Page 1

pro

jects

2004report

2004 milestones

philippines copper-gold systems

why invest in the philippines

president’s message

batangas projects

lobo

archangel

new acquisitions

pan de azucar

surigao projects

tapian san francisco

tapian main

agata

mat-I

new acquisitions

community relations

financials

md&a

auditors’ report

balance sheets

statements of loss and deficit

statements of cash flows

notes to statements

corporate directory

1

annual

1. BATANGAS PROJECTS

• Lobo

• Archangel

2. PAN DE AZUCAR PROJECT

3. SURIGAO PROJECTS

• Tapian San Francisco

• Tapian Main

• Agata

• Mat-I

2

3

2

4

5

6

8

11

13

14

17

18

22

23

23

25

25

27

29

36

37

38

39

40

Page 4

+

++ +

+

++

+

+

++

PHILIPPINE COPPER-GOLD SYSTEMS: THE COMPETITIVE ADVANTAGEThe Philippines is located in the Pacifi c Ring of Fire, the

circum-Pacifi c belt of volcanic activity which contains much

of the world’s copper-gold resources. Philippine gold-copper

systems are especially attractive targets because they are char-

acterized by the telescoping together of high-level epithermal

gold deposits and underlying porphyry copper-gold deposits.

The model to the left illustrates a typical Philippine copper-gold

system.

Epithermal gold-silver mineralization, with varying amounts

of base metals such as copper, lead and zinc, occurs at shallow

levels in the earth’s crust. As shown in our model, epithermal

deposits may occur as fl at-lying bodies in volcanics, such as

Mindoro’s Kay Tanda prospect, or as more steeply-dipping

tabular zones, similar to Mindoro’s SW Breccia gold resource.

High grades of more than 10 grams per tonne (g/t) gold are

common, making epithermal deposits particularly attractive

targets for a junior company. Some of the larger Philippine epi-

thermal gold deposits have produced several million ounces of

gold (eg. Antamok Mine, Baguio, produced 10 million ounces).

Epithermal deposits are usually derived from and related to

intrusive rocks below which may be associated with porphyry

copper-gold mineralization. Porphyry copper-gold deposits are

generally low-grade, but large-tonnage, often over 100 million

tonnes and to a billion tonnes or more, and contain very large

amounts of copper and gold which are potentially bulk mine-

able. They provide over 50% of the world’s copper production.

Worldwide, porphyry grades average 0.5% copper and 0.38

g/t gold. In the case of the Philippines, gold content can be

much higher, as much as 1 g/t or more, which makes Philip-

pine porphyry deposits especially attractive exploration targets.

Porphyry deposits often occur in clusters, such as the Anglo-

Philex Boyongan and Bayugo porphyry deposits, situated just a

few hundred meters away from each other in the Surigao Gold

District of the Philippines.

In the Philippines, the separation between the shallower level

epithermal deposits and the porphyry deposits below is com-

monly just a few hundred meters, or they may even be tele-

scoped together, while in the Americas the separation may be

several kilometers. In fact, most of the gold prospects being ex-

plored by Mindoro have evidence of nearby porphyry systems.

The high-grade epithermal deposits are attractive exploration

targets, but the porphyry copper-gold deposits below are the

real “elephants” we seek.

The high-grade epithermal deposits are attractive exploration targets, but the porphyry copper-gold deposits below are the real “elephants” we seek.

Page 4

volcanic arc

Page 5

pro

jects

hig

hlig

hts

· Located in the Pacifi c “Ring of Fire”, the Philippines is one of

the most prolifi cally mineralized countries in the world, glob-

ally ranking third in gold resources, fourth in copper and fi fth in

nickel.

· Tremendous remaining potential for additional discoveries,

since, despite it’s vast mineral wealth, the Philippines has seen

little modern exploration.

· The Philippines provides a natural gateway to other Asia

Pacifi c economies, particularly China, with its voracious demand

for metals.

· The Philippines has a stable and democratic government and a

free market economy.

· A change in government policy from tolerance of mining to

active promotion with the issue of Executive Order No. 270, in

January 2004, setting the National Policy Agenda on Revitalizing Min-

ing in the Philippines.

· 100% foreign ownership allowed following the December

2004, Supreme Court decision abolishing all legal obstacles to the

implementation of the Philippine Mining Act of 1995.

· The Philippines has an attractive structure of tax incentives

and guarantees repatriation of the earnings and capital of foreign

investors.

WHY INVEST IN THE PHILIPPINES

Page 5

PRESIDENT’S MESSAGE – 2004

The past year has seen a remarkable turn-around in our outlook.

The door to the Philippines fi nally swung wide open, with the

Philippines Supreme Court decision allowing, with fi nality, 100%

foreign ownership of mining projects and the Philippines govern-

ment now strongly embracing foreign mining investment. Right

at the doorstep of the Philippines, and our tremendous project

portfolio, is China and other expanding Asian economies, all with

voracious metals demand that is likely to sustain high metal prices

for a very long time.

I have been contacted by many organizations expressing interest in

participation in our projects. Initially this interest was by early-re-

acting Chinese companies and agencies, other SE Asian entities,

Australian companies, and now increasingly, by international ma-

jors. A renowned Canadian mine-fi nder and promoter is believed

to be behind the recent acquisition of major exploration and

mining assets in the Philippines. Why all this interest? They are

hungry for the virtually untapped copper-gold and nickel potential

of the Philippines, a potential which is unsurpassed anywhere.

A bonus geological endowment of the Philippines is a telescop-

ing together of the near-surface epithermal gold-silver deposits

and porphyry copper-gold deposits below. This gives us unique

double-barreled opportunities on most of our projects; to establish

near-surface epithermal gold-silver resources together with a great

opportunity to discover porphyry copper-gold “elephants” below.

This is a factor I cannot over-stress. We are only now beginning to

tap into that underlying porphyry copper-gold potential.

This increasing recognition of the Philippines’ mineral potential

has meant that, fi nally, we were able to fi nance and advance our

outstanding projects, which have largely lain fallow since we com-

menced acquiring them almost a decade ago. Major geophysical

programs were carried out on fi ve of our projects to detect the

porphyry copper-gold deposits believed to be below our many

epithermal gold prospects. Initial survey areas had to be extended

on all projects as anomalies proved to be much larger and stronger

than anticipated, and as new anomalies were detected. Remark-

ably, our geophysical campaign outlined approximately ten

porphyry copper-gold targets. We have an exciting drill campaign

to look forward to over the coming year as we begin drilling an

astonishing number of targets.

Considerable advances were made on two of our Batangas District

Projects: Lobo and Archangel. Exploring the extensive epither-

mal mineralization trends at Lobo, we reported a modest, starter

gold resource at SW Breccia that is open to extension; we drill-

Page 7

intersected high-grade gold mineralization at West Drift, as well as

promising silver-copper mineralization at the Camo Prospect, and

commenced drilling a possible Carlin-type gold setting at the Signal

Prospect. Also at Lobo, geophysics defi ned the strong Pica and

Calumpang porphyry copper-gold targets, where drilling is about

to commence at the time of writing.

At the nearby Archangel Project, we are working to establish the

open-pit, heap-leach potential of an extensive area of epithermal

gold-silver mineralization along the Pulang Lupa-Kay Tanda-

Marita trend. Based on initial favorable metallurgical test work, a

second phase of test work is in progress at Kay Tanda. Resource

delineation will continue in conjunction with drill-testing of

multiple porphyry copper-gold targets below. An initially-planned

eight line-kilometer geophysical program to defi ne those porphyry

targets has expanded to over fi fty kilometers at the time of writing.

A semi-continuous anomalous trend, consistent with a cluster of

two to three porphyry copper-gold targets, has been defi ned over

a strike length of six kilometers to date and will be the target of

major upcoming drill programs.

Over the next year, work will begin on our other Batangas District

Projects near Lobo and Archangel. These contain many known

copper and gold prospects which have never seen systematic mod-

ern exploration.

A similar story unfolded on our Surigao District Projects. Geo-

physical programs carried out on the Tapian San Francisco, Tapian

Main and Agata Projects were expanded greatly to cover emerg-

ing anomalies. We have defi ned a cluster of porphyry copper-gold

targets at Tapian San Francisco, which is being readied for drilling.

Geophysics has also partially defi ned another porphyry copper-

gold target at Tapian Main, in addition to other promising gold

prospects nearby.

A greatly extended geophysical program at Agata defi ned two very

strong porphyry copper-gold targets, as well as other anomalies

of potential interest. Preparations for drilling are underway at the

time of writing. Preliminary evaluations of the potential of a nickel

laterite prospect at Agata by a Japanese-Filipino mining company

were promising. But, in a seeming embarrassment of target riches

on this project, geophysical surveys defi ned strong anomalies near-

by, believed to be copper-gold targets, and an assessment is being

made on how both nickel and copper-gold targets can be advanced

in a systematic manner.

Mindoro also embarked on several new marketing and fi nancing

initiatives over the past year. Most signifi cant was the commence-

ment of trading on the Frankfurt Stock Exchange in August. Min-

doro found a receptive and enthusiastic audience for its Philippine

story, and the resulting increased liquidity of our stock, both on the

Frankfurt Exchange and the TSX-V, was immediate and impres-

sive. We are indebted to the efforts of our Chairman, Dr. Gerhard

Kirchner, for his tremendous efforts in taking the Mindoro story to

Europe. To support our renewed marketing efforts, Ascenta Capi-

tal Partners Inc. was retained to provide investor relations and mar-

keting services. As a result of these initiatives, Mindoro successfully

raised over $2.4 million through brokered and private placement

offerings. Given that all this occurred prior to the landmark deci-

sion of the Philippine Supreme Court, which has dramatically re-

invigorated exploration investment in the country, we are optimistic

the coming year will see an unprecedented market response to base

and precious metals exploration in the Philippines.

This report is dedicated with appreciation and thanks to those loyal

shareholders who have supported us so strongly over the years:

believing in our focus and strategy and thereby making it possible

for our company to be in the right place at the right time with the

right projects.

Tony Climie, President and CEO

All work on Mindoro Projects is carried out under the supervision of Tony

Climie, P. Geol., a “qualifi ed person” as defi ned by National Instrument 43-

101.

Top Image: From left to right: Peter Draper (Director), Dr. Gerhard Kirchner (Chairman),

Tony Climie (President & Director), Bail Lab-oyan (Project Manager), Edsel Abrasaldo

(Vice President of Subsidiary MRL Gold Phils., Inc.).

messag

e

Page 8

2004projectsbatangas

Page 9

batangas

lobo

archangel

Pan de Azucar

surigao

tapian san francisco

tapian main

agata

mat-I

2004projects

Mindoro is exploring for gold and gold-copper in the high-potentialmagmatic arcs of the Asia-Pacifi c Region, focusing on the Philippines.

Page 11

pro

jects

LOBO PROJECT

Mindoro acquired the Lobo and Archangel Projects in the Batan-

gas District of Luzon in December 2000, under an agreement

with Egerton Gold Philippines Inc., a private Philippines com-

pany. Mindoro may earn a 75% interest in the Batangas Projects

through phased exploration expenditures, issues of shares, and by

taking one of the projects (either Lobo or Archangel) to feasibil-

ity stage. Lobo and Archangel are each held under a Mineral

Production Sharing Agreement (MPSA), which is a legally binding

contract with the Philippine Government allowing for mineral

exploration and development. Early work in the Batangas District

was so encouraging that Mindoro immediately applied for and ac-

quired, via option arrangements, for over 12,000 hectares adjacent

to Lobo and Archangel. Mindoro now holds over 14,400 hectares

covering multiple epithermal gold and porphyry copper-gold pros-

pects (see Batangas Projects, page 8).

GEOLOGY AND MINERALIZATION

Geology consists of hydrothermally altered volcanics and lime-

stone intruded by hornblende porphyry intrusions, and overlain in

places by younger cover volcanics and sediments.

Reconnaissance work has outlined from fi ve to seven kilometers

of northeast-trending epithermal vein/breccia trends (see Lobo

Compilation, page 12). Mineralization along these epithermal

trends occurs as both low-sulphidation gold and high-sulphida-

tion copper-silver, with lesser gold, mineralization-shoots. Two

such mineralization-shoots are SW Breccia, where Mindoro has

drill-defi ned a near-surface gold resource, and the old Lobo Mine,

where copper was mined during the 1960s. High gold-copper-

silver values occur at surface in a number of areas along these

trends, which are shown as prospects on the Lobo Compilation,

and are believed to refl ect mineralization shoots exposed at sur-

face. There are likely other mineralization-shoots not exposed at

surface that will require drilling to discover.

From April 2003 to January 2005, 4,469 meters of drilling in 53

drill holes were completed on the Sampson and Camo epither-

mal trends. Most drilling has focused on defi ning the SW Breccia

resource, but scout drilling has been carried out on other targets

as well.

Since epithermal gold deposits in the Philippines are commonly

underlain in close proximity by porphyry copper-gold mineral-

ized intrusions, a major geophysical survey of combined induced

polarization and magnetic surveying was carried out over Lobo in

late 2004 to defi ne porphyry copper-gold targets.

