FORM F1 GRANDCRU RESOURCES CORPORATION. MANAGEMENT DISCUSSION & ANALYSIS April 30, 2005

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1 FORM F1 GRANDCRU RESOURCES CORPORATION MANAGEMENT DISCUSSION & ANALYSIS April 30, 2005 The following management discussion and analysis ( MDA ) provides information on the activities of Grandcru Resources Corporation ( Grandcru or the Company ) and should be read in conjunction with the quarterly consolidated financial statements and notes thereto. The interim consolidated financial statements have been prepared in Canadian dollars and in accordance with Canadian generally accepted accounting principles. Readers are cautioned that management s discussion and analysis contains forward-looking statements and that actual events may vary from management s expectations. Description of Business and Report Date The Company's principal business activity is the exploration and development of mineral properties. The Company currently has two exploration properties in the Red Lake District of Ontario, the Danny Boy property in Nevada, USA and the San Miguel Property in Mexico. The properties in the Red Lake District are referred to as North and South. Grandcru Resources Corporation is incorporated under the laws of British Columbia and currently trades on Tier 2 of the TSX Venture Exchange (the TSXV ). Certain information dis closed in this discussion is derived from the Company s unaudited interim consolidated financial statements for the six month period ended April 30, The following MDA is for the six month period ended April 30, 2005 (the Current Period ) and includes relevant information up to June 24 th, 2005 (the Report Date ). Overall Performance The Company is focused on precious metals exploration opportunities in North America. The Company s projects are strategically located in the Red Lake region of Ontario, the North Carlin region of Nevada and the Sierra Madre Belt in Mexico. The Company s properties range from early-stage exploration to advanced-stage and represent a diversified opportunity to invest in North American gold and silver exploration. The Company s property portfolio includes the following: Guadalupe De Los Reyes District Mexico The Guadalupe de Los Reyes District is situated 100 km north of the city of Mazatlan on the border between the states of Sinaloa and Durango, Mexico. The project covers approximately 88 square km and hosts four major epithermal gold and silver bearing quartz veins, breccias, and stockwork zones with a combined strike length in excess of 14 km. Historically, three of these structures supported underground mining operations. The Guadalupe structure was mined as early as 1772, with the most active period being between 1872 and The Company is now the majority landholder in the District. - The Company has not done the work necessary to verify the classification of the historical production and/or resource; - The Company is not treating these historical numbers as a NI defined resource or production amount verified by a Qualified Person; and - These historical estimates should not be relied upon. The initial exploration target is 15 million ounces of silver and 1,000,000 ounces of gold. Extensive exploration has been completed on the property, although the results have to be verified by the Company's independent geologist in order to meet National Instrument standards of disclosure.

2 (2) The San Miguel property has exploration potential within the area of the historical resource and along Company controlled extensions of historic workings. The Company will focus its exploration efforts on the expansion of the resource that is currently identified on the property. The pending exploration program will consist of historical data acquisition followed by further drilling of the historical resource zones. During November 2004, the Company signed an Agreement with Wheaton River Minerals Ltd. ( Wheaton ) to purchase One Hundred Percent (100%) of Wheaton s claim group ( Wheaton Property ) in the Guadalupe Gold/Silver District, located in the Municipality of Cosala, State of Sinaloa, in the Mining Agency of Culiacan, Mexico. This acquisition, combined with the Company s current land position, provides the Company with the majority of the Guadalupe District. In April 2005 Wheaton merged with Goldcorp Inc., with the merged businesses continuing under the name Goldcorp Inc. Under the terms of the Agreement, the Company will purchase the Wheaton Property by the issuance to Wheaton on the Closing Date of One Million (1,000,000) units (the Units ) of Grandcru, which were issued in June Each Unit is comprised of one fully paid and non-assessable common share without par value in the capital stock of the Company, and one share purchase warrant, with