High-grade gold mineralization at the LMS property commonly occurs in late stage quartz stockwork veins hosted within brecciated siliceous graphitic horizons in schist and gneiss units which are parallel to a thrust contact.  These stockwork zones appear to be related to a west-northwest trend of mineralization which is currently open to the east, west and at depth.  Native gold is common within the high-grade zones, often exceeding values of 10g/t gold.

The Company also carried out additional drilling (three holes) on two new soil anomalies to the north and south of the Camp Zone, but results have not been encouraging and only weak mineralization was encountered.  A total of 200 additional soil auger samples have also been taken, and results are pending.

Terra

The Terra property consists of 177 Alaska State mining claims, comprising approximately 11,461 hectares, and is located 200 kilometres west of Anchorage along the southwest portion of the Alaska Range in the Hartman District.  172 of the mining claims are owned 100% by AngloGold, while 5 are held under lease from an individual, in each case subject to the option held by the Company (see Item 4.B “Business Overview – AngloGold Property Acquisition”).  The lease is dated March 22, 2005 and has an initial term of 10 years and so long thereafter as AngloGold pays the required minimum royalties.  Minimum royalties are payable as follows: US$50,000 on or before March 22, 2007, US$75,000 on or before March 22, 2008, US$100,000 on or before March 22, 2009 and each subsequent anniversary until March 22, 2015 and US$125,000 on each subsequent anniversary thereafter.  The Company will pay a net smelter return production royalty of 3% or 4% on gold and silver (depending upon the gold price) and 4% on all other minerals.  The production royalty may be reduced by 1% (to 2% or 4%) upon payment of US$1,000,000 and by a further 1% (to 1% or 2%) upon payment of an additional US$3,000,000.  The lease may be terminated at any time upon notice by the Company.

The Company has recently staked an additional 22 Alaska State mining claims on the south-west side of the main Terra property claim block and, as required by the applicable option agreement, has requested Anglo to elect whether such claims are to become part of the Terra property subject to the option held by the Company, or are to be held 100% by the Company, free of any interest of AngloGold.

The property is centered on a series of gold-bearing bonanza quartz veins.  AngloGold drilled 12 diamond core holes in 2005 to test the subsurface continuity of outcropping veins.  In two zones, drill holes intersected high grade veins and numerous gold-bearing smaller veins.  In the third zone, no veins were intersected indicating that fold and/or fault controls exist that need to be resolved.  Samples of vein material from outcrop and drill core contain up to several hundred ppm gold (the highest being 960 ppm), although most samples contain more modest values.

At this early stage of exploration, outcropping veins and drill hole intercepts indicate that the veins can be continuous for more than 100 metres along strike and 250 metres down dip.  More drilling is required to assess further continuity.  Lesser veins also occur to form vein zones.  These veins are banded and exhibit relict open-space-fill dog-tooth textures.  These textures are now diffuse, suggesting that there has been minor recrystallization.  Veins are interpreted to have formed in the transition between mesothermal and epithermal settings.

Veins occur primarily in a ±150 metres wide, subvertical diorite “dike” that is interpreted to be part of the Hartman intrusive suite.  The dike intrudes Jurassic to Cretaceous Kahiltna Terrane sedimentary rocks consisting of shale, phyllite, siltstone, and minor conglomerate and carbonate.  The sedimentary host rocks have undergone multiple stages of deformation prior to intrusion, with the principle deformation being a fold-thrust style.  The host intrusive rocks are late Cretaceous age (approximately 70 million years ago) diorite to quartz monzonite.  This intrusive age and composition is the same as that for other intrusive-related gold deposits in Alaska.

Reconnaissance sampling and mapping has identified three other areas on the Terra property with anomalous gold in rock, soil, and stream sediment samples.  The report author believes two areas probably consist of more bonanza veins.  The third area is unusual, and is a large (tectonic) breccia zone in which breccia fragments are set in a matrix of tan carbonate.  Samples of this material contain up to 5 g/t Au, but it is unclear whether the gold lies in the matrix or in the breccia fragments.

The report author recommended a US$750,000 work program, consisting of drilling to better define the strike and dip extent of known veins and to evaluate the three other, newly discovered anomalous areas, expanded reconnaissance prospecting and sampling, and further work to evaluate the structural architecture of this area.

Following the execution of the option agreement with AngloGold on August 4, 2006, the Company continued with the ongoing exploration program commenced by AngloGold.

The Company expanded the surface prospecting program at Terra to cover the full 8 kilometre strike length of the system and, as a result, has identified new vein systems which have returned a number of high-grade gold values.  In addition, the Company conducted a limited drilling program on the extension of the “Ben Vein” (the focus of the 2005 drilling campaign) which returned high-grade intervals from both holes drilled on the 150 metre step out.  The Ben Vein system has now been intersected in all eight holes drilled along the greater than 250 metres of strike length and 250 metres down dip and it remains completely open.  Results from the six holes drilled in 2005 and the two holes drilled in 2006 indicate the Ben Vein system has good continuity of grade and appears to be expanding in width to the northwest, as shown by the last hole which intersected 4.2 metres averaging 22.4 g/t gold.

During the surface mapping and sampling program in 2006, the Company collected 136 rock and rock chip channel samples from the Terra project, which ranged in values from less than 2 ppb to 130 g/t gold (average value for all 136 rock samples is 6.8 g/t gold and 33.7 g/t silver).  This work has now defined 4 main zones of veining in the core Terra target area, as well as a new zone of veining 4 kilometres to the south in the Ice Vein area (13 samples averaging 24.8 g/t gold and 170 g/t silver with a high chip sample of 0.5 metres @ 72.3 g/t gold and 453 g/t silver).  Each of these five vein zones has multiple high-grade veins that are intimately associated with the Terra Diorite.  The grades in each are comparable to those found in the Ben Vein zone, which has averaged in the drilling, over a minimum true width of 1 metre, approximately 25 g/t gold (gold values ranging from 6 g/t to 136 g/t).  Structural studies indicate that all of the veins have a common north-northwest to north-south trend with variable westerly dips.  In addition, a new blind vein was discovered in the 2006 drilling (1.65 metres @ 13.9 g/t gold), which increases the tonnage potential of the system.

The Company’s proposed 2007 work program at the Terra property will include approximately 50 metre spaced drilling along 350 metres of strike length and 300 metres down dip on the Ben Vein system to evaluate the grade and continuity of this potentially large, high-grade deposit.  In addition, the Company plans to test two of the other vein systems to asses their potential to develop similar systems.  The proposed 2007 work program has an estimated budget of US$2,000,000.

Additional Properties

West Tanana

The West Tanana project consists of 51,792 acres held under lease from Doyon, Limited, an Alaskan Native Regional Corporation, located 250 kilometres west of Fairbanks, Alaska.  The project has barge access, via the Yukon River, to a road network developed for historic placer gold mining.

The agreement with Doyon is a two stage Exploration Option/Mining Lease dated August 14, 2006, whereby the Company has the option to enter into one or more mining leases over some or all of the Doyon conveyed lands (25,920 acres) and up to 3 leases totalling 8,000 acres over the Doyon selected lands (25,872 acres) subject to the exploration option agreement.The terms of the exploration option agreement are confidential. 

The project area has been historically mined for placer gold (unknown production).  The property was partially explored in the 1990’s using geochemistry and limited trenching but was never drill tested.  Rock sampling from this initial work returned several gold values in excess of 5 g/t with a high of 17.6 g/t gold over 0.5 metres.  This bedrock mineralization has only been exposed at one location at West Tanana due to its limited exploration history and extensive cover.  The West Tanana property contains a number of significant gold and ‘pathfinder’ trace element soil anomalies which have never been drill tested.  The best developed target to date, known as the Monday Creek soil anomaly, covers an area of roughly 1.5 kilometres x 1 kilometre and is open in all directions.  Data provided by Doyon on ‘historical’ trenching conducted in the 1990’s referenced a pair of 0.5 metre wide, north-east trending shears with vein quartz and silicified schist.

The geologic setting on the West Tanana property is similar to that in the Goodpaster District which hosts the LMS property.  The target is underlain by a thick sequence of metamorphic rocks which have been intruded by a batholith to the north equivalent in age to the main stage Tintina gold event (approximately 100 million years ago).  The area is bounded to the south by the Kaltag Fault zone, a major terrane bounding structure.

Following the execution of the Doyon agreement, the Company collected 480 new soil samples, the data from which have significantly increased the size and intensity of the bulk tonnage gold target.  The soil sampling program has highlighted an area of strong gold mineralization, roughly one kilometre in diameter, confirming the historic data provided to the Company from the Doyon proprietary database.  Within this zone there appear to be a series of north-northeast trending structures which host the gold mineralization.  The anomaly is still open to the southwest and north beyond the extent of the current sampling grid.

Analysis of the multi-element data from the soil survey indicates a multistage geochemical association with gold primarily associated with gold-arsenic-tellurium.  The presence of bismuth, tellurium and gold together with low antimony suggests that the mineralization could be related to a proximal magmatic hydrothermal system.  Trench TR-10-02-01, approximately 200 metres northwest of the historical placer mine, exposed northeast trending, flat lying high-grade quartz veins dipping to the northwest.  Other gold mineralized rocks have been found in float and in trench TR-09-28-03 along the schist-quartzite contact.

Historical Trench & Rock Results (Au>5g/t)

The Company has completed the minimum required 2006 work program.  Based on these results, the Company is proposing a work program for 2007 that will consist of drilling a series of core holes to test both the anomaly adjacent to Monday Creek and the mineralization along the schist-quartzite contact to the west of Monday Creek, together with continued district scale exploration will continue to evaluate a number of other anomalous areas within the system.  The estimated budget for this program is US$700,000.

Ongoing Reconnaissance Exploration Work

In addition to work programs on its existing properties, during the 2006 field season the Company carried out a program of regional reconnaissance prospecting based, in part, upon its extensive regional exploration database, and has identified a number of additional properties that it will likely consider staking (if open) or negotiating to option or lease (if held by third parties).

Qualified Person and Quality Control/Quality Assurance

The 2006 work programs at the Company’s mineral properties were designed and supervised by Jeffrey A. Pontius, the President and Chief Executive Officer of the Company and/or Dr. Russell Myers, Vice President of Exploration of the Company, who is/are responsible for all aspects of the work, including the quality control/quality assurance program.  On-site personnel at the project rigorously collect and track samples (including core, which is photographed prior to preparing the split core) which samples are then sealed and shipped to ALS Chemex for assay.  ALS Chemex's quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025: 1999.  Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples.  Quality control is further assured by the use of international and in-house standards.  Finally, representative blind duplicate samples are forwarded to ALS Chemex and an ISO compliant third party laboratory for additional quality control.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The Company is in the business of acquiring, exploring and evaluating interests in mineral properties.  The Company’s current property interests are held for the purposes of exploration for precious metals and diamonds.

