of exploration for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. There is no assurance that Tone Resources’ mineral exploration and development activities will result in any discoveries of commercial bodies of ore. The long-term profitability of Tone Resources’ operations will in part be directly related to the costs and success of its exploration programs, which may be affected by a number of factors.

Title to properties in which Tone Resources holds an interest is uncertain.

Although Tone Resources has exercised the usual due diligence with respect to determining title to properties in which it has a material interest, there is no guarantee that title to such properties will not be challenged or impugned. Tone Resources’ mineral property interests may be subject to prior unregistered agreements or transfers or native land claims and title may be affected by undetected defects. Surveys have not been carried out on any of Tone Resources’ mineral properties, therefore, in accordance with the laws of Nevada; their existence and area could be in doubt.

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Tone Resources’ industry is highly speculative and involves substantial risks.

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by Tone Resources may be affected by numerous factors which are beyond its control and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and 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 combination of which factors may result in Tone Resources not receiving an adequate return on investment capital.

Not all of Tone Resources’ risks may be insured.

In the course of exploration, development and production of mineral properties, 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 Tone Resources 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 Tone Resources.

Tone Resources is subject to the risk of litigation.

Although Tone Resources is not currently subject to litigation, it may become involved in disputes with other parties in the future which may result in litigation. Any litigation could be costly and time consuming and could divert management’s time and attention from business operations. In addition, if Tone Resources is unable to resolve any litigation favorably, it may have a material adverse impact on Tone Resources’ financial performance, cash flow and results of operations.

Tone Resources’ operations are subject to environmental regulation.

Tone Resources’ operations 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 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 requires 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 the potential to reduce the profitability of operations.

Tone Resources’ business requires licenses and permits.

Tone Resources’ operations require permits from various federal, state and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that Tone Resources obtain permits from various governmental agencies. There can be no assurance that all permits which Tone Resources may require for its operations and exploration activities will be obtainable on reasonable terms or on a timely basis or at all.

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Tone Resources operates in a highly competitive industry.

The mining industry is intensely competitive in all its phases. Tone Resources competes with other companies that have greater financial resources and technical facilities. Competition could adversely affect Tone Resources’ ability to acquire suitable properties or prospects in the future, to hire personnel with resource industry experience, and to arrange for necessary funding.

Tone Resources depends heavily on its officers.

Tone Resources’ success is currently largely dependent on the performance of its officers. The loss of the services of these persons may be expected to have a materially adverse effect on Tone Resources’ business and prospects. There is no assurance Tone Resources can maintain the services of its officers or other qualified personnel required to operate its business. Failure to do so could have a material adverse affect on Tone Resources and its prospects. Tone Resources does not maintain “key man” insurance with respect to any of its officers.

Tone Resources is subject to foreign currency fluctuations.

Tone Resources maintains its accounts in Canadian dollars, and raises equity financing on Canadian markets in Canadian dollars. Its exploration properties are in the United States, and accordingly the costs of exploring those properties to date have principally been denominated in U.S. dollars. Accordingly, the results of Tone Resources’ operations are subject to currency exchange risks, particularly to changes in the exchange rate between the United States and Canadian dollars. Tone Resources does not hedge its foreign currency exposure to manage these risks. Fluctuations in the rate of exchange between the U.S. and Canadian dollars may significantly impact on Tone Resources’ financial position and results of operations in the future.

Tone Resources has limited ability to raise capital without incurring a change of control.

Tone Resources has entered into a subscription agreement with Robert McEwen, the Chairman of U.S. Gold, which provides, among other things, that, for a period of two years following the closing of the acquisition of the common shares, if at any time subsequent to the closing of the acquisition of such common shares, Mr. McEwen owns not less than 10% of the issued and outstanding common shares of Tone Resources (assuming the exercise of any warrants held by Mr. McEwen), then Mr. McEwen shall have a right of first refusal to participate in any future financings of Tone Resources. This right of first refusal may adversely affect Tone Resources’ ability to raise capital and/or could cause a change in control of Tone Resources.

Tone Resources’ directors and officers are subject to conflicts of interest.

Certain directors and officers of Tone Resources are officers or directors of, or are associated with, other natural resource companies that acquire interests in mineral properties. Such associations may give rise to conflicts of interest from time to time. The directors are required by law, however, to act honestly and in good faith with a view to the best interests of Tone Resources and its shareholders and to disclose any personal interest which they may have in any material transaction which is proposed to be entered into with Tone Resources and to abstain from voting as a director for the approval of any such transaction.

It is not certain Tone Resources will continue as a going concern.

The continuation of Tone Resources as a going concern depends upon its ability to generate profitable operations in the future, and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations as they become due. Tone Resources’ financial statements do not include the adjustments that would be necessary if it is unable to continue its operations and therefore be required to realize its assets and discharge its liabilities in other than its normal course of operations and at amounts different from those reflected in the financial statements.

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Tone Resources’ common shares have limited and volatile trading volume.

Although Tone Resource’s common shares are listed on the TSX Venture Exchange, the volume of trading has been limited and volatile in the past and is likely to continue to be so in the future, reducing the liquidity of the common shares and making it difficult for investors to readily sell their common shares in the open market. Without a liquid market for Tone Resources’ common shares, investors may be unable to sell their common shares at favorable times and prices and may be required to hold their common shares in declining markets or to sell them at unfavorable prices.

Tone Resources’ common share price is volatile.

In recent years, securities markets in Canada have experienced a high level of price volatility. The market price of many resource companies, particularly those such as Tone Resources that are considered speculative exploration companies, have experienced wide fluctuations in price, resulting in substantial losses to investors who have sold their common shares at a low price point. These fluctuations are based only in part on the level of progress of exploration, and can reflect general economic and market trends, world events or investor sentiment, and may sometimes bear no apparent relation to any objective factors or criteria. Significant fluctuations in Tone Resource’s common share price is likely to continue, and could potentially increase in the future.

Tone Resources has incurred net losses since inception and expects losses to continue.

Tone Resources has not been profitable since incorporation. For the fiscal year ended August 31, 2005, Tone Resources had a net loss of $855,799 and an accumulated deficit on August 31, 2005 of $2,505,159. As Tone Resources is currently at the exploration stage and has no reserves of precious metals, management expects Tone Resources to continue to suffer net losses for the foreseeable future.

Off-Balance Sheet Arrangements

Excepting incentive options and common share purchase warrants, there are no off-balance sheet arrangements likely to affect Tone Resources’ financial position.

Transactions with Related Parties

See the Financial Statements of Tone Resources in this Annex D, Note 5 to Tone Resources’ Unaudited Consolidated Financial Statements for the nine month period ended May 31, 2006.

Financial Instruments and Other Instruments

Tone Resources’ consolidated financial instruments include cash and cash equivalents, reclamation bonds, accounts receivable and accounts payable. The fair values of these financial instruments approximate their carrying values.

Critical Accounting Policies

Property Acquisition Costs

Acquisitions of mineral properties are initially recorded at cost. Producing resource properties are depleted over their estimated useful lives based upon a method relating recoverable resource reserves to production. Non-producing resource properties that Tone Resources abandons its interest in are written off in the year of abandonment.

Deferred Exploration Costs

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expenses are depleted over the estimated useful lives of the producing resource properties on a method relating recoverable reserves to production.

Environmental Costs

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no disagreements with accountants or any reportable event in connection with a change in accountants during any of the past two fiscal years.

Glossary

The following glossary and metric equivalents have been provided by Tone Resources. These definitions should be read in conjunction with this Annex D, and do not apply to other sections of this proxy statement.


As		The element symbol for arsenic.
Au		The element symbol for gold.
Bedrock		Solid rock underlying loose and unconsolidated soils and gravel.
Breccia		An angular fragmental rock often mineralized, and in the case of gold, favorable for gold deposition.
Colluvium		Surface material covering bedrock that consists of soil, gravel and any other size rock fragments.
Decarbonatization		Removal of carbonate.
Dolomitization		Introduction of dolomite.
Epithermal		Low temperature environments in the earth’s crust where mineralization, specifically gold, may occur.
Fault		Break along which movement of two juxtaposed blocks of rock has occurred.
Float		Loose unconsolidated broken rock in soil material.
Hydrothermal		Hot water conditions in the earth’s crust that may cause mineralization.
Jasperoid		A rock consisting essentially of cryptocrystalline or chalcedonic silica.
Llode claim		Generally a 1500 ft x 600 ft, 20 acre parcel, staked with 5 posts to secure ownership of certain minerals, including gold, below the surface.
Lower plate		A section of rocks, usually comprised of carbonate materials, that are conducive to gold mineralization.
Mesothermal		Medium temperature environment in the earth’s crust where mineralization may occur.
Mineralization		The process of converting or being converted into another mineral, as a metal and, or sulfide.
Oxidation		Conversion to oxide minerals.

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Oxide		The property of being in the form of an oxide mineral, in the case of gold material favorable for gold leaching.
Pathfinder element		An element in common association with gold, such as arsenic, mercury, antimony, and zinc.
Section		Generally a 1 mile by one mile area comprised of a total of 640 acres of land.
Silicification		Introduction of silica.
Skarn		Rocks that were comprised of pure to nearly pure limestone that have undergone a mineralization change through thermal processes to calcium and magnesium-bearing siliceous minerals.
Stratigraphic unit		Unit consisting of stratified mainly sedimentary rocks.
Sulfidation		Introduction of sulfides.
Upper plate		A section of rocks, usually non-prospective, that may overly prospective lower-plate rock units below.

Terms Relating to Mineral Resources

The following terms used in this Annex are Canadian mining terms defined in accordance with National Instrument 43-101 under the guidelines set out the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines. The terms mineral resource, measured mineral resource, indicated mineral resource, and inferred mineral resource are recognized and required to be reported by Canadian regulations, the SEC does not recognize these terms. Information contained in this Annex concerning descriptions of mineralization, resources and reserves may not be comparable to similar information publicly reported by U.S. companies. Resources classified as indicated mineral resource and inferred mineral resource have an uncertain existence and uncertain as to their economic and legal feasibility. You should not assume that any part or all of an inferred resource exists, or is economically mineable.


Mineral Resource		A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge.
Measured Mineral Resource		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.
Indicated Mineral Resource		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.
Inferred Mineral Resource		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.

D-25


A Partnership of Incorporated Professionals	Amisano Hanson

Chartered Accountants

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors,

Tone Resources Limited

(An Exploration Stage Company)

We have audited the consolidated balance sheets of Tone Resources Limited as at August 31, 2005 and 2004 and the consolidated statements of loss, cash flows and stockholders’ equity for the three years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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 its cash flows for the three years then ended in accordance with Canadian generally accepted accounting principles.

/s/ AMISANO HANSON

Chartered Accountants

Vancouver, Canada

December 22, 2005

COMMENTS BY AUDITOR FOR US READERS ON CANADA — US REPORTING CONFLICT

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is substantial doubt about a company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes the realization of assets and discharge of liabilities in the normal course of business. As discussed in Note 1 to the financial statements, the Company has losses from operations and the recoverability of amounts shown for mineral property costs is dependent upon whether the properties contain reserves that are economically recoverable, which raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our report to the shareholders dated December 22, 2005, is expressed in accordance with Canadian reporting standards which do not permit a reference to such uncertainty in the auditors’ report when the uncertainty is adequately disclosed in the financial statements.

/s/ AMISANO HANSON

Chartered Accountants

Vancouver, Canada

December 22, 2005


750 WEST PENDER STREET, SUITE 604	TELEPHONE: 604-689-0188


VANCOUVER CANADA	FACSIMILE: 604-689-9773


V6C 2T7	E-MAIL: amishan@telus.net

D-28

TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF LOSS
for the years ended August 31, 2005, 2004 and 2003
and for the period October 31, 2001 (Date of Inception) to August 31, 2005


										October 31,
										2001 (Date of
										Inception) to
										August 31,
	2005			2004			2003			2005
	(Stated in Canadian Dollars)

General and administrative expenses
Accounting and audit fees — Note 6	$	35,808		$	62,012		$	56,768		$	161,783
Advertising and promotion		32,937			28,174			681			74,602
Consulting fees		—			—			7,747			7,747
Filing fees		16,769			29,450			8,764			54,983
Finance fees		10,000			—			—			10,000
Investor relations		68,000			79,435			13,500			160,935
Legal fees — Note 6		59,192			179,391			35,644			288,480
Management fees — Note 6		151,581			181,036			189,295			587,482
Office and miscellaneous		13,334			14,971			11,617			49,417
Rent — Note 6		15,000			15,000			12,000			52,665
Stock-based compensation — Note 6		282,409			368,313			7,938			658,660
Secretarial — Note 6		11,389			13,462			11,240			38,146
Telephone		13,679			16,046			13,188			48,681
Transfer agent fees		8,213			6,912			4,236			19,361
Travel		37,865			82,241			63,578			185,381

Loss before other items		(756,176	)		(1,076,443	)		(436,196	)		(2,398,323	)
Other items
Foreign exchange loss		(17,389	)		(7,440	)		(4,265	)		(29,450	)
Interest income		535			1,203			2,763			5,383
Write-off of mineral property costs — Note 4		(82,769	)		—			—			(82,769	)

Net loss for the year	$	(855,799	)	$	(1,082,680	)	$	(437,698	)	$	(2,505,159	)

Basic and diluted loss per share	$	(0.06	)	$	(0.09	)	$	(0.07	)

Weighted average number of shares outstanding		13,168,002			11,478,821			6,547,593

See accompanying notes

D-30

TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended August 31, 2005, 2004 and 2003
and for the period October 31, 2001 (Date of Inception) to August 31, 2005


										October 31,
										2001 (Date of
										Inception) to
										August 31,
	2005			2004			2003			2005
	(Stated in Canadian Dollars)

Operating Activities
Net loss for the year	$	(855,799	)	$	(1,082,680	)	$	(437,698	)	$	(2,505,159	)
Add items not affecting cash:
Stock-based compensation		282,409			368,313			7,938			658,660
Write-off of mineral property costs		82,769			—			—			82,769
Changes in non-cash working capital accounts:
GST recoverable		(3,797	)		11,305			(14,016	)		(6,508	)
Prepaid expenses and advances		13,162			2,275			32,608			(2,558	)
Accounts payable		71,921			(43,132	)		62,622			101,805
Due to related parties		65,819			5,617			11,162			77,204

		(343,516	)		(738,302	)		(337,384	)		(1,593,787	)

Financing Activities
Special warrants issued		—			—			262,773			—
Common shares issued		220,015			1,280,135			576,473			2,786,507

		220,015			1,280,135			839,246			2,786,507

Investing Activities
Reclamation bonds		3,281			(2,900	)		(18,165	)		(34,584	)
Mineral property costs		(247,471	)		(455,870	)		(347,435	)		(1,153,067	)

		(244,190	)		(458,770	)		(365,600	)		(1,187,651	)

Increase (decrease) in cash during the year		(367,691	)		83,063			136,262			5,069
Cash, beginning of the year		372,760			289,697			153,435			—

Cash, end of the year	$	5,069		$	372,760		$	289,697		$	5,069

Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	—		$	—		$	—

Income taxes	$	—		$	—		$	—

Non-cash Transactions — Note 7

See accompanying notes

D-31

TONE RESOURCES LIMITED
(An Exploration Stage Company)
for the years ended August 31, 2005, 2004 and 2003

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


		Number of					Special			Contributed
		Common Shares		Amount			Warrants			Surplus			Deficit			Total
		(Stated in Canadian dollars)

Balance, October 31, 2001			—	$	—		$	—		$	—		$	—		$	—
For cash:
Issuance of founders shares	— at $0.0001		5,000,000		500			—			—			—			500
Issuance of special warrants	— at $0.15		—		—			446,611			—			—			446,611
Net loss for the period			—		—			—			—			(128,982	)		(128,982	)

Balance, August 31, 2002			5,000,000		500			446,611			—			(128,982	)		318,129
For cash:
Initial public offering	— at $0.50		1,532,700		766,350			—			—			—			766,350
Issuance of special warrants	— at $0.15		—		—			31,426			—			—			31,426
	— at $0.50		—		—			231,347			—			—			231,347
Less: share issue costs — Note 6			—		(189,877	)		—			—			—			(189,877	)
Conversion of special warrants			3,649,606		709,384			(709,384	)		—			—			—
Stock-based compensation			—		—			—			7,938			—			7,938
Net loss for the year			—		—			—			—			(437,698	)		(437,698	)

Balance, August 31, 2003			10,182,306		1,286,357			—			7,938			(566,680	)		727,615
For cash:
Pursuant to private placements	— at $0.47		1,081,670		508,385			—			—			—			508,385
	— at $0.50		1,543,500		771,750			—			—			—			771,750
Stock-based compensation			—		—			—			368,313			—			368,313
Net loss for the year			—		—			—			—			(1,082,680	)		(1,082,680	)

Balance, August 31, 2004			12,807,476		2,566,492			—			376,251			(1,649,360	)		1,293,383
For cash:
Pursuant to private placements	— at $0.40		175,412		70,165			—			—			—			70,165
	— at $0.40		250,000		100,000			—			—			—			100,000
Pursuant to exercise of options	— at $0.30		67,500		20,250			—			—			—			20,250
	— at $0.50		59,200		29,600			—			—			—			29,600
Shares for debt	— at $0.45		110,986		49,944			—			—			—			49,944
Mineral property costs	— at $0.45		120,000		54,000			—			—			—			54,000
Stock-based compensation			—		—			—			282,409			—			282,409
Stock based compensation charge on stock options exercised			—		36,811			—			(36,811	)		—			—
Net loss for the year			—		—			—			—			(855,799	)		(855,799	)

Balance, August 31, 2005			13,590,574	$	2,927,262		$	—		$	621,849		$	(2,505,159	)	$	1,043,952

See accompanying notes

D-32

Schedule 1

TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
August 31, 2005 and 2004


															Big		Crescent
	South		Roberts				Kent		Red		Battle		Gold Bar		Antelope		Valley
	Keystone		Creek		Kobeh		Springs		Ridge		Mountain		North		Springs		North			2005			2004
	(Eureka)		(Eureka)		(Eureka)		(Pershing)		(Elko)		(Lander)		(Eureka)		(Lander)		(Eureka)			Total			Total
	(Stated in Canadian Dollars)

Property acquisition and maintenance costs
Balance, August 31, 2004	$	25,522	$	53,772	$	123,284	$	7,440	$	54,226	$	51,927	$	14,583	$	6,385	$	—		$	337,139		$	201,505
Cash		—		—		—		—		4,243		—		—		—		—			4,243			27,913
Common shares — Note 6		—		—		—		—		—		—		—		—		54,000			54,000			—
Claims maintenance — Note 6		3,693		7,122		17,540		1,319		35,318		9,891		2,506		6,571		28,769			112,729			96,718
Title opinions		—		—		—		—		—		—		—		—		—			—			11,003

Balance, August 31, 2005		29,215		60,894		140,824		8,759		93,787		61,818		17,089		12,956		82,769			508,111			337,139

Deferred exploration costs
Balance, August 31, 2004		13,766		88,848		191,259		125		143,538		130,286		525		110		—			568,457			248,221
Assaying		—		—		—		—		17,062		—		4,884		—		—			21,946			59,771
Consulting fees		—		—		—		—		—		—		5,754		—		—			5,754			7,507
Drilling		—		—		—		—		87,196		—		—		—		—			87,196			224,653
Field costs		—		—		—		—		4,760		—		2,046		729		—			7,535			18,784
Reclamation		—		—		—		—		8,068		—		—		—		—			8,068			9,521

Balance, August 31, 2005		13,766		88,848		191,259		125		260,624		130,286		13,209		839		—			698,956			568,457

Write-off mineral property — Note 4		—		—		—		—		—		—		—		—		(82,769	)		(82,769	)		—

Totals	$	42,981	$	149,742	$	332,083	$	8,884	$	354,411	$	192,104	$	30,298	$	13,795	$	—		$	1,124,298		$	905,596

See accompanying notes

D-33

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005 and 2004

(Stated in Canadian Dollars)


Note 1	Nature and Continuance of Operations

The Company was incorporated on October 31, 2001 in the Yukon Territory. On March 1, 2005, the Company was continued to British Columbia from the Yukon Territory. The Company’s business is the exploration and development of its mineral properties located in Nevada, USA. The Company’s shares are publicly listed on the TSX Venture Exchange.

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern which assume that the Company will realize its assets and discharge its liabilities in the normal course of business. At August 31, 2005, the Company has a working capital deficiency if $114,930, has not yet achieved profitable operations and has accumulated losses of $2,505,159 since incorporation. No assurances can be given that the Company will be able to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue its operations and therefore be required to realize its assets and discharge its liabilities in other than its the normal course of operations and at amounts different from those reflected in the financial statements. The Company has historically satisfied its capital needs primarily by issuing equity securities. Management plans to continue to provide for its capital needs during the year ended August 31, 2006, by the issuance of common stock and through loans.

The recoverability of amounts shown for mineral property costs is dependent upon the discovery of economically recoverable reserves and the ability to obtain the necessary financing to complete their exploration and development.


Note 2	Significant Accounting Policies

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in Canada and are stated in Canadian dollars. Except as disclosed in Note 10, these financial statements conform in all material respects with GAAP in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgement. Actual results may differ from these estimates.

The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:

a) Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned United States subsidiary, Tone Resources (US) Inc., which was incorporated on June 27, 2002 in the State of Nevada. All inter-company transactions and balances have been eliminated.

D-34

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

b) Mineral Property Costs and Depletion

Property Acquisition Costs

Acquisitions of mineral properties are initially recorded at cost. Producing resource properties are depleted over their estimated useful lives based upon a method relating recoverable resource reserves to production. Non-producing resource properties that the Company abandons interest in are written off in the year of abandonment.

Deferred Exploration Costs

The Company capitalizes all exploration expenses that result in the acquisition and retention of mineral properties or an interest therein. The accumulated costs including applicable exploration expenses relative to non-productive resource properties that the Company abandons interest in are written off. Otherwise, the exploration expenses are depleted over the estimated useful lives of the producing resource properties on a method relating recoverable reserves to production.

The Company is in the process of exploring and developing its mineral properties and has not yet determined the amount of reserves available. Management reviews the carrying values of mineral properties on a periodic basis and will recognize impairment in value based upon current exploration results, the prospect of further work being carried out by the Company, the assessment of future probability of profitable revenues from the property or from the sale of the property. Write-downs due to impairment in value are charged to operations. Amounts shown for properties represent costs incurred net of write-downs and recoveries, and are not intended to represent present or future values.

c) Environmental Costs

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitment to a plan of action based on the then known facts.

d) Financial Instruments

The carrying values of cash, accounts payable and due to related parties approximate fair value because of the short-term maturity of those instruments. It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

The Company’s mineral exploration activities are located in the United States of America and expenditures are in U.S. dollars. Consequently some assets and liabilities are exposed to foreign currency fluctuations. As at August 31, 2005, cash of $868 (2004: $229,870) and accounts payable of $15,830 (2004: $17,108) denominated in U.S. dollars are included in these financial statements.

e) Foreign Currency Translation

D-35

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

f) Basic and Diluted Loss Per Share

g) Income Taxes

The Company accounts for income taxes by the asset and liability method. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are more likely than not to be realized.

h) Stock-based Compensation

The Company has a stock-based compensation plan as disclosed in Note 5. During the year ended August 31, 2004, the Company adopted CICA Handbook Section 3870 — “Stock-based Compensation and Other Stock-based Payments”. This change in accounting policy has been applied prospectively with no restatement of prior periods presented for the statements of loss and cash flows.

Under this standard, the Company must account for compensation expense based on the fair value of options granted under its stock-based compensation plan. Costs attributable to stock options granted to directors, employees or consultants are measured at fair value at the grant date, and expensed when vested with a corresponding increase to contributed surplus. Upon exercise of stock options, consideration paid by the option holder, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital.

Previously, the Company accounted for stock-based compensation using the settlement method. No compensation expense was recorded in the financial statements for stock options granted to directors and employees as the options had no intrinsic value at the date of grant. Consideration paid on the exercise of stock options was credited to share capital.


Note 3	Reclamation Bonds

The Company has certificates of deposit that earn interest at approximately 1% per annum. These deposits represent restricted cash as they are pledged as security to the Bureau of Land Management and are only released to the Company after the Company meets inspection requirements. Reclamation costs are added to mineral property costs as incurred.


Note 4	Mineral Property Costs

The Company holds 410 mining claims in Nevada, USA. The properties are located in Eureka, Pershing, Elko and Lander counties and are subject to royalties of 1% to 4% of net smelter returns. Certain of the royalties are payable to a company with a director in common.

D-36

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, the Company holds two leased mineral rights located in Elko county, Nevada. Lease payments are due as follows for the years ended:


August 31, 2003	US$	12,000	(paid)
August 31, 2004		12,000	(paid)
August 31, 2005		12,000	(paid)
August 31, 2006		20,000	(paid $10,000)
August 31, 2007		30,000
August 31, 2008		35,000
August 31, 2009		40,000
August 31, 2010		45,000
August 31, 2011		50,000

	US$	256,000

On March 9, 2004, the Company entered into an agreement with Teck Cominco. The agreement grants Teck Cominco the option to earn interests of up to 75% in any two of the Company’s current properties located in north-central Nevada as well as any other properties acquired by the Company until March 9, 2006 in this defined area of interest in Nevada. Teck Cominco has a first right of refusal on the Red Ridge property. Teck Cominco may earn the interests by completing expenditure requirements totalling $3,000,000 and preparing feasibility reports.

By an agreement dated October 19, 2004, the Company entered into a mining lease with a company with a common director to acquire 76 mining claims known as the Crescent Valley North claims located in Nevada in exchange for 120,000 common shares of the Company (issued). The claims were subject to a 4% net smelter return royalty. In addition, the claims required the following lease payments:


US$12,000		Upon execution of the agreement (paid)
US$25,000		Anniversaries 1 through 4
US$50,000		Anniversaries 5 through 9
US$75,000		Thereafter

During the year ended August 31, 2005, the Company abandoned its interest in these claims and wrote-off related mineral property costs in the amount of $82,769.


Note 5	Share Capital — Notes 6 and 9

a) Authorized:

An unlimited number of common shares without par value

b) Escrow:

At August 31, 2005 there were 1,542,000 common shares held in escrow by the Company’s transfer agent. These shares will be released from escrow as follows:


November 16, 2005 (subsequently released)			771,000
May 16, 2006			771,000

			1,542,000

D-37

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

c) Commitments:

i) Stock-based Compensation Plan

Stock options are granted with an exercise price equal to the market price of the Company’s stock on the date of the grant. Pursuant to the stock-based compensation plan, options may not be granted at an exercise price of less than $0.10 per share. Stock options have a maximum term of five years. The Company’s options vest 25% on the date of the grant with the remaining 75% vesting over the next 18 months at a rate of 12.5% per quarter based on the original amount granted.

A summary of the status of the Company’s stock option plan as of August 31, 2005 and 2004 and the changes during the years then ended is presented below:


	2005					2004
				Weighted					Weighted
				Average					Average
	Number			Exercise		Number			Exercise
	of Shares			Price		of Shares			Price

Options outstanding, beginning of year		1,850,000		$	0.50		2,000,000		$	0.50
Granted		1,099,732		$	0.41		550,000		$	0.50
Exercised		(126,700	)	$	0.39		—			—
Cancelled		(150,000	)	$	0.50		(700,000	)	$	0.50

Options outstanding, end of year		2,673,032		$	0.50		1,850,000		$	0.50

Options exercisable, end of year		2,115,291		$	0.50		1,459,375		$	0.50

The following stock options were outstanding as at August 31, 2005:


		Exercise		Expiry
Number		Price		Date

	1,165,800	$	0.50	May 16, 2008
	50,000	$	0.50	June 09, 2008
	25,000	$	0.50	July 21, 2008
	300,000	$	0.50	November 14, 2008
	100,000	$	0.50	December 18, 2008
	321,500	$	0.30	September 2, 2009
	484,732	$	0.50	February 1, 2010
	226,000	$	0.40	July 26, 2010

	2,673,032

At August 31, 2005, 557,741 of the above outstanding options were not yet vested with the optionees. These options will vest with the optionees over the period from September 2, 2005 to January 26, 2007.

Non-cash compensation charges totalling $282,409 (2004: $368,313) associated with vested options granted to directors, employees and consultants were recognized in the consolidated financial statements of the Company.

D-38

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

These compensation charges have been determined under the fair value method using the Black-Scholes option pricing model with the following assumptions:


	Years Ended August 31,
	2005			2004

Expected dividend yield		0.0	%		0.0	%
Expected volatility		99.2	%		90.0	%
Risk-free interest rate		2.0	%		2.0	%
Expected term in years		5 years			5 years

The weighted average fair value at the date of grant of the stock options granted was as follows:


	Years Ended August 31,
	2005		2004

Weighted average fair value	$	0.29	$	0.32
Total options granted		1,099,732		550,000
Total fair value of options granted	$	314,972	$	178,500
Total fair value of options vested	$	282,409	$	368,313

ii) Share Purchase Warrants

At August 31, 2005, there were 2,837,876 share purchase warrants outstanding entitling the holders thereof the right to purchase one common share for each warrant held as follows:


Number		Exercise Price	Expiry Date

	1,026,387	$0.50	December 8, 2005
	55,283	$0.50	January 15, 2006
	1,000,000	$0.75	March 31, 2006
	543,500	$0.75	July 5, 2006
	87,706	$0.60	May 26, 2006
		or at $0.80	November 26, 2006
	125,000	$0.60	June 14, 2006

		or at $0.80	December 14, 2006
	2,837,876

D-39

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6 Related Party Transactions — Notes 4, 5, 8 and 9

The Company incurred the following charges from directors and officers of the Company, a company with a director in common with the Company and the daughter of a director of the Company for the years ended August 31, 2005, 2004 and 2003 and for the period October 31, 2001 (Date of Inception) to August 31, 2005:


							October 31,
							2001 (Date of
							Inception) to
							August 31,
	2005		2004		2003		2005

Accounting fees	$	13,725	$	—	$	—	$	13,725
Legal fees		30,209		41,945		6,353		78,507
Management fees		151,581		181,036		189,295		587,482
Mineral property costs		—		—		—		87,247
Mineral property acquisition costs
— common shares		54,000		—		—		54,000
— cash		15,717		—		47,043		15,717
Rent		15,000		15,000		12,000		52,665
Share issue costs		—		—		—		74,275
Stock-based compensation		197,763		286,813		—		484,576
Secretarial		11,389		13,462		11,090		37,996

	$	489,384	$	538,256	$	340,056	$	1,486,190

These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.

Included in prepaid expenses and advances is $Nil (2004: $7,750) representing prepayment of management fees and rent to a director of the Company.

Amounts due to related parties are due to directors and officers of the Company and representing unpaid fees and expenses. These amounts are unsecured, non-interest bearing and have no specific terms of repayment.

During the year ended August 31, 2004, the Company issued 110,000 common shares for cash proceeds of $52,000 to directors of the Company.


Note 7	Non-cash Transactions

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the year ended August 31, 2005, the Company issued 120,000 common shares at $0.45 totalling $54,000 as a property acquisition cost pursuant to a mining lease. In addition, the Company issued 110,986 common shares at $0.45 to settle a debt of $49,944. These transactions have been excluded from the statement of cash flows.

During the year ended August 31, 2003, the company converted 3,649,606 special warrants to 3,649,606 common shares at a value of $709,384. This transaction has been excluded from the statement of cash flows.

D-40

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 8 Income Taxes

Significant components of the Company’s future tax assets and liabilities, after applying enacted corporate income tax rates, are as follows:


	2005			2004

Future income tax assets
Tax losses carried forward	$	1,022,523		$	772,122
Less: valuation allowance		(1,022,523	)		(772,122	)

	$	—		$	—

The Company recorded a valuation allowance against its future income tax assets based on the extent to which it is more likely-than-not that sufficient taxable income will not be realized during the carry forward periods to utilize all the future tax assets.

At August 31, 2005, the Company and its subsidiary have accumulated losses totalling $2,870,643, which may be carried forward to reduce future years income for federal and state income tax purposes. These losses, the potential benefit of which have not been recognized in these financial statements, expire as follows:


			United States
	Canada		of America		Total

2009	$	100,542	$	—	$	100,542
2010		377,116		—		377,116
2011		661,076		—		661,076
2015		432,271		—		432,271
2022		—		96,061		96,061
2023		—		352,776		352,776
2024		—		487,178		487,178
2025		—		363,623		363,623

	$	1,571,005	$	1,299,638	$	2,870,643


Note 9	Subsequent Events — Note 5

a) On October 7, 2005, the Company issued 88,000 common shares at $0.30 per share to a director of the Company for proceeds of $26,400 pursuant to the exercise of share purchase options outstanding at August 31, 2005.

b) On November 18, 2005, the Company granted a director of the Company 100,000 share purchase options entitling him to purchase one common share for each option held at $0.20 per share until November 18, 2010.

c) On December 1, 2005, the Company granted a director of the Company 50,000 share purchase options entitling him to purchase one common share for each option held at $0.35 per share until December 1, 2010.

d) On December 8, 2005, the Company issued 103,058 common shares (80,000 to a director of the Company) at $0.50 per share for proceeds of $51,529 pursuant to the exercise of share purchase warrants outstanding at August 31, 2005. The remaining 923,329 warrants expired.

e) On December 19, 2005, the Company issued 2,570,000 units (1,840,000 to directors of the Company) at $0.20 per unit pursuant to private placement agreements for total proceeds of $514,000. Each unit consists of one common share and one share purchase warrant entitling the holder thereof the right to purchase an additional

D-41

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

common share at $0.25 per share until December 19, 2007. The Company received regulatory approval for the issuance of a total 3,300,000 units at $0.20 per unit. The remaining 730,000 units are subject to disinterested shareholder approval at the Company’s next annual general meeting.

f) On December 20, 2005, the Company issued 25,000 common shares at $0.40 per share for proceeds of $10,000 pursuant to the exercise of share purchase options outstanding at August 31, 2005.


Note 10	Differences Between Canadian and United States Accounting Principles

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada which differ in certain respects with those principles and practices that the Company would have followed had its financial statements been prepared in accordance with accounting principles and practices generally accepted in the United States.

The Company’s accounting principles generally accepted in Canada differ from accounting principles generally accepted in the United States as follows:

a) Mineral Property Costs and Deferred Exploration Costs

Under accounting principles generally accepted in Canada (“Canadian GAAP”) resource property acquisition and exploration costs may be deferred and amortized to the extent they meet certain criteria. Under accounting principles generally accepted in the United States (“US GAAP”) resource property acquisition and exploration costs must be expensed as incurred. Therefore an additional expense is required under US GAAP.

D-42

TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

b) The impact of the above on the consolidated financial statements is as follows:


	2005			2004			2003

Net Loss and Loss Per Share
Net loss for the year per Canadian GAAP	$	(855,799	)	$	(1,082,680	)	$	(437,698	)
Write-off of mineral property costs		82,769			—			—
Mineral property costs		(301,471	)		(455,870	)		(347,435	)

Net loss for the year per US GAAP	$	(1,074,501	)	$	(1,538,550	)	$	(785,133	)

Basic and diluted loss per share per US GAAP	$	(0.08	)	$	(0.13	)	$	(0.12	)

Total Assets and Liabilities
Total assets per Canadian GAAP	$	1,173,017		$	1,335,652
Mineral property costs		(1,124,298	)		(905,596	)

Total assets per US GAAP	$	48,719		$	430,056

Total liabilities per Canadian and US GAAP	$	129,065		$	42,269

Stockholders’ Equity
Deficit, end of the year, per Canadian GAAP	$	(2,505,159	)	$	(1,649,360	)
Mineral property costs		(1,124,298	)		(905,596	)

Deficit, end of the year, per US GAAP		(3,629,457	)		(2,554,956	)
Capital stock per Canadian and US GAAP		2,927,262			2,566,492
Contributed surplus per Canadian and US GAAP		621,849			376,251

Stockholders’ equity (deficiency) per US GAAP	$	(80,346	)	$	387,787

Statements of Cash Flows
Operating Activities per Canadian GAAP	$	(343,516	)	$	(738,302	)	$	(337,384	)
Mineral property costs		(247,471	)		(455,870	)		(347,435	)

Operating Activities per US GAAP	$	(590,987	)	$	(1,194,172	)	$	(684,819	)

Financing Activities per Canadian and US GAAP	$	220,015		$	1,280,135		$	839,246

Investing Activities per Canadian GAAP	$	(244,190	)	$	(458,770	)	$	(365,600	)
Mineral property costs		247,471			455,870			347,435

Investing Activities per US GAAP	$	3,281		$	(2,900	)	$	(18,165	)


Note 11	Comparative Figures

Certain comparative figures as at August 31, 2004 and for the years ended August 31, 2004 and 2003 have been reclassified in order to comply with the financial statement presentation adopted for the year ended August 31, 2005.

