Auditors Report 2. Consolidated Balance Sheets 3. Consolidated Statements of Operations and Deficit 4. Consolidated Statements of Cash Flows 5

Transcription

1 Consolidated Financial Statements of Mega Uranium Ltd. For the Years Ended and 2006 Contents Auditors Report 2 Consolidated Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations and Deficit 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-38

2 AUDITORS REPORT To the Shareholders of Mega Uranium Ltd. We have audited the consolidated balance sheet of Mega Uranium Ltd. as at and the consolidated statements of operations and deficit, retained earnings and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. 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 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. The consolidated financial statements as at and for the year ended September 30, 2006 were audited by other auditors who expressed an opinion without reservation on these statements in their report dated December 15, 2006 and June 26, Toronto, Canada December 19, 2007 Ernst & Young LLP Chartered Accountants Licensed Public Accountants 2

3 MEGA URANIUM LTD. Consolidated Balance Sheets As at September 30, Assets Current Cash and cash equivalents (note 4) $ 48,830,098 $ 1,162,908 Marketable securities (note 6) 65,171,792 40,132,759 Prepaid expenses and receivables 4,688,982 2,034, ,690,872 43,329,956 Mineral properties and related expenditures (notes 3 and 5) 466,856,883 56,756,577 Investments in public companies (note 7) 5,749,815 12,896,500 Restricted cash (note 8) 375, ,500 Capital assets, net (note 9) 1,216, ,999 Liabilities and Shareholders' Equity $ 592,889,537 $ 113,427,532 Current Accounts payable and accrued liabilities $ 11,053,592 $ 715,245 Income taxes payable 586,156 - Due to broker - 8,945,644 11,639,748 9,660,889 Future tax liabilities (note 13) 134,444,519 12,370, ,084,267 22,031,608 Shareholders' equity Share capital (note 11) 417,070,102 99,464,341 Warrants (note 11(g)) 41,768,336 6,188,059 Contributed surplus (note 11(h)) 26,550,114 8,138,956 Deficit (38,583,282) (22,395,432) On behalf of the Board: 446,805,270 91,395,924 $ 592,889,537 $ 113,427,532 "Sheldon Inwentash" Director "Douglas Reeson" Director See accompanying notes to the consolidated financial statements. 3

4 , MEGA URANIUM LTD. Consolidated Statements of Operations and Deficit For the years ended September 30, Revenue Interest income $ 3,556,379 $ 1,078,074 Gain on disposal of investments in public companies 6,795,706 - Unrealized gains (losses) on investments in public companies, net 144,275 (89,598) Unrealized gains (losses) on marketable securities 45,550 (28,679) Other income 83,691 4,235 10,625, ,032 Expenses Operating, general and administrative 10,541,255 3,828,679 Stock-based compensation (note 11(j)) 18,085,529 8,238,011 Foreign exchange loss 581, Write-off of mineral properties and related expenditures 1,921, ,804 Amortization 107,610 24,616 31,237,947 12,400,686 Loss before income taxes (20,612,346) (11,436,654) Recovery of income taxes (note 13) (4,424,496) (767,026) Net loss and comprehensive loss for the year (16,187,850) (10,669,628) Deficit, beginning of year (22,395,432) (11,725,804) Deficit, end of year $ (38,583,282) $ (22,395,432) Loss per common share Basic and diluted $ (0.11) $ (0.12) Weighted average number of common shares outstanding Basic and diluted 145,222,919 90,134,263 See accompanying notes to the consolidated financial statements. 4

5 MEGA URANIUM LTD. Consolidated Statements of Cash Flows For the years ended September 30, Cash flows from operating activities Net loss for the year $ (16,187,850) $ (10,669,628) Items not affecting cash: Gain on disposal of investments in public companies (6,795,706) - Unrealized losses (gains) on investments in public companies, net (144,275) 89,598 Unrealized losses (gains) on marketable securities (45,550) 28,679 Write-off of mineral properties and related expenditures 1,921, ,804 Amortization 107,610 24,616 Stock-based compensation 18,085,529 8,238,011 Gain on sale of marketable security - (979) Issue of share capital for name rights - 176,640 Future tax recovery (5,199,897) (767,026) Foreign exchange loss 581,641 - (7,676,586) (2,571,285) Changes in non-cash working capital balances Prepaid expenses and sundry receivables (657,129) (1,564,221) Accounts payable and accrued liabilities 3,208, ,314 Income taxes payable 586,156 - (4,538,748) (3,791,192) Cash flows from financing activities Proceeds from issue of share capital pursuant to private placements, net 44,011,703 35,970,457 Proceeds pursuant to exercise of options and warrants 14,307,170 6,386,323 Due to brokers (8,945,644) 8,945,644 49,373,229 51,302,424 Cash flows from investing activities Expenditures on mineral properties and related exploration (13,943,455) (5,811,788) Restricted cash (17,500) - Acquisition of UMVI - (19,476) Acquisition of Hindmarsh - 1,287,907 Acquisition of FME - (23,564) Acquisition of Redport 7,071,635 - Acquisition of TSC 4,247,100 - Acquisition of Monster 5,102,359 - Acquisition of Nu Energy 19,062,666 - Acquisition of Lorena (50,000) - Proceeds from sale of marketable securities 56,983,562 12,632 Purchase of marketable securities (78,721,457) (40,525,859) Amortization of premium on purchase of marketable securities 221, ,274 Proceeds from sale of investments in public companies 10,888,414 - Purchase of investments in public companies (7,136,847) (12,986,098) Purchase of capital assets (875,419) (74,343) Loan to related party (note 10 (a)) 29,673,700 17,763,330 Repayment of loan to related party (note 10 (a)) (29,673,700) (17,763,330) 2,832,709 (57,850,315) Increase (decrease) in cash and cash equivalents 47,667,190 (10,339,083) Cash and cash equivalents, beginning of year 1,162,908 11,501,991 Cash and cash equivalents, end of year $ 48,830,098 $ 1,162,908 Supplemental Cash Flows Information Cash paid for interest $ 1,206 $ 72,095 Non-cash investing and financing activities Issue of share capital pursuant to acquisition of subsidiaries (notes 4(a,b,d,f,g)) 260,456,608 29,766,411 Issue of warrants pursuant to acquisition of subsidiaries (notes 4(b,d)) 32,425,478 - Issue of broker warrants pursuant to acquisition of subsidiary (note 4(b)) 817,500 - Issue of share capital pursuant to acquisitions of properties (note 4(c,e,h)) 7,507,581 5,487,500 5