For the year ended May 31, 2006, the Company reported interest income of $348 as compared to $132 for the year ended May 31, 2005.  For the year ended May 31, 2006, the Company had a net loss of $127,228 as compared to a net loss of $121,483 for the year ended May 31, 2005, for a nominal increase of $5,745.  The increased net losses in 2006 was primarily due to the recovery of exploration expense-permit fees and a gain on sale of marketable securities in fiscal 2005, which is offset by a decrease in mineral property due diligence of $20,881 in 2006, compared to $45,286 for fiscal 2005.

For the year ended May 31, 2005, the Company reported interest income of $132 as compared to $4,519 for the year ended May 31, 2004.  The decrease in interest income is a result of lower interest being earned on cash and cash equivalents and a decrease in cash on hand.  For the year ended May 31, 2005, the Company had net losses of $121,483 as compared to net losses of $244,330 for the year ended May 31, 2004.   The increased net loss in 2004 was primarily due the write down of deferred exploration expenses for three natural resource properties.

During the fiscal year ended May 31, 2006 and the year ended May 31, 2005, no share purchase warrants or stock options were exercised.

General and Administrative (Operating) expenses for the fiscal year ended May 31, 2006 consisted primarily of management fees, mineral property due diligence costs, rent, office and miscellaneous, professional fees, stock exchange and filing fees and transfer agent fees and other expenses that support our daily operations.  General and Administrative expenses for the year ended May 31, 2006 were $127,576, being a decrease of $18,068 compared to General and Administrative expenses of $145,644 during the fiscal year ended May 31, 2005.  The majority of the decrease in General and Administrative costs was due to decreased mineral property due diligence expenses of $20,881, compared to $45,286 for fiscal 2005.  Management fees of $60,000 and rent of $7,200 were unchanged from 2005.  Other expenses incurred include professional fees of $18,635 (2005 - $16,360), stock exchange and filing fees of $11,529 (2005 - $7,504), transfer agent fees of $4,428 (2005 - $4,455), office and miscellaneous of $3,338 (2005 - $3,151), and travel and promotion of $1,565 (2005 - $1,688).  During fiscal 2005 the Company recovered exploration expense and permit fees in the sum of $14,889 and had a gain of $9,140 on the sale of marketable securities.

General and Administrative (Operating) expenses for the fiscal year ended May 31, 2005 consisted of management fees, office, professional fees, stock exchange and filing fees and transfer agent fees and other expenses that support our daily operations.  General and Administrative expenses for the year ended May 31, 2005 were $145,644, being an increase of $51,140 compared to General and Administrative expenses of $94,504 during the fiscal year ended May 31, 2004.  The majority of the increase in General and Administrative costs was due to mineral property due diligence expenses of $45,286.  Management fees of $60,000 and rent of $7,200 were unchanged from 2004.  Other expenses incurred include professional fees of $16,360 (2004 - $10,615), stock exchange and filing fees of $7,504 (2004 - $7,627), transfer agent fees of $4,455 (2004 - $4,117), office and miscellaneous of $3,151 (2004 - $4,077), and travel and promotion of $1,688 (2004 - $868).  During fiscal 2004 deferred acquisition and exploration expenditures in the sum of $154,345 were written off.  During fiscal 2005 we recovered exploration expense and permit fees in the sum of $14,889 and had a gain of $9,140 on the sale of marketable securities.

5.A

Operating Results

During the year ended May 31, 2006, mineral property costs decreased by $78,270 to $574, as compared to exploration and developments costs of $78,844 for the year ended May 31, 2005.

During the year ended May 31, 2005, mineral property costs increased by $52,874 to $78,844, as compared to exploration and developments costs of $25,970 for the year ended May 31, 2004.

The two material differences between Canadian GAAP and United States GAAP that are applicable to our financial results are as follows: (i) Under U.S. GAAP, all mineral exploration and development property expenditures are expensed in the year incurred in an exploration stage company until there is substantial evidence that a commercial body of ore has been located.  Canadian GAAP allows resource exploration and development property expenditures to be deferred during this process; and (ii) Under U.S. GAAP, the marketable securities are carried at market with an adjustment to shareholders equity as they are held for resale.

Siwash Creek Property – British Columbia

For the year ended May 31, 2006, costs related to the Siwash Creek Property were $3,804 for assay, sampling and lease costs, compared to costs of $111,316 for the year ended May 31, 2005, which were offset by a tax credit receivable of $19,711 and cost recovery of $35,000.

For the year ended May 31, 2005, costs related to the Siwash Creek Property were $111,316, consisting of lease costs of $12,761 and geological and consulting of $19,244, preparation of a geological assessment report $17,565, as well as drilling of $51,502, assay and sampling of $3,120 and miscellaneous costs of $7,574, which were offset by a tax credit receivable of $19,711 and cost recovery of $35,000, compared to drilling and miscellaneous costs of $32,119 for the year ended May 31, 2004, offset by a tax credit receivable of $6,149.

5.B

Liquidity and Capital Resources

At May 31, 2006, the Company reported cash and cash equivalents of $6,695, compared to $7,711 for the year ended May 31, 2005, for a nominal decrease of $1,106.  The Company has historically satisfied its cash requirements by issuing equity securities.

At May 31, 2005, the Company reported cash and cash equivalents of $7,711, compared to $111,180 for the year ended May 31, 2004.  The decrease of $103,469 was for operating expenses used during the year ended May 31, 2005.  The Company’s unused sources of liquidity arise from unallocated working capital.  The Company has historically satisfied its cash requirements by issuing equity securities.

The Company did not carry out any exploration work on the Chinchaga Property, the Torngat Property or the Fort Vermillion Property and all of these properties have been returned to their owners or abandoned.  All deferred costs related to the Chinchaga Property and the Torngat Property were written down during fiscal 2004.

The Company’s plans over the next 12 months are to complete the ongoing 2006 exploration programs and to proceed with the proposed 2007 exploration programs on our Alaska properties and to continue to seek out additional properties for acquisition.  If the Company determines to purchase or stake additional properties, it will finance the costs thereof from its working capital reserve and if necessary, through the sale of marketable securities.

The Company completed two private placements in August, netting an aggregate of approximately $11.4 million (approximately US$10.1 million).  As of August 31, 2006 the Company had a working capital of approximately US$10.3 million.   The Company expects that its 2006 exploration programs on all of its properties will cost approximately US$4.6 million.  The Company has sufficient funding to cover its anticipated exploration programs for 2006 and 2007 and to cover its basic administrative costs for a period of twelve months.  If we undertake any additional exploration activities on our properties or acquire additional properties in the future we may have to seek financing, most likely through the issuance of equity securities or the joint venturing of existing properties.

5.C

Research and Development, Patents and Licences, etc.

Not applicable.

5.D

Trend Information

None of our assets are currently in production or generate revenue.

5.E

Off-Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements.

5.F

Contractual Obligations

Not applicable.

5.G

Safe Harbour

Not applicable.

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A

Directors and Senior Management

The following table sets out the directors and executive officers of the Company and all positions and offices held with the Company as at November 30, 2006:

(1)

Member of Audit Committee

(2)

Member of the Compensation Committee

(3)

Member of the Sustainable Development Committee

(4)

Member of the Nominating and Corporate Governance Committee

Anton Drescher and Gerhard Drescher, both directors, are brothers.  There is no other family relationship between any of the above named directors or officers.

Hendrik Van Alphen (Chairman and Director) - Mr. Van Alphen has been in the mining business for 23 years.  He started, initially, as a successful exploration/drilling contractor, and then became the President of Pacific Rim Mining Corp., where he laid the foundation for Pacific Rim to become a successful South American based resource company.  He served as Vice-President of Corriente Resources Inc. from 1994 to 1999, following which he became the President of Cardero Resource Corp., reactivating it and spearheading its entrance into South America, particularly Argentina and Peru.  Mr. Van Alphen is presently a director and officer of a number of precious metal and resource companies (including Cardero Resource Corp., Wealth Minerals Ltd. and Athlone Energy Corp.).

Benjamin Wayne Guenther (Director) - Mr. Guenther graduated from the Colorado School of Mines as a mining engineer (BS Mining Engineering) in 1974.  Thereafter, until 1986, he held various managerial positions at mining operations in the USA owned or operated by Hanna Mining Company.  From 1987 to 1994 he was Mine Manager, and then General Manger, at the Cannon Mine of Asamera Minerals in Wenatchee, Washington.  He joined Minorco (now AngloGold Ashanti) in 1995 as Senior Vice President and General Manager of the Jerritt Canyon mine in Elko, Nevada.  In 2000 he was seconded to AngloGold Ashanti Limited’s corporate office in Johannesburg as Head of Mining and, in 2001, he assumed some responsibilities for safety and health, as well as heading up the Corporate Technical Group.  Mr. Guenther was appointed Executive Officer-Corporate Technical Group of AngloGold Ashanti Limited in May 2004.  In 2006 he returned to the USA as Executive Officer-Technical International of AngloGold Ashanti Americas, Inc.

Anton J. Drescher (Director) - Mr. A. Drescher has been Chief Financial Officer and a director of USA Video Interactive Corp., a public company listed for trading on the TSXV and the OTC Bulletin Board, since December 1994, which company is involved in streaming video and video-on-demand.  He has also been a director and Secretary/Treasurer of Dorato Resources Inc., a public company listed on the TSXV, involved in digital audio distribution since 1996; President of Westpoint Management Consultants Limited, a private company engaged in tax and accounting consulting for business reorganizations since 1979; President of Harbour Pacific Capital Corp., a private British Columbia company involved in regulatory filings for businesses in Canada since 1998; a director of Landmark Minerals Inc., a public company listed on the TSXV, since 2003 and a director of Waymar Resources Ltd., a public company listed on the TSXV, since 2005.  Mr. Drescher has been a Certified Management Accountant since 1981.

Rowland Perkins (Director) - Mr. Perkins has been the President and a director of eBackup Inc. from 2001 to present.  Previously, he was the Marketing Manager of Intellisave Datavaults Inc. (Securinet Inc.) from 1999 to 2000.  Mr. Perkins has also served as a director of USA Video Interactive Corporation since January 2005.

Gerhard Drescher (Director) - Mr. G. Drescher has, from 1989 to present, been the President of Python Technologies of Delta, British Columbia, Canada, an electronics consulting firm.  Mr. Drescher has also served as a director of Dorato Resources Inc. since July 2000 and a director Landmark Minerals Inc. since May 2005, both companies listed on the TSXV.