D-43

TONE RESOURCES LIMITED

(An Exploration Stage Company)

Interim Consolidated Balance Sheets

May 31, 2006 and August 31, 2005

(Unaudited)


	May 31,			August 31,
	2006			2005
	(Stated in Canadian Dollars)

ASSETS
Current
Cash	$	1,304,315		$	5,069
GST recoverable		14,717			6,508
Prepaid expenses and advances		10,630			2,558

		1,329,662			14,135
Reclamation bonds		32,742			34,584
Mineral property costs — Notes 3 and 5 and Schedule 1		1,254,834			1,124,298

	$	2,617,238		$	1,173,017


LIABILITIES
Current
Accounts payable	$	115,873		$	51,861
Due to related parties — Note 5		17,562			77,204

		133,435			129,065


STOCKHOLDERS’ EQUITY
Share capital — Notes 4, 5, and 7		5,348,694			2,927,262
Contributed surplus — Note 4		438,876			621,849
Deficit		(3,303,767	)		(2,505,159	)

		2,483,803			1,043,952

	$	2,617,238		$	1,173,017

Nature and Continuance of Operations — Note 2
Commitments — Notes 3, 4 and 7
Subsequent Events — Note 7

See accompanying notes

APPROVED BY THE DIRECTORS:


/s/ Dan Huber		Director


/s/ Scott Baxter		Director

D-45

TONE RESOURCES LIMITED

(An Exploration Stage Company)

Interim Consolidated Statements of Loss

for the three and nine months periods ended May 31, 2006 and 2005

and for the period October 31, 2001 (Date of Inception) to May 31, 2006

(Unaudited)


													October 31,
													2001 (Date of
	Three Months Ended						Nine Months Ended						Inception) to
	May 31,						May 31,						May 31,
	2006			2005			2006			2005			2006
	(Stated in Canadian Dollars)

General and administrative expenses
Accounting and audit fees — Note 5	$	60,828		$	8,000		$	122,963		$	22,454		$	284,746
Advertising and promotion		15,834			6,472			50,042			29,493			124,644
Consulting fees		75,000			—			75,000			—			75,000
Filing fees		5,932			1,298			21,938			15,464			76,921
Investor relations		22,500			12,966			67,000			22,000			227,935
Legal fees — Note 5		118,447			18,028			118,756			40,042			407,236
Management fees — Note 5		71,272			47,156			130,202			157,939			717,684
Office and miscellaneous		1,690			1,495			5,908			7,096			67,689
Rent — Note 5		3,750			3,750			11,250			11,250			63,915
Stock-based compensation — Note 5		36,627			48,945			123,870			160,884			782,530
Secretarial — Note 5		3,435			1,798			8,743			8,833			46,889
Telephone		2,636			1,231			9,329			9,279			58,010
Transfer agent fees		2,297			3,091			9,633			7,550			28,994
Travel		16,374			12,493			32,306			25,165			217,687

Loss before other items		(436,622	)		(166,723	)		(786,940	)		(517,449	)		(3,179,880	)
Other items
Foreign exchange gain (loss)		(8,767	)		(1,414	)		(11,668	)		(2,623	)		(41,118	)
Write-off of mineral property costs		—			—			—			—			(82,769	)

Net loss for the period	$	(445,389	)	$	(168,137	)	$	(798,608	)	$	(520,072	)	$	(3,303,767	)

Basic and diluted loss per share	$	(0.02	)	$	(0.01	)	$	(0.05	)	$	(0.04	)

Weighted average number of shares outstanding		18,535,489			13,151,582			16,043,936			13,077,760

See accompanying notes

D-46

TONE RESOURCES LIMITED
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three and nine months periods ended May 31, 2006 and 2005
and for the period October 31, 2001 (Date of Inception) to February 28, 2006

(Unaudited)


													October 31,
													2001 (Date of
	Three Months Ended						Nine Months Ended						Inception) to
	May 31,						May 31,						May 31,
	2006			2005			2006			2005			2006
	(Stated in Canadian Dollars)

Operating Activities
Net loss for the period	$	(445,389	)	$	(168,137	)	$	(798,608	)	$	(520,072	)	$	(3,303,767	)
Add items not affecting cash:
Write-off of mineral property costs		—			—			—			—			82,769
Stock-based compensation		36,627			48,945			123,870			160,884			782,530
Changes in non-cash working capital accounts:
GST recoverable		(772	)		9,213			(8,209	)		13			(14,717	)
Subscriptions receivable		3,500			—			—			—			—
Prepaid expenses and advances		14,977			12,788			(8,072	)		13,432			(10,630	)
Accounts payable		42,787			25,911			64,012			13,998			115,873

		(348,270	)		(71,280	)		(627,007	)		(331,745	)		(2,347,942	)

Financing Activities
Share subscriptions		—			13,110			—			68,664			—
Common shares issued		1,490,587			70,530			2,114,589			215,325			4,922,271

		1,490,587			83,640			2,114,589			283,989			4,922,271

Investing Activities
Increase (decrease) in reclamation bonds		1,154			—			1,842			2,278			(32,742	)
Mineral property costs		(6,378	)		(9,134	)		(130,536	)		(234,288	)		(1,254,834	)
Increase (decrease) in due to related parties		(24,030	)		—			(59,642	)		—			17,562

		(29,254	)		(9,134	)		(188,336	)		(232,010	)		(1,270,014	)

INCREASE (DECREASE) IN CASH DURING THE PERIOD		1,113,063			3,226			1,299,246			(279,766	)		1,304,315
Cash, beginning of the period		191,252			89,768			5,069			372,760			—

CASH, END OF THE PERIOD	$	1,304,315		$	92,994		$	1,304,315		$	92,994		$	1,304,315

Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	—		$	—		$	—		$	—		$	—

Income taxes	$	—		$	—		$	—		$	—		$	—

Non-cash Transactions — Note 6

See accompanying notes

D-47

TONE RESOURCES LIMITED
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
for the period October 31, 2001 (Date of Inception) to May 31, 2006

(Unaudited)


		Number of
		Common					Special			Contributed
		Shares		Amount			Warrants			Surplus			Deficit			Total
		(Stated in Canadian Dollars)

Balance, October 31, 2001			—	$	—		$	—		$	—		$	—		$	—
For cash:
Issuance of founders shares	— at $0.0001		5,000,000		500			—			—			—			500
Issuance of special warrants	— at $0.15		—		—			446,611			—			—			446,611
Net loss for the period			—		—			—			—			(128,982	)		(128,982	)

Balance, August 31, 2002			5,000,000		500			446,611			—			(128,982	)		318,129
For cash:
Initial public offering	— at $0.50		1,532,700		766,350			—			—			—			766,350
Issuance of special warrants	— at $0.15		—		—			31,426			—			—			31,426
	— at $0.50		—		—			231,347			—			—			231,347
Less: share issue costs — Note 6			—		(189,877	)		—			—			—			(189,877	)
Conversion of special warrants			3,649,606		709,384			(709,384	)		—			—			—
Stock-based compensation			—		—			—			7,938			—			7,938
Net loss for the year			—		—			—			—			(437,698	)		(437,698	)

Balance, August 31, 2003			10,182,306		1,286,357			—			7,938			(566,680	)		727,615
For cash:
Pursuant to private placements	— at $0.47		1,081,670		508,385			—			—			—			508,385
	— at $0.50		1,543,500		771,750			—			—			—			771,750
Stock-based compensation			—		—			—			368,313			—			368,313
Net loss for the year			—		—			—			—			(1,082,680	)		(1,082,680	)

Balance, August 31, 2004			12,807,476		2,566,492			—			376,251			(1,649,360	)		1,293,383
For cash:
Pursuant to private placements	— at $0.40		175,412		70,165			—			—			—			70,165
	— at $0.40		250,000		100,000			—			—			—			100,000
Pursuant to exercise of options	— at $0.30		67,500		20,250			—			—			—			20,250
	— at $0.50		59,200		29,600			—			—			—			29,600
Shares for debt	— at $0.45		110,986		49,944			—			—			—			49,944
Mineral property costs	— at $0.45		120,000		54,000			—			—			—			54,000
Stock-based compensation			—		—			—			282,409			—			282,409
Stock based compensation charge on stock options exercised			—		36,811			—			(36,811	)		—			—
Net loss for the year			—		—			—			—			(855,799	)		(855,799	)

Balance, August 31, 2005			13,590,574		2,927,262			—			621,849			(2,505,159	)		1,043,952

See accompanying notes

D-48

TONE RESOURCES LIMITED

(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
for the period October 31, 2001 (Date of Inception) to May 31, 2006

(Unaudited)


	Number of					Contributed
	Common Shares		Amount			Surplus			Deficit			Total
	(Stated in Canadian Dollars)

Balance, August 31, 2005		13,590,574		2,927,262			621,849			(2,505,159	)		1,043,952
For cash:
Pursuant to a private placement — at $0.20		3,300,000		660,000			—			—			660,000
Pursuant to exercise of options — at $0.20		60,000		12,000			—			—			12,000
— at $0.30		301,999		90,600			—			—			90,600
— at $0.35		22,500		7,875			—			—			7,875
— at $0.40		105,000		42,000			—			—			42,000
— at $0.50		579,800		289,900			—			—			289,900
Pursuant to exercise of warrants — at $0.25		95,000		23,750			—			—			23,750
— at $0.50		158,341		79,170			—			—			79,170
— at $0.60		146,531		87,919			—			—			87,919
— at $0.75		1,148,500		861,375			—			—			861,375
Less: share issue costs		—		(40,000	)		—			—			(40,000	)
Stock based compensation		—		—			123,870			—			123,870
Stock based compensation charge on options exercised		—		306,843			(306,843	)		—			—
Net loss for the period		—		—			—			(798,608	)		(798,608	)

Balance, May 31, 2006		19,508,245	$	5,348,694		$	438,876		$	(3,303,767	)	$	2,483,803

See accompanying notes

D-49

Schedule 1

TONE REOURCES LIMITED.
(An Exploration Stage Company)
INTERIM CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
for the nine months ended May 31, 2006

(Unaudited)


															Big		Crescent
	South		Roberts				Kent		Red		Battle		Gold Bar		Antelope		Valley
	Keystone		Creek		Kobeh		Springs		Ridge		Mountain		North		Springs		North
	(Eureka)		(Eureka)		(Eureka)		(Pershing)		(Elko)		(Lander)		(Eureka)		(Lander)		(Eureka)			Total
	(Stated in Canadian Dollars)

Property acquisition and maintenance costs
Balance, August 31, 2004	$	25,522	$	53,772	$	123,284	$	7,440	$	54,226	$	51,927	$	14,583	$	6,385	$	—		$	337,139
Cash		—		—		—		—		4,243		—		—		—		—			4,243
Common shares — Note 5		—		—		—		—		—		—		—		—		54,000			54,000
Claims maintenance — Note 5		3,693		7,122		17,540		1,319		35,318		9,891		2,506		6,571		28,769			112,729

Balance, August 31, 2005		29,215		60,894		140,824		8,759		93,787		61,818		17,089		12,956		82,769			508,111

Deferred exploration costs
Balance, August 31, 2004		13,766		88,848		191,259		125		143,538		130,286		525		110		—			568,457
Assaying		—		—		—		—		17,062		—		4,884		—		—			21,946
Consulting fees		—		—		—		—		—		—		5,754		—		—			5,754
Drilling		—		—		—		—		87,196		—		—		—		—			87,196
Field costs		—		—		—		—		4,760		—		2,046		729		—			7,535
Reclamation		—		—		—		—		8,068		—		—		—		—			8,068

Balance, August 31, 2005		13,766		88,848		191,259		125		260,624		130,286		13,209		839		—			698,956

Write-off mineral property — Note 4		—		—		—		—		—		—		—		—		(82,769	)		(82,769	)

Totals	$	42,981	$	149,742	$	332,083	$	8,884	$	354,411	$	192,104	$	30,298	$	13,795	$	—		$	1,124,298

See accompanying notes

D-50

Schedule 1

Continued

TONE REOURCES LIMITED.
(An Exploration Stage Company)
INTERIM CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
for the nine months ended May 31, 2006

(Unaudited)


															Big
	South		Roberts				Kent		Red		Battle		Gold Bar		Antelope
	Keystone		Creek		Kobeh		Springs		Ridge		Mountain		North		Springs
	(Eureka)		(Eureka)		(Eureka)		(Pershing)		(Elko)		(Lander)		(Eureka)		(Lander)		Total
	(Stated in Canadian Dollars)

Property acquisition and maintenance costs
Balance, August 31, 2005	$	29,215	$	60,894	$	140,824	$	8,759	$	93,787	$	61,818	$	17,089	$	12,956	$	425,342
Cash — lease payments		—		—		—		—		11,593		—		—		—		11,593
Claims maintenance — Note 5		1,088		2,080		5,121		401		2,577		2,886		746		932		15,831

Balance, May 31, 2006		30,303		62,974		145,945		9,160		107,957		64,704		17,835		13,888		452,766

Deferred exploration costs
Balance, August 31, 2005		13,766		88,848		191,259		125		260,624		130,286		13,209		839		698,956
Assaying		—		—		—		—		—		—		11,389		—		11,389
Consulting fees		—		—		—		—		—		—		853		—		853
Drilling		—		—		—		—		—		—		87,749		—		87,749
Field costs		—		—		—		—		—		—		3,121		—		3,121

Balance, May 31, 2006		13,766		88,848		191,259		125		260,624		130,286		116,321		839		802,068

Totals	$	44,069	$	151,822	$	337,204	$	9,285	$	368,581	$	194,990	$	134,156	$	14,727	$	1,254,834

See accompanying notes

D-51

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
May 31, 2006
(Unaudited)
(Stated in Canadian Dollars)


Note 1 —	Interim Financial Statements

While the information presented in the accompanying interim three and nine months consolidated financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with the accounting principles generally accepted in Canada. These financial statements are inconformity with generally accepted accounting principles in the United States of America, except as described in Note 8 to the consolidated financial statements. These interim financial statements follow the same accounting policies and methods of their application as the Company’s August 31, 2005 annual consolidated financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s August 31, 2005 annual financial statements.

Operating results for the three and nine months ended May 31, 2006 are not necessarily indicative of the results that can be expected for the year ended August 31, 2006.


Note 2 —	Nature and Continuance of Operations

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At May 31, 2006, the Company had not yet achieved profitable operations, has accumulated losses of $3,303,767 since its inception and had working capital of $1,196,227 which may not be sufficient to sustain operations over the next twelve months and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.


Note 3 —	Mineral Property Costs

D-52

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

In addition, the Company holds two leased mineral rights located in Elko county, Nevada. Lease payments are due as follows for the years ended:


August 31, 2003	US$ 12,000	(paid)
August 31, 2004	12,000	(paid)
August 31, 2005	12,000	(paid)
August 31, 2006	20,000	(paid $10,000)
August 31, 2007	30,000
August 31, 2008	35,000
August 31, 2009	40,000
August 31, 2010	45,000
August 31, 2011	50,000

	US$256,000


Note 4 —	Share Capital — Notes 5 and 7

a) Authorized:

An unlimited number of common shares without par value

b) Escrow:

At May 31, 2006 there were no common shares held in escrow by the Company’s transfer agent.

c) Commitments:

i) Stock-based Compensation Plan

D-53

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

A summary of the status of the Company’s stock option plan as of August 31, 2005 and May 31, 2006 and the changes during the periods then ended is presented below:


	May 31,					August 31,
	2006					2005
				Weighted					Weighted
				Average					Average
	Number			Exercise		Number			Exercise
	of Shares			Price		of Shares			Price

Options outstanding, beginning of the period		2,673,032		$	0.50		1,850,000		$	0.50
Granted		150,000		$	0.25		1,099,732		$	0.41
Exercised		(1,069,299	)	$	0.41		(126,700	)	$	0.39
Cancelled		—			—		(150,000	)	$	0.50

Options outstanding, end of the period		1,753,733		$	0.48		2,673,032		$	0.50

Options exercisable, end of the period		1,523,695		$	0.49		2,115,291		$	0.50

The following stock options were outstanding as at May 31, 2006:


Number		Exercise Price		Expiry Date

	1,190,000	$	0.50	May 16, 2008
	50,000	$	0.50	June 09, 2008
	25,000	$	0.50	July 21, 2008
	100,000	$	0.50	November 14, 2008
	12,000	$	0.30	September 2, 2009
	188,232	$	0.50	February 1, 2010
	121,000	$	0.40	July 26, 2010
	40,000	$	0.20	November 18, 2010
	27,500	$	0.35	December 2, 2010

	1,753,732

At May 31, 2006, 230,037 of the above outstanding options were not yet vested with the optionees. These options will vest with the optionees over the period from June 2, 2006 to June 2, 2007.

Non-cash compensation charges associated with vested options granted to directors, employees and consultants for the nine months ended May 31, 2006 were $123,870 (May 31, 2005: $160,884). These compensation charges were determined under the fair value method using the Black-Scholes option pricing model with the following assumptions:


	May 31,			May 31,
	2006			2005

Expected dividend yield		0.0	%		0.0	%
Expected volatility		94.9	%		100.5	%
Risk-free interest rate		2.0	%		2.0	%
Expected term in years		5 years			5 years

D-54

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

The weighted average fair value at the date of grant of the stock options granted was as follows:


	May 31,		May 31,
	2006		2005

Weighted average fair value	$	0.18	$	0.29
Total options granted		150,000		873,732
Total fair value of options granted	$	27,000	$	249,432

ii) Share Purchase Warrants

At May 31, 2006, there were 3,676,175 share purchase warrants outstanding entitling the holders thereof the right to purchase one common share for each warrant held as follows:


Number		Exercise Price		Expiry Date

	405,000	$	0.75	July 5, 2006
	2,475,000	$	0.25	December 19, 2007
	41,175	$	0.80	November 26, 2006
	25,000	$	0.60	June 14, 2006
		or at $	0.80	December 14, 2006
	730,000	$	0.25	March 3, 2008

	3,676,175

Subsequent to May 31, 2006, 200,000 share purchase warrants exercisable at $0.75 per warrant expired on July 5, 2006.


Note 5 —	Related Party Transactions — Notes 3, 4 and 7

The Company incurred the following charges from directors and officers of the Company, a company with a director in common with the Company and the daughter of a director of the Company for the three and nine months ended May 31, 2006 and 2005 and for the period October 31, 2001 (Date of Inception) to May 31, 2006:


									October 31,
									2001 (Date of
	Three Months Ended				Nine Months Ended				Inception) to
	May 31,				May 31,				May 31,
	2006		2005		2006		2005		2006

Accounting fees	$	29,476	$	8,000	$	74,387	$	16,561		88,112
Legal fees		13,616		6,185		56,669		20,606		135,176
Management fees		71,000		39,000		129,500		118,400		716,982
Mineral property acquisition costs										87,247
— common shares		—		—		—		54,000		54,000
— claims maintenance		—		—		—		15,717		15,717
Rent		3,750		3,750		11,250		11,250		63,915
Stock-based compensation		23,206		24,337		89,516		81,478		574,092
Share issue costs		—		—		—		—		74,275
Secretarial		3,435		1,798		8,743		8,833		46,739

	$	144,483	$	83,070	$	370,065	$	326,845	$	1,856,255

D-55

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.

Amounts due to related parties are due to directors and officers of the Company and represent unpaid fees and expenses. These amounts are unsecured, non-interest bearing and have no specific terms of repayment.

During the year ended August 31, 2005, the Company issued 151,700 common shares for cash proceeds of $59,850 and 120,000 common shares for mineral property acquisition costs of $54,000 to directors of the Company and to a company with a director in common with the Company. During the nine months ended May 31, 2006, the Company issued 2,806,803 common shares to directors of the Company for cash proceeds of $787,917 pursuant to exercise of share purchase options (629,800 common shares), warrants (336,283 common shares) and a private placement (1,840,000 common shares). The Company issued 730,000 units to a director of the Company at $0.20 per unit pursuant to a private placement agreement for total proceeds of $146,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof the right to purchase an additional common share at $0.25 per share until March 3, 2008.


Note 6 —	Non-cash Transactions

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the nine months ended May 31, 2005, the Company issued 120,000 common shares at $0.45 totalling $54,000 as a property acquisition cost pursuant to a mining lease and 110,986 common shares at $0.45 to settle a debt of $49,944. These transactions have been excluded from the statements of cash flows.


Note 7 —	Subsequent Events — Notes 4 and 5

Subsequent to May 31, 2006:

a) the Company issued 146,000 common shares (113,500 to directors of the Company) for proceeds of $70,125 ($54,875 from directors of the Company) pursuant to the exercise of share purchase options outstanding at May 31, 2006.

b) the Company issued 400,000 common shares for proceeds of $211,250 pursuant to the exercise of share purchase warrants outstanding at May 31, 2006.

c) by a letter dated March 5, 2006, the Company received an offer from US Gold Corporation to acquire 100% of the issued securities of the Company. Shareholders of the Company will receive 0.26 of a share of US Gold Corporation (or 0.26 Exchangeable Shares of US Gold Canadian Acquisition Corporation) for each share of the Company. Management of the Company is evaluating the offer. The proposed offer is subject to shareholder and regulatory approval.


Note 8 —	Differences Between Canadian and United States Accounting Principles

D-56

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

would have followed had its financial statements been prepared in accordance with accounting principles and practices generally accepted in the United States.

a) The Company’s accounting principles generally accepted in Canada differ from accounting principles generally accepted in the United States as follows:

Mineral Property Costs and Deferred Exploration Costs

Under accounting principles generally accepted in Canada (“Canadian GAAP”) mineral property acquisition and exploration costs may be deferred and amortized to the extent they meet certain criteria. Under accounting principles generally accepted in the United States (“US GAAP”) mineral property acquisition and exploration costs must be expensed as incurred. Therefore an additional expense is required under US GAAP.

b) The impact of the above on the consolidated financial statements is as follows:


	May 31,			August 31,
Total Assets and Liabilities	2006			2005

Total assets per Canadian GAAP	$	2,617,238		$	1,173,017
Mineral property costs		(1,254,834	)		(1,124,298	)

Total assets per US GAAP	$	1,362,404		$	48,719

Total liabilities per Canadian and US GAAP	$	133,435		$	129,065

Stockholders’ Equity
Deficit, end of the year, per Canadian GAAP	$	(3,303,767	)	$	(2,505,159	)
Mineral property costs		(1,254,834	)		(1,124,298	)

Deficit, end of the year, per US GAAP		(4,558,601	)		(3,629,457	)
Capital stock per Canadian and US GAAP		5,348,694			2,927,262
Contributed surplus per Canadian and US GAAP		438,876			621,849

Stockholders’ equity (deficiency) per US GAAP	$	1,228,969		$	(80,346	)

D-57

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

Three Months Ended
Nine Months Ended

May 31, May 31,

Net Loss and Loss Per Share
2006 2005 2006 2005

Net loss for the year per Canadian GAAP
$ (445,389 ) $ (168,137 ) $ (798,608 ) $ (520,072 )

Mineral property costs
(6,378 ) (9,134 ) (130,536 ) (234,288 )

Net loss for the year per US GAAP
$ (451,767 ) $ (177,271 ) $ (929,144 ) $ (754,360 )

Basic and diluted loss per share per US GAAP
$ (0.02 ) $ (0.01 ) $ (0.06 ) $ (0.06 )

Statements of Cash Flows

Operating Activities per Canadian GAAP
$ (348,270 ) $ (71,280 ) $ (627,006 ) $ (331,745 )

Mineral property costs
(6,378 ) (9,134 ) (130,536 ) (234,288 )

Operating Activities per US GAAP
$ (354,648 ) $ (80,414 ) $ (757,542 ) $ (566,033 )

Financing Activities per Canadian and US GAAP
$ 1,490,587 $ 83,640 $ 2,114,589 $ 283,989

Investing Activities per Canadian GAAP
$ (29,254 ) $ (9,134 ) $ (188,336 ) $ (232,010 )

Mineral property costs
6,378 9,134 130,536 234,288

Investing Activities per US GAAP
$ (22,876 ) $ — $ (57,800 ) $ 2,278

D-58

ANNEX E — INFORMATION REGARDING WHITE KNIGHT

In addition to the information filed by White Knight with the SEC under the Exchange Act, White Knight files audited annual financial statements, unaudited interim financial statements, management’s discussion and analysis, proxy statements or information circulars and other information with the SEDAR. The information concerning White Knight contained in this Annex E has been taken from White Knight’s annual report on Form 20-F, for the fiscal year ended June 30, 2006, filed on October 20, 2006. Although we have no reason to doubt the accuracy or completeness of the information relating to White Knight, we are not in a position to independently assess or verify this information, including White Knight’s financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this proxy statement regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources.” on page 14 of this proxy statement.

The terms mineral reserve, proven mineral reserve and probable mineral reserve under Canadian standards are different than the definitions adopted by the SEC and applicable to U.S. companies filing reports with the SEC. Further, the terms mineral resource, measured mineral resource, indicated mineral resource and inferred mineral resource are recognized and required to be reported by Canadian regulations, but the SEC does not recognize these terms. As a result, the information contained in this Annex E relating to mineral reserves and mineral resources may not be comparable to similar information publicly reported by U.S. companies. See the section entitled “— Terms Relating to Mineral Reserves and Resources” beginning on page E-34 of this Annex E.

Some terms used in this Annex may be unfamiliar to you. We have provided a Glossary beginning on page E-32 for your reference.

Overview

The legal and commercial name of White Knight is White Knight Resources Ltd. White Knight is active in the mineral exploration sector. From 1986 to 1993, White Knight explored various properties in British Columbia and the Northwest Territories, Canada. In 1993, White Knight began to acquire gold exploration properties in Nevada and has focused solely on exploration of properties in Nevada since that time.

White Knight is a British Columbia-based mineral resource exploration company, engaged, through its subsidiaries, in the acquisition and exploration of precious metals properties, primarily gold. All of White Knight’s mineral exploration operations are located in the State of Nevada, United States, where White Knight’s operations have been based since 1993. White Knight continues to explore for projects to acquire in Nevada.

White Knight has been exploring for Carlin-type gold deposits in Nevada since 1993. White Knight has continued to follow its exploration plan whereby targets have been generated on a number of its 100% owned properties. During the 2006 exploration season, significant drill production difficulties have been encountered by White Knight. Drill availability is at an all time low and in an effort to alleviate this obstacle, White Knight is in the process of building its own drill rig. It is anticipated that this rig will be available in the near future.

To date, White Knight has had no revenue from its operations, nor is it dependent upon any patents, licenses or manufacturing processes. White Knight’s operations are dependent upon mineral exploration and mining rights and claims as well as the terms of option and/or joint venture agreements on those properties. White Knight currently holds interests in 18 properties in Nevada.

The exploration operations of White Knight are subject to regulation by several government agencies at the Federal, State, and local levels. White Knight believes that it is in compliance with all current regulatory requirements and does not anticipate any significant changes to these regulations which will have a material effect on White Knight’s operations.

Authorized and Outstanding Share Capital of White Knight

White Knight is authorized to issue an unlimited number of common shares without par value. Based on information contained in White Knight’s management discussion and analysis for the year ended June 30, 2006, dated September 30, 2006, there were:


	•	59,384,972 White Knight common shares issued and outstanding as of September 30, 2006;

E-1


	•	5,120,000 White Knight common shares issuable upon exercise of outstanding options as of June 30, 2006; and

	•	1,500,000 White Knight common shares issuable upon exercise of outstanding warrants as of June 30, 2006.

White Knight shareholders are entitled to receive notice of and attend any meetings of shareholders and to one vote per common share at all such meetings. Shareholders are entitled to receive such dividends as White Knight’s board of directors may declare from time to time, according to the number of shares held and subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of White Knight.

Dividends and Dividend Policy

Based on publicly-available information, White Knight has never declared any dividends on White Knight common shares. Further, White Knight has not publicly stated that it has the intention to pay dividends in the future.

History and Development of White Knight

White Knight’s registered office is located at Suite 3350, 1055 Dunsmuir Street, Vancouver, British Columbia, Canada V7X 1L2 and its principal office is located at 922, 510 West Hastings Street, Vancouver, British Columbia, Canada V6B 1L8. White Knight is a reporting issuer in the Provinces of British Columbia and Alberta and files its continuous disclosure documents with the securities regulatory authorities in those provinces. These documents are available without charge at www.sedar.com.

White Knight was incorporated under The Company Act of British Columbia on December 18, 1986. White Knight’s articles were amended on January 31, 1995 to increase the authorized share capital from 10,000,000 White Knight common shares to 100,000,000 common shares without par value. White Knight completed a mandatory transition to the Business Corporations Act (British Columbia), or the BCBCA, on December 21, 2005. On March 29, 2004, the British Columbia legislature enacted the BCBCA and repealed the former act, which previously governed White Knight. The BCBCA removed many of the restrictions contained in the former act, including restrictions on the residency of directors, the place of annual general meetings and limits on authorized share capital. The BCBCA also uses new forms and terminology. Under the BCBCA, every company incorporated, amalgamated or continued under the former act must complete a mandatory transition rollover. Under the BCBCA, the directors of White Knight were permitted to approve and complete this mandatory transition rollover, effective June 20, 2005. At an annual general meeting held on November 26, 2005, White Knight’s shareholders approved, by a three-quarter majority vote, the removal of pre-existing restrictions based on the former act and no longer required under the BCBCA. At this meeting shareholders also approved amendments to White Knight’s Notice of Articles and authorized share capital. In addition, the shareholders approved new articles to bring White Knight’s charter documents into line with the incorporated BCBCA, altered the authorized capital of White Knight from 100,000,000 common shares without par value to an unlimited number of common shares without par value. The changes were effected under a new Notice of Articles on December 21, 2005.

During the year ended June 30, 2006, White Knight received Cdn$6,175,733 from the exercise of 4,940,586 warrants. During the 2006 fiscal year, White Knight wrote off Cdn$143,783 and invested cash of Cdn$288,777 in mineral property interests and deferred exploration costs of Cdn$2,413,657. See the section entitled “White Knight’s Mineral Properties” on page E-4 of this Annex.

During the year ended June 30, 2006, White Knight issued Cdn$6,345,433 in capital stock: 40,000 shares were issued for mineral property interests at a deemed value of Cdn$72,000; 315,000 shares were issued on the exercise of stock options for net proceeds of Cdn$169,700; and 4,940,586 shares were issued pursuant to the exercise of warrants for net proceeds of Cdn$6,175,733.

There are ongoing drilling programs on the Cottonwood, Celt, Squaw Creek, New Pass and Patty properties. White Knight anticipates spending $2,000,000 or more during 2006 on further exploration of its properties.

E-2

White Knight’s Organizational Structure

White Knight has three subsidiaries:


	•	CUN Minerals, Inc., incorporated in Nevada, 100% directly owned by White Knight.

	•	White Knight Gold (U.S.) Inc., incorporated in Delaware, 100% directly owned by White Knight.

	•	Quito Gold Corporation, incorporated in Nevada, 100% directly owned by White Knight.

White Knight’s Mineral Properties

The following is a description of White Knight’s properties and the nature of White Knight’s interests in such properties. This section, entitled “White Knight’s Mineral Properties” was reviewed and the contents have been verified by White Knight’s Qualified Person, John M. Leask, P.Eng. The Qualified Persons for the Gold Pick Property analysis are Neil Prenn, Registered Professional Mining Engineer, and Peter Ronning, Professional Engineer, each of Mine Development Associates.

The Patty Property (formerly Indian Ranch)

The Patty Property, formerly known as the Indian Ranch property is located in Eureka County, Nevada and consists of 544 unpatented mining claims totaling 10,008 acres. White Knight owns a 30% undivided interest in the Patty Property. Chapleau Resources Ltd. owns a 10% undivided interest and Placer Dome U.S. Inc. owns a 60% undivided interest in the Patty Property. The Patty Property is without known mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Patty Property

White Knight entered into an option agreement dated February 10, 1994 with the Damele family on the Patty Property. The agreement was subsequently amended through five separate amendments with the Damele family. Under the agreement and its amendments, White Knight earned a 100% leasehold interest in the Patty Property by issuing to the Damele family 100,000 common shares and an annual work commitment of 5,000 feet of drilling. The drill commitment was waived for the year ended February 10, 1996 in consideration of a $15,000 cash payment. Additionally, the original net smelter royalty held by the Damele family was amended for consideration of a $15,000 cash payment. Currently, the Damele family retains a 6% net smelter royalty, but White Knight may

E-3

reduce the net smelter royalty to 3% in consideration of a $500,000 payment. White Knight’s lease on the Patty Property extends through February 10, 2014 or for so long thereafter as exploration, development or mining activity is being conducted on a continuous annual basis. White Knight has met all the required terms under the agreement to date.

Under an agreement with Chapleau Resources Ltd. dated May 26, 1997 and amended June 18, 2001, White Knight granted Chapleau the right to earn an interest in the Patty Property by making payments to White Knight totaling $400,000 and incurring exploration expenditures of $1,500,000. On June 25, 2001, Chapleau vested a 25% interest, thus reducing White Knight’s interest to 75%.

Under an agreement dated March 26, 2003 between White Knight, Chapleau and Placer Dome U.S. Inc., White Knight granted Placer Dome the right to earn an initial 60% interest in the Patty Property by paying $55,000 and incurring a minimum of $2,000,000 in work expenditures over a four-year period under the following schedule:


	Minimum Work
Expenditure	Expenditures
Due Date	($)

March 25, 2004		100,000
March 25, 2005		300,000
March 25, 2006		600,000
March 25, 2007		1,000,000

Total		2,000,000

In August 2006, Placer Dome vested its 60% interest in the Patty Property and declined to elect to earn an extra 15% by financing a feasibility study. As a result of Placer Dome vesting its 60% interest, the interests of White Knight and Chapleau were reduced to 30% and 10%, respectively.

Location of and Access to Patty Property

The Patty Property lies 10 miles southeast of the Gold Acres-Cortez Window, and is located 17 air miles southeast of the Pipeline/South Pipeline gold mines and 38 air miles northwest of Eureka, Nevada. Access is via Nevada State Highway 278 south from Carlin for 48 miles, west on the JD Ranch Road for 41/2 miles, south for 12 miles to the Tonkin Ranch site, and then northwest for 5 miles. The south and central portions of the Patty Property can be traversed by unimproved dirt roads, and new roads are planned to provide drilling access to the north.

Regional and Property Geology of Patty Property

The Patty Property is located on the Cortez Trend. Lower-plate Paleozoic sediments underlies shallow volcanic and alluvial cover on much of the central and eastern portions of the Patty Property. Lower-plate carbonate rocks are not exposed at the surface, but drilling and mapping thus far indicate that about 10 square miles of the Patty Property is underlain by lower plate Paleozoic carbonate rocks of the Roberts Mountains Formation, Rabbit Hill Limestone, Nevada Group, or underlying dolomites of the Hanson Creek Formation. This covered window of Lower Plate rocks is present in the form of several uplifted or hoisted blocks. Roberts Mountains Formation rocks occur in the window and have been intersected in drill holes within 35 feet of the surface. Hydrothermal alteration is present over large areas of the property, and thick (up to 600 feet or more) zones of intense alteration in the form of silicification, decalcification or sanding, and argillization are present, as well as amorphous carbon or fine-grained sulfides. Anomalous gold and associated hydrothermal alteration is present across Patty in both Upper and Lower Plate rocks.

Previous Exploration History of Patty Property

Prior to White Knight’s acquisition of its interest in the Patty Property, Northern Dynasty Exploration Ltd. explored it in 1987. Northern Dynasty prepared a preliminary geologic map and drilled 4 holes totaling 1,130 feet. Hycroft Resources and Development Corporation then acquired the property and drilled 90 additional holes from 1988 to 1990 to an average depth of 114 feet. After White Knight acquired the Patty Property in 1994, exploration

E-4

was conducted by Delta Gold Mining Corp. under an earn-in joint venture agreement on a combined land package comprised of the Patty Property and the Imperial property. Delta Gold completed an induced polarization survey, a CSAMT survey, and drilled 10 holes to an average depth of 501 feet. This drilling resulted in the discovery of an 80 foot wide zone of gold mineralization averaging 0.012 oz/ton gold. Delta Gold also intersected a higher-grade zone of 10 feet averaging 0.22 oz/ton gold. Delta Gold subsequently terminated the agreement. Under the Chapleau option agreement, 20 holes were drilled during 1997, 12 holes were drilled in 1998, four holes were drilled in 1999, and 11 holes were drilled in 2000 for a total of 45,100 feet in 47 holes. During 1999, a detailed gravity survey and a soil sampling grid program were also completed. Exploration expenditures under the Chapleau agreement totaled $1,500,000.

In 2001, Kennecott Exploration Company entered an option agreement with White Knight and Chapleau. Kennecott drilled 11 reverse circulation holes which intersected low-grade gold mineralization three miles south of the previously identified gold zones. Kennecott expended $531,100 before terminating the agreement.

During the 2005 field season, Placer Dome completed reverse circulation, or RC, drilling in three holes comprising 1,830 metres. As part of this campaign, Hole PIR 05-10 intersected a broad zone of Carlin-type mineralization grading 0.32 grams/tonne over a thickness of 102 metres which included 9.1 metres grading 1.58 grams/tonne.

Several holes angled off the same drill pad also intersected significant gold at what is interpreted to be the same host sequence. Highlights of the program occurred in drill hole PIR05-12 which was drilled at an angle of 70º and an azimuth of 350º from PIR05-10 and returned the following intervals: 676 ppb Au (0.023 oz/ton) from 1370 feet to 1460 feet (90 feet) including 15 feet grading 1,820 ppb Au (0.057 oz/ton) from 1380 feet to 1395 feet Drill holes PIR05-11, PIR05-13, PIR05-14 and PIR05-15 were all drilled off the drill pad set-up for PIR05-10 and were lost above the target section. Drill hole PIR05-16 also intersected anomalous gold in what is projected as a down faulted block to the south of PIR05-10. The assay interval from 2,620 feet to 2,720 feet returned 219 ppb gold over 100 feet with a high of 500 ppb gold over 5 feet.

Current and Planned Exploration of Patty Property

In September 2006, Placer Dome commenced drilling on the Patty Property with a planned program of 6,000 feet of reverse circulation drilling in 3 to 4 holes.

Slaven Canyon Property

The Slaven Canyon Property is located in Lander County, Nevada, and totals 6,599 acres. White Knight has a 100% interest in 258 unpatented mining claims comprising 5,174 acres of the Slaven Canyon Property and has a lease on the remaining 1,425 acres, which are subject to net smelter royalties. The Slaven Canyon Property is without known mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

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Acquisition of Slaven Canyon Property

Since September 2001, White Knight has staked 258 unpatented mining claims comprising 5,174 acres. Since fiscal 2003, White Knight has signed lease agreements on 1,425 acres adjacent to White Knight’s staked claims. The leases called for the payment of approximately $32,430 on signing and escalating lease payments thereafter. The owners retain net smelter returns ranging from one-half of one percent to three and one-half percent with a buy down to one percent for $1,500,000. Annual holding costs for the property are estimated to be $81,885 for 2007, which includes $47,438 for the lease payments and $34,447 in federal and county fees.

Location of and Access to Slaven Canyon Property

The Slaven Canyon Property is located in the Northern Shoshone Range, Lander County, Nevada, approximately 14 miles southeast of Battle Mountain. The Slaven Canyon Property is traversed by numerous unimproved dirt roads traveling south from Battle Mountain.

Regional and Property Geology of Slaven Canyon Property

Rock units on the Slaven Canyon Property are dominated by chert, siltstone and limestone of the Ordovician Vinini Formation and Devonian Slaven Chert, both units of the Upper Plate Roberts Mountains Allochthon. These units are overlain on the east by Miocene basalt of the Northern Nevada Rift. Major northeast trending faults cut through the area and are believed to be a regional control to the localization of gold mineralization. The main zone

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of gold mineralization on the property measures about 2,400 feet east-west by 300 to 500 feet north-south. Select drill intercepts include:


	Gold
Interval	(Ounces
(Feet)	per Ton)

60		0.059
35		0.096
60		0.052
100		0.049
40		0.050
45		0.063
25		0.083

Mineralization is open on the east and west end and to some degree down dip. A second area of gold mineralization occurs on the northern portion of the claims. The primary exploration target is a Carlin-type gold deposit in lower plate carbonate rocks or in carbonate units of the upper plate. Select drill hole intercepts from here include:


	Gold
Interval	(Ounces
(Feet)	per Ton)

25		0.066
25		0.054
10		0.063

The zone of mineralization is a shallow, mostly oxide, shallowly dipping tabular body hosted in upper plate siliclastic rocks. Gold mineralization is probably controlled by a shallow angle thrust fault. Alteration is dominantly argillization and sanding. Most holes in the vicinity of the main zone are between 200 feet to 300 feet deep with the deepest being 700 feet.

Previous Exploration History of Slaven Canyon Property

After the discovery of gold-bearing breccia outcrops, Resource Associates of Alaska staked claims at Slaven Canyon in 1984. Resource Associates conducted geologic mapping, rock and soil sampling, and trenching from 1984 to 1987. Nerco Exploration Company acquired Resource Associates in 1988 and Alta Gold Company joint-ventured the claims with Nerco later that year. Alta Gold began an aggressive drilling program and completed 59 shallow holes in 1988. An additional eight holes were drilled in 1989. Cyanide-shake metallurgical tests were conducted in 1990, followed by the drilling of 17 holes in 1991. Uranerz Exploration and Mining Limited leased the property in 1991 and completed a 57-hole drilling program in 1992. Bottle-roll tests were completed in 1993 after which a resource estimate was completed. Cameco acquired Uranerz in 1994 and terminated the lease. Cyprus Minerals Corp. leased the claims from Alta Gold later that year and drilled nine holes in the northwest part of the property before terminating the lease in 1995. Following Cyprus’ withdrawal, Alta Gold retained the claims from 1996 through 1999 but performed no further work on the Slaven Canyon Property. Alta Gold filed for bankruptcy in 2000 and relinquished the claims shortly thereafter.

Current and Future Exploration of Slaven Canyon Property

Work on the Slaven Canyon Property over recent seasons included 24 shallow reverse circulation holes and one deep core hole (DDH SL-21). White Knight drilled the Slaven Canyon Property with two exploration objectives: 1) to establish the existence of, and depth to, lower-plate limestone host rocks, and 2) to establish a better understanding of the structural controls for the upper-plate hosted mineralization. Drill hole SL21, drilled to a final depth of 2,583 ft, encountered several thrust fault sequences. Deep in the hole, a 100 ft-thick, highly sheared micritic limestone was encountered, which was interpreted to be a piece of lower-plate, based on lithology. Diamond drill hole SL25 was completed 3 months later and reached a total depth of 3,088 ft. This hole was drilled through the known upper-plate resource and confirmed the grade and disseminated nature of gold mineralization,

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intersecting 50 ft @ 0.092 opt Au including 5 ft @ 0.380 opt Au. The hole also drilled the same thrusted and repeated sequences observed in DDH SL21. However, the hole, which included some limestone interbeds similar to the limestone drilled in DDH SL21, remained in upper-plate rocks to the total depth drilled. White Knight believes that the shallow drilling at the Slaven Canyon Property (less than 1,000 ft) established strong exploration potential for a structurally controlled deposit of significant size in upper-plate host rocks, principally in quartzites which have yielded strong gold values both in drill holes and in surface samples (e.g. 25 ft @ 0.122 opt Au in a roadcut).

It is White Knight’s intention to further explore the Slaven Canyon Property when a drill rig becomes available.

