CONTINENTAL MINERALS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2005

(Expressed in Canadian Dollars)

These financial statements have not been reviewed by the Company's auditors.

CONTINENTAL MINERALS CORPORATION
Consolidated Balance Sheets
(Expressed in Canadian Dollars)

		September 30			December 31
		2005			2004
		(unaudited)
ASSETS
Current assets
Cash and equivalents	$	4,559,556		$	7,396,308
Amounts receivable		148,709			6,941
Prepaid expenses		65,544			101,107
Due from related parties (note 7)		824,215			–
		5,598,024			7,504,356
Equipment (note 4)		110,167			–
Investments (note 3)		1			1
	$	5,708,192		$	7,504,357
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	959,111		$	349,236
Due to related parties (note 7)		–			5,003
		959,111			354,239
Shareholders' equity
Share capital (note 6(b))		14,424,275			10,843,269
Contributed surplus (note 6(e))		1,964,206			2,727,254
Deficit		(11,639,400	)		(6,420,405	)
		4,749,081			7,150,118
Continuing operations (note 1)
Commitments (notes 3(a) and 6(f))
Subsequent events (note 6(a) and 10)
	$	5,708,192		$	7,504,357

See accompanying notes to the consolidated financial statements.

Approved by the Board of Directors

/s/ Ronald W. Thiessen	/s/ Jeffrey R. Mason
Ronald W. Thiessen	Jeffrey R. Mason
Director	Director

CONTINENTAL MINERALS CORPORATION
Consolidated Statements of Operations
(Unaudited - Expressed in Canadian Dollars)

		Three months ended September 30						Nine months ended September 30
		2005			2004			2005			2004
Expenses
Amortization	$	5,872		$	–		$	7,275		$	–
Conference and travel		31,548			–			66,976			–
Exploration (schedule)		1,829,467			176,725			3,861,081			460,288
Foreign exchange		(9,576	)		54,470			(25,998	)		88,367
Interest (income)		(33,133	)		(37,843	)		(112,103	)		(70,007	)
Legal, accounting and audit		47,923			141,562			194,204			271,485
Office and administration		193,563			141,752			521,838			299,559
Project investigation		–			–			20,634			–
Shareholder communications		45,195			2,621			121,549			25,157
Stock-based compensation - exploration (note 6(d))		17,131			44,956			196,455			936,603
Stock-based compensation - administration (note 6(d))		130,424			387,621			329,610			903,129
Trust and filing		7,462			2,214			37,474			24,780
Loss for the period	$	2,265,876		$	914,078		$	5,218,995		$	2,939,361
Basic and diluted loss per share	$	0.06		$	0.03		$	0.14		$	0.09
Weighted average number of
common shares outstanding		39,760,874			36,171,965			38,427,093			30,956,509

See accompanying notes to consolidated financial statements.

Consolidated Statements of Deficit
(Unaudited - Expressed in Canadian Dollars)

		Nine months ended September 30
		2005		2004
Deficit, beginning of year	$	6,420,405	$	821,088
Loss for the period		5,218,995		2,939,361
Deficit, end of period	$	11,639,400	$	3,760,449

See accompanying notes to consolidated financial statements.

CONTINENTAL MINERALS CORPORATIONConsolidated Statements of Cash Flows
(Unaudited - Expressed in Canadian Dollars)

		Three months ended September 30						Nine months ended September 30
Cash provided by (used in)		2005			2004			2005			2004
Operating activities
Loss for the period	$	(2,265,876	)	$	(914,078	)	$	(5,218,995	)	$	(2,939,361	)
Items not involving cash
Amortization		5,872			–			7,275			–
Stock-based compensation (note 6(d))		147,555			432,577			526,065			1,839,732
Changes in non-cash working capital
Amounts receivable		21,653			1,071			(141,768	)		(22,583	)
Amounts receivable from related parties		(634,630	)		165,585			(829,218	)		(30,017	)
Prepaid expenses		(36,516	)		112,302			35,563			(14,613	)
Accounts payable and accrued liabilities		(280,860	)		(197,963	)		609,876			(81,443	)
		(3,042,802	)		(400,506	)		(5,011,202	)		(1,248,285	)
Investing activities
Purchase of equipment		(103,412	)		–			(117,442	)		–
Financing activities
Issuance of common shares for cash, net of costs		1,860,321			573,413			2,291,892			7,265,028
		1,860,321			573,413			2,291,892			7,265,028
Increase (decrease) in cash and equivalents		(1,285,893	)		172,907			(2,836,752	)		6,016,743
Cash and equivalents, beginning of period		5,845,449			8,760,918			7,396,308			2,917,082
Cash and equivalents, end of period	$	4,559,556		$	8,933,825		$	4,559,556		$	8,933,825
Supplementary cash flow information
Income taxes paid	$	–		$	–		$	–		$	–
Non-cash financing activities
Fair value of stock options allocated to shares issued
upon exercise	$	299,910		$	–		$	1,289,113		$	–

See accompanying notes to consolidated financial statements.