Jeffrey Pontius (President and Chief Executive Officer) - Mr. Pontius has over 28 years of geological experience and possesses a distinguished track record of successful discovery that includes three precious metal deposits.  Significantly, during 1989-1996, as Exploration Manager of Pikes Peak Mining Company (a subsidiary of NERCO Mineral Co. and Independence Mining Company), he managed the large district scale exploration program resulting in the discovery of the Cresson Deposit at Cripple Creek, Colorado, containing over 5 million ounces of gold.  While working as Exploration Manager, Mr. Pontius developed an integrated exploration program which focused on both surface bulk mine able and underground high grade target types.  He spent the past seven years at AngloGold Ashanti (USA) Exploration Inc., starting as Senior US Exploration Manager, and became North American Exploration Manager and also a Director of Anglo American (USA) Exploration Inc.  He was also a member of the regional business development team and provided technical and strategic support for the company's acquisition program.  During the past four years as US and North American Exploration Manager, Mr. Pontius led the exploration team that spent US$10 million developing an extensive database and acquiring all of the Alaskan projects the Company recently acquired from AngloGold.   He left AngloGold Ashanti to become the President and Chief Executive Officer of the Company and continue the exploration programs he started at AngloGold.  Mr. Pontius holds a Masters Degree from the University of Idaho (Economic Geology), a BSc from Huxley College of Environmental Studies (Environmental Science) and a BSc from Western Washington University (Geology).

Michael W. Kinley (Chief Financial Officer) – Mr. Kinley possesses extensive public company experience and, the financial qualifications to play an important role as the Company continues to rapidly expand.  He received his Chartered Accountant designation in 1973 in Ontario while with KPMG, where he became a partner in 1981.  Since 1993, Mr. Kinley has been the president of Winslow Associates Management & Communications Inc., a private consulting firm which provides accounting and regulatory support services to junior public companies.  He is a director and the Chief Financial Officer of Indico Technologies Ltd. and StonePoint Global Brands Ltd., and is the Chief Financial Officer of Cardero Resource Corp. and Wealth Minerals Ltd.  He is an officer and/or director of a number of other public companies, including Noise Media Inc., WorldStar Energy Corp. and Can-Asia Minerals Inc.

Lawrence W. Talbot (Vice President and General Counsel)– Mr. Talbot  is a mining lawyer with over 20 years experience in representing a wide range of clients in the mining industry, from individual prospectors and junior and mid-size explorers and producers through to major mining companies, in both the hard-rock and industrial mineral fields.  He has extensive experience acting for public natural resource companies and providing advice on all aspects of their businesses, including mineral property acquisitions, divestitures and joint ventures, corporate finance, securities and regulatory matters, corporate governance and shareholder issues, and all aspects of corporate acquisitions, takeovers, divestitures and reorganizations.  He is a director and officer of a number of public natural resource companies including Alma Resources Ltd., Cardero Resource Corp., Excellon Resources Inc., Gold Port Resources Ltd., Samba Gold Inc. and Wealth Minerals Ltd.  Prior to July 1, 2006, he was a partner in one of Canada's largest law firms, and now acts as general counsel to a select group of public companies, including the Company.

Russell Myers (Vice-President, Exploration) - Dr. Myers has over 25 years experience utilizing key geological and project assessment tools that involve mapping and the compilation and integration of geological, geochemical, and geophysical data required for the generation of exploration models. Throughout his distinguished career as a 'hands-on' exploration geologist, Dr. Myers special interests have been ore genesis and regional tectonic evolution.  Dr. Myers spent the past six years at AngloGold holding several key senior geological positions.  His principal responsibilities since May 2004 were regional target generation for gold deposits in Alaska together with the design and implementation of exploration programs.  While with AngloGold, Dr. Myers was part of an integrated team of geologists that evaluated the potential for deep targets at the Cripple Creek Gold mine.  He also conducted regional targeting and ground follow up for AngloGold's Columbian exploration initiative which has defined a series of new deposits.  Dr. Myers holds a PhD in Geology, University of the Witwatersrand, Johannesburg, South Africa, 1991.  Dr. Myers was Summa cum Laude, BSc Geology and Geophysics, Missouri School of Mines, Missouri, 1981.

Quentin Mai (Vice-President, Corporate Communications) - Mr. Mai has extensive experience in the provision of professional corporate communications, investor relations and business initiative and development services to publicly listed companies in both the Canadian and US equities markets.  Quentin brings over 15 years of professional commerce experience, including 5 years based in Asia, to the Company.  Quentin will be an important member of the team that is coordinating the Company’s growing investor and market communications programs.  These programs will be dedicated to raising the Company’s profile in the investment community around the globe.

Marla K. Ritchie (Corporate Secretary) – Ms. Ritchie brings over 15 years experience in public markets working as an Administrator and Corporate Secretary specializing in resource based exploration.  Since 2001, she has worked as Corporate Secretary for Cardero Resource Corp.  Between 1992 and 2003, she worked for Ascot Resources Ltd, Brett Resources Inc, Golden Band Resources Inc, Hyder Gold Inc., Leicester Diamond Mines Ltd., Loki Gold Corporation, Oliver Gold Corporation and Solomon Resources Limited.

Conflicts of Interest

There are no existing or potential conflicts of interest among the Company’s directors, officers or promoters as a result of their outside business interests with the exception that certain of our directors, officers and promoters serve as directors, officers and promoters of other companies, and, therefore, it is possible that a conflict may arise between their duties as a director, officer or promoter of the Company and their duties as a director or officer of such other companies.

The Company’s directors and officers are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and we have and will rely upon such laws in respect of any directors' and officers' conflicts of interest or in respect of any breaches of duty by any of our directors or officers.  All such conflicts will be disclosed by such directors or officers in accordance with the BCBCA, and they will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.

All of the Company’s directors are also directors, officers or shareholders of other companies that are engaged in the business of acquiring, developing and exploiting natural resource properties including properties in countries where we are conducting our operations.  Such associations may give rise to conflicts of interest from time to time.  Such a conflict poses the risk that we may enter into a transaction on terms which place us in a worse position than if no conflict existed.  Our directors are required by law to act honestly and in good faith with a view to our best interests and to disclose any interest which they may have in any project or opportunity of the company. However, each director has a similar obligation to other companies for which such director serves as an officer or director.  We have no specific internal policy governing conflicts of interest.

The following table identifies, as of November 30, 2006, the name of each officer and director and any company (i) which employs such officer or director, (ii) for which such officer or director currently serves as an officer or director, or (iii) which is affiliated with such officer or director (other than the Company):

6.B

Executive Compensation

For the fiscal year ending May 31, 2006, the Company paid an aggregate of $71,856 in cash compensation to the directors and officers as a group.

The following table sets out compensation information for the fiscal years ended May 31, 2006, May 31, 2005 and May 31, 2004 for the Company’s directors and members of our administrative, supervisory or management bodies.

(1)

The amounts paid were for consulting and accounting fees paid to Harbour Pacific Capital Corp., a private company wholly-owned by Mr. Drescher.

Long Term Incentive Awards

The Company does not have any long term incentive plan awards defined as "any plan providing compensation intended to motivate performance over a period longer than one financial year and does not include option or SAR plans or plans for compensation through restricted shares or units."

Option/Stock Appreciation Right (“SAR”) Grants and Repricings During the Most Recently Completed Financial Year

During the financial year ended May 31, 2006 no option grants were made to executive officers and no options were re-priced.

Aggregated Option Exercises During the Most Recently Completed Financial year and Financial year-End Option/SAR Values

No stock options were exercised during the fiscal year ended May 31, 2006 and no stock options were outstanding as at May 31, 2006.

Pension Plan

The Company does not provide retirement benefits for directors or executive officers.

Director Compensation

Cash Compensation

The Company does not compensate directors in their capacities as such, although our directors are reimbursed for their expenses incurred in connection with their services as directors.

Non-Cash Compensation

No stock options were granted by the Company during the financial year ended May 31, 2006 to our directors who are not executive officers.

No stock options were exercised during the fiscal year ended May 31, 2006 by directors who are not executive officers and there were no stock options outstanding as at May 31, 2006.

Board Practices

The Board is elected at the annual general meetings of the shareholders.  Each director elected will hold office until the next annual meeting or until his successor is duly elected or appointed, unless his office is earlier vacated in accordance with the BCBCA.  See Section 6.A - Directors and Senior Management - for dates directors were first elected to the Board.

Audit Committee

Anton J. Drescher

Gerhard J. Drescher

Rowland Perkins

At the first meeting following each annual general meeting, the directors must elect an audit committee consisting of no fewer than three directors, of whom of whom a majority must not be members of the management, or officers or employees, of the Company or of any affiliate or associate of the Company or a control person of the Company or any of its associates or affiliates, to hold office until the next annual general meeting.

Before a financial statement that is to be submitted to an annual general meeting is considered by the directors, it must be submitted to the audit committee for review by the auditor, and the report of the audit committee on the financial statements must be submitted to the directors thereafter.

Subsequent to our 2006 annual meeting of shareholders held on September 22, 2006, the Board adopted a replacement Audit Committee Charter, a copy of which is attached as Exhibit 99.1 to this Form 20-F Annual Report.

Following our 2006 annual general meeting held on September 22, 2006, we formed the following Board committees:

Compensation Committee

Hendrik Van Alphen

Benjamin Wayne Guenther

Rowland Perkins

The overall purpose of the Compensation Committee is to implement and oversee human resources and compensation policies and best practices for recommendation to the Board for approval and implementation.  A copy of the Compensation Committee Charter is attached to this Annual Report as Exhibit 99.2.

Sustainable Development Committee

Benjamin Wayne Guenther

Anton J. Drescher

The overall purpose of the Sustainable Development Committee is to assist the Board in fulfilling its oversight responsibilities with respect to our continuing commitment to improving the environment and ensuring that our activities are carried out, and that our facilities are operated and maintained, in a safe and environmentally sound manner and reflect the ideals and principles of sustainable development.  The primary function of the committee is to monitor, review and provide oversight with respect to our policies, standards, accountabilities and programs relative to health, safety, community relations and environmental-related matters.  The committee will also advise the Board and make recommendations for the Board’s consideration regarding health, safety, community relations and environmental-related issues.  A copy of the Sustainable Development Committee Charter is attached to this Annual Report as Exhibit 99.3.

Corporate Governance & Nominating Committee

Benjamin Wayne Guenther

Hendrik Van Alphen

The role of the Corporate Governance & Nominating Committee is to (1) develop and monitor the effectiveness of our system of corporate governance; (2) establish procedures for the identification of new nominees to the Board and lead the candidate selection process; (3) develop and implement orientation procedures for new directors; (4) assess the effectiveness of directors, the Board and the various committees of the Board; (5) ensure appropriate corporate governance and the proper delineation of the roles, duties and responsibilities of management, the Board and its committees; and (6) assist the Board in setting the objectives of the Chief Executive Officer and evaluating the performance of the CEO.  A copy of the Corporate Governance & Nominating Committee Charter is attached to this Annual Report as Exhibit 99.4.

New Policies

We have also adopted a Code of Business Conduct and Ethics and a Share Trading Policy.  A copy of each of these policies is attached to this Annual Report as Exhibits 99.5 and 99.6, respectively.

6.D

Employees

The Company has no employees.  Talon LLC has three employees, through which all of the Company’s exploration activities are conducted.  These employees are as follows:

•

Jeffrey A. Pontius - President:  Mr. Pontius manages and guides corporate function and growth strategy.  Mr. Pontius is also the President and Chief Executive Officer of the Company.