BATANGAS PROJECTS

Top Image: Porphyry copper-gold target at Pica; a zone of intense alteration coincident with

strong geophysical anomalies

Bottom Image: Jasperoid boulders cut by gold-mineralized quartz stockworking from

Signal Prospect

SW BRECCIA MINERAL RESOURCE

At SW Breccia on the Camo Trend, a National Instrument 43-101

compliant resource estimate was prepared during 2004, based on

25 shallow drill holes completed using a man-portable diamond

drill rig.

Indicated resources, to a depth of 130 meters, are 270,000 tonnes

at a grade of 6.49 grams per tonne gold, containing 56,380 ounces

of gold. Additional inferred resources are 61,000 tonnes at a grade

of 5.35 g/t gold, containing 10,540 ounces of gold. The mineral-

ization is believed to be open to depth and to the south-west along

strike. At a later date, Mindoro plans to utilize a larger drill rig to

extend the resource.

WEST DRIFT: NEW MINERALIZATION SHOOT

LOCATED

Scout drilling was carried out in proximity to the old Lobo Copper

Mine on the Sampson Trend. The mine operated between 1966

and 1969, with underground production from three levels on a

high-sulphidation copper-silver ore-shoot over a vertical range of

50 meters and 350 meters horizontal extent. Copper head grade

was reported at 2.67%. Mining ceased due to economic factors at

that time. Despite reported high gold grades in places, gold was not

a signifi cant component due to the prevailing $30 per ounce gold

price. The Philippines Mines and Geosciences Bureau reported

(1986) high-grade (20 g/t) gold mineralization in proximity to the

West Drift area (see Lobo Compilation). This reported high-grade

gold mineralization became a target of the scout drilling program.

This drilling located, what appears to be, the top of a new, high-

grade mineralization shoot in the West Drift area, where hole 38

intersected 12 meters of 7.42 g/t gold, including 2.5 meters of

29.46 g/t gold (true widths), at a vertical depth of 120 meters. A

larger drill rig will be used at later date with the objective of ex-

tending this mineralization and defi ning mineral resources.

CAMO PROSPECT: ENCOURAGING COPPER-

SILVER MINERALIZATION INTERSECTED

Scout drilling in late 2004 at the Camo Prospect, approximately

one kilometer northeast along strike of SW Breccia, gave encour-

aging results. Mineralization is high-sulphidation with copper and

silver associated with lesser gold. Hole 47 intersected 0.69 g/t

gold, 37.66 g/t silver and 0.2 % copper over 4.0 meters. Hole 49,

a steeper angle hole from the same site, intersected three zones of

mineralization: 1.12 g/t gold, 133.5 g/t silver and 1.24 % copper

Lobo Compilation

Page 12

Page 13

pro

jects

over 1.0 meter, 0.19 g/t gold, 114.88 g/t silver and 0.36 % copper

over 3.5 meters, and 0.16 g/t gold, 64.56 g/t silver and 0.29 %

copper over 2.0 meters (all true widths).

Hole 51, drilled 45 meters along strike, intersected 488.38 g/t silver

and 1.83 % copper over 4.5 meters. Hole 52, a steeper angle hole

from the same site, intersected 0.77 g/t gold, 44.32 g/t silver and

1.33 % copper over 2.0 meters, before being lost in faulted mineral-

ization deeper in the hole.

The promising copper, silver and gold mineralization at Camo

will be evaluated at a later date using a larger drill rig.

SIGNAL PROSPECT: LIMESTONE-HOSTED

REPLACEMENT GOLD MINERALIZATION

Extensive coincident chargeability, resisitivity and magnetic

anomalies were defi ned at the Signal Prospect. Large numbers of

boulders of hematitic jasperoid, quartz-pyrite breccia with barite

veining, and massive quartz-replaced rock were found in an area

of sand overburden over an area of 1.5 by 1.5 kilometers, above

and adjacent to the geophysical anomalies. Samples from the fl oat

boulders gave several very high values: up to 72.64 g/t gold and

432.3 g/t silver.

The boulders are believed to be derived from silicifi ed and re-

placed limestone. It is noted that important gold deposits, such as

Carlin-type gold deposits in Nevada, can occur in limestones and

inter-bedded sediments. At the time of writing, drilling had com-

menced on the Signal Prospect.

PICA AND CALUMPANG PROSPECTS: PORPHYRY

COPPER-GOLD TARGETS

The induced polarization survey defi ned two areas with strong indi-

cations of a buried porphyry copper-gold system. These anomalies

consist of a fl at-lying resistive layer (possible silica cap) overlying

a high chargeability body (possible sulphides). Coincident mag-

netic anomalies support this interpretation. The fi rst porphyry

target is the Pica Prospect, in which anomalous responses have

been obtained for over one kilometer of strike length and 500 to

700 meters width. Very strong hydrothermal alteration is noted at

surface at Pica.

The second porphyry target is the Calumpang Prospect, immedi-

ately to the northeast of Pica. An independent geophysical consul-

tant has recommended drilling of both Pica and Calumpang and a

drill rig was being mobilized to site at the time of writing.

ARCHANGEL PROJECTGEOLOGY AND MINERALIZATION: A TELESCOP-

ING OF EPITHERMAL AND PORPHYRY SYSTEMS

The Archangel Project covers a strong and extensive gold-copper

system. Geology consists of pervasively altered volcanics intruded

by andesitic, dioritic and dacitic intrusives, and overlain by younger

cover volcanics to the northwest.

The Chinese and Spanish mined copper and gold at Archangel in

earlier centuries and the Japanese carried out tunneling and other

investigations for copper potential during World War 2. West-

ern Mining Corporation of Australia defi ned strong copper soil

anomalies over the Balibago Prospect in 1987-1989, but focused on

the gold potential of Kay Tanda and Pulang Lupa (see Archangel

Compilation). Chase Minerals, in alliance with BHP Minerals,

further drill-evaluated this gold potential in 1995-1998. At the time,

Philex Mining Corporation held the ground immediately to the

northeast of Kay Tanda.

Mindoro, through the acquisition of the Philex ground and adja-

cent lands, is the fi rst company to put the entire gold-copper system

together in one land package. Work is in the very early stages of

defi ning and evaluating the very large mineral system, which may,

in fact, include several copper-gold systems. Altered and mineral-

ized volcanic rocks, and associated high-level intrusives, have been

mapped over six kilometers along strike, and are still open to the

northeast. The area of altered and mineralized rocks averages

about 1.5 kilometers wide before extending under younger volcanic

cover to the northwest.

Epithermal gold-silver mineralization occurs extensively at higher

elevations, whereas erosion has exposed indications of underlying

porphyry copper-gold mineralization at lower elevations.

EPITHERMAL GOLD-SILVER AT ARCHANGEL:

RESOURCE DELINEATION STAGE

Epithermal gold-silver mineralization is associated with quartz

stock-working of varying intensity, hydrothermal quartz breccias

and massive replacement quartz. It occurs at higher elevations and

is associated with gold-in-soil anomalies that extend semi-continu-

ously over at least four by one kilometers. Geological mapping and

reconnaissance rock sampling has traced the mineralization a dis-

tance of two kilometers, from Pulang Lupa (trench channel sample

gave 15 meters of 3.18 g/t gold and 63.54 g/t silver), through Kay

Tanda, where extensive gold-silver mineralization has been drill-

intersected, to South Lumbangan (trench channel sample gave 20

meters of 2.66 g/t gold and 46 g/t silver). Mineralization appears

to be open to the northeast and northwest. At the Marita Prospect,

three kilometers northeast of Pulang Lupa, a quartz stock-worked

Archangel Compilation

pro

jects

Page 14

fl oat boulder with disseminated pyrite and some chalcopyrite (a

copper mineral), assayed 9.92 g/t gold.

Only a small part of the Archangel epithermal gold-silver system

was tested by the previous drilling, which focused on Kay Tanda.

Drilling at Kay Tanda was wide-spaced, with most holes in excess

of 100 meters apart. Higher grade intersections, which have not

yet been drilled off, included hole CA-02 with 8.6 g/t gold over 6

meters and CA-09, more than 200 meters distant, with 7 g/t gold

over two meters. The zones of internal, higher-grade mineraliza-

tion will be further evaluated.

Since the mineralization is near-surface and within grade ranges

being heap-leached elsewhere in the world, Mindoro has com-

menced an evaluation of the open-pit, heap-leach potential of Kay

Tanda and its extensions. Preliminary metallurgical test work has

been largely positive. More-detailed metallurgical test-work is in

progress in Australia at the time of writing.

PORPHYRY COPPER-GOLD: MULTIPLE TARGETS

DEFINED

Reconnaissance work has defi ned very extensive porphyry cop-

per-gold related alteration (sericite-clay-chlorite-quartz, phyllic and

propylitic), at lower elevations, semi-continuously over more than

fi ve kilometers along the northeast trend. The altered volcanics are

covered by younger rocks in the northwest. Copper oxide showings

are present in at least six widely-distributed locations. For example,

at Balibago, there is cliff face of altered volcanics with abundant

copper staining. A three meter trench sample nearby gave 5.58%

copper. At South Lumbangan, two kilometers to the northeast, a

fi ve meter trench sample of quartz stock-worked material assayed

3.22% copper and 4% zinc. Extensive and strong copper-in-soil

anomalies are associated with the alteration.

A major geophysical survey comprising combined induced po-

larization and magnetic surveys commenced in January 2005, to

defi ne porphyry copper-gold drill targets and was still in progress at

the time of writing, with over 50 line kilometers completed.

Strong chargeability and resisitivity anomalies have been defi ned

semi-continuously along a northeast trend for over fi ve kilome-

ters. The anomalies are over one kilometer wide in places and are

consistent with the refl ection of multiple porphyry copper-gold

systems at depth. The strongest anomalies are being defi ned in the

northeastern area, known as Marita, where strongly silica-illite-

altered quartz diorite boulders have been located. These contain

quartz-stockworks and disseminated copper mineralization, also

suggesting a porphyry copper-gold setting.

Once the geophysical surveys have been completed, the data will be

modeled and interpreted and drill targets selected.

NEW BATANGASACQUISITIONS A commanding land position in a well-mineralized copper-gold belt An additional 12,200 ha adjacent to the Lobo and Archangel Proj-

ects has been applied for or optioned.

At least 10 known gold and gold-copper prospects occur on this

new ground. Only preliminary reconnaissance work has been car-

ried out to date, but mineralization styles identifi ed include high-

sulphidation epithermal, skarn and porphyry copper-gold related.

Reconnaissance and semi-detailed work is in progress.

Top Image: Geophysical survey on Archangel

Page 15

pro

jects

Surrounding, and

adjacent to, the Lobo and

Archangel Projects, an

additional 12,200 ha of

lands have been applied

for, or optioned, bringing

the total land holdings in

this highly-mineralized

copper-gold belt to

14,400 ha.

Page 16

2004projectsbatangas

lobo

archangel

Pan de Azucar

surigao

tapian san francisco

tapian main

agata

mat-I

The Pan de Azucar Prospect is located within a collapsed caldera structure, where the dacitic -andesitic caldera-fi ll package hosts pervasive replacement and structurally-controlled alteration and mineralization.

Page 17

pro

jects

PAN DE AZUCAR PROJECT

The Pan de Azucar MPSA covers 535 ha on Pan de Azucar Island

and adjacent Panay Island. Under a 1997 agreement with a private

Philippines company, Minimax Mineral Exploration Corporation,

Mindoro may earn a 75% interest in the Pan de Azucar Project

through phased exploration expenditures and issues of shares.

Mindoro has earned a 40% interest to date and is negotiating an

extension to its fi nal, Phase Three, earn-in period.

GEOLOGY AND MINERALIZATION

The Pan de Azucar Prospect is located within a collapsed caldera

structure, where the dacitic-andesitic caldera-fi ll package hosts

pervasive replacement and structurally-controlled alteration and

mineralization. Dacitic units are preferred hosts to mineraliza-

tion. An epithermal, massive pyritic-sulphide deposit at Valderama

Zone, with low to moderate grade copper-gold-zinc-silver mineral-

ization was discovered by drilling in 2001, and a porphyry copper-

gold target located at Asparin Hill in 2002.

VALDERAMA ZONE

A 2001 scout drill program, consisting of 1,041 meters, encoun-

tered promising copper, gold, silver and zinc values at shallow

depths, such as 37.1 meters of 0.8% copper, 1.87 g/t gold, and

40.25 meters of 0.69% copper, 1.21 g/t gold, 4.34 g/t silver, and

0.63% zinc. A second drill program in 2002, consisting of 431

meters, encountered lower grades, indicating the copper-gold-sil-

ver-zinc mineralization is irregular.

Although the Valderama Zone is still under-drilled and open

in several directions, the 2002 drilling reduced the potential for

an economic copper, gold, silver, zinc resource. The Valderama

epithermal replacement mineralization is probably the high-level

refl ection of an adjacent porphyry copper-gold system. The zone

is open to the north for a further 250-300 meters, to the property

boundary, where gossanous outcrops are present.