CONTINENTAL MINERALS CORPORATIONConsolidated Schedules of Exploration Expenses
(Unaudited - Expressed in Canadian Dollars)

		Three months ended September 30					Nine months ended September 30
Xietongmen Property		2005			2004		2005		2004
Exploration Expenses
Assays and analysis	$	154,052		$	1,429	$	256,027	$	24,848
Drilling		696,275			–		1,704,045		–
Engineering		5,913			–		12,833		–
Equipment rentals and leases		28,276			575		82,405		2,344
Geological		266,851			165,855		677,710		331,681
Graphics		7,221			–		28,784		6,898
Reclamation		(11,027	)		–		17,079		–
Site activities		362,280			8,866		537,770		53,381
Socioeconomic		218,332			–		311,604		–
Transportation		101,294			–		232,824		41,136
Incurred during the period		1,829,467			176,725		3,861,081		460,288
Non-cash stock based compensation		17,131			44,956		196,455		936,603
		1,846,598			221,681		4,057,536		1,396,891
Cumulative balance, beginning of period		5,583,670			1,175,210		3,372,732		–
Cumulative balance, end of period	$	7,430,268		$	1,396,891	$	7,430,268	$	1,396,891
Consists of
Accumulated cash expenditures	$	6,000,143		$	460,288	$	6,000,143	$	460,288
Accumulated non-cash stock-based compensation		1,430,125			936,603		1,430,125		936,603
	$	7,430,268		$	1,396,891	$	7,430,268	$	1,396,891

See accompanying notes to consolidated financial statements.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

1.	CONTINUING OPERATIONS
	Continental Minerals Corporation (“Continental” or the “Company”) is incorporated under the laws of the Province of British Columbia and its principal business activity is the acquisition, exploration and development of mineral properties.
	In 2001, the Company completed an arrangement agreement (the “Arrangement”) whereby the Company transferred its principal mineral property interest, the Harmony Gold Property, to Gibraltar Mines Ltd. (“Gibraltar”), a subsidiary of Taseko Mines Limited (“Taseko”), a company with certain directors in common (note 9).
	Subsequently, the Company focussed its efforts on securing a new mineral exploration project in the People’s Republic of China ("China"). In 2004, the Company acquired an option to earn up to a 60% interest in the Xietongmen Copper-Gold Property located in Tibet, China (note 5(a)).
	The Company has incurred losses since its inception and the ability of the Company to ensure continuing operations are dependent on the Company maintaining its mineral property interests, raising sufficient funds to finance its activities, identifying a commercial ore body, developing such mineral property interest, and achieving future profitable production or proceeds from the disposition of its mineral property interests.
	These consolidated financial statements have been prepared using accounting principles applicable to a going concern. These financial statements do not reflect adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.
2.	SIGNIFICANT ACCOUNTING POLICIES