6 1. Basis of preparation: Mega Uranium Ltd. ( Mega or the Company ) is a development stage mineral resources company with a focus on uranium properties in Australia, Argentina, Colombia, Bolivia, Mongolia, Cameroon and Canada. Mega also has precious and base metal interests in Africa, Mexico, Brazil and Canada. Mega is in the process of exploring its mineral properties and has not as yet determined whether these properties contain reserves that are economically recoverable. The recoverability of the amounts shown for mineral properties and related expenditures is dependent upon: the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; government policies and regulations; and future profitable production or proceeds from disposition of such properties. Mega s Australian uranium properties, including without limitation the Ben Lomond, Lake Maitland and Maureen properties are subject to state policies which presently prohibit the mining of uranium. In late April, the Federal Labor Party abolished its anti-uranium mining policy and the current Labor Government of South Australia has announced that it supports new uranium mine development. These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ( GAAP ) and include the significant accounting policies listed below. All references are in Canadian dollars unless otherwise noted. 2. Significant accounting policies: (a) Cash and cash equivalents: Cash and cash equivalents include cash and short-term investments with original maturities of less than three months. (b) Mineral properties and related expenditures: The cost of mineral properties and their related exploration and development costs are deferred until the properties are placed into production, sold or abandoned. These costs will be amortized over the estimated useful life of the properties following the commencement of production. Mineral properties in which the Company has no intention to develop and management believes have little or no value are written down to their estimated fair value. Mineral properties are written off if the properties are sold, allowed to lapse or abandoned. Cost includes the cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements or joint ventures, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made. The proceeds from property options granted reduce the cost of the related property and any excess over cost is applied to income. 6

7 2. Significant accounting policies (continued): The Company conducts some of its exploration activities on a joint venture basis. These consolidated financial statements reflect only the expenditures made by the Company for its proportionate interest in such joint ventures. (c) Marketable securities and investments in public companies: All of the Company s marketable securities and investments in public companies are designated as held-for-maturity for accounting purposes. (d) Revenue recognition: Security transactions are recorded on a settlement basis. Realized gains and losses on disposal of investments in public companies and unrealized gains and losses in the value of investments in public companies are reflected in the consolidated statements of operations and deficit and comprehensive loss and are calculated on an average cost basis. Upon disposal of an investment in a public company, previously recognized unrealized gains or losses are reversed, so as to recognize the full realized gain or loss in the period of disposition. Dividend income is recorded on the ex-dividend date. Interest income and other income are recorded on an accrual basis. (e) Stock-based compensation plans: The Company has stock-based compensation plans which are described in notes 10(j and k). Any consideration received on the exercise of stock options or sale of stock is credited to share capital. The Company records compensation expense and credits contributed surplus for all stock options granted. Stock options granted during the year are accounted for in accordance with the fair value method of accounting for stock-based compensation. The fair value of these options is estimated at the date of grant using the Black-Scholes option pricing model. (f) Capital assets: Capital assets are recorded at cost, less accumulated amortization. Amortization is provided at rates designed to amortize the cost of capital assets over their estimated useful lives as follows: Rate Basis Mining equipment Five to 15 years Declining balance and straight line Computer equipment 35% Declining balance and straight line Furniture and equipment 20% Declining balance and straight line Motor vehicles 12 years Straight line 7