Based on drilling to date, the Valderama Zone averages between

36% and 40% sulphur. Mineralization is near-surface, and a few

hundred meters from tide water. It may, therefore, have potential

for a low-cost sulphur source for sulphuric acid production for

treatment of the numerous lateritic nickel deposits expected to go

into production in the Philippines and elsewhere in the region and

for fertilizer production. Mindoro’s main priorities, however, are

the remaining Pan de Azucar copper-gold targets and Mindoro’s

projects elsewhere.

ASPARIN HILL TARGET

A 45 meter drill hole was completed on the Asparin Hill target,

approximately 700 meters west of the Valderama Zone, to test an

area of gossanous quartz-alunite boulders, also site of the strongest

geochemical anomalies on the project, a coincident circular topo-

graphic depression some 300 meters in diameter, and a broad mag-

netic anomaly. This intersected dacitic rocks with intense porphyry-

related alteration, including biotite alteration, plus disseminated

and veinlet chalcopyrite mineralization. Both are characteristic of

porphyry copper systems.

Future work will focus on the Asparin Hill porphyry copper-

gold target and a partner will be sought to fund this work.

Page 18

2004projectssurigao

Mindoro believes the surigao gold district will become a major copper-gold camp within the decade.

2004projectsbatangas

lobo

archangel

Pan de Azucar

surigao

tapian san francisco

tapian main

agata

mat-I

The Surigao Gold District is attracting considerableinternational attention and will undergo extensiveexploration for new porphyry copper-gold deposits, as well as for epithermal gold deposits.

Page 21

pro

jects

AN EMERGING WORLD-CLASS PORPHYRY COPPER GOLD CAMPTHE BOYONGAN AND BAYUGO DISCOVERIES

In September 2000, the Philex Gold/Anglo American joint venture

announced spectacular drill results at their Boyongan Prospect in

the Surigao Gold District. Subsequent drilling outlined a major

porphyry copper-gold deposit with a disclosed resource estimate of

219 million tonnes at a grade of 0.51 % copper and 0.74 g/t gold, or

about 13 million ounces gold equivalent. Philex has announced that

a second porphyry system has been discovered to the northwest of

Boyongan, known as Bayugo, and possibly, a third porphyry system

to the southwest. Australian junior Red 5 subsequently announced

the discovery of a new porphyry copper-gold system just a few hun-

dred meters along trend from Mindoro ground (see Surigao Projects

on page 18). Two other porphyry copper-gold prospects also occur

just to the north of Mindoro’s Tapian San Francisco Project.

The Surigao Gold District is attracting considerable international

attention and is just beginning to undergo extensive exploration for

new porphyry copper-gold deposits as well as for epithermal gold

deposits. Mindoro believes the Surigao Gold District will become a

major copper-gold camp within the decade.

MINDORO IN THE SURIGAO DISTRICT

Mindoro commenced exploring in the Surigao District in 1997

under an agreement with Minimax Mineral Exploration Corpora-

tion, a private Philippines company. Under the agreement, Mindoro

may earn a 75% interest in the Agata, Tapian San Francisco, Tapian

Main and Mat-I Projects through phased exploration expenditures

and issues of shares. To date, Mindoro has earned a 40% interest

in the Agata, Tapian San Francisco and Tapian Main Projects and a

10% interest in the Mat-I Project.

On announcement of the Boyongan discovery hole, Mindoro im-

mediately applied for an additional 15,900 hectares of land in which

Mindoro has an automatic 75% interest. This brings Mindoro’s total

project area in Surigao to approximately 24,000 hectares. The grant-

ed tenements consist of an MPSA on Agata and Exploration Permits

on Tapian San Francisco and Tapian Main, as well as MPSA and

Exploration Permit applications that are undergoing normal process-

ing on the remaining ground. This is believed to be the second larg-

est land holding after the Philex-Anglo American joint venture.

In 2004, Mindoro fi nalized a joint venture with Panoro Minerals

Ltd. whereby Panoro has the option to spend $2 million to earn a

40% interest in the Surigao Projects. Under an amending agreement

with Minimax, the underlying title holder, both Mindoro and Panoro

could each attain a 42.5% interest at feasibility.

During 2004 and extending into 2005, Mindoro completed a major

program of combined magnetic and induced polarization surveys

SURIGAO PROJECTS

Top Image: Pumpboat on Tubay River

Bottom Image: Copper mineralization at Tapian San Francisco

over parts of the Tapian San Francisco, Tapian Main and Agata

Projects. A National Instrument 43-101 compliant report was

commissioned and prepared by Dr. Bruce Rohrlach (Aus.IMM) to

summarize the status of the three projects.

TAPIAN SAN FRANCISCOMultiple porphyry copper-gold targets defined As a result of geological and geochemical surveys carried out in

1997, Mindoro had early on recognized the porphyry copper-gold

potential of Tapian San Francisco. Market and fi nancing condi-

tions precluded further evaluation of that potential until 2004,

when combined magnetic and induced polarization surveys and

geological work were completed over the southern part of the

project. These defi ned chargeability and resistivity anomalies are

shown on the Tapian San Francisco Compilation map. The most

signifi cant are the C5 and C6 chargeability anomalies, which occur

below shallower zones of high resistivity and interpreted

silicifi cation.

GEOLOGY AND MINERALIZATION

Geology consists of ultra-mafi cs, volcanics and limestones intruded

by diorite dykes and intrusions. Several major northeast-trending

lineaments extend from Tapian San Francisco through the Boyon-

gan district hosting the Boyongan and Bayugo copper-gold por-

phyry deposits. The northern portion of the Tapian San-Francisco

property overlaps the southern edge of a large intrusive complex

of approximately six kilometers in diameter that hosts the Masgad

porphyry system on its western margin and the Mayag porphyry

system on its eastern margin (see Surigao Projects on page 18).

Alteration at Tapian San Francisco is widespread, pervasive, and

typical of porphyry systems. This includes widespread propylitic

alteration, widespread argillic alteration, minor calc-silicate altera-

tion, structurally-controlled phyllic alteration and occurrences of

potassic alteration. These alteration assemblages span an area that

exceeds 3.5 by 2 kilometers, typical of large magmatic hydrother-

mal copper-gold ore-forming systems.

MULTIPLE PROSPECTS

Small-scale workings, such as shafts, adits, and pits, are widespread

on the property. Various styles of mineralization are encountered

and include high-grade gold in a possible massive sulfi de replace-

TapianSan FranciscoCompilation

Page 22

Page 23

pro

jects

ment body (Mina), vein stockwork gold-copper mineralization

(Gold Hill), copper and gold in breccia veins (Canaga), copper-ox-

ides in dense fracture networks within diorite (Canaga), disseminat-

ed sulfi des in phyllic-altered rocks (Cantikoy), and gold in argillised

andesites (Canaga, Quino and Gold Hill). Gold and copper are

enriched in soil samples that occur over an extensive region and

gold is elevated in many rock samples at surface, with some reach-

ing ore-grade.

Dr. Rohrlach concludes that the southern portion of the Tapian

San Francisco property shows a number of features indicative of

one or more porphyry copper-gold targets at depth beneath the

small-scale, but widespread, surface workings and zones of anoma-

lous surface geochemistry. He interprets the hydrothermal system

exposed at Tapian San-Francisco to comprise the high-levels of a

porphyry-copper-gold magmatic-hydrothermal system and recom-

mends drilling of the C5 and C6 chargeability anomalies. Drilling

is planned for 2005.

TAPIAN MAIN PROJECTGold prospects with a porphyry copper target below

GEOLOGY AND MINERALIZATION

Geology consists of greenschist overthrust by ultramafi cs, uncon-

formably overlain by limestone and intruded by multiple intermedi-

ate porphyry intrusions. High-level epithermal gold mineralization

occurs as veins, stockworks and breccias at contacts between green-

schist, ultramafi c, limestone and intrusives. The principal areas of

interest are Rosario and Samson Zones, as defi ned by greater than

100 ppb gold soil anomalies.

ROSARIO AND SAMSON ZONES

The Rosario Zone is about 500 meters by 200 meters and open

to the north. It includes extensive pre-World War 2 underground

development of a vein system, which had a 100 ton per day mill.

The workings are inaccessible and production is unknown. Very

incomplete pre-World War 2 records suggest the average grade was

8.3 g/t gold.

The Samson Zone is about 600 meters by 200 meters. Encouraging

gold values from rock sampling were obtained over widespread ar-

eas. Copper soil anomalies greater than 150 ppm and up to 1,192

ppm are associated with the Rosario and Samson zones.

The geophysical IP survey defi ned a strong chargeability anomaly,

coincident with intrusives, soil geochemical anomalies and altera-

tion, that extends over an area of 1.4 kilometers by 600 meters and

is open to the south.

The clustering of multiple intrusions is typical of horizontal sec-

tions above the top of large magma chambers related to porphyry

copper-gold systems. The porphyry target is likely deeper than at

Tapian San Francisco.

Planned work includes further evaluation of the epithermal gold

potential, extension of the geophysical survey to fully defi ne the

anomalies, and drilling, if warranted.

AGATA PROJECTA cluster of porphyry copper-gold targets

GEOLOGY AND MINERALIZATION

Geology consists of greenschist overthrust by ultramafi cs, un-

conformably overlain by limestone and intruded by intermediate

and alkaline intrusions. Early phyllic alteration is overprinted by

propylitic alteration in many areas. There are abundant gold pros-

pects and anomalies related to the intrusives. Less than 20% of the

project has been covered by geochemical surveys to date. Strong

gold and copper in soil anomalies have been defi ned over two by

one kilometers, encompassing clusters of gold showings associated

with the American Tunnels, Assmicor and Limestone Prospects.

ASSMICOR PROSPECT

During the 1980s, thousands of artisanal miners mined a saprolite

(soil) horizon at Assmicor to shallow depths. In 1999, seven of eight

drill holes completed by Mindoro intersected better than 0.5 g/t

gold near surface in oxidized intrusives and dykes. The two best

holes were 1.1 g/t gold over 19 meters and 1.4 g/t gold over 24

meters. The mineralization is open to the north and east.

ASSMICOR PORPHYRY COPPER-GOLD

PROSPECT

Alteration, accompanied by copper-gold mineralized veins charac-

teristic of the margins of a porphyry copper-gold system, are as-

sociated with east-dipping dykes and intrustions intersected in 1999

drill-hole 11. Together with a resistivity anomaly on the east side of

the assmicor prospect, this suggests a porphyry copper-gold system

is being approached to the east.

LIMESTONE PROSPECT

At the Limestone Prospect, geology consists of silty limestone with

strong gold in soil anomalies occurring in an area of approximately

600 meters by 500 meters. Artisanal miners previously panned

gold from the soils and mined gold from shallow workings in the

limestone. Two holes drilled at the eastern edge of the soil anoma-

lies encountered 2.7 g/t gold and 2.2 g/t gold over seven and eight

meters, respectively, at shallow depths. Deeper sections of miner-

alization were also encountered in both holes. Mineralization at

the Limestone Prospect resembles important limestone-hosted gold

deposits in Nevada, US.

NORTH AND SOUTH PORPHYRY

COPPER-GOLD TARGETS

A major induced polarization and magnetic geophysical survey,

consisting of 75 line kilometers, was completed in early 2005. The

survey outlined two intense and broad chargeability anomalies,

the North and South Targets, as well as peripheral anomalies. The

Agata Compilation map shows the main features identifi ed.

North Target is a very large and strong chargeability anomaly of

greater than 28 m/secs covering about 1.2 kilometers by 500 me-

ters. Ultra-mafi c rocks in the area exhibit quartz-magnetite-(pyrite)

alteration, with coincident copper, zinc and gold soil anomalies.

The alteration is believed to be related to an underlying intrusive

complex, which has high potential for associated porphyry copper-

gold mineralization.

South Target is also a large, 1.5 kilometers by 500 meters, and

extremely strong, chargeability anomaly of greater than 28 m/secs

and has a very large, fl anking resistivity high anomaly. The anoma-

lies extend onto another tenement which has now been secured

by Mindoro. Geological and geochemical evaluation of the South

Target is in its early stages. Small dykes or stocks of altered intru-

sive, likely the top of a much larger intrusive complex, have been

mapped. There are historical and ongoing artisanal gold mining

operations in this area. Soil geochemical surveys carried out by

Mindoro in 1997 partially covered the South Target and defi ned

gold, zinc and copper anomalies. The South Target geological,

geochemical and geophysical results strongly point to a porphyry

copper-gold system at depth.

A number of other broad and lower order, but still-signifi cant,

chargeabilty anomalies have been defi ned between and peripheral

to the North and South Targets. These are related to epithermal

or mesothermal gold-pyrite mineralization in limestones and other

lithologies, and to a pyrite halo associated with the intrusive com-

plexes.

