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Q2 - 2002

As at June 30th  (in thousands of dollars)

June 30,




Dec. 31,



Cash 5 114
Accounts receivable 5 134
Prepaid expenses          5        20
Total current assets 15 268
Cash for Exploration Expenditures - 116
Exploration and Development Projects (note 2) 17,425 17,260
Other Assets       150       156
  $ 17,590 $17,800
Accounts payable and accrued liabilities $  463 288
Mortgage Payable (note 5)       500       500 
963 778
Convertible notes (note 3)       200          -
1,163 788
Share capital 54,050 53,853
Special   Warrants - 197
Contributed surplus 759 759
Deficit (38,382) (37,797)
Net shareholders' equity   16,427   17,012
$ 17,590 $17,800


(unaudited in thousands of dollars)





                3 mo ended

6 mo ended

                June 30      June 30
Cash from (used by)
Operating activities
Net loss for the period  $ (471) $ (452)  $ (585) $ (589)
Item not affecting cash - - - -
Depreciation 3 5 (6) 10
Write-down E&D projects      300        -      300        -
  168 (447) (279) (579)
Changes in non-cash working capital         8    177       37    175
Cash used by operating activities (160) (270) (242) (404)
Financing activities
Convertible notes 200 - 200 -
Exercise of share options           -     100         -    100
Cash provided by financing activities 200 100 200 100
Investing activities
Cash for exploration expenditure - - 116 -
Additions to E&D projects (55) (252) (183) (994)
Equipment purchases           -       (2)         -      (2)
Cash used by investing activities (55) (254) (67) (996)
Net decrease  in cash this period (15) (424) (109) (1,300)
Cash beginning of period         20     843      114   1,719
Cash end of period $ 5 $ 419 $ 5 $ 419


(unaudited in thousands of dollars, except per share amounts)


2002 2001 2002 2001


Three mo ended June 30

Six mo ended June 30


Interest income

$ - $ 5 $ 3 $ 23



Costs and Expenses

General and administrative

168 452 282 602


3 5 6 10

Write-down of E&D Projects

      300         -      300         -


471 457 588 612



Net loss for period

471 452 585 589

Deficit, beginning of period

37,911 33,845 37,797 33,708

Deficit, end of period

$  38,382 34,297 38,382 $  34,297



Loss per share -  basic and fully diluted

$ 0.009 $0.009 $0.011 $ 0.011



Average outstanding common shares

54,266,740 51,707,252 54,266,740 51,643,186


June 30, 2002  (unaudited)

1. General

(a) The consolidated interim financial statements of the Company are prepared by management using accounting principles generally accepted in Canada for interim financial statements and reflect the accounting principles set out in the notes to the Company's consolidated financial statements as of December 31, 2001, appearing in the Company's 2001 Annual Report. These interim financial statements should be read in conjunction with those annual financial statements and the notes thereto.

The results of operations and cash flows for the current periods are not necessarily indicative of the results to be expected for the full year.

(b) Going Concern

These consolidated financial statements have been prepared using accounting principles applicable to a going concern entity, which assume that the entity will continue operating in the future and be able to realize its assets and discharge its liabilities in the normal course of its business. The Company's exploration and development projects are in their early stages and, consequently, the Company, having no operating revenues to sustain its activities, has been wholly dependent on equity financings and the optioning of resource properties for its funds.   

Several adverse conditions cast substantial doubt on the validity of the Company’s application of the going concern principle.  The conditions include ongoing losses and property write-downs, working capital deficiencies and insufficient cash reserves to meet the Company’s minimum commitments. Therefore, the Company’s ability to continue its operations, its planned development activities, and maintain its interest in its projects, is dependent upon the satisfactory completion of a financing or optioning or sale of property interests to provide the required funds.  Should the company not be able to obtain the necessary financing and should the Company not be able to continue as a going concern, then adjustments would be required with respect to the carrying value of the Company’s assets and liabilities, reported net loss, and the balance sheet classifications used.

2.  Exploration and Development Projects


June 30, 2002

Dec. 31, 2001

(in thousands)

Rainy River

    $  11,684

    $  11,429

Lac Rocher



Mel Properties



Stong Lake/Moak






     $  17,425

    $  17,260

3.  Convertible Notes

During the period $200,000 of convertible notes were issued which are secured by a pledge of the Minago property leases.  The notes bear interest at 9% per year, payable annually and mature July 9, 2007.  The notes may be converted into common shares of the Company based on $0.19 per share.