Celt Property

White Knight’s 100% owned Celt Property is located in Eureka County, Nevada, and consists of 608 unpatented mining claims totaling 12,569 acres. Teck Cominco American Incorporated has an option to earn an initial 51% interest in the Celt Property. The Celt Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Celt Property

White Knight has staked 608 unpatented mining claims located on Bureau of Land Management land since September 2003. In October 2004, White Knight entered into a property acquisition agreement with Teck whereby Teck was granted the option to earn an initial 51% interest in the Celt Property. The terms of the agreement provide for exploration expenditures of $4,000,000 and cash payments of $750,000 which must be incurred and paid to White Knight’s U.S. subsidiary in annual increments prior to December 31, 2008. Teck has completed a firm commitment to incur $500,000 in exploration expenditures by December 31, 2005. Upon Teck vesting its 51% interest, Teck and White Knight will form a joint venture to further develop the Celt Property. When the joint venture completes the earlier of $8.0 million in expenditures or a preliminary feasibility study, Teck will have a one-time option to elect to earn an additional 9% interest by funding and completing a feasibility study. Upon Teck earning its additional interest and the approval of a production plan, White Knight will have the option to request that Teck arrange financing for White Knight’s share of the capital costs required to develop the property. If White Knight exercises this option Teck shall commit to use its best efforts to arrange or provide project debt financing for not less than 60% of projected capital costs on a limited recourse basis after technical completion. If project costs

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exceed the amount available for debt financing and the parties elect nonetheless to put the property into production then at White Knight’s election Teck shall also arrange or provide White Knight’s share of equity financing on a subordinate loan basis at LIBOR plus 4%. During the earn-in period, Teck is responsible for all property holding costs

Location of and Access to Celt Property

The Celt Property lies along the southern portion of the Cortez Trend. It is situated along the western edge of the Roberts Mountains. Access is by a network of all-weather roads.

Regional and Property Geology of Celt Property

The Celt Property lies over the Ordovician Vinini Formation which is dominantly chert and shale, but includes some limestone and greenstone units. The Celt Property follows more than four miles of strike length of a north-northwest trending fault zone where anomalous gold and pathfinder elements occur. The claims were staked to cover the gravel-covered area to the west of the fault.

Previous Exploration History of Celt Property

Gold was discovered in jasperoids along the eastern edge of the Celt Property in 1972 which led to prospecting and the staking of blocks of claims between 1972 and 1978. After the discovery of the nearby Gold Bar deposit in 1984, Atlas Precious Metals staked the entire area, but the property was not drilled. Cordex Syndicate leased Atlas’ claims in the area in 1994. Cordex conducted geologic mapping and grid rock and soil sampling, and drilled one exploration hole of less than 600 feet along the range front of the property before dropping the claims.

During the 2005 field season, Teck executed gravity and induced polarization surveys that defined a 7 kilometre long zone interpreted as the faulted western edge of a lower-plate horst block. Outcrops of dolomitized limestone along the zone are confirmation of shallowly buried lower-plate lithologies. Teck collected twenty-six rock chip samples of which ranged from no gold detected to 6.17 grams/tonne gold. The five highest values returned 6.17 grams/tonne, 5.02 grams/tonne, 2.28 grams/tonne, 0.82 grams/tonne and 0.26 grams/tonne. Teck’s follow-up 2005 reverse circulation drilling program tested a geophysical/geological series of targets in the central portion of the property. Lower-plate carbonate host rocks were encountered at relatively shallow depths under a veneer of upper-plate siliclastics in 5 of 8 drill holes. Significant path finder elements, as well as anomalous gold, were encountered. After careful examination of the results, it is now believed that the several kilometre-long gold soil/rock anomaly located along the west Roberts Mountains rangefront, may be a part of a gold system focused to the west.

Current and Planned Exploration

Teck has just commenced a 6-10 hole, 8,000 foot reverse circulation drill program on the Celt Property.

Cottonwood Property

The Cottonwood Property is located in Eureka County, Nevada, and consists of 113 unpatented mining claims totaling 2,178 acres. White Knight currently has a 100% interest in 107 unpatented mining claims and has an option to purchase 100% interest in the other 6 unpatented mining claims. The Cottonwood Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

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Acquisition of Cottonwood Property

White Knight has staked 107 unpatented mining claims in the Cottonwood Property since October 2001. Under an agreement dated February 1, 2002, White Knight has leased from Gregory McN. French 6 adjacent unpatented mining claims known as the Jam Claims. Under the agreement, White Knight is required make cash payments and issue common shares to Mr. French under the following schedule:


	Cash Option		Common Share
Payment Due Date	Payments ($)		Issuances

Initial Payment		1,000 (paid)		None
February 1, 2003		1,000 (paid)		20,000 (issued)
February 1, 2004		2,000 (paid)		20,000 (issued)
February 1, 2005		2,000 (paid)		20,000 (issued)
February 1, 2006		3,000 (paid)		20,000 (issued)
February 1, 2007 and each year thereafter		5,000		None

Mr. French also retains a net smelter royalty on the Jam Claims which varies by ounces produced and the price of gold. On production greater than 50,000 ounces but less than 150,000 ounces, the net smelter royalty is 4%. For production of less than 50,000 ounces and greater than 150,000 ounces, the net smelter royalty varies from between 1% to 2%, depending upon the price of gold. Mr. French also retains a 1.5% net smelter royalty on minerals other than gold. White Knight has the option to acquire the net smelter royalty and purchase the Jam Claims from Mr. French for $50,000 at any time before the 10th anniversary date of the lease.

Annual holding costs for the Cottonwood Property are estimated to be $15,085 for 2007 in federal and county fees.

Location of and Access to Cottonwood Property

The Cottonwood Property is located at the headwaters of Cottonwood Creek in the central Roberts Mountains, approximately 30 miles northwest of the town of Eureka, Nevada. Access is by a network of improved all-weather roads.

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Regional and Property Geology of Cottonwood Property

The Cottonwood Property lies on the Cortez Trend and encompasses a major north-northwest trending window-bounding fault where it is intersected by a west-northwest trending belt of mineralization which crosses the Roberts Mountains. The fault places a block of thick Ordovician Vinini Formation on the west in juxtaposition with Lower Plate Devonian carbonates on the east. Gold bearing jasperoid is developed on the southeast extension of this window bounding fault.

The Cottonwood Property contains the Pot Canyon mineralized zone, the French Trail and South French Trail mineralized zones, and the Wall mineralized zone. The Pot Canyon zone is still open for expansion in two directions. Significant intercepts from previous drilling at Pot Canyon include:


			Gold
	Interval		(Ounces
Drill Hole	(Feet)		per Ton)

114-29		80		0.049
114-34		125		0.022
114-36		130		0.029

At the South French Trail zone, about 3,000 feet north of Gold Canyon, Atlas intersected gold mineralization grading 0.015 opt gold to 0.044 opt gold over widths of 10 feet to 20 feet in five holes. Follow-up drilling was not conducted. At the Wall prospect south of Pot Canyon, Barrick intersected 30 feet of 0.048 opt gold in a window-bounding fault and did no follow-up drilling.

The target is a large Carlin-type deposit hosted in Devonian carbonate rocks along or east of the major window-bounding fault. The convergence of the window-bounding fault, the Roberts Mountains thrust fault, the east-west anticlinal axis, and the west-northwest-trending belt of gold mineralization produces an ideal exploration setting. Expansion of the Pot Canyon resource and South French Trail mineralization are also targets.

Previous Exploration History of Cottonwood Property

Barite occurrences in the area were prospected in the late 1970’s and in 1980, N.L Baroid Division of N.L. Industries, Inc. located claims for barite in the central Cottonwood area. Prospecting during the gold boom of the early 1980’s led to claim groups being located by Chevron Resources Company in 1980 and by Mapco Minerals Corporation/Nerco in 1983 in the northern and southern parts of the Cottonwood area respectively. Chevron’s claims lapsed in 1983 and were restaked by Nerco. American Copper and Nickel Company and Phelps Dodge later leased and explored the claims staked by N.L. Baroid and Nerco. N.L. Baroid discovered the Pot Canyon gold zone in 1985. The property was acquired by Phelps Dodge in 1986 who continued to explore the property through 1990 until Atlas acquired their holdings in 1991. Atlas acquired the Nerco claims in 1990. The French Trail and South French Trail mineralized zones were drilled by Atlas in 1993.

Cordex leased the northern part of the Cottonwood area in 1995 and drilled a few holes. In 1997, Barrick leased most of Atlas’ claims in the area. Barrick drilled eight fairly deep holes in 1998 and intersected gold mineralization at the Wall prospect. Atlas’ claims were leased by Vengold (now American Bonanza) in 1999 after Barrick terminated its lease but conducted no work before relinquishing the property.

Drilling on the Cottonwood Property by previous operators identified several gold zones, but little follow-up work was ever conducted. The Pot Canyon deposit remains open in two directions, and gold mineralization discovered by drilling the South French Trail and Wall prospect were never followed-up.

In 2005, White Knight completed five shallow holes on the Cottonwood Property at the southern end of the target area where a hole drilled by Barrick Gold in the late 1990’s was reported to have significant gold in favorable host rocks. These follow-up drill holes around the Barrick hole failed to intersect significant gold mineralization in this area.

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Current and Planned Exploration

White Knight is currently drilling on the Cottonwood Property. The planned drill program consists of a four to eight hole, 5,000 to 10,000 ft campaign focusing along the Wall fault north of the 2005 drilling, in the Pot Canyon and French Trail deposit areas where significant gold mineralization has been drilled and remains open for expansion, and at the Gold Ledge prospect along the faulted gold-mineralized anticline east of the Wall fault.

Fye Canyon Property

The Fye Canyon Property is located in Eureka County, Nevada and comprises 345 unpatented mining claims on 6,320 acres. White Knight currently has a 100% interest, although Teck is holding an option to earn an initial 51% interest. The Fye Canyon Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Fye Canyon Property

White Knight staked 231 unpatented mining claims after acquiring 114 unpatented mining claims upon the execution of a mining lease agreement. Under the terms of the agreement, White Knight must pay annual advance royalty payments starting at $5,000 upon execution, and increasing by $5,000 per year to a maximum of $50,000 per year. White Knight must expend a minimum of $20,000 on exploration work on the property per year. The vendor retains a 2% net smelter royalty payable on production up to $1,000,000 after which it is reduced to 1% to a maximum of $5,000,000.

In October 2004, White Knight and Teck entered into an agreement which granted Teck an option to earn an initial 51% interest in the property by making cash payments to White Knight totalling $750,000 and incurring exploration expenditures of $4,000,000 in annual increments prior to December 31, 2008. Upon Teck earning a 51% interest in the property, Teck and White Knight will form a joint-venture on the Fye Canyon Property. When the joint-venture completes the earlier of $8.0 million in expenditures or a preliminary feasibility study, Teck will have the one-time option to elect to earn an additional 9% interest (for 60% total) in the property by funding and completing a feasibility study. Upon Teck earning its additional interest and the approval of a production plan, White Knight will have the option to request that Teck arrange financing for White Knight’s share of the capital costs required to develop the Fye Canyon Property. If White Knight exercises this option Teck shall commit to use its best efforts to arrange or provide project debt financing for not less than 60% of projected capital costs on a

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limited recourse basis after technical completion. If project costs exceed the amount available for debt financing and the parties elect nonetheless to put the property into production then at White Knight’s election Teck shall also arrange or provide White Knight’s share of equity financing on a subordinate loan basis with an interest rate of the London Interbank Offered Rate, or LIBOR, plus 4%.

During the earn-in period, Teck is responsible for all property holding costs.

Location of and Access to Fye Canyon Property

The Fye Canyon Property lies on the Cortez Trend and is adjacent to White Knight’s Pat Canyon Property to the north. Access is by a series of all-weather and dirt roads.

Regional and Property Geology of Fye Canyon Property

The Fye Canyon Property lies along the southern projection of the north-northwest by south-southeast-trending Cortez fault zone, just south of a major northeast-trending cross-structure which bounds the northern edge of Simpson Park Mountains. The claims cover 31/2 miles of strike length of this splayed north-northwest fault system. Upper-plate Ordovician Vinini Formation crops out in the eastern part of the block and is overlain by scabs of felsic Tertiary volcanics and thin Quaternary alluvium in the central area with thicker gravels in the west part. Intermediate Tertiary volcanics cover the southernmost part of the claim block. The claim block lies along the projection of lower plate carbonate rocks in the Cortez window to the northwest and the Tonkin window to the southeast. On the property, hematite and barite veined cherts and siltstones of the Vinini Formation are highly anomalous in both mercury and arsenic.

Previous Exploration History of Fye Canyon Property

A number of companies explored portions of the Fye Canyon claims in the 1980’s and 1990’s. ECM Inc./Noranda Inc. staked the Gap claims in 1985; ECM/Noranda drilled 4 shallow (less than 500 ft) holes in 1988; Kennecott drilled 4 holes (500 ft) in 1991; Rio Algom Ltd. leased the claims and drilled 1 hole in 1992; Lac Minerals Ltd. drilled one deep hole (1100 ft) in the northeast corner of the property in 1995; Placer drilled one hole in 1996; and Aquaterre Mineral Development Ltd. drilled 2 shallow holes from one pad in 1999. These holes targeted shallow mineralization based on geochemical anomalies in outcropping upper plate rocks and holes terminated in Vinini Formation.

During the 2005 exploration season, Teck undertook additional gravity surveys and drilled four reverse circulation holes to test certain structural and lithological targets generated by the geophysical program. Elevated gold geochemistry (>20 ppb, up to 56 ppb) was encountered in hole F04-04.

Current and Future Exploration

Teck has not yet advised White Knight of the details of their upcoming planned drill program.

Gold Pick Property

White Knight’s 100% owned Gold Pick Property is located in Eureka County, Nevada, and consists of 27 unpatented mining claims for 601 acres and patented mining claims for 193 acres for a total of 794 acres. The Gold Pick Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

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Acquisition of Gold Pick Property

White Knight acquired the unpatented mining claims and patented mining claims by staking and application since June 2002. Annual holding costs for the property are estimated to be $3,604 for 2007 in federal and county fees.

Location of and Access to Gold Pick Property

The Gold Pick Property is located on the Cortez Trend in the southern Roberts Mountains approximately 30 miles northwest of the town of Eureka, Nevada. Access is by all-weather county-maintained roads to the past producing Gold Bar Mine approximately six miles southwest of the property and then along the Gold Bar haul road to the Gold Pick Property.

Regional and Property Geology of Gold Pick Property

The Gold Pick Property is underlain by an east-dipping sequence of Devonian carbonate rocks, comprising the Lone Mountain Dolomite overlain by the McColley Canyon Formation and Denay Formation. Located on the Gold Pick Property is the past producing Gold Pick Mine, which contains two gold deposits, the Gold Pick East and Gold Pick West. Also on the Gold Pick Property is a portion of the formerly producing Gold Ridge gold deposit. All of the known deposits lie along a subtle east-west anticline, which crosses the Roberts Mountains and provides a regional control to gold mineralization. Northeast and northwest-trending faults cut the section in the vicinity of the deposits and provide deposit-scale controls to gold mineralization.

The main Gold Pick East deposit has a footprint of approximately 1,100 feet east-west by 1,200 feet north-south. The deposit is typically 50 feet to 100 feet thick, but can be up to 300 feet thick adjacent to controlling structures. The southwest extension of the Gold Pick East deposit measures about 1,200 feet in a west-southwest

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direction and ranges from 75 feet to 200 feet in width. Within this structurally controlled zone are at least two pods of high-grade mineralization which include the following drill intercepts:


			Gold
	Interval		(Ounces
Drill Hole	(Feet)		per Ton)

33-578		35		0.215
33-570		30		0.209
33-5		15		0.371
33-321		40		0.264
33-719		60		0.209

Higher-grade pods of gold mineralization also occur within the main Gold Pick East deposit and include a drill intercept of 10 feet at 1.20 oz/tone gold beneath the southwest corner of the pit.

The Gold Pick West deposit measures about 700 feet north-south by 700-800 feet east-west. The deposit contains at least two pods of +0.20 oz/tone gold mineralization. A third higher-grade pod lies to the east of the main deposit. The Gold Pick mine consists of two separate open pits: Gold Pick East and Gold Pick West. Atlas Precious Metals considered mining the high-grade mineralization in the southwest extension of Gold Pick East by underground mining methods. In the late stages of mining, an exploration adit was driven to better define reserves in the north wall of the pit and to define underground reserves in the southwest extension. However, the drift never reached the southwest zone, and no underground reserves were delineated.

The Gold Pick East and West deposits have been tested with a total of 877 drill holes. Despite the intensity of drilling, potential to expand resources remains. The southwest extension zone is open to the southwest, where it is cut off by a single fence of three drill holes. Beyond that, only a handful of widely spaced (approx. 300 foot) holes were drilled. The zone could easily continue beyond the limits of drilling. A fairly high-grade drill intercept (5 ft @ 0.202 oz/ton gold) near the west end of the drilling suggests that the high-grade core of the zone may extend further to the southwest along the structure. The vast majority of drill holes have been vertical, which could easily miss high-grade mineralization along high-angle structures. There is potential to expand the high-grade portions of the deposit by drilling angle holes, especially in the area of higher-grade mineralized pods such as the southwest extension zone. Drilling is also wide-spaced to the northeast of the Gold Pick East open pit, and good potential remains to expand resources in this direction as well.

The following disclosure was provided by Mine Development Associates, or MDA, of Reno, Nevada. In April 2006, a technical report was filed on the Gold Pick and Gold Ridge deposits, which verified an indicated resource of 321,000 oz gold contained in the Gold Pick and Gold Ridge deposits. During 1994, Donald Tschabrun, a consulting geologist working for Atlas, estimated resources for the deposits (Tschabrun Estimate) which were audited by Mine Reserve Associates. The technical report submitted by MDA completed work required to bring the Tschabrun Estimate in compliance with 43-101 regulations. The deposits are drilled on a nominal 50 ft spacing. The Tschabrun Estimate was completed by first outlining mineralized areas on cross sections spaced at 50 ft intervals and then transferred the mineralized outlines to plan view benches on 10 ft intervals. Grades were interpolated into 25 x 25 x 10 ft blocks by inverse distance weighting methods. MDA concluded that the Tschabrun Estimate is equivalent to Indicated Resources. Atlas drill holes used to calculate the Tschabrun Estimate total more than 1200 reverse circulation holes and seven core holes. The following table summarizes the audited indicated resource (after the Tschabrun Estimate):


			Gold Pick Deposit						Gold Ridge North Deposit						Totals
Mineralization	Cutoff Grade		Tons		Grade		Ounces		Tons		Grade		Ounces		Tons		Grade		Ounces
Type	Oz Au/t		000’s		Oz Au/t		Au 000’s		000’s		Oz Au/t		Au 000’s		000’s		Oz Au/t		Au 000’s

Oxide		0.01		4,738		0.039		184.8		1,108		0.034		37.7		5,846		0.038		222.5
Carbonaceous		0.01		1,954		0.049		95.7		74		0.037		2.7		2,028		0.049		98.4
Totals		0.01		6,692		0.042		280.5		1,182		0.034		40.4		7,874		0.041		320.9

Details of the audit and additional technical information on the Gold Pick Property are contained in a 43-101 Technical Report completed by MDA which can be viewed at www.sedar.com. The Qualified Persons

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commissioned by MDA were Neil Prenn, Registered Professional Mining Engineer, and Peter Ronning, Professional Engineer, who conducted the site visit.

Previous Exploration History of Gold Pick Property

After the discovery of the Gold Bar gold deposit in 1984, Atlas began systematic exploration of the Roberts Mountains. Gold-mineralized jasperoid was discovered in the Gold Ridge and Gold Pick areas in 1986. Atlas drilled discovery holes in the Gold Ridge deposit in 1986 and the Gold Pick deposit in 1987. Open-pit mining of the Gold Ridge deposit commenced in 1991. Approximately 96,000 ounces of gold were produced from the Gold Ridge deposit until mining ceased in 1992. The Gold Pick deposit was mined between 1992 and 1994, with production totaling approximately 48,000 ounces of gold. Vengold Inc. (now American Bonanza) leased the Atlas claim block in 1999. American Bonanza dropped the claims in the Gold Pick and Gold Ridge areas in September 2001.

Current and Future Exploration Plans of Gold Pick Property

White Knight drilled a total of 18 reverse-circulation holes (11,700 ft) at the Gold Pick Property in August and September of 2005. The results of the exploration campaign demonstrated grade continuity in extensions of both the southwest feeder structure (30 ft @ 0.062 opt Au, 25 ft @ 0.083 opt Au) and the northwest feeder structure (25 ft @ 0.143 opt Au with 10 ft @ 0.226 opt Au), indicating the potential to significantly increase the dimensions of the gold deposit. In addition, the successful extension of the feeder zones away from the pit area into un-drilled terrain opens up the potential for discovery of a new gold deposit. Geologic mapping in the Roberts Mountains District in 2005 led to a recognition of local karsting within the lower-plate host rocks in the area. The karsting presents strong exploration targets as a number of Carlin type deposits in the Carlin trend are related to solution collapse (karst) features. Further work will be required to establish the geologic timing of this karsting and its relevance to gold deposition. The drill program at the Gold Pick Property was encouraging and a follow-up program is planned for late 2006.

McClusky Pass Property

White Knight’s 100% owned McClusky Pass Property consists of 243 unpatented mining claims totaling 5,175 acres located in Eureka County, Nevada. The McClusky Pass Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

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Acquisition of McClusky Pass Property

White Knight acquired the McClusky Pass Property by staking in September, 2003. Annual holding costs for the property are estimated to be $32,440 for 2007 in federal and county fees.

Location of and Access to McClusky Pass Property

The McClusky Pass Property is located in Eureka County near the intersection of the Roberts and Simpson Park Mountains, approximately 30 miles northwest of Eureka, Nevada. Access is by way of a series of improved all-weather roads.

Regional and Property Geology of McClusky Pass Property

The McClusky Pass Property is located immediately south of the convergence of the north-northeast trending Simpson Park Mountains and the northwest-trending Roberts Mountains. The two mountain ranges intersect along a major northwest-trending fault. This fault zone is postulated to be a major regional control of gold mineralization within the Cortez Trend.

The McClusky Pass Property is centered on the intersection of this northwest fault zone with a major northeast-trending cross-structure. The northeast-trending structural zone is characterized by a broad northeast-trending magnetic low, interpreted to reflect a zone of magnetic destruction. The zone is also manifest as a northeast-trending gravel-covered embayment into the range. The project area is nearly completely covered by Quaternary and Tertiary gravels which fill the northwest arm of Kobeh Valley. Intermediate-composition Tertiary volcanics crop out in the north central and northeast parts of the property. Thickness of the gravel deposits is unknown but regional gravity data suggests that the basin becomes shallower to the north towards McClusky Pass. Tertiary volcanic rocks in the northeast portion of the property are bleached and argillized, suggesting the possible presence of a hydrothermal system.

Previous Exploration History of McClusky Pass Property

Sections of the McClusky Pass Property were explored by different exploration companies between 1984 and 1995. Atlas staked claims covering the eastern portion of the current property in 1984 as part of its larger Gold Bar claim block. Atlas focused its exploration efforts on areas with outcrop and thus conducted little work in the area of the property, although a few shallow (200 feet or less) holes may have been drilled. In 1988, ECM staked claims over the western portion of the McClusky area immediately to the west of Atlas’ claims. ECM drilled four or five shallow (500 feet deep) holes in the north central part of the claim block, east of McClusky Pass in 1990. ECM dropped its claims and the area was staked by MBM Consultants in 1994. Battle Mountain Exploration Company leased the claims and drilled an unknown number of holes in the north central portion of the claim block in 1995. All previous claims lapsed and White Knight staked the property in September 2003.

Current and Future Exploration of McClusky Pass Property

White Knight commenced a drill program at the McClusky Pass Property in September 2005. One diamond drill hole was completed to a depth of 1,191 ft on the northern portion of the project with only anomalous gold encountered. A reverse circulation hole was attempted, but was lost at 775 ft, about 200 ft short of the target. The holes were drilled approximately 1,000 ft apart to test a geophysically interpreted uplifted block. Anomalous gold and pathfinder elements, as well as intrusive dykes and strong dolomitization, were encountered in the southern most reverse-circulation drill hole. Both holes encountered chert and siltstones with minor limestone interbeds which are interpreted to be part of the Upper-plate. The depth to lower-plate on the project is not known at this time. Additional work will be performed on the McClusky Pass Property in late 2006 to generate new drill targets.

New Pass Property

The New Pass Property consists of 107 unpatented mining claims totaling 2,232 acres located near the town of Austin in Churchill County, Nevada. White Knight currently has a 100% interest subject to an option agreement with Bonaventure Enterprises Inc. who can earn an initial 50% interest in the New Pass Property. The New Pass

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Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of New Pass Property

In March 1998, White Knight acquired a 100% interest in the New Pass Property from Quest USA Resources Inc. for $165,000 cash. Quest maintained a 2.75% net smelter royalty which White Knight purchased in March 2000, in exchange for 100,000 White Knight common shares.

In September 2004, White Knight entered into an option agreement with Consolidated Odyssey Exploration Inc., whereupon Odyssey may earn an initial 50% interest in the New Pass Property. To earn a 50% interest, Odyssey must make cash payments to White Knight of $500,000, issue 500,000 of its common shares and provide $2,000,000 in exploration expenditures, all over a four-year period. Upon earning a 50% interest in the property, Odyssey may earn an additional 10% interest in the property by financing the completion of a feasibility study. Subsequently, Odyssey assigned all rights under the option agreement to Bonaventure. During the earn-in period, Bonaventure is responsible for all property holding costs.

Location of and Access to New Pass Property

The New Pass Property is located along the Austin-Lovelock mineral belt in the New Pass Mining District, 27 miles west of Austin, Nevada. Access is from Austin on US Highway 50 for 34 miles, north on the Edwards Valley Road for 5 miles, and east-southeast for 21/2 miles on an unimproved road to the center of the property.

Regional and Property Geology of New Pass Property

Gold mineralization on the New Pass Property is hosted in silty and carbonaceous limestones of the Triassic Lower Augusta Mountain Formation. This unit consists of thin to medium bedded, carbonaceous limestone with interbeds of platy, calcareous siltstone, fine-grained sandstone, and bioclastic turbidites. Impermeable, massive, cliff-forming limestones of the upper Augusta Mountain sequence cap these rocks.

Previous Exploration History of New Pass Property

Gold was discovered on the New Pass Property in 1980 by Dekalb Mining Ltd. which was conducting follow-up work to a stream sediment survey. Dekalb transferred ownership of the claims to Northern Illinois Coal, Oil and Resources Mineral Ventures in 1982. Northern Illinois Coal explored the New Pass Property from 1982 through 1992, and drilled a total of 165 holes. Consolidated Ramrod Gold (USA), Inc. acquired the New Pass Property in 1993. In 1995, Santa Fe Pacific Gold Corporation completed 11 holes on the property under an exploration agreement with Ramrod. Ramrod was later reorganized and renamed Quest which sold the property to

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White Knight in 1998. During 1998, White Knight completed 1:6000 scale mapping, collected 250 rock chip samples, prepared geochemical overlays for all surface rock chip data, constructed 100-foot cross sections via an Interdex mining software program, and estimated geologic resources on the main jasperoid.

Current and Future Exploration of New Pass Property

During 2005, Bonaventure completed 28 drill holes totaling 9,140 ft of drilling. The results from this campaign, which include 75 ft @ 0.057 opt Au with 10 ft @ 0.307 opt Au and 30 ft @ 0.095 opt Au, confirm the exploration potential for the project. Bonaventure has commenced its 2006 drill effort which will involve further step out as well as infill drilling of the 2005 program. The Phase 2 angle drilling has begun in the northern portion of the project drill grid using a reverse circulation rig. The program includes 9,000-10,000 feet of new drilling in 20-25 holes to expand the current resource. Hole depths will be 250 feet to 650 feet deep. Drilling of the untested portion of the current drill grid as well as up-dip and down-dip offsets from previous drilling will be completed. The Phase 2 drilling program will occur over a strike length of approximately 3,200 feet. The angle hole program will also test volcanic rocks above previous drilling that have not been assayed and explore possible high grade feeder faults below the deposit.

Squaw Creek Property

The Squaw Creek Property is located on the northern portion of the Carlin Trend, 42 miles north of the town of Battle Mountain in Elko County, Nevada. The property consists of 151 unpatented mining claims totaling 3,040 acres. White Knight currently has a 100% interest, subject to an agreement with Bonaventure who can earn an initial 50% interest. The Squaw Creek Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Squaw Creek Property

White Knight acquired the Squaw Creek Property by staking during 1996. In September 2004, White Knight entered into an option agreement with Odyssey whereupon Odyssey may earn an initial 50% interest by making cash payments to White Knight of $500,000, issue 500,000 of its common shares and provide $2,000,000 in exploration expenditures, all over a four-year period. Odyssey may earn an additional 10% interest in the Squaw Creek Property by financing the completion of a feasibility study. Subsequently, Odyssey assigned all its rights under the option agreement to Bonaventure. During the earn-in period, Bonaventure is responsible for all property holding costs.

Location of and Access to Squaw Creek Property

The Squaw Creek Property lies between the Midas and Ivanhoe mining districts on the northern portion of the Carlin Trend. Access to the property is achieved from the towns of Battle Mountain, Elko, or Winnemucca, Nevada via highway and maintained all-weather roads. Unimproved dirt roads provide access along the pediment on the northern part of the Squaw Creek Property.

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Regional and Property Geology of Squaw Creek Property

The Squaw Creek Property is located directly on the Carlin Trend, and strongly anomalous gold mineralization associated with pyrite has been intersected in drill holes in an area more than 3 miles long and 1 mile wide. Additional weakly anomalous gold has been discovered within virtually all drill holes over a much larger area. The anomalous gold occurs within silicified and brecciated zones often more than 100 feet thick in the sedimentary rocks of the Upper Plate or in the overlying Miocene age volcanics. Zones of gold mineralization are also hosted within silty dolomitic sediments of unknown age and of unknown stratigraphic position. These silty dolomitic sediments may be part of the Rodeo Creek Formation and possibly indicate the presence of nearby auriferous Lower Plate sediments.

Exploration History of Squaw Creek Property

During the 1970’s, the US Steel Company explored the Ivanhoe District and by 1984 had defined a gold reserve on the adjacent Ivanhoe Property. A series of companies explored the Ivanhoe project which was expanded to cover the current Squaw Creek Property. Touchstone Resources explored the Squaw Creek Property by surface mapping, and drilled at least 4 holes. Newmont Mining Corporation and Cornucopia Resources Ltd. explored the Squaw Creek Property from 1992 until 1995, drilling a total of 12 holes in the Sheep Corral Mine area before dropping the outer claims, including the Squaw Creek Property. White Knight drilled three holes in 1998, 14 holes in 1999, and 10 holes in 2000 funded by Chapleau which terminated its option in August 2000 after incurring exploration expenditures totaling $1,024,135.

Current and Future Exploration of Squaw Creek Property

During the 2005 field season, Bonaventure completed controlled source audio magnetotelluric surveys. A follow-up drill program has just commenced. The first of three 1,500 feet deep angle holes is approaching target depth. The holes are pre-collared using a reverse circulation drill rig to penetrate post-mineral rocks and completed using a core rig. Holes SC-0601 and 0602 are a fence of holes designed to drill across a large interpreted fault zone indicated in a CSMT geophysical survey completed in 2005. The primary target at the Squaw Creek Property is a high grade vein deposit like Ken Snyder to the northwest or the deeper part of Hollister, located to the southeast.

White Knight’s Other Properties

South Cabin Creek Property

White Knight’s 100% owned South Cabin Creek Property is located in Eureka County, Nevada, and consists of 84 unpatented mining claims totaling approximately 1,735 acres. The South Cabin Creek Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of South Cabin Creek Property

White Knight acquired the claims that make up the South Cabin Creek Property by way of staking in October 2001. Annual holding costs for the property are estimated to be $11,214 for 2007 in federal and county fees.

Location of and Access to South Cabin Creek Property

The South Cabin Creek Property is located approximately three-quarters of a mile east of the past-producing Gold Pick Mine, approximately 30 miles northwest of the town of Eureka, Nevada. Access is via county maintained roads and then along all-weather dirt roads.

Regional and Property Geology of South Cabin Creek Property

The South Cabin Creek Property lies along the Cortez Trend. The claims are underlain by an east-dipping fault-repeated section of Silurian Lone Mountain Dolomite overlain by Devonian McColley Canyon Formation and Denay Formation. The claims lie near the Devonian dolomite line, a major facies boundary controlled by regional Paleozoic-age structure along the continental margin.

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The South Cabin Creek Property covers a small portion of the Cabin Creek deposit, the South Cabin Creek mineralized zone, and potential extensions of the Cabin Creek mineralizing structure. The Cabin Creek deposit is an oxide gold deposit hosted in the Bartine member of the McColley Canyon Formation. Drill intercepts in the southernmost portion of the deposit on White Knight’s claims include:


Drill Hole	Interval (feet)		Gold (ounces per ton)

92-41		70		0.058
SS-26		85		0.039
SS-19		90		0.057
SS-27		125		0.037
92-53		100		0.035

Mineralization in the Cabin Creek deposit consists of two ore pods aligned in a northwest-southeast direction. The trend of gold mineralization and the favourable host rock unit project onto White Knight’s claims to the southeast of the Cabin Creek deposit. The northeast-trending high-grade feeder structure of the deposit also projects on to the northeast part of White Knight’s claims.

Widely spaced drilling in the area south of the Cabin Creek deposit by Atlas discovered the South Cabin Creek gold zone. Anomalous drill intercepts at the South Cabin Creek mineralized zone include:


Drill Hole	Interval (feet)		Gold (ounces per tonne)

55-51		20		0.019
55-12		120		0.019
55-10		10		0.038
PD55-27		30		0.012

Exploration targets on the South Cabin Creek Property include shallow small to moderate pods of mineralization in the South Cabin Creek zone, high-grade mineralization along the projection of the high-grade feeder structure, and potentially large Carlin-type deposits concealed beneath gravel and volcanic cover along the major north-northwest-trending fault zone (main controlling structure) to the east of the Cabin Creek deposit.

Previous Exploration History of South Cabin Creek Property

The area containing the South Cabin Creek Property was explored by a number of companies from 1982 to 1992. Exxon Coal and Minerals Company geologists first discovered gold-bearing jasperoid rocks in the Cabin Creek area in 1982, and drilled the first mineralized holes on the property. After Exxon relinquished the claims, Nerco staked claims which include the current property in 1982. American Copper and Nickel Company leased the property and drilled the discovery hole at Cabin Creek oxide gold deposit adjacent to White Knight’s current property, which was later further defined by Phelps Dodge Corporation and Atlas. Atlas also drilled holes to the south and discovered the South Cabin Creek mineralization. From 1997 to 1998, Barrick Gold Corporation leased the claims but conducted no work. American Bonanza Gold Mining Corporation (now American Bonanza Gold) leased the claims in 1999, but conducted no work before relinquishing the claims in September 2001.

Current and Planned Exploration of South Cabin Creek Property

Due to the location and extension of a portion of the Cabin Creek oxide deposit onto White Knight’s property, exploration targets include potential high-grade mineralization along the projection of the high-grade feeder structure, shallow small to moderate pods of mineralization in the South Cabin Creek zone, and possible Carlin-type deposits concealed beneath gravel and volcanic cover along the major north-northwest trending fault zone (main controlling structure) to the east of the Cabin Creek deposit.

White Knight is currently seeking a joint-venture partner to fund and conduct exploration on the South Cabin Creek Property.

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Gold Bar Horst Property

White Knight’s 100% owned Gold Bar Horst Property is located in Eureka County, Nevada, and consists of 183 unpatented mining claims totaling 3,652 acres. The Gold Bar Horst Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Gold Bar Horst Property

White Knight acquired the 183 unpatented mining claims by way of staking since September 2001. Annual holding costs for the property are estimated to be $24,430 for 2007 in federal and county fees.

Location of and Access to Gold Bar Horst Property

The Gold Bar Horst Property is located in Eureka County on the southwest flank of the Roberts Mountains, approximately 30 miles northwest of Eureka, Nevada. Access is by way of a series of improved all weather roads.

Regional and Property Geology of Gold Bar Horst Property

The claims were staked to cover the projection of a northwest-trending horst of Lower Plate Devonian Carbonates. The claims are in two noncontiguous blocks, covering the northern and southern projections of the horst beyond the immediate past producing Gold Bar Mine. The depth to bedrock under Quarternary gravels, as indicated by CSAMT surveys, gravity surveys and drilling varies from less than 500 feet to greater than 1,000 feet. Mineralization is controlled by a north-northwest-trending fault and structural intersections with northeast-trending cross faults.

Previous Exploration History of Gold Bar Horst Property

Atlas discovered gold-anomalous jasperoid along the southwest flank of the Roberts Mountains in 1983 and drilled 16 shallow exploration holes, one of which intersected thin gold mineralization. In 1984 Atlas discovered the Gold Bar deposit, which lies between the 2 current portions of White Knight’s property. Atlas mined the Gold Bar deposit beginning in 1987 before exhausting the economic reserves in 1994. Atlas negotiated a series of joint-venture agreements with other mining companies between 1994 and 1999 for further exploration of the project which includes the claims encompassed by White Knight’s current property boundaries. Homestake Mining Company entered into a joint venture in 1994 for exploration of the pediment area south and southeast of the Gold Bar mine. Homestake conducted CSAMT surveys and drilled 17 exploration holes on the area south of Gold Bar in 1995 and 1996. The joint venture was terminated in 1996. Barrick joint-ventured all of Atlas’ holdings in the Roberts Mountains, exclusive of the mine areas, in 1997. Barrick drilled a series of widely-spaced holes in the Millsite area and drilled seven deep holes to the north before terminating the joint venture in 1999. Vengold (now American Bonanza) leased all of Atlas’ holdings in the Roberts Mountains later in 1999. When American Bonanza reduced the size of its claim holdings in 2001 to concentrate on the claims around the past producing Gold Bar mine, White Knight staked the two noncontiguous claim groups bordering the remaining claims at Gold Bar on the north and south which currently comprise the Gold Bar Horst Property.

Current and Planned Exploration of Gold Bar Horst Property

Future exploration is expected to target possible Carlin-style gold mineralization beneath the gravel cover. North-northwest to northwest-trending horst-bounding faults and crosscutting northeast-trending faults are possible feeder structures. The master feeder fault has not been tested. The majority of previous drilling on the Gold Bar Horst Property is less than 350 feet deep and did not encounter bedrock. One deeper drill hole located on the property encountered a mineralized jasperoid which returned minor gold values from a depth of 1,160 feet to 1,255 feet. This mineralization may be peripheral to other gold mineralization.

White Knight also initiated a nine hole reverse circulation drill program on the southern portion of the property in June 2006. The objective of the program was to determine the areal extent of lower-plate lithologies, explorable within reasonable target depths. In addition, structural edges of the horsted domain were targeted in attempts to extend the Gold Bar “proper” mineralized system.

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White Knight has completed the drilling program at the Gold Bar Horst Property and is awaiting assay results.

Hunter Property

The Hunter Property is located in Eureka County, Nevada, and consists of 48 unpatented mining claims totaling 1,116 acres. White Knight has a 100% interest in 46 claims, and has a lease agreement and an option to purchase a 100%

interest in the other two claims which make up the property. The Hunter Property is without known economic mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Hunter Property

White Knight acquired 46 unpatented mining claims of the Hunter Property through staking in September 2001. In February 2002, White Knight signed a lease agreement with Gregory McN. French on two adjacent unpatented mining claims known as the HNT Claims. Under the terms of the lease agreement, White Knight is required to make lease payments and issue common shares to Mr. French under the following schedule:


	Cash Option			Common Share
Payment Due Date	Payments ($)			Issuances

Initial Payment		2,000(paid	)		20,000(issued	)
February 1, 2003		2,000(paid	)		20,000(issued	)
February 1, 2004		3,000(paid	)		20,000(issued	)
February 1, 2005		3,000(paid	)		20,000(issued	)
February 1, 2006		4,000(paid	)		20,000(issued	)
February 1, 2007 and each year thereafter		7,000			None

Mr. French also retains a net smelter royalty on the HNT claims which varies from between one to two percent, depending upon the price of gold. Mr. French retains a 1.5% net smelter royalty on minerals other than gold. White Knight has the option to acquire the net smelter royalty and purchase the HNT Claims from Mr. French for $75,000 at any time before the 10th anniversary date of the lease.

Annual holding costs for the property are estimated to be $6,408 for 2007 in federal and county fees.

Location of and Access to Hunter Property

The Hunter Property is located on the Cortez Trend and lies approximately three miles southeast of the Gold Pick Mine. Access is via Highway 50, then approximately 13 miles along county maintained gravel road and 11/2 miles along unimproved dirt road.

Regional and Property Geology of Hunter Property

The Hunter Property encompasses an easterly dipping fault-repeated section of Silurian Lone Mountain Dolomite overlain by Devonian McColley Canyon Formation, Bay State Dolomite and Devils Gate Limestone. Miocene basalts and minor rhyolite overlay and/or are faulted against the Paleozoic section along both the western and eastern parts of the claims. The western portion of the Hunter Property is covered by pediment gravels, which masks the Paleozoic and Tertiary rocks.