AGATA NICKEL LATERITE PROSPECTEncouraging initial results from TaganitoIn June 2004, Taganito Mining Corporation was selected from

several interested parties and granted the non-exclusive right to

assess the nickel laterite potential of the Agata Project. Taganito

AgataCompilation

Page 24

Page 25

pro

jects

is owned by Japanese nickel smelter and trading companies and

private Philippine interests. Taganito produces approximately one

million tonnes per year of direct shipping-grade ore from four dif-

ferent mines in the Surigao Province. The ore is shipped to Japan

and Queensland, Australia, for processing.

Taganito carried out two phases of evaluation and reported

encouraging results. Forty-eight surface laterite and rock samples

were collected from an area of about 300 hectares, within a much

more extensive area of nickel laterite mineralization. Nickel

contents range from very low to a high of 2.09%, with most of the

values exceeding 0.5%. Taganito consider these values to be within

the range that normally cap the secondary nickel enriched zone

and have recommended a detailed geological survey and drilling.

However, the Agata geophysical program also defi ned a number of

large and strong anomalies in proximity to the nickel laterite (see

Agata Compilation map on page 24).

Nickel laterite deposits occur at and near-surface, in highly-weath-

ered ultra-mafi c rocks. In the case of the Agata project, the situa-

tion may occur where a nickel laterite deposit is overlying a gold or

copper–gold deposit at depth below it. If this is the case, Mindoro

will strive to maximize the economic return from the project by de-

veloping and exploiting both deposits. Therefore, discussions with

Taganito on agreement terms and programming will be postponed

pending a thorough evaluation of Agata’s copper-gold potential, at

which time discussions will continue.

MAT-I PROJECTGeology consists of ultramafi cs, sediments and volcanic tuffs in-

truded by intermediate porphyry intrusives. The Mat-I area was an

important artisanal gold mining area and thousands of miners won

gold from alluvials as well as shallow, hard-rock workings. There

are spectacular examples of high-grade epithermal veins. However,

most of the highest potential ground was lost in land disputes to

other parties.

Systematic geochemical surveys by Mindoro defi ned four moder-

ate-order copper in soil anomalies of greater than 100 ppm and up

to 268 ppm. Maximum dimension is approximately 2,000 meters

by 200 to 300 meters. Minor associated gold anomalies are present,

as well as very strong arsenic anomalies of up to 1,520 ppm. The

copper anomalies may refl ect intrusive-related mineralization of

potential interest. Further geological investigations are planned.

NEW SURIGAO ACQUISITIONS A commanding land position in an emerging copper-gold districtThe additional 15,900 hectares of application lands give Mindoro

a commanding land position in the Surigao Gold District. The

acquisitions have not seen any systematic modern exploration and,

once approvals are in place, reconnaissance investigations will com-

mence. The acquisitions are close to many known prospects, such

as the Madja porphyry copper-gold prospect defi ned by Anglo and

being drilled by Red 5 of Australia, which is located within a few

hundred meters and is on trend with Mindoro’s property. The new

acquisitions likely include epithermal gold, porphyry copper-gold,

and nickel laterite prospects.

Top Image: Looking east into the middle of Tapian San Francisco

Bottom Image: Nickel laterite (garnierite) from nickel laterite prospect on Agata property

pro

jects

Mindoro recognizes that

any successful exploration

venture must have the

support of those local

inhabitants whose daily

lives are most affected by

our activities.

Page 27

pro

jects

co

mm

un

ity

SOCIALRESPONSIBILITY

Mindoro recognizes that any successful exploration venture must

have the support of those local inhabitants whose daily lives are

most affected by our activities. Understanding the need for infor-

mation and dialogue, we have taken positive steps to develop strong

relationships with local villages and municipalities. Open and frank

discussion regarding the implications of exploration on their families

and communities is encouraged at the many information meetings

hosted by the Company. Not only do we believe the support of these

people is essential, but their skills and special area knowledge play an

invaluable role in our exploration activities. We are pleased to have

received strong expressions of acceptance and support from these

local communities.

Through modest infrastructure development and community sup-

port, plus training and employment of nationals for its exploration

programs, Mindoro has demonstrated its commitment to directing

benefi ts back into the community and improving local economies.

Assisting local school children with educational expenses and provid-

ing basic medicines and materials to upgrade community buildings

are a few examples of Mindoro’s positive impact in the communities

where we work.

Top Two Images: This High School, built with Mindoro’s fi nancial support, consists of one

permanent and one outdoor temporary structure that accommodates 157 students

Bottom Two Images: MRL Gold Phils. helped fi nance the Nagtalontong Elementary

School Science Park Project, featuring a mini orchidarium, fl ower garden, mini aviary

and fi sh pond

CommunityRelations

Page 27

Page 28

ENVIRONMENTAL RESPONSIBILITY

Regulated standards provide levels of environmental responsibility

which we view as standards not just to meet, but to exceed. Even

though the impact of our current exploration activities is negligible,

we are committed to achieving the highest environmental standards

at all levels of operations. This commitment will come increas-

ingly into focus as our exploration programs advance and poten-

tial impacts become more pronounced. By establishing a strong

environmental consciousness early in its programs, Mindoro will

remain sensitive to the consequences of its activities and dedicated to

achieving results acceptable to the environment, the community and

our shareholders.

CommunityRelations

Left Image: This nursery is one of many Green Projects sponsored by Mindoro;

the hard wood tree seedlings will be used for project rehabilitation

Top Image: Environmentally friendly drilling

Bottom Image: Tree nursery for drill site rehabilitation

Page 29

This Management Discussion and Analysis for the Year End Report of 2004 should be read in conjunction with the Audited Consolidated

Financial Statements for the year ended December 31, 2004.

NATURE OF THE BUSINESS

Mindoro Resources Ltd. (“Mindoro” or “the Company”) is a Canadian-based mineral exploration and development company holding interests

in the Philippines. The primary corporate objective is the acquisition, exploration and, when successful, development and production of gold

and gold-copper properties in the Asia-Pacifi c region. There is no commercial production from any mineral property in which Mindoro has

an interest. There is no established source of revenue and the Company presently operates at a loss. All operations have been funded by equity

subscriptions. Revenue for the current period was derived from interest income. All project expenditures are capitalized in deferred exploration

where, upon development of an operating mine, these expenses can be recovered against income from operations. If the Company chooses to

discontinue exploration activities on a particular property then the to-date expenses are written off against income.

The Company is in the process of exploring its mineral properties and has not yet determined whether the properties contain economically

recoverable reserves. The recovery of expenditures on mineral properties and the related deferred exploration expenditures are dependent upon

the existence of economically recoverable mineralization, the ability of the Company to obtain fi nancing necessary to complete the explora-

tion and the development of the mineral properties, and upon future profi table production or alternatively, on the suffi ciency of proceeds from

disposition.

The following information, prepared as of February 25, 2005, should be read in conjunction with the December 31, 2004 audited consolidated

fi nancial statements, which have been prepared in accordance with Canadian generally accepted accounting principals. All amounts are ex-

pressed in Canadian dollars, unless otherwise indicated.

OVERALL PERFORMANCE

It was a year of change for Mindoro in 2004 as the Company acquired a joint venture partner committed to spending $2 million on the Compa-

ny’s Surigao Projects, over $2.4 million (gross) was raised through private placements and a Short Form Offering for exploration of the Batangas

Projects, the Company’s shares commenced trading on the Frankfurt Stock Exchange, and a marketing fi rm was retained to provide marketing

and investor relations services. These events led to signifi cant progress in the fi eld, as the Company advanced its projects in the Philippines.

The year 2004 started under diffi cult circumstances, as a Philippine court ruling in January 2004 declared parts of the Philippines Mining Act

of 1995 to be unconstitutional, particularly those dealing with 100% foreign ownership. Although the Philippines government immediately

launched an appeal, the international investment community was clearly disappointed in the court’s decision. For the remainder of the year,

Mindoro’s achievements were overshadowed by the political uncertainty. Late in 2004, this shadow was fi nally lifted, with the Supreme Court

overturning the previous court’s decision and at last, with fi nality, removing all legal barriers to 100% foreign ownership. Within days of the

decision, Mindoro was contacted by several large international mining companies interested in acquiring projects in the Philippines.

Despite the political uncertainty for most of the year in the Philippines, we were confi dent these matters would be resolved and we forged ahead,

advancing our projects. Drilling early in the year at SW Breccia, on the Lobo Project, outlined a modest starter gold resource which remains

open to depth. At a later date, Mindoro plans to utilize a larger drill rig to extend the resource. Geophysics at Lobo has outlined two porphyry

copper-gold targets and partially defi ned a third. Drilling is expected to commence at the fi rst porphyry target, located at Pica Prospect, by the

end of April 2005.

A few kilometers away from Lobo, at Mindoro’s Archangel Project, geophysical surveys are continuing to outline further porphyry copper-gold

targets. Work is also underway to establish the open-pit, heap-leach potential of the extensive gold-silver mineralization at the Kay Tanda Pros-

pect. Additional metallurgical testing and resource delineation continue at Kay Tanda as well as other adjacent zones of gold-silver mineraliza-

tion.

Management’s Discussion & analysis

MINDORO RESOURCES LTD.

Management’s Discussion and Analysis

Year ended December 31, 2004

Page 30

A joint venture agreement with Panoro Minerals Ltd. was concluded during 2004 and an aggressive exploration campaign commenced on the

Company’s Surigao Projects in northern Mindanao. An extensive geophysical program has produced an abundance of targets, including four

porphyry copper-gold targets at Tapian San Francisco, three at Agata, and a probable one at Tapian Main. Due diligence by an international

nickel company on Agata’s nickel laterite prospect resulted in a proposal to enter into formal joint venture discussions. However, we plan to fur-

ther investigate the strong copper-gold targets we have identifi ed in close proximity to the nickel laterite prospect before entering into any formal

negotiations.

Despite our accomplishments advancing and adding value to our projects, recognition in the market was hard won in 2004. However, the politi-

cal uncertainty that caused many North American investors to shy away from the Philippines was dramatically reversed with the Supreme Court

decision ratifying the 1995 Mining Act. At an international mining forum hosted by the Philippine government in March 2005, Philippine Presi-

dent Gloria Macapagal-Arroyo welcomed the world to the Philippines, stating that “the Government of the Philippines is committed to building

a world-class minerals industry and to make this sector one of the major growth-drivers for the economy in the years ahead”.

There is downside to the recent boom of exploration activity in the Philippines - that being a growing shortage of skilled labour and equipment.

As a result, increased costs and delays in fi eld programs, particularly geophysics and drilling, are unavoidable. This is, however, a small price to

pay for the tremendous increase in the Philippines’ attractiveness to the world as an exploration locale of choice.

Mindoro’s President, Tony Climie, P.Geol., supervises all Mindoro’s fi eld programs and is a “qualifi ed person” as defi ned by NI43-101.

SELECTED ANNUAL INFORMATION

Year Ended , Year Ended, Year Ended,

December 31, 2004 December 31, 2003 December 31, 2002

Interest income $ 5,537 $ 101 $ 552

Net loss (800,055) (361,609) (241,588)

Loss, per share(1) (0.02) (0.01) (0.01)

Balance, deferred exploration costs 4,202,091 3,111,576 2,423,263

Total assets 5,696,940 3,520,898 2,666,415

Note (1): The number of common shares outstanding during each period for purposes of the loss per share calculation is calculated on the

weighted average of outstanding shares in each period.

RESULTS OF OPERATIONS

Interest income of $5,537 was higher in 2004 than 2003 as the Company’s cash position increased after completing a $2 million dollar fi nancing

in October 2004. Net loss for the year, though, of $800,055 was considerably greater than net loss of $361,609 in 2003. Increased corporate

and exploration activity in the past year resulted in signifi cant increases in administration expenses over 2003. The hiring of a marketing and

investor relations fi rm also contributed to increased expenditures. The following are the more signifi cant increases in expenditures in 2004 com-

pared to 2003: advertising and promotion expenses of $85,339 in 2004, compared to $27,449 in 2003; trade show costs of $28,992 in 2004 com-

pared to $12,387 in 2003; consulting and professional fees of $105,817 in 2004 compared to $54,048 in 2003; printing costs of $18,532 in 2004

compared to $8,947 in 2003; and travel costs of $39,578 in 2004 compared to $8,136 in 2003. Stock based compensation expenses, related to

the issue of stock options, increased to $281,075 from $51,380 in 2003. Salaries in 2004 of $121,289 were higher than 2003 salaries of $87,249

primarily due to the hiring of an additional administrative employee in the corporate offi ce.