(a)	Basis of presentation
	These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated.
(b)	Cash and equivalents
	Cash and equivalents consist of cash and highly liquid investments, having maturity dates of three months or less from the date of acquisition, that are readily convertible to known amounts of cash.
(c)	Investments
	Investments are carried at the lower of cost, less provisions for impairment in value, and quoted market value.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(d)	Equipment
	Equipment is stated at cost less accumulated amortization. Amortization is provided on a straight-line basis over three to five years, which represents the estimated useful lives of the related equipment. Amortization on equipment used directly on exploration projects is included in exploration expenses until the related property is placed into production.
(e)	Mineral property interests
	Exploration expenses incurred prior to the determination of the feasibility of mining operations and option payments, until such time as the option is exercised or an interest in the property is earned, are expensed as incurred.
	Mineral property acquisition costs subsequent to exercising the option or earning an interest in the property, and exploration and development expenditures incurred subsequent to the determination of the feasibility of mining operations are deferred until the property to which they relate is placed into production, sold, allowed to lapse or abandoned. Mineral property acquisition costs include the cash consideration and the fair market value of common shares issued for mineral property interests, based on the trading price of the shares, pursuant to the terms of the agreement. These costs are amortized over the estimated life of the property following commencement of commercial production, or written off if the property is sold, allowed to lapse, abandoned or when an impairment in value is determined to have occurred. Administrative expenditures are expensed in the period incurred.
(f)	Share capital
	Share capital is recorded based on proceeds from share issuances net of issue costs. Shares issued for consideration other than cash are valued at the quoted price on the stock exchange on the date that shares are issued pursuant to the relevant agreement.
(g)	Stock-based compensation
	The Company has a share purchase option plan, which is described in note 6(d). All stock-based payments are accounted for using a fair value based method and the related compensation expense is included in operations, with an offset to contributed surplus.
	Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital.
	Under the fair value method, stock-based payments are measured at the fair value of the consideration received or the fair value of the equity instruments issued or liabilities incurred, whichever is more reliably measurable, and are charged to operations over the vesting period. The offset is credited to contributed surplus.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(h)	Foreign currency translation
	All of the Company’s foreign operations are considered integrated with those of the Company’s domestic operations and use the Canadian dollar as their functional currency.
	Monetary assets and liabilities of the Company and its integrated foreign operations are translated into Canadian dollars at exchange rates in effect at the balance sheet date. Non- monetary assets and liabilities are translated at historical exchange rates unless such items are carried at market, in which case they are translated at the exchange rates in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rates for the period. Gains or losses on translation are recorded in the statement of operations.
(i)	Loss per common share
	Basic loss per common share is calculated by dividing loss for the period by the weighted average number of common shares outstanding during the year. For all periods presented, loss available to common shareholders equals reported loss.
	Diluted loss per common share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive stock options or warrants are applied to repurchase common shares at the average market price for the period. For all periods presented, the impact of stock options and warrants, if any, has been excluded as they would be anti-dilutive.
(j)	Use of estimates
	The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of potential impairments of investments and mineral properties as well as the assumptions used in determining stock-based compensation. Actual results could differ from those estimates.
(k)	Fair value of financial instruments
	The carrying amounts of cash and equivalents, amounts receivable, and accounts payable and accrued liabilities approximate their fair values due to the short term to maturity of such instruments.
	The fair values of the Company’s investment in Gibraltar preferred shares, and the offsetting redeemable preferred shares of the Company, are not practicably determinable due to the nature of the amounts and the absence of a quoted market for such instruments.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(l)	Segment disclosures
	The Company operates in a single segment – the acquisition, exploration and development of mineral properties in China.
(m)	Income taxes
	The Company uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are computed based on differences between the carrying amounts of existing assets and liabilities on the balance sheet and their corresponding tax values (temporary differences), using the enacted income tax rates expected to apply to taxable income in the periods in which those temporary difference are expected to be recovered or settled. Future income tax assets also result from unused loss carry forwards, and other deductions. Future tax assets are recognized to the extent that they are considered more likely than not to be realized. The valuation of future income tax assets is adjusted, if necessary, by the use of a valuation allowance to reduce the asset to its estimated realizable amount.
(n)	Asset retirement obligations
	The Company recognizes statutory, contractual or other legal obligations related to the retirement of tangible long-lived assets when such obligations are incurred, if a reasonable estimate of fair value can be made. These obligations are measured initially at fair value and the resulting costs capitalized to the carrying value of the related asset. In subsequent periods, the liability is adjusted for any changes in the amount or timing and for the discounting of the underlying future cash flows. The capitalized asset retirement cost is amortized to operations over the life of the asset.
(o)	Impairment of long-lived assets
	The Company recognizes an impairment loss if the carrying value of a long-lived asset exceeds its fair market value. An estimate of fair market value is undertaken annually and the impairment loss, if any, is recorded. There were no impairment losses recorded during fiscal 2004, and for the nine months ended September 30, 2005
(p)	Comparative figures
	Certain of the prior periods’ comparative figures have been reclassified to conform with the presentation adopted in the current period.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

3. INVESTMENTS

		September 30			December 31
		2005			2004
Investment in Gibraltar preferred shares (note 3(a))	$	26,764,784		$	26,764,784
Redeemable preferred shares of the Company (note 6(f))		(26,764,784	)		(26,764,784	)
Investment in net smelter returns royalty (note 3(b))		1			1
	$	1		$	1

(a)	Investment in Gibraltar preferred shares
	Pursuant to the Arrangement, the Company received 12,483,916 series A preferred shares of Gibraltar. As the Arrangement was between companies with certain common management and directors, the preferred shares were valued at the net book value of the assets transferred, net of cash consideration received, as follows:

Mineral property interests	$	28,811,296
Land and equipment		8,488
Reclamation deposits		175,000
Cash consideration		(2,230,000	)
Value attributable to Gibraltar preferred shares	$	26,764,784

The Gibraltar preferred shares issued pursuant to the Arrangement are redeemable non-dividend-paying preferred shares, which generally are non-voting, except that they may vote in certain events if Gibraltar proposes to sell the Harmony Project for proceeds of less than $20 million. They also vote as a class, pursuant to the provisions of the British Columbia Business Corporations Act (formerly the Company Act), in the event Gibraltar proposes to alter, modify or abrogate the stated special rights.