8 2. Significant accounting policies (continued): (g) Use of estimates: The preparation of these consolidated financial statements in conformity with Canadian generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (h) Foreign currency translation: The Company's subsidiaries are considered to be integrated operations for accounting purposes. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange prevailing at the year-end. Non-monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at historical rates. All revenues and expenses denominated in foreign currencies are translated into Canadian dollars at rates of exchange prevailing at the transaction dates. Gains or losses resulting from translation are included in the determination of net loss for the year. (i) Loss per common share: Basic loss per common share has been determined by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the year, excluding shares securing employee share purchase loans and shares in escrow. Diluted loss per common share is in accordance with the treasury stock method and is based on the weighted average number of common shares and dilutive common share equivalents outstanding. In order to determine diluted earnings (loss) per share, the treasury stock method assumes that any proceeds from the exercise of dilutive stock options and warrants would be used to repurchase common shares being included in the denominator of the diluted earnings (loss) per share calculation. The diluted earnings (loss) per share calculation excludes any potential conversion of options and warrants that would increase earnings per share or decrease loss per share. During the year ended, there was no effect on diluted loss per common share as the effect of outstanding stock options on basic loss per common share would be anti-dilutive. (j) Income taxes: The Company follows the liability method of tax allocation in accounting for income taxes. Under this 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 enacted or substantively enacted tax rates expected to apply to taxable income (loss) in the year in which those temporary 8

9 2. Significant accounting policies (continued): differences are expected to be recovered or settled. When the future realization of income tax assets does not meet the test of being more likely than not to occur, a valuation allowance in the amount of the potential future benefit is taken and no net asset is recognized. (k) Flow-through financing: The Company may issue securities referred to as flow-through shares, whereby the investor may claim the tax deductions arising from the expenditure of the proceeds. When resource expenditures are renounced to the investors and the Company has reasonable assurance that the expenditures will be completed, future income tax liabilities are recognized (renounced expenditures multiplied by the effective corporate tax rate) and share capital is reduced. Previously unrecognized tax assets may then offset or eliminate the liability recorded. (l) Financial instruments: Effective October 1, 2006, the Company adopted Canadian Institute of Chartered Accountants Handbook Section 1530, Comprehensive Income ( Section 1530 ); Section 3855, Financial Instruments Recognition and Measurement ( Section 3855 ); Section 3861, Financial Instruments Disclosure and Presentation ( Section 3861 ); and Section 3865, Hedges ( Section 3865 ). Section 3855 establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. Section 3861 establishes standards for disclosure and presentation of financial assets, financial liabilities and non-financial derivatives. As there are no other comprehensive income items, comprehensive income is equal to net income. Also, the Company does not hold any derivative instruments for hedging purposes. The impact to the consolidated financial statements on the date of adoption of Sections 3855 and 3861 was not significant and resulted in the recognition of $189,825 of unrealized gains ($155,543 after tax) that previously would not have been recorded for the year ended. (i) Risk management: The Company has no operating cash flow and has no assurance that sufficient funding will be available to it for further exploration and development of its projects or to fulfill its obligations under any applicable agreements. There can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. The Company s risk management objective is to preserve its current cash reserve for exploration and development of its properties and for general operating activities. 9

10 2. Significant accounting policies (continued): The business of exploring for minerals involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the current exploration programs planned by the Company will result in a profitable commercial mining operation. (ii) Interest rate risk: The Company holds a significant portion of cash equivalents and marketable securities in interest-bearing instruments and is exposed to the risk of changing interest rates. The primary objective of the Company s investment activities is to preserve principal while at the same time maximizing the income it receives from its investments without significantly increasing risk. The Company places investments with high credit quality issuers. To minimize interest rate risk, the Company maintains its portfolio of cash equivalents and marketable securities in a variety of securities, including GICs, bankers acceptances and corporate bonds. Interest rate risk is further limited by the fact that these investments generally mature in less than one year from the date of acquisition. The Company does not use any derivative instruments to reduce exposure to interest rate fluctuations. (iii) Commodity price risk: The ability of the Company to develop its properties and the future profitability of the Company is directly related to the market price of certain minerals. (iv) Foreign exchange risk: The Company is exposed to currency fluctuations as it presently holds funds in Canadian dollars and a significant amount of its costs and liabilities are denominated in Australian and other currencies. The Company has not entered into any foreign currency contracts. (v) Fair value: The carrying values of cash and cash equivalents, prepaid expenses and sundry receivables, due from broker, restricted cash, income taxes payable and accounts payable and accrued liabilities approximate their fair values due to the short term to maturity for these instruments. All other financial instruments are carried at their fair value in accordance with the Company s accounting policies. The fair value of the Company s marketable securities and investments in public companies are determined as follows: 10