•

Russell Myers – Vice President of Exploration:  Mr. Myers oversees all of the Company’s exploration activities.  Mr. Myers is also the Vice-President, Exploration of the Company.

•

Heather Kelly – Denver Office Manager:  Ms. Kelly manages the Denver office and coordinates the flow of information to and from the exploration projects.

6.E

Share Ownership

The following table sets out the number of shares held by our directors and members of our administrative, supervisory or management bodies as of November 30, 2006 and percentage of those shares outstanding of that class.

(1)

Of the Common Shares owned by Mr. Van Alphen, 135,716 Common Shares are represented by share purchase warrants.

(2)

Of the Common Shares owned by Mr. Talbot, 135,714 Common Shares are represented by share purchase warrants.

(3)

Of the Common Shares owned by Mr. Mai, 135,714 Common Shares are represented by share purchase warrants.

(4)

Of the Common Shares owned by Ms. Ritchie, 135,714 Common Shares are represented by share purchase warrants.

Options and Other Rights to Purchase Securities

On August 22, 2006, the Board adopted a new incentive stock option plan (the “2006 Plan”) to replace the existing 2005 Incentive Stock Option Plan, subject to the approval of the shareholders at the 2006 annual general meeting and the acceptance for filing thereof by the TSXV.  At the annual general meeting held on September 22, 2006, the shareholders approved the 2006 Plan, and it was subsequently accepted for filing by the TSXV on November 23, 2006.

The purpose of the 2006 Plan is to allow the Company to grant options to the directors, officers, employees and consultants of, and to the employees of companies providing management services to, the Company and its affiliates, as additional compensation, and as an opportunity to participate in our profitability.  The granting of such options is intended to align the interests of such persons with our interests.

The material terms of the 2006 Plan are as follows:

1.

Options may be granted to directors, officers, employees and consultants of, and to the employees of companies providing management services to, the Company and its affiliates.

2.

The aggregate number of shares which may be issued pursuant to options granted under the 2006 Plan, unless otherwise approved by shareholders, may not exceed that number which is equal to 10% of the Common Shares issued and outstanding at the time of the grant.

3.

The number of Common Shares subject to each option will be determined by the Board, or a duly appointed committee of the Board, provided that the aggregate number of shares reserved for issuance pursuant to options granted to:

(a)

insiders during any 12 month period may not exceed 10% of our issued Common Shares;

(b)

any one individual during any 12 month period may not exceed 5% of our issued Common Shares;

(c)

any one consultant during any 12 month period may not exceed 2% of our issued Common Shares; and

(d)

all persons employed to provide investor relations activities (as a group) may not exceed 2% of our issued Common Shares during any 12 month period; in each case calculated as at the date of grant of the option, including all other Common Shares under option to such person at that time.

4.

The exercise price of an option may not be set at less than the minimum price permitted by the TSXV (currently the closing price of the Common Shares on the TSXV on the day prior to an option grant less the maximum discount permitted by the TSXV).

5.

Options may be exercisable for a period of up to five years from the date of grant.

6.

The options are non-assignable and non-transferable.  The options can only be exercised by the optionee as long as the optionee remains an eligible optionee pursuant to the 2006 Plan or within a period of not more than 90 days after ceasing to be an eligible optionee (30 days in the case of a person engaged in investor relations activities) or, if the optionee dies, within one year from the date of the optionee’s death.

7.

Options granted to consultants engaged to perform investor relations activities must be subject to a vesting requirement, whereby such options will vest over a period of not less than 12 months, with a maximum of 25% vesting in any 3 month period.

8.

On the occurrence of a takeover bid, issuer bid or going private transaction, the Board will have the right to accelerate the date on which any option becomes exercisable.

As of November 30, 2006 there were no options outstanding; however, we may in the future grant options to eligible participants in accordance with the 2006 Plan.  Based on the outstanding Common Shares, as at November 30, 2006, options with respect to 3,047,948 Common Shares are available for grant under the 2006 Plan.  A copy of the 2006 Plan is attached to this Annual Report as Exhibit 99.7.

Warrants

As of November 30, 2006, the following transferable common share purchase warrants were outstanding:

(a)

950,000 warrants to purchase up to 950,000 Common Shares at a price of $0.26 per share, exercisable on or before October 21, 2007, issued as part of a non-brokered private placement of 1,000,000 units issued at a price of $0.20 per unit;

(b)

3,999,859 warrants to purchase up to 3,999,859 Common Shares at a price of $1.00 per share, exercisable on or before August 4, 2008, issued as part of a non-brokered private placement of 7,999,718 units issued at a price of $0.56 per unit;

(c)

2,493,741 warrants to purchase up to 2,493,741 Common Shares at a price of $1.50 per share, exercisable on or before August 4, 2008, issued as part of a brokered private placement of 4,987,483 units at a price of $1.25 per unit;

(d)

174,561 warrants to purchase up to 174,561 Common Shares at a price of $1.50 per share, exercisable on or before August 4, 2008, issued to the agent as part of the agent’s commission in connection with a brokered private placement of 4,987,483 units;

(e)

498,748 compensation options to purchase up to 498,748 Common Shares at a price of $1.30 per share, exercisable on or before August 4, 2008, issued to the agent as part of the agent’s commission in connection with the brokered private placement of 4,987,483 units; and

(f)

306,061 warrants to purchase up to 306,061 Common Shares at a price of $1.50 per share, exercisable on or before August 4, 2008, issued as part of a non-brokered private placement of 612,122 units issued at a price of $1.25 per unit.

As at November 30, 2006, the Company’s directors and officers, as a group (11 persons), held warrants to purchase 542,858 Common Shares of the Company.

There are no assurances that any of the options or warrants described above will be exercised in whole or in part.

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

The Company is not, directly or indirectly, owned or controlled by another corporation or by any foreign government, or by any other natural or legal person.

As at November 30, 2006, the aggregate number of Common Shares beneficially owned, directly or indirectly, by our directors and senior officers as a group is 2,912,276 Common Shares, representing 9.50% of our total issued and outstanding Common Shares (assuming exercise of the warrants held by such directors and senior officers).  “Beneficial ownership” means sole or shared power to vote or direct the voting of the Common Shares, or the sole or shared power to dispose, or direct a disposition, of the Common Shares.  More than one person may be deemed to have beneficial ownership of the same securities.

All of the Common Shares, both issued and unissued, are shares of the same class and rank equally as to dividends, voting powers and participation of powers.  Accordingly, there are no special voting powers held by our major shareholders.

7.A

Major Shareholders

As at November 30, 2006, to the knowledge of management, the following are the only persons who beneficially own 5% or more of our issued and outstanding Common Shares:

(1)

Cardero also holds common share purchase warrants to purchase up to 2,000,000 Common Shares at a price of $1.00 until to August 4, 2008.  Assuming the exercise of these warrants, Cardero would then hold 6,000,000 Common Shares, or 18.68% of the then outstanding Common Shares.

(2)

RAB also holds common share purchase warrants to purchase up to 500,000 Common Shares at a price of $1.00 until to August 4, 2008 and to purchase up to 700,000 Common Shares at a price of $1.50 until August 4, 2008.  Assuming the exercise of these warrants, RAB would then hold 3,600,000 Common Shares, or 11.49% of the then outstanding Common Shares.

(3)

Tocqueville also holds common share purchase warrants to purchase up to 340,875 Common Shares at a price of $1.00 until to August 4, 2008 and to purchase up to 477,225 Common Shares at a price of $1.50 until August 4, 2008.  Assuming the exercise of these warrants, Tocqueville would then hold 2,454,300 Common Shares, or 7.92% of the then outstanding Common Shares.

As of December 18, 2006, there were 30,109,515 Common Shares issued and outstanding.  The Company’s shareholder list as provided by Computershare Investor Services, Inc., the Company’s registrar and transfer agent, indicates that the Company had 227 registered shareholders owning Common Shares, of which 68 (29.95%) of these registered shareholders, holding approximately 8,480,060 (28.16%) Common Shares, are residents of the United States, 155 (68.29%) of these registered shareholders, holding approximately 20,948,455 (69.58%) Common Shares, are residents of Canada, and 4 (1.76%) of these registered shareholders, holding approximately 681,000 (2.26%) Common Shares, are residents of jurisdictions other than the United States and Canada.

Control by Foreign Government or Other Persons

To the best of our knowledge, the Company is not directly or indirectly owned or controlled by another corporation, any foreign government, or any other natural or legal person, severally or jointly.

Change of Control

As of the date of this Annual Report, there are no arrangements known to the Company which may at a subsequent date result in a change of control.

7.B

Related Party Transactions

There are no material interests, direct or indirect, of our directors, senior officers or shareholders who beneficially own, directly or indirectly, more than 10% of the outstanding Common Shares or any known associate or affiliates of such persons, in any transaction since May 31, 2005 or in any proposed transaction which has materially affected or will materially affect us except for:

1.

Harbour Pacific Capital Corp., a private company owned by Anton J. Drescher, a director and former President of the Company, provided consulting and accounting services to the Company during the fiscal year ended May 31, 2006, and thereafter until October 1, 2006, when the arrangement was terminated.

2.

Talon LLC, an indirect subsidiary of the Company, has entered into employment agreements with its three employees:  Jeffery Pontius, Russell Myers and Heather Kelly.  These employment agreements are “at will” employment agreements upon normal commercial terms and do not contain any special provisions with respect to termination, severance rights or rights on a change of control of Talon LLC.

3.

The Company has entered into an investor relations consulting agreement with Quatloo Investment Management Inc., whereby Quatloo will provide investor relations services to the Company.  The agreement is for an initial term of one year, and is terminable on 90 days’ notice by either party.  Quatloo will be paid a fee of $4,000 per month.  The president and owner of Quatloo, Quentin Mai, is the Vice-President, Corporate Communications of the Company.

It is the opinion of management that the terms of these transactions are favourable to the Company and in the Company’s best interests.  Management also believes that it could not have obtained, through arms-length negotiations, a more favourable arrangement from an unrelated third party.

Indebtedness of Directors, Officers, Promoters and Other Management

During the fiscal years ended May 31, 2006, 2005, 2004, none of the following were indebted to the Company:

(a)

enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company;

(b)

associates;

(c)

individuals owning, directly or indirectly, an interest in the voting power of the company that gives them significant influence over the Company, and close members of any such individuals' family;

(d)

key management personnel and close members of such individuals' families; or

(e)

enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

7.C

Interests of Experts and Counsel

Not applicable.

ITEM 8.

FINANCIAL INFORMATION

8.A

Consolidated Statements and Other Financial Information

See the Company’s audited consolidated financial statements for the fiscal years ended May 31, 2006, 2005 and 2004.

The Company is not aware of any current or pending material legal or arbitration proceeding to which we are or are likely to be a party or of which any of our properties are or are likely to be the subject.

The Company is not aware of any material proceeding in which any director, senior manager or affiliate is either a party adverse to us or our subsidiaries or has a material interest adverse to us.