Gibraltar is obligated to redeem the shares on the sale of all or substantially all (80%) of the Harmony Gold Property excluding options or joint ventures which do not result in the certain or immediate transfer of 80% of Gibraltar’s interest in the Harmony Gold Property, or upon the commencement of commercial production at the Harmony Gold Property (an “HP Realization Event”). The commencement of commercial production generally means the operation of a mine or milling facility at the Harmony Gold Property at 75% of rated capacity for any 20 days in a 30 consecutive day period. On the occurrence of an HP Realization event, Gibraltar must redeem Gibraltar preferred shares by distributing that number of Taseko common shares (“Taseko Shares”) equal to the paid-up amount (as adjusted) divided by a deemed price per Taseko Share, which will vary dependent on the timing of such HP Realization Event. The conversion rates of the Taseko Share price for the purposes of an obligatory redemption based on an HP Realization Event occurring by the noted dates are:

a)	until July 21, 2001, $3.39;
b)	if after July 21, 2001 but before July 21, 2002, $3.64,

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

c) if after July 21, 2002, $3.89 and thereafter increasing by $0.25 per year each July 21^st. If there is no HP Realization Event on or before October 16, 2011, the Gibraltar preferred shares will be redeemed by Gibraltar for that number of Taseko Shares valued at the greater of $10.00 and the weighted average trading price of Taseko Shares for the immediately preceding 20 trading days.

At September 30, 2005, the conversion rate was $4.64.

The initial paid-up amount for the Gibraltar preferred shares is $62.77 million, subject to reduction prior to redemption for certain stated events. The amount will be reduced to the extent that the actual net proceeds of disposition of the Harmony Gold Property is less than $62.77 million, or to the extent that the fair market value of Gibraltar’s interest in a mine at the Harmony Gold Property is determined to be less than $62.77 million. The paid-up amount (as adjusted) will be increased in the event Gibraltar receives consideration by way of granting an option to a third party which forfeits such option and also in the event of any reduction of the paid-up amount (as adjusted), such amount will be credited to the account should the proceeds of disposition exceed the reduced paid-up amount (as adjusted) by an amount greater than the reduction. In no event will the paid-up amount (as adjusted) exceed $62.77 million nor be less than $20 million. Net proceeds of disposition shall mean the fair value of all consideration received by Gibraltar as a consequence of a sale of the Harmony Gold Property, net of Gibraltar’s reasonable costs of disposition, costs incurred by Gibraltar after the effective date in connection with the Harmony Gold Project, and a reasonable reserve for Gibraltar’s taxes arising in consequence of the sale or other disposition of the Harmony Gold Project.

The Gibraltar preferred shares also require that Gibraltar not sell the Harmony Gold Property except pursuant to an HP Realization Event, but options and joint ventures are permitted as long as the third party expends funds on the Harmony Gold Property. Gibraltar may not alter the rights of these shares without the consent of the holders.

In accordance with provincial government mineral exploration requirements, cash deposits of $175,000 were made to secure future reclamation activities on the Harmony Gold Property. These reclamation deposits were transferred to Gibraltar on October 16, 2001, pursuant to the Arrangement.

(b)

Investment in net smelter returns royalty

Pursuant to an assignment agreement dated September 30, 1995, the Company transferred its rights to certain mineral properties located in Peru to El Misti Gold Ltd., a company with common directors at the time, in exchange for common shares of El Misti Gold Ltd. pursuant to an option granted to a company affiliated with a former director, and a 1% net smelter returns royalty, to a maximum of $2 million, from revenues earned from the properties. The common shares of El Misti Gold Ltd. were sold in 1997. The investment in the net smelter returns royalty was assigned a nominal value of $1.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

4. EQUIPMENT

		September 30, 2005
				Accumulated		Net book
		Cost		depreciation		value
Equipment	$	2,533	$	127	$	2,406
Vehicles		114,909		7,148		107,761
	$	117,442	$	7,275	$	110,167
		December 31, 2004
				Accumulated		Net book
		Cost		depreciation		value
Equipment	$	–	$	–	$	–
Vehicles		–		–		–
	$	–	$	–	$	–