each such warrant being exercisable to purchase an additional common share without par value in the capital stock of the Company at a price of Cdn Seventy-Five Cents (Cdn $0.75) per share until June 20, The acquisition was subject to TSX Venture Exchange acceptance, which was received subsequent to April 30, Wheaton will receive an additional Five Hundred Thousand (500,000) fully paid and non-assessable common shares without par value in the capital stock of the Company upon the Company identifying aggregate reserves in excess of Four Hundred and Ninety-Nine Thousand (499,000) gold equivalent ounces on the Wheaton Property. The Company also grants to Wheaton an exclusive option to acquire from the Company an undivided Sixty Percent (60%) interest in all of the Company s properties in the Guadalupe District once the Company has made aggregate expenditures (not including acquisition costs) of US Ten Million Dollars (US $10,000,000). Upon exercise of this right, Wheaton will be obligated to make a cash payment to the Company, equal to 60% of the Company s total acquisition costs up to that date. In order to maintain this interest, Wheaton will be required to incur an aggregate of US Twenty-Five Million Dollars (US $25,000,000) in expenditures over five years; and complete a Bankable Feasibility Study. Wheaton will have to complete minimum expenditures of US On e Million Dollars (US $1,000,000) per year over the five year period. Red Lake Project Ontario The Red Lake Mining District in Ontario is currently home to the richest gold deposit in the world (operated by Goldcorp Inc.). This gold belt has more than 24 million oz of past production. The District's high-grade gold deposits are profitable even with depressed gold prices. Currently there are five senior gold companies: Placer Dome, Goldcorp, AngloGold, Teck, and Kinross that are active in the District. Recent exploration has identified several major gold discoveries in the Red Lake District. Grandcru currently holds two properties in the Red Lake District, having elected not to continue with the Coli Lake East, Coli Lake West and East properties in the District and accordingly writing off their related acquisition and deferred exploration costs. The Company has two properties (north and south) under 100% option in the region of the Red Lake District. These properties are located approximately 25 km southeast of Goldcorp's Red Lake mine and straddle the northwest and southern borders of the Dixie Creek property of Fronteer Development Group. Fronteer's Dixie Creek project ( is where the Ontario Government Geological Survey reports a resource, in the 88-4 zone, of 1.1 million tons of 0.1oz Au/ton. Teck Corporation drilled the 88-4 zone in The gold resource included high grade intercepts up to g/t gold (0.5 opt) over 2.83 metres (9.3 feet) at depths of less than 50 metres. In addition to being virtually untested below 150 metres, there are clear high-grade targets as shallow as 50 metres, and the aeromagnetic data confirm that the 88-4 zone is open along strike. The 88-4 deposit is both conductive and magnetic and the same magnetic anomalies trend onto Grandcru's northern property. 2

3 (3) Danny Boy - Nevada The Company has an Option on the Danny Boy property ( the Property ) in Nevada under which the Company must make Cash Payments totaling US $183,000 and Exploration Expenditures totaling US $320,000 over the four (4) year term of the Option. Within 90 days of completing the annual Cash Payments, the Company can make a onetime US $1.5 million payment to purchase the property. The Property will be subject to a Gold price indexed NSR royalty from production. The Property includes two major areas of interest: (1) The Core area is a NNW trending soil geochemical anomaly roughly 3000 feet by 100 feet and further explored by rock chip sampling and magnetic data. (2) The Beard Hill area is a butte on the east side of the property held up by a wide rib of altered mineralized and silicified volcanic rocks cut by a highly silicified dacite porphyry dike with numerous rock chip samples with grades ranging roughly from 100 ppb gold to several ppm gold. The Property is a volcanic -hosted gold system with large areas of substantially altered volcanic rocks anolalous in gold, arsenic, mercury and antimony adjacent to a significant epithermal district. The textures of the rocks (hydrofracturing and microbreccias) and alteration (quartz-sericite-pyrite, silicification, argillic alteration and propylitic alteration) are all consistent with large producing Nevada gold districts. Sulphides are present locally in abundance on the Property. The district has a long history of placer gold exploration and production. The Company completed surface geology and geochem programs