The Company has not declared or paid any cash dividends on our capital stock and, we do not currently expect to pay cash dividends in the foreseeable future.

8.B

Significant Changes

There have been no significant changes in the affairs of the Company since the date of our annual financial statements or since the date of our most recent interim financial statements, other than as discussed in this Annual Report.

ITEM 9.

THE OFFER AND LISTING

9.A

Offer and Listing Details

The following table discloses the annual high and low sales prices in Canadian dollars for the Common Shares for the five (5) most recent financial years as traded on the TSXV:

The following table discloses the high and low sales prices in Canadian dollars for the Common Shares for each quarterly period within the two most recent fiscal years and the subsequent interim period as traded on the TSXV:

The following table discloses the monthly high and low sales prices in Canadian dollars for the Common Shares for the most recent six months as traded on the TSXV:

The following table discloses the high and low sales prices in US dollars for the Common Shares for each quarterly period within the two most recent fiscal years and the subsequent interim period as traded on the OTC BB:

The following table discloses the monthly high and low sales prices in US dollars for the Common Shares for the most recent six months as traded on the OTC BB:

9.B

Plan of Distribution

Not applicable.

9.C

Markets

The Common Shares are listed on the TSXV under the trading symbol “ITH.”  There are currently no restrictions on the transferability of the Common Shares under Canadian securities laws.  The Common Shares also trade on the OTC BB under the trading symbol “ITHMF”, and on the Berlin Stock Exchange - Unofficial Regulated Market and the Frankfurt Stock Exchange under the trading symbol “IW9”.

As a foreign private issuer, the Company is not be subject to the reporting obligations of the proxy rules of the Section 14 of the Securities Exchange Act of 1934 or the insider short-swing profit rules of Section 16 of the Securities Exchange Act of 1934.

9.D

Selling Shareholder

Not applicable.

9.E

Dilution

Not applicable.

9.F

Expenses of the Issuer

Not applicable.

ITEM 10.

ADDITIONAL INFORMATION

10.A

Share Capital

Not applicable.

10.B

Memorandum and Articles of Association

The Company’s Memorandum and Articles are incorporated by reference to the information in our registration statement on Form 20-F filed with the Securities and Exchange Commission on February 6, 2001, which became effective April 6, 2001, to which our Memorandum and Articles were filed as exhibits.

On March 29, 2004, the Company Act (British Columbia) (the “Company Act”) was replaced by the BCBCA.  Accordingly, the Company is now subject to the BCBCA and is no longer governed by the Company Act.  There are a number of differences under the BCBCA, which differences are designed to provide greater flexibility and efficiency for British Columbia companies.

Under the BCBCA, every company incorporated under the Company Act must complete a mandatory transition rollover under the BCBCA to substitute a Notice of Articles for its Memorandum within two years of March 29, 2004.  The only information contained in the Notice of Articles is the authorized share structure of the company, the name of the company, the address of the registered and records office of the company, and the names and addresses of the directors of the company.  A copy of the Transition Application and Notice of Articles as filed with the Registrar of Companies for British Columbia is attached to this Annual Report as Exhibit 1.6.

As a pre-existing company under the Company Act, we are subject to provisions contained in the BCBCA known as the “Pre-Existing Company Provisions”.  The Pre-Existing Company Provisions are statutory provisions intended to preserve certain provisions of the Company Act to companies incorporated under the Company Act.  Under the BCBCA, we have the option to replace the Pre-Existing Company Provisions with a new form of Articles to take advantage of the benefits of the BCBCA, provided the shareholders approve the change.

As a public company, the only significant provision of the Pre-Existing Company Provisions that applied to us is the requirement under the Company Act that three-quarters of the votes cast at a general meeting must vote in favour of a proposed special resolution in order for the special resolution to be passed.  Under the BCBCA, the level of approval for special resolutions may be reduced to two-thirds of the votes cast at a general meeting, which is consistent with the corporate statutes in other Canadian jurisdictions.  Management considered the two-thirds approval threshold to be appropriate for fundamental changes requiring approval by special resolution.

Accordingly, at the annual meeting held on October 29^th, 2004, the shareholders approved a special resolution to alter the Notice of Articles to remove the application of the Pre-Existing Company Provisions.  A copy of the amended Notice of Alteration is attached to this Annual Report as Exhibit 1.7.

In addition to deleting the Pre-Existing Company Provisions, the Board were also of the view that it would be in our best interest to adopt a new set of Articles (the “New Articles”) to replace our existing Articles (the “Old Articles”).  The New Articles reflect the flexibility and efficiency permitted under the BCBCA, while maintaining a significant portion of the existing governing provisions.  As a result, most of the changes in the New Articles are minor in nature, and are not substantive changes.  A copy of the New Articles is attached to this Annual Report as Exhibit 1.8.

10.C

Material Contracts

The Company has entered into the following material contracts during the previous two years:

1.

Asset Purchase and Sale and Indemnity Agreement dated June 30, 2006 among AngloGold, Talon Alaska and the Company – see Item 4.B “Business Overview – AngloGold Property Acquisition”.

2.

First Amending Agreement, dated July 26, 2006, among AngloGold, Talon Alaska and the Company amending the AngloGold Agreement – see Item 4.B “Business Overview – AngloGold Property Acquisition”.

3.

Indemnity and Pre-emptive Rights Agreement, dated for reference August 4, 2006 among AngloGold, Talon Alaska and the Company - see Item 4.B “Business Overview – AngloGold Property Acquisition”.

4.

Agency Agreement dated August 4, 2006 between Pacific International Securities Inc. and the Company with respect to the brokered private placement of 4,987,483 units – See Item 4.B “Business Overview – Private Placements”.

5.

Exploration, Development and Mine Operating Agreement dated August 4, 2006 among AngloGold, Talon Alaska and the Company with respect to the LMS property – See Item 4.B “Business Overview – AngloGold Property Acquisition” and Item 4.D Business Overview – Property, Plant and Equipment - Alaskan Mineral Properties - Optioned Properties – LMS”.

6.

Exploration, Development and Mine Operating Agreement dated August 4, 2006 among AngloGold, Talon Alaska and the Company with respect to the Terra property - See Item 4.B “Business Overview – AngloGold Property Acquisition” and Item 4.D “Business Overview – Property, Plant and Equipment – Alaska Mineral properties - Optioned Properties – Terra”.

7.

Mining Exploration Agreement with Option to Lease dated August 14, 2006 between Doyon, Limited and Talon Alaska with respect to the West Tanana property – See Item 4.D “Business Overview – Property, Plant and Equipment – Alaska Mineral Properties – Additional Properties – West Tanana”.

8.

Binding Letter of Intent dated September 11, 2006 among Talon Alaska, Karl Hanneman and the Bergelin Family Limited Partnership with respect to 169 Alaska State mining claims forming part of the Livengood Property – See Item 4.D “Business Overview – Property, Plant and Equipment – Alaska Mineral properties - Sale Properties – Livengood”.

10.D

Exchange Controls

There are no governmental laws, decrees, regulations or other legislation, including foreign exchange controls, in Canada which may affect the export or import of capital or that may affect the remittance of dividends, interest or other payments to non-resident holders of the Company’s securities.  Any such remittances to United States residents, however, are subject to a withholding tax pursuant to the Canada – U.S. Income tax Convention (1980) (the “Treaty”), as amended.

There is no limitation imposed by Canadian law or by our articles or other charter documents on the right of a non-resident to hold or vote Common Shares or preference shares with voting rights (the “Voting Shares”), other than as provided in the Investment Canada Act (the “ICA”).  The ICA requires a non-Canadian making an investment which would result in the acquisition of control of a Canadian business (i.e. the gross value of the assets of which exceed a certain monetary threshold) or an investment to establish a new Canadian business, to identify, notify, or file an application for review with the Investment Review Division of Industry Canada (“IRD”).

The notification procedure involves a brief statement of information about the investment on a prescribed form which is required to be filed with the IRD by the investor at any time up to 30 days following implementation of the investment.  It is intended that investments requiring only notification will proceed without government intervention unless the investment is in a specific type of business activity related to Canada’s cultural heritage and national identity.

If an investment is reviewable under the ICA, an application for review in the form prescribed is normally required to be filed with the IRD prior to the investment taking place and the investment may not be implemented until the review has been completed and the Minister of Industry (“Minister”) (the Minister responsible for Investment Canada) is satisfied that the investment is likely to be of net benefit to Canada.  The Minister has up to 75 days to make this determination.  If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian must not implement the investment or, if the investment has been implemented, may be required to divest himself of control of the business that is the subject of the investment.

10.E

Taxation

Material Canadian Federal Income Tax Considerations

The following summary is based upon the current provisions of the Income Tax Act (Canada) (the “Tax Act”), the current provisions of the regulations promulgated thereunder (the “Regulations”) and the current provision of the Treaty, as at the date hereof and counsel’s understanding of the current administrative practices of the Canada Revenue Agency (the “CRA”). This summary takes into account all specific proposals to amend the Tax Act and the Regulations that have been publicly announced by, or on behalf of, the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”), but does not otherwise take into account or anticipate any changes in law, whether by judicial, governmental or legislative decision or action, or changes in administrative practices of the CRA. No assurances can be given that the Tax Proposals will be enacted as proposed, if at all. This summary does not take into account the tax legislation of any province or territory of Canada or any non-Canadian jurisdiction. Provisions of provincial income tax legislation vary from province to province in Canada and in some cases differ from federal income tax legislation.

The Tax Act contains certain provisions relating to securities held by certain financial institutions (the “mark-to-market rules”). This summary does not take into account the mark-to-market rules and investors that are financial institutions for the purposes of those rules should consult their own tax advisors. This summary is not applicable to investors an interest in which would be a “tax shelter investment”, as defined in the Tax Act, and any such investor should consult their own tax advisers.

The following summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular investor. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, investors should consult their own tax advisors with respect to their particular circumstances, including the application and effect of the income and other taxes of any country, province, territory, state or local tax authority.

The following summary is generally applicable to an investor who, at all relevant times, for purposes of the Tax Act and any applicable income tax treaty or convention, is neither resident nor deemed to be resident in Canada, is not affiliated with the Company for the purposes of the Tax Act, deals at arm’s length with the Company for the purposes of the Tax Act, holds Common Shares as capital property and does not use or hold, and is not deemed to use or hold Common Shares in connection with carrying on business in Canada (a “non-resident shareholder”).  Special rules, which are not discussed in this summary, may apply to a non-resident shareholder that is an insurer that carries on an insurance business in Canada and elsewhere.

Dividends on Common Shares

Generally, dividends (including stock dividends) paid or credited (including amounts on account of or in lieu of dividends) by Canadian corporations to non-resident shareholders are subject to a withholding tax of 25 percent.  However, the Treaty provides for a 15 percent withholding tax on dividends paid to all individuals and corporate residents of the United States qualifying for treaty benefits.  Dividends paid to any non-resident company that beneficially owns at least 10 percent of the voting stock of the payer company are subject to withholding tax at 5 percent.