5. MINERAL PROPERTY INTERESTS

(a)	Xietongmen Property
	In February 2004, the Company reached an interim agreement (the “Property Option Agreement”) with China NetTV Holdings Inc. now known as Great China Mining’s Inc. (“Great China Mining”), a US-listed public company, pursuant to which the Company had acquired the right to earn up to a 60% interest in Great China Mining’s Xietongmen copper-gold property, located 240 kilometres southwest of Lhasa in Tibet.
	In November 2004, the Property Option Agreement was cancelled and the Company signed a formal agreement in its place (the “Preliminary Option Agreement”), that required further Canadian and Chinese regulatory approvals. Under the Preliminary Option Agreement, the Company acquired options to earn up to a 60% interest in Highland Mining Inc. (“Highland”), the British Virgin Islands parent company of Tibet Tian Yuan Minerals Exploration Ltd. (“Tian Yuan”). Tian Yuan is a "wholly-owned foreign enterprise" (as defined in China) which owns 100% of the Xietongmen Property.
	In December 2004, a formal agreement (the “Formal Agreement”) was finalized and subsequently received Canadian and Chinese regulatory approvals. Under the Formal Agreement, the Company acquired options to earn up to a 60% interest in Highland as follows:
	The Company can earn an initial 50% interest in Highland ("Tranche One") by:
	(i)	paying initial option payments totalling US$2 million, comprising:

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(A)	US$1.2 million ($1,435,292) upon receipt of regulatory approvals (which was paid in December 2004); and
(B)	the US$0.8 million balance within one year (December 28, 2005); and

(ii) funding Highland to allow it to conduct a further US$5 million of exploration on the Xietongmen Project. Of this, exploration expenditures of US$3 million were to be funded by November 10, 2005 (which was met), with a further US$2 million of exploration expenditures to be funded by November 10, 2006 (which was met subsequent September 30, 2005).

Upon acquisition of 50% of Highland, the Company may, at its option, increase its interest in Highland to 60% ("Tranche Two") by funding a further US$3 million in exploration expenditures on the Xietongmen Property within the ensuing year.

A finder’s fee of US$120,000 ($146,293) was paid in January 2005. The remaining US$80,000 finder's fee will be due upon payment of the remaining US$0.8 million of the initial option payments.

Upon payment of the US$1.2 million in December 2004, the Company received 500,000 common shares of Highland, representing 50% of the share capital of Highland, which the Company agreed to pledge (the “Pledged Shares”) to the founding shareholders of Highland pursuant to a Share Pledge Agreement executed in April 2005. Pursuant to the Share Pledge Agreement, the Pledged Shares may be transferred to the founding shareholders of Highland for US$1 if the Company ceases to fund the Tranche One amounts described above. The Pledged Shares are to be released to the Company upon completion of the option payments and exploration expenditures required under Tranche One.

Under the Formal Agreement, the Company is the operator of Highland and Tian Yuan during the option period. Upon completion of Tranche One, or if the Company has chosen to exercise the second option, the completion of Tranche Two, further equity and/or loan funding of Highland are to be proportional to the interests held in the project, with a proportionate reduction in the shareholdings of any shareholder which fails to match the funding of the others.

In December 2004, a Highland Shareholders Agreement was executed as required under the Formal Agreement. Under the Highland Shareholders Agreement, if the other parties’ shareholdings in Highland fall below 15%, those parties may elect to convert their holdings to an entitlement of 12.5% of the after pay-back net profit of Highland.

(b)	Harmony Gold Property
	The Company owned a 100% interest in the Harmony Gold Property, located in the Skeena Mining District on Graham Island, Queen Charlotte Islands (Haida Gwaii), British Columbia.
	On October 16, 2001, the Company completed the sale of its Harmony Gold Property and related assets to Gibraltar, a British Columbia company with certain directors in common with the

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

Company, for 12,483,916 tracking preferred shares of Gibraltar and $2.23 million cash (note 9). The tracking preferred shares are designed to track and capture the value of the Harmony Gold property and will be convertible into common shares of Gibraltar’s parent company, Taseko Mines Limited (“Taseko”), upon a realization event such as a sale to a third party or the commencement of commercial production at the Harmony Gold Property (note 3(a)).

(c)	Prosperity Property
	In February 1999, Taseko and its subsidiary, Concentrated Exploration Ltd., granted to North Island Exploration Limited Partnership (“Partnership”) an exclusive farm-out right to earn up to a 9% working interest in the Prosperity Property (“Prosperity”) through a program of exploration expenditures. Prosperity is a gold-copper property located in the Clinton Mining Division, British Columbia, Canada. The Partnership spent $600,000 on Prosperity during 1999, earning a 1% working interest in Prosperity. The Company then acquired 600 units of the Partnership at $1,000 each.
	On October 16, 2001, the Company exchanged its 1% working interest in the Prosperity Property for Taseko’s 5% net profits interest in the Harmony Project, both valued at $600,000, giving the Company 100% ownership of the Harmony Project prior to the Arrangement (note 9).
(d)	Westgarde Property
	Under the Arrangement, the Company acquired from an affiliate of Gibraltar an option to purchase a porphyry copper prospect known as the Westgarde Property located at Chisholm Lake, 60 kilometres southwest of Houston, British Columbia, for $230,000 (note 9). The Company ultimately decided not to proceed with exploration on the property, and terminated its option agreement. Consequently, all costs related to the Westgarde Property were written off during fiscal 2001.