on the Property during the late Summer and Fall of These programs were successful and after further work conducted on the Property in the Spring of 2005 a drilling program is planned. Exploration results - Quarter Ended April 30, 2005 San Miguel Project - Mexico During the period the Company conducted a short recognizance program on its two properties at Guadalupe and concluded the completion of a technical report. Danny Boy Project - Nevada During the period, the Company conducted field work and permitting on the Danny Boy project in preparation for an initial Drill program. Red Lake Projects Ontario Minimal work was completed on the North and South Properties during the period do to the winter weather. The Company has determined drill targets on the Dixie North property for a late Spring Drill program. The Company is planning a comprehensive surface and geophysical program on the Dixie South for late Spring as well. Red Lake Work Program Exploration Expense Analysis The major exploration expense components of the work programs on the Red Lake properties during the six month period ended April 30, 2005 and their particular property allocation are included in the following table: Coli East Coli West East North South Assaying Communications Consulting-geological 900 6,600 2,500 8,700 3,100 21,800 Equipment Rental Total 3

4 (4) Coli East Coli West East North South Geophysical Surveys - 23,683 19,975 9,192-52,850 Line Cutting - 9,150-2,933-12,083 Maps, reports and reproductions ,418 Project management and other ,050 Travel and accommodation - 4, , ,180 Total ,681 23,030 27,130 3, ,397 Total Selected Annual Information The following table sets out selected financial information for the Company which has been derived from the Company s audited financial statements for the fiscal years ended October 31, 2004, 2003, and These financial statements were prepared in accordance with accounting principles generally accepted in Canada and are in Canadian dollars. As at October 31, Fiscal 2004 Fiscal 2003 Fiscal 2002 Income Statement Data Revenues Income (loss) before discontinued operations and extraordinary items (2,090,096) (247,358) (90,048) Net income (loss) for the year (2,090,096) (247,358) (90,048) Loss per common share outstanding - basic and diluted: Loss before discontinued operations and extraordinary items (0.14) (0.04) (0.02) Net loss for the year (0.14) (0.04) (0.02) Balance Sheet Data Total assets 1,215, , ,420 Total long-term liabilities Dividends Factors That Affect the Comparability of the Annual Financial Data Disclosed Above The Company was originally formed as a natural resource company. During Fiscal 2002 the Company did not have an active business and was attempting to acquire a business project in the high tech sector, as opportunities in the resource industry during that period were limited. The loss for Fiscal 2002 of $90,048 represents primarily the general and administrative costs of maintaining the Company s public trading status while it endeavored to acquire a new business project. During Fiscal 2003 there was a significant improvement in the mining industry, principally due to an improvement in metal prices. During that year the Company entered into options to acquire interests in mineral properties in Quebec, in the Red Lake District of Ontario, and in Nevada. As a result of the increase in activity in the Company during Fiscal 2003, the operating costs increased and the Company incurred a loss of $247,358 for the year. The increase in loss resulted primarily from an increase in general and administrative costs, which in aggregate increased from $94,531 for Fiscal 2002 to $223,358 for Fiscal This increase resulted from increases in most of the general and administrative cost classifications. During Fiscal 2004, the Company continued to expand its operations by acquiring options on additional mineral property interests in Nevada and Mexico. As a result of the continued expansion of the Company s activities there was a substantial increase in general and administrative expenses, which increased by $691,229 for Fiscal 2004, as compared to Fiscal A significant part of the increase ($162,237) in general and administrative costs was due to a change in the method of accounting for stock options and due to the stock options that were issued during the year.. The Company recognizes 4