Previous Exploration History of Hunter Property

Gold-bearing jasperiods were discovered in the Hunter area in 1983 and Mapco (now Nerco) staked claims over the prospective ground. The claims were leased to American Copper and Nickel Company in 1985. American Copper and Nickel Company conducted geological mapping, rock-chip and soil sampling, geophysical surveys, and drilled 39 shallow holes between 1985 and 1987.

Nerco conducted additional geologic and geochemical work and drilled seven holes in 1988-1989. Phelps Dodge acquired the Nerco claims in 1989 and conducted more mapping and collected additional rock-chip samples

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as well as drilling 21 exploration holes in 1990. Atlas acquired the Nerco claims in 1991 and conducted additional drilling in 1993. American Barrick leased all of Atlas’ claims in 1997, including those at Hunter, but performed no work on the property before terminating its lease in 1998. Vengold (now American Bonanza) then leased the Atlas land holdings in 1999 but also performed no work on the property before abandoning the claims in September 2001.

Current and Planned Exploration of Hunter Property

During the 2006 field season White Knight completed 800 feet of drilling in three holes. Assays are pending.

Pat Canyon Property

The wholly owned Pat Canyon Property is located in Eureka County, Nevada and consists of 178 unpatented mining claims totaling 3,582 acres. The Pat Canyon Property is without known mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Pat Canyon Property

White Knight acquired the Pat Canyon Property by staking in November 2003. Annual holding costs for the property are estimated to be $23,763 for 2007 in federal and county fees.

Location of and Access to Pat Canyon Property

The Pat Canyon Property lies on the Cortez Trend and is adjacent to White Knight’s Fye Canyon Property to the south. Access is by a series of all-weather and dirt roads.

Regional and Property Geology of Pat Canyon Property

The Pat Canyon Property lies along the southern projection of the north-northwest-south-southeast-trending Cortez fault zone just south of a major northeast-trending cross-structure which bounds the northern edge of Simpson Park Mountains. The property covers three and one-half miles of strike length of this splayed north northwest fault system. Upper-plate Ordovician Vinini Formation crops out in the eastern part of the block and is overlaid by scabs of felsic Tertiary volcanics and thin Quaternary alluvium in the central area with thicker gravels in the west part. Intermediate Tertiary volcanics cover the southernmost part of the claim block. The claim block lies along the projection of lower plate carbonate rocks in the Cortez window to the northwest and the Tonkin window to the southeast.

Current and Future Exploration of Pat Canyon Property

White Knight is seeking a joint venture partner to further explore the Pat Canyon Property.

Tonkin Summit Property

The Tonkin Summit Property is located in Eureka County, Nevada, adjacent to White Knight’s McClusky Pass Property to the East. The 100% owned property consists of 186 unpatented mining claims totaling 3,826 acres. The Tonkin Summit Property is without known mineral reserves and is at the exploration stage. White Knight’s current efforts are exploratory in nature.

Acquisition of Tonkin Summit Property

White Knight acquired the Tonkin Summit Property by staking in the spring 2004. Annual holding costs are estimated to be $24,831 for 2007 in federal and county fees.

Location of and Access to Tonkin Summit Property

The Tonkin Summit Property is located on the Cortez Trend at the northwest end of the Roberts Mountains approximately 30 miles northwest of Eureka, Nevada. Access is by way of a series of improved all weather roads.

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Regional and Property Geology of Tonkin Summit Property

The claims are underlain by upper plate Ordivician Vinini Formation (chert, siltstone with some limestone beds) with minor Tertiary volcanic and Quaternary gravel cover in the northwest corners. Lower-plate carbonate rocks are projected to underlie Vinini Formation at relatively shallow depths.

Current and Planned Exploration of Tonkin Summit Property

The target is a Carlin-type disseminated gold deposit hosted in lower plate carbonate units beneath the Roberts Mountains thrust fault, alternatively similar bodies in limestone units of lower Ordovician Vinini Formation. The depth to lower plate is unknown as the property is unexplored below a 200 to 600 foot depth. Lower plate Devonian limestones crop out within 2,000 feet of the east side of the claim block. Scattered anomalous gold, arsenic, antimony and mercury in rock chips and soils are on trend from two mineralized northeast trending faults on an adjacent property. White Knight is seeking a joint venture partner to further explore the Tonkin Summit Property.

Miscellaneous

Since 2004, White Knight has acquired, by staking, a 100% interest in four additional Nevada mineral exploration properties comprised of unpatented mining claims located on the Cortez Trend in Eureka County and one additional mineral exploration property located on the Getchell Trend in Humboldt County. The combined acreage of these properties totals approximately 9,300 acres. The cumulative annual holding cost for these properties is estimated to be $64,480 for 2007 in federal and county fees. These properties are without known mineral reserves and are at the exploration stage. White Knight’s current efforts are exploratory in nature.

Sampling and Analysis

The sampling method used by White Knight field personnel varies with the purpose of the sample. Geologists doing initial reconnaissance or prospecting may collect selected grab samples from new discoveries. Such samples would be intended only to determine if minerals of interest are present, not to estimate grades for any volume of material.

For more systematic sampling, outcrops are cleaned off and in some cases shallow hand trenches are dug. Continuous chip samples are collected over intervals selected by a company geologist. The manner of sampling is recorded in field notes and is entered into the digital database of surface samples.

Core from drilling programs is photographed and logged on the project site by contract geologists under the supervision of White Knight’s project manager. Core is split by a contract geotechnician in Eureka, Nevada. Split core is bagged, sealed and shipped directly to assay labs in Elko, Nevada for sample preparation, and then to Sparks, Nevada for analysis. All samples are analyzed for gold and silver by fire-assay technique.

White Knight employs a quality control program consisting of re-assaying of both mineralized (0.010 ounce per ton of gold) and randomly selected coarse reject samples, insertion of coarse standard samples and assaying of both random and mineralized duplicate drilling samples through an umpire laboratory. Drill-cuttings samples are bagged, sealed and shipped directly to an assay laboratory in Elko, Nevada for sample preparation, then to Sparks, Nevada for analysis. All samples are analyzed for gold and silver by fire-assay technique.

Legal Proceedings

White Knight is not and has not been, since July 1, 2005, a party to any material legal or arbitration proceeding, nor is any material governmental proceeding involving White Knight pending or known to be contemplated.

Exchange Controls

Other than as provided in the Investment Canada Act, as amended, there are currently no limitations imposed by Canadian laws, decrees or regulations that restrict the import or export of capital, including foreign exchange controls, or that affect the remittance of dividends to non-resident holders of White Knight’s securities. However,

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any such remittances of dividends paid to United States residents are subject to withholding tax at a rate equal to a maximum of 15% of the amount paid.

Management of White Knight considers that the following summarizes the material features of the Investment Act, in its present form, pertinent to a non-resident of Canada who proposes to acquire common shares of White Knight. However, provisions of the Investment Act are complex and any non-Canadian contemplating an investment to acquire control of White Knight should consult professional advisors as to whether and how the Investment Act might apply.

The Investment Act regulates the acquisition of control of a Canadian business by a non-Canadian, as defined under the Investment Act. Under the Investment Act, an acquisition of control is considered to be the acquisition of the majority of a company’s common shares. However, if a non-Canadian acquires more than one-third but less than a majority of White Knight’s voting shares, there is a presumed acquisition of control, unless it can be established that White Knight is not in fact controlled by the acquirer. All acquisitions of control of a Canadian business are notifiable, which requires that a notification form be submitted to Investment Canada within thirty days after the implementation of the investment, unless the investment is reviewable. If the investment is reviewable, the investment may not be implemented until the Minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada.

An investment is reviewable if there is an acquisition of a Canadian business and the asset value of the Canadian business being acquired equals or exceeds the following thresholds:

(a) for non-WTO investors (as defined below), the threshold is Cdn$5 million for a direct acquisition and over Cdn$50 million for an indirect acquisition; the Cdn$5 million threshold will apply however for an indirect acquisition if the asset value of the Canadian business being acquired exceeds 50% of the asset value of the global transaction;

(b) except as specified in paragraph (c) below, a threshold is calculated annually for reviewable direct acquisitions by or from WTO investors. The threshold for 2006 is Cdn$265 million. Indirect acquisitions by or from WTO investors are not reviewable.

(i) engages in the production of uranium and owns an interest in a producing uranium property in Canada;

(ii) provides any financial service;

(iii) provides any transportation service; or

(iv) is a cultural business.

Notwithstanding the above, any investment which is usually only notifiable, including the establishment of a new Canadian business, and which falls within a specific business activity listed in the Regulations to Respecting Investment in Canada, may be reviewed if an Order-in-Council directing a review if made and a notice is sent to the investor within 21 days following the receipt of a certified complete notification.

“WTO investor” as defined in the Investment Act includes: an individual, other than a Canadian, who is a national of a member of the World Trade Organization, or a WTO Member, or who has the right of permanent residence in relation to that WTO Member; a government or government agency of a WTO investor-controlled corporation; corporation or limited partnership; or trust that is neither WTO-investor controlled or Canadian controlled of which two-thirds of its board of directors, general partners or trustees, as the case may be, are any combination of Canadians and WTO investors.

Certain types of transactions are exempt from application of the Investment Act including, among the transactions, acquisitions of control of White Knight:

(a) by the acquisition of voting shares or other voting interests by any person in the ordinary course of that person’s business as a trader or dealer in securities;

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(b) in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the Investment Act;

(c) for the purpose of facilitating its financing and not for any purpose related to the Investment Act on the condition that the acquirer divest itself of control within two years after control was acquired or within such longer period as is approved by the Minister; and

(d) by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of White Knight through the ownership of voting interests remains unchanged.

Except as provided in the Investment Act, there are currently no limitations specific to the right of non-resident Canadians to hold or vote the common shares of White Knight under Canadian law or White Knight’s charter documents.

Operating And Financial Review And Prospects Of White Knight

Overview

White Knight’s consolidated financial statements are stated in Cdn$ and are prepared in accordance with Canadian GAAP, the application of which for White Knight’s financial reporting, conforms in all material respects for the years presented with U.S. GAAP, except as disclosed in Note 16 to the consolidated financial statements. The value of the US$ in relationship to the Cdn$ was $1.00 = Cdn$1.115 as of June 30, 2006.

White Knight has since inception financed its activities through the distribution of equity capital. While White Knight has sufficient resources to meet its obligations for the foreseeable future at its current level of activity, it is anticipated that additional funds by equity issuance will be required in the future, as all of White Knight’s properties are at the exploration stage. The timing of such offerings is dependent upon the success of White Knight’s exploration programs as well as the general economic climate.

Results of Operations

Year Ended June 30, 2006 vs. Year Ended June 30, 2005

During the year ended June 30, 2006 White Knight received Cdn$6,175,733 from the exercise of 4,940,586 warrants.

The loss for the year ended June 30, 2006 was Cdn$3,307,465, or Cdn$0.06 per share, compared to a loss of Cdn$1,063,474, or Cdn$0.02 per share, in the prior year. The increased loss was due to higher expenses of Cdn$3,572,966 in 2006 compared to Cdn$1,100,746 in 2005, with the largest increase occurring in stock-based compensation, which totaled Cdn$2,275,298 compared to Cdn$148,543 in 2005. Other significant changes in expenses occurred in audit fees which rose to Cdn$116,362 from Cdn$48,696 as well as wages and benefits which rose to Cdn$130,998 from Cdn$79,918 due to a higher level of corporate activity. Consulting increased to Cdn$123,809 from Cdn$116,588 in 2005, and travel and entertainment rose to Cdn$108,044 in 2006 from Cdn$69,132 in 2005 as management and consultants visited and reviewed existing properties in Nevada as well as travel related to investor relations. Investor relations and shareholder information rose to Cdn$175,427 in 2006 from Cdn$123,189 in 2005 as White Knight continued its effort to better inform shareholders and the investment community about White Knight’s activities.

White Knight also recorded the write-off of deferred exploration costs of Cdn$143,783 in 2006 compared to Cdn$194,598 in 2005. These write-offs are related to general exploration of properties in Nevada. White Knight also recorded a loss on foreign exchange of Cdn$11,574 in 2006 compared to a loss of Cdn$60,377 in 2005 due to favorable changes in the Canadian/US dollar exchange rate, a partial recovery of Cdn$2,749 of the unrealized loss on temporary investments reported in 2004 compared to Cdn$31,404 in 2005 as well as a loss on disposal of temporary investments of Cdn$23,927 (Cdn$0 in 2005). These expenses were offset by an increase in interest income of Cdn$442,036 in 2006 versus Cdn$261,600 in 2005, with the increase due to higher cash balances in the current period.

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Year Ended June 30, 2005 vs. Year Ended June 30, 2004

During the year ended June 30, 2005, White Knight acquired two additional mineral exploration properties on the Cortez Trend. White Knight also completed a private placement of its common shares, which provided net proceeds of Cdn$2,370,000.

In 2005, White Knight had a loss of Cdn$1,063,474 or Cdn$0.02 per share as the result of interest on short-term investments of Cdn$261,600, a loss on foreign exchange of Cdn$60,377, a partial recovery of Cdn$31,404 of the unrealized loss on temporary investments reported in 2004, a loss on disposal of equipment of Cdn$757, a stock-based compensation charge of Cdn$148,543 and costs of Cdn$952,203 before write-offs.

In 2004, White Knight had a loss of Cdn$1,664,257 or Cdn$0.04 per share as a result of short-term investment interest of Cdn$97,920, a loss on foreign exchange of Cdn$9,299, an unrealized loss on temporary investments of Cdn$42,999, a stock-based compensation charge of Cdn$840,005 and costs of Cdn$628,325 before write-offs.

During the 2005 fiscal year, Cdn$194,598 of preliminary exploration costs was written-off compared to Cdn$241,549 in 2004. The increase in administrative costs from Cdn$628,325 at June 30, 2004 to Cdn$952,203 at June 30, 2005 was a result of an increase in consulting fees, audit fees, investor relations and shareholder information costs, management fees, rent, amortization, office costs, telephone and travel expenses, reflecting the costs associated with White Knight’s new Reno office as well as the general increase in exploration activities in Nevada.

Liquidity and Capital Resources

White Knight’s working capital at June 30, 2006 was Cdn$13,238,927 compared to Cdn$11,216,455 at June 30, 2005. As at June 30, 2006, Cdn$2,107,699 was classified as temporary investments compared to a reclassification to Cdn$1,995,443 at June 30, 2005 while Cdn$11,397,885 was classified as cash at June 30, 2006, compared to a reclassification to Cdn$9,182,459 at June 30, 2005.

For the 2007 fiscal year, White Knight has budgeted $2,000,000 for its anticipated exploration activities. Property costs, including land holding leases and fees, are estimated to total $600,000, and administrative costs are estimated at approximately $600,000. Therefore, White Knight estimates it has sufficient capital resources for all planned expenditures through fiscal 2007 and beyond.

Year Ended June 30, 2006

White Knight had working capital of Cdn$13,238,927 as at June 30, 2006 compared to Cdn$11,216,455 as at June 30, 2005. During the year ended June 30, 2006 operating activities used cash of Cdn$605,920. Loss for the year of Cdn$3,307,465 was reduced by items not affecting cash including write-off of deferred exploration costs of Cdn$143,783 and a stock-based compensation charge of Cdn$2,275,298. Changes in non-cash working capital items included an increase in accounts payable and accrued liabilities of Cdn$75,709, a decrease in receivables of Cdn$58,674, and an increase in amounts due to related parties of Cdn$100,248.

Investing activities provided cash of Cdn$5,375,913, including the reclassification of temporary investments to cash of Cdn$8,806,566 offset by Cdn$288,777 in acquisition of mineral property interests, Cdn$2,413,657 in deferred exploration costs and acquisition of equipment in the amount of Cdn$696,458.

Financing activities provided cash of Cdn$6,345,433, resulting from the issuance of 4,940,586 common shares pursuant to the exercise of warrants (proceeds of Cdn$6,175,733) and 315,000 common shares pursuant to the exercise of stock options (proceeds of Cdn$169,700). White Knight also issued 40,000 common shares for mineral property acquisitions at a deemed value of Cdn$72,000.

During the year ended June 30, 2006, White Knight’s cash position inclusive of temporary investments increased by Cdn$2,327,682.

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Year Ended June 30, 2005

Operating activities for the year ended June 30, 2005 used cash of Cdn$954,361, with the loss for the year of Cdn$1,063,474 reduced by items not affecting cash including stock-based compensation of Cdn$148,543 and write-off of deferred exploration costs of Cdn$194,598. Changes in non-cash working capital items included increases in accounts receivable of Cdn$103,457 and prepaid expenses of Cdn$26,214, and decreases in accounts payable and accrued liabilities of Cdn$51,640, and amounts due to related parties of Cdn$52,616.

Investing activities used cash of Cdn$4,972,207. The largest component was the acquisition of temporary investments of Cdn$3,413,215 as White Knight invested in highly liquid short-term bonds. Acquisition of mineral property interests used cash of Cdn$673,373, and deferred exploration costs used cash of Cdn$816,648. Acquisition of equipment used cash of Cdn$86,486.

Financing activities provided cash of Cdn$3,813,500, with the entire amount provided by the issuance of capital stock. During the year, White Knight issued a total of 4,060,000 common shares: 1,500,000 common shares were issued pursuant to a private placement for proceeds of Cdn$2,370,000; 40,000 shares were issued for mineral property interests at a deemed value of Cdn$28,400; 230,000 shares were issued on the exercise of stock options for net proceeds of Cdn$120,125; and 2,290,000 shares were issued pursuant to the exercise of warrants for net proceeds of Cdn$1,421,304.

During the year White Knight’s cash position decreased by Cdn$2,113,068.

Year Ended June 30, 2004

Operating activities for the year ended June 30, 2004 used cash of Cdn$741,247, with the loss for the year of Cdn$1,664,257 reduced by items not affecting cash including stock-based compensation of Cdn$840,005 and write-off of deferred exploration costs of Cdn$241,549. Changes in non-cash working capital items included an increase in accounts receivable of Cdn$70,608, an increase in accounts payable and accrued liabilities of Cdn$12,714, and a decrease in amounts due to related parties of Cdn$153,168.

Investing activities used cash of Cdn$8,702,270. The largest component was the acquisition of temporary investments of Cdn$7,493,823. Acquisition of mineral property interests used cash of Cdn$611,213, and deferred exploration costs used cash of Cdn$442,661. Acquisition of equipment used cash of Cdn$89,321 and reclamation bonds were posted which used cash of Cdn$65,252.

Financing activities provided cash of Cdn$11,705,658, with the entire amount provided by the issuance of capital stock. During the year, White Knight issued a total of 20,870,734 common shares: 12,486,926 common shares were issued pursuant to private placements for gross proceeds of Cdn$9,599,998; 40,000 shares were issued for mineral property interests at a deemed value of Cdn$31,200; 2,134,500 shares were issued for the exercise of stock options for proceeds of Cdn$268,310; 6,084,308 shares were issued pursuant to the exercise of warrants for net proceeds of Cdn$2,377,872; and 125,000 common shares were issued for a finder’s fee.

During the year White Knight’s cash position increased by Cdn$2,262,141.

U.S. GAAP Reconciliation with Canadian GAAP

Under Canadian GAAP, mineral properties, including exploration, development and acquisition costs, are carried at cost and written down if the properties are abandoned, sold or if management decides not to pursue the properties. Under U.S. GAAP, all expenditures relating to mineral interests prior to the completion of a definitive feasibility study, which establishes proven and probable reserves, other than certain capitalized costs related to the acquisition of mineral property interests, must be expensed as incurred. Once a final feasibility study has been completed, additional costs incurred to bring a mine into production are capitalized as development costs.

Under U.S. GAAP, Statements of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, requires companies to establish a fair market value based method of accounting for stock-based compensation plans. White Knight has chosen to account for stock-based compensation using Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of White Knight’s stock at the date of

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grant over the option price. Effective July 1, 2003, White Knight elected to follow the fair value method of accounting for stock-based compensation.

New accounting and disclosure standards were introduced under Canadian GAAP for the fiscal year ending June 30, 2003. Accordingly, there were no differences between Canadian GAAP and United States GAAP for the years ended June 30, 2006, 2005 and 2004 other than those disclosed in the financial statements.

The reader is advised to consult White Knight’s audited annual consolidated financial statements for the year ended June 30, 2006, particularly Note 16, in the (Financial Statements of White Knight included in this Annex), for quantification of the differences.

Canadian GAAP Conflict in Accounting for Mineral Property Interests and Deferred Exploration Costs

In March 2000, the Accounting Standards Board of the Canadian Institute of Chartered Accountants, or CICA, issued Accounting Guideline No. 11 “Enterprises in the Development Stage,” or AcG 11. AcG 11 addresses three distinct issues: i) the capitalization of costs/expenditures; ii) impairment; and iii) disclosure. Prior to its issuance, development stage entities were exempt from following certain aspects of Canadian GAAP. AcG 11 requires that all companies account for transactions based on the underlying characteristics of the transaction rather than the maturity of the enterprise. In addition, AcG 11 requires specific disclosure of information by development stage companies and is effective no later than fiscal periods beginning on or after April 1, 2000, which in the case of White Knight, is the year ended June 30, 2001.

In March 2002, the Emerging Issues Committee, or EIC, of the CICA issued EIC-126 “Accounting by Mining Enterprises for Exploration Costs,” or EIC-126, which interprets how AcG 11 affects mining companies with respect to the deferral of exploration costs. EIC-126 refers to CICA Handbook Section 3061 “Property, Plant and Equipment,” or HB 3061, paragraph .21, which states that for a mineral property interest, the cost of the asset includes exploration costs if the enterprise considers that such costs have the characteristics of property, plant and equipment.

EIC-126 then states that a mining enterprise that has not established mineral reserves objectively, and therefore does not have a basis for preparing a projection of the estimated cash flow from the mineral property interest, is not precluded from considering the exploration costs to have the characteristics of property, plant and equipment. EIC-126 also sets forth the EIC’s consensus that a mining enterprise in the development stage is not required to consider the conditions in AcG 11 regarding impairment in determining whether exploration costs may be initially capitalized. With respect to impairment of capitalized exploration costs, EIC-126 sets forth the EIC’s consensus that a mining enterprise in the development stage that has not established mineral reserves objectively, and, therefore, does not have a basis for preparing a projection of the estimated cash flow from the property, is not obliged to conclude that capitalized costs have been impaired. However, such an enterprise should consider the conditions set forth in AcG 11 and HB 3061 in determining whether a subsequent write-down of capitalized exploration costs related to mineral property interest is required.

As disclosed above, White Knight considers that its mineral property interests and deferred exploration costs have the characteristics of property, plant and equipment, and, accordingly, White Knight has chosen to classify its mineral property interests and deferred exploration costs as tangible assets in accordance with its interpretation of Canadian GAAP.

Although White Knight believes its accounting policy is appropriate and consistent with Canadian GAAP, there is an alternative interpretation of Canadian GAAP that would consider them to be intangible assets as a result of the issuance of CICA Handbook Section 1581 “Business Combinations,” or HB 1581, and CICA Handbook Section 3062 “Goodwill and Other Intangible Assets,” or HB 3062.

This alternative interpretation under HB 1581 and HB 3062 would provide for the capitalization of a contract based mining asset as an intangible asset at its fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination. For exploration stage mineral property interests and deferred exploration costs such as those owned by White Knight, the excess of the carrying value over the residual value of the intangible assets would be amortized on a straight-line basis over the period in which White Knight expected to

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complete its exploration process or convert, develop or further explore the underlying properties. For White Knight, a reasonable estimate of this amortization period would be 5 years.

Consult White Knight’s audited annual consolidated financial statements for the year ended June 30, 2006 for the differences if White Knight had chosen to account for these costs as intangible assets under HB 1581 and HB 3062 effective July 1, 2001.

Variation in Operating Results

White Knight derives interest income on its cash and temporary investments, which depend on White Knight’s ability to raise funds.

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

Research and Development

White Knight conducts no research and development activities, nor is it dependent upon any patents or licenses.

Trend Information

White Knight knows of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on White Knight’s operations or financial condition.

Off-Balance Sheet Arrangements

White Knight does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on White Knight’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Tabular Disclosure of Contractual Obligations

White Knight has an interest in various exploration-stage mineral properties located in the State of Nevada. Certain of the underlying claims are leased from third-parties and have lease payments due. Other claims are unpatented mining claims on land owned by the Bureau of Land Management, or BLM, and have annual lease fees payable. All claims have Nevada county taxes due annually which vary by county.

Based upon its current and anticipated future claim holdings, White Knight estimates its land holding costs for the next three fiscal years to be the following:

Annual Estimated Property Holding Costs


Type of Cost	2007		2008		2009

Leases	$	79,438	$	85,379	$	90,469
BLM Fees	$	444,750	$	444,750	$	444,750
County Fees	$	30,243	$	30,243	$	30,243

White Knight also maintains reclamation bonds for exploration work on certain of its properties. These bonds are held by or in trust for the responsible government body who oversees White Knight’s exploration work. When exploration, development or mining activities cease on that property, White Knight is responsible for restoring the property as provided by law. If White Knight either does not, or is not able, to comply with the required restoration, the reclamation bond will be used to provide funds for the required restoration work. However, if White Knight

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completes the required restoration and the applicable government body is satisfied all requirements have been met, the reclamation bond for that property will be returned to White Knight.

The following is a list of White Knight’s reclamation bonds outstanding as of June 30, 2006.

Current

Government Body

$ Amount

Cdn$ Amount

Property

Status

Holding the Bond

of Bond

Cottonwood

Exploration

Nevada Division of Minerals

30,885

—

Gold Bar Horst

Exploration

Nevada Division of Minerals

7,586

—

Gold Pick

Exploration

Nevada Division of Minerals

8,698

—

Hunter

Exploration

Nevada Division of Minerals

2,613

—

Patty (Indian Ranch)

Exploration

BLM

77,600

—

McClusky Pass

Exploration

BLM, Nevada Division of Minerals

2,114

—

New Pass

Exploration

BLM

5,982

—

Slaven Canyon

Exploration

BLM

12,997

Unallocated Nevada

Exploration

BLM

53,421

—

Quito

Dropped

US Forest Service

5,000

—

Lookout

Dropped

B.C. Minister of Finance

—

3,500

MGM

Dropped

B.C. Minister of Finance

—

2,000

DISCLOSURES ABOUT WHITE KNIGHT’S MARKET RISK

White Knight’s mineral property interests are all currently at the exploration stage and White Knight’s operations are limited to exploring those properties. Therefore, White Knight’s believes its market risks are minimal. White Knight does, however, have future property payments due in U.S. dollars which we refer to herein as “$”. As a Canadian company, White Knight’s cash balances are kept in both Canadian and U.S. dollars funds. Therefore, White Knight is exposed to some exchange rate risk. White Knight considers the amount of risk to be manageable and does not currently, nor is it likely in the foreseeable future, to conduct hedging to reduce its exchange rate risk. A hypothetical 10% increase in the value of one Canadian dollar expressed in U.S. dollars as at June 30, 2006 would have caused a $404,000 increase in White Knight’s net assets as at June 30, 2006, and an equivalent decrease in the value of one Canadian dollar would have caused a $367,000 decrease in White Knight’s net assets as at June 30, 2006.

Glossary

The following glossary and metric equivalents have been taken from White Knight’s annual report on Form 20-F for the fiscal year ended June 30, 2006, filed with the SEC on October 20, 2006. These definitions should be read in conjunction with this Annex, and do not apply to other sections of this proxy statement.


Adit		A horizontal or nearly horizontal tunnel made for exploration or mining with one opening.

Alluvial		Material deposited by the action of running water.

Alteration		Any change in the mineral composition of a rock brought about by physical or chemical means.

Argillization		Alteration of the rock which produces clay minerals.

Audiomagnetotelluric		Geophysical technique which measures variations in the earth’s own electromagnetic field.

Au		Gold.

Barite		Barium sulphate.

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Basalt		A general term for dark-colored mafic igneous rocks, commonly extrusive but locally intrusive.

Bioclastic Turbidites		Submarine debris flows.

Breccia		A rock in which angular fragments are surrounded by a mass of fine-grained matrix.

Carbonate		A sediment formed by the organic or inorganic precipitation from aqueous solution of carbonates of calcium, magnesium, or iron; e.g., limestone and dolomite.

Chert		A hard, dense, sedimentary rock, consisting primarily of cryptocrystaline quartz.

CSAMT		Controlled Source Audio Magnetotelluric — geophysical method which measures the decay of an induced electromagnetic field.

Devonian		Geologic era 360 million years to 410 million years.

Dolomite		A carbonate sedimentary rock consisting of carbonate and magnesium. Often associated with and interbedded with limestone.

Embayment		Indentation in the profile of a coastline.

Facies		Environment in which a certain sedimentary rock unit is deposited.

Felsic		Intrusive or volcanic rock with a high silica content.

g/t		Grams per metric tonne.

Greenstone		Metamorphosed intermediate to basic volcanics.

Hematite		An oxide of iron, and one of iron’s most common ore minerals.

Horst		A relatively uplifted rock unit or block that is bounded by faults on its long sides.

Hydrothermal		The products or the actions of heated waters in a rock mass such as a mineral deposit precipitating from a hot solution.

Induced Polarization		Geophysical exploration method which measures decay of an induced charge.

Jasperoid		A dense, usually gray, siliceous rock which contains quartz instead of limestone or dolomite.

Karsting		The development of large open spaces (caves) by the process of solution collapse. This usually takes place in limestones or other calcium carbonate rich rocks.

Lower-plate		Generally refers to the eastern assemblage of northeastern Nevada.

Magnetotelluric Survey		An electromagnetic survey in which natural electric and magnetic fields are measured.

Miocene		Geologic era 23.7 Million years to 6.2 million years.

Micritic		Fine-grained carbonate rock.

Opt		Ounces per ton.

Paleozoic		Geologic era 570 million years to 245 million years.

ppb		Parts per billion.

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Pod		A roughly cylindrically-shaped body of ore that decreases at the ends.

Quarternary		The period of Earth’s history from about 2 million years ago to the present; also, the rocks and deposits of that age.

Rhyolite		A group of extrusive igneous rocks, typically porphyritic and commonly exhibiting flow texture, with phenocrysts of quartz and alkali feldspar in a glassy to cryptocrystalline groundmass; also, any rock in that group; the extrusive equivalent of granite.

Sediments		Solid fragmental material that originates from weathering of rocks and is transported or deposited by air, water, or ice, or that accumulates by other natural agents, such as chemical precipitation from solution or secretion by organisms, and that forms in layers on the Earth’s surface at ordinary temperatures in a loose, unconsolidated form; e.g., sand, gravel, silt, mud, alluvium.

Siliclastic		Sedimentary rock with a high silica content.

Siltstone		An indurated silt having the texture and composition of shale but lacking its fine lamination or fissility; a massive mudstone in which the silt predominates over clay.

Tertiary		Geologic era 57 million years to recent.

Upper-plate		Generally refers to the western assemblage of northeastern Nevada.

Terms Relating to Mineral Reserves and Resources

The following terms used in this Annex are Canadian mining terms defined in accordance with National Instrument 43-101 under the guidelines set out in Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines. The definitions of the terms mineral reserve, proven mineral reserve and probable mineral reserve under CIM standards are different than the definitions adopted by the SEC and applicable to U.S. companies filing reports with the SEC. It is the view of the SEC’s staff that:


	•	A final or bankable feasibility study is required to meet the requirements to designate reserves.

	•	A historic three year average price must be used in any reserve or cash flow analysis to designate reserves.

	•	To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities.

In addition, while the terms mineral resource, measured mineral resource, indicated mineral resource, and inferred mineral resource are recognized and required to be reported by Canadian regulations, the SEC does not recognize these terms. Information contained in this Annex concerning descriptions of mineralization, resources and reserves may not be comparable to similar information publicly reported by U.S. companies. Resources classified as indicated mineral resource and inferred mineral resource have an uncertain existence and uncertain as to their economic and legal feasibility. You should not assume that any part or all of an inferred resource exists, or is economically mineable.


Mineral Reserve		The economically mineable part of a measured or indicated mineral resource demonstrated by 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 might occur when the material is mined.

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Proven Mineral Reserve		The economically mineable part of 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 is justified.

Probable Mineral Reserve		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.

Mineral Resource		A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge.

Measured Mineral Resource		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.

Indicated Mineral Resource		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.

Inferred Mineral Resource		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.

Preliminary Feasibility Study		A comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, and economic factors and evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve.

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INDEPENDENT AUDITORS’ REPORT

To the Shareholders of

White Knight Resources Ltd.

We have audited the consolidated balance sheets of White Knight Resources Ltd. as at June 30, 2006 and 2005 and the consolidated statements of operations, shareholders’ equity and cash flows for the years ended June 30, 2006, 2005 and 2004 and the cumulative amounts from inception on December 18, 1986 to June 30, 2006. 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 with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2006 and 2005 and the results of its operations and its cash flows for the years ended June 30, 2006, 2005 and 2004 and the cumulative amounts from inception on December 18, 1986 to June 30, 2006 in accordance with Canadian generally accepted accounting principles.

/s/ DAVIDSON & COMPANY LLP

Chartered Accountants

Vancouver, Canada

August 22, 2006

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
-U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) to identify circumstances 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 August 22, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.

/s/ DAVIDSON & COMPANY LLP

Chartered Accountants

Vancouver, Canada

August 22, 2006

A Member of SC INTERNATIONAL

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

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

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WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS


	As at June 30
	2006			2005
	(Expressed in Canadian Dollars)

ASSETS
Current
Cash	$	11,397,885		$	282,459
Temporary investments (Note 3)		2,107,699			10,895,443
Receivables (net of allowance — $NIL; 2005 — $NIL)		117,490			176,164
Prepaid expenses		49,370			41,974

Total current assets		13,672,444			11,396,040
Mineral property interests (Note 4)		2,799,619			2,456,147
Deferred exploration costs (Note 5)		3,864,359			1,508,878
Equipment (Note 6)		930,853			139,118
Restricted reclamation bonds (Note 12)		234,783			196,692

Total assets	$	21,502,058		$	15,696,875


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities	$	315,515		$	161,831
Due to related parties (Note 7)		118,002			17,754

Total current liabilities		433,517			179,585
Asset retirement obligation (Note 8)		165,985

Total Liabilities		599,502			179,585

Shareholders’ equity
Capital stock (Note 9)
Authorized: unlimited common shares without par value
Issued and outstanding 59,384,972 (2005 — 54,089,386)		33,630,385			26,844,701
Contributed surplus		3,153,572			1,246,525
Deficit accumulated during the exploration stage		(15,881,401	)		(12,573,936	)

Total shareholders’ equity		20,902,556			15,517,290

Total liabilities and shareholders’ equity	$	21,502,058		$	15,696,875

Nature and continuance of operations (Note 1)
Commitments (Note 14)

On behalf of the Board:

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

E-39

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended June 30
	Cumulative
	Amounts from
	Inception on
	December 18, 1986
	to June 30, 2006			2006			2005			2004
	(Expressed in Canadian Dollars)

ADMINISTRATION COSTS
Amortization	$	220,145		$	34,051		$	30,546		$	13,893
Audit		255,423			116,362			48,696			10,950
Bank charges and interest		26,349			7,464			5,762			1,520
Consulting		1,283,627			123,809			116,588			82,540
Consulting — stock-based compensation (Note 9)		3,263,846			2,275,298			148,543			840,005
Investor relations and shareholder information		665,974			175,427			123,189			52,889
Legal		641,631			120,155			26,958			23,196
Management fees — related party (Note 7)		1,437,910			264,000			264,000			210,000
Office and miscellaneous		753,670			96,089			85,068			56,201
Rent		338,199			56,497			54,873			28,300
Telephone		204,215			21,183			16,444			8,898
Transfer agent and listing fees		305,597			43,589			31,029			55,506
Travel and entertainment		505,337			108,044			69,132			52,569
Wages and benefits		831,071			130,998			79,918			31,863

Loss before other items		(10,732,994	)		(3,572,966	)		(1,100,746	)		(1,468,330	)

OTHER ITEMS
Write-off of deferred exploration costs (Note 5)		(3,560,589	)		(143,783	)		(194,598	)		(241,549	)
Interest income		1,295,734			442,036			261,600			97,920
Option payments received (net)		633,519
Write-off of mineral property interests		(3,814,257	)
Gain (loss) on foreign exchange		125,574			(11,574	)		(60,377	)		(9,299	)
Gain (loss) on disposal of temporary investments		166,591			(23,927	)
Unrealized recovery (loss) on temporary investments (Note 3)		(8,846	)		2,749			31,404			(42,999	)
Gain (loss) on disposal of equipment		13,867						(757	)

		(5,148,407	)		265,501			37,272			(195,927	)

Loss for the period	$	(15,881,401	)	$	(3,307,465	)	$	(1,063,474	)	$	(1,664,257	)

Basic and diluted loss per common share				$	(0.06	)	$	(0.02	)	$	(0.04	)

Weighted average number of common shares outstanding					58,855,176			53,091,304			39,038,472

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

E-40

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY


									Deficit
									Accumulated
									During the
	Number of							Contributed	Exploration
	Shares		Price		Amount			Surplus	Stage			Total
	(Expressed in Canadian Dollars)

Balance, June 30, 1986			$		$			$	$			$
Shares issued for:
Incorporation		1
Initial offering		201,200		0.13		26,300							26,300
Loss for the period										(17,325	)		(17,325	)

Balance, June 30, 1987		201,201				26,300				(17,325	)		8,975
Shares issued for:
Initial offering		1,176,400		0.12		138,100							138,100
Loss for the year										(49,793	)		(49,793	)

Balance, June 30, 1988		1,377,601				164,400				(67,118	)		97,282
Loss for the year										(44,166	)		(44,166	)

Balance, June 30, 1989		1,377,601				164,400				(111,284	)		53,116
Shares issued for:
Mineral property interests		150,000		0.46		68,499							68,499
Exercise of stock options		332,680		0.40		133,072							133,072
Private placement		350,000		0.40		140,000							140,000
Private placement		250,000		0.50		125,000							125,000
Flow-through private placement		279,905		0.54		150,100							150,100
Exercise of agent’s warrants		105,000		0.40		42,000							42,000
Private placement expenses						(30,000	)						(30,000	)
Loss for the year										(282,410	)		(282,410	)

Balance, June 30, 1990		2,845,186				793,071				(393,694	)		399,377
Shares issued for:
Exercise of stock options		50,000		0.90		45,000							45,000
Exercise of stock options		262,250		0.28		73,430							73,430
Private placement		600,000		0.15		90,000							90,000
Private placement		263,158		0.95		250,000							250,000
Flow-through private placement		286,666		0.15		43,000							43,000
Loss for the year										(119,275	)		(119,275	)

Balance, June 30, 1991		4,307,260			$	1,294,501		$	$	(512,969	)	$	781,532

E-41

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

Deficit

Accumulated

During the

Number of
Contributed
Exploration

Shares Price Amount Surplus Stage Total

(Expressed in Canadian Dollars)

Balance, June 30, 1991
4,307,260 $ $ 1,294,501 $ $ (512,969 ) $ 781,532

Shares issued for:

Mineral property interests
100,000 0.29 29,000 29,000

Exercise of stock options
245,000 0.15 36,750 36,750

Debt settlement
114,308 0.53 60,869 60,869

Private placement
55,555 0.18 10,000 10,000

Finder’s fee
9,000 0.33 2,970 2,970

Private placement
300,000 0.33 99,000 99,000

Private placement
122,222 0.45 55,000 55,000

Exercise of warrants
460,000 0.20 92,000 92,000

Exercise of warrants
75,000 0.33 24,750 24,750

Loss for the year
(164,398 ) (164,398 )

Balance, June 30, 1992
5,788,345 1,704,840 (677,367 ) 1,027,473

Shares issued for:

Mineral property interests
250,000 0.20 50,000 50,000

Exercise of stock options
189,999 0.15 28,500 28,500

Exercise of stock options
395,000 0.20 79,000 79,000

Private placement
500,000 0.40 200,000 200,000

Private placement
20,000 0.45 9,000 9,000

Private placement
28,000 0.50 14,000 14,000

Loss for the year
(115,290 ) (115,290 )

Balance, June 30, 1993
7,171,344 2,085,340 (792,657 ) 1,292,683

Shares issued for:

Mineral property interests
190,000 0.24 46,000 46,000

Exercise of stock options
15,000 0.15 2,250 2,250

Exercise of stock options
132,000 0.21 27,720 27,720

Private placement
600,000 0.15 90,000 90,000

Private placement
300,000 0.23 67,500 67,500

Loss for the year
(1,051,873 ) (1,051,873 )

Balance, June 30, 1994
8,408,344 2,318,810 (1,844,530 ) 474,280

E-42

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

Deficit

Accumulated

During the

Number of
Contributed
Exploration

Shares Price Amount Surplus Stage Total

(Expressed in Canadian Dollars)