Dividends (including stock dividends) paid or credited to a holder that is a United States tax-exempt organization, as described in Article XXI of the Treaty, and is entitled to the benefits of Article XXI(2) of the Treaty will not have to pay any Canadian withholding tax in respect of the amount of the dividend.

Disposition of the Company’s Common Shares

A non-resident shareholder will not be subject to tax under the Tax Act on any capital gain realized on a disposition of a Common Share unless the Common Shares constitute “taxable Canadian property” to the non-resident shareholder. Generally, Common Shares will not constitute “taxable Canadian property” to a non-resident shareholder at a particular time provided that (a) the Common Shares are listed on a prescribed stock exchange (which includes the Tier I and Tier II of the TSXV) at that time, and (b) the non-resident shareholder, persons with whom the non-resident shareholder does not deal at arm’s length, or the non-resident shareholder together with persons with whom the non-resident shareholder does not deal at arm’s length, have not owned 25% or more of the issued shares of any of classes (or of any series within a class) of the Company at any time during the 60-month period that ends at that time.  Common Shares may also be taxable Canadian property in certain other circumstances, including where the non-resident shareholder elected to have them treated as taxable Canadian property upon ceasing to be resident in Canada.  Notwithstanding the foregoing, in certain circumstances set out in the Tax Act, Common Shares could be deemed taxable Canadian property.  Non-resident shareholders should consult their own tax advisers to determine whether the Common Shares will constitute taxable Canadian property in their particular circumstances.

Even if the Common Shares are taxable Canadian property to a non-resident shareholder, a taxable capital gain or an allowable capital loss resulting from the disposition of the shares will not be included in computing the non-resident shareholder’s income for the purposes of the Tax Act if the Common Shares constitute “treaty-protected property”.  Common Shares owned by a non-resident shareholder will generally be treaty-protected property if the gain from the disposition of such property would, because of an applicable income tax treaty or convention to which Canada is a signatory, be exempt from tax under the Tax Act.  Non-resident shareholders should consult their own tax advisors to determine whether the Common Shares constitute treaty-protected property in their particular circumstances.

Under the Tax Act, the disposition of a Common Share by a holder may occur in a number of circumstances including on a sale or gift of the Common Share or upon the death of the holder.  There are no Canadian federal estate or gift taxes on the purchase or ownership of the Common Shares.

All non-resident shareholders who dispose of "taxable Canadian property" are required to file a Canadian tax return reporting their gain or loss on the disposition and, subject to an applicable tax treaty exemption, pay the Canadian federal tax due on the disposition.

All non-resident shareholders who dispose of "taxable Canadian property" are also required to obtain an advance clearance certificate in respect of their disposition under section 116 of the Tax Act (the “Section 116 Certificate”).  The purchaser of the Common Shares is obligated to withhold 25% of the gross proceeds on the acquisition of the Common Shares from a non-resident shareholders except to the extent of the certificate limit on the Section 116 Certificate.  A Section 116 Certificate is required even where the gain is exempt from Canadian income tax under a provision of an income tax treaty with Canada, such as the Treaty.  If the non-resident shareholder does not provide a Section 116 Certificate to the purchaser, then the purchaser will be required to withhold and remit to the CRA 25% of the proceeds on account of the non-resident shareholder’s tax obligation, on or before the end of the month following the date of the sale.  The non-resident shareholder may then file a Canadian tax return to obtain a refund of excess withholding tax, if any.

U.S. Federal Income Tax Considerations

The following is a summary of the material anticipated U.S. federal income tax consequences of an investment by a U.S. Holder, as defined below, under U.S. tax laws.  The discussion of U.S. federal income tax considerations is not exhaustive of all possible U.S. federal income tax considerations and does not take into account state, local or foreign tax considerations.  It is not intended to be, nor should it be construed to be, legal or tax advice to any particular holder of Common Shares.  Prospective purchasers of Common Shares are advised to consult with their advisors about the income tax consequences to them of an acquisition of Common Shares.  The discussion of U.S. federal income tax considerations is based on the Internal Revenue Code of 1986, as amended (“Code”), Treasury Department Regulations (whether final, temporary, or proposed), administrative pronouncements of the Internal Revenue Service, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”) and court decisions which are currently applicable and, in each case, as in effect and available, as of the date of this Annual Report.  Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis.  This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive basis.  Further, any variation or difference from the facts or representations recited here, for any reason, might affect the following discussion, perhaps in an adverse manner, and make this summary inapplicable.

U.S. Holders

For purposes of this summary, a “U.S. Holder” is a beneficial owner of Common Shares that, for U.S. federal income tax purposes, is (a) an individual who is a citizen or resident of the U.S., (b) a corporation, or any other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S. or any state in the U.S., including the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

Non-U.S. Holders

For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of Common Shares other than a U.S. Holder.  This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares to non-U.S. Holders.  Accordingly, a non-U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal income, U.S. state and local, and foreign tax consequences (including the potential application of and operation of any tax treaties) of the acquisition, ownership, and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares to U.S. Holders that are subject to special provisions under the Code, including the following U.S. Holders:  (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that are liable for the alternative minimum tax under the Code; (f) U.S. Holders that own Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (g) U.S. Holders that acquired Common Shares in connection with the exercise of employee stock options or otherwise as compensation for services; (h) U.S. Holders that hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code; or (i) U.S. Holders that own (directly, indirectly, or constructively) 10% or more, by voting power or value, of the outstanding shares of the Company.  U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal income, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of Common Shares.

If an entity that is classified as a partnership (or “pass-through” entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such partnership (or “pass-through” entity) and the partners of such partnership (or owners of such “pass-through” entity) generally will depend on the activities of the partnership (or “pass-through” entity) and the status of such partners (or owners).  Partners of entities that are classified as partnerships (or owners of “pass-through” entities) for U.S. federal income tax purposes should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.

U.S. Federal Income Tax Consequences of the Acquisition, Ownership and Disposition of Common Shares

Except as discussed below in the section on passive foreign investment companies, the mere acquisition and holding of Common Shares is not a taxable event for U.S. federal income tax purposes.   The taxable events impacting U.S. Holders generally will be the payment of dividends on Common Shares, the sale or exchange of Common Shares and the repurchase of Common Shares by the Company.

General Taxation of Distributions

The amount of any distribution with respect to Common Shares received (whether actually or constructively) by a U.S. Holders will be includible in such holder’s gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company.  To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first, as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the Common Shares and, thereafter, as gain from the sale or exchange of such Common Shares.  (See more detailed discussion at “Disposition of Common Shares” below).

Reduced Tax Rates for Certain Dividends

For taxable years beginning before January 1, 2011, a dividend paid by the Company generally will be taxed at the preferential tax rates applicable to long-term capital gains if (a) the Company is a “qualified foreign corporation” (as defined below), (b) the U.S. Holder receiving such dividend is an individual, estate, or trust, and (c) such dividend is paid on Common Shares that have been held by such U.S. Holder for at least 61 days during the 121-day period beginning 60 days before the “ex-dividend date.”

The Company generally will be a “qualified foreign corporation” under Section 1(h)(11) of the Code (a “QFC”) if (a) the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or (b) the Common Shares are readily tradable on an established securities market in the U.S.  However, even if the Company satisfies one or more of such requirements, the Company will not be treated as a QFC if the Company is a “passive foreign investment company” (as defined below) for the taxable year during which the Company pays a dividend or for the preceding taxable year.  

As discussed below, the Company believes that it was a “passive foreign investment company” for the taxable year ended May 31, 2006 and expects that it may be a “passive foreign investment company” for the taxable year ending May 31, 2007 (See more detailed discussion at “Additional Rules that May Apply to U.S. Holders—Passive Foreign Investment Company” below).  Accordingly, the Company does not expect be a QFC for the taxable year ending May 31, 2007.  Dividends paid on the Common Shares generally will not be eligible for the “dividends received deduction.”

If the Company is not a QFC, a dividend paid by the Company to a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains).  The dividend rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the dividend rules.

Distributions Paid in Foreign Currency

The amount of a distribution paid to a U.S. Holder in foreign currency generally will be equal to the U.S. dollar value of such distribution based on the exchange rate applicable on the date of receipt.  A U.S. Holder that does not convert foreign currency received as a distribution into U.S. dollars on the date of receipt generally will have a tax basis in such foreign currency equal to the U.S. dollar value of such foreign currency on the date of receipt.  Such a U.S. Holder generally will recognize ordinary income or loss on the subsequent sale or other taxable disposition of such foreign currency (including an exchange for U.S. dollars).

Foreign Tax Credit

U.S. Holders can reduce U.S. federal income tax on dividends by claiming a foreign tax credit for Canadian income tax and certain other foreign taxes incurred on such dividends.  The amount of foreign tax credit allowed is generally the lower of the foreign taxes incurred or the amount of U.S. federal income tax imposed on the dividend.  Unused foreign tax credits can be carried back two years and carried forward five years to reduce U.S. federal income tax on similar foreign source income.  U.S. taxpayers can forego foreign tax credits on foreign taxes and instead elect to take a deduction for foreign taxes in computing taxable income.  The election to take a credit or deduction for foreign taxes paid or incurred is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income.  In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source”.  In addition, this limitation is calculated separately with respect to specific categories of income (including “passive income,” “high withholding tax interest,” “financial services income,” “general income,” and certain other categories of income).  Dividends paid by the Company generally will constitute “foreign source” income and generally will be categorized as “passive income” or, in the case of certain U.S. Holders, “financial services income”.  However, for taxable years beginning after December 31, 2006, the foreign tax credit limitation categories are reduced to “passive income” and “general income” (and the other categories of income, including “financial services income”, are eliminated).  The foreign tax credit rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the foreign tax credit rules.

Sale or Exchange of Common Shares to Third Parties

On the sale or exchange of Common Shares to third parties, a U.S. Holder will recognize gain or loss equal to the difference, if any, between the proceeds received and such holder’s tax basis in the Common Shares sold.  Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if the Common Shares are held for more than one year.

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust.  There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation.  Deductions for capital losses are subject to significant limitations under the Code.  

Repurchase of Common Shares

If the Company repurchases the entire shareholdings of a U.S. Holder in a single transaction, the transaction will be taxed in the same manner as described above for sales and exchanges to third parties.  Complex attribution rules apply in determining whether a transaction involves the entire shareholdings of a holder.  If the Company repurchase less than the entire holdings of a holder of Common Shares, complicated rules determine whether or not the transaction will be taxed as a sale or exchange or as a distribution taxable as a dividend from us (to the extent of accumulated and current earnings and profits).  In the event of a Common Share repurchase, U.S. Holders should consult their own tax advisors to determine the U.S. federal income tax consequences to them of tendering their Common Shares.

Information Reporting; Backup Withholding Tax

Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, or proceeds arising from the sale or other taxable disposition of, Common Shares generally will be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax.  However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules.  Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the information reporting and backup withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If the Company is a “controlled foreign corporation” or a “passive foreign investment company” (each as defined below), the preceding sections of this summary may not describe the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.