Page 31

SUMMARY OF QUARTERLY RESULTS

Net Earnings Earnings Gain

Quarter Ending Gain (Loss) (Loss) Per Share Total Assets

December 31, 2004 $ (72,341) $ (0.002) $ 5,696,940

September 30, 2004 (224,101) (0.007) 3,769,857

June 30, 2004 (85,386) (0.003) 3,564,252

March 31, 2004 (418,227) (0.013) 3,503,666

December 31, 2003 (82,176) (0.003) 3,520,898

September 30, 2003 (57,208) (0.002) 3,271,363

June 30, 2003 (99,089) (0.004) 2,867,034

March 31, 2003 (123,136) (0.005) 2,783,098

LIQUIDITY

The Company continues to rely on raising capital in order to fund its ongoing operations. As of December 31, 2004, Mindoro’s cash position

was $1,295,541 compared to $296,772 as at December 31, 2003; accounts receivable increased slightly to $96,429 from $61,698; cash calls re-

ceivable from our joint venture partner was $48,324 and prepaid expenses decreased slightly to $12,433 from $13,627 at the end of the previous

year. Accounts payable also increased as at December 31, 2004 to $232,469 from $146,023 as at December 31, 2003.

In 2004, $1,123,214 spent on Exploration Activities in the Philippines, less management fee recoveries, related to the Company’s Surigao joint

venture, in the amount of $32,699. The total amount of deferred exploration on existing properties as at December 31, 2004 was $4,202,091.

In January 2004, the Company issued 500,000 Units at $0.30 per unit, for proceeds of $129,604, net of issue costs of $20,396. Each unit con-

sisted of one Common share and one half Common share purchase warrant. Each whole warrant entitled the holder to acquire one Common

share at a price of $0.60 for one year from date of issue. The Company also issued 50,000 agent’s options; each option exercisable into Units

having the same terms as the Units issued.

In August 2004, pursuant to a non-brokered private placement, the Company issued 831,112 Units at a price of $0.225 per Unit, for proceeds

of $185,159, net of issue costs of $1,841. Each unit consisted of one Common share and one Common share purchase warrant. Each warrant

entitles the holder to acquire one Common share at a price of $0.30 for two years from the date of issue.

Pursuant to a Short Form Offering document, in October 2004, the Company issued 8,888,888 Units at a price of $0.225 per unit for gross

proceeds of $2,000,000. Each Unit consisted of 8,888,888 Common shares and 8,888,888 Common share purchase warrants. Each Common

share purchase warrant entitles the holder to purchase one Common share for $0.30 for two years. Cash commissions equal to nine percent of

the gross proceeds of the offering were paid to Northern Securities Inc. An additional 888,888 Agents Warrants were issued with each Agents

Warrant entitling the holder to purchase one Unit at $0.225 per Unit for one year after the issue date. The Company also issued 50,000 Com-

mon shares to Northern Securities and paid $91,440 in additional miscellaneous share issue costs.

Also in October 2004, pursuant to a private placement, the Company issued 1,102,200 Units at a price of $0.225 per Unit for proceeds of

$245,756, net of issue costs of $2,239. Each Unit consists of 1,102,200 Common shares and 1,102,200 Common share purchase warrants.

Each Common share purchase warrant entitles the holder to acquire one Common share at a price of $0.30 for two years from the date of issue.

MINDORO RESOURCES LTD.

Management’s Discussion and Analysis

Year ended December 31, 2004

Page 32

CAPITAL RESOURCES

Pursuant to a Memorandum of Agreement (“MOA”) effective January 19, 1997 with Minimax Mineral Exploration Corporation, the Company

was granted the option to earn up to a 75% interest in fi ve mineral properties located in the Philippines. Under the terms of the MOA, the

Company may earn interests of 10%, 30% and 35% in each of the properties by completing phases one, two and three, respectively, as follows:

(i) Phase one - incurring an aggregate of 20,000,000 Philippine Pesos (“PP”) in eligible mining expenditures allocated to the properties as

defi ned in the MOA.

(ii) Phase two - incurring an aggregate of 75,000,000 PP in eligible mining expenditures allocated to the properties as defi ned in the MOA.

(iii) Phase three - incurring an aggregate of 75,000,000 PP in eligible mining expenditures allocated to the properties as defi ned in the MOA.

Once a phase expenditure requirement has been met on a property, the Company has the option to enter into the next phase of the project by is-

suing 50,000 and 100,000 Common shares to Minimax for each phase two and phase three entered into, respectively. As at December 31, 2004,

the Company had met phase one expenditure requirements on all properties under this agreement, with the exception of Lahuy, and phase two

expenditure requirements on the Agata, Tapian and Pan de Azucar properties by incurring the required minimum eligible expenditures.

Pursuant to a Letter Agreement (the “Letter Agreement”) dated October 23, 2000 with Egerton Gold Phils., Inc. (“Egerton”), the Company was

granted the option to earn up to 75% interest in two mineral properties located in the Philippines. The Company may earn interests of 51%

and 24% in each mineral property by completing phases one and two, respectively, as follows:

(i) Phase one - incurring an aggregate of $1,500,000 US in eligible mining expenditures on the mineral properties by January 21, 2006.

(ii) Phase two - completing a feasibility study and obtaining the necessary fi nancing to commence commercial drilling and production on the

mineral properties.

Pursuant to the terms of the Letter Agreement, the Company issued 500,000 Common shares to Egerton upon receipt of the related explora-

tion permits in 2003. Once the phase one expenditure requirement has been met on the properties, the Company has the option to enter into

phase two by issuing an additional 500,000 Common shares to Egerton. Upon completion of phase two, the Company must issue an additional

500,000 Common shares to Egerton. At this point, Egerton will have the option to participate at 25 % interest at production or convert to a 2%

gross smelter royalty. Pursuant to the terms of each MPSA, the Company is required to spend certain minimum amounts on eligible expendi-

tures; these minimum requirements have been met as at December 31, 2004.

Pursuant to a Memorandum of Agreement dated August 23, 2004, Egerton further granted the Company the right to earn up to a 75% interest

in approximately 12,200 hectares, referred to at the Batangas Acquistions, contiguous to the Lobo and Archangel Projects. As consideration

for including the Batangas Acquisitions within the terms of the Letter Agreement, the Company has agreed to issue 500,000 common shares

to Egerton for each mineral deposit located within the Batangas Acquisitions for which a positive feasibility study is achieved, to a maximum of

1,500,000 shares.

The Company has entered into an Option Agreement with Panoro Minerals Ltd. (“Panoro”), on the Agata, Tapian and Mat-I properties

whereby Panoro may earn a 40% interest in these properties by spending $2,000,000 on the properties over a four-year period ($350,000 in year

one; $450,000 in year two; and $600,000 in each of years three and four). Mindoro will be the operator for at least the fi rst two years. Both

Mindoro and Panoro may increase their interest to 42.5% at feasibility stage through an interest purchase agreement with Minimax based on

future established mining reserves. Mindoro could ultimately hold 42.5%, Panoro 42.5% and Minimax 15%.

Pursuant to an agreement dated October 28, 2002 with East West Drilling Limited (“EWDL”), the Company issued two tranches of 600,000

Common shares as consideration for EWDL providing $90,000 worth of drilling services in 2003 and another $90,000 worth of drilling services

again in 2004.

Page 33

The following table summarizes the status of Mindoro’s earn-in on each of its Projects, as of December 31, 2004:

Project Interest Current Expenditure Expenditure

Available Interest (1) Required Deadline Funding By

SURIGAO PROJECTS

Agata 75% 40% held Pp3,058,874 November 2005 Panoro (2)

Earning 35% in Phase III

Agata – new acquisitions 75% 75% held N/A N/A N/A

Tapian 75% 40% held Pp5,159,975 December 2006 Panoro (2)

Earning 35% in Phase III

Tapian – new acquisitions 75% 75% held N/A N/A N/A

Mat-I 75% 10% held Pp13,821,743 1 yr upon receipt Panoro (2)

Earning 30% in Phase II of necessary gov’t

approvals (pending)

BATANGAS PROJECTS

Lobo Archangel 75% Earning 51% in US$306,016 January 2006 Mindoro

Bantangas – new Phase I

acquistions

OTHER PROJECTS

Pan de Azucar 75% 40% Pp10,948,941 January 2004 Mindoro

Earning 35% in Phase III Negotiating extension

(1) Under the MOA with Minimax and Letter Agreement with Egerton (alone or collectively the “Philippine Joint Venture Partner(s)”), for each

project in which Mindoro earns an interest, Mindoro is required to establish a Philippine joint venture company which will hold the interests

of both Mindoro and the Philippine Joint Venture Partner in the applicable project. Mindoro is in the process of establishing a joint venture

company for its Surigao Projects and will establish a joint venture company for its Batangas projects upon reaching its Phase I earn-in thresh-

old. Establishing a joint venture company to hold the Pan de Azucar interest is postponed pending successful negotiations of an extension to

Mindoro’s Phase III earn-in period.

(2) Panoro Minerals Ltd. to fund a total of CDN$2 million in exploration expenditures on the Agata, Tapian and Mat-I projects in order to earn

a 40% interest in each of the projects from Mindoro. Upon reaching the CDN$2 million earn in threshold, both Mindoro and Panoro will fund

any remaining expenditure requirements pro-rata. Both Mindoro and Panoro may increase their interest to 42.5% at feasibility stage through an

interest purchase agreement with Minimax based on future established mining reserves.

TRANSACTIONS WITH RELATED PARTIES

(a) Accounts receivable and advances includes $34,797 due from an offi cer and director of the Company.

(b) Mineral properties and deferred costs includes $296,320 for drilling services to a corporation during the time period in which an

individual who controlled the corporation was a director of the company. Of these amounts, $90,000 was paid through the issuance

of shares and $56,991 is included in accounts payable and accrued liabilities at December 31, 2004. As well, mineral properties and

deferred costs includes $3,829 paid to a director of the Company.

MINDORO RESOURCES LTD.

Management’s Discussion and Analysis

Year ended December 31, 2004

Page 34

(c) Of the 1,580,000 stock options granted during 2004, 100,000 were granted to a fi rm during the time period in which a principal of

this fi rm was a director of the Company.

(d) Consulting and professional fees expenses includes $9,712 paid to a director of the Company, and $29,000 paid for investor rela-

tions services to a fi rm during the time period in which a principal of this fi rm was a director of the Company. Advertising and

promotion expense includes $17,055 paid to this investor relations fi rm.

These transactions are in the normal course of operations and are measured at the exchange amount which is the amount of consideration

established and agreed to by the related parties.

CAPITAL STRUCTURE

Authorized:

Unlimited number of Common shares

Unlimited number of Preferred shares

Issued - Common shares Number

Balance, December 31, 2003 31,356,757

Pursuant to private placements 2,433,312

Pursuant to Short Form Offering 8,938,888

For mineral properties 600,000

On exercise of purchase warrants 50,000

On exercise of agent’s warrants 202,910

On exercise of stock options 530,000

Issuable for mineral properties 90,000

Balance, December 31, 2004 44,201,867

Common share purchase warrants

Balance, December 31, 2003 1,631,083

Issued with private placements 2,233,312

Issued with Short Form Offering 9,777,776

Warrants exercised (252,910)

Warrants expired (320,900)

Balance, December 31, 2004 13,068,361

Stock options

Balance, December 31, 2003 2,046,000

Issued to directors, offi cers and employee 1,230,000

Issued to consultants 350,000

Exercised (530,000)

Expired (266,000)

Balance, December 31, 2004 2,830,000

Included in the common shares issued as of December 31, 2003, were obligations to issue 1,000,000 common shares with a stated valued of

$198,000. These shares were subsequently issued in the second quarter of 2004, but no additional entry in 2004 was necessary. To follow is a

summary of the share obligations recorded as at December 31, 2003, and issued in 2004:

(i) 600,000 shares issued to East West Drilling (L) Limited on March 1, 2004, as consideration for drilling services during 2003.

Page 35

(ii) 100,000 shares issued to Minimax Mineral Exploration Corp. on March 5, 2004, as consideration for granting an extension to the earn-in

periods on the Agata, Tapian and Mat-I Projects.

(iii) 100,000 shares issued to Minimax on April 27, 2004, pursuant to the Company’s election to enter the next phase of exploration on the

Pan de Azucar Project.

(iv) 200,000 shares issued to Minimax as consideration for granting an option to earn additional interest in the Agata, Tapian, and Mat-I Proj-

ects.

Included in the common shares issued as of December 31, 2004, was an obligation to issue (1) 50,000 common shares to Minimax Mineral

Exploration Corp. with a stated value of $13,750, pursuant to the Company’s election to enter into the next phase of exploration on the Tapian

Project; and (2) 40,000 shares, with a stated value of $10,800, issuable to a property vendor pursuant to an Agreement to Explore, Develop, and

Operate Mineral Property, entered into by the company on December 8, 2004.

The following table summarizes information about Common share purchase warrants outstanding and exercisable as at December 31, 2004:

Number of Warrants Exercise Price Expiry Date

250,000 $ 0.60 January 2005

500,000 0.50 March 2005

557,273 1.00 August 2005

50,000 0.30 January 2006

831,112 0.30 August 2006

8,888,888 0.30 October 2006

888,888 0.23 October 2006

1,102,200 0.50 October 2006

13,068,361

The following table summarizes information about stock options outstanding and exercisable at December 31, 2004:

Weighted Weighted

Average Average

Range of Remaining Remaining

Exercise Number Contractual Number Contractual

Prices Outstanding Life Exercisable Life

$ 0.10 - 0.13 925,000 2.16 years 925,000 2.16 years

0.15 395,000 3.18 395,000 3.18

0.23 630,000 3.20 517,500 3.52

0.32 - 0.36 880,000 7.31 880,000 7.31

2,830,000 4.14 years 2,717,500 4.24 years

FORWARD LOOKING STATEMENTS

Some of the statements contained in this report are forward-looking statements, such as estimates that describe the Company’s future plans,

objectives or goals. This includes words to the effect that the Company or management expects a stated condition or result to occur. Since

forward-looking statements address future events or conditions, by their very nature they involve inherent risks and uncertainties. Actual results

in each case could differ materially from those currently anticipated in such statements.