5 (5) compensation expense over the vesting term for options granted to employees, officers, directors and consultants based on the fair value of the options as determined using an option pricing model. The loss of $2,090,096 for Fiscal 2004 includes a write down of mineral properties and deferred costs of $1,563,381 and an income tax recovery of $125,587 as further described herein. Share Capital, Convertible Securities, Options, and Warrants As at the Report Date, the Company had the following outstanding securities: Share Capital Authorized Share Capital: Issued Share Capital: Shares in escrow Convertible debt securities None Options and warrants an unlimited number of common shares without nominal or par value 23,998,539 common shares None The following incentive stock options and share purchase warrants were outstanding at the Report Date: Number of Shares Exercise Price Expiry Date Options 675,000 $0.10 May 16, ,000 $0.55 March 5, ,100,000 $0.30 June 1, ,000 $0.40 August 3, ,000 $0.25 December 13, ,000 $0.25 April 22, ,525,000 Warrants 1,947,623 $0.35 December 18, 2005 (1) 3,459,585 $0.45 June 30, ,696,750 $0.45 August 10, ,044 $0.45 October 15, ,000,000 $0.75 June 20, ,267,002 (1) The expiry date was extended from June 18 th to December 18 th 2005 and is subject to acceleration in certain circumstances. The above stock options were granted pursuant to the terms of the Company s stock option plan, which provisions include, among other things, vesting requirements. At the Report Date 1,775,000 of the above stock options had vested. Pursuant to the terms of the Company s stock option plan, the maximum aggregate number of stock options that the Company can currently have outstanding is 4,567,099; therefore, as of the Report Date, an additional 2,042,099 options are available for granting. Results of Operations Current Quarter The Company s operating loss of $472,559 for the three months ended April 30, 2005 (the Current Quarter ) increased by $300,462 when compared to the loss of $172,097 incurred during the three months ended April 30, 2004 (the Prior Quarter ). The increase in loss during the Current Quarter, as compared to the Prior Quarter, 5

6 (6) resulted principally from an increase of $45,298 in expenses during the Current Quarter, the write-down of mineral properties of $420,058, which was partially offset by the income tax recovery in the Current Quarter of $173,967. The Company has elected not to continue with the Coli Lake East, Coli Lake West, and East mineral properties in the Red Lake District of Ontario. Accordingly the related acquisition and deferred costs aggregating $418,820 were written off during the Current Qu arter. In addition, during the Current Quarter the Company expensed $1,778 for costs incurred during the quarter in connection with mineral properties that were written off during the fiscal year ended October 31, During the Current Quarter, the Company renounced certain exploration deductions for Canadian tax purposes in connection with the Company s resource property resulting in a future income tax liability of $173,967, which was recorded as share issue costs. This future income tax liability has been offset against future income tax assets resulting in a future income tax recovery of $173,967. The increase in expenses during the Current Quarter, as compared to the Prior Quarter, was due to primarily to increases in (i) consulting fees ($32,434) and management fees ($15,656), (ii) share-based compensation ($48,742), and in (iii) travel and entertainment ($22,656). The increase in consulting and management fees is due to an increase in the number of consultants and management of the Company required to manage the increase in activity of the Company. The increase in share base compensation is due primarily to the stock options issued during the prior and current year and the Company s accounting policy of recognizing compensation expense over the vesting term for options granted to employees, officers, directors and consultants based on the fair value of the options as determined using an option pricing model. The increase in travel and entertainment is due primarily to increased travel in connection with the management of the Company s operations in Canada and in the United States. These increases were partially offset by decreases of $76,500 in financing fees, which were not duplicated in the Current Quarter, and a decrease in transfer agent and regulatory fees of $12,161. The decrease in transfer agent and regulatory fees is due principally to a decrease in regulatory fees. Current Period The Company s operating loss of $706,987 for the six months ended April 30, 2005 (the Current Period ) increased by $374,163 when compared to the loss of $332,824 incurred during the six months ended April 30, 2004 (the Prior Period ). The increase in loss during the Current Period, as compared to the Prior Period, resulted principally from an increase of $119,343 in expenses during the Current Period, the write-down of mineral properties of $420,058, which was partially offset by the income tax recovery in the Current Period of $173,967. The Company has elected not to continue with the Coli