Financial Results

The financial results for fiscal year 2006 reflect the cost of financing and developing the Lefa and Masara projects and the increased cost of building a much larger world class organization to manage and operate the Company’s significantly expanded asset base, in preparation for the targeted five-fold increase in the Company’s production rate in 2007.

The Company’s EBITDA for fiscal 2006 is $0.8 million (2005 - $3.0 million), due to the additional general and administration costs with respect to Lefa and Masara and the delayed shipment from Nalunaq in the fourth quarter of fiscal 2006. The 2006 fiscal year loss is $35.6 million (2005 - $9 million), of which $32.9 million is directly related to the build up of the Lefa and Masara projects, including interest and financing charges, currency losses on NOK denominated borrowings, additional general and administrative costs and depletion and depreciation charges.

Non-cash items in fiscal 2006 are $22.7 million, represented by $12.9 million in unrealised foreign currency translation adjustments and $9.8 million of depletion and depreciation charges.

The details of the $32.9 million of directly related Lefa and Masara costs are described below;

• Foreign exchange losses representing non-cash items relating principally to the difference, for reporting purposes, upon translation of the amount of the Company’s bond financing denominated in Norwegian kroner (“NOK”) into United States dollars - $12.9 million;
• Interest and finance charges relating to the bond financing undertaken to acquire Guinor Gold Corporation and to develop the Lefa and Masara properties - $9.2 million;
• Incremental administration, office and general costs relating to operating offices at Lefa and Masara and the increased travel, insurance, consultant, staff and overhead costs incurred at the corporate office - $8.0 million;
• Non-cash depletion and depreciation on the acquired Lefa and Masara mining property and equipment - $2.8 million.

The increase in the administration, office and general fees over fiscal 2005 of $8.0 million reflects the controlled and expected build-up of worldwide operations necessary to manage the requirements of a 500,000+ ounce producer.