Additional information relevant to the Company’s activities is available on SEDAR at www.sedar.com.

MINDORO RESOURCES LTD.

Management’s Discussion and Analysis

Year ended December 31, 2004

Page 36

Auditors’ Report

To the Shareholders

Mindoro Resources Ltd.

We have audited the consolidated balance sheets of Mindoro Resources Ltd. as at December 31, 2004 and 2003 and the consolidated statements

of loss and defi cit and cash fl ows for the years then ended. These fi nancial statements are the responsibility of the company’s management. Our

responsibility is to express an opinion on these fi nancial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and

perform an audit to obtain reasonable assurance whether the fi nancial statements are free of material misstatement. An audit includes examin-

ing, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting

principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation.

In our opinion, these consolidated fi nancial statements present fairly, in all material respects, the fi nancial position of the company as at De-

cember 31, 2004 and 2003 and the results of its operations and its cash fl ows for the years then ended in accordance with Canadian generally

accepted accounting principles.

CHARTERED ACCOUNTANTS

Calgary, Alberta

February 25, 2005, except as to note 12

which is as of April 19, 2005

Page 37

MINDORO RESOURCES LTD.CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2004 AND 2003

2004 2003

(restated-note 2[f])

Assets

Current assets

Cash $ 1,295,541 $ 296,772

Accounts receivable and advances 96,429 61,698

Prepaid expenses and deposits 12,433 13,627

Cash call receivable 48,324 -

1,452,727 372,097

Royalty deposits (note 3) 28,396 25,110

Mineral properties and deferred costs (note 4) 4,202,091 3,111,576

Property and equipment (note 5) 13,726 12,115

$ 5,696,940 $ 3,520,898

Liabilities

Current liabilities

Accounts payable and accrued liabilities $ 232,469 $ 146,023

Shareholders’ Equity

Share capital (note 6) 11,627,155 9,292,564

Contributed surplus (note 7) 886,771 331,711

Defi cit (7,049,455) (6,249,400)

5,464,471 3,374,875

$ 5,696,940 $ 3,520,898

Approved by the Board,

(Signed) “Gerhard Kirchner”, Director (Signed) “Peter Draper”, Director

Page 38

MINDORO RESOURCES LTD.CONSOLIDATED STATEMENT OF LOSS AND DEFICITYEARS ENDED DECEMBER 31, 2004 AND 2003

2004 2003

(restated-note 2[f])

Revenue

Interest $ 5,537 $ 101

Expenses

Administration 2,372 2,011

Advertising and promotion 85,339 27,449

Communications 6,528 5,678

Conferences and trade shows 28,992 12,387

Consulting and professional fees 105,817 54,048

Listing fees and shareholder communications 26,651 17,527

Offi ce 28,101 24,502

Printing 18,532 8,947

Rent 11,218 10,068

Salaries and benefi ts 121,289 87,249

Stock-based compensation 281,075 51,380

Travel 39,578 8,136

Amortization 2,845 13,601

758,337 322,983

Loss before the following (752,800) (322,882)

Foreign exchange loss (47,255) (38,727)

Net loss (800,055) (361,609)

Defi cit, beginning of year

As previously reported (6,128,365) (5,818,136)

Change in accounting policy (note 2[f]) (121,035) (69,655)

As restated (6,249,400) (5,887,791)

Defi cit, end of year $ (7,049,455) $ (6,249,400)

Net loss per share (note 6[e]) - basic and diluted $ (0.02) $ (0.01)

Page 39

MINDORO RESOURCES LTD.CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2004 AND 2003

2004 2003

(restated-note 2[f])

Operating activities

Net loss $ (800,055) $ (361,609)

Items not affecting cash

Stock-based compensation 281,075 51,380

Amortization 2,845 13,601

Unrealized foreign exchange loss 23,144 38,727

(492,991) (257,901)

Changes in non-cash working capital (114,435) 62,328

Decrease (increase) in royalty deposits (3,286) 2,976

(610,712) (192,597)

Financing activity

Issuance of share capital, net of issuance costs 2,395,626 748,087

Investing activities

Expenditures on mineral properties and deferred costs (900,709) (410,875)

Acquisition of property and equipment (4,456) (6,144)

Changes in non-cash working capital 119,020 -

(786,145) (417,019)

Cash infl ow 998,769 138,471

Cash, beginning of year 296,772 158,301

Cash, end of year $ 1,295,541 $ 296,772

Supplemental cash fl ows information (note 9)

Page 40

1. NATURE OF OPERATIONS AND GOING CONCERN

Mindoro Resources Ltd.’s (the “company” or “Mindoro”) principal activity is the acquisition, exploration and development of mineral properties

in the Philippines and Laos. To date, no mineral development projects have been completed and commercial production has not commenced.

These consolidated fi nancial statements have been prepared in accordance with Canadian generally accepted accounting principles, an underly-

ing assumption being that the company will be able to realize its assets and discharge its liabilities in the normal course of operations.

The continued existence of the company is dependent upon its ability to obtain additional sources of fi nancing or negotiate appropriate farm-in

arrangements, to fund current and future exploration and administrative expenditures, to meet obligations to preserve its interests in existing

mineral properties and to achieve commercial production and positive cash fl ows from operations. Failure to obtain suffi cient fi nancing or other

appropriate arrangements would have an adverse effect on the fi nancial position of the company and its ability to continue as a going concern.

Since the company operates internationally, exposure also arises from fl uctuations in currency exchange rates, political risk and varying levels of

taxation. While the company seeks to manage these risks, many of these factors are beyond its control.

If the going concern assumption was not appropriate to these consolidated fi nancial statements, then adjustments would be necessary to the car-

rying value of assets and liabilities and reported revenues and expenses.

2. SIGNIFICANT ACCOUNTING POLICIES

(A) PRINCIPLES OF CONSOLIDATION

The consolidated fi nancial statements include the accounts of the company and its wholly-owned subsidiary, MRL Gold Phils., Inc.

(B) MINERAL PROPERTIES AND DEFERRED COSTS

Mineral property costs are comprised of initial property acquisition costs and related property option payments. All costs related to the

exploration and development of mineral properties are deferred on a property by property basis until commencement of commercial

production or a write-down is considered necessary. The recoverability of the amounts recorded for mineral properties and deferred costs

is dependent on the existence of economically recoverable reserves and future profi table production from the mineral properties.

Incidental revenue derived from management fees from third parties are recorded fi rst as a reduction of the specifi c mineral property

and deferred costs to which the fees relate, and any excess as a reduction to expenses in the consolidated fi nancial statements of loss and

defi cit.

When properties are brought into commercial production, mineral properties and deferred costs related to a specifi c mine site will be

amortized on a unit-of-production basis over economically recoverable reserves.

Mineral properties and deferred costs are written down when properties are abandoned or when cost exceeds net realizable value.

No provision for depletion of the amounts carried as mineral properties and deferred costs is included in the consolidated fi nancial state-

ments, as the properties are yet to reach commercial production.

(C) PROPERTY AND EQUIPMENT

Property and equipment are amortized using the declining balance method at annual rates of 20% to 30% per annum.

(D) ASSET RETIREMENT OBLIGATIONS

Effective January 1, 2004, the company adopted retroactively the recommendations of the Canadian Institute of Chartered Accountants’

(“CICA”) Handbook Section 3110 “Asset Retirement Obligations”. Under the new accounting policy, the company recognizes asset

retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be determined. The liability is

measured at fair value and is adjusted to its present value in the periods to settlement as accretion expense. The associated asset retire-

ment costs are capitalized as part of mineral properties and deferred costs.

Page 41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMEBER 31, 2004 AND 2003

The company has not yet incurred any signifi cant asset retirement obligations and, as such, this change in accounting policy did not affect

the consolidated fi nancial statements.

(E) INCOME TAXES

Income taxes are accounted for using the liability method of income tax allocation. Under the liability method, income tax assets and li-

abilities are recorded to recognize future income tax infl ows and outfl ows arising from the settlement or recovery of assets and liabilities at

their carrying values. Income tax assets are also recognized for the benefi ts from tax losses and deductions that cannot be identifi ed with

particular assets or liabilities, provided those benefi ts are more likely than not to be realized. Future income tax assets and liabilities are

determined based on the tax laws and rates that are anticipated to apply in the period of realization.

(F) STOCK-BASED COMPENSATION

The company has a stock option plan as described in note 6[d].

Effective January 1, 2004, the company adopted retroactively with restatement the recommendations of the CICA Handbook Section

3870 “Stock-based Compensation and Other Stock-based Payments”. The recommendations apply to all stock-based compensation

granted on or after January 1, 2002. Stock-based compensation granted to employees, directors, offi cers and non-employees on or after

January 1, 2002 is accounted for using the fair value method. Compensation expense is amortized over the vesting period of the options,

with a corresponding increase in contributed surplus. Any consideration paid on the exercise of stock options will be credited to share

capital. Contributed surplus recognized as a result of granting options will be credited to share capital when the options are exercised.

Prior to January 1, 2004, the company used the intrinsic value method of accounting for stock-based compensation granted to employees,

directors and offi cers.

The effect of this change in accounting policy on the consolidated fi nancial statements is as follows:

Consolidated Balance Sheets

December 31,

2004 2003

Increase in mineral properties and deferred exploration costs $ 161,565 $ 63,165

Increase in share capital 42,271 -

Increase in contributed surplus 521,404 184,200

Increase in defi cit 402,110 121,035

Consolidated Statements of Loss and Defi cit

Years Ended December 31,

2004 2003

Stock-based compensation expense, being increase in net loss $ 281,075 $ 51,380

Increase in opening defi cit 121,035 69,655

Increase in net loss per share - basic and diluted 0.01 -

(G) FOREIGN CURRENCY TRANSLATION

The company follows the temporal method when translating foreign currency transactions and the fi nancial statements of its integrated

subsidiary.

Under this method, foreign currency denominated assets and liabilities are translated at the exchange rate prevailing at the balance sheet

date for monetary items and at the transaction date for non-monetary items. Revenues and expenses are translated at average exchange

Page 42

rates for the year. Exchange gains or losses on translation of current and non-current monetary items are included in the determination

of net loss.

(H) DILUTED LOSS PER SHARE

Diluted loss per share is calculated using the treasury stock method, whereby it is assumed that proceeds from the exercise of in-the-

money stock options and warrants are used by the company to repurchase company shares at the weighted average market price during

the period.

(I) MEASUREMENT UNCERTAINTY

The valuation of mineral properties and deferred costs are based on management’s best estimate of the future recoverability of these

assets. The amounts computed with respect to stock-based compensation are based on estimates of the expected lives of the options and

warrants, expected dividends, and other relevant assumptions.

By their nature, these estimates are subject to measurement uncertainty and the effect on the consolidated fi nancial statements of changes

in such estimates in future periods could be signifi cant.

3. ROYALTY DEPOSITS

The company has arrangements with various Philippine landowners to conduct exploration and development activities for several mineral proj-

ects (note 4). Under these arrangements, the company has advanced royalty deposits to these landowners which will be applied against royalties

payable on future production, if any, from the related properties. If the company abandons a mineral project, the related royalty deposit will be

charged against income.

4. MINERAL PROPERTIES AND DEFERRED COSTS

Balance, Balance, Management Balance, December 31, 2002 December 31, 2003 Fee December 31, (restated-note 2[f]) Expenditures (restated-note 2[f]) Expenditures Recovery 2004

Agata* (s) (b) $ 1,086,432 $ 47,401 $ 1,133,833 $ 21,140 $ (21,254) $ 1,133,719

Tapian* (s) (b) 517,861 45,038 562,899 97,094 (11,445) 648,548

Lahuy* 103,361 - 103,361 - - 103,361

Mat-I* (s) - 27,000 27,000 15,017 - 42,017

Pan de Azucar* 624,932 40,522 665,454 22,345 - 687,799

Lobo** 83,525 412,583 496,108 731,483 - 1,227,591

Archangel** 43,298 79,623 122,921 195,004 - 317,925

Batangas** - - - 16,374 - 16,374

Laos - - - 24,757 - 24,757

$ 2,459,409 $ 652,167 $ 3,111,576 $ 1,123,214 $ (32,699) $ 4,202,091

* Governed by a Memorandum of Agreement (note 4[a])

** Governed by a Letter Agreement (note 4[d])

(s) Governed by the Surigao Option Agreement (note 4[b])

(b) Governed by the Bautista Agreements (note 4[c])

During the year ended December 31, 2004, the company capitalized $93,293 (2003 – $92,500) in salaries and benefi ts expenses.