11 2. Significant accounting policies (continued): (a) Marketable securities: Marketable securities consist primarily of highly liquid AA and AAA corporate bonds. These corporate bonds are fair valued at the fair value of the underlying security. Fair value is determined using the quoted closing bid prices at the consolidated balance sheet dates or the closing bid price on the last day the security traded if there were no trades at the consolidated balance sheet dates. (b) Investments in public companies: Investments in public companies which are traded on a recognized securities exchange are recorded at fair value based on quoted closing bid prices at the consolidated balance sheet dates or the closing bid price on the last day the security traded if there were no trades at the consolidated balance sheet dates. Options and warrants of publicly-traded securities are fair valued based on quoted closing bid prices at the consolidated balance sheet dates or the closing bid price on the last day the security traded if there were no trades at the consolidated balance sheet dates. (m) Recent Accounting Pronouncements: The following accounting pronouncements are applicable to annual and interim periods beginning on or after October 1, 2007: CICA 1535, Capital Disclosures requires that a company disclose information that enables users of its financial statements to evaluate its objectives, policies and procedures for managing capital including disclosures of any externally imposed capital requirements and the consequences for non-compliance. The Company is currently evaluating the effect of adopting this standard. CICA 3862, Financial Instruments Disclosure requires disclosure of information related to the significance of financial instruments to a Company s financial position and performance. A company is also required to disclose information related to the risks of its use of financial instruments and how those risks are managed. The Company is currently evaluating the effect of adopting this standard. CICS 3863, Financial Instruments Presentation establishes standards for presentation of financial instruments. It deals with the presentation of financial instruments and the circumstances in which financial assets and financial liabilities are offset. The Company is currently evaluating the effect of adopting this standard. 11

12 3. Basis of consolidation: These consolidated financial statements include the accounts of Mega and its wholly-owned subsidiaries: Maple Resources Inc.; Maple Minerals Exploration and Development Inc.; Uranium Mineral Ventures Inc. ( UMVI ); Mega Georgetown Pty Ltd. and its wholly-owned subsidiary Future Metals and Energy Limited ( FME ); Mega Hindmarsh Pty Ltd. ( Hindmarsh ); Mega Redport Pty Ltd. ( Redport ); Mega Uranium Argentina S.A.; Twenty- Seven Capital Corp. ( TSC ); Monster Copper Corporation ( Monster ); Nu Energy Uranium Corporation ( Nu Energy ); and Northern Lorena Resources Ltd. ( Lorena ). All significant inter-company accounts and transactions have been eliminated on consolidation. In the prior year, the Company purchased several of its subsidiaries as follows: (a) In February 2006, the Company acquired a 100% interest in the capital stock of UMVI, a private company incorporated under the laws of the Province of Ontario, Canada, in exchange for 6,000,002 common shares of the Company valued at $3,000,001. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. This acquisition was a related party transaction since the Chairman of Mega was a minority shareholder of UMVI (representing a 6.7% interest) at the time of purchase and was recorded at the exchange amount. Details of the acquisition of UMVI are as follows: As at February 17, 2006 Purchase price Issuance of 6,000,002 Mega shares $ 3,000,001 Transaction costs 24,452 3,024,453 Fair value of UMVI s net assets acquired Current assets $ 109,931 Mineral properties and related expenditures 5,721,797 5,831,728 Less: current liabilities (919,082) Less: future tax liabilities (1,888,193) Fair value of net assets assumed $ 3,024,453 (b) As of September 30, 2006 and through a series of transactions, the Company purchased 100% of Hindmarsh s issued and outstanding shares and options by issuing a total of 7,291,120 common shares of Mega to Hindmarsh shareholders valued at $17,316,410. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. 12

13 3. Basis of consolidation (continued): Details of the acquisition of Hindmarsh are as follows: As at July 12, 2006 Purchase price Issuance of 7,291,120 Mega shares $ 17,316,410 Transaction costs 214,730 17,531,140 Fair value of Hindmarsh s net assets acquired Current assets $ 1,696,527 Mineral properties and related expenditures 22,366,777 Capital assets, net 62,272 24,125,576 Less: current liabilities (162,351) Less: future tax liabilities (6,432,085) Fair value of net assets assumed $ 17,531,140 (c) In June 2006, the Company acquired a 100% interest of the private Australian company Future Metals and Energy Ltd ( FME ). Mega issued 2,000,000 common shares valued at $9,450,000 in exchange for its 100% interest in FME. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. Details of the acquisition of FME are as follows: As at June 20, 2006 Purchase price Issuance of 2,000,000 Mega shares $ 9,450,000 Transaction costs 24,874 9,474,874 Fair value of FME s net assets acquired Current assets $ 23,844 Mineral properties and related expenditures 13,501,471 13,525,315 Less: current liabilities - Less: future tax liabilities (4,050,441) Fair value of net assets assumed $ 9,474,874 13

14 4. Cash and cash equivalents: Cash and cash equivalents consist of the following: September 30, 2006 Cash $ 8,648,275 $ - Cash equivalents (a) 40,181,823 1,162,908 $ 48,830,098 $ 1,162,908 (a) As at, all bankers acceptances had yields ranging from 4.7% to 4.8% with the weighted average yield rate being approximately 4.8% with maturity dates from October 18, 2007 to November 12, Mineral properties and related expenditures: The Company enters into exploration agreements with other companies whereby it may earn an interest in certain mineral properties by issuing common shares and/or making option payments and/or incurring expenditures in varying amounts by varying dates. Failure by a party to meet such requirements in certain circumstances can result in a reduction or loss of the ownership interest. 14