Lake East, Coli Lake West, and East mineral properties in the Red Lake District of Ontario. Accordingly the related acquisition and deferred costs aggregating $418,820 were written off during the Current Period. In addition, during the Current Period the Company expensed $1,778 for costs incurred during the period in connection with mineral properties that were written off during the fiscal year ended October 31, During the Current Period, the Company renounced certain exploration deductions for Canadian tax purposes in connection with the Company s resource property resulting in a future income tax liability of $173,967, which was recorded as share issue costs. This future income tax liability has been offset against future income tax assets resulting in a future income tax recovery of $173,967. The increase in expenses during the Current Period, as compared to the Prior Period, was due to primarily to increases in (i) consulting fees ($71,137) and management fees ($35,967), (ii) share-based compensation ($123,968), and in (iii) travel and entertainment ($36,243). The increase in consulting and management fees is due to an increase in the number of consultants and management of the Company required to manage the increase in activity of the Company. The increase in share base compensation is due primarily to the stock options issued during the prior and current year and the Company s accounting policy of recognizing compensation expense over the vesting term for options granted to employees, officers, directors and consultants based on the fair value of the options as determined using an option pricing model. The increase in travel and entertainment is due primarily to increased travel in connection with the management of the Company s operations in Canada and in the United States. These increases were partially offset by decreases of $136,305 in financing fees, which were not duplicated in the Current Period, a decrease in transfer agent and regulatory fees of $14,466, and a decrease in professional fees of $14,971. The decrease in transfer agent and regulatory fees is due principally to a decrease in regulatory fees. The decrease in professional fees is due principally to the Company s capability to perform certain work that was previously done by an external law firm. 6

7 (7) Summary of Quarterly Results Results for the eight most recent quarters ending with the last quarter for the three months ending on April 30, 2005 are: Income Statement Data For the Three Months Ending Fiscal 2005 Fiscal 2004 Fiscal 2003 Apr. 30/05 Jan 31/05 Oct. 31/04 Jul. 31/04 Apr. 30/04 Jan 31/04 Oct. 31/03 Jul. 31/03 Total revenues Income (loss) before discontinued operations and extraordinary items (472,559) (234,428) (1,451,388) (305,884) (172,097) (160,727) (74,179) (49,470) Net income (loss) (472,559) (234,428) (1,451,388) (305,884) (172,097) (160,727) (74,179) (49,470) Income (loss) per common share outstanding basic and diluted Income (loss) before discontinued operations and extraordinary items (0.02) (0.01) (0.08) (0.02) (0.01) (0.02) (0.01) (0.01) Net income (loss) per share (0.02) (0.01) (0.08) (0.02) (0.01) (0.02) (0.01) (0.01) The financial data presented above is derived from the Company s financial statements, which are prepared in accordance with accounting principles generally accepted in Canada and in Canadian dollars. Factors That Affect the Comparability of the Quarterly Financial Data Disclosed Above For the losses for the quarters ended April 30, 2003, July 31, 2003 and October, 31, 2003, were fairly consistent with the Company completing a reactivation of its operations in the latter part of Fiscal 2003 by acquiring interests in mineral properties in Quebec, in the Red Lake District of Ontario, and in Nevada. Results for the quarter ended October 31, 2003 include $30,840 in connection with share based compensation due to the adoption of a new accounting policy as further described herein. The losses during the quarters in Fiscal 2004 reflect an increase in the Company s activities due to its reactivation. The Company continued during Fiscal 2004 to acquire mineral property interests by acquiring options on properties in Nevada and Mexico. The loss for the quarter ended July 31, 2004 includes $143,822 for share based compensation. The loss for the quartered ended October 31, 2004 includes a write down of mineral properties and deferred costs of $1,563,381 and an income tax recovery of $125,587 as further described herein. The loss for the quarter ended January 31, 2005 includes $92,014 in management and consulting fees and $75,226 in share based compensation. The loss for the quarter ended April 30, 2005 includes $89,590 in management and consulting fees and $48,742 in share based compensation, a write-down