Page 43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMEBER 31, 2004 AND 2003

Some of the following commitments are denominated in Philippine Pesos (“PP”). At December 31, 2004, 46.838 PP = $1CDN.

(a) Pursuant to a Memorandum of Agreement (“MOA”) dated January 19, 1997 with Minimax Mineral Exploration Corporation (“Mini-

max”), the company was granted the right to earn options to earn up to a 75% working interest in fi ve mineral properties: Agata, Tapian,

Pan de Azucar, Mat-I and Lahuy, located in the Philippines. Under the terms of the MOA, the company may earn working interests of 10%,

30% and 35% in each of the properties by completing phases one, two and three, respectively, as follows:

(i) Phase one – incurring an aggregate of 20,000,000 PP in eligible mining expenditures allocated to the properties as defi ned in the

MOA;

(ii) Phase two – incurring an aggregate of 75,000,000 PP in eligible mining expenditures allocated to the properties as defi ned in the

MOA; and

(iii) Phase three – incurring an aggregate of 75,000,000 PP in eligible mining expenditures allocated to the properties as defi ned in the

MOA.

Once a phase expenditure requirement has been met on a property, the company has the option to enter the next phase of the project by issu-

ing 50,000 and 100,000 Common shares to Minimax for each of phase two and phase three of the property entered into, respectively.

As at December 31, 2004, the company has met phase one expenditure requirements on all properties under this agreement, with the

exception of Lahuy, and phase two expenditure requirements on the Agata, Tapian and Pan de Azucar properties by incurring the required

minimum eligible expenditures. In accordance with the MOA, 700,000 Common shares of the company have been issued to Minimax to

December 31, 2004. An additional 100,000 Common shares were committed to be issued in 2004 as the company elected to enter into phase

three on the Tapian property. These shares were not issued to December 31, 2004 and are recorded as Common shares issuable at December

31, 2004 at fair value, on the date the company exercised the option, of $27,500 less the Common shares deliverable by Panoro Minerals Ltd.

(“Panoro”) (note 4[b]) at fair value of $13,750, for a net obligation of $13,750.

The company must incur expenditures in relation to each phase within time periods specifi ed in the MOA as summarized below:

(i) Agata – The company is in Phase three of this project and must incur 15,000,000 PP in eligible mining expenditures before Novem-

ber 1, 2005.

(ii) Tapian – The company is in Phase three of this project and must incur 15,000,000 PP in eligible mining expenditures before Decem-

ber 20, 2006.

(iii) Pan de Azucar – The company is in Phase three of this project and was to have incurred 15,000,000 PP in eligible mining expendi-

tures by January 4, 2004. Although the company did not meet these requirements, the company is currently negotiating an extension to

this deadline through extending the exploration period in the exploration permit.

(iv) Mat-I – The company is in Phase two of this project and must incur 15,000,000 PP in eligible mining expenditures to earn a 40%

interest. These expenditures must be made within a two year period from the approval and execution of the Mineral Production Sharing

Agreement (“MPSA”) on this project. The MPSA on this project was fi led in 1997 and has not yet been approved.

(v) Lahuy – The company is in Phase one of this project and must incur 5,000,000 PP in eligible mining expenditures. There is currently

more than one party claiming title to the mining claims over this property, and as such, the company has not been able to obtain a MPSA

or an exploration permit. The company is of the opinion they will be able to successfully resolve this dispute.

Pursuant to an agreement dated November 4, 2003, the company was granted an option to earn to an additional 10% working interest in

each of the Agata, Tapian and Mat-I properties from Minimax. The company may exercise its option on each property by making a pay-

ment to Minimax equivalent to 0.5% of the gross value of each mining reserve with a minimum of $5,000,000 US per mining reserve. The

agreement also requires the company to issue 200,000 Common shares to Minimax as additional consideration for granting the option. The

shares, having a fair value of $54,000, were recorded as issuable at December 31, 2003 and were issued during 2004.

(b) Pursuant to the Surigao Option Agreement (“SOA”) effective June 21, 2004, Panoro was granted an option to acquire a 40% working

interest in each of the Agata, Tapian and Mat-I properties and any extensions on those properties. In order to earn the working interests in

Page 44

the properties, Panoro is to make expenditures totaling $2,000,000 over a four year period as follows (the “Surigao Option Period”):

(i) $350,000 on or before June 21, 2005;

(ii) $450,000 on or before June 21, 2006; and

(iii) $600,000 in each of the years ending June 21, 2007 and 2008.

Panoro was granted an additional interest option to earn 2.5% of the additional 10% working interest in each of the Agata, Tapian and Mat-

I properties as described in note 4[a] by reimbursing the company 25% of the costs incurred by the company under the additional interest

option at the time the option is exercised. As consideration for the granting of the additional interest option, Panoro is obligated to deliver

to the company 50,000 Common shares of the company. These shares have not been received by the company to December 31, 2004. The

expected receipt of these 50,000 company shares by the company has been netted against the obligation to issue 100,000 company shares to

Minimax upon entering Phase three of the Tapian project as described in note 4[a]. Thus, 50,000 net shares have been recorded as Common

shares issuable at December 31, 2004 at net fair value of the shares on the date of the transactions of $13,750.

If the phase expenditures on the properties described in note 4[a] are not met, the properties become excluded from the SOA.

Effective June 8, 2004, Panoro and Mindoro became related companies due to a common director.

(c) Under the terms of the MOA and the SOA and as confi rmed in a Confi rmation Agreement between the company, Minimax and Panoro,

the parties established an Area of Mutual Interest surrounding the Agata, Tapian and Mat-I properties. During 2004, the company entered

into two agreements to acquire mineral tenements over properties that are within the Area of Mutual Interest to the Surigao properties.

On October 26, 2004, the company entered into an Agreement to Explore, Develop and Operate Mineral Property (“the Bautista-Agata

Agreement”) and acquired mineral exploration, development and production rights. On signing this agreement, the company paid a signing

bonus of 500,000 PP to the vendor. The company has the following additional obligations:

(i) Issue 100,000 Common shares to the vendor upon the approval of an exploration permit over the property;

(ii) Commence payment to the vendor of quarterly royalty advances of 50,000 PP per quarter three months following the approval of an

exploration permit over the property;

(iii) Issue 250,000 Common shares to the vendor one year following the approval of an exploration permit over the property; and

(iv) Issue 500,000 Common shares to the vendor upon decision to commence commercial production from the property.

The vendor is entitled to a 1.5% Net Smelter Royalty on commercial production from the property. Pursuant to the terms of the Confi rma-

tion Agreement, Panoro elected to include this additional property as part of the Agata project. As such, as part of the SOA, Panoro is to

reimburse the company costs of acquiring the property, and will incur all further obligations under the Bautista-Agata Agreement until the

Surigao Option Period expires, or the Agata property becomes an excluded property. The costs reimbursable by Panoro have been included

in cash call receivable at December 31, 2004.

On December 8, 2004, the company entered into an Agreement to Explore, Develop and Operate Mineral Property (“the Bautista-Tapian

Agreement”) and acquired mineral exploration, development and production rights. On signing the agreement, the company paid a signing

bonus of 1,500,000 PP to the vendor. The company is also obligated to issue to the vendor 40,000 Common shares of the company and

40,000 Common shares of Panoro on signing of the agreement. These 40,000 company shares have not yet been issued to December 31,

2004 and are recorded as Common shares issuable (note 6[b]) at December 31, 2004 at fair value on the date of signing of $10,800. The fair

value of the Panoro Common shares on the date of signing of $6,800 is included in accounts payable and accrued liabilities at December 31,

2004. The company has the following additional obligations under the terms of this agreement:

(i) Commence payment to the vendor of quarterly royalty advances of 150,000 PP per quarter on June 8, 2005;

(ii) Issue 50,000 company Common shares and 50,000 Common shares of Panoro to the vendor on December 8, 2005;

(iii) Issue 250,000 company Common shares and 250,000 Panoro Common shares to the vendor at feasibility study stage on the

property; and

Page 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMEBER 31, 2004 AND 2003

(iv) Issue 250,000 company Common shares and 250,000 Panoro Common shares to the vendor upon decision to commence commer-

cial production on the property.

The vendor is entitled to a 1.5% Net Smelter Royalty on commercial production from the property. Subsequent to December 31, 2004,

pursuant to the terms of the Confi rmation Agreement, Panoro elected to include this additional property as part of the Tapian project. As

such, it will now be part of the SOA and Panoro will reimburse the company for the costs of acquiring the property, and will incur all further

obligations under the Bautista-Tapian Agreement until either the Surigao Option Period expires, or the Tapian property becomes an excluded

property.

(d) Pursuant to a Letter Agreement (the “Agreement”) dated October 23, 2000 with Egerton Gold Philippines, Inc. (“Egerton”), the company

was granted the option to earn up to a 75% interest in the Lobo and Archangel mineral properties in the Philippines. The company may

earn interests of 51% and 24% in these mineral properties by completing phases one and two, respectively, as follows:

(i) Phase one – incurring an aggregate of $1,500,000 US in eligible mining expenditures by January 21, 2006; and

(ii) Phase two – completing a feasibility study and obtaining the necessary fi nancing to commence commercial drilling and production on

either of these mineral properties.

Pursuant to the Agreement, the company issued 500,000 Common shares to Egerton at a fair value of $55,000 upon receipt of the related

MPSAs on the properties during 2003.

Once the phase one expenditure requirement has been met on these properties, the company has the option to enter into phase two by issuing

an additional 500,000 Common shares to Egerton.

Upon completion of phase two, the company must issue an additional 500,000 Common shares to Egerton. At that point, Egerton will have

the option to participate at 25% interest at production, or convert to a 2% gross smelter royalty.

Pursuant to the terms of each MPSA, the company is required to spend certain minimum amounts on eligible expenditures to maintain the

MPSA in good standing. These minimum requirements have been met as at December 31, 2004.

During 2004, the company entered into an Addendum to Agreement, whereby the area covered by the Agreement was extended to include

certain mineral tenements surrounding the Lobo and Archangel properties (the “Batangas properties”). Egerton has acquired and made ap-

plications to acquire the Batangas properties. For each mineral deposit located within the Batangas properties for which a positive feasibility

study is achieved and necessary fi nancing to commence commercial drilling and production is obtained, the company must issue 500,000

Common shares to Egerton, to a maximum of 1,500,000 Common shares or three mineral deposits on the Batangas properties.

Effective June 8, 2004, Egerton and Mindoro became related companies because a director of Mindoro has signifi cant infl uence over Egerton.

(e) Pursuant to an agreement dated October 28, 2002 with East West Drilling Limited (“EWDL”), the company issued 600,000 Common

shares as consideration for EWDL providing $90,000 of drilling services on the mining projects described in note 4(d) in each of 2003 and

2004.

Page 46

5. PROPERTY AND EQUIPMENT

2004 2003

Accumulated Net Book Accumulated Net Book

Cost Amortization Value Cost Amortization Value

Computer hardware $ 50,181 $ 44,844 $ 5,337 $ 47,806 $ 43,036 $ 4,770

Computer software 42,547 39,205 3,342 40,445 38,222 2,223

Offi ce furniture and equipment 29,724 24,677 5,047 29,724 24,602 5,122

Leasehold improvements 16,517 16,517 - 16,517 16,517 -

$ 138,969 $ 125,243 $ 13,726 $ 134,492 $ 122,377 $ 12,115

6. SHARE CAPITAL

(a) Authorized

Unlimited number of Common shares

Unlimited number of Preferred shares

(b) Issued – Common shares

Stated

Number Value

Balance, December 31, 2002 24,503,429 $ 8,219,877

For mineral properties (note 4[a] and [d]) 900,000 162,682

For drilling services rendered (note 4[e]) 600,000 90,000

For services rendered (note 6[b][i]) 334,648 65,954

Private Placement (note 6[b][ii]) 1,100,000 163,575

Exercise of warrants (note 6[c][i]) 3,780,680 567,661

Exercise of stock options (note 6[d][i]) 138,000 22,815

Balance, December 31, 2003 31,356,757 9,292,564

For drilling services rendered (note 4[e]) 600,000 90,000

Private Placements (note 6[b][iii]) 2,433,312 547,374

Short Form Offering (note 6[b][iv]) 8,938,888 1,506,337

Exercise of warrants (note 6[c][i]) 252,910 54,831

Exercise of stock options (note 6[d][i]) 530,000 111,499

Balance, December 31, 2004 44,111,867 11,602,605

Common shares issuable (note 4[a] and [c]) 90,000 24,550

$ 11,627,155

(i) During 2003, the company issued 61,922 Common shares to settle a consulting fee payable to a director in the amount of $6,811. The

transaction was recorded at the exchange amount based on the market price of $0.11 per share when the payable was settled.