6. SHAREHOLDERS’ EQUITY

(a)	Authorized share capital
	At September 30, 2005, the Company’s authorized share capital consisted of:
	(i)	an unlimited number of common shares without par value; and
	(ii)	12,438,916 non-voting, redeemable preferred shares without par value.
	At the annual and extraordinary general meeting of shareholders of the Company held in June 2002, a special resolution was passed that the paid-up capital of the Company’s common shares be reduced by $7,471,248 (which represented the accumulated deficit of the Company at December 31, 2001). For financial statement purposes, this reduction has been presented as a reduction of share capital of $7,128,939 and a reduction of contributed surplus of $342,309. The Company received court approval for this reduction in May 2003.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

Pursuant to the Arrangement (note 9) and the provisions of the redeemable preferred shares, as long as any redeemable preferred shares are outstanding, the Company may not, without the prior approval of the holders of the redeemable preferred shares, pay any dividends (other than stock dividends), redeem, purchase, or make any capital distribution in respect of common shares. In addition, the redeemable preferred shares are entitled to preference over common shares and any other shares ranking junior to the redeemable preferred shares with respect to the distribution of assets on liquidation, dissolution or wind up of the Company, or any other distribution of assets of the Company. This preference is limited to the Company’s obligation to distribute the Gibraltar preferred shares (less a reserve for taxes related to the distribution), to the holders of the redeemable preferred shares, after which the holders of redeemable preferred shares will not be entitled to share in any further distribution of the Company’s net assets. The Company may not dispose of its Gibraltar preferred shares.

(b) Issued and outstanding common share capital

	Number of		Dollar
	common shares		Amount
Balance, December 31, 2002	20,594,101	$	7,564,652
Private placement, March 2003, net of issue costs (i)	367,000		273,971
Shareholder and Court-approved reduction of paid-up capital	–		(7,128,939	)
Share purchase warrants exercised	184,251		119,763
Private placement, October 2003, net of issue costs (ii)	5,000,000		2,449,913
Balance, December 31, 2003	26,145,352		3,279,360
Private placement, July 2004, net of issue costs (iii)	7,000,000		6,595,839
Share purchase warrants exercised	4,423,500		875,975
Share purchase options exercised	60,999		30,500
Fair value of stock options allocated to shares issued on exercise	–		61,595
Balance, December 31, 2004	37,629,851		10,843,269
Share purchase options exercised	1,109,000		588,893
Warrants exercised	1,910,000		1,703,000
Fair value of stock options allocated to shares issued on exercise	–		1,289,113
Balance, September 30, 2005	40,648,851	$	14,424,275

(i)

In March 2003, the Company completed a private placement consisting of 367,000 units at a price of $0.75 per unit. Each unit was comprised of one common share and one half of a share purchase warrant exercisable at $0.85 per common share until July 5, 2004. The 183,500 warrants issued on this private placement were exercised in 2004.

(ii)

In December 2003, the Company completed a private placement of 5,000,000 units at a price of $0.50 per unit for gross proceeds of $2.5 million. Each unit was comprised of one common share and one share purchase warrant exercisable into one common share at $0.50 until December 31, 2005. The warrants are subject to a 45 day accelerated expiry upon elected notice by the Company (which has not been given), if the shares trade at or above $1.00 for 10 consecutive trading days.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(iii) In July 2004, the Company completed a private placement of 7,000,000 units at a price of $1.00 per unit for gross proceeds of $7 million. Each unit was comprised of one common share and one share purchase warrant exercisable into one common share at $1.05 until July 12, 2006. The warrants are subject to a 45 day accelerated expiry upon notice by the Company (which has not been given), if the shares trade at or above $2.10 for 10 consecutive trading days.

(c)	Warrants
	The continuity of share purchase warrants is as follows:

Note reference	7(e)	5(b)(i)	5(b)(ii)	5(b)(iii)
	Jun 5	Jul 5	Dec 31	Jul 12	Dec 27
Expiry date	2004	2004	2005	2006	2003
Exercise price	$0.10	$0.85	$0.50	$1.05	$0.65	TOTAL
Balance, Dec 31, 2002	–	–	–	–	345,710	345,710
Issued	3,500,000	183,500	5,000,000	–	–	8,683,500
Exercised	–	–	–	–	(184,251)	(184,251)
Expired	–	–	–	–	(161,459)	(161,459)
Balance, Dec 31, 2003	3,500,000	183,500	5,000,000	–	–	8,683,500
Issued	–	–	–	7,000,000	–	7,000,000
Exercised	(3,500,000)	(183,500)	(740,000)	–	–	(4,423,500)
Balance, Dec 31, 2004	–	–	4,260,000	7,000,000	–	11,260,000
Exercised	–	–	(550,000)	(1,360,000)	–	(1,910,000)
Balance, Sept 30, 2005	–	–	3,710,000	5,640,000	–	9,350,000