of mineral properties and deferred costs of $420,058, and an income tax recovery of $173,967. Liquidity and Capital Resources As at April 30, 2005, the Company had a cash balance of $455,653 compared to $20,258 as at October 31, The Company had working capital as at April 30, 2005 of approximately $530,000 compared to a working capital deficiency of approximately $93,000 as at October 31, The Company s working capital deficiency at the beginning of the Current Quarter improved to a positive working capital at the end of the quarter primarily due to the cash received from a brokered private placement, which consisted of three tranches. The Company s cash balances at the beginning of the Current Quarter plus the proceeds form the private placement were used to fund continuing operations, the acquisition of property and equipment, and the acquisition costs and the deferred exploration expenditures on the Company s mineral properties during the quarter. Current Quarter Operations during the Current Quarter were funded by primarily by Company s cash position of $292,381 at the beginning of the quarter and the net proceeds of $575,192 raised from the closing of the second and third tranches of a brokered private placement, as further described herein, that consisted of three tranches. Cash of $228,135 was used during the Current Period by operating activities. Investing activities during the Current Period consisted 7

8 (8) primarily of i) $98,735 for expenditures on the Company s mineral properties and deferred costs, $5,410 of which was spent on acquisition costs and $93,325 was spent on property exploration costs, and ii) $47,790 spent on property and equipment, primarily for exploration equipment.. There were no non-cash investing and financing activities during the Current Quarter. The exploration work during the Current Period consisted primarily of i) geological consulting in connection with the Company s properties and ii) geophysical surveys on the Company s Coli Lake West, East, and North properties in the Red Lake District of Ontario. Current Period Operations during the Current Period were funded by primarily by issuance of equity of $1,278,198, raised principally from a brokered private placement, as further described herein, that consisted of three tranches that closed during the period. Cash of $519,261 was used during the Current Period by operating activities. Investing activities during the Current Period consisted primarily of i) $273,791 for expenditures on the Company s mineral properties and deferred costs, $127,793 of which was spent on acquisition costs and $145,998 was spent on property exploration costs, and ii) $49,751 spent on property and equipment, primarily for exploration equipment. Non-cash investing and financing activities during the Current Period consisted of 90,000 common shares issued for $22,500 for the acquisition of options on mineral properties. These shares include 25,000 shares with a value of $6,250 that were issued in January 2005 in connection with the Clear Lake Property. The value of these shares ($6,250) plus a property payment for Clear Lake of $8,000 that was paid in January 2005 (aggregate costs of $14,250) were accrued for and included in the write-down of mineral properties in the consolidated financial statements for the year ended October 31, The exploration work during the Current Period consisted primarily of i) geological consulting in connection with the Company s properties and ii) line cutting, geophysical surveys on the Company s Coli Lake West, East, and North properties in the Red Lake District of Ontario. Financing activities during the Current Period also included advances of $69,182 that were repaid during the period. Requirement for Additional Financing The Company is in the mineral exploration and development business and has incurred losses since its inception. The Company has no revenue generating operations and has funded its operations primarily through the issue of capital stock. The Company may be required to raise additional financing in the future in order to explore and develop its mineral properties, to acquire additional exploration properties, or to acquire and develop other business opportunities. However, there can be no assurances that the Company will be able to secure acceptable financing to conduct such activities. Related Party Transactions Transactions with related parties during the Current Period not elsewhere disclosed herein are as follows: Type of transaction Nature of relationship to the Company Consulting fees To Pam White, an officer $ 15,000 $ 10,000 Consulting fees To C. J. Baker, an officer 15,167 - Barranca Resources A company controlled by Geoffrey Snow, a director of the Company 1,559 - Duckmanton Partners