15 Following is a detailed list of the Company s mineral properties: September 30, 2006 Net Book Value Net Expenditures/ (Recoveries) Write-off Net Book Value AUSTRALIA - Queensland Ben Lomond Property Acquisition $ 5,721,797 $ - $ - $ 5,721,797 Exploration expenditures 30, , ,598 5,751, ,501-6,200,395 Future Metals and Energy Properties Acquisition 13,501, ,501,471 Exploration expenditures - 318, ,338 13,501, ,338-13,819,809 Georgetown Properties Acquisition 6,412, ,412,990 Exploration expenditures 504,530 2,041,343 2,545,873 6,917,520 2,041,343-8,958,863 Glengarry Properties Acquisition - 4,590,000-4,590,000 Exploration expenditures - 449, ,930-5,039,930-5,039,930 Tabletop joint venture Acquisition Exploration expenditures - 45,729-45,729-45,729-45,729 Total Queensland properties 26,170,885 7,893,841-34,064,726 15

16 5. Mineral properties and related expenditures (continued): September 30, 2006 Net Book Value Net Expenditures/ (Recoveries) Write-off Net Book Value AUSTRALIA - South Australia & Northern Territory Hindmarsh Property Western South Australia Acquisition $ 8,393,781 $ - $ - $ 8,393,781 Exploration expenditures 196, , ,830 8,590, ,875-9,094,611 Central South Australia Acquisition 6,773, ,773,490 Exploration expenditures 72, , ,417 6,846, ,871-7,599,907 Eastern South Australia Acquisition 3,497,260 - (1,411,738) 2,085,522 Exploration expenditures 217, , ,131 3,715, ,289 (1,411,738) 2,674,653 Northern Territory Acquisition 3,702, ,702,246 Exploration expenditures 31, , ,958 3,733, ,450-4,036,204 Total South Australia & Northern Territory 22,885,628 1,931,485 (1,411,738) 23,405,375 AUSTRALIA - Western Australia Redport Properties Lake Maitland Acquisition - 102,970, ,970,181 Exploration expenditures - 1,237,305-1,237, ,207, ,207,486 Kintyre Rocks Acquisition - 25,742,545-25,742,545 Exploration expenditures - 755, ,978-26,498,523-26,498,523 Aura Energy joint venture Acquisition Exploration expenditures - 187, , , ,829 Total Western Australian properties - 130,893, ,893,838 16

17 5. Mineral properties and related expenditures (continued): September 30, 2006 Net Book Value Net Expenditures/ (Recoveries) Write-off Net Book Value ARGENTINA Chubut/Patagonia Property Acquisition $ 146,898 $ - $ - $ 146,898 Exploration expenditures 630, ,748-1,044, , ,748-1,191,779 Sierra Pintada District Uranium Property Acquisition 75, ,675 Exploration expenditures 31,224 3,600-34, ,899 3, ,499 Total Argentina properties 883, ,348-1,302,278 BOLIVIA Uranium Project (Intrepid Minerals joint venture) Acquisition 80, ,000 Exploration expenditures 57, , , , , ,942 BRAZIL Monster Properties Acquisition - 5,000,000-5,000,000 Exploration expenditures ,000,000-5,000,000 COLOMBIA Acquisition - 130, ,518 Exploration expenditures - 126, , , ,622 MEXICO Twenty-Seven Properties Acquisition - 2,577,616-2,577,616 Exploration expenditures ,577,616-2,577,616 17

18 5. Mineral properties and related expenditures (continued): September 30, 2006 Net Book Value Net Expenditures/ (Recoveries) Write-off Net Book Value MONGOLIA Uranium Project (Red Hill Energy joint venture) Acquisition $ 98,388 $ - $ - $ 98,388 Exploration expenditures 812, ,450-1,501, , ,450-1,599,846 GUINEA (WEST AFRICA) Mt. Kakoulima Property Acquisition 2,787,348 5,895-2,793,243 Exploration expenditures 31, , ,469 2,818, ,329-3,603,712 CAMEROON (AFRICA) Kitongo/Lolodorf Property Acquisition - 104,023, ,023,846 Exploration expenditures - 150, , ,173, ,173,884 CANADA Ontario Properties (East West Resources joint venture) Acquisition 379,064 95,389 (149,135) 325,318 Exploration expenditures 2,569, ,079 (361,039) 2,370,865 2,948, ,468 (510,174) 2,696,183 Quebec Properties Acquisition Exploration expenditures Santoy Properties Acquisition - 2,492,000-2,492,000 Exploration expenditures - 823, ,305-3,315,305-3,315,305 Thelon Basin (Titan Uranium) Acquisition Exploration expenditures - 3,067,026-3,067,026-3,067,026-3,067,026 18

19 5. Mineral properties and related expenditures (continued): September 30, 2006 Net Book Value Net Expenditures/ (Recoveries) Write-off Net Book Value CANADA (continued) Lever Lake Properties (NWT) Acquisition $ - $ 95,776 $ - $ 95,776 Exploration expenditures - 58,836-58, , ,612 Lorena Properties Acquisition - 3,136,276-3,136,276 Exploration expenditures - 349, ,730-3,486,006-3,486,006 Geomode Properties Acquisition - 442, ,250 Exploration expenditures , ,250 Twenty-Seven Yukon Properties Acquisition - 74,390,367-74,390,367 Exploration expenditures - 1,006,984-1,006,984-75,397,351-75,397,351 Monster Labrador Properties Acquisition - 68,944,614-68,944,614 Exploration expenditures - 1,260,707-1,260,707-70,205,321-70,205,321 Monster Yukon & NWT Properties Acquisition - 730, ,572 Exploration expenditures - 75,555-75, , ,127 Total Canadian properties 2,949, ,131,466 (510,174) 159,571,044 Total mineral properties and $ 56,756,577 $ 412,022,218 $ (1,921,912) $ 466,856,883 related expenditures 19