(d)

Share purchase option plan

The Company has a share purchase option plan approved by the shareholders at the June 2005 annual general meeting which allows it to grant up to 7,500,000 options to its employees, officers, directors and non-employees, subject to regulatory terms and approval. The exercise price of each option can be set equal to or greater than the closing market price, less allowable discounts, of the common shares on the TSX Venture Exchange on the day prior to the date of the grant of the option. Options have a maximum term of ten years and terminate 30 days following the termination of the optionee’s employment, except in the cases of retirement or death. Vesting of options is made at the discretion of the Board of Directors at the time the options are granted.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

The continuity schedule of share purchase options is as follows:

				Weighted
Share purchase options outstanding	Number of			average
	options			exercise price
Balance, December 31, 2003	4,100,000		$	0.50
Granted	800,000			1.19
Exercised	(60,999	)		0.50
Expired or cancelled	(26,667	)		0.50
Balance, December 31, 2004	4,812,334			0.61
Granted	1,180,000			1.59
Exercised	(1,109,000	)		0.53
Expired or cancelled	(46,733	)		0.96
Balance September 30, 2005	4,836,601		$	0.87

The following table summarizes information pertaining to the Company’s share purchase options outstanding at September 30, 2005:

	Options outstanding			Options exercisable
		Weighted
		average	Weighted		Weighted
	Number of	remaining	average	Number of	average
Range of	options	contractual life	exercise	options	exercise
exercise prices	outstanding	(years)	price	exercisable	price
$0.50	2,942,334	0.16	$ 0.50	2,942,334	$ 0.50
$1.10	432,600	1.16	1.10	265,933	1.10
$1.20	281,667	2.17	1.20	–	1.20
$1.33	260,000	1.17	1.33	81,667	1.33
$1.70	920,000	1.99	1.70	–	1.70
0.50 to $1.70	4,836,601	0.77	$ 0.87	3,289,934	$ 0.57

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

The exercise prices of all share purchase options granted during the period were equal to the market price at the grant date. Using an option pricing model with the assumptions noted below, the estimated fair value of all options granted during 2005 and 2004 have been reflected in the statement of operations as follows:

		Three months ended					Nine months ended
		September 30					September 30
		2005			2004		2005		2004
Exploration
Engineering	$	27,238		$	18,595	$	40,762	$	121,706
Environmental, socioeconomic and land		4,210			3,841		14.120		23,633
Geological		(14,317	)		22,520		141,573		791,264
Exploration		17,131			44,956		196,455		936,603
Administration		130,424			387,621		329,610		903,129
Total compensation cost recognized in
operations, credited to contributed surplus	$	147,555		$	432,577	$	526,065	$	1,839,732

The weighted average assumptions used to estimate the fair value of options during the period were:

	Three months ended		Nine months ended
	September 30		September 30
	2005	2004	2005	2004
Risk free interest rate	3%	3%	3%	3%
Expected life	2.0 years	2.0 years	2.1 years	2.4 years
Vesting period	6 – 18 months	6 – 18 months	6 – 18 months	6 – 18 months
Expected volatility	95%	118%	95%	118%
Expected dividends	nil	nil	Nil	nil

Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models may not necessarily provide a reliable measure of the fair value of the Company's share purchase options.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(e) Contributed surplus

Balance, December 31, 2002	$	342,309
Changes during 2003
Shareholder and Court-approved reduction of paid-up capital (note 6(a))		(342,309	)
Non-cash stock-based compensation		352,854
Balance, December 31, 2003		352,854
Changes during 2004
Non-cash stock-based compensation		2,435,995
Share purchase options exercised, credited to share capital		(61,595	)
Balance, December 31, 2004		2,727,254
Changes during 2005
Non-cash stock-based compensation		526,065
Share purchase options exercised, credited to share capital		(1,289,113	)
Balance, September 30, 2005	$	1,964,206

(f)	Redeemable preferred shares
	The 12,483,916 redeemable preferred shares were issued to common shareholders pursuant to the Arrangement. The redeemable shares are non-voting, non-dividend-paying, and are redeemable by the Company in certain events such as the occurrence of an HP Realization Event, at which time Gibraltar will become obligated to redeem the Gibraltar preferred shares for Taseko Shares (note 3(a)). The Company will redeem the shares for the number of Taseko Shares received by the Company on redemption of the Gibraltar preferred shares, as adjusted for any taxes payable, pro-rata to holders of the redeemable preferred shares. After such distribution, the holders of the redeemable preferred shares will not be entitled to any further distributions and the redeemable preferred shares will be cancelled.
	The redeemable preferred shares may not vote except on any proposal to alter their special rights and restrictions or in the event the Company proposes to sell the Harmony Gold Property (as one of the possible HP Realization Events) for less than $20 million.
	These redeemable preferred shares have been presented as a financial liability due to the obligation of the Company to redeem the shares for Taseko Shares. As the Company has the obligation to redeem the redeemable preferred shares immediately after the Gibraltar preferred shares have been redeemed, the redeemable preferred shares and Gibraltar preferred shares have been offset. Accordingly, a nil amount is reported on the balance sheet of the Company.