Controlled Foreign Corporation

The Company generally will be a “controlled foreign corporation” under Section 957 of the Code (a “CFC”) if more than 50% of the total voting power or the total value of the outstanding Common Shares is owned, directly or indirectly, by citizens or residents of the U.S., domestic partnerships, domestic corporations, domestic estates, or domestic trusts (each as defined in Section 7701(a)(30) of the Code), each of which own, directly or indirectly, 10% or more of the total voting power of the outstanding Common Shares (a “10% Shareholder”).

If the Company is a CFC, a 10% Shareholder generally will be subject to current U.S. federal income tax with respect to (a) such 10% Shareholder’s pro rata share of the “subpart F income” (as defined in Section 952 of the Code) of the Company and (b) such 10% Shareholder’s pro rata share of the earnings of the Company invested in “United States property” (as defined in Section 956 of the Code).  In addition, under Section 1248 of the Code, any gain recognized on the sale or other taxable disposition of Common Shares by a U.S. Holder that was a 10% Shareholder at any time during the five-year period ending with such sale or other taxable disposition generally will be treated as a dividend to the extent of the “earnings and profits” of the Company that are attributable to such Common Shares.  If the Company is both a CFC and a “passive foreign investment company” (as defined below), the Company generally will be treated as a CFC (and not as a “passive foreign investment company”) with respect to any 10% Shareholder.

The Company does not believe that it has previously been, or currently is, a CFC.  However, there can be no assurance that the Company will not be a CFC for the current or any subsequent taxable year.

Passive Foreign Investment Company Considerations

It is likely that the Company will be classified as a passive foreign investment company (“PFIC”) from time to time for U.S. federal income tax purposes.  A non-U.S. corporation is classified as a PFIC whenever it satisfies either the asset test or the income test described below.

A non-U.S. corporation is a PFIC if 50% or more of the average value (or on the adjusted tax basis of such assets, if the Company is not publicly traded and either is a “controlled foreign corporation” or makes an election) of its assets consists of assets that produce, or are held for the production of, passive income or if 75% or more of its gross income is passive income.  “Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.  However, for transactions entered into after December 31, 2004, gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation’s commodities are (a) stock in trade of such foreign corporation or other property of a kind which would properly be included in inventory of such foreign corporation, or property held by such foreign corporation primarily for sale to customers in the ordinary course of business, (b) property used in the trade or business of such foreign corporation that would be subject to the allowance for depreciation under Section 167 of the Code, or (c) supplies of a type regularly used or consumed by such foreign corporation in the ordinary course of its trade or business.

For purposes of the PFIC tests described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another foreign corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other foreign corporation and (b) received directly a proportionate share of the income of such other foreign corporation.  In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents, or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.  

In addition, if the Company is PFIC and own shares of another foreign corporation that also is a PFIC, under certain indirect ownership rules, a disposition by the Company of the shares of such other foreign corporation or a distribution received by the Company from such other foreign corporation generally will be treated as an indirect disposition by a U.S. Holder or an indirect distribution received by a U.S. Holder, subject to the rules discussed above.  To the extent that gain recognized on the actual disposition by a U.S. Holder of Common Shares or income recognized by a U.S. Holder on an actual distribution received on Common Shares was previously subject to U.S. federal income tax under these indirect ownership rules, such amount generally should not be subject to U.S. federal income tax.

Because the PFIC income test is a gross income test, losses from operations or administrative expenses do not reduce passive income for purposes of the PFIC income test.  The Company has had, in past years, interest income and gain from the sale of marketable securities and no other operating income, and may have such situations in the future.  Thus, the Company believes that it was a PFIC for the taxable year ending May 31, 2006 based on this gross income test and would be classified as a PFIC from time to time in the future for U.S. federal income tax purposes.  The determination of whether the Company was, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations.  In addition, whether the Company will be a PFIC for the taxable year ending May 31, 2007 and each subsequent taxable year depends on the assets and income of the Company over the course of each such taxable year and, as a result, cannot be predicted with certainty as of the date of this Annual Report.  Accordingly, there can be no assurance that the IRS will not challenge the determination made by the Company concerning its PFIC status or that the Company was not, or will not be, a PFIC for any taxable year.

U.S. Taxpayers holding shares classified as PFIC stock are subject to one of three special tax regimes with respect to the PFIC stock.  Such shareholders can elect to be taxed under either the under the Qualified Electing Fund (“QEF”) Regime or the Market-to- Market Regime.  Failure to qualify for and elect either of these two regimes results in being taxed under the Excess Distribution Regime.

Under the Excess Distribution Regime, Common Shares are considered PFIC stock in the first year that the Company becomes a PFIC with respect to that particular holder and all subsequent years.  Actual distributions from the Company are classified as regular distributions or excess distributions.  An actual distribution is an excess distribution to the extent the total of actual distributions during a taxable year exceeds 125% of the average of actual distributions received in the three preceding years (or during a U.S. Holder’s holding period for the Common Shares, if shorter).  Any gain recognized on the sale or the disposition of Common Shares, and any excess distributions for any year are allocated rateably over all the days during which the holder held the Common Shares.  Amounts allocated to prior years during which the Company was a PFIC are subject to a special tax calculation consisting of the highest rate of tax for the year to which allocated and an interest charge as if such tax were an underpayment of taxes for the year allocated.  This special tax, known as the Deferred Tax Amount, is added to the holder’s regular tax liability.  A non-corporate U.S. Holder must treat any such interest paid as “personal interest” which is not deductible.  All other portions of the gains and excess distributions are added to the regular distributions and taxed as dividend income according to the general rules above.  Foreign taxes incurred with respect to an excess distribution are allocated in the same manner as the excess distributions.  Foreign taxes allocable to excess distributions used to determine the Deferred Tax Amount can be credited against the Deferred Tax Amount otherwise payable, but any foreign taxes in excess of the Deferred Tax Amount are permanently lost rather than generating foreign tax credits that can be carried forward to future years.  Foreign taxes allocable to the remainder of the excess distributions are subject to the general rules for foreign tax credits discussed above.

If the Company is a PFIC for any taxable year during which a non-electing U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC with respect to such U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent years.  A non-electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain which will be taxed according to the rules above, as if such Common Shares were sold on the last day of the last taxable year for which the Company was a PFIC.

A U.S. Taxpayer can avoid the Excess Distribution Regime by electing to be taxed under the QEF Regime in the first year in which the Company qualifies as a PFIC while the Common Shares are held by such holder.  The Company must have agreed to make available to holders the information necessary to determine the inclusions under the QEF rules and to assure compliance in order for the holder to be able to make a QEF election.  Under a QEF election, the holder must include in its taxable income its pro rata share of the Company’s earnings and profits divided into ordinary income and net capital gain, whether or not such amounts are actually distributed.  Actual distributions from the Company paid out of earnings and profits previously included as income under the QEF election are treated as a tax-free return of capital.  Under the QEF election, a holder’s basis in the Common Shares is increased by any amount included in the holder’s income under the QEF rules and decreased by any distributed amount treated as a tax free return of capital.  Gains on sales or other dispositions of PFIC stock under the QEF regime are generally taxable as capital gain income under the general rules discussed above.

A holder electing to be taxed under the QEF Regime may make a further election to defer paying taxes due under the QEF Regime until actual distributions are made from the PFIC to the holder.  Interest will be charged on such deferred tax liability until the liability is actually paid at the normal rate for underpayments of tax.

The procedure for making a QEF election, and the U.S. federal income tax consequences of making a QEF election, will depend on whether such QEF election is timely.  A QEF election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for the Common Shares in which the Company was a PFIC.  A U.S. Holder may make a timely QEF election by filing the appropriate QEF election documents at the time such U.S. Holder files a U.S. federal income tax return for such first year.  However, if the Company was a PFIC in a prior year, then in addition to filing the QEF Election documents, a U.S. Holder must elect to recognize (a) gain (which will be taxed under the rules described above) as if the Common Shares were sold on the qualification date or (b) if the Company was also a CFC, such U.S. Holder’s pro rata share of the post-1986 “earnings and profits” of the Company as of the qualification date.  The “qualification date” is the first day of the first taxable year in which the Company was a QEF with respect to such U.S. Holder.  The election to recognize such gain or “earnings and profits” can only be made if such U.S. Holder’s holding period for the Common Shares includes the qualification date.  By electing to recognize such gain or “earnings and profits,” such U.S. Holder will be deemed to have made a timely QEF election.  In addition, under very limited circumstances, a U.S. Holder may make a retroactive QEF election if such U.S. Holder failed to file the QEF election documents in a timely manner.

A QEF election will apply to the taxable year for which such QEF election is made and to all subsequent taxable years, unless such QEF election is invalidated or terminated or the IRS consents to revocation of such QEF election.  If a U.S. Holder makes a QEF election and, in a subsequent taxable year, the Company ceases to be a PFIC, the QEF election will remain in effect (although it will not be applicable) during those taxable years in which the Company is not a PFIC.  Accordingly, if the Company becomes a PFIC in another subsequent taxable year, the QEF election will be effective and the U.S. Holder will be subject to the QEF rules described above during any such subsequent taxable year in which the Company qualifies as a PFIC.  In addition, the QEF election will remain in effect (although it will not be applicable) with respect to a U.S. Holder even after such U.S. Holder disposes of all of such U.S. Holder’s direct and indirect interest in the Common Shares.  Accordingly, if such U.S. Holder reacquires an interest in the Company, such U.S. Holder will be subject to the QEF rules described above for each taxable year in which the Company is a PFIC.

Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the availability of, and procedure for making, a QEF election.  U.S. Holders should be aware that there can be no assurance that the Company will satisfy record keeping requirements that apply to a QEF, or that the Company will supply U.S. Holders with information that such U.S. Holders require to report under the QEF rules, in event that the Company is a PFIC and a U.S. Holder wishes to make a QEF election.

U.S. Taxpayers holding shares can also avoid the Excess Distribution Regime by electing to be taxed under the Market-to Market-Regime as long as the shares are “marketable stock” as defined in the Code.  However, if a U.S. Holder makes a Mark-to-Market Election after the beginning of such holder’s holding period for the Common Shares and such holder has not made a timely QEF Election, the rules above will apply to certain dispositions of, and distributions on, the Common Shares.  The Common Shares generally will be “marketable stock” if the Common Shares are regularly traded on a qualified exchange or other market.  For this purpose, a “qualified exchange or other market” includes (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, surveillance, and other requirements designed to prevent fraudulent and manipulative acts and practices, remove impediments to and perfect the mechanism of a free, open, fair, and orderly market, and protect investors (and the laws of the country in which the foreign exchange is located and the rules of the foreign exchange ensure that such requirements are actually enforced) (ii) the rules of such foreign exchange effectively promote active trading of listed stocks.  If the Common Shares are traded on such a qualified exchange or other market, the Common Shares generally will be “regularly traded” for any calendar year during which the Common Shares are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.