20 5. Mineral properties and related expenditures (continued): The following are the significant acquisitions completed or announced during the year ended : (a) In July 2006, the Company acquired 15.6% of Redport, a public company listed on the Australian Stock Exchange ( ASX ) under the symbol RPT. The total cost to Mega for this transaction was $10,485,598 (AUD12,787,053). The Company also entered into an Agreement with Redport whereby Mega would offer to acquire all of the other issued securities of Redport on a share-exchange basis for common shares of Mega, in a conditional off-market takeover. Redport is an Australian based resource company specializing in the strategic acquisition and development of uranium properties in Australia. Through a series of transactions, during the first quarter of the current year the Company acquired the remainder of the ordinary shares of Redport by issuing 19,205,604 common shares to Redport shareholders valued at $88,921,946 for a 100% ownership of Redport. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. The allocation of the purchase price related to this transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those net assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at October 23, 2006 Preliminary purchase price Original investment in Redport, at cost $ 10,485,598 Issuance of 19,205,604 Mega shares 88,921,946 Assumed Redport options (i) 2,211,645 Transaction costs 477, ,097,025 Preliminary fair value of Redport s net assets acquired Current assets $ 8,958,879 Mineral properties and related expenditures 128,712,726 Capital assets, net 91, ,763,281 Less: current liabilities (989,488) Less: future tax liabilities (34,676,768) Fair value of net assets assumed $ 102,097,025 20

21 5. Mineral properties and related expenditures (continued): (i) An aggregate of 401,962 common shares are issuable to former shareholders of Redport pursuant to the exercise of the Redport options which have been assumed by Mega in connection with the acquisition and are included in the purchase price. (b) During the first quarter, the Company entered into a binding letter agreement with Twenty-Seven Capital Corp. ( TSC ) whereby Mega would acquire all of the outstanding common shares of TSC, a then publicly-listed uranium exploration company with uranium prospective land holdings in the Yukon Territory. Effective February 12, 2007, the Company acquired TSC and issued common shares and warrants to the former shareholders of TSC on the basis of one common share of Mega and one-half of one Mega common share purchase warrant (a Mega Warrant ) in exchange for each three TSC common shares. An aggregate of 6,785,373 common shares valued at $42,747,850 and 3,392,188 Mega Warrants valued at $14,145,424 were issued by Mega to the former shareholders of TSC. The Mega Warrants commenced trading on the TSX on February 13, 2007 under the symbol MGA.WT. Included in transaction costs, Mega issued 100,000 common shares and 50,000 common share purchase warrants (the Advisor Warrants ) to its financial advisor on the transaction, valued at $620,000 and $208,500, respectively. Each Mega Warrant and Advisor Warrant entitles the holder to acquire one common share of Mega at a price of $6.20 per share until February 12, The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. The allocation of the purchase price related to the TSC transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those net assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at Feb 12, 2007 Purchase price Issuance of 6,785,373 Mega shares $ 42,747,850 Issuance of 3,392,188 Mega warrants 14,145,424 Transaction costs 1,021,312 57,914,586 Preliminary fair value of TSC s net assets acquired Current assets $ 6,582,124 Mineral properties and related expenditures 76,727,652 83,309,776 Less: current liabilities (607,874) Less: future tax liabilities (24,787,316) Fair value of net assets assumed $ 57,914,586 21

22 5. Mineral properties and related expenditures (continued): (c) In April 2007, in connection with, but after the acquisition of TSC, Mega issued 33,333 common shares for a total consideration of $240,331 to the Dodson Group, towards the earning of a 100% interest in certain mineral concessions in the State of Sonora, Mexico. These concessions are included in TSC s Mexico properties in the detailed list of the Company s mineral properties. (d) In March 2007, the Company s wholly-owned subsidiary, Mega Georgetown Pty Ltd., acquired from a publicly-listed Australian company, Glengarry Resources Ltd. ( Glengarry ), uranium interests located in Queensland, Australia, approximately midway between Mega s Ben Lomond and Georgetown Projects. The Company issued 750,000 common shares to Glengarry for a total consideration of $4,590,000. In addition, Glengarry will receive a 1% net smelter royalty ( NSR ) on any uranium production from the ground. (e) On March 8, 2007, Mega entered into a binding letter agreement with Monster Copper Corporation (TSXV: MNS) ( Monster ) whereby Mega would acquire all of the outstanding securities of Monster in exchange for common shares and common share purchase warrants of Mega. Monster was a publicly-listed uranium exploration company with prospective uranium exploration projects in the Central Mineral Belt of Labrador, Canada. In addition, it has properties with potential for Iron Oxide Copper Gold ( IOCG ) and lateritic nickel deposits in the Carajas Region of Brazil. As consideration for the acquisition of Monster which was completed on June 6, 2007, the Company issued common shares and warrants to the former shareholders of Monster, on the basis of one common share of Mega and one-half of one Mega share purchase warrant (a Mega Warrant ) in exchange for each six Monster common shares. An aggregate of 6,836,834 common shares valued at $41,773,056 and 3,418,416 Mega Warrants valued at $8,785,329 were issued to the former shareholders of Monster. In addition, Mega assumed Monster common share purchase warrants (the Monster Warrants ) valued at $6,068,080. The Mega Warrants commenced trading on the TSX on June 13, 2007 under the symbol MGA.WT.A. The acquisition was accounted for using the purchase method. The results of operations are included in the accounts from the effective date of acquisition. The allocation of the purchase price related to the Monster transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: 22