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

7. RELATED PARTY BALANCES AND TRANSACTIONS

Due from (to) related parties		September 30, 2005				December 31, 2004
Hunter Dickinson Inc. (a)	$			200,265			$	(5,003	)
Tibet Tian Yuan Mineral Explorations Ltd. (b)				623,950				–
	$			824,215			$	(5,003	)
		Three months ended				Nine months ended
Reimbursement for third party expenses		September 30				September 30
and services rendered		2005		2004		2005		2004
Hunter Dickinson Inc. (a)	$	377,364	$	73,382	$	859,325	$	311,562

(a)	Hunter Dickinson Inc. ("HDI") is a private company owned equally by nine public companies, one of which is the Company. HDI has certain directors in common with the Company, and provides geological, corporate development, administrative and management services to, and incurs third party costs on behalf of, the Company on a full cost recovery basis pursuant to an agreement dated December 31, 1996. The balances receivable from, or payable to, HDI have resulted from advances against future work, services, or cost reimbursements, or from HDI providing periodic short-term working capital advances to the Company.
(b)	Tian Yuan is a wholly-owned subsidiary of Highland (note 5(a)). During the period ended September 30, 2005, the Company advanced US$500,000 ($623,950) to Tian Yuan’s bank as security for Tian Yuan’s operating line of credit.
	These amounts are non-interest-bearing and are due on demand with no specific terms of repayment.

8.	INCOME TAXES
	Substantially all of the differences between the actual income tax expense (recovery) of nil and the expected income tax recovery based on statutory rates relate to the benefit of losses not previously recognized and items not deductible for tax purposes.
	At December 31, 2004, the Company had available non-capital losses for Canadian income tax purposes totalling approximately $1.28 million expiring in various periods to 2011.
9.	ARRANGEMENT AGREEMENT
	On October 16, 2001, the Company completed an arrangement agreement dated February 22, 2001 with Taseko and its subsidiary Gibraltar, which are British Columbia companies with certain management and directors in common with the Company. The Company received shareholder approval at an Extraordinary General Meeting on March 29, 2001, the final court order from the British Columbia Supreme Court at a hearing held on April 3, 2001, and regulatory permission from the TSX Venture Exchange in October 2001. Under the terms of the arrangement agreement:

CONTINENTAL MINERALS CORPORATION

Notes to Consolidated Financial Statements

Nine months ended September 30, 2005

(Unaudited – Expressed in Canadian Dollars)

(a)	The Company’s Harmony Gold Property was transferred to Gibraltar for $2.23 million cash and 12,483,916 series A non-voting, redeemable preferred shares in the capital of Gibraltar which are redeemable on certain terms into common shares of Taseko (note 3);
(b)	The Company’s share capital was reorganized so that each common shareholder of record as of October 16, 2001 received in exchange for each ten common shares held, one new common share plus ten non-voting redeemable preferred shares of the Company;
(c)	The Company settled amounts payable due to Hunter Dickinson Inc., a related company (note 7(a)), in the amount of $1,892,309 for 15.5 million escrowed common shares recorded at $1,550,000, a majority of which were optioned to, and were to be under the control of, the directors of the Company. As the value of the shares issued was less than the amount of debt settled, the excess of $342,309 was initially recorded as contributed surplus. The associated book value of these shares at December 31, 2001 was $188,219, and at June 30, 2005, no shares remained in escrow;
(d)	Gibraltar transferred to the Company, for $230,000, its option to acquire the Westgarde Property near Houston, British Columbia, Canada. The Company ultimately decided not to proceed with exploration on the Westgarde Property, and consequently, terminated its option agreement in 2001;
(e)	The Company received $350,000 in consideration of a special warrant financing issuance of 3.5 million units (note 6(c)); and
(f)	Taseko exchanged its 5% net profits interest in the Harmony Gold Property, valued at $600,000, for a 1% working interest in Taseko’s Prosperity Project held by the Company, also valued at $600,000 (note 5(c)).

10.	SUBSEQUENT EVENTS
	Subsequent to September 30, 2005, to November 10, 2005,
	32,000 warrants were exercised for proceeds of $16,000; 955,000 options were exercised for proceeds of $497,650, and 25,000 options expired or were cancelled.