Ltd. A company controlled by David Shaw, a director of the Company 6,250 - Management fees To W. Glen Zinn, an officer and director 42,967 - Management fees To Brian Leeners, an officer and director 24,000 25,000 Management fees To Mike Iannacone, a former officer - 3,000 Legal fees To Gordon J. Fretwell Law Corporation, a law firm controlled by a 15,775 - expensed/capitalized director Rent and office services To 1650 Developments Ltd., a company with a director in common 23,227 10,188 Interest expense To W. Glen Zinn, an officer and director Purchase of equipment, furniture and lease hold improvements To 1650 Developments Ltd., a company with a director in common 9,761 14,250 Included in accounts payable and accrued liabilities as at April 30, 2005 is $15,203 (October 31, 2004-$32,299) owing to related parties as follows: 8

9 (9) Owed to: Nature of relationship to the Company January 31, 2005 Gordon J. Fretwell Law Corporation October 31, 2004 A law firm controlled by Gordon Fretwell, a director $ 6,000 $ 13,500 Brian Leeners An officer and director C. J. Baker An officer W. Glen Zinn An officer and director 8,600 16,749 Barranca Resources A company controlled by a director - 1,980 $ 15,203 $ 32,299 Amounts included in accounts payable owing to related parties are non-interest bearing and have no specific terms of repayment. During the six months ended April 30, 2005, the Company received and repaid advances of $31,922 from two directors of the Company. $23,922 (US$20,000) was received from and repaid during the period to W. Glen Zinn, a director and officer of the Company. In connection therewith interest of $754 was paid as disclosed above. $8,000 was received and repaid during the period to Gordon J. Fretwell, a director and officer of the Company. This advance was non interest bearing. There were no advances outstanding to related parties during the six months ended April 30, Included in receivables as at January 31, 2005 is $24,170 (October 31, 2004-$30,261) owing by related parties as follows: Owed by: Nature of relationship to the Company January 31, 2005 October 31, 2004 Gordon J. Fretwell Law A law firm controlled by Gordon Fretwell, a director $ 229 $ 229 Corporation Nexvu Capital Corporation A company with directors in common 20,739 19,175 Bell Resources Corporation A company with directors in common 3,202 10,857 The receivables are non interest bearing and are due on issuance of the invoice $ 24,170 $ 30,261 Included in prepaid expenses and deposits as at April 30, 2005 is $8,436 (October 31, 2004-$11,024) in connection with prepaid rent, travel advances, and advanced fees to related parties as follows: Related party: Nature of relationship to the Company January 31, 2005 October 31, 2004 Brain Leeners An officer and director $ - $ 4,334 Pam White An officer - 2,500 W. Glen Zinn An officer and director 5,028 4, Developments Ltd. A company with a director in common 3,408 - Financial instruments $ 8,436 $ 11,024 The Company's financial instruments consist of cash, receivables, reclamation bonds, and accounts payable and accrued liabilities. The fair value of cash, receivables, reclamation bonds, accounts payable and accrued liabilities are assumed to approximate their carrying amounts because of their short term to maturity. The Company is exposed to credit risk to the extent that its debtors may be unable to repay amounts owing to the Company. 9

10 (10) Other Private placement During the six months ended April 30, 2005, the Company completed a brokered private placement consisting of flow-through and non-flow through units in three tranches. Each flow-through unit was issued at $0.28 each and consisted of one flow-through common share and one non flow-through share purchase warrant. Each non-flow through unit was issued at $0.25 and consisted of one common share and one share purchase warrant. Each warrant entitles the holder to acquire one additional non flow-through common share at a price of $0.45 per share for a period of 18 months from closing. Canaccord Capital Corporation acted as agent and received, as further described herein, i) a commission of 8% of the gross proceeds of the offering, a portion of which it elected, pursuant to the terms of the agency agreement, to be paid in units having the same terms as the non flow-through units, ii) Agent's Warrants equal to 15% of the offering sold, exercisable for 18 months at $0.45, iii) an administration fee, and iv) a corporate finance fee, payable in non flow-through units. The first tranche consisted of an aggregate 1,745,251 flow-through units at a purchase price of $0.28 per unit to raising gross proceeds of Cdn$488,670 and an aggregate 1,195,000 non flow-through units at a purchase price of $0.25 per unit to raise gross proceeds of