Shares issued for:

Mineral property interests
70,000 $ 0.17 $ 11,900 $ 11,900

Loss for the year
(84,711 ) (84,711 )

Balance, June 30, 1995
8,478,344 2,330,710 (1,929,241 ) 401,469

Balance, June 30, 1995
8,478,344 2,330,710 (1,929,241 ) 401,469

Shares issued for:

Mineral property interests
130,000 0.50 65,000 65,000

Exercise of stock options
4,000 0.62 2,480 2,480

Exercise of stock options
580,000 0.22 127,600 127,600

Exercise of stock options
265,000 0.30 79,500 79,500

Private placement
650,000 0.30 195,000 195,000

Private placement
1,800,000 0.15 270,000 270,000

Private placement
500,000 0.46 230,000 230,000

Private placement
2,000,000 0.68 1,360,000 1,360,000

Exercise of warrants
10,000 0.30 3,000 3,000

Exercise of warrants
600,000 0.17 102,000 102,000

Exercise of warrants
300,000 0.26 78,000 78,000

Loss for the year
(288,538 ) (288,538 )

Balance, June 30, 1996
15,317,344 4,843,290 (2,217,779 ) 2,625,511

Shares issued for:

Exercise of stock options
205,000 0.78 159,900 159,900

Exercise of stock options
9,500 0.62 5,890 5,890

Private placement
100,000 1.40 140,000 140,000

Private placement
3,600,000 1.00 3,600,000 3,600,000

Exercise of warrants
470,000 0.30 141,000 141,000

Exercise of warrants
225,000 0.15 33,750 33,750

Exercise of warrants
500,000 0.46 230,000 230,000

Loss for the year
(477,124 ) (477,124 )

Balance, June 30, 1997
20,426,844 9,153,830 (2,694,903 ) 6,458,927

Shares issued for:

Mineral property interests
70,000 1.32 92,700 92,700

Exercise of warrants
1,575,000 0.17 267,750 267,750

Loss for the year
(1,063,932 ) (1,063,932 )

Balance, June 30, 1998
22,071,844 9,514,280 (3,758,835 ) 5,755,445

E-43

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

Deficit

Accumulated

During the

Number of
Contributed
Exploration

Shares Price Amount Surplus Stage Total

(Expressed in Canadian Dollars)

Shares issued for:

Private placement
3,708,132 $ 0.38 $ 1,409,090 $ $ $ 1,409,090

Mineral property interests
70,000 0.41 28,500 28,500

Management bonus
500,000 0.30 150,000 150,000

Loss for the year
(2,173,417 ) (2,173,417 )

Balance, June 30, 1999
26,349,976 11,101,870 (5,932,252 ) 5,169,618

Balance, June 30, 1999
26,349,976 11,101,870 (5,932,252 ) 5,169,618

Shares issued for:

Mineral property interests
170,000 0.27 46,300 46,300

Loss for the year
(1,234,438 ) (1,234,438 )

Balance, June 30, 2000
26,519,976 11,148,170 (7,166,690 ) 3,981,480

Loss for the year
(642,586 ) (642,586 )

Balance, June 30, 2001
26,519,976 11,148,170 (7,809,276 ) 3,338,894

Shares issued for:

Mineral property interests
20,000 0.20 4,000 4,000

Exercise of stock options
300,000 0.10 30,000 30,000

Private placement
1,764,706 0.17 300,000 300,000

Finder’s fee
176,470

Loss for the year
(1,679,183 ) (1,679,183 )

Balance, June 30, 2002
28,781,152 11,482,170 (9,488,459 ) 1,993,711

Shares issued for:

Mineral property interests
40,000 0.20 8,000 8,000

Exercise of stock options
337,500 0.10 33,750 33,750

Loss for the year
(357,746 ) (357,746 )

Balance, June 30, 2003
29,158,652 11,523,920 (9,846,205 ) 1,677,715

E-44

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

Deficit

Accumulated

During the

Number of
Contributed
Exploration

Shares Price Amount Surplus Stage Total

(Expressed in Canadian Dollars)

Shares issued for:

Mineral property interests
40,000 $ 0.78 $ 31,200 $ $ $ 31,200

Exercise of stock options
1,712,500 0.10 171,250 171,250

Exercise of stock options
422,000 0.23 97,060 97,060

Private placement
2,500,000 0.40 1,000,000 1,000,000

Finder’s fee
125,000

Private placement
7,764,704 0.85 6,599,998 6,599,998

Private placement
2,222,222 0.90 2,000,000 2,000,000

Exercise of warrants
3,708,132 0.44 1,631,578 1,631,578

Exercise of warrants
1,941,176 0.25 485,294 485,294

Exercise of warrants
435,000 0.60 261,000 261,000

Private placement expenses
(896,428 ) 355,906 (540,522 )

Stock-based compensation
840,005 840,005

Loss for the year
(1,664,257 ) (1,664,257 )

Balance, June 30, 2004
50,029,386 22,904,872 1,195,911 (11,510,462 ) 12,590,321

Balance, June 30, 2004
50,029,386 22,904,872 1,195,911 (11,510,462 ) 12,590,321

Shares issued for:

Mineral property interests
40,000 0.71 28,400 28,400

Exercise of stock options (Note 9)
230,000 0.30 120,125 120,125

Exercise of warrants (Note 9)
1,965,000 0.60 1,179,000 1,179,000

Exercise of broker’s warrants (Note 9)
325,000 0.60 242,304 242,304

Private placement
1,500,000 1.58 2,370,000 2,370,000

Stock-based compensation
148,543 148,543

Less: Fair market value of stock options and broker’s warrants exercised
(97,929 ) (97,929 )

Loss for the year
(1,063,474 ) (1,063,474 )

Balance, June 30, 2005
54,089,386 26,844,701 1,246,525 (12,573,936 ) 15,517,290

E-45

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

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

E-46

WHITE KNIGHT RESOURCES LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended June 30
	Cumulative
	Amounts from
	Inception on
	December 18,
	1986 to
	June 30,
	2006			2006			2005			2004
	(Expressed in Canadian Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period	$	(15,881,401	)	$	(3,307,465	)	$	(1,063,474	)	$	(1,664,257	)
Items not affecting cash:
Amortization		220,145			34,051			30,546			13,893
Write-off of mineral property interests		3,814,257
Write-off of deferred exploration costs		3,560,589			143,783			194,598			241,549
Loss (gain) on disposal of equipment		(13,867	)					757
Stock-based compensation		3,263,846			2,275,298			148,543			840,005
Unrealized loss (recovery) on temporary investments		8,846			(2,749	)		(31,404	)		42,999
Loss (gain) on disposal of investments		(166,591	)		23,927
Shares issued for management bonus		150,000
Changes in non-cash working capital items:
Decrease (increase) in receivables		(117,490	)		58,674			(103,457	)		(70,608	)
Increase in prepaid expenses		(49,370	)		(7,396	)		(26,214	)		(4,374	)
Increase (decrease) in accounts payable and accrued liabilities		298,409			75,709			(51,640	)		12,714
Increase (decrease) in due to related parties		118,002			100,248			(52,616	)		(153,168	)

Net cash used in operating activities		(4,794,625	)		(605,920	)		(954,361	)		(741,247	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock		32,724,773			6,345,433			3,813,500			11,705,658

Net cash provided by financing activities		32,724,773			6,345,433			3,813,500			11,705,658

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of mineral property interests		(6,046,712	)		(288,777	)		(673,373	)		(611,213	)
Deferred exploration costs		(7,339,341	)		(2,413,657	)		(816,648	)		(442,661	)
Restricted reclamation bond refunded (posted)		(228,453	)		(31,761	)		15,547			(65,252	)
Acquisition (disposal) of temporary investments (net)		(1,909,954	)		8,806,566			(3,413,215	)		(7,493,823	)
Proceeds from disposal of equipment		58,141						1,968
Acquisition of equipment		(1,065,944	)		(696,458	)		(86,486	)		(89,321	)

Net cash provided by (used in) investing activities		(16,532,263	)		5,375,913			(4,972,207	)		(8,702,270	)

Increase (decrease) in cash during the period		11,397,885			11,115,426			(2,113,068	)		2,262,141
Cash, beginning of period					282,459			2,395,527			133,386

Cash, end of period	$	11,397,885		$	11,397,885		$	282,459		$	2,395,527

Supplemental disclosures with respect to cash flows (Note 13)

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

E-47

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

JUNE 30, 2006


1.	NATURE AND CONTINUANCE OF OPERATIONS

White Knight Resources Ltd. (the “Company”) is a Canadian company incorporated in British Columbia. The Company is primarily engaged in the acquisition and exploration of mineral property interests.

At the date of these consolidated financial statements, the Company has not been able to identify a known body of commercial grade ore on any of its mineral property interests. The ability of the Company to realize the costs it has incurred to date on these mineral property interests is dependent upon the Company being able to lever its property interests and cash, by way of exploration activities and option/joint ventures, into assets of greater value or to identify a commercial ore body, to finance its exploration costs and to resolve any environmental, regulatory or other constraints which may hinder the successful development of the mineral property interest. To date, the Company has not earned revenues and is considered to be in the exploration stage.

These consolidated financial statements have been prepared assuming the Company will continue on a going concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, or other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. The Company has sufficient resources to meet its obligations for the foreseeable future at its current level of activity.

There can be no assurance that the Company will be able to continue to raise funds in which case the Company may be unable to meet its obligations. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded on the consolidated balance sheets.

All amounts are in Canadian dollars unless otherwise stated.


	2006			2005

Working capital	$	13,238,927		$	11,216,455
Deficit		(15,881,401	)		(12,573,936	)


2.	SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). The significant accounting policies adopted by the Company are as follows:

Use of estimates

The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the year. Actual results could differ from these estimates.

E-48

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Principles of consolidation

These consolidated financial statements include the accounts of the Company and the following subsidiaries, all of which are 100% owned:

White Knight Gold (U.S.) Inc.
CUN Minerals Inc.
Quito Gold Corp.

All material inter-company transactions have been eliminated upon consolidation.

Cash

Cash consists of cash on hand and highly liquid investments with original maturities of three months or less. At June 30, 2006 and 2005, cash consisted of cash and guaranteed investment certificates held in financial institutions.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company places its cash with high quality financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts. The Company believes that credit risk associated with cash is remote.

Temporary investments

Temporary investments are recorded at the lower of cost or market on an aggregate basis. For temporary investments in which unrealized losses had been recognized in a previous year, any subsequent recoveries in market value are recorded up to original cost. This occurred during fiscal 2006 and 2005.

Mineral property interests and deferred exploration costs

The Company records mineral property interests, which consist of the right to explore for mineral deposits, at cost. The Company records deferred exploration costs, which consist of costs attributable to the exploration of mineral property interests, at cost. All direct and indirect costs relating to the acquisition and exploration of these mineral property interests are capitalized on the basis of specific claim blocks until the mineral property interests to which they relate are placed into production, the mineral property interests are disposed of through sale or where management has determined there to be an impairment. If a mineral property interest is abandoned, the mineral property interest and deferred exploration costs will be written off to operations in the period of abandonment.

On an ongoing basis, the capitalized costs are reviewed on a property-by-property basis to consider if there is any impairment on the subject mineral property interest. Management’s determination for impairment is based on: i) whether the Company’s exploration programs on the mineral property interests have significantly changed, such that previously identified resource targets are no longer being pursued; ii) whether exploration results to date are promising and whether additional exploration work is being planned in the foreseeable future or iii) whether remaining lease terms are insufficient to conduct necessary studies or exploration work. As at June 30, 2006 and 2005, management believes that no impairment relating to the mineral property interests and deferred exploration costs was required.

The recorded cost of mineral property interests and deferred exploration costs is based on cash paid and the assigned value of share consideration issued for mineral property interest acquisitions and exploration costs incurred. The recorded amount may not reflect recoverable value as this will be dependent on future development programs, the nature of the mineral deposit, commodity prices, adequate funding and the ability of the Company to bring its projects into production.

E-49

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Canadian GAAP Conflict in Accounting for Mineral Property Interests and Deferred Exploration Costs

In March 2000, the Accounting Standards Board of the Canadian Institute of Chartered Accountants (“CICA”) issued Accounting Guideline No. 11 “Enterprises in the Development Stage” (“AcG 11”). AcG 11 addresses three distinct issues: i) the capitalization of costs/expenditures; ii) impairment; and iii) disclosure. Prior to its issuance, development stage entities were exempt from following certain aspects of Canadian GAAP. AcG 11 requires that all companies account for transactions based on the underlying characteristics of the transaction rather than the maturity of the enterprise. In addition, AcG 11 requires specific disclosure of information by development stage companies.

In March 2002, the Emerging Issues Committee (“EIC”) of the CICA issued EIC-126 “Accounting by Mining Enterprises for Exploration Costs” (“EIC-126”) which interprets how AcG 11 affects mining companies with respect to the deferral of exploration costs. EIC-126 refers to CICA Handbook Section 3061 “Property, Plant and Equipment” (“HB 3061”), paragraph .21, which states that for a mineral property interest, the cost of the asset includes exploration costs if the enterprise considers that such costs have the characteristics of property, plant and equipment.

As disclosed above, the Company considers that its mineral property interests and deferred exploration costs have the characteristics of property, plant and equipment, and, accordingly, the Company has chosen to classify its mineral property interests and deferred exploration costs as tangible assets in accordance with its interpretation of Canadian GAAP.

Although the Company believes its accounting policy is appropriate and consistent with Canadian GAAP, there is an alternative interpretation of Canadian GAAP that would consider them to be intangible assets as a result of the issuance of CICA Handbook Section 1581 “Business Combinations” (“HB 1581”) and CICA Handbook Section 3062 “Goodwill and Other Intangible Assets” (“HB 3062”).

This alternative interpretation under HB 1581 and HB 3062 would provide for the capitalization of a contract based mining asset as an intangible asset at its fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination. For exploration stage mineral property interests and deferred exploration costs such as those owned by the Company, the excess of the carrying value over the residual value of the intangible assets would be amortized on a straight-line basis over the period in which the Company expected to complete its exploration process or convert, develop or further explore the underlying properties. For the Company, a reasonable estimate of this amortization period would be 5 years.

In September, 2004, the CICA amended the guidance in HB 3062 to remove the example of mineral rights as this reference may have implied that mineral rights are necessarily an intangible asset. This amendment confirmed the Company’s current method of accounting for mineral property interests. Unless alternative guidance is provided, the Company expects to continue accounting for these assets as tangible assets.

E-50

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Asset retirement obligations

Effective July 1, 2004, the Company recognizes the fair value of a liability for an asset retirement obligation in the year in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability. Changes in the liability for an asset retirement obligation due to the passage of time will be measured by applying an interest method of allocation. The amount will be recognized as an increase in the liability and an accretion expense in the statement of operations. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the cost of the related long-lived asset.

Impairment of long-lived assets and long-lived assets to be disposed of

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount and the fair value less costs to sell.

Risk management

The Company’s largest non-monetary assets are its mineral property interests in the United States of America. The Company could accordingly be at risk for foreign currency fluctuations and developing legal and political environments.

The Company does not maintain significant cash or other monetary assets or liabilities in the United States.

The Company relies on local consultants for the management of its exploration activities and for legal and accounting matters.

Equipment and amortization

Equipment is recorded at cost and amortization is calculated at the following rates per annum using the declining-balance method:


Vehicles and technical equipment	30	%
Office equipment	20	%

Foreign currency translation

The Company’s subsidiaries are integrated foreign operations and its operating results are translated into Canadian dollar equivalents using the temporal method. Monetary items are translated at the exchange rate in effect at the balance sheet date; non-monetary items are translated at historical exchange rates. Income and expense items are translated at the average exchange rate for the period. Translation gains and losses are reflected in loss for the year.

Stock-based compensation

The Company has an employee stock option plan. The Company recognizes an expense arising from stock options granted to both employees and non-employees using the fair value method. The fair value of option grants is generally established at the date of grant using the Black Scholes option pricing model and the compensation amount, equal to the option’s fair value, is then recognized over the options vesting periods.

E-51

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future income taxes

Future income taxes are recorded using the asset and liability method. Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment or enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.

Loss per share

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. The weighted average number of common shares outstanding at June 30, 2006 of 58,855,176 (2005 — 53,091,304; 2004 — 39,038,472) does not include the 1,500,000 (2005 — 9,808,233; 2004 — 11,964,899) warrants outstanding and the 5,120,000 (2005 — 3,385,000; 2004 — 3,665,000) stock options outstanding.

Basic loss per share is calculated using the weighted-average number of shares outstanding during the year.

Comprehensive income (loss)

SFAS No. 130 “Reporting Comprehensive Income” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at June 30, 2006, the Company has no items that represent comprehensive loss, and therefore has not included a schedule of comprehensive loss in the financial statements.

Comparative figures

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


3.	TEMPORARY INVESTMENTS

Temporary investments consist of highly liquid bonds with a carrying value at June 30, 2006 of $2,107,699 and a fair value of $2,155,981. The recovery reported in the consolidated financial statements of $2,749 (2005 — $31,404) related to temporary investments is a partial recovery of the unrealized loss on temporary investments reported in fiscal 2004 of $42,999.

E-52

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. MINERAL PROPERTY INTERESTS


	Balance at							Balance at
	June 30,							June 30,
	2005		Additions		Recovery			2006

Nevada Properties
Benmark	$	61,163	$	19,955	$			$	81,118
Celt		283,867		1,052					284,919
Cottonwood		93,403		66,811					160,214
Fye Canyon		173,778		47					173,825
Gold Bar Horst		120,828		28,409					149,237
Gold Pick		19,555		5,001					24,556
Goldstone		22,684		9,625					32,309
Hunter		88,788		48,103					136,891
Ian		18,930		12,387					31,317
Knolls		58,154		27,948					86,102
McClusky Pass		96,737		37,723					134,460
New Pass		419,727		1,062		(1,057	)		419,732
Pat Canyon		81,163		27,634					108,797
Patty (formerly Indian Ranch)		108,402							108,402
Slaven Canyon		254,556		110,871					365,427
South Cabin Creek		34,349		13,040					47,389
Squaw Creek		377,471		1,498		(108,708	)		270,261
Tonkin Summit		100,788		28,875					129,663
Other		41,804		13,196					55,000

Total Nevada Properties	$	2,456,147	$	453,237	$	(109,765	)	$	2,799,619

E-53

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance at
Balance at

June 30,
June 30,

2004 Additions Recovery 2005

Nevada Properties

Benmark
$ 24,922 $ 36,241 $ $ 61,163

Celt
106,057 194,427 (16,617 ) 283,867

Cottonwood
58,016 35,387 93,403

Fye Canyon
119,889 57,559 (3,670 ) 173,778

Gold Bar Horst
82,543 38,285 120,828

Gold Pick
10,811 8,744 19,555

Goldstone
19,846 2,838 22,684

Hunter
62,830 25,958 88,788

Ian
18,930 18,930

Knolls
58,154 58,154

McClusky Pass
56,194 40,543 96,737

New Pass
402,981 17,888 (1,142 ) 419,727

Pat Canyon
34,965 46,198 81,163

Patty (formerly Indian Ranch)
108,402 108,402

Slaven Canyon
163,314 91,242 254,556

South Cabin Creek
17,426 16,923 34,349

Squaw Creek
426,563 25,511 (74,603 ) 377,471

Tonkin Summit
59,615 41,173 100,788

Other
41,804 41,804

Total Nevada Properties
$ 1,754,374 $ 797,805 $ (96,032 ) $ 2,456,147

E-54

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance at
Balance at

June 30,
June 30,

2003 Additions Recovery 2004

Nevada Properties

Benmark
$ $ 24,922 $ $ 24,922

Celt
106,057 106,057

Cottonwood
30,692 27,324 58,016

Fye Canyon
119,889 119,889

Gold Bar Horst
61,700 20,843 82,543

Gold Pick
8,202 2,609 10,811

Goldstone
19,846 19,846

Hunter
36,203 26,627 62,830

McClusky Pass
400 55,794 56,194

New Pass
387,381 15,600 402,981

Pat Canyon
34,965 34,965

Patty (formerly Indian Ranch)
108,402 108,402

Slaven Canyon
54,177 109,137 163,314

South Cabin Creek
13,052 4,374 17,426

Squaw Creek
404,550 22,013 426,563

Tonkin Summit
59,615 59,615

Total Nevada Properties
$ 1,104,759 $ 649,615 $ $ 1,754,374

Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral claims. The Company has investigated title to all of its mineral property interests and, to the best of its knowledge, expects title to all of its interests to be in good standing. The mineral property interests in which the Company has committed to earn an interest are located in the United States and the Company is therefore relying on advice by legal counsel who are basing such advice on the laws of the United States.

Celt, Eureka County, Nevada

In fiscal 2004, the Company acquired the property by staking. During the 2005 fiscal year, the Company entered into a Financing and Acquisition Agreement with Teck Cominco American Incorporated (“TCAI”) whereby TCAI was granted the option to earn an initial 51% interest in the property. The terms of the agreement provide for exploration expenditures of US$4,000,000 and cash payments of US$750,000 (US$50,000 paid) which must be incurred and paid to the Company’s U.S. subsidiary in annual increments prior to December 31, 2008. TCAI has made a firm commitment to incur US$500,000 in exploration expenditures by December 31, 2005 (completed). Upon TCAI vesting its 51% interest, TCAI and the Company will form a joint venture to further develop the property. When the joint venture completes the earlier of US$8.0 million in expenditures or a preliminary feasibility study, TCAI will have a one-time option to elect to earn an additional 9% interest in the property by funding and completing a feasibility study. Upon TCAI earning its additional interest and the approval of a production plan, the Company will have the option to request that TCAI arrange financing for the Company’s share of the capital costs required to develop the property. If the Company exercises this option TCAI shall commit to use its best efforts to arrange or provide project debt financing for not less than 60% of projected capital costs on a limited recourse basis after technical completion. If project costs exceed the amount available for debt financing

E-55

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and the parties elect nonetheless to put the property into production then at the Company’s election TCAI shall also arrange or provide the Company’s share of equity financing on a subordinate loan basis at LIBOR plus 4%. The property is comprised of 608 claims.

Cottonwood, Eureka County, Nevada

In fiscal 2002, the Company staked 56 claims and executed a mining lease agreement to acquire six adjacent claims. Under the terms of the agreement, the Company has made lease payments totalling US$9,000 and has issued 80,000 common shares of the Company at a value of $69,800. The Company is required to make further annual lease payments of US$5,000. The Company has staked an additional 57 claims in the surrounding area.

Fye Canyon, Eureka County, Nevada

In fiscal 2004, the Company executed a mining lease agreement to acquire 114 claims (the “Underlying Fye Agreement”). Under the terms of the agreement, the Company has made an initial lease payment of US$5,000 which will increase by US$5,000 per year to a maximum of US$50,000 per year. The underlying royalty retained by the owner is 2% of net smelter returns up to a maximum of US$1,000,000 after which it is reduced to 1% of net smelter returns to a maximum of US$5,000,000. During the 2005 fiscal year, the Company entered into a Financing and Acquisition Agreement with TCAI whereby TCAI was granted the option to earn an initial 51% interest in the property. The terms of the agreement provide for exploration expenditures of US$4,000,000, cash payments of US$750,000 (US$50,000 paid) which must be incurred and paid to the Company’s U.S. subsidiary in annual increments prior to December 31, 2008, and the assumption of all obligations under the Underlying Fye Agreement. TCAI completed a firm commitment to incur US$500,000 in exploration expenditures by December 31, 2005. Upon TCAI vesting its 51% interest, TCAI and the Company will form a joint venture to further develop the property. When the joint venture completes the earlier of US$8.0 million in expenditures or a preliminary feasibility study, TCAI will have a one-time option to elect to earn an additional 9% interest in the property by funding and completing a feasibility study. Upon TCAI earning its additional interest and the approval of a production plan, the Company will have the option to request that TCAI arrange financing for the Company’s share of the capital costs required to develop the property. If the Company exercises this option TCAI shall commit to use its best efforts to arrange or provide project debt financing for not less than 60% of projected capital costs on a limited recourse basis after technical completion. If project costs exceed the amount available for debt financing and the parties elect nonetheless to put the property into production then at the Company’s election TCAI shall also arrange or provide the Company’s share of equity financing on a subordinate loan basis at LIBOR plus 4%. An additional 231 claims have been staked in the area of interest.

Hunter, Eureka County, Nevada

In fiscal 2002, the Company staked 46 claims and executed a mining lease agreement to acquire two adjacent claims. Under the terms of the agreement, the Company has made lease payments totalling US$14,000 and issued 100,000 common shares of the Company at a value of $73,800. The Company is required to make further annual lease payments of US$7,000.

Patty (formerly Indian Ranch), Eureka County, Nevada

In fiscal 1994, the Company entered into a lease agreement for a 100% interest in 48 claims by issuing 100,000 common shares of the Company. The agreement is subject to a 6% net smelter return royalty payable to the lessee. The agreement was amended during a prior year whereby the Company secured the ability to buy down the 6% net smelter return royalty to 3% by making a payment of US$500,000 and extending the lease term to 2014. The Company holds an additional 496 claims within the area of interest.

E-56

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 1997, the Company entered into an option agreement with Chapleau Resources Ltd. (“Chapleau”). Pursuant to the terms of the agreement and the subsequent amendment, Chapleau was vested a 40% undivided interest in the property in 2001.

In fiscal 2001, the Company and Chapleau entered into an option agreement with Kennecott Exploration Company (“Kennecott”) whereby Kennecott could earn a 60% interest in the property by making certain option payments and incurring certain exploration expenditures. After paying the Company certain option payments, Kennecott terminated the agreement in November 2001. Upon termination of the Kennecott agreement, Chapleau’s interest in the property was reduced to a 25% undivided interest, leaving the Company with a 75% undivided interest in the property.

In fiscal 2003, the Company and Chapleau entered into an option-joint venture agreement with Placer Dome U.S. Inc. (“PDUS”). Under the terms of the agreement, PDUS may earn a 60% interest in the property by incurring minimum work expenditures of US$2.0 million over a four year period and reimbursing the companies for their 2002 claim filing costs. During fiscal 2005, PDUS provided notice that it had completed the work expenditure requirement and was exercising its right to vest its 60% ownership. The Company now owns an undivided 30% interest.

New Pass, Churchill County, Nevada

In fiscal 1998, the Company purchased a 100% interest in the property from Quest USA Resources Inc. by making payments totalling US$165,000, subject to a 2.75% net smelter return royalty. In fiscal 2000, the Company purchased the 2.75% net smelter return royalty by issuing 100,000 common shares of its capital stock to the vendor. In fiscal 2005, the Company granted Consolidated Odyssey Exploration Inc. (“ODE”) an option to earn an initial 50% interest in the property. The Company paid a finders fee of $10,000 with respect to the ODE agreement. In February 2005, ODE assigned all of its rights under the agreement to Bonaventure Enterprises Inc. (“Bonaventure”). Under the terms of the agreement, Bonaventure must incur US$2,000,000 in exploration expenditures, issue 500,000 shares and make option payments totalling US$500,000 over a 4-year period (US$125,000 and 200,000 shares valued at $44,617 received). Upon vesting a 50% interest, Bonaventure may elect to earn an additional 10% interest by financing the completion of a feasibility study. The property is comprised of 107 claims.

Slaven Canyon, Lander County, Nevada

In fiscal 2002, the Company acquired 51 claims by staking. In fiscal 2003, the Company acquired 17 claims by staking and acquired an additional 642 acres of land contiguous to the Company’s claims by executing three lease agreements which provide for escalating lease payments. In fiscal 2004, the Company acquired an additional 190 claims by staking and acquired an additional 350 acres of land contiguous to the Company’s claims by executing seven lease agreements which provide for cash payments totalling US$7,400 on signing and escalating lease payments thereafter. The underlying royalty retained by the owners ranges from 1/2% of net smelter returns to 31/2% of net smelter returns with a buy-down provision allowing the Company to reduce the underlying royalty to a 2% net smelter return by paying US$1,500,000. In July, 2005, the Company acquired an additional 320 acres of land contiguous to the Company’s claims by executing a lease agreement which provides for a cash payment of US$7,619 and re-imbursement of fees of US$15,000 upon signing (both payments made), and escalating lease payments thereafter. The underlying royalty retained by the owner is 2.75%.

Squaw Creek, Elko County, Nevada

Since 1996, the Company has held a 100% interest in 151 claims located in Elko County which were acquired by staking. During the 2005 fiscal year, the Company granted ODE an option to earn an initial 50% interest in the property. The Company paid a finders fee of $10,000 with respect to the ODE agreement. In February 2005, ODE assigned all of its rights under the agreement to Bonaventure. Under the terms of the agreement, Bonaventure must

E-57

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

incur US$2,000,000 in exploration expenditures, issue 500,000 shares and make option payments totaling US$500,000 over a 4-year period (US$125,000 and 200,000 shares at a value of $44,617 received). Upon vesting a 50% interest, Bonaventure may elect to earn an additional 10% interest by financing the completion of a feasibility study.

Other Nevada Properties

In fiscal 2002, the Company acquired a 100% interest by staking the South Cabin Creek and Gold Bar Horst properties. In fiscal 2003, the Company acquired a 100% interest in the Gold Pick property by staking. In fiscal 2004, the Company acquired the McClusky Pass, Pat Canyon, Tonkin Summit, Benmark, and Goldstone properties. During the 2005 fiscal year, the Company acquired the Ian and Knolls properties.


5.	DEFERRED EXPLORATION COSTS


	Balance at						Balance at
	June 30,						June 30,
By Type of Cost	2005			Additions			2006

Assays	$	713,694		$	170,016		$	883,710
Consulting		2,875,000			573,571			3,448,571
Drafting and report preparation		431,177			12,385			443,562
Drilling		3,103,814			1,474,859			4,578,673
Field operations		847,547			151,922			999,469
Reclamation		191,795			176,375			368,170
Recording		80,079						80,079
Supervision		374,039			17,668			391,707
Surveys		740,154			70,595			810,749
Trenching and site preparation		397,332			75,376			472,708
Recovery		(4,998,875	)		(223,503	)		(5,222,378	)
Write-off		(3,246,878	)		(143,783	)		(3,390,661	)

Total	$	1,508,878		$	2,355,481		$	3,864,359

E-58

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance at
Balance at

June 30,
June 30,

By Type of Cost
2004 Additions 2005

Assays
$ 681,131 $ 32,563 $ 713,694

Consulting
2,577,377 297,623 2,875,000

Drafting and report preparation
416,202 14,975 431,177

Drilling
2,753,845 349,969 3,103,814

Field operations
771,641 75,906 847,547

Reclamation
179,489 12,306 191,795

Recording
80,079 80,079

Supervision
356,723 17,316 374,039

Surveys
497,305 242,849 740,154

Trenching and site preparation
368,921 28,411 397,332

Recovery
(4,897,361 ) (101,514 ) (4,998,875 )

Write-off
(3,052,280 ) (194,598 ) (3,246,878 )

Total
$ 733,072 $ 775,806 $ 1,508,878


	Balance at						Balance at
	June 30,						June 30,
By Type of Cost	2003			Additions			2004

Assays	$	680,604		$	527		$	681,131
Consulting		2,342,159			235,218			2,577,377
Drafting and report preparation		393,336			22,866			416,202
Drilling		2,753,845						2,753,845
Field operations		739,812			31,829			771,641
Reclamation		178,609			880			179,489
Recording		80,079						80,079
Supervision		356,177			546			356,723
Surveys		320,921			176,384			497,305
Trenching and site preparation		368,921						368,921
Recovery		(4,897,361	)					(4,897,361	)
Write-off		(2,810,731	)		(241,549	)		(3,052,280	)

Total	$	506,371		$	226,701		$	733,072

E-59

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance at
Balance at

June 30,
June 30,

By Property
2005 Additions Recoveries Write-offs 2006

Nevada Properties

Benmark
$ 6,743 $ 25,388 $ $ $ 32,131

Celt
70,920 4,729 (58,144 ) 17,505

Cottonwood
105,702 351,546 457,248

Fye Canyon
78,139 816 (58,144 ) 20,811

Gold Bar Horst
54,943 92,504 147,447

Gold Pick
75,290 389,571 464,861

Goldstone
3,864 3,864

Hunter
24,926 9,260 34,186

Ian
625 625

Knolls
9,636 11,723 21,359

McClusky Pass
71,157 458,007 529,164

New Pass
162,063 9,301 (107,215 ) 64,149

Pat Canyon
22,846 22,846

Patty (formerly Indian Ranch)
24,223 92,487 116,710

Slaven Canyon
730,729 1,075,530 1,806,259

South Cabin Creek
34,106 4,539 38,645

Tonkin Summit
32,966 53,583 86,549

General exploration
143,783 (143,783 )

Total Nevada Properties
$ 1,508,878 $ 2,722,767 $ (223,503 ) $ (143,783 ) $ 3,864,359

E-60

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance at
Balance at

June 30,
June 30,

By Property
2004 Additions Recoveries Write-offs 2005

Nevada Properties

Benmark
$ 2,091 $ 4,652 $ $ $ 6,743

Celt
24,295 46,625 70,920

Cottonwood
30,807 74,895 105,702

Fye Canyon
31,495 46,644 78,139

Gold Bar Horst
40,975 13,968 54,943

Gold Pick
60,933 14,357 75,290

Goldstone
2,920 944 3,864

Hunter
23,028 1,898 24,926

Ian
625 625

Knolls
9,636 9,636

McClusky Pass
21,506 49,651 71,157

New Pass
237,246 11,919 (87,102 ) 162,063

Pat Canyon
13,007 9,839 22,846

Patty (formerly Indian Ranch)
12,395 11,828 24,223

Slaven Canyon
199,521 531,208 730,729

South Cabin Creek
26,322 7,784 34,106

Squaw Creek
2,227 12,185 (14,412 )

Tonkin Summit
4,304 28,662 32,966

General exploration
194,598 (194,598 )

Total Nevada Properties
$ 733,072 $ 1,071,918 $ (101,514 ) $ (194,598 ) $ 1,508,878

E-61

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance at
Balance at

June 30,
June 30,

By Property
2003 Additions Write-offs 2004

Nevada Properties

Benmark
$ $ 2,091 $ $ 2,091

Celt
24,295 24,295

Cottonwood
30,807 30,807

Fye Canyon
31,495 31,495

Gold Bar Horst
40,975 40,975

Gold Pick
47,939 12,994 60,933

Goldstone
2,920 2,920

Hunter
23,028 23,028

McClusky Pass
7,266 14,240 21,506

New Pass
229,959 7,287 237,246

Pat Canyon
13,007 13,007

Patty (formerly Indian Ranch)
10,099 2,296 12,395

Slaven Canyon
88,532 110,989 199,521

South Cabin Creek
26,322 26,322

Squaw Creek
1,444 783 2,227

Tonkin Summit
4,304 4,304

General exploration
241,549 (241,549 )

Total Nevada Properties
$ 506,371 $ 468,250 $ (241,549 ) $ 733,072


6.	EQUIPMENT


	2006						2005
			Accumulated		Net Book				Accumulated		Net Book
	Cost		Amortization		Value		Cost		Amortization		Value

Vehicles	$	93,552	$	40,476	$	53,076	$	76,745	$	24,156	$	52,589
Technical equipment		847,526		20,602		826,924		41,041		14,221		26,820
Office equipment		79,378		28,525		50,853		76,884		17,175		59,709

	$	1,020,456	$	89,603	$	930,853	$	194,670	$	55,552	$	139,118


7.	RELATED PARTY TRANSACTIONS

During the year ended June 30, 2006, the Company entered into the following transactions with related parties:

a) Paid or accrued $264,000 (2005 — $264,000; 2004 — $210,000) in management fees to directors and officers of the Company and to companies controlled by directors of the Company.

b) Paid or accrued $127,504 (2005 — $111,223; 2004 — $115,879) in consulting fees to directors and officers of the Company and to companies controlled by directors of the Company, of which $111,636 (2005 — $111,223; 2004 — $115,879) is included in or written-off to deferred exploration costs.

c) Paid or accrued $117,770 (2005 — $8,815; 2004 — $NIL) in administrative fees to officers and a company controlled by a director of the Company.

E-62

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At June 30, 2006, there is $118,002 (2005 — $17,754) payable to directors and officers of the Company and to companies controlled by directors of the Company. The amounts are unsecured and non-interest bearing.

The Company entered into consulting agreements with directors and officers of the Company and to companies controlled by directors of the Company. The annual consulting fee commitments are as follows:


2007	$	324,000
2008		162,000

	$	486,000

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


8.	ASSET RETIREMENT OBLIGATION

The following table presents the aggregate carrying amount of the obligation associated with the retirement of the properties:


	2006		2005

Asset retirement obligation	$	165,985	$

The undiscounted amount of cash flows, required over the estimated reserve life of the underyling assets, to settle the obligation, adjusted for inflation, is estimated at $196,768 (2005 — $NIL). The obligation was calculated using a credit-adjusted risk free discount rate of 4% and an inflation rate of 4.1%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred with the majority of costs expected to occur when the properties are disposed of.


9.	CAPITAL STOCK

Share issuances

During the 2006 fiscal year the Company had no share issuances other than those issued for mineral property interests, exercise of warrants and stock options.

During the 2005 fiscal year the Company completed a private placement of 1,500,000 units at $1.58, each unit consisting of one common share and one non-transferable share purchase warrant, each warrant entitling the holder to purchase an additional share at $2.50 for one year.

During the 2004 fiscal year the Company completed three private placements:

a) 2,500,000 units at $0.40, each unit consisting of one common share and one non-transferable share purchase warrant, each warrant entitling the holder to purchase an additional share at $0.60 for two years (435,000 warrants exercised during the year) with an additional provision that if the closing price of the Company’s shares exceeds $0.95 for a period of more than 20 business days, the warrants must be exercised within two weeks of notice (triggered subsequent to year end). A finder’s fee of 125,000 units were issued as well as finder’s warrants valued at $47,304 entitling the holder to acquire 200,000 shares of the Company at a price of $0.60 for one year; subject to the same additional provision as for the placees (triggered subsequent to year end);

b) 7,764,704 units at $0.85, each unit consisting of one common share and one non-transferable share purchase warrant, each warrant entitling the holder to purchase an additional share at $1.25 for 18 months.

E-63

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Brokers’ warrants valued at $239,567 were issued entitling the holder to acquire 543,529 shares of the Company at a price of $1.25, exercisable for 18 months; and

c) 2,222,222 units at $0.90, each unit consisting of one common share and one-half non-transferable share purchase warrant, each one warrant entitling the holder to purchase an additional share at $1.25 for one year. Brokers’ warrants valued at $69,035 were issued entitling the holder to acquire 155,555 shares of the Company at a price of $1.25, exercisable for 1 year.

d) Share issuance costs related to private placements during the year totalled $540,522.

Stock options

Under the Company’s stock option plan effective November 4, 2002 and amended December 12, 2003, the Company may grant options for up to 7,072,935 common shares to directors, employees and consultants at exercise prices to be determined by the market value on the date of grant. Vesting of options is made at the discretion of the Board of Directors at the time the options are granted with the exception of options granted in relation to investor relations. Options granted to consultants engaged in investor relations activities vest no earlier than as to one-quarter upon the grant date and a further one-quarter after each of the following three three-month periods. The options can be granted for a maximum term of 10 years.