23 5. Mineral properties and related expenditures (continued): As at June 6, 2007 Purchase price Issuance of 6,836,834 Mega shares $ 41,773,056 Issuance of 3,418,416 Mega warrants 8,785,329 Assumed Monster purchase warrants (i) 6,068,080 Transaction costs 84,950 56,711,415 Preliminary fair value of Monster s net assets acquired Current assets $ 5,464,677 Mineral properties and related expenditures 74,675,186 Capital assets, net 21,967 Investment in public companies 196,000 80,357,830 Less: current liabilities (276,250) Less: future tax liabilities (23,370,165) Fair value of net assets assumed $ 56,711,415 (i) An aggregate of 1,104,712 Mega common shares and 552,356 Mega common share purchase warrants are issuable to former shareholders of Monster pursuant to the exercise of the Monster Warrants which have been assumed by Mega in connection with the acquisition and are included in the purchase price. (f) On April 27, 2007, Mega and Nu Energy Uranium Corporation (TSXV: NU ) ( Nu Energy ) entered into a binding letter of intent whereby it was proposed that Mega would acquire all of the outstanding shares of Nu Energy in exchange for common shares of Mega (the Acquisition ). Effective August 14, 2007, Mega acquired all of the outstanding shares of Nu Energy, by way of a three-corned amalgamation involving Mega, Nu Energy and B.C. Ltd., a wholly-owned subsidiary of Mega. Nu Energy is a junior development stage uranium company which owns a 92% interest in the Kitongo and Lolodorf uranium properties located in the Republic of Cameroon, Africa. Under the terms of the amalgamation, shareholders of Nu Energy received two (2) common shares of Mega in exchange for each three (3) Nu Energy common shares held. Mega issued to Nu Energy s shareholders 23,819,128 common shares valued at $83,128,757. In addition, Mega assumed Nu Energy stock options (the Nu Energy Options ) and common share purchase warrants (the Nu Energy Warrants ) valued at $448,500 and $558,000, respectively, and exercisable for an aggregate of up to 250,000 common shares of Mega. 23

24 5. Mineral properties and related expenditures (continued): The allocation of the purchase price related to the Nu Energy transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at August 14, 2007 Purchase price Issuance of 23,819,128 Mega shares $ 83,128,757 Assumed Nu Energy options (i) 448,500 Assumed Nu Energy warrants (i) 558,000 Transaction costs 200,000 84,335,257 Preliminary fair value of Nu Energy s net assets acquired Current assets $ 20,512,700 Mineral properties and related expenditures 104,023,846 Capital assets, net 223, ,760,062 Less: current liabilities (1,804,331) Less: future tax liabilities (38,620,474) Fair value of net assets assumed $ 84,335,257 (i) An aggregate of 100,000 Mega share purchase warrants and 150,000 Mega common shares are issuable to former shareholders of Nu Energy pursuant to the exercise of the Nu Energy Options and Nu Energy Warrants which have been assumed by Mega in connection with the acquisition and are included in the purchase price. (g) In June 2007, Mega entered into an agreement with Santoy Resources Limited ( Santoy ) (TSXV: SAN ) to acquire all of Santoy s right, title and interest in three projects in the Central Mineral Belt, Labrador. Under the agreement, Mega acquired the West Michelin, West Micmac and Gravelly River projects (the Projects ) from Santoy (subject to a 1% net smelter royalty covering certain claims in favour of a third party) in exchange for 400,000 common shares of Mega for a total consideration of $2,492,000. (h) On July 30, 2007, Mega entered into an agreement to acquire Northern Lorena Resources Ltd. ( Lorena ), a private company based in Nova Scotia, Canada, which holds options on seven mineral properties in Labrador, for a total consideration of 500,000 common shares of Mega. Effective September 28, 2007, Mega acquired Lorena for an aggregate of 500,000 common shares of Mega valued at $2,165,000 and Lorena became a wholly-owned subsidiary of Mega. Under the terms of the acquisition, Mega assumed Lorena s obligations under the option agreements with the original optionors. 24