Cdn$298,750. The 2,940,151 non transferable share purchase warrants issued in this tranche entitle the holder to purchase one additional non flow-through common share at a price of $0.45, expiring June 30, All of the common shares issued by the Company in connection with this tranche are subject to a hold period that expires on May 1, The agent received 87,297 common shares and an aggregate of 519,334 warrants in connection with the closing of the first tranche. Each warrant entitles the agent to purchase one additional non flow through share at an exercise price of $0.45, expiring June 30, Directors and officers of the Company subscribed to 40,000 of the non flow-through units. The second tranche, which closed in February 2005, consisted of an aggregate 2,345,000 non flow-through units at a purchase price of $0.25 per unit raising gross proceeds of Cdn$586,250. Each unit consists of one common share and one non-transferable share purchase warrant, entitling the holder to purchase one additional non flow-through common share at a price of $0.45, expiring August 10, All of the common shares issued by the Company in connection with this tranche are subject to a hold period, which expires on June 11, The agent received an aggregate of 351,750 warrants in connection with the closing of the second tranche. Each warrant entitles the agent to purchase one additional non flow through share at an exercise price of $0.45, expiring August 10, A director and officer of the Company subscribed to 150,000 of these units. The third tranche, which closed in April 2005, consisted of an aggregate 163,044 non flow-through units at a purchase price of $0.25 per unit raising gross proceeds of Cdn$40,761. Each unit consists of one common share and one non-transferable share purchase warrant, entitling the holder to purchase one additional non flow-through common share at a price of $0.45, expiring October 15, All of the common shares issued by the Company in connection with this tranche are subject to a hold period, which expires on August 16, Subsequent events Subsequent to April 30, 2005, the Company: i) received regulatory acceptance to further extend the exercise term of 1,947,623 warrants for an additional 6 months, from an expiry date of June 18, 2005 to an expiry date of December 18, The exercise price of these warrants is $0.35. The Warrants were originally issued in a private placement of the Company which closed December 18, In December, 2004, the Company received Exchange acceptance to amend the exercise term of the warrants from December 18, 2004 to June 18, 2005 and to amend the exercise price from $0.55 to $0.35 per share. An additional provision to the extension and repricing of the warrants is that if the closing price of the Company s shares is $0.44 or greater for a period of 10 consecutive days, the warrant holders shall have 30 days in which to exercise, otherwise they will expire. ii) issued 1,000,000 units in connection with the acquisition from Wheaton River Minerals Ltd. ( Wheaton ) of a One Hundred Percent (100%) interest in Wheaton s claim group in the Guadalupe Gold/Silver District, located in the Municipality of Cosala, State of Sinaloa, in the 10

11 (11) Investor relations Mining Agency of Culiacan, Mexico (Note 3). Each unit consists of one common share in the capital of the Company and one share purchase warrant entitling Wheaton to acquire one additional share in the capital of the Company for $0.75 expiring June 20, The common shares issued as part of a unit and the common shares issuable on exercise of the warrants are subject to a hold period expiring October 21, The Company handles its investor relations activities internally by assigning various duties to its officers and directors. Additional Information Additional information is available concerning the Company and its operations on SEDAR at and on the Company web site at Additional financial information concerning the Company is provided in its audited comparative financial statements and management s discussion and analysis for the Company s most recently completed financial year. Copies of this information are available by contacting the Company at its offices located at Burrard St., Vancouver, BC, V6C 3A6; phone ; fax Directors and Officers The Company s directors and officers as at the Report Date are: Directors: Officers: W. Glen Zinn W. Glen Zinn President & Chief Executive Officer Brian Leeners Brian Leeners Chief Financial Officer David Shaw Pamela White Secretary Geoffrey Snow Gord Fretwell Board Approval The contents of this management discussion and analysis have been approved and its mailing has been authorized by the board of directors of the Company. ON BEHALF OF THE BOARD OF DIRECTORS W. Glen Zinn W. Glen Zi nn, PRESIDENT 11