At June 30, 2006, the following incentive stock options were outstanding:


Number		Exercise
of Options		Price		Expiry Date

	755,500	$	0.23	January 23, 2008
	2,074,500		0.41	September 23, 2008
	150,000		0.75	March 1, 2009
	50,000		0.85	March 21, 2010
	40,000		0.67	April 6, 2010
	50,000		1.50	October 19, 2010
	2,000,000		1.91	January 10, 2011

	5,120,000

E-64

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


				Weighted
				Average
	Number			Exercise
	of Options			Price

Balance, June 30, 2003		3,075,000		$	0.15
Options granted		2,724,500			0.51
Options exercised		(2,134,500	)		0.13

Balance, June 30, 2004		3,665,000			0.43
Options granted		150,000			0.73
Options expired/cancelled		(200,000	)		1.25
Options exercised		(230,000	)		0.30

Balance, June 30, 2005		3,385,000			0.41
Options granted		2,050,000			1.90
Options exercised		(315,000	)		0.54

Balance, June 30, 2006		5,120,000		$	1.00

Number of options currently exercisable		4,920,000		$	0.96

Weighted average fair value of options granted during the year		2004		$	0.39
		2005			0.56
		2006			1.16

Stock-based compensation

The following assumptions were used in the Black-Scholes valuation of stock options and warrants granted during the years presented:


	2006	2005	2004

Weighted average risk-free interest rate	3.9%	3.7%	4.2%
Expected life of options and warrants	5 years	5 years	1 year-5 years
Weighted average annualized volatility	71%	101%	118%
Dividend	0.00%	0.00%	0.00%

E-65

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Warrants

Warrant transactions are summarized as follows:


	Number			Exercise
	of Warrants			Price		Expiry Date

Balance, June 30, 2003		5,649,308
Warrants exercised		(3,708,132	)	$	0.44		November 18, 2003
Warrants exercised		(1,941,176	)		0.25		June 27, 2004
Warrants granted		200,000			0.60		October 24, 2004
Warrants granted		2,625,000			0.60		August 3, 2004
Warrants exercised		(435,000	)		0.60		August 3, 2004
Warrants granted		7,719,998			1.25		July 29, 2005
Warrants granted		588,235			1.25		August 3, 2005
Warrants granted		1,266,666			1.25		June 25, 2005

Balance, June 30, 2004		11,964,899
Warrants exercised		(2,290,000	)		0.60		August 3, 2004
Warrants expired		(100,000	)		0.60		August 3, 2004
Warrants expired		(1,266,666	)		1.25		June 25, 2005
Warrants granted		1,500,000			2.50		December 20, 2006

Balance, June 30, 2005		9,808,233
Warrants exercised		(4,352,351	)		1.25		July 29, 2005
Warrants exercised		(588,235	)		1.25		August 3, 2005
Warrants expired		(3,367,647	)		1.25		July 29, 2005

Balance, June 30, 2006		1,500,000

The number of warrants outstanding at June 30, 2006 is summarized as follows:


Number		Exercise
of Warrants		Price		Expiry Date

	1,500,000	$	2.50	December 20, 2006


10.	INCOME TAXES

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


	2006			2005			2004

Loss before income tax recovery	$	(3,307,465	)	$	(1,063,474	)	$	(1,664,257	)

Expected income tax recovery	$	(1,227,731	)	$	(378,597	)	$	(618,241	)
Non-deductible expenses		1,144,086			14,884			315,842
Differences in foreign tax rates		13,135			32,371			1,810
Tax loss benefit not recognized for book purposes		70,510			331,342			300,589

Actual income tax recovery	$	NIL		$	NIL		$	NIL

E-66

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


	2006			2005			2004

Net operating loss carry forwards	$	2,413,320		$	2,338,680		$	2,517,008
Mineral properties and other assets		681,280			590,427			618,517
Share issuance costs		80,257			117,590			158,213

		3,174,857			3,046,697			3,293,738
Less: valuation allowances		(3,174,857	)		(3,046,697	)		(3,293,738	)

Net future tax assets	$	NIL		$	NIL		$	NIL

The Company has non-capital losses of approximately $6,853,000 which may be carried forward and applied against taxable income in future years. These losses, if unutilized, will begin to expire in 2007. Subject to certain restrictions, the Company has further resource development and exploration expenditures totalling approximately $1,709,000 available to reduce taxable income of future years. Future tax benefits which may arise as a result of these non-capital losses and resource deductions have not been recognized in these financial statements and have been offset by a valuation allowance.


11.	SEGMENTED INFORMATION

The Company’s one reportable operating segment is the exploration and development of mineral properties. Geographic information is as follows:


					Mineral
					Property
					Interests and
					Deferred
	Total				Exploration		Other
	Assets		Equipment		Costs		Assets

June 30, 2006
Canada	$	13,637,654	$	24,639	$		$	13,613,015
United States		7,864,404		906,214		6,663,978		294,212

	$	21,502,058	$	930,853	$	6,663,978	$	13,907,227

June 30, 2005
Canada	$	11,377,473	$	30,799	$		$	11,346,674
United States		4,319,402		108,319		3,965,025		246,058

	$	15,696,875	$	139,118	$	3,965,025	$	11,592,732


	2006		2005		2004

Loss before other items:
Canada	$	3,338,256	$	893,992	$	1,366,939
United States		234,710		206,754		101,391

	$	3,572,966	$	1,100,746	$	1,468,330


12.	RESTRICTED RECLAMATION BONDS

The Company has secure funds in place with the United States government, a Canadian bank and a United States bank as security for reclamation bonds on its mineral properties. These restricted reclamation

E-67

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

bonds were required by the local jurisdictions at the time exploration activities commenced on the properties and do not represent an asset retirement obligation (Note 2). Interest on the certificates of deposit with Canadian and United States banks is paid on a periodic basis to the Company.


13.	SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS

Significant non-cash transactions during the years ended June 30, 2006, June 30, 2005 and June 30, 2004 include the Company issuing 40,000 common shares each year at a value in the current year of $72,000 (2005 — $28,400; 2004 — $31,200) for the acquisition of mineral property interests. In the year ended June 30, 2004, the Company issued 125,000 units as a finder’s fee related to a private placement. Included in accounts payable are $93,378 (2005 — $153,756) relating to deferred exploration costs, $129,328 (2005 — $NIL) relating to equipment, $6,330 (2005 — $NIL) relating to restricted reclamation bonds and $2,695 (2005 — $NIL) relating to mineral property interests.


14.	COMMITMENTS

The Company has entered into lease agreements for its premises in Canada and the United States. The annual lease commitments are as follows:


2007	$	38,295
2008		22,500

	$	60,795


15.	FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, temporary investments, receivables, restricted reclamation bonds, accounts payable and accrued liabilities, and due to related parties. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments. The fair values of these financial instruments approximate their carrying values, unless otherwise noted.

The Company has its cash primarily in one commercial bank in Vancouver, British Columbia, Canada and one commercial bank in Reno, Nevada, United States.


16.	DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These financial statements have been prepared in accordance with Canadian GAAP. Material variations in the accounting principles, practices and methods used in preparing these financial statements from principles, practices and methods accepted in the United States (“United States GAAP”) are described and quantified below.

E-68

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The impact of the differences between Canadian GAAP and United States GAAP on the consolidated balance sheets would be as follows:


	2006							2005
	Balance,					Balance,		Balance,					Balance,
	Canadian					United States		Canadian					United States
	GAAP		Adjustments			GAAP		GAAP		Adjustments			GAAP

Temporary investments	$	2,107,699	$	48,282		$	2,155,981	$	10,895,443	$	36,224		$	10,931,667
Other current assets		11,564,745					11,564,745		500,597					500,597
Mineral property interests		2,799,619		(2,032,127	)		767,492		2,456,147		(1,839,607	)		616,540
Deferred exploration costs		3,864,359		(3,864,359	)				1,508,878		(1,508,878	)
Equipment		930,853					930,853		139,118					139,118
Restricted reclamation bonds		234,783					234,783		196,692					196,692

	$	21,502,058	$	(5,848,204	)	$	15,653,854	$	15,696,875	$	(3,312,261	)	$	12,384,614

Current liabilities	$	433,517	$			$	433,517	$	179,585	$			$	179,585
Asset retirement obligation		165,985					165,985
Shareholders’ equity		20,902,556		(5,848,204	)		15,054,352		15,517,290		(3,312,261	)		12,205,029

	$	21,502,058	$	(5,848,204	)	$	15,653,854	$	15,696,875	$	(3,312,261	)	$	12,384,614

The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of operations would be as follows:


	Cumulative
	Amounts from
	Inception on
	December 18, 1986
	to June 30, 2006			2006			2005			2004

Loss for the period, Canadian GAAP	$	(15,881,401	)	$	(3,307,465	)	$	(1,063,474	)	$	(1,664,257	)
Adjustments:
Mineral property interests		(2,032,127	)		(192,520	)		(619,497	)		(556,945	)
Deferred exploration costs		(3,864,359	)		(2,355,481	)		(775,806	)		(226,701	)
Increase in temporary investments		48,282			22,634			36,224

Loss for the period, United States GAAP	$	(21,723,605	)	$	(5,832,832	)	$	(2,422,553	)	$	(2,447,903	)

Basic and diluted loss per share, United States GAAP				$	(0.10	)	$	(0.05	)	$	(0.06	)

Weighted average number of common shares outstanding, United States GAAP					58,855,176			53,091,304			39,038,472

E-69

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of cash flows would be as follows:


	Cumulative Amounts
	from Inception on
	December 18, 1986
	to June 30, 2006			2006			2005			2004

Cash flows used in operating activities, Canadian GAAP	$	(4,794,625	)	$	(605,920	)	$	(954,361	)	$	(741,247	)
Acquisition of mineral property interests		(5,449,802	)		(209,852	)		(619,497	)		(556,945	)
Deferred exploration costs		(7,339,941	)		(2,413,657	)		(816,648	)		(442,661	)
Acquisition (disposal) of temporary investments (net)		(1,909,954	)		8,806,566			(3,413,215	)		(7,493,823	)

Cash flows provided by (used in) operating activities, United States GAAP		(19,494,322	)		5,577,137			(5,803,721	)		(9,234,676	)

Cash flows provided by financing activities, Canadian GAAP and United States GAAP		32,724,773			6,345,433			3,813,500			11,705,658

Cash flows provided by (used in) investing activities, Canadian GAAP		(16,532,263	)		5,375,913			(4,972,207	)		(8,702,270	)
Acquisition of mineral property interests		5,449,802			209,852			619,497			556,945
Deferred exploration costs		7,339,941			2,413,657			816,648			442,661
Acquisition (disposal) of temporary investments (net)		1,909,954			(8,806,566	)		3,413,215			7,493,823

Cash flows used in investing activities, United States GAAP		(1,832,566	)		(807,144	)		(122,847	)		(208,841	)

Increase (decrease) in cash during the period		11,397,885			11,115,426			(2,113,068	)		2,262,141
Cash, beginning of period					282,459			2,395,527			133,386

Cash, end of period	$	11,397,885		$	11,397,885		$	282,459		$	2,395,527

Mineral property interests and deferred exploration costs

In accordance with EITF 04-02, the Company classifies the costs of acquiring its mineral interests as tangible assets resulting in no difference between Canadian and United States GAAP.

Under United States GAAP exploration costs on mineral properties, other than acquisition costs, prior to the establishment of proven or probable reserves are expensed as incurred. Under Canadian GAAP these costs may be deferred.

E-70

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for impairment whenever events or circumstances change which indicates the carrying amount of an asset may not be recoverable, utilizing established guidelines based on undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization.

Asset retirement obligations

The Company adopted new accounting and disclosure standards under Canadian GAAP (Note 2) since the 2005 fiscal year. Accordingly there were no differences between Canadian GAAP and United States GAAP as at June 30, 2006 and 2005.

Under Canadian GAAP, the Company was not required to record asset retirement obligations as at June 30, 2005. The Company determined there were no asset retirement obligations as at June 30, 2005.

Temporary Investments

Under Canadian GAAP, temporary investments are carried at the lower of aggregate cost or current market value, with any unrealized gain or loss included in the statement of operations. Long-term investments are carried on the cost or equity basis and are only written down when there is evidence of a decline in value that is other than temporary.

Under United States GAAP, SFAS 115 requires that certain debt and equity investments must be classified into available-for-sale or trading securities and stated at fair market values. Any unrealized holding gains or losses are reported as a separate component of shareholders’ equity until realized for available-for-sale securities, and included in earnings for trading securities. For United States GAAP purposes, the Company’s investment in debt securities have been classified as trading securities. Under SFAS 115, for the 2004 fiscal year there was no difference under Canadian GAAP or United States GAAP as these debt securities have been written down to their fair market value, with an unrealized loss of $42,999 included in the consolidated statement of operations. For the 2006 fiscal year, an excess holding gain of $48,282 (2005 — $36,224) would be recognized under United States GAAP.

New accounting pronouncements

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

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

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

E-71

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF U.S. GOLD AND CORAL GOLD

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2006


	As Reported
				Coral Gold									Coral Gold									Pro Forma
				Resources									Resources									Consolidated
	U.S. Gold			Ltd. (Cdn			US GAAP						Ltd. (US			Transaction						U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Adjustments			Notes			Corporation
	(Expressed in United States dollars unless otherwise stated)

ASSETS
Current
Cash and cash equivalents	$	30,065,618		$	4,152,402								$	4,152,402								$	34,218,020
Accounts receivable		133,743			47,414									47,414									181,157
Other current assets — prepaid expenses		74,793			70,242									70,242									145,035

Total current assets		30,274,154			4,270,058									4,270,058									34,544,212

Property and equipment, net		101,629			3,108									3,108									104,737
Mineral property interests		—			9,197,107		$	(8,262,481	)		2	(i)		934,626									934,626
Acquired mineral property interests		—			—									—		$	32,682,236			3&4	(a)		32,682,236
Offering costs, net		2,991,684			—									—									2,991,684
Restrictive time deposits for reclamation bonding		3,102,454			234,878									234,878									3,337,332
Escrow funding		38,009,105			—									—									38,009,105
Long-lived asset retirement		1,068,353			—									—									1,068,353
Other assets:
Inactive milling equipment		777,819			—									—									777,819
Other assets		2,125			207,367			141,688			2	(ii)		349,055									351,180

Total other assets		779,944			207,367			141,688						349,055			—						1,128,999

TOTAL ASSETS	$	76,327,323		$	13,912,518		$	(8,120,793	)				$	5,791,725		$	32,682,236					$	114,801,284


LIABILITIES
Current
Accounts payable and accrued liabilities	$	1,961,514		$	336,252								$	336,252		$	1,407,053			3&4	(b)	$	3,704,819
Installment purchase contracts		48,164			—									—									48,164
Advances payable		—			72,656									72,656									72,656
Retirement obligation (reclamation activities)		1,235,776			—									—									1,235,776

Total current liabilities		3,245,454			408,908									408,908			1,407,053						5,061,415

Installment purchase contracts, long-term		10,444			—									—									10,444
Retirement obligation		1,389,107			—									—									1,389,107
Future income tax liability		—			1,303,796									1,303,796			7,189,456			3&4	(c)		8,493,252
Other permit obligations		72,511			—									—									72,511
Escrow account		38,009,105			—									—									38,009,105
Derivative liabilities		96,601,884			—									—									96,601,884
Other liabilities		—			23,685									23,685									23,685

Total liabilities		139,328,505			1,736,389									1,736,389			8,596,509						149,661,403


SHAREHOLDERS’ EQUITY (DEFICIENCY)
Capital stock		41,339,239			30,836,785									30,836,785			(30,836,785	)		4	(d)		66,157,565
																	24,818,326			3
Options and warrants		—			—									—			3,322,737			3			3,322,737
Other equity accounts		—			1,872,348		$	141,688			2	(iii)		2,014,036			(2,014,036	)		4	(d)		—
Deficit		(104,340,421	)		(20,533,004	)		(8,262,481	)		2	(iii)		(28,795,485	)		28,795,485			4	(d)		(104,340,421	)

Total shareholders’ equity (deficiency)		(63,001,182	)		12,176,129			(8,120,793	)					4,055,336			24,085,727						(34,860,119	)

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	76,327,323		$	13,912,518		$	(8,120,793	)				$	5,791,725		$	32,682,236					$	114,801,284

See accompanying notes to unaudited pro forma consolidated financial statements.

F-2

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations

For the six months ended June 30, 2006


	As Reported
				Coral Gold									Coral Gold			Pro Forma
				Resources									Resources			Consolidated
	U.S. Gold			Ltd. (Cdn			US GAAP						Ltd. (US			U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Corporation
	(Expressed in United States dollars unless otherwise stated)

Interest and other items	$	488,378		$	43,853								$	43,853		$	532,231
Gain (loss) on foreign exchange		—			12,768									12,768			12,768

Total other revenue		488,378			56,621									56,621			544,999

COSTS AND EXPENSES
General and administrative		1,449,070			911,743									911,743			2,360,813
Proposed acquisitions		3,384,378			—									—			3,384,378
Property holding costs		781,853			—									—			781,853
Exploration costs		1,000,423			—									—			1,000,423
Stock compensation expense		—			876,942									876,942			876,942
Interest		3,442			—									—			3,442
Stock option expense		536,000			—									—			536,000
Accretion of asset retirement obligation		135,989			—									—			135,989
Change in value of derivatives		59,026,884			—									—			59,026,884
Write-off of mineral property costs		—			—		$	141,802			2	(i)		141,802			141,802
Amortization of offering cost		228,066			—									—			228,066
Depreciation		12,594			380									380			12,974

Total costs and expenses		66,558,699			1,789,065			141,802						1,930,867			68,489,566

Loss before income taxes		(66,070,321	)		(1,732,444	)		(141,802	)					(1,874,246	)		(67,944,567	)
Provision for future income taxes		—			669,080									669,080			669,080
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(66,070,321	)	$	(2,401,524	)	$	(141,802	)				$	(2,543,326	)	$	(68,613,647	)

Basic and diluted net loss per share (Note 6)	$	(1.98	)													$	(1.83	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		33,296,755															37,503,251

See accompanying notes to unaudited pro forma consolidated financial statements.

F-3

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations

For the twelve months ended December 31, 2005


	As Reported
				Coral Gold									Coral Gold			Pro Forma
				Resources									Resources			Consolidated
	U.S. Gold			Ltd. (Cdn			US GAAP						Ltd. (US			U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Corporation
	(Expressed in United States dollars unless otherwise stated)

OTHER REVENUE
Earnest money forfeited	$	200,000														$	200,000
Interest and other items		32,032		$	15,270								$	15,270			47,302
Management fee		330,000			—									—			330,000
Realized gain from disposition of shares		520,428			—									—			520,428
Gain (loss) on sale of assets		(29,982	)		(3,296	)								(3,296	)		(33,278	)
Gain (loss) on foreign exchange		—			(15,576	)								(15,576	)		(15,576	)

Total other revenue		1,052,478			(3,602	)								(3,602	)		1,048,876

COSTS AND EXPENSES
General and administrative		1,027,194			480,660									480,660			1,507,854
Write-off of purchase price receivable		182,748			—									—			182,748
Property holding costs		761,081			—									—			761,081
Employment termination payments		1,423,824			—									—			1,423,824
Stock compensation expense		294,400			311,545									311,545			605,945
Equity share of subsidiary loss		58,888			—									—			58,888
Realization reserve — stock		168,960			—									—			168,960
Interest		3,011			—									—			3,011
Accretion of asset retirement obligation		110,243			—									—			110,243
Write-off of mineral property costs		—			—		$	642,993			2	(i)		642,993			642,993
Depreciation		12,850			764									764			13,614

Total costs and expenses		4,043,199			792,969			642,993						1,435,962			5,479,161

Loss before income taxes		(2,990,721	)		(796,571	)		(642,993	)					(1,439,564	)		(4,430,285	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(2,990,721	)	$	(796,571	)	$	(642,993	)				$	(1,439,564	)	$	(4,430,285	)

Basic and diluted net loss per share (Note 6)	$	(0.12	)													$	(0.15	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		25,931,172															30,137,668

See accompanying notes to unaudited pro forma consolidated financial statements.

F-4

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars unless otherwise stated)

June 30, 2006 and December 31, 2005

(Unaudited)


1.	Basis of presentation

On March 5, 2006 U.S. Gold Corporation (“U.S. Gold” or the “Company”) announced that it intends to acquire, in stock transactions, all of the outstanding common shares of White Knight Resources Ltd., Nevada Pacific Gold Ltd., Coral Gold Resources Ltd. and Tone Resources Limited. This proposal was made in letters sent on the same day by Mr. Robert R. McEwen, Chairman and Chief Executive Officer of U.S. Gold, to the chief executive officers of each of the subject companies.

These unaudited pro forma consolidated financial statements have been prepared to give effect to the Company’s acquisition of Coral Gold (the “Acquisition”). These unaudited pro forma consolidated financial statements have been prepared on the basis that each shareholder will receive shares of common stock of U.S. Gold in exchange for their Coral Gold common shares. The combined effects of the proposed transactions with each of the four companies have been presented separately under “Unaudited Pro Forma Consolidated Supplementary Financial Statements”, included elsewhere in this document. Each of these acquisitions is not conditional on the other three and the Company may or may not be successful in acquiring all of the target companies.

These unaudited pro forma consolidated financial statements have been compiled from and include:

(a) An unaudited pro forma consolidated balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the unaudited balance sheet of Coral Gold as at April 30, 2006 giving effect to the transaction as if it occurred on June 30, 2006.

(b) An unaudited pro forma consolidated statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with the unaudited constructed statement of operations of Coral Gold for the twelve months ended October 31, 2005, giving effect to the transaction as if it occurred on January 1, 2005. The Coral Gold’s statement of operations for the twelve months ended October 31, 2005 has been constructed by adding together (a) the results for the three months ended January 31, 2005 (derived from Coral Gold’s audited financial statements for the year ended January 31, 2005 and the unaudited interim results for the nine months ended October 31, 2004) and (b) the unaudited interim results for the nine months ended October 31, 2005.

(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with the unaudited constructed statement of operations of Coral Gold for the six months ended April 30, 2006 (derived from Coral Gold’s audited financial statements for the year ended January 31, 2006, the unaudited interim results for the nine months ended October 31, 2005 and the unaudited interim results for the three months ended April 30, 2006), giving effect to the transaction as if it occurred on January 1, 2005.

The unaudited pro forma consolidated balance sheet and statements of operations have been presented on the above basis to ensure that the unaudited pro forma consolidated financial statements reflect the acquired business financial statements for a period that is no more than 93 days from U.S. Gold’s year-end, as required pursuant to pro forma presentation requirements contained in the securities rules.

The unaudited pro forma consolidated financial statements have been compiled using the significant accounting policies as set out in the audited financial statements of U.S. Gold for the year ended December 31, 2005 which are included elsewhere in this document. The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company and Coral Gold described above.

Management of U.S. Gold has consolidated certain line items from Coral Gold’s financial statements in an attempt to conform to the presentation of the Company’s financial statements. It is management’s opinion that these

F-5

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation of the transactions described in Note 3 in accordance with United States generally accepted accounting principles.

Coral Gold prepares its financial statements in accordance with Canadian GAAP and in Canadian dollars. These financial statements have been translated to United States GAAP, as more fully described in note 2. The conversion from Canadian dollars to U.S. dollars has been reflected at the rates described in the following table.


As at April 30, 2006			0.90
Average for the six months ended April 30, 2006			0.86
Average for the twelve months ended October 31, 2005			0.82

For restatement in U.S. dollars, the Company followed the method suggested by the Emerging Issues Committee (“EIC”) in release number EIC-130 which conforms in all material respects with Statement of Financial Accounting Standards No. 52 Foreign Currency Translation. The consensus of the EIC was that financial statements for all prior years should be translated using the current rate method.

The unaudited pro forma consolidated financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for Coral Gold are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of Coral Gold that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated financial statements. In addition, the impact of integration activities, the timing of completion of the acquisition and other changes in Coral Gold’s net tangible and intangible assets prior to the completion of the acquisition, which have not been incorporated into these unaudited pro forma consolidated financial statements, could cause material differences in the information presented.


2.	Reconciliation to United States Generally Accepted Accounting Principles


*(i)*	*Deferred exploration expenditures*

Under Canadian GAAP, all acquisition and exploration costs relating to the mineral properties held are deferred. Under US GAAP, the deferred exploration expenditures would have been expensed in the year they were incurred.

The effects of the foregoing differences are summarized as follows:

Pro forma balance sheet at June 30, 2006
The US GAAP statement reflects $934,626 balance for Mineral Property Interests ($9,197,107 under Canadian GAAP).

Pro forma statements of operations
Mining and Exploration Expenditures amounts to $141,802 and $642,993 under US GAAP for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively. These expenditures are capitalized for Canadian GAAP purposes but are expensed under US GAAP.

F-6

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) Temporary Investments

Under US GAAP (FAS 115), temporary investments are re-measured at fair value, with changes in fair value recorded in net income or Other Comprehensive Income. Under Canadian GAAP, these assets are recorded at the lower of cost and market value and are not re-measured to fair value prior to the date they are realized or settled.

The effects of the foregoing differences are summarized as follows:

The US GAAP pro forma balance sheet at June 30, 2006 reflects $274,355 balance for temporary investments ($132,667 under Canadian GAAP), included in item Other assets.

(iii) Deficit and Other Equity Accounts

The US GAAP pro forma balance sheet reflects increase in deficit of $8,262,481 due to a write-off of deferred mining and exploration expenses described above and an increase in other equity accounts of $141,688 due to changes in the fair value of temporary investments described above.


3.	Business acquisition

The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of Coral Gold.

In consideration for the acquisition of Coral Gold, the Company will issue 0.63 shares of U.S. Gold common stock for each outstanding common share of Coral Gold totaling approximately 4,206,496 common shares to shareholders of Coral Gold, representing approximately $24.8 million total value based on the closing price of U.S. Gold’s common stock. For accounting purposes, the measurement of the purchase consideration in the unaudited pro forma consolidated financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date and is estimated at $5.90 per each U.S. Gold share.

Each Coral Gold warrant or stock option which gives the holder the right to acquire shares in the common stock of Coral Gold when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of Coral Gold common shares for U.S. Gold common shares. The initial exchange will not include the Coral Gold options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $3.3 million based on the Black-Scholes pricing model.

The principal assumptions used in applying the Black-Scholes option-pricing model were as follows:


Risk-free interest rate	4.82	%
Dividend yield	N/A
Volatility factor	102	%
Expected life — options	4 years
Remaining period to expiry date — warrants (weighted average)	9 months

The value of the purchase consideration for accounting purposes may differ from the amount assumed in the unaudited pro forma consolidated financial statement information due to any future changes in the negotiation process.

After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of Coral Gold’s assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisition of Coral Gold, the fair value of all identifiable assets and liabilities

F-7

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to Coral Gold’s capital assets would result in increased amortization charges. The fair value of the net assets of Coral Gold to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material. The preliminary purchase price allocation is subject to change and is summarized as follows:


Purchase price:
Shares issued on acquisition	$	24,818,326
Options		1,980,924
Warrants		1,341,813
Acquisition costs (estimated at 5% of purchase price)		1,407,053

	$	29,548,116

Net assets acquired:
Cash and cash equivalents	$	4,152,402
Accounts receivable		47,414
Other current assets — prepaid expenses		70,242
Property and equipment, net		3,108
Mineral property interests		934,626
Restrictive time deposits for reclamation bonding		234,878
Other assets		349,055
Accounts payable and accrued liabilities		(336,252	)
Advances payable		(72,656	)
Future income tax liability		(1,303,796	)
Other liabilities		(23,685	)
Future income tax payable on acquisition		(7,189,456	)
Acquired mineral property interests		32,682,236

	$	29,548,116


4.	Pro forma assumptions and adjustments

The unaudited pro forma consolidated financial statements incorporate the following pro forma assumptions:

(a) The purchase price for the Acquisition has been allocated to the acquired assets and liabilities on a proforma basis as described in Note 3.

(b) Transaction costs have been assumed to be $1,407,053 representing 5 per cent of the total fair value of the purchase price of the Acquisition.

(c) Future income taxes have been taken into consideration in connection with the purchase price allocation where assumed fair values are not the same as the carry forward book values.

(d) Represents elimination of acquired business capital stock, equity accounts and accumulated deficit.

F-8

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	Pro forma share capital

Pro forma share capital as at June 30, 2006 has been determined as follows:


	Number of
	Shares		Amount

Issued common shares of U.S. Gold		33,296,755	$	41,339,239
Shares issued for acquisition of Coral Gold		4,206,496		24,818,326

Pro forma balance		37,503,251	$	66,157,565


6.	Pro forma loss per share

Pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 has been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to Coral Gold shareholders being effective on January 1, 2006 and January 1, 2005 respectively.


	Six Months Ended			Year Ended
	June 30,			December 31,
	2006			2005
	(Shares or US dollars)

Actual weighted average number of U.S. Gold common shares outstanding		33,296,755			25,931,172
Assumed number of U.S. Gold common shares issued to Coral Gold shareholders		4,206,496			4,206,496

Pro forma weighted average number of U.S. Gold common shares outstanding		37,503,251			30,137,668

Pro forma net loss	$	(68,613,647	)	$	(4,430,285	)
Pro forma adjusted basic loss per share	$	(1.83	)	$	(0.15	)

F-9

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF U.S. GOLD AND NEVADA PACIFIC

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2006


	As Reported
				Nevada									Nevada									Pro Forma
				Pacific									Pacific									Consolidated
	U.S. Gold			Gold Ltd.			US GAAP						Gold Ltd.			Transaction						U.S. Gold
	Corporation			(Cdn GAAP)			Adjustments			Notes			(US GAAP)			Adjustments			Notes			Corporation
	(Expressed in United States dollars unless otherwise stated)

ASSETS
Current
Cash and cash equivalents	$	30,065,618		$	3,659,738								$	3,659,738								$	33,725,356
Accounts receivable		133,743			180,697									180,697									314,440
Product inventory and stockpiled ore		—			109,074									109,074									109,074
Supplies inventory		—			285,152									285,152									285,152
Other current assets — prepaid expenses		74,793			239,424									239,424									314,217

Total current assets		30,274,154			4,474,085									4,474,085									34,748,239

Property and equipment, net		101,629			13,306,314		$	(4,657,846	)		2	(i)		8,648,468									8,750,097
Mineral property interests		—			4,661,805			(4,661,805	)		2	(ii)		—									—
Acquired mineral property interests		—			—									—		$	136,711,293			3&4	(a)		136,711,293
Offering costs, net		2,991,684			—									—									2,991,684
Restrictive time deposits for reclamation bonding		3,102,454			96,363									96,363									3,198,817
Escrowed funding		38,009,105			—									—									38,009,105
Long-lived asset — asset retirement		1,068,353			—									—									1,068,353
Other assets:
Inactive milling equipment		777,819			—									—									777,819
Other assets		2,125			—									—									2,125

Total other assets		779,944			—			—						—			—						779,944

TOTAL ASSETS	$	76,327,323		$	22,538,567		$	(9,319,651	)				$	13,218,916		$	136,711,293					$	226,257,532


LIABILITIES
Current
Accounts payable and accrued liabilities	$	1,961,514		$	1,194,495								$	1,194,495		$	5,564,985			3&4	(b)	$	8,720,994
Installment purchase contracts		48,164			—									—									48,164
Retirement obligation (reclamation activities)		1,235,776			—									—									1,235,776

Total current liabilities		3,245,454			1,194,495									1,194,495			5,564,985						10,004,934

Installment purchase contracts, long-term		10,444			—									—									10,444
Retirement obligation		1,389,107			1,684,812									1,684,812									3,073,919
Future income tax liability		—			—									—			30,073,825			3&4	(c)		30,073,825
Other permit obligations		72,511			—									—									72,511
Escrow account		38,009,105			—									—									38,009,105
Derivative liabilities		96,601,884			—									—									96,601,884
Other liabilities		—			112,397									112,397									112,397

Total liabilities		139,328,505			2,991,704									2,991,704			35,638,810						177,959,019


SHAREHOLDERS’ EQUITY
Capital stock		41,339,239			30,955,143									30,955,143			(30,955,143	)		4	(d)		134,934,273
																	93,595,034			3
Options and warrants		—			—									—			17,704,661			3			17,704,661
Other equity accounts		—			1,490,594		$	(287,376	)		2	(iii)		1,203,218			(1,203,218	)		4	(d)		—
Deficit		(104,340,421	)		(12,898,874	)		(9,032,275	)		2	(iv)		(21,931,149	)		21,931,149			4	(d)		(104,340,421	)

Total shareholders’ equity		(63,001,182	)		19,546,863			(9,319,651	)					10,227,212			101,072,483						48,298,513

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	76,327,323		$	22,538,567		$	(9,319,651	)				$	13,218,916		$	136,711,293					$	226,257,532

See accompanying notes to unaudited pro forma consolidated financial statements.

F-10

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations

For the six months ended June 30, 2006


	As Reported
				Nevada									Nevada			Pro Forma
				Pacific									Pacific			Consolidated
	U.S. Gold			Gold Ltd.			US GAAP						Gold Ltd.			U.S. Gold
	Corporation			(Cdn GAAP)			Adjustments			Notes			(US GAAP)			Corporation
	(Expressed in United States dollars unless otherwise stated)

SALES				$	2,943,367								$	2,943,367		$	2,943,367

COST OF SALES					3,226,675		$	120,536			2	(i)		3,347,211			3,347,211
DEPRECIATION AND DEPLETION					259,340			(83,543	)		2	(i)		175,797			175,797
ROYALTIES					171,026									171,026			171,026

					3,657,041			36,993						3,694,034			3,694,034

EARNINGS (LOSS) FROM MINING OPERATIONS					(713,674	)		(36,993	)					(750,667	)		(750,667	)

OTHER REVENUE
Interest and other items	$	488,378			51,326									51,326			539,704
Gain (loss) on foreign exchange		—			(37,154	)								(37,154	)		(37,154	)

Total other revenue		488,378			14,172			—						14,172			502,550

COSTS AND EXPENSES
General and administrative		1,449,070			1,149,356									1,149,356			2,598,426
Proposed acquisitions		3,384,378			—									—			3,384,378
Property holding costs		781,853			—									—			781,853
Exploration costs		1,000,423			—									—			1,000,423
Stock compensation expense		—			494,015									494,015			494,015
Interest		3,442			—									—			3,442
Stock option expense		536,000			—									—			536,000
Accretion of asset retirement obligation		135,989			—									—			135,989
Change in value of derivatives		59,026,884			—									—			59,026,884
Write-off of mineral property costs		—			—			948,500			2	(ii)		948,500			948,500
Write-down of mineral properties		—			47,139			(47,139	)		2	(ii)		—			—
Amortization of offering cost		228,066			—									—			228,066
Depreciation		12,594			—									—			12,594

Total costs and expenses		66,558,699			1,690,510			901,361						2,591,871			69,150,570

Loss before income taxes		(66,070,321	)		(2,390,012	)		(938,354	)					(3,328,366	)		(69,398,687	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(66,070,321	)	$	(2,390,012	)	$	(938,354	)				$	(3,328,366	)	$	(69,398,687	)

Basic and diluted net loss per share (Note 6)	$	(1.98	)													$	(1.41	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		33,296,755															49,160,320

See accompanying notes to unaudited pro forma consolidated financial statements.

F-11

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations

For the Twelve Months Ended December 31, 2005


	As Reported
				Nevada									Nevada			Pro Forma
				Pacific									Pacific			Consolidated
	U.S. Gold			Gold Ltd.			US GAAP						Gold Ltd.			U.S. Gold
	Corporation			(Cdn GAAP)			Adjustments			Notes			(US GAAP)			Corporation
	(Expressed in United States dollars unless otherwise stated)

SALES				$	8,881,168								$	8,881,168		$	8,881,168

COST OF SALES					8,024,132		$	396,305			2	(i)		8,420,437			8,420,437
DEPRECIATION AND DEPLETION					1,203,093			(398,878	)		2	(i)		804,215			804,215
ROYALTIES					472,743									472,743			472,743

					9,699,968			(2,573	)					9,697,395			9,697,395

EARNINGS (LOSS) FROM MINING OPERATIONS					(818,800	)		2,573						(816,227	)		(816,227	)

OTHER REVENUE
Earnest money forfeited	$	200,000			—									—			200,000
Interest and other items		32,032			27,205									27,205			59,237
Management fee		330,000			—									—			330,000
Realized gain from disposition of shares		520,428			—									—			520,428
Gain (loss) on sale of assets		(29,982	)		155,199									155,199			125,217
Gain (loss) on foreign exchange		—			(67,043	)								(67,043	)		(67,043	)

Total other revenue		1,052,478			115,361			—						115,361			1,167,839

COSTS AND EXPENSES
General and administrative		1,027,194			1,800,234									1,800,234			2,827,428
Write-off of purchase price receivable		182,748			—									—			182,748
Property holding costs		761,081			—									—			761,081
Employment termination payments		1,423,824			—									—			1,423,824
Stock compensation expense		294,400			472,707									472,707			767,107
Equity share of subsidiary loss		58,888			—									—			58,888
Realization reserve — stock		168,960			—									—			168,960
Interest		3,011			246									246			3,257
Accretion of asset retirement obligation		110,243			—									—			110,243
Write-off of mineral property costs		—			—			1,642,479			2	(ii)		1,642,479			1,642,479
Write-down of mineral properties		—			131,710			(131,710	)		2	(ii)		—			—
Depreciation		12,850			—									—			12,850

Total costs and expenses		4,043,199			2,404,897			1,510,769						3,915,666			7,958,865

Loss before income taxes		(2,990,721	)		(3,108,336	)		(1,508,196	)					(4,616,532	)		(7,607,253	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(2,990,721	)	$	(3,108,336	)	$	(1,508,196	)				$	(4,616,532	)	$	(7,607,253	)

Basic and diluted net loss per share (Note 6)	$	(0.12	)													$	(0.18	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		25,931,172															41,794,737

See accompanying notes to unaudited pro forma consolidated financial statements.

F-12

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
June 30, 2006 and December 31, 2005
(Unaudited)


1.	Basis of presentation

These unaudited pro forma consolidated financial statements have been prepared to give effect to the Company’s acquisition of Nevada Pacific (the “Acquisition”). These unaudited pro forma consolidated financial statements have been prepared on the basis that each shareholder will receive shares of common stock of U.S. Gold in exchange for their Nevada Pacific common shares. The combined effects of the proposed transactions with each of the four companies have been presented separately under “Unaudited Pro Forma Consolidated Supplementary Financial Statements”, included elsewhere in this document. Each of these acquisitions is not conditional on the other three and the Company may or may not be successful in acquiring all of the target companies.

These unaudited pro forma consolidated financial statements have been compiled from and include:

(a) An unaudited pro forma consolidated balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the audited balance sheet of Nevada Pacific as at June 30, 2006, giving effect to the transaction as if it occurred on June 30, 2006.

(b) An unaudited pro forma consolidated statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with the unaudited constructed statement of operations of Nevada Pacific for the twelve months ended December 31, 2005, giving effect to the transaction as if it occurred on January 1, 2005. Nevada Pacific’s statement of operations for the twelve months ended December 31, 2005 has been constructed by adding together (a) the results for the six months ended June 30, 2005 (derived from Nevada Pacific’s audited financial statements for the year ended June 30, 2005 and the unaudited interim results for the six months ended December 31, 2004) and (b) the unaudited interim results for the six months ended December 31, 2005.

(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with the unaudited constructed statement of operations of Nevada Pacific for the six months ended June 30, 2006 (derived from Nevada Pacific’s audited financial statements for the year ended June 30, 2006 and the unaudited interim results for the six months ended December 31, 2005), giving effect to the transaction as if it occurred on January 1, 2005.

Management of U.S. Gold has consolidated certain line items from Nevada Pacific’s financial statements in an attempt to conform to the presentation of the Company’s financial statements. It is management’s opinion that these unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation of

F-13

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the transactions described in Note 3 in accordance with United States generally accepted accounting principles. Nevada Pacific’s financial statements have been translated to United States GAAP, as more fully described in note 2.

The unaudited pro forma consolidated financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for Nevada Pacific are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of Nevada Pacific that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated financial statements. In addition, the impact of integration activities, the timing of completion of the acquisition and other changes in Nevada Pacific’s net tangible and intangible assets prior to the completion of the acquisition, which have not been incorporated into these unaudited pro forma consolidated financial statements, could cause material differences in the information presented.


2.	Reconciliation to United States Generally Accepted Accounting Principles


*(i)*	*Property, plant and equipment*

For mineral properties where commercial feasibility has been established, under US GAAP, start-up costs are expensed as incurred in accordance with AICPA Statement of Position 98-5, Reporting on the Cost of Start-up Activities.

Under CDN GAAP, these start-up costs are deferred and amortized over the estimated life of the property following the commencement of the commercial production, or written off if the property is sold, allowed to lapse, abandoned or impaired. Under CDN GAAP, deferred start-up costs include operating costs, net of revenue, prior to the commencement of commercial production.

Under CDN GAAP the Magistral Gold Mine began commercial production on January 1, 2005, therefore from acquisition on February 2, 2004 to January 1, 2005 all operating costs, net of revenue for the Magistral Gold Mine were deferred to property, plant and equipment.

Accordingly, gold sales, cost of sales, depreciation and depletion and royalties are included in the loss for the year for US GAAP and were deferred to property plant and equipment for CDN GAAP.

The differences in the amounts deferred to pad inventory and property, plant and equipment are cumulative and affect the opening balances for each period following June 30, 2004.

The effects of the foregoing differences are summarized as follows:

Pro forma balance sheet at June 30, 2006

The US GAAP statement reflects $8,648,468 balance for Property and Equipment ($13,306,314 under Canadian GAAP).