25 5. Mineral properties and related expenditures (continued): The allocation of the purchase price related to the Lorena transaction is preliminary and will be refined as information relating to the valuation of the fair value of net assets and the determinant of certain tax values of those assets are finalized. The preliminary fair values of the assets and liabilities and the preliminary allocation of the purchase consideration are as follows: As at September 28, 2007 Purchase price Issuance of 500,000 Mega shares $ 2,165,000 Transaction costs 50,000 2,215,000 Preliminary fair value of Lorena s net assets acquired Current assets $ 5,130 Mineral properties and related expenditures 3,136,276 Other long term assets 2,000 3,143,406 Less: current liabilities (26,763) Less: future tax liabilities (901,643) Fair value of net assets assumed $ 2,215,000 (i) (j) In September 2007, Mega completed an option agreement with Geomode Minerals Exploration Ltd. ( Geomode ) to acquire a 100% interest in certain mineral claims and other rights to properties located in Saskatchewan, Canada. The option will be exercisable by Mega if Mega makes certain cash payments totaling $1.0 million and issues an aggregate of 125,000 common shares to Geomode over a period of three years from the date of the agreement. Twenty-five thousand common shares have been issued pursuant to the agreement valued at $92,250 and $350,000 has been paid as at. In September 2007, Mega entered into an agreement with Forum Uranium Corp. ( Forum ) (TSX-V: FDC ) in respect of Forum s 100% owned Maurice Point property, which is located close to Cameco Corporation s Maurice Bay uranium deposit in the Athabasca Basin of northern Saskatchewan, Canada. Mega can earn a 55% interest in the Maurice Point project by spending $8 million over three years and by issuing 100,000 Mega common shares to Forum. Mega has a $2 million expenditure commitment in the first year of the option and Forum will initially operate the project. Mega can earn a further 15% interest (for a total 70% interest) by delivering a positive feasibility study and arranging project financing. Forum has the option to convert its remaining 30% interest to a 2% NSR at its election. 25

26 6. Marketable securities: Marketable securities are classified as held-for-trading, are stated at their fair values and consist of the following: September 30, 2006 Corporate bonds (a) $ 63,775,981 $ 40,111,127 Other equity securities 1,395,811 21,632 $ 65,171,792 $ 40,132,759 (a) As at, all corporate bonds were highly liquid AA and AAA bonds with yields ranging from 4.11% to 4.48% with the weighted average yield rate being approximately 4.23% with maturity dates from December 3, 2007 to March 8, Investments in public companies: Investments consisted of the following as at : Investments Security Description Cost Fair Value Northern Uranium Limited 2,260,520 common shares and 1,250,000 options expiring December 12, 2009 $ 406,057 $ 1,644,441 Scimitar Resources Limited 2,250,000 common shares 1,742,498 1,210,820 Alberta Star Development Corporation 449,800 common shares 659, ,298 Baywater Uranium Corporation 550,000 common shares 786, ,500 EastAsia Mineral Corporation 117,500 common shares 232, ,450 Mawson Resources Limited 391,900 common shares 788, ,881 RPT Uranium Corporation 500,000 common shares 274, ,500 Silver Spruce Resources Inc. 146,000 common shares 246, ,100 Santoy Resources Limited 200,000 common shares 196, ,000 Xemplar Energy Corporation 150,000 common shares 232, ,500 Other equity investments 130, ,325 Total investments in public companies $ 5,695,138 $ 5,749,815 Investments consisted of the following as at September 30, 2006: Investments Security Description Cost Fair Value Redport Limited 58,453,950 common shares, 26,000,000 options expiring June 30, 2007 and 25,000,000 unlisted options expiring June 30, 2009 $ 10,485,598 $ 10,562,700 Khan Resources Inc. 1,667,000 common shares and 833,500 warrants expiring August 2, ,500,500 2,333,800 Total investments in public companies $ 12,986,098 $ 12,896,500 26

27 8. Restricted cash: On May 6, 2005, the Company pledged approximately $350,000 ( $332,500) of cash held in a Guaranteed Investment Certificate ( GIC ) as collateral for a letter of guarantee issued to the State of Queensland, Australia, related to the mining leases for the Ben Lomond uranium project. The letter of guarantee is automatically renewable annually for an indefinite period of time and accordingly the pledged GIC will continue to be renewed annually. In connection with the acquisition of TSC (see note 4(b)), the Company has $25,000 of cash held in a GIC as collateral for a reclamation bond issued to the Province of British Columbia, Canada, related to the mining properties for the Muskwa uranium project. The letter of guarantee is automatically renewable annually for an indefinite period of time and accordingly the pledged GIC will continue to be renewed annually. 9. Capital assets: Capital assets consist of the following as at September 30: Cost Accumulated amortization Net book value Cost Accumulated amortization Net book value Mining equipment $ 684,263 $ 47,150 $ 637,113 $ 126,803 $ 22,419 $ 104,384 Computer equipment 111,959 16,499 95,460 2, ,852 Furniture and 406,052 62, ,542 7,122 1,359 5,763 equipment Motor vehicles 146,919 6, ,852 $ 1,349,193 $ 132,226 $ 1,216,967 $ 136,615 $ 24,616 $ 111, Related party transactions: All transactions with related parties have occurred in the normal course of operations other than as disclosed in note 3(a) and are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related party transactions were as follows during the year ended September 30: Type of service Nature of relationship Interest income Affiliated company (a) 170, ,010 Cost sharing arrangement Affiliated company (b) 428, ,000 27