During 2003, the company issued 272,726 Common shares to settle salaries payable to certain offi cers in the amount of $95,000. The trans-

action was recorded at the exchange amount of $60,000 based on the market price of $0.22 per share when the payable was settled. The

Page 47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMEBER 31, 2004 AND 2003

offi cers waived the remaining $35,000 payable and as such, this amount was included in contributed surplus.

The above issuances were recorded net of issue costs of $857.

(ii) During 2003, the company issued 1,100,000 Units at $0.15 per Unit for proceeds of $163,575, net of issue costs of $1,425. Each Unit

consisted of one Common share and one-half Common share purchase warrant. Each whole Common share purchase warrant entitles the

holder to acquire one Common share at $0.30 per share until March 27, 2004, and thereafter at $0.50 per share until March 27, 2005.

(iii) On January 16, 2004, the company issued 500,000 Units at $0.30 per Unit for proceeds of $129,604, net of cash issue costs of $20,396.

Each Unit consisted of one Common share and one-half Common share purchase warrant. Each whole Common share purchase warrant

entitles the holder to acquire one Common share at $0.60 per share until January 16, 2005. The company issued 50,000 agent’s warrants

pursuant to this private placement exercisable into one Unit of the company at $0.30 per Unit until January 16, 2006, each Unit having the

same terms as above. The fair value of the agent’s warrants was estimated to be $13,145 using the Black-Scholes option pricing model with

the following assumptions: expected life of 2 years, expected volatility of 123%, risk-free interest rate of 2.84% and a 0% dividend yield. This

was recorded as a share issue cost with a corresponding increase in contributed surplus.

On August 5, 2004, the company issued 831,112 Units at $0.225 per Unit for proceeds of $185,159, net of issue costs of $1,841. Each Unit

consisted of one Common share and one Common share purchase warrant entitling the holder to acquire one Common share at $0.30 per

share until August 4, 2006.

On October 29, 2004, the company issued 1,102,200 Units at $0.225 per Unit for proceeds of $245,756, net of issue costs of $2,239. Each

Unit consisted of one Common share and one Common share purchase warrant entitling the holder to acquire one Common share at $0.30

per share until October 29, 2006.

(iv) Pursuant to a Short Form Offering document, the company issued 8,888,888 Units at $0.225 per Unit for gross proceeds of $2,000,000.

Each Unit consisted of one Common share and one Common share purchase warrant entitling the holder to acquire one Common share

at $0.30 per share until October 15, 2006. The company paid the agent a 9% cash commission on the gross proceeds of $180,000, granted

888,888 agent’s warrants, issued the agent 50,000 Common shares and paid $91,440 in additional miscellaneous share issue costs. The

agent’s warrants entitle the holder to acquire one Unit of the company at $0.225 per Unit until October 15, 2006. The fair value of the

agent’s warrants was estimated to be $222,222 using the Black-Scholes option pricing model with the following assumptions: expected life of

2 years, expected volatility of 110%, risk-free interest rate of 3.2% and a 0% dividend yield. This was recorded as a share issue cost with a

corresponding increase in contributed surplus. The fair value of the shares issued of $11,250 was recorded as a share issue cost with a cor-

responding increase in share capital.

(c) A summary of the company’s Common share purchase warrants as at December 31, 2004 and 2003 and changes during the years then

ended are as follows:

Number

Balance, December 31, 2002 6,742,926

Private Placement (note 6[b][ii]) 550,000

Exercised (note 6[c][i]) (3,780,680)

Expired (1,881,163)

Balance, December 31, 2003 1,631,083

Private Placements (note 6[b][iii]) 2,233,312

Short Form Offering (note 6[b][iv]) 9,777,776

Exercised (note 6[c][i]) (252,910)

Expired (320,900)

Balance, December 31, 2004 13,068,361

Page 48

The following table summarizes information about Common share purchase warrants outstanding and exercisable at December 31, 2004:

Number of Warrants Exercise Price ExpiryDate

250,000 $ 0.60 January 2005

500,000 0.50 March 2005

557,273 1.00 August 2005

50,000 0.30 January 2006

831,112 0.30 August 2006

8,888,888 0.30 October 2006

888,888 0.23 October 2006

1,102,200 0.50 October 2006

13,068,361

(i) These warrants were exercised for $37,320 (2003 – $562,872). Stock-based compensation costs totaling $17,511 (2003 – $4,789), recorded

as an increase to contributed surplus on issuance in 2002, were reclassifi ed to share capital upon the exercise of these warrants.

(ii) Subsequent to December 31, 2004, 279,465 Units were issued upon the exercise of 279,465 warrants for $62,880. Each Unit consists of

one Common share and one Common share purchase warrant entitling the holder to purchase one Common share at $0.30 per share for two

years from the date of issue.

(iii) Subsequent to December 31, 2004, 750,000 warrants expired unexercised.

(d) Stock-based compensation

The company has a stock option plan under which directors, offi cers, consultants and employees of the company are eligible to receive stock

options. The maximum number of shares reserved for issuance upon exercise of all options granted under the plan may not exceed 10% of the

issued and outstanding Common shares. The Board of Directors shall determine the terms and provisions of the options at the time of grant.

Options granted may not exceed ten years and vest immediately. The exercise price of each option shall not be less than the price permitted by

any stock exchange on which the Common shares are then listed.

A summary of the status of the company’s stock option plan as at December 31, 2004 and 2003 and changes during the years then ended are as

follows:

2004 2003

Weighted Weighted

Average Average

Number of Exercise Number of Exercise

Options Price Options Price

Outstanding, beginning of year 2,046,000 $ 0.14 1,894,000 $ 0.16

Granted 1,580,000 0.31 560,000 0.15

Exercised (note 6[d][i]) (530,000) 0.13 (138,000) 0.17

Expired/cancelled (266,000) 0.32 (270,000) 0.30

Outstanding, end of year 2,830,000 $ 0.22 2,046,000 $ 0.14

Exercisable, end of year 2,717,500 $ 0.22 2,046,000 $ 0.14

Page 49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMEBER 31, 2004 AND 2003

The following table summarizes information about stock options outstanding and exercisable at December 31, 2004:

Weighted Weighted

Average Average

Remaining Remaining

Range of Exercise Number Contractual Number Contractual

Prices Outstanding Life Exercisable Life

$ 0.10 - 0.13 925,000 2.16 years 925,000 2.16 years

0.15 395,000 3.18 395,000 3.18

0.23 630,000 3.20 517,500 3.52

0.32 - 0.36 880,000 7.31 880,000 7.31

2,830,000 4.14 years 2,717,500 4.24 years

(i) These options were exercised for $69,228 (2003 – $22,815), net of share issue costs of $173 (2003 – $NIL). Contributed surplus was re-

duced by the fair value at grant date of the options exercised during the year of $42,271 (2003 – $NIL) with a corresponding increase in share

capital on the date of exercise.

(ii) The estimated fair value of options granted were calculated on the date of grant using the Black-Scholes option pricing model with

weighted average assumptions as follows:

2004 2003

Risk-free interest rate 3.98% 5.0%

Expected hold period prior to exercise (years) 7.17 5

Expected volatility (%) 120 150

Dividend yield per share (%) - -

Grant date fair value per option $ 0.26 $ 0.14

Compensation costs of $281,075 (2003 – $51,380) was recorded as stock-based compensation expense and $98,400 (2003 – $27,020) was

recorded as mineral properties and deferred costs, with a total corresponding increase in contributed surplus of $379,475 (2003 – $78,400).

(iii) On February 3, 2005, the company granted 1,115,000 stock options to directors, offi cers and employees at $0.28 per share, expiring

February 3, 2010.

(e) Net loss per share

Net loss per share is calculated on the basic weighted average number of Common shares outstanding during the year of 34,693,803 (2003

– 27,677,032). The exercise of stock options and Common share purchase warrants would be anti-dilutive. The Common shares the company

is obligated to issue (note 6[b]) have been included in the weighted average number of Common shares outstanding in calculating net loss per

share.

Page 50

7. CONTRIBUTED SURPLUS

Balance, December 31, 2002 (restated-note 2[f]) $ 223,100

Settlement of salaries payable (note 6[b][i]) 35,000

Exercise of warrants (note 6[c][i]) (4,789)

Stock-based compensation (note 6[d][ii]) (restated-note 2[f]) 78,400

Balance, December 31, 2003 (restated-note 2[f]) 331,711

Agent warrants (note 6[b][iii] and [iv]) 235,367

Exercise of warrants (note 6[c][i]) (17,511)

Stock options exercised (note 6[d][i]) (42,271)

Stock-based compensation (note 6[d][ii]) 379,475

Balance, December 31, 2004 $ 886,771

8. INCOME TAXES

(a) Signifi cant components of the future tax asset are as follows:

2004 2003

Tax values in excess of net book value of mineral properties

and deferred costs and property and equipment $ 100,897 $ 150,110

Share issue costs 89,476 15,000

Loss carryforwards 983,014 1,075,000

Valuation allowance (1,173,387) (1,240,110)

$ - $ -

(b) Income tax recovery differs from that which would be expected from applying the combined effective Canadian federal and provincial in-

come tax rates of 38.62% (2003 – 40.62%) to net loss as follows:

2004 2003

(restated-note 2[f])

Expected income tax recovery $ (308,981) $ (146,886)

Decrease (increase) resulting from:

Stock-based compensation 108,551 20,871

Change in future tax asset resulting from changes in tax rates (16,142) 326,184

Expiry of non-capital loss carryforwards, net 323,411 116,660

Future income tax benefi ts not previously recognized (108,656) (332,531)

Other 1,817 15,702

$ - $ -

Page 51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMEBER 31, 2004 AND 2003

(c) At December 31, 2004, Canadian non-capital losses of approximately $2,952,000 for which no benefi t has been recognized in the consoli-

dated fi nancial statements expire as follows:

Year of Expiry Amount

2005 $ 528,000

2006 614,000

2007 349,000

2008 206,000

2009 137,000

2010 281,000

2014 564,000

$ 2,679,000

9. SUPPLEMENTAL CASH FLOWS INFORMATION

The following non-cash transactions have been excluded from the consolidated statements of cash fl ows:

2004 2003

Mineral property costs settled by share issuances (notes 4[a], [c] and [e]) $114,550 $252,682

Stock-based compensation capitalized to deferred exploration costs (note 6[d][ii]) 98,400 27,020

Issuance of stock options and Common shares to settle accounts payable (note 6[b][i]) - 101,811

Share issue costs as a result of increasing contributed surplus (notes 6[b][iii] and [iv]) 235,367 -

Contributed surplus transferred on exercise of stock options and warrants (note 7) 59,782 4,789

10. FINANCIAL INSTRUMENTS

(a) Fair values

The fair values of all fi nancial instruments approximate their carrying values due to their short-term nature.

(b) Currency risk

The company is exposed to currency price risk to the extent of its foreign operations conducted in the Philippines. The company does not

hedge its exposure to fl uctuations in the related foreign exchange rate.

11. RELATED PARTY TRANSACTIONS

(a) Accounts receivable and advances includes $34,797 (2003 - $30,019) due from an offi cer and director of the company.

(b) Mineral properties and deferred costs includes $296,320 (2003 - $NIL) for drilling services to a corporation during the time period in

which an individual who controlled the corporation was a director of the company. Of these amounts, $90,000 (2003 - $NIL) was paid

through the issuance of shares (note 4[e]) and $56,991 (2003 - $NIL) is included in accounts payable and accrued liabilities at December 31,

2004. As well, mineral properties and deferred costs includes $3,829 (2003 - $NIL) paid to a director of the company.

(c) Of the 1,580,000 stock options granted during 2004 (note 6[d]), 100,000 were granted to a fi rm during the time period in which a princi-

pal of this fi rm was a director of the company.

(d) Consulting and professional fees expense includes $9,712 (2003 - $10,338) paid to a director of the company, and $29,000 (2003 - $NIL)

Page 52

paid for investor relations to a fi rm during the time period in which a principal of this fi rm was a director of the company. Advertising and

promotion expense includes $17,055 (2003 - $NIL) paid to this investor relations fi rm.

These transactions are in the normal course of operations and are measured at the exchange amount which is the amount of consideration

established and agreed to by the related parties.

12. SUBSEQUENT EVENTS

(a) Subsequent to December 31, 2004, 50,000 Common shares were issued upon the exercise of 50,000 warrants for proceeds of $15,000.

(b) Subsequent to December 31, 2004, 59,000 Units were issued upon the exercise of 59,000 warrants for $13,275. Each Unit consists of

one Common share and one Common share purchase warrant entitling the holder to purchase one Common share at $0.30 per share for two

years from the date of issue.

(c) On April 5, 2005, the company granted 100,000 stock options to an investor relations fi rm at $0.32 per share, expiring April 5, 2007.

(d) On April 12, 2005, the company issued 2,117,500 Units for gross proceeds of $677,600. Each Unit consists of one Common share and

one-half Common share purchase warrant. Each whole Common share purchase warrant entitles the holder to acquire one Common share

at $0.50 per share until October 12, 2006. The shares are subject to a four month hold period expiring August 13, 2005. Finders fees of

$16,716 were paid to agents.