Pro forma statements of operations

Cost of Sales amounts to $3,347,211 and $8,420,437 under US GAAP ($3,226,675 and $8,024,132 under Canadian GAAP) for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively.

Depreciation and Depletion amounts to $175,797 and $804,215 under US GAAP ($259,340 and $1,203,093 under Canadian GAAP) for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively.

F-14

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) Mineral properties

Under US GAAP, mineral properties and exploration costs related to mineral properties for which commercial feasibility has not yet been established are expensed as incurred. Under Canadian GAAP, exploration expenditures may be capitalized as incurred.

The effects of the foregoing differences are summarized as follows:

Pro forma balance sheet at June 30, 2006

The US GAAP statement reflects $ Nil balance for Mineral Property Interests ($4,661,805 under Canadian GAAP).

Pro forma statements of operations

Mining and Exploration Expenditures amounts to $948,500 and $1,642,479 under US GAAP for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively. These expenditures are capitalized for Canadian GAAP purposes but are expensed under US GAAP.

The US GAAP statements reflect a reversal of a write-down of previously deferred mineral property interests recorded under Canadian GAAP in the amount of $47,139 and $131,710 for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively.

(iii) Stock based compensation

Under CDN GAAP, CICA 3870, Stock-Based Compensation and Other Stock — Based Payments, recommends companies to adopt the fair valued base method of accounting for all stock-based compensation. The section permitted companies to continue to measure stock-based compensation using intrinsic value method of accounting but requires pro-forma disclosure of earnings and earnings per share as if the fair value method had been adopted.

For US GAAP purposes, the Company has chosen to adopt the fair value based method on a modified prospective basis from July 1, 2004 as permitted by SFAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS 123. There is no difference from the stock compensation expenses reported under CDN GAAP for the six months ended June 30, 2006 and the year ended December 31, 2005. The balance sheet reconciliation item occurs as a result of modified prospective adoption of the fair value method under SFAS 123.

F-15

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(iv) Deficit

The US GAAP pro forma balance sheet at June 30, 2006 reflects increase in deficit of $9,032,275 as a result of reconciliation adjustments under US GAAP described in (i) and (ii) above.


3.	Business acquisition

The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of Nevada Pacific.

In consideration for the acquisition of Nevada Pacific, the Company will issue 0.23 shares of U.S. Gold common stock for each outstanding common share of Nevada Pacific totaling approximately 15,863,565 common shares to shareholders of Nevada Pacific, representing approximately $93.6 million total value based on the closing price of U.S. Gold’s common stock. For accounting purposes, the measurement of the purchase consideration in the unaudited pro forma consolidated financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date and is estimated at $5.90 per each U.S. Gold share.

Each Nevada Pacific warrant or stock option which gives the holder the right to acquire shares in the common stock of Nevada Pacific when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of Nevada Pacific common shares for U.S. Gold common shares. The initial exchange will not include the Nevada Pacific options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $17.7 million based on the Black-Scholes pricing model.

The principal assumptions used in applying the Black-Scholes option-pricing model were as follows:


Risk-free interest rate	4.82	%
Dividend yield	N/A
Volatility factor	102	%
Expected life — options	1-3 years
Remaining period to expiry date — warrants (weighted average)	19 months

After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of Nevada Pacific’s assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisition of Nevada Pacific, the fair value of all identifiable assets and liabilities acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to Nevada Pacific’s capital assets would result in increased amortization charges. The fair value of the net assets of Nevada Pacific to be acquired will ultimately be determined after the closing of the transaction. Therefore,

F-16

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

it is likely that the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material. The preliminary purchase price allocation is subject to change and is summarized as follows:


Purchase price:
Shares issued on acquisition	$	93,595,034
Options		3,365,875
Warrants		14,338,786
Acquisition costs (estimated at 5% of purchase price)		5,564,985

	$	116,864,680

Net assets acquired:
Cash and cash equivalents	$	3,659,738
Accounts receivable		180,697
Product inventory and stockpiled ore		109,074
Supplies inventory		285,152
Other current assets — prepaid expenses		239,424
Property, plant and equipment		8,648,468
Reclamation bonds		96,363
Accounts payable and accrued liabilities		(1,194,495	)
Other liabilities		(112,397	)
Asset retirement obligation		(1,684,812	)
Future income tax liability		(30,073,825	)
Acquired mineral property interests		136,711,293

	$	116,864,680


4.	Pro forma assumptions and adjustments

The unaudited pro forma consolidated financial statements incorporate the following pro forma assumptions:

(a) The purchase price for the Acquisition has been allocated to the acquired assets and liabilities on a proforma basis as described in Note 3.

(b) Transaction costs have been assumed to be $5,564,985 representing 5 per cent of the total fair value of the purchase price of the Acquisition.

(c) Future income taxes have been taken into consideration in connection with the purchase price allocation where assumed fair values are not the same as the carry forward book values.

(d) Represents elimination of acquired business capital stock, equity accounts and accumulated deficit.

F-17

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Pro forma share capital

Pro forma share capital as at June 30, 2006 has been determined as follows:


	Number of
	Shares		Amount

Issued common shares of U.S. Gold		33,296,755	$	41,339,239
Shares issued for acquisition of Nevada		15,863,565		93,595,034

Pro forma balance		49,160,320	$	134,934,273


6.	Pro forma loss per share

Pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 has been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to Nevada Pacific shareholders being effective on January 1, 2006 and January 1, 2005 respectively.


	Six Months
	Ended			Year Ended
	June 30, 2006			December 31, 2005
	(Shares or US dollars)

Actual weighted average number of U.S. Gold common shares outstanding		33,296,755			25,931,172
Assumed number of U.S. Gold common shares issued to Nevada shareholders		15,863,565			15,863,565

Pro forma weighted average number of U.S. Gold common shares outstanding		49,160,320			41,794,737

Pro forma net loss	$	(69,398,687	)	$	(7,607,253	)
Pro forma adjusted basic loss per share	$	(1.41	)	$	(0.18	)

F-18

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF U.S. GOLD AND TONE RESOURCES

U.S. Gold Corporation
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2006
(Expressed in United States dollars unless otherwise stated)


	As Reported
				Tone									Tone									Pro Forma
				Resources									Resources									Consolidated
	U.S. Gold			Limited (Cdn			US GAAP						Limited (US			Transaction						U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Adjustments			Notes			Corporation

ASSETS
Current
Cash and cash equivalents	$	30,065,618		$	1,186,927								$	1,186,927								$	31,252,545
Accounts receivable		133,743			13,392									13,392									147,135
Other current assets — prepaid expenses		74,793			9,673									9,673									84,466

Total current assets		30,274,154			1,209,992									1,209,992									31,484,146

Property and equipment, net		101,629			—									—									101,629
Mineral property interests		—			1,141,899		$	(1,141,899	)		2	(i)		—									—
Acquired mineral property interests		—			—									—		$	48,235,406			3&4	(a)		48,235,406
Offering costs, net		2,991,684			—									—									2,991,684
Restrictive time deposits for reclamation bonding		3,102,454			29,795									29,795									3,132,249
Escrow funding		38,009,105			—									—									38,009,105
Long-lived asset — asset retirement		1,068,353			—									—									1,068,353
Other assets:
Inactive milling equipment		777,819			—									—									777,819
Other assets		2,125			—									—									2,125

Total other assets		779,944			—			—						—			—						779,944

TOTAL ASSETS	$	76,327,323		$	2,381,686		$	(1,141,899	)				$	1,239,787		$	48,235,406					$	125,802,516


LIABILITIES
Current
Accounts payable and accrued liabilities	$	1,961,514		$	105,444								$	105,444		$	1,844,901			3&4	(b)		3,911,859
Installment purchase contracts		48,164			—									—									48,164
Due to related parties		—			15,981									15,981									15,981
Retirement obligation (reclamation activities)		1,235,776			—									—									1,235,776

Total current liabilities		3,245,454			121,425			—						121,425			1,844,901						5,211,780

Installment purchase contracts, long-term		10,444			—									—									10,444
Retirement obligation		1,389,107			—									—									1,389,107
Future income tax liability		—			—									—			10,610,850			3&4	(c)		10,610,850
Other permit obligations		72,511			—									—									72,511
Escrow account		38,009,105			—									—									38,009,105
Derivative liabilities		96,601,884			—									—									96,601,884

Total liabilities		139,328,505			121,425			—						121,425			12,455,751						151,905,681

SHAREHOLDERS’ EQUITY (DEFICIENCY)
Capital stock		41,339,239			4,594,291									4,594,291			(4,594,291	)		4	(d)		71,264,889
																	29,925,650			3
Options and warrants		—			—									—			6,972,367			3			6,972,367
Other equity accounts		—			487,445									487,445			(487,445	)		4	(d)		—
Deficit		(104,340,421	)		(2,821,475	)	$	(1,141,899	)		2	(ii)		(3,963,374	)		3,963,374			4	(d)		(104,340,421	)

Total shareholders’ equity (deficiency)		(63,001,182	)		2,260,261			(1,141,899	)					1,118,362			35,779,655						(26,103,165	)

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	76,327,323		$	2,381,686		$	(1,141,899	)				$	1,239,787		$	48,235,406					$	125,802,516

See accompanying notes to unaudited pro forma consolidated financial statements.

F-19

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 2006
(Expressed in United States dollars unless otherwise stated)


	As Reported
				Tone									Tone			Pro Forma
				Resources									Resources			Consolidated
	U.S. Gold			Limited (Cdn			US GAAP						Limited (US			U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Corporation

OTHER REVENUE
Interest and other items	$	488,378														$	488,378
Gain (loss) on foreign exchange		—		$	(9,416	)							$	(9,416	)		(9,416	)

Total other revenue		488,378			(9,416	)								(9,416	)		478,962

COSTS AND EXPENSES
General and administrative		1,449,070			497,519									497,519			1,946,589
Proposed acquisitions		3,384,378			—									—			3,384,378
Property holding costs		781,853			—									—			781,853
Exploration costs		1,000,423			—									—			1,000,423
Stock compensation expense		—			70,468									70,468			70,468
Interest		3,442			—									—			3,442
Stock option expense		536,000			—									—			536,000
Accretion of asset retirement obligation		135,989			—									—			135,989
Change in value of derivatives		59,026,884			—									—			59,026,884
Write-off of mineral property costs		—			—		$	102,011			2	(i)		102,011			102,011
Amortization of offering cost		228,066			—									—			228,066
Depreciation		12,594			—									—			12,594

Total costs and expenses		66,558,699			567,987			102,011						669,998			67,228,697

Loss before income taxes		(66,070,321	)		(577,403	)		(102,011	)					(679,414	)		(66,749,735	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(66,070,321	)	$	(577,403	)	$	(102,011	)				$	(679,414	)	$	(66,749,735	)

Basic and diluted net loss per share (Note 6)	$	(1.98	)													$	(1.74	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		33,296,755															38,368,899

See accompanying notes to unaudited pro forma consolidated financial statements.

F-20

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations
For the Twelve Months Ended December 31, 2005
(Expressed in United States dollars unless otherwise stated)


	As Reported
				Tone									Tone			Pro Forma
				Resources									Resources			Consolidated
	U.S. Gold			Limited (Cdn			US GAAP						Limited (US			U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Corporation

OTHER REVENUE
Earnest money forfeited	$	200,000														$	200,000
Interest and other items		32,032		$	439								$	439			32,471
Management fee		330,000			—									—			330,000
Realized gain from disposition of shares		520,428			—									—			520,428
Gain (loss) on sale of assets		(29,982	)		—									—			(29,982	)
Gain (loss) on foreign exchange		—			(1,723	)								(1,723	)		(1,723	)

Total other revenue		1,052,478			(1,284	)								(1,284	)		1,051,194

COSTS AND EXPENSES
General and administrative		1,027,194			374,644									374,644			1,401,838
Write-off of purchase price receivable		182,748			—									—			182,748
Property holding costs		761,081			—									—			761,081
Employment termination payments		1,423,824			—									—			1,423,824
Stock compensation expense		294,400			233,415									233,415			527,815
Equity share of subsidiary loss		58,888			—									—			58,888
Realization reserve — stock		168,960			—									—			168,960
Interest		3,011			—									—			3,011
Accretion of asset retirement obligation		110,243			—									—			110,243
Write-off of mineral property costs		—			67,871		$	25,335			2	(i)		93,206			93,206
Depreciation		12,850			—									—			12,850

Total costs and expenses		4,043,199			675,930			25,335						701,265			4,744,464

Loss before income taxes		(2,990,721	)		(677,214	)		(25,335	)					(702,549	)		(3,693,270	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(2,990,721	)	$	(677,214	)	$	(25,335	)				$	(702,549	)	$	(3,693,270	)

Basic and diluted net loss per share (Note 6)	$	(0.12	)													$	(0.12	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		25,931,172															31,003,316

See accompanying notes to unaudited pro forma consolidated financial statements.

F-21

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars unless otherwise stated)

June 30, 2006 and December 31, 2005

(Unaudited)


1.	Basis of presentation

These unaudited pro forma consolidated financial statements have been prepared to give effect to the Company’s acquisition of Tone Resources (the “Acquisition”). These unaudited pro forma consolidated financial statements have been prepared on the basis that each shareholder will receive shares of common stock of U.S. Gold in exchange for their Tone Resources common shares. The combined effects of the proposed transactions with each of the four companies have been presented separately under “Unaudited Pro Forma Consolidated Supplementary Financial Statements”, included elsewhere in this document. Each of these acquisitions is not conditional on the other three and the Company may or may not be successful in acquiring all of the target companies.

These unaudited pro forma consolidated financial statements have been compiled from and include:

(a) An unaudited pro forma consolidated balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the unaudited balance sheet of Tone Resources as at May 31, 2006 giving effect to the transaction as if it occurred on June 30, 2006.

(b) An unaudited pro forma consolidated statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with the unaudited constructed statement of operations of Tone Resources for the twelve months ended November 30, 2005, giving effect to the transaction if it occurred on January 1, 2005. Tone Resources’ statement of operations for the twelve months ended November 30, 2005 has been constructed by adding together (a) the results for the nine months ended August 31, 2005, (derived from Tone’s audited financial statements for the year ended August 31, 2005 and the unaudited interim results for the three months ended November 30, 2004) and (b) the unaudited interim results for the three months ended November 30, 2005.

(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with the unaudited constructed statement of operations of Tone Resources for the six months ended May 31, 2006 (derived from Tone Resources’ unaudited interim results for the nine months ended May 31, 2006 and the unaudited interim results for the three months ended November 30, 2005), giving effect to the transaction as if it occurred on January 1, 2005.

Management of U.S. Gold has consolidated certain line items from Tone Resources financial statements in an attempt to conform to the presentation of the Company’s financial statements. It is management’s opinion that these

F-22

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Tone Resources prepares its financial statements in accordance with Canadian GAAP and in Canadian dollars. These financial statements have been translated to United States GAAP, as more fully described in note 2. The conversion from Canadian dollars to U.S. dollars has been reflected at the rates described in the following table.


As at May 31, 2006			0.91
Average for the six months ended May 31, 2006			0.87
Average for the twelve months ended November 30, 2005			0.82

The unaudited pro forma consolidated financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for Tone Resources are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of Tone Resources that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated financial statements. In addition, the impact of integration activities, the timing of completion of the acquisition and other changes in Tone Resources’ net tangible and intangible assets prior to the completion of the acquisition, which have not been incorporated into these unaudited pro forma consolidated financial statements, could cause material differences in the information presented.


2.	Reconciliation to United States Generally Accepted Accounting Principles


*(i)*	*Mineral property costs and deferred exploration costs*

The effects of the foregoing differences are summarized as follows:

Pro forma balance sheet at June 30, 2006

The US GAAP statement reflects $Nil balance for Mineral Property Interests ($1,141,899 under Canadian GAAP).

Pro forma statements of operations

Mining and Exploration Expenditures amounts to $102,011 and $25,335 under US GAAP for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively. These expenditures are capitalized for Canadian GAAP purposes but are expensed under US GAAP.

F-23

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) Deficit

The US GAAP pro forma balance sheet at June 30, 2006 reflects increase in deficit of $1,141,899 due to the write-off of deferred mining and exploration expenses described above.


3.	Business acquisition

The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of Tone Resources.

In consideration for the acquisition of Tone Resources, the Company will issue 0.26 shares of U.S. Gold common stock for each outstanding common share of Tone Resources totaling approximately 5,072,144 common shares to shareholders of Tone Resources, representing approximately $29.9 million total value based on the closing price of U.S. Gold’s common stock. For accounting purposes, the measurement of the purchase consideration in the unaudited pro forma consolidated financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date and is estimated at $5.90 per each U.S. Gold share.

Each Tone Resources warrant or stock option which gives the holder the right to acquire shares in the common stock of Tone Resources when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of Tone Resources common shares for U.S. Gold common shares. The initial exchange will not include the Tone Resources options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $7 million based on the Black-Scholes pricing model.

The principal assumptions used in applying the Black-Scholes option-pricing model were as follows:


Risk-free interest rate	4.82	%
Dividend yield	N/A
Volatility factor	102	%
Expected life — options	2-3 years
Remaining period to expiry date — warrants (weighted average)	17 months

After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of Tone Resources’ assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisition of Tone Resources, the fair value of all identifiable assets and liabilities acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to Tone Resources’ capital assets would result in increased amortization charges. The fair value of the net assets of Tone Resources to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that

F-24

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material. The preliminary purchase price allocation is subject to change and is summarized as follows:


Purchase price:
Shares issued on acquisition	$	29,925,650
Options		2,210,544
Warrants		4,761,823
Acquisition costs (estimated at 5% of purchase price)		1,844,901

	$	38,742,918

Net assets acquired:
Cash and cash equivalents	$	1,186,927
Accounts receivable		13,392
Retainers and prepaid expenses		9,673
Reclamation bond		29,795
Accounts payable and accrued liabilities		(105,444	)
Due to related parties		(15,981	)
Future income tax liability		(10,610,850	)
Acquired mineral property interests		48,235,406

	$	38,742,918


4.	Pro forma assumptions and adjustments

The unaudited pro forma consolidated financial statements incorporate the following pro forma assumptions:

(a) The purchase price for the Acquisition has been allocated to the acquired assets and liabilities on a proforma basis as described in Note 3.

(b) Transaction costs have been assumed to be $1,844,901 representing 5 per cent of the total fair value of the purchase price of the Acquisition.

(c) Future income taxes have been taken into consideration in connection with the purchase price allocation where assumed fair values are not the same as the carry forward book values.

(d) Represents elimination of acquired business capital stock, equity accounts and accumulated deficit.


5.	Pro forma share capital

Pro forma share capital as at June 30, 2006 has been determined as follows:


	Number of
	Shares		Amount

Issued common shares of U.S. Gold		33,296,755	$	41,339,239
Shares issued for acquisition of Tone		5,072,144		29,925,650

Pro forma balance		38,368,899	$	71,264,889

F-25

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Pro forma loss per share

Pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 has been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to Tone Resources shareholders being effective on January 1, 2006 and January 1, 2005 respectively.


	Six Months
	Ended			Year Ended
	June 30,			December 31,
	2006			2005
	(Shares or US dollars)

Actual weighted average number of U.S. Gold common shares outstanding		33,296,755			25,931,172
Assumed number of U.S. Gold common shares issued to Tone shareholders		5,072,144			5,072,144

Pro forma weighted average number of U.S. Gold common shares outstanding		38,368,899			31,003,316

Pro forma net loss	$	(66,749,735	)	$	(3,693,270	)
Pro forma adjusted basic loss per share	$	(1.74	)	$	(0.12	)

F-26

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF U.S. GOLD AND WHITE KNIGHT

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2006


	As Reported
				White									White
				Knight									Knight									Pro Forma
				Resources									Resources									Consolidated
	U.S. Gold			Ltd. (Cdn			US GAAP						Ltd. (US			Transaction						U.S. Gold
	Corporation			GAAP)			Adjustments			Notes			GAAP)			Adjustments			Notes			Corporation
	(Expressed in United States dollars unless otherwise stated)

ASSETS
Current
Cash and cash equivalents	$	30,065,618		$	10,258,097								$	10,258,097								$	40,323,715
Temporary investments		—			1,896,929		$	43,454			2	(i)		1,940,383									1,940,383
Accounts receivable		133,743			105,741									105,741									239,484
Other current assets — prepaid expenses		74,793			44,433									44,433									119,226

Total current assets		30,274,154			12,305,200			43,454						12,348,654									42,622,808

Property and equipment, net		101,629			837,768									837,768									939,397
Mineral property interests		—			2,519,657			(1,828,914	)		2	(ii)		690,743									690,743
Deferred exploration costs		—			3,477,923			(3,477,923	)		2	(ii)		—									—
Acquired mineral property interests		—			—									—		$	160,273,810			3&4	(a)		160,273,810
Offering costs, net		2,991,684			—									—									2,991,684
Restrictive time deposits for reclamation bonding		3,102,454			211,305									211,305									3,313,759
Escrow funding		38,009,105												—									38,009,105
Long-lived asset — asset retirement		1,068,353			—									—									1,068,353
Other assets:
Inactive milling equipment		777,819			—									—									777,819
Other assets		2,125			—									—									2,125

Total other assets		779,944			—			—						—									779,944

TOTAL ASSETS	$	76,327,323		$	19,351,853		$	(5,263,383	)				$	14,088,470		$	160,273,810					$	250,689,603


LIABILITIES
Current
Accounts payable and accrued liabilities	$	1,961,514		$	283,964								$	283,964		$	6,598,362			3&4	(b)	$	8,843,840
Installment purchase contracts		48,164			—									—									48,164
Due to related parties		—			106,202									106,202									106,202
Retirement obligation (reclamation activities)		1,235,776			—									—									1,235,776

Total current liabilities		3,245,454			390,166									390,166			6,598,362						10,233,982

Installment purchase contracts, long-term		10,444			—									—									10,444
Retirement obligation		1,389,107			149,387									149,387									1,538,494
Future income tax liability		—			—									—			35,257,120			3&4	(c)		35,257,120
Other permit obligations		72,511			—									—									72,511
Escrow account		38,009,105			—									—									38,009,105
Derivative liabilities		96,601,884			—									—									96,601,884

Total liabilities		139,328,505			539,553									539,553			41,855,482						181,723,540


SHAREHOLDERS’ EQUITY
Capital stock		41,339,239			28,926,147									28,926,147			(28,926,147	)		4	(d)		163,969,205
																	122,629,966			3
Options and warrants		—			—									—			9,337,279			3			9,337,279
Other equity accounts		—			3,600,678									3,600,678			(3,600,678	)		4	(d)		—
Deficit		(104,340,421	)		(13,714,525	)	$	(5,263,383	)		2	(iii)		(18,977,908	)		18,977,908			4	(d)		(104,340,421	)

Total shareholders’ equity (deficiency)		(63,001,182	)		18,812,300			(5,263,383	)					13,548,917			118,418,328						68,966,063

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	76,327,323		$	19,351,853		$	(5,263,383	)				$	14,088,470		$	160,273,810					$	250,689,603

See accompanying notes to unaudited pro forma consolidated financial statements.

F-27

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations

For the six months ended June 30, 2006


	As Reported															Pro Forma
				White Knight									White Knight			Consolidated
	U.S. Gold			Resources			US GAAP						Resources			U.S. Gold
	Corporation			Ltd. (Cdn GAAP)			Adjustments			Notes			Ltd. (US GAAP)			Corporation
	(Expressed in United States dollars unless otherwise stated)

OTHER REVENUE
Interest and other items	$	488,378		$	191,339		$	16,228			2	(i)	$	207,567		$	695,945
Gain (loss) on foreign exchange		—			(13,868	)								(13,868	)		(13,868	)

Total other revenue		488,378			177,471			16,228						193,699			682,077

COSTS AND EXPENSES General and administrative		1,449,070			624,458									624,458			2,073,528
Proposed acquisitions		3,384,378			—									—			3,384,378
Property holding costs		781,853			—									—			781,853
Exploration costs		1,000,423			—									—			1,000,423
Stock compensation expense		—			1,947,693									1,947,693			1,947,693
Interest		3,442			3,695									3,695			7,137
Stock option expense		536,000			—									—			536,000
Accretion of asset retirement obligation		135,989			—									—			135,989
Change in value of derivatives		59,026,884			—									—			59,026,884
Write-off of deferred exploration costs		—			73,676			509,207			2	(ii)		582,883			582,883
Write-off (recovery) of mineral property costs		—			—			(13,046	)		2	(ii)		(13,046	)		(13,046	)
Amortization of offering cost		228,066			—									—			228,066
Depreciation		12,594			14,817									14,817			27,411

Total costs and expenses		66,558,699			2,664,339			496,161						3,160,500			69,719,199

Loss before income taxes		(66,070,321	)		(2,486,868	)		(479,933	)					(2,966,801	)		(69,037,122	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(66,070,321	)	$	(2,486,868	)	$	(479,933	)				$	(2,966,801	)	$	(69,037,122	)

Basic and diluted net loss per share (Note 6)	$	(1.98	)													$	(1.28	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		33,296,755															54,081,495

See accompanying notes to unaudited pro forma consolidated financial statements.

F-28

U.S. Gold Corporation

Unaudited Pro Forma Consolidated Statement of Operations

For the Twelve Months Ended December 31, 2005


	As Reported
				White Knight									White Knight			Pro Forma
	U.S. Gold			Resources			US GAAP						Resources			Consolidated U.S.
	Corporation			Ltd. (Cdn GAAP)			Adjustments			Notes			Ltd. (US GAAP)			Gold Corporation
	(Expressed in United States dollars unless otherwise stated)

OTHER REVENUE
Earnest money forfeited	$	200,000														$	200,000
Interest and other items		32,032		$	294,563		$	51,599			2	(i)	$	346,162			378,194
Management fee		330,000			—									—			330,000
Realized gain from disposition of shares		520,428			—									—			520,428
Gain (loss) on sale of assets		(29,982	)		—									—			(29,982	)
Gain (loss) on foreign exchange		—			1,634									1,634			1,634

Total other revenue		1,052,478			296,197			51,599						347,796			1,400,274

COSTS AND EXPENSES General and administrative		1,027,194			808,304									808,304			1,835,498
Write-off of purchase price receivable		182,748			—									—			182,748
Property holding costs		761,081			—									—			761,081
Employment termination payments		1,423,824			—									—			1,423,824
Stock compensation expense		294,400			174,760									174,760			469,160
Equity share of subsidiary loss		58,888			—									—			58,888
Realization reserve — stock		168,960			—									—			168,960
Interest		3,011			5,016									5,016			8,027
Accretion of asset retirement obligation		110,243			—									—			110,243
Write-off of deferred exploration costs		—			107,296			1,692,739			2	(ii)		1,800,035			1,800,035
Write-off of mineral property costs		—			—			189,718			2	(ii)		189,718			189,718
Depreciation		12,850			27,329									27,329			40,179

Total costs and expenses		4,043,199			1,122,705			1,882,457						3,005,162			7,048,361

Loss before income taxes		(2,990,721	)		(826,508	)		(1,830,858	)					(2,657,366	)		(5,648,087	)
Provision for income taxes		—			—			—						—			—

NET LOSS	$	(2,990,721	)	$	(826,508	)	$	(1,830,858	)				$	(2,657,366	)	$	(5,648,087	)

Basic and diluted net loss per share (Note 6)	$	(0.12	)													$	(0.12	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		25,931,172															46,715,912

See accompanying notes to unaudited pro forma consolidated financial statements.

F-29

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars unless otherwise stated)

June 30, 2006 and December 31, 2005

(Unaudited)


1.	Basis of presentation

On March 5, 2006 U.S. Gold Corporation (“U.S. Gold” or the “Company”) announced that it intends to acquire, in stock transactions, all of the outstanding common shares of White Knight Resources Ltd., Nevada Pacific Gold Ltd, Coral Gold Resources Ltd and Tone Resources Limited. This proposal was made in letters sent on the same day by Mr. Robert R. McEwen, Chairman and Chief Executive Officer of U.S. Gold, to the chief executive officers of each of the subject companies.

These unaudited pro forma consolidated financial statements have been prepared to give effect to the Company’s acquisition of White Knight (the “Acquisition”). These unaudited pro forma consolidated financial statements have been prepared on the basis that each shareholder will receive shares of common stock of U.S. Gold in exchange for their White Knight common shares. The combined effects of the proposed transactions with each of the four companies have been presented separately under “Unaudited Pro Forma Consolidated Supplementary Financial Statements,” included elsewhere in this document. Each of these acquisitions is not conditional on the other three and the Company may or may not be successful in acquiring all of the target companies.

These unaudited pro forma consolidated financial statements have been compiled from and include:

(a) An unaudited pro forma consolidated balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the audited balance sheet of White Knight as at June 30, 2006, giving effect to the transaction as if it occurred on June 30, 2006.

(b) An unaudited pro forma consolidated statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with the unaudited constructed statement of operations of White Knight for the twelve months ended December 31, 2005, giving effect to the transaction as if it occurred on January 1, 2005. White Knight’s statement of operations for the twelve months ended December 31, 2005 has been constructed by adding together (a) the results for the six months ended June 30, 2005 (derived from White Knight’s audited financial statements for the year ended June 30, 2005 and the unaudited interim results for the six months ended December 31, 2004) and (b) the unaudited interim results for the six months ended December 31, 2005.

(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with the unaudited constructed statement of operations of White Knight for the six months ended June 30, 2006 (derived from White Knight’s audited financial statements for the year ended June 30, 2006 and the unaudited interim results for the six months ended December 31, 2005), giving effect to the transaction as if it occurred on January 1, 2005.

Management of U.S. Gold has consolidated certain line items from White Knight’s financial statements in an attempt to conform to the presentation of the Company’s financial statements. It is management’s opinion that these unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation of the transactions described in Note 3 in accordance with United States generally accepted accounting principles.

F-30

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

White Knight prepares its financial statements in accordance with Canadian GAAP and in Canadian dollars. These financial statements have been translated to United States GAAP, as more fully described in note 2. The conversion from Canadian dollars to U.S. dollars has been reflected at the rates described in the following table.


As at June 30, 2006			0.90
Average for the six months ended June 30, 2006			0.88
Average for the twelve months ended December 31, 2005			0.83

The unaudited pro forma consolidated financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for White Knight are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of White Knight that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated financial statements. In addition, the impact of integration activities, the timing of completion of the acquisition and other changes in White Knight’s net tangible and intangible assets prior to the completion of the acquisition, which have not been incorporated into these unaudited pro forma consolidated financial statements, could cause material differences in the information presented.


2.	Reconciliation to United States Generally Accepted Accounting Principles


*(i)*	*Temporary Investments*

The effects of the foregoing differences are summarized as follows:

Pro forma balance sheet at June 30, 2006

The US GAAP statement reflects $1,940,383 balance of temporary investments ($1,896,929 under Canadian GAAP).

Pro forma statements of operations

The US GAAP statements reflect changes in the fair value of temporary investments amounting to $16,228 and $51,599 for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively.

F-31

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) Mineral property interests and deferred exploration costs

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

The effects of the foregoing differences are summarized as follows:

Pro forma balance sheet at June 30, 2006

The US GAAP statement reflects $690,743 balance for Mineral Property Interests ($2,519,657 under Canadian GAAP) and nil balance for Deferred Exploration Costs ($3,477,923 under Canadian GAAP).

Pro forma statements of operations

Under US GAAP Mining and Exploration Expenditures amounts to $496,161 ($509,207 for Deferred Exploration Costs less $13,046 for Mineral Property Interests) for the 6 months ended June 30, 2006 and $1,882,457 ($1,692,739 for Deferred Exploration Costs and $189,718 for Mineral Property Interests) for the 12 months ended December 31, 2005. These expenditures are capitalized for Canadian GAAP purposes but are expensed under US GAAP.

(iii) Deficit

The US GAAP pro forma balance sheet at June 30, 2006 reflects increase in deficit of $5,263,383 due to changes in the fair value of temporary investments and the write-off of deferred mining and exploration expenses described above.


3.	Business acquisitions

The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of White Knight.

In consideration for the acquisition of White Knight, the Company will issue 0.35 shares of U.S. Gold common stock for each outstanding common share of White Knight totaling approximately 20,784,740 common shares to shareholders of White Knight, representing approximately $122.6 million total value based on the closing price of U.S. Gold’s common stock. For accounting purposes, the measurement of the purchase consideration in the unaudited pro forma consolidated financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date and is estimated at $5.90 per each U.S. Gold share.

Each White Knight warrant or stock option which gives the holder the right to acquire shares in the common stock of White Knight when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of White Knight common shares for U.S. Gold common shares. The initial exchange will not include the White Knight options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $9.3 million based on the Black-Scholes pricing model.

F-32

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The principal assumptions used in applying the Black-Scholes option pricing model were as follows:


Risk-free interest rate	4.82	%
Dividend yield	N/A
Volatility factor	102	%
Expected life — options	3-4 years
Remaining period to expiry date — warrants (weighted average)	6 months

After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of White Knight’s assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisition of White Knight, the fair value of all identifiable assets and liabilities acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to White Knight’s capital assets would result in increased amortization charges. The fair value of the net assets of White Knight to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material. The preliminary purchase price allocation is subject to change and is summarized as follows:


Purchase price:
Shares issued on acquisition	$	122,629,966
Options		8,533,504
Warrants		803,775
Acquisition costs (estimated at 5% of purchase price)		6,598,362

	$	138,565,607

Net assets acquired:
Cash and cash equivalents	$	10,258,097
Temporary investments		1,940,383
Accounts receivable		105,741
Other current assets — prepaid expenses		44,433
Property and equipment, net		837,768
Mineral property interests		690,743
Restrictive time deposits for reclamation bonding		211,305
Accounts payable and accrued liabilities		(283,964	)
Due to related parties		(106,202	)
Retirement obligation		(149,387	)
Future income tax liability		(35,257,120	)
Acquired mineral property interests		160,273,810

	$	138,565,607

F-33

U.S. GOLD CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Pro forma assumptions and adjustments

The unaudited pro forma consolidated financial statements incorporate the following pro forma assumptions:

(a) The purchase price for the Acquisition has been allocated to the acquired assets and liabilities on a proforma basis as described in Note 3.

(b) Transaction costs have been assumed to be $6,598,362 representing 5 per cent of the total fair value of the purchase price of the Acquisition.

(c) Future income taxes have been taken into consideration in connection with the purchase price allocation where assumed fair values are not the same as the carry forward book values.

(d) Represents elimination of acquired business capital stock, equity accounts and accumulated deficit.


5.	Pro forma share capital

Pro forma share capital as at June 30, 2006 has been determined as follows:


	Number of
	Shares		Amount

Issued common shares of U.S. Gold		33,296,755	$	41,339,239
Shares issued for acquisition of White Knight		20,784,740		122,629,966

Pro forma balance		54,081,495	$	163,969,205


6.	Pro forma loss per share

Pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 have been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to White Knight shareholders being effective on January 1, 2006 and January 1, 2005 respectively.


	Six Months
	Ended			Year Ended
	June 30, 2006			December 31, 2005
	(Shares or US dollars)

Actual weighted average number of U.S. Gold common shares outstanding		33,296,755			25,931,172
Assumed number of U.S. Gold common shares issued to White Knight shareholders		20,784,740			20,784,740

Pro forma weighted average number of U.S. Gold common shares outstanding		54,081,495			46,715,912

Pro forma net loss	$	(69,037,122	)	$	(5,648,087	)
Pro forma adjusted basic loss per share	$	(1.28	)	$	(0.12	)

F-34

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF U.S. GOLD AND CORAL GOLD, NEVADA PACIFIC, TONE RESOURCES AND WHITE KNIGHT

U.S. Gold Corporation
Unaudited Pro Forma Consolidated Supplementary Balance Sheet
June 30, 2006


																Pro								Pro
				U.S. GAAP												Forma								Forma
				White			Nevada			Coral						Consolidated								Consolidated
	As Reported			Knight			Pacific			Gold			Tone			(before								U.S.
	U.S. Gold			Resources			Gold			Resources			Resources			transaction			Transaction					Gold
	Corporation			Ltd.			Ltd.			Ltd.			Limited			adjustments)			Adjustments			Notes		Corporation
	(Expressed in United States dollars unless otherwise stated)

ASSETS
Current
Cash and cash equivalents	$	30,065,618		$	10,258,097		$	3,659,738		$	4,152,402		$	1,186,927		$	49,322,782							$	49,322,782
Temporary investments		—			1,940,383			—			—			—			1,940,383								1,940,383
Accounts receivable		133,743			105,741			180,697			47,414			13,392			480,987								480,987
Product inventory and stockpiled ore		—			—			109,074			—			—			109,074								109,074
Supplies inventory		—			—			285,152			—			—			285,152								285,152
Other current assets — prepaid expenses		74,793			44,433			239,424			70,242			9,673			438,565								438,565

Total current assets		30,274,154			12,348,654			4,474,085			4,270,058			1,209,992			52,576,943								52,576,943

Property and equipment, net		101,629			837,768			8,648,468			3,108			—			9,590,973								9,590,973
Mineral property interests		—			690,743			—			934,626			—			1,625,369								1,625,369
Acquired mineral property interests		—			—			—			—			—			—		$	377,902,746			3&4		377,902,746
Offering costs, net		2,991,684			—			—			—			—			2,991,684								2,991,684
Restrictive time deposits for reclamation bonding		3,102,454			211,305			96,363			234,878			29,795			3,674,795								3,674,795
Escrow funding		38,009,105			—			—			—			—			38,009,105								38,009,105
Long-lived asset — asset retirement		1,068,353			—			—			—			—			1,068,353								1,068,353
Other assets:
Inactive milling equipment		777,819			—			—			—			—			777,819								777,819
Other assets		2,125			—			—			349,055			—			351,180								351,180

Total other assets		779,944			—			—			349,055			—			1,128,999			—					1,128,999

TOTAL ASSETS	$	76,327,323		$	14,088,470		$	13,218,916		$	5,791,725		$	1,239,787		$	110,666,221		$	377,902,746				$	488,568,967


LIABILITIES
Current
Accounts payable and accrued liabilities	$	1,961,514		$	283,964		$	1,194,495		$	336,252		$	105,444		$	3,881,669		$	15,415,301			4	$	19,296,970
Installment purchase contracts		48,164			—			—			—			—			48,164								48,164
Due to related parties		—			106,202			—			—			15,981			122,183								122,183
Advances payable		—			—			—			72,656			—			72,656								72,656
Retirement obligation (reclamation activities)		1,235,776			—			—			—			—			1,235,776								1,235,776

Total current liabilities		3,245,454			390,166			1,194,495			408,908			121,425			5,360,448			15,415,301					20,775,749

Installment purchase contracts, long-term		10,444			—			—			—			—			10,444								10,444
Retirement obligation		1,389,107			149,387			1,684,812			—			—			3,223,306								3,223,306
Future income tax liability		—			—			—			1,303,796			—			1,303,796			83,131,251			4		84,435,047
Other permit obligations		72,511			—			—			—			—			72,511								72,511
Escrow account		38,009,105			—			—			—			—			38,009,105								38,009,105
Derivative liabilities		96,601,884			—			—			—			—			96,601,884								96,601,884
Other liabilities		—			—			112,397			23,685			—			136,082								136,082

Total liabilities		139,328,505			539,553			2,991,704			1,736,389			121,425			144,717,576			98,546,552					243,264,128

SHAREHOLDERS’ EQUITY
Capital stock		41,339,239			28,926,147			30,955,143			30,836,785			4,594,291			136,651,605			(95,312,366	)		4		312,308,215
																				270,968,976			3
Options and warrants		—			—			—			—			—			—			37,337,045			3		37,337,045
Other equity accounts		—			3,600,678			1,203,218			2,014,036			487,445			7,305,377			(7,305,377	)		4		—
Deficit		(104,340,421	)		(18,977,908	)		(21,931,149	)		(28,795,485	)		(3,963,374	)		(178,008,337	)		73,667,916			4		(104,340,421	)

Total shareholders’ equity		(63,001,182	)		13,548,917			10,227,212			4,055,336			1,118,362			(34,051,355	)		279,356,194					245,304,839

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	76,327,323		$	14,088,470		$	13,218,916		$	5,791,725		$	1,239,787		$	110,666,221		$	377,902,746				$	488,568,967

See accompanying notes to unaudited pro forma consolidated supplementary financial statements.