4.       Share Capital

At August 20, 2002, the issued and outstanding common shares of the Company totalled 54,266,740 and on a fully diluted basis there would be 59,216,724 common shares outstanding.

4.       Subsequent Event

Subsequent to the end of the period, the mortgage loan of $500,000 was repaid by the issuance of 2,500,000 common shares of the Company.

On August 27, 2002, Mr. Frank Crothers, the Company's largest shareholder, was granted and exercised stock options to purchase 600,000 shares at $0.185 to provide funding for the preliminary exploration program at Prairie Lake and other corporate expenses.


Six Months Ended June 30, 2002

This MD&A reflects the period ended June 30, 2002 and should be read in conjunction with the MD&A included in the 2001 Annual Report.


   During the three months and the six months ended June 30, 2002, the Company incurred losses of $471,000 and $585,000, respectively, compared to losses of $452,000 and $589,000 in the corresponding periods of 2001.  In addition, interest income on excess cash balances continued to decline.  The current year losses included a $300,000 write-down of the Strong Lake/Moak project.  General and administrative expenses have been significantly lower due to reduced activity. 

Expenditures on exploration projects for the three months and the six months ended June 30, 2002 were $55,000 and $183,000, respectively, compared to expenditures of $252,000 and $994,000 in the corresponding periods of 2001.  The significant reduction in project expenditures in 2002 is principally due to the Company’s limited cash resources and adverse market conditions, which are not conducive to equity financings.  In view of these conditions, the Company is currently evaluating its financing alternatives and reviewing the priorities of the various projects.


Having no producing properties, the Company has financed its activities through sales of its equity securities.  As at December 31, 2001, cash balances of $114,000 were available to finance the Company's activities.  In the first six months of 2002, operating activities used $242,000 and $67,000 was spent on exploration projects offset by the result of a cash balance of $5,000 at June 30, 2002; Issue of convertible notes during the second quarter resulted in proceeds of $200,000 secured by a pledge of the Minago property leases. Subsequent to the end of the period, the $500,000 mortgage loan, originally repayable in November 2002, was repaid by the issuance of 2,500,000 common shares of the Company.


Following is a brief summary of exploration, development and available resources:

PRAIRIE LAKE TANTALUM - exploration work starting in September 2002:

An exploration program seeking high grade tantalum has been launched on our Prairie Lake property, located north of Lake Superior, about 30 miles NW of Marathon, Ontario.  This work is based on research studies conducted by Prof. D.W. Watkinson of Carleton University (see Press Release dated May 28th for details).  The result of the Carleton studies proved to be quite remarkable.  Dr. Watkinson identified rock types from the SW quadrant of the Complex grading 8 to 10 wt% Ta2O5 in pyrochlore.  The host rock may carry up to 10% pyrochlore.  Favourable results from this work can be expected to lead to a major extension of the program to evaluate the economic potential of the entire complex, which measures about 1,250 acres.  The Prairie Lake complex hosts significant metals (tantalum, niobium, uranium) and by-product industrial minerals wollastonite, apatite and high-grade calcium carbonate. Necessary equipment is being assembled and field crews will be on the ground immediately following the Labour Day holiday.

MEL PROJECT - with INCO at Thompson, Manitoba:

Since last reporting on the Mel claim group, interpretation of the winter 2002 geophysical results were received and are very promising.  Both INCO and Nuinsco have proposed drilling a number of strong conductors located along the Thompson nickel belt just north of INCO's mining and smelting complex.  An extensive diamond drill program is planned for the winter months of 2002-2003. 

RAINY RIVER - Drill Program on hold:

Continuation of testing high-priority MT geophysical anomalies within altered volcanics along the Rainy River greenstone belt has been deferred. Several conductive zones have been delineated along the Pinewood River and a deep anomaly lies adjacent to the nickel-enriched base-metal #34 Zone.  Further diamond drill testing will get underway as soon as funding has been arranged.


    On August 27, 2002, Mr. Frank Crothers, the Company's largest shareholder, was granted and exercised stock options to purchase 600,000 shares at $0.185 to provide funding for the preliminary exploration program at Prairie Lake and other corporate expenses.

August 28, 2002