Under the Market-to-Market Regime, a holder includes in taxable income an amount equal to the excess, if any, of a) the fair market value of the Common Shares as of the close of such taxable year over b) such holder’s tax basis in the Common Shares.  A U.S. Holder that makes a Mark-to-Market election will be allowed a deduction in an amount equal to the lesser of (a) the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in the Common Shares over (ii) the fair market value of such Common Shares as of the close of the taxable year or (b) the excess, if any, of (i) the amount included in ordinary income because of such Mark-to-Market election for prior taxable years over (b) the amount allowed as a deduction because of such election for prior taxable years.

A U.S. Holder that makes a Mark-to-Market election generally also will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market election.  In addition, upon a sale or other taxable disposition of Common Shares, a U.S. Holder that makes a Mark-to-Market election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market election for prior taxable years over (b) the amount allowed as a deduction because of such Mark-to-Market election for prior taxable years).

A Mark-to-Market election applies to the taxable year in which such Mark-to-Market Election is made and to each subsequent taxable year, unless the Common Shares cease to be “marketable stock” or the IRS consents to revocation of such election.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the availability of, and procedure for making, a Mark-to-Market election.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations).  However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which Common Shares are transferred.

Use of PFIC shares as security for a loan constitutes a disposition of the shares for tax purposes.  Holders are advised to consult their own personal tax advisors before entering into such transactions.

The PFIC rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.

Repurchase of Common Shares

If the Company repurchases Common Shares from a holder thereof (other than a purchase of Common Shares on the open market in a manner in which Common Shares would be purchased by any member of the public in the open market), the amount paid by us that exceeds the “paid-up capital” of the Common Shares purchased will be deemed by the Tax Act to be a dividend paid by the Company to the holder of Common Shares.  The paid-up capital of the Common Shares may be less than the holder's cost of its Common Shares.  The tax treatment of any dividend received by a non-resident shareholder of Common Shares has been described above under “Dividends on Common Shares.”

A holder of Common Shares will also be considered to have disposed of its Common Shares purchased by the Company for proceeds of disposition equal to the amount received or receivable by the holder on the purchase, less the amount of any dividend as described above.  As a result, the holder of Common Shares will generally realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition, net of any costs of disposition and less the amount of any deemed dividends, exceed (or are exceeded by) the adjusted cost base of the Common Shares.  The tax treatment of any capital gain or capital loss by a non-resident shareholder has been described above under “Disposition of Common Shares”.

10.F

Dividends and Paying Agents

Not applicable.

10.E

Statement by Experts

The Company’s auditors for financial statements for each of the preceding three years was MacKay LLP, Chartered Accountants, of #1100, 1177 West Hastings Street, Vancouver, British Columbia, V6E 4T5, Canada.  Their audit reports for the fiscal years ended May 31, 2006, 2005 and 2004 are included with the related financial statements in this Annual Report statement with their consent.

Paul Klipfel, Ph.D. of Mineral Resource Services, Inc. prepared the 43-101 compliant technical reports as furnished to the Commission on Form 6-K on August 9, 2006 on the Livengood, Terra and LMS properties.  Excerpts and summaries from such reports are included with the consent of Mr. Klipfel under Item 4.D – Property, Plant and Equipment.  Mr. Klipfel resides at 4861 Ramcreek Trail, Reno, Nevada, USA 89509.

10.F

Documents on Display

Data on the Company mineral properties may be viewed at our head office located at Suite 1901, 1177 West Hastings Street, Vancouver, B.C., V6E 2K3 and on our website at www.internationaltowerhill.com.

Material contracts and publicly available corporate records may be viewed at the Company’s registered and records office located at Suite 2300, 1055 Dunsmuir Street, Vancouver, B.C., V7X 1J1.

The Company filed a registration statement on Form 20-F with the Securities and Exchange Commission in Washington, D.C. (Registration No. 000-30084) on February 6, 2001, which became effective April 6, 2001.  The Registration Statement contains exhibits and schedules.  Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete.  If the contract or document is filed as an exhibit to the Registration Statement, the contract or document is deemed to modify the description contained in this Annual Report.  The exhibits must be reviewed by themselves for a complete description of the contract or documents.

The Company’s registration statements may be inspected and copied, including exhibits and schedules, and the reports and other information as filed with the Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934 at the public reference facilities maintained by the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, Room 1024, N.W., Washington, D.C. 20549.  Copies of such material may also be obtained from the Public Reference Section of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.  Information may be obtained regarding the Washington D.C. Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by contacting the Securities and Exchange Commission over the Internet at its website at http://www.sec.gov.

10.I

Subsidiary Information

Not applicable.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a small business issuer as defined in Rule 405 of the Securities Act of 1933, as amended, and Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and therefore need not provide the information requested by this item.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

14.A-D

Material Modifications to the Rights of Security Holders

There have no material modifications to the rights of security holders since the adoption of new Articles in 2004.

14.E

Use of Proceeds

Not applicable

ITEM 15.

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, The Company’s disclosure controls and procedures were adequately designed and are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms.

In addition, the Company’s Chief Executive Officer and Chief Financial Officer have determined that the disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s annual report on internal control over financial reporting

The Company is currently considered a non-accelerated filer pursuant to Rule 12b-2 of the Exchange Act.  Therefore, the Company is not currently required to make statements regarding the effectiveness of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act.  However, the Company and its management, including its Chief Executive Officer and Chief Financial Officer, recognize that the Company, as a small business issuer, will likely be required to comply with disclosure report requirements of Section 404 beginning with the fiscal year ending May 31, 2008.

There were no changes in the Company’s internal control over financial reporting or in other factors that could significantly affect the Company’s internal control over financial reporting during 2006.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud.  A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

The Board has determined that the Company has at least one audit committee financial expert (as defined in Item 16A of Form 20-F).  Anton J. Drescher is a Certified Management Accountant.  Rowland Perkins and Gerhard Drescher have the industry experience necessary to understand and analyze financial statements, as well as the understanding of internal controls and procedures necessary for financial reporting.

ITEM 16B.

CODE OF ETHICS

The Company has adopted a Code of Business Conduct and Ethics, effective September 22^nd, 2006 (the “Code”).  A copy of the Code is attached as Exhibit 99.5 to this Annual Report.  A copy is also posted on our website at www.internationaltowerhill.com.  Any person may obtain without charge, upon written request, a copy of such Code of Business Conduct and Ethics by contacting the Vice-President and General Counsel at Suite 1901, 1177 West Hastings Street, Vancouver, BC, V6E 2K3.

The Code sets out the conduct expected of all Company directors officers and employees, a summary of which is set forth below.

The Company insists on honest and ethical conduct by all of our directors, officers, employees and other representatives.  We place the highest value on the integrity of our directors, officers and employees and demand this level of integrity in all our dealings.  We insist on not only ethical dealings with others, but on the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.

Directors, officers and employees are required to deal honestly and fairly with our business partners, competitors and other third parties, which includes prohibiting bribes, kickbacks and other forms of improper payment, including gifts or favours and limited marketing and entertainment expenditures.

Company directors, officers and employees are prohibited from being involved in any activity that creates or gives the appearance of a conflict of interest between their personal interests and our interests, including acting as a consultant to, or a director, officer or employee with, an outside business that competes with us or supplies products or services to us (other than professional services such as legal, accounting, geological or financial advisory services), unless specific permission has been provided by our Ethics Officer or the Chair of the Audit Committee.  Personal loans or services from any entity with which we do business are prohibited, as well any person loans or guarantees of obligations from us, except as legally permissible.  No immediate family members, including spouses, children, parents, siblings and persons sharing the same home shall conduct business on our behalf.  Directors, officers, and employees must notify our Ethics Officer or the Chair of the Audit Committee of the existence of any actual or potential conflict of interest.

Company directors, officers and employees are entrusted with our confidential information and with the confidential information of our business partners and shall not discuss confidential information with or in the presence of any unauthorized persons, including family members and friends, shall use the confidential information only for our legitimate business purposes and not for personal gain, and shall not use our property or resources for any personal benefit or the personal benefit of anyone else, which property includes our internet, email, and voicemail services, which should be used only for business related activities, and which we may monitor at any time without notice.

The Company is committed to providing our shareholders and investors with full, fair, accurate, timely and understandable disclosure in the reports that we file with the United States Securities and Exchange Commission and with the Canadian provincial securities regulators.  Our directors, officers and employees shall not make false or misleading entries in our books and records for any reason, nor condone any undisclosed or unrecorded bank accounts or assets established for any purpose.  They shall comply with generally accepted accounting principles at all times and notify our Chief Financial Officer if there is an unreported transaction.  A system of internal controls shall be maintained that will provide reasonable assurances to our management that material information about our business is made known to management, particularly during the periods in which our periodic reports are being prepared.

The Company will comply with all laws and governmental regulations that are applicable to our activities, and expect all our directors, officers and employees to obey the law.  Our directors, officers and employees are prohibited from trading our securities while in possession of material, non-public information.

Compliance with the Code is the individual responsibility of every director, officer and employee.  We attempt to foster a work environment in which ethical issues and concerns may be raised and discussed with supervisors or with others without the fear of retribution.

The Board and Audit Committee have established the standards of business conduct contained in the Code and oversee compliance with the Code.  Additionally, we have appointed our Vice-President and General Counsel to serve as our Ethics Officer to ensure adherence to the Code.  While serving in this capacity our Ethics Officer reports directly to the Board.

Directors, officers, and employees must report, in person or in writing, any known or suspected violations of laws, governmental regulations or the Code to either our Ethics Officer or the Chair of the Audit Committee.  Additionally, directors, officers, and employees may contact our Ethics Officer or the Chair of the Audit Committee with a question or concern about the Code or a business practice.  Any questions or violation reports will be addressed immediately and seriously, and can be made anonymously.

The Company will not allow any retaliation against a director, officer or employee who acts in good faith in reporting any violation.  Our Ethics Officer will investigate any reported violations and will determine an appropriate response, including corrective action and preventative measures, involving the Chair of the Audit Committee or Chief Executive Officer when required.  All reports will be treated confidentially to every extent possible.

Directors, officers and employees that violate any laws, governmental regulations or the Code will face appropriate, case specific disciplinary action, which may include demotion or immediate discharge.

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table lists the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None.

ITEM 16E.

PURCHASERS OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

The Company did not repurchase any Common Shares in the fiscal year ended May 31, 2006.

PART III

ITEM 17.

FINANCIAL STATEMENTS

See the Financial Statements and Exhibits listed in Item 19 hereof and filed as part of this annual report.

The Company's consolidated financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP).  Reference is made to Note 10 of the Consolidated Financial Statements of the Company included herein for a discussion of the material differences between Canadian GAAP and U.S. GAAP, and their effect on the Company’s financial statements.

ITEM 18.

FINANCIAL STATEMENTS

The Company elected to provide consolidated financial statements pursuant to Item 17.

ITEM 19.    EXHIBITS