F-35

U.S. Gold Corporation
Unaudited Pro Forma Consolidated Supplementary Statement of Operations
For the six months ended June 30, 2006


				U.S. GAAP
				White												Pro Forma
	As Reported			Knight			Nevada			Coral Gold			Tone			Consolidated
	U.S. Gold			Resources			Pacific Gold			Resources			Resources			U.S. Gold
	Corporation			Ltd.			Ltd.			Ltd.			Limited			Corporation
	(Expressed in United States dollars unless otherwise stated)

SALES							$	2,943,367								$	2,943,367

COST OF SALES								3,347,211									3,347,211
DEPRECIATION AND DEPLETION								175,797									175,797
ROYALTIES								171,026									171,026

								3,694,034									3,694,034

EARNINGS (LOSS) FROM MINING OPERATIONS								(750,667	)								(750,667	)

OTHER REVENUE
Interest and other items	$	488,378		$	207,567			51,326		$	43,853						791,124
Gain (loss) on foreign exchange		—			(13,868	)		(37,154	)		12,768		$	(9,416	)		(47,670	)

Total other revenue		488,378			193,699			14,172			56,621			(9,416	)		743,454

COSTS AND EXPENSES
General and administrative		1,449,070			624,458			1,149,356			911,743			497,519			4,632,146
Proposed acquisitions		3,384,378			—			—			—			—			3,384,378
Property holding costs		781,853			—			—			—			—			781,853
Exploration costs		1,000,423			—			—			—			—			1,000,423
Stock compensation expense		—			1,947,693			494,015			876,942			70,468			3,389,118
Interest		3,442			3,695			—			—			—			7,137
Stock option expense		536,000			—			—			—			—			536,000
Accretion of asset retirement obligation obligation		135,989			—			—			—			—			135,989
Change in value of derivatives		59,026,884			—			—			—			—			59,026,884
Write-off of deferred exploration costs		—			582,883			—			—			—			582,883
Write-off of mineral property costs		—			(13,046	)		948,500			141,802			102,011			1,179,267
Amortization of offering cost		228,066			—			—			—			—			228,066
Depreciation		12,594			14,817			—			380			—			27,791

Total costs and expenses		66,558,699			3,160,500			2,591,871			1,930,867			669,998			74,911,935

Loss before income taxes		(66,070,321	)		(2,966,801	)		(3,328,366	)		(1,874,246	)		(679,414	)		(74,919,148	)
Provision for future income taxes		—			—			—			669,080			—			669,080
Provision for income taxes		—			—			—			—			—			—

NET LOSS	$	(66,070,321	)	$	(2,966,801	)	$	(3,328,366	)	$	(2,543,326	)	$	(679,414	)	$	(75,588,228	)

Basic and diluted net loss per share (Note 6)	$	(1.98	)													$	(0.95	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		33,296,755															79,223,700

See accompanying notes to unaudited pro forma consolidated supplementary financial statements.

F-36

U.S. Gold Corporation
Unaudited Pro Forma Consolidated Supplementary Statement of Operations
For the twelve months ended December 31, 2005


				U.S. GAAP
				White												Pro Forma
	As Reported			Knight			Nevada			Coral Gold			Tone			Consolidated
	U.S. Gold			Resources			Pacific Gold			Resources			Resources			U.S. Gold
	Corporation			Ltd.			Ltd.			Ltd.			Limited			Corporation
	(Expressed in United States dollars unless otherwise stated)

SALES							$	8,881,168								$	8,881,168

COST OF SALES								8,420,437									8,420,437
DEPRECIATION AND DEPLETION								804,215									804,215
ROYALTIES								472,743									472,743

								9,697,395									9,697,395

EARNINGS (LOSS) FROM MINING OPERATIONS								(816,227	)								(816,227	)

OTHER REVENUE
Earnest money forfeited	$	200,000						—									200,000
Interest and other items		32,032		$	346,162			27,205		$	15,270		$	439			421,108
Management fee		330,000			—			—			—			—			330,000
Realized gain from disposition of shares		520,428			—			—			—			—			520,428
Gain (loss) on sale of assets		(29,982	)		—			155,199			(3,296	)		—			121,921
Gain (loss) on foreign exchange		—			1,634			(67,043	)		(15,576	)		(1,723	)		(82,708	)

Total other revenue		1,052,478			347,796			115,361			(3,602	)		(1,284	)		1,510,749

COSTS AND EXPENSES
General and administrative		1,027,194			808,304			1,800,234			480,660			374,644			4,491,036
Write-off of purchase price receivable		182,748			—			—			—			—			182,748
Property holding costs		761,081			—			—			—			—			761,081
Employment termination payments		1,423,824			—			—			—			—			1,423,824
Stock compensation expense		294,400			174,760			472,707			311,545			233,415			1,486,827
Equity share of subsidiary loss		58,888			—			—			—			—			58,888
Realization reserve — stock		168,960			—			—			—			—			168,960
Interest		3,011			5,016			246			—			—			8,273
Accretion of asset retirement obligation obligation		110,243			—			—			—			—			110,243
Write-off of deferred exploration costs		—			1,800,035			—			—			—			1,800,035
Write-off of mineral																	—
property costs		—			189,718			1,642,479			642,993			93,206			2,568,396
Depreciation		12,850			27,329			—			764			—			40,943

Total costs and expenses		4,043,199			3,005,162			3,915,666			1,435,962			701,265			13,101,254

Loss before income taxes		(2,990,721	)		(2,657,366	)		(4,616,532	)		(1,439,564	)		(702,549	)		(12,406,732	)
Provision for income taxes		—			—			—			—			—			—

NET LOSS	$	(2,990,721	)	$	(2,657,366	)	$	(4,616,532	)	$	(1,439,564	)	$	(702,549	)	$	(12,406,732	)

Basic and diluted net loss per share (Note 6)	$	(0.12	)													$	(0.17	)

Weighted average number of shares outstanding — basic and diluted (Note 6)		25,931,172															71,858,117

See accompanying notes to unaudited pro forma consolidated supplementary financial statements.

F-37

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
June 30, 2006 and December 31, 2005
(Unaudited)


1.	Basis of presentation

On March 5, 2006 U.S. Gold Corporation (“U.S. Gold” or the “Company”) announced that it intends to acquire, in stock transactions, all of the outstanding common shares of White Knight Resources Ltd. (“White Knight”), Nevada Pacific Gold Ltd. (“Nevada Pacific”), Coral Gold Resources Ltd. (“Coral Gold”) and Tone Resources Limited (“Tone Resources”) (together, the “Target Companies” or “Targets”). This proposal was made in letters sent on the same day by Mr. Robert R. McEwen, Chairman and Chief Executive Officer of U.S. Gold, to the chief executive officers of each of the subject companies.

The combined effects of the proposed transactions with each of the Target Companies have been presented in these Unaudited Pro Forma Consolidated Supplementary Financial Statements. The unaudited pro forma consolidated financial statements giving effect to the Company’s acquisition of each of Coral Gold, Nevada Pacific, Tone Resources and White Knight have been presented separately in the document. These unaudited pro forma consolidated supplementary financial statements have been prepared on the basis that each shareholder of the target Companies will receive shares of common stock of U.S. Gold Corporation in exchange for their Target Companies common shares.

These unaudited pro forma consolidated supplementary financial statements have been compiled from and include:

(a) An unaudited pro forma consolidated supplementary balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the unaudited consolidated balance sheet of Coral Gold as at April 30, 2006, the audited consolidated balance sheet of Nevada Pacific as at June 30, 2006, the unaudited consolidated balance sheet of Tone Resources as at May 31, 2006 and the audited consolidated balance sheet of White Knight as at June 30, 2006, giving effect to the transactions as if they occurred on June 30, 2006.

(b) An unaudited pro forma consolidated supplementary statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with unaudited constructed statement of operations of Coral Gold for the twelve months ended October 31, 2005, the unaudited constructed statement of operations of Nevada Pacific for the twelve months ended December 31, 2005, the unaudited constructed statement of operations of Tone Resources for the twelve months ended November 30, 2005 and the unaudited constructed statement of operations of White Knight for the twelve months ended December 31, 2005, giving effect to the transactions as if they occurred on January 1, 2005.

(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with unaudited constructed statement of operations of Coral Gold for the six months ended April 30, 2006, the unaudited constructed statement of operations of Nevada Pacific for the six months ended June 30, 2006, the unaudited constructed statement of operations of Tone Resources for the six months ended May 31, 2006 and the unaudited constructed statement of operations of White Knight for the six months ended June 30, 2006, giving effect to the transactions as if they occurred on January 1, 2005.

The unaudited pro forma consolidated supplementary balance sheet and statements of operations have been presented on the above basis to ensure that the unaudited pro forma consolidated supplementary financial statements reflect the acquired business financial statements for a period that is no more than 93 days from U.S. Gold’s year-end, as required pursuant to pro forma presentation requirements contained in the securities rules.

The unaudited pro forma consolidated supplementary financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company and the financial statements of the Target Companies. Management of U.S. Gold has consolidated certain line items from the Target Companies financial

F-38

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS — (Continued)

statements in an attempt to conform to presentation of the Company’s financial statements, and also to conform the Target’s accounting policies to United States generally accepted accounting principles.

It is management’s opinion that these unaudited pro forma consolidated supplementary financial statements include all adjustments necessary for the fair presentation of the transactions described in Note 3 in accordance with United States generally accepted accounting principles.

The unaudited pro forma consolidated supplementary financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma consolidated supplementary financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for the Target Companies are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of the Target Companies that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated supplementary financial statements. In addition, the impact of integration activities, the timing of completion of the acquisitions and other changes in the Target Companies net tangible and intangible assets prior to the completion of the acquisitions, which have not been incorporated in these unaudited pro forma consolidated supplementary financial statements, could cause material differences in the information presented.


2.	Summary of significant accounting policies

The unaudited pro forma consolidated supplementary financial statements have been compiled using the significant accounting policies as set out in the audited financial statements of U.S. Gold for the year ended December 31, 2005 which are included elsewhere in this proxy statement.


3.	Business acquisitions

The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of the Target Companies.

In consideration for the acquisition of Tone Resources the Company will issue 0.26 shares of U.S. Gold common stock for each outstanding common share of Tone Resources totaling approximately 5,072,144 common shares to shareholders of Tone Resources, representing approximately US$29.9 million. In addition, the options and warrants to be issued by U.S. Gold will amount to approximately $7 million.

F-39

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS — (Continued)

The measurement of the purchase consideration in the unaudited pro forma consolidated supplementary financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date. The value of the purchase consideration for accounting purposes may differ from the amount assumed in the unaudited pro forma consolidated supplementary financial statement information due to any future changes in the negotiation process.

Each Target warrant or stock option which gives the holder the right to acquire shares in the common stock of the Target when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of the Target common shares for U.S. Gold common shares. The initial exchange will not include the Target options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $37.3 million based on the Black-Scholes pricing model.

The principal assumptions used in applying the Black-Scholes option pricing model were as follows:


Risk-free interest rate	4.82	%
Dividend yield	N/A
Volatility factor	102	%
Expected life — options	2-4 years
Remaining periods to expiration dates — warrants (weighted average)	6-19 months

After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of the Targets’ assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisitions of the Targets, the fair value of all identifiable assets and liabilities acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to the Targets’ capital assets would result in increased amortization charges. The fair value of the net assets of the Targets to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the fair values of assets and liabilities acquired will vary from the preliminary purchase allocation and the differences may be material.


4.	Pro forma assumptions and adjustments

The unaudited pro forma consolidated supplementary financial statements incorporate the following pro forma assumptions:

(a) After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of the Targets’ assets and liabilities has been allocated in full to Acquired Mineral Property Interests, together with the related future income tax liability.

(b) Transaction costs have been assumed to be 5 per cent of the total fair value of the purchase price of the acquisition of the Targets.

F-40

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS — (Continued)

A breakdown of the transaction related adjustments has been provided in the following table:


	White Knight			Nevada Pacific			Coral Gold			Tone Resources
	Resources Ltd.			Gold Ltd.			Resources Ltd.			Limited			Total

Acquired mineral property interests	$	160,273,810		$	136,711,293		$	32,682,236		$	48,235,406		$	377,902,746

Accounts payable and accrued liabilities	$	6,598,362		$	5,564,985		$	1,407,053		$	1,844,901		$	15,415,301
Future income tax liability		35,257,120			30,073,825			7,189,456			10,610,850			83,131,251
Capital stock reversal		(28,926,147	)		(30,955,143	)		(30,836,785	)		(4,594,291	)		(95,312,366	)
USG shares issued		122,629,966			93,595,034			24,818,326			29,925,650			270,968,976
Options and warrants issued		9,337,279			17,704,661			3,322,737			6,972,367			37,337,045
Other equity accounts reversal		(3,600,678	)		(1,203,218	)		(2,014,036	)		(487,445	)		(7,305,377	)
Deficit reversal		18,977,908			21,931,149			28,795,485			3,963,374			73,667,916

	$	160,273,810		$	136,711,293		$	32,682,236		$	48,235,406		$	377,902,746


5.	Pro forma share capital

Supplementary pro forma share capital as at June 30, 2006 has been compiled as follows:


	Number of
	Shares		Amount

Issued common shares of U.S. Gold		33,296,755	$	41,339,239
Shares issued for acquisitions of Targets		45,926,945		270,968,976

Pro forma balance		79,223,700	$	312,308,215


6.	Pro forma loss per share

Supplementary pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 have been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to the Target shareholders being effective on January 1, 2006 and January 1, 2005 respectively.


	Six Months Ended			Year Ended
	June 30, 2006			December 31, 2005
	(Shares or US dollars)

Actual weighted average number of U.S. Gold common shares outstanding		33,296,755			25,931,172
Assumed number of U.S. Gold common shares issued to Targets		45,926,945			45,926,945

Pro forma weighted average number of U.S. Gold common shares outstanding		79,223,700			71,858,117

Pro forma net loss	$	(75,588,228	)	$	(12,406,732	)
Pro forma adjusted basic loss per share	$	(0.95	)	$	(0.17	)

F-41

US GOLD CANADIAN ACQUISITION CORPORATION

NOTES TO UNAUDITED BALANCE SHEET

Note 1 — Nature of Business:

US Gold Canadian Acquisition Corporation was incorporated on April 18, 2006 for the purpose of making an offer to purchase the outstanding common shares in the capital of each of Coral Gold Resources Ltd., Nevada Pacific Gold Ltd., Tone Resources Limited and White Knight Resources Ltd.

US Gold Canadian Acquisition Corporation is a wholly-owned subsidiary of U.S. Gold Corporation and has no material assets or liabilities and no operating history.

Note 2 — Basis of Reporting:

The balance sheet of US Gold Canadian Acquisition Corporation is prepared in accordance with accounting principles generally accepted in the United States of America under the accrual method of accounting.

The presentation of a statement of income, a statement of changes in shareholder’s equity and a statement of cash flows is not included as there has been no activity, except for the sale of one common share to U.S. Gold Corporation on April 18, 2006 for $1.00.

G-3

ANNEX H — WELLINGTON WEST FAIRNESS OPINION

(WELLINGTON WEST Capital Markets Inc. LETTERHEAD)

April 6, 2006

The Special Committee of the Board of Directors

U.S. Gold Corporation

99 George Street, 3rd Floor

Toronto, Ontario M5A 2N4

To the Special Committee of the Board of Directors:

We, Wellington West Capital Markets Inc. (“Wellington West”), understand that U.S. Gold Corporation (“U.S. Gold”) intends to acquire all of the outstanding common shares of each of White Knight Resources Ltd., Nevada Pacific Gold Ltd., Coral Gold Resources Ltd., and Tone Resources Limited (collectively, the “Companies”) (each a “Transaction” and together the “Transactions”). Under the proposed terms of the Transactions, U.S. Gold will issue to the shareholders of the Companies upon the closing of the Transactions consideration in the form of shares of its common stock (collectively, the “Consideration”) in accordance with exchange ratios representing a 25% premium to the actual exchange ratios between the common shares of U.S. Gold and those of each of the Companies based on their market closing prices on March 3, 2006 (the “Exchange Ratios”). The approximate Exchange Ratios pursuant to the foregoing are as follows:


	•	0.35 shares of U.S. Gold common stock for each outstanding common share of White Knight Resources Ltd.

	•	0.23 shares of U.S. Gold common stock for each outstanding common share of Nevada Pacific Gold Ltd.

	•	0.63 shares of U.S. Gold common stock for each outstanding common share of Coral Gold Resources Ltd.

	•	0.26 shares of U.S. Gold common stock for each outstanding common share of Tone Resources Limited.

The Special Committee of the Board of Directors of U.S. Gold (the “Special Committee”) has retained Wellington West to provide an opinion, in customary form, to the Special Committee (the “Fairness Opinion”) as to the fairness of the Exchange Ratios, from a financial point of view, to U.S. Gold.

ENGAGEMENT

The Special Committee initially contacted Wellington West regarding a potential advisory assignment in March 2006, and Wellington West was formally engaged by U.S. Gold through an agreement between U.S. Gold and Wellington West (the “Engagement Agreement”) dated as of March 27, 2006 pursuant to which Wellington West would provide the Special Committee with the Fairness Opinion. The terms of the Engagement Agreement provide that Wellington West is to be paid a fee for its services for rendering the Fairness Opinion. The fees payable to Wellington West are not contingent in whole or in part upon the completion of the Transactions or on the conclusions reached in the Fairness Opinion.

CREDENTIALS OF WELLINGTON WEST CAPITAL MARKETS INC.

Wellington West is one of Canada’s leading independent investment banking firms and provides services in corporate finance, equity sales and trading, and investment research. The Fairness Opinion expressed herein represents the opinions of Wellington West and the form and content herein have been approved for release by the executive committee of Wellington West, the members of which are experienced in merger, acquisition, divestiture, valuation, fairness opinion, and capital market matters.

H-1

Wellington West is not an insider, associate, or affiliate of U.S. Gold or any of the Companies and is not an advisor to any person or company other than U.S. Gold with respect to the Transactions. Wellington West has not acted as lead underwriter for U.S. Gold or any of the Companies in the past 24 months, nor has Wellington West entered into any other agreements or arrangements with U.S. Gold or any of the Companies or any of their affiliates with respect to any future dealings. Wellington West may however, in the course of its business, provide financial advisory or investment banking services to U.S. Gold, any of the Companies, or any of their respective affiliates from time to time.

Wellington West acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have positions in the securities of U.S. Gold, any of the Companies, or any of their respective associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it received or may receive compensation. As an investment dealer, Wellington West conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including with respect to U.S. Gold, any of the Companies, or the Transactions.

SCOPE OF REVIEW

In connection with our Fairness Opinion, we have reviewed and relied upon (without attempting to verify independently the completeness or accuracy of), or carried out, among other things, the following:


i.		Audited financial statements of White Knight Resources for the years ended June 30, 1997 through June 30, 2005; unaudited quarterly financial statements for the second quarter ended December 31, 2005;

ii.		Audited financial statements of Coral Gold Resources for the years ended January 31, 1997 through January 31, 2005; unaudited quarterly financial statements for the third quarter ended October 31, 2005;

iii.		Audited financial statements of Tone Resources for the years ended August 31, 2003, 2004, and 2005; unaudited quarterly financial statements for the first quarter ended November 30, 2005;

iv.		Audited financial statements of Nevada Pacific Gold Ltd. for the years ended June 30, 1998, through June 30, 2005; unaudited quarterly financial statements for the second quarter ended December 31, 2005;

v.		Audited financial statements of U.S. Gold for the years ended December 31, 1995 through December 31, 2005; unaudited quarterly financials for the third quarter ended September 30, 2005;

vi.		Annual Information Form of Nevada Pacific Gold Ltd. dated February 24, 2005;

vii.		Final Long Form Prospectus of Tone Resources dated February 10, 2003

viii.		2005 annual report of Coral Gold Resources;

ix.		Management Information Circular of Coral Gold Resources dated May 6, 2005;

x.		Management Information Circular of Nevada Pacific Gold Ltd. dated October 27, 2005;

xi.		Management Information Circular of Tone Resources dated January 6, 2006;

xii.		Management Information Circular of White Knight Resources dated October 24, 2005;

xiii.		Technical Report on the Roberts Mountain Project, Roberts Mountain, Eureka County, Nevada USA prepared by Marvin A. Mitchell P.Eng, Mitchell Geological Services Inc, October 21, 2002;

xiv.		Technical Report for the Slaven Canyon Property, Lander County, Nevada, USA prepared by Timothy D. Jefferson, P.G., and Arthur R. Leger, P.G., November 16, 2005;

H-2

xv. Summary Report for the Celt Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc., September 23, 2005;

xvi. Technical Report on the Cottonwood Property, Eureka County, Nevada, USA prepared by John M. Leask, P.Eng, July 11, 2005;

xvii. Summary Report for the McClusky-Tonkin Summit Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc, September 22, 2005;

xviii. Technical Report on the Fye Canyon Property, Eureka County, Nevada prepared by John M. Leask, P.Eng., April 15, 2005;

xix. NI 43-101 Technical Report on the New Pass Property, Churchill County, Nevada prepared by Paul A Pelke, California Registered Geologist, October 2004;

xx. Technical Report on the Indian Ranch Property, Eureka County, Nevada, USA prepared by John M. Leask, P.Eng., December 20, 2004;

xxi. Amended Technical Report for the Magistral Gold Project, Sinaloa State, Mexico, prepared by Pincock Allen & Holt, January 6, 2005;

xxii. Technical Report on the Tonkin Springs Project, Nevada, USA, May 2004;

xxiii. Filings on the System for Electronic Disclosure by Insiders (SEDI) for Coral Gold Resources, Nevada Pacific Gold Ltd., Tone Resources, and White Knight Resources;

xxiv. March 6, 2006 Corporate Presentation of U.S. Gold;

xxv. Spring 2006 Corporate Presentation of Nevada Pacific Gold Ltd.;

xxvi. Press releases for U.S. Gold, White Knight Resources, Nevada Pacific Gold, Coral Gold Resources and Tone Resources since January 1, 2005;

xxvii. Public information relating to the business, operations, financial performance and stock trading history of U.S. Gold, White Knight Resources, Nevada Pacific Gold, Coral Gold, Tone Resources and other selected public companies considered by us to be relevant;

xxviii. Public information with respect to other transactions of a comparable nature considered by us to be relevant;

xxix. Public information regarding the industries in which U.S. Gold and the Companies operate;

xxx. Representations contained in a certificate addressed to us, dated as of the date hereof, from senior officers of U.S. Gold as to the completeness and accuracy of the information upon which the Fairness Opinion is based; and

xxxi. Such other corporate, industry and financial market information, investigations and analyses as Wellington West considered necessary or appropriate in the circumstances.

Wellington West has not, to the best of its knowledge, been denied access by U.S. Gold to any information requested by Wellington West.

ASSUMPTIONS AND LIMITATIONS

Wellington West has not been asked to prepare and has not prepared a formal valuation or appraisal of the securities or assets of U.S. Gold, any of the Companies, or any of their respective associates or affiliates, and this opinion should not be construed as such. We have, however, conducted such analyses, investigation, research, and testing of assumptions as were considered by us to be necessary in the preparation of this Fairness Opinion. In addition, this Fairness Opinion is not, and should not be construed as, advice as to the price at which securities of

H-3

U.S. Gold or the Companies, after giving effect to the Transactions, may trade at a future date. Wellington West was not engaged to review any legal, tax or accounting aspects of the Agreements.

With the Special Committee’s approval and as provided for in the Engagement Agreement, Wellington West has relied upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions or representations obtained by it from public sources, and senior management of U.S. Gold and their respective consultants and advisors (collectively, the “Information”). The Fairness Opinion is conditional upon such completeness, accuracy and fair presentation of such Information. Subject to the exercise of professional judgment and except as expressly described herein, we have not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information. In preparing the Fairness Opinion, we have not been provided with direct access to the Companies or their respective managements, and have relied, with your permission, solely on publicly available information relating to the Companies.

We have assumed that one or more of the Transactions will be consummated on the terms described in the U.S. Gold press release dated March 5, 2006. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transactions will be obtained without any adverse effect on U.S. Gold or the Companies or the contemplated benefits of the Transactions.

Senior officers of the Company have represented to Wellington West in a certificate delivered as of the date hereof, among other things, that (i) the Information provided orally by, or in the presence of, an officer or employee of U.S. Gold or in writing by U.S. Gold to Wellington West relating to U.S. Gold or the Transactions for the purpose of preparing this Fairness Opinion was, at the date the Information was provided to Wellington West, and is, except as has been disclosed in writing to Wellington West, complete, true and correct in all material respects, and did not and does not contain any untrue statement of material fact in respect of U.S. Gold or the Transactions, necessary to make the information not misleading in light of the circumstances under which the Information was made or provided; and (ii) since the dates on which the Information was provided to Wellington West, except as disclosed in writing to Wellington West, there has been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of U.S. Gold and no material change has occurred in the Information or any part thereof which would have or which would reasonably be expected to have a material effect on the Fairness Opinion.

The Fairness Opinion is rendered on the basis of securities markets, economic, financial and general business conditions prevailing as at the date hereof and the condition and prospects, financial and otherwise, of U.S. Gold and its subsidiaries and affiliates, as they were reflected in the Information and as they have been represented to Wellington West in discussions with management of U.S. Gold. In its analyses and in preparing the Fairness Opinion, Wellington West made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Wellington West or any party involved in the Transactions.

The Fairness Opinion has been provided for the use of the Special Committee and the Board of Directors of U.S. Gold and may not be used by any other person or relied upon by any other person other than the Special Committee and the Board of Directors without the express prior written consent of Wellington West. The Fairness Opinion is given as of the date hereof, and Wellington West disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Fairness Opinion which may come or be brought to Wellington West’s attention after the date hereof. Without limiting the foregoing, in the event that there is any material change in any fact or matter affecting the Fairness Opinion after the date hereof, Wellington West reserves the right to change, modify or withdraw the Fairness Opinion.

Our opinion is limited to the fairness, from a financial point of view, to U.S. Gold of the Exchange Ratios and we do not address the merits of the underlying decision by U.S. Gold to engage in the Transactions. The Fairness Opinion is not to be construed as a recommendation to any securityholder as to whether to tender or vote its securities in favour of the Transactions.

H-4

FAIRNESS ANALYSIS

In rendering this Fairness Opinion, Wellington West has considered and performed a variety of financial analyses. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant assumptions and methods of financial analysis and the application of these methods to the particular circumstances and, therefore, a fairness opinion is not necessarily susceptible to partial analysis or summary description. Qualitative judgments were made based upon Wellington West’s assessment of the surrounding factual circumstances relating to the Transactions and Wellington West’s analysis of such factual circumstances in its best judgment. Any attempt to select portions of Wellington West’s analysis or of the factors considered, without considering all of the analysis employed and factors considered, would likely create an incomplete and misleading view of the process underlying this Fairness Opinion. This Fairness Opinion should be read in its entirety.

FAIRNESS CONCLUSION

Based upon and subject to the foregoing, Wellington West is of the opinion that, as of April 6, 2006, the Consideration payable in the Transactions, and each of the Exchange Ratios, is fair, from a financial point of view, to U.S. Gold and its shareholders.

Yours very truly,

/s/ Wellington West Capital Markets Inc.

Wellington West Capital Markets Inc.

H-5

To approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources.


o FOR		o AGAINST		o ABSTAIN

To approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight.


o FOR		o AGAINST		o ABSTAIN

To approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 5.


o FOR		o AGAINST		o ABSTAIN


Address change? Mark Box o Indicate changes below:		Please sign exactly as your name appears on this card. Joint owners should each sign personally. Corporation proxies should be signed in corporate name by an authorized officer. Executors, administrators, trustees or guardians should give their title when signing.


		Date:


		Signature(s):

I-2


Q:		When is the special meeting?

A:		Our special meeting will be held on [ • ], 2006 at [ • ], local time, at [ • ].

Q:		What matters will be considered at the special meeting?

A:		At the special meeting, shareholders will be asked to:

		• approve amendments to U.S. Gold’s Articles of Incorporation that:

		• create a new class of U.S. Gold stock comprised of one share of preferred stock, designated Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions;

		• remove provisions related to corporate opportunity to allow your board of directors to adopt and maintain an updated corporate opportunity policy; and

		• update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions.

		• approve the issuance of up to 5,303,738 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Coral Gold;

		• approve the issuance of up to 20,852,358 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific;

		• approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources;

		• approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight;

		• approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 5; and

		• take action on any other business that may properly come before the meeting.

Q:		Why are you asking shareholders to approve the amendment to U.S. Gold’s Articles of Incorporation creating preferred stock?

A:		U.S. Gold’s Articles of Incorporation currently authorize only common stock for issuance by U.S. Gold. U.S. Gold proposes to undertake four separate offers to purchase whereby it will offer to acquire all of the outstanding common shares of the Target Companies in exchange for exchangeable shares of Canadian Exchange Co. The exchangeable shares are intended to provide their holders with rights which are correlative to holders of shares of U.S. Gold’s common stock. To accomplish this objective, U.S. Gold will authorize and issue to the exchange and voting trustee one share of Series A Special Voting Preferred Stock, which will entitle the trustee to the number of votes with respect to any matter properly submitted to a vote of the holders of U.S. Gold common stock equal to the number of exchangeable shares of Canadian Exchange Co. outstanding at the time of the vote, as more fully described in “Structure of the Proposed Acquisitions — The Voting and Exchange Trust Agreement” beginning on page 55, and in the proposed amendment to the Articles of Incorporation, shown in Annex A to this proxy statement. An amendment to U.S. Gold’s Articles of Incorporation is necessary in order to authorize this new class of special voting stock. See “Proposal 1 — Amendments to Articles of Incorporation” beginning on page 22. In connection with this amendment to the


	Cdn$

August 31, 2002		1.5585
August 31, 2003		1.3850
August 31, 2004		1.3166
August 31, 2005		1.1893
May 31, 2005		1.2512
May 31, 2006		1.1027
Average for the period September 1, 2001 to August 31, 2002		1.5724
Average for the period September 1, 2002 to August 31, 2003		1.4808
Average for the period September 1, 2003 to August 31, 2004		1.3317
Average for the period September 1, 2004 to August 31, 2005		1.2323
Average for the period September 1, 2004 to May 31, 2005		1.2356
Average for the period September 1, 2005 to May 31, 2006		1.1569


	Cdn$

June 30, 2002		1.5190
June 30, 2003		1.3558
June 30, 2004		1.3407
June 30, 2005		1.2256
June 30, 2006		1.1150
Average for the period July 1, 2001 to June 30, 2002		1.5686
Average for the period July 1, 2002 to June 30, 2003		1.5100
Average for the period July 1, 2003 to June 30, 2004		1.3439
Average for the period July 1, 2004 to June 30, 2005		1.2499
Average for the period July 1, 2005 to June 30, 2006		1.1627


	Page

TERMINOLOGY		1
IMPORTANT NOTES		1
FORWARD-LOOKING INFORMATION		1
REPORTING CURRENCIES AND FINANCIAL PRINCIPLES		2
QUESTIONS AND ANSWERS ABOUT THE MEETING AND THE TRANSACTIONS		3
SUMMARY		8
RISK FACTORS		14
THE SPECIAL MEETING		19
Purpose of the Special Meeting		19
Record Date and Outstanding Shares		19
Voting of Proxies		20
Revocation of Proxies		20
Voting in Person		20
Votes Required		20
Board of Directors’ Recommendation		20
Conditions to the Proposals		20
Internet and Telephone Voting		21
Vote Tabulation		21
Quorum; Abstentions and Broker Non-Votes		21
Costs of Solicitation		21
PROPOSAL 1 — AMENDMENTS TO ARTICLES OF INCORPORATION		22
A. Creation of Preferred Stock		22
B. Deletion of Corporate Opportunity Provisions		23
C. Updating Statutory References		23
PROPOSAL 2 — ISSUANCE OF STOCK IN CONNECTION WITH THE ACQUISITION OF CORAL GOLD		24
PROPOSAL 3 — ISSUANCE OF STOCK IN CONNECTION WITH THE ACQUISITION OF NEVADA PACIFIC		26
PROPOSAL 4 — ISSUANCE OF STOCK IN CONNECTION WITH THE ACQUISITION OF TONE RESOURCES		27
PROPOSAL 5 — ISSUANCE OF STOCK IN CONNECTION WITH THE ACQUISITION OF WHITE KNIGHT		28
PROPOSAL 6 — ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING TO SOLICIT ADDITIONAL PROXIES		29
THE PROPOSED ACQUISITIONS		30
Reasons for the Proposed Acquisitions		30
About the Target Companies		31
*Coral Gold*		31
*Nevada Pacific*		31
*Tone Resources*		31
*White Knight*		32
Effecting the Proposed Acquisitions		32
The Offers to Purchase		32
Shares to be Issued		33


	Page

Pro Forma Financial Information		34
Risks Relating to the Proposed Acquisitions		34
Conditions to the Proposed Acquisitions		34
Background of the Proposed Acquisitions		37
*Coral Gold*		37
*Nevada Pacific*		37
*Tone Resources*		38
*White Knight*		39
Opinion of U.S. Gold Financial Advisor		41
Regulatory Matters		46
STRUCTURE OF THE PROPOSED ACQUISITIONS		48
Description of the Structure of the Proposed Acquisitions		48
Subsequent Acquisition Transactions		48
About U.S. Gold		49
About Canadian Exchange Co.		49
Background and Reason for the Issuance of Exchangeable Shares		50
Description of Exchangeable Shares		50
Description of U.S. Gold Common Stock		54
The Voting and Exchange Trust Agreement		55
The Support Agreement		57
Effect of the Proposed Acquisitions on U.S. Gold Shareholders		58
Accounting Treatment		58
Additional Information		58
SELECTED HISTORICAL FINANCIAL DATA OF U.S. GOLD		59
SELECTED HISTORICAL FINANCIAL DATA OF THE TARGET COMPANIES		60
Coral Gold		60
Nevada Pacific		62
Tone Resources		63
White Knight		65
*SELECTED UNAUDITED PRO FORMA* CONSOLIDATED FINANCIAL DATA**		67
U.S. Gold and Coral Gold		68
U.S. Gold and Nevada Pacific		69
U.S. Gold and Tone Resources		70
U.S. Gold and White Knight		71
U.S. Gold and All Four Target Companies		72
COMPARATIVE PER SHARE INFORMATION		73
COMPARATIVE MARKET DATA		77
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION		78
CURRENCY EXCHANGE RATES		79
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON		80
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		82
NO DISSENTERS’ OR APPRAISAL RIGHTS		84
YEAR 2007 SHAREHOLDER PROPOSALS		84
OTHER MATTERS		84


		conversion of Canadian dollars to United States dollars in the summary selected historical financial data of Tone Resources above are set forth immediately below.


		years then ended, as applicable. The exchange rates that may be used for the conversion of Canadian dollars to United States dollars in the selected historical financial data of White Knight above are set forth immediately below.


Report of Independent Registered Public Accounting Firm			B-26
Consolidated Balance Sheets			B-27
Consolidated Statements of Operations and Deficit			B-28
Consolidated Statements of Cash Flows			B-29
Consolidated Statements of Mineral Properties			B-30
Notes to Consolidated Financial Statements			B-31


*(b)*	*Reconciliation of Consolidated Statement of Income items:*


Mineral Resource Summary (0.40 g/t Au cutoff grade)	July 2006


	Measured						Indicated						Measured + Indicated
	Tonnes		Au		Cont.		Tonnes		Au		Cont.		Tonnes		Au		Cont.
Resource Area	(x1000)		(g/t)		Au Oz.		(x1000)		(g/t)		Au Oz.		(x1000)		(g/t)		Au Oz.

Samaniego/San Rafael		4,699		2.09		315,665		1,378		1.79		79,290		6,077		2.02		394,955
Sagrado Corazon		862		1.28		35,528		170		0.94		5,144		1,032		1.22		40,672
Luptia/Central		1,245		1.55		61,937		832		1.36		36,305		2,077		1.47		98,242
Magistral Mill Tailings		118		1.89		7,147		—		—		—		118		1.89		7,147

Total		6,924		1.89		420,277		2,380		1.58		120,739		9,304		1.81		541,016


							Gold Mining
	Corporate			Exploration			& Exploration
	(Canada)			(U. S.)			(Mexico)			Total
	($)			($)			($)			($)

Property, plant and equipment
June 30, 2006		29,610			14,050			13,262,654			13,306,314
June 30, 2005		38,590			8,025			13,342,339			13,388,954
June 30, 2004		56,203			11,795			10,492,254			10,560,252
Property, plant and equipment:
expenditures
June 30, 2006		9,492			11,370			4,838			25,700
June 30, 2005		769			900			3,985,974			3,987,643
June 30, 2004		61,125			11,458			10,492,254			10,564,837
Mineral Properties
June 30, 2006		—			3,499,776			1,162,029			4,661,805
June 30, 2005		—			2,405,370			700,987			3,106,357
June 30, 2004		—			2,286,989			168,145			2,455,134
Mineral Properties: expenditures
June 30, 2006		—			1,243,766			461,042			1,704,808
June 30, 2005		—			788,713			532,842			1,321,555
June 30, 2004		—			1,055,182			168,145			1,223,327
Net income (loss) for the year ended
June 30, 2006		(2,327,532	)		(314,215	)		(2,378,795	)		(5,020,542	)
June 30, 2005		(2,529,225	)		(834,873	)		982,440			(2,381,658	)
June 30, 2004		(1,475,170	)		(461,377	)		—			(1,936,547	)
Gold revenues for the year ended
June 30, 2006		—			—			6,649,300			6,649,300
June 30, 2005		—			—			5,175,235			5,175,235
June 30, 2004		—			—			—			—
Depreciation, depletion and amortization for the year ended
June 30, 2006		18,472			5,345			734,618			758,435
June 30, 2005		18,382			4,670			1,136,023			1,159,075
June 30, 2004		12,633			3,345			—			15,978


Note 6	Related Party Transactions — Notes 4, 5, 8 and 9


Metric Measurement	U.S. Equivalent	Multiply Metric Figure by:

Hectares	Acres		2.471
Meters	Feet (ft.)		3.281
Kilometers (km)	Miles		0.621
Tonnes	Tons (2000 pounds)		1.102
Grams/tonne	Ounces (troy/tonne)		0.029


Balance Sheet as of April 30, 2006			G-2
Notes to Balance Sheet			G-3


	As of
	April 30, 2006

Assets
Current Assets:
Cash	$	1.00
Total current assets	$	1.00

Liabilities and Shareholder’s Equity
Liabilities	$	—

Shareholder’s equity Common shares, authorized — unlimited, issued and outstanding — 1 share	$	1.00

Total shareholder’s equity	$	1.00


xv.		Summary Report for the Celt Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc., September 23, 2005;

xvi.		Technical Report on the Cottonwood Property, Eureka County, Nevada, USA prepared by John M. Leask, P.Eng, July 11, 2005;

xvii.		Summary Report for the McClusky-Tonkin Summit Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc, September 22, 2005;

xviii.		Technical Report on the Fye Canyon Property, Eureka County, Nevada prepared by John M. Leask, P.Eng., April 15, 2005;

xix.		NI 43-101 Technical Report on the New Pass Property, Churchill County, Nevada prepared by Paul A Pelke, California Registered Geologist, October 2004;

xx.		Technical Report on the Indian Ranch Property, Eureka County, Nevada, USA prepared by John M. Leask, P.Eng., December 20, 2004;

xxi.		Amended Technical Report for the Magistral Gold Project, Sinaloa State, Mexico, prepared by Pincock Allen & Holt, January 6, 2005;

xxii.		Technical Report on the Tonkin Springs Project, Nevada, USA, May 2004;

xxiii.		Filings on the System for Electronic Disclosure by Insiders (SEDI) for Coral Gold Resources, Nevada Pacific Gold Ltd., Tone Resources, and White Knight Resources;

xxiv.		March 6, 2006 Corporate Presentation of U.S. Gold;

xxv.		Spring 2006 Corporate Presentation of Nevada Pacific Gold Ltd.;

xxvi.		Press releases for U.S. Gold, White Knight Resources, Nevada Pacific Gold, Coral Gold Resources and Tone Resources since January 1, 2005;

xxvii.		Public information relating to the business, operations, financial performance and stock trading history of U.S. Gold, White Knight Resources, Nevada Pacific Gold, Coral Gold, Tone Resources and other selected public companies considered by us to be relevant;

xxviii.		Public information with respect to other transactions of a comparable nature considered by us to be relevant;

xxix.		Public information regarding the industries in which U.S. Gold and the Companies operate;

xxx.		Representations contained in a certificate addressed to us, dated as of the date hereof, from senior officers of U.S. Gold as to the completeness and accuracy of the information upon which the Fairness Opinion is based; and

xxxi.		Such other corporate, industry and financial market information, investigations and analyses as Wellington West considered necessary or appropriate in the circumstances.