The Mission Group Regulatory News (TMG)

27 Jun 2007 14:30

Thistle Mining Inc.27 June 2007 THISTLE ANNOUNCES RESULTS FOR THE FIRST QUARTER ENDING MARCH 31, 2007 Toronto June 27, 2007 - Thistle Mining Inc. (AIM: TMG ) Overview Thistle Mining Inc ("Thistle" or the "Company") (AIM:TMG) wishes to announcethat the Company's unaudited Consolidated Financial Statements and ManagementsDiscussion and Analysis ("MD&A") for the three month period ended March 31, 2007will be filed on SEDAR today. All dollar references in this announcement are inUS $. A full copy of the Company's 2007 first quarter report can be obtainedfrom the Company's website: www.thistlemining.com. On March 19, 2007 the Company disposed of its interest in the Masbate Goldproject located in the Philippines to CGA Mining Limited ("CGA") (ASX: CGX) fora consideration of $51 million of which $30 million represents a cashconsideration and US$21 million being payable in ordinary shares of CGA. Thistransaction resulted in an extraordinary gain of $23.9 million or $0.52 pershare and has allowed the Company to repay $26.7 million of the purchaseconsideration to MC Resources Limited ("MC") and Casten Holdings Limited ("Casten") as part payment of short term debt owing. Following this payment, theamount of principal, interest and withholding taxes outstanding on April 1, 2007amounted to $54.3 million. For the quarter Philippine Gold Ltd, a wholly ownedUK subsidiary of the Company, and the Company's other interests in the MasbateGold project have been classified as a discontinued operation with its financialresults separately disclosed. Following the CGA transaction Thistle's onlyremaining principal asset (other than the CGA Shares) is President Steyn GoldMines (Free State) (Pty) Limited ("PSGM") which owns and operates the PresidentSteyn Gold Mine in the Republic of South Africa. Gold production at PSGM continues to be challenging due to a lack of operationalflexibility compounded by infrastructure problems. Sales of gold for the second,third and fourth quarters of 2007 are forecast at approximately 31,200, 39,800and 37,000 oz's at cash costs of approximately $670, $564 and $558 per ozrespectively assuming an exchange rate of 7.25 ZAR:US$ for the second half of2007. Traditionally the second half of the year is more productive than thefirst half. Gold production from PSGM in 2007 is anticipated to be approximately137,200 oz, at a cash cost and total cost of approximately $605 to $615 and $645to $655 per oz respectively assuming an average exchange rate of 7.20 ZAR:US $for 2007. In April and May, 2007 a framework was laid down for restructuring the remainingdebt owing to MC and Casten (refer to Highlights for the quarter ending March31, 2007 and Subsequent events). The Board has also decided to embark on aprocess to consider the future of PSGM. This could lead to the divestiture ofPSGM. The high risk nature of operating a single gold mine on a stand-alonebasis and inability at present of PSGM to self-fund all the capital expenditureneeded to upgrade infrastructure, create more operational flexibility, developthe Golden Triangle and explore the Eldorado reefs indicates that it could beappropriate to integrate PSGM into a diversified South African gold miningcompany. The Company is in the process of finalising arrangements with a SouthAfrican based investment banker to act as its financial advisor in this processand is currently in early stage discussions with an interested third party. TheCompany hopes to conclude agreements relating to the future of PSGM by September2007. These agreements would however be subject to shareholder approval. On June 27, 2007, MC and Casten agreed to provide a credit line of up to$666,600 per month for the three month period to September 2007 during whichperiod management hope to conclude divestiture or other agreements for PSGM. Thecredit line will be available for the purpose of funding corporate costsincluding the cost of strategic initiatives relating to PSGM and to provide acontingency in the event of below forecast performance by PSGM. The credit lineis contingent on improved performance at PSGM to levels of production of notless than 396, 396 and 384 kg's of gold for the months of July, August andSeptember 2007 respectively, adequate progress in strategic initiatives relatingto PSGM and certain other conditions. Given recent production problemsexperienced by PSGM there can be no assurance that these conditions will besatisfied. Without the line of credit there may be a material uncertainty whichmay cast doubt on the ability of the Company and its subsidiaries to continue asgoing concerns. Having reviewed the cash flow forecasts of the Company and its subsidiaries,given agreement to move forward with the Plan or Standstill Agreement whicheveris applicable and given the credit line entered into with MC and Casten on June27, 2007 for $666,600 per month for the three month period up to September 2007during which period management expect to conclude divestiture or otheragreements for PSGM, it is management's belief that existing cash resources, netcash to be generated from operations and the sale of assets and the credit lineprovided, will be sufficient to meet the Company's anticipated requirements. In making this statement management has assumed that current market prices willprevail, that the revised production forecasts for the year will be met and thatthe restructuring under the Plan will be successful or the divestiture or otheragreements for PSGM will be concluded by the end of September 2007. Accordinglythe financial statements have been prepared on the basis of accounting policiesapplicable to a going concern. Should PSGM not be successful in achieving sufficient levels of profitableoperations within the contingency provided in the credit line entered into withMC and Casten on June 27, 2007, and / or there be a material award adverse toPSGM under the M Hall and Associates claim, and/or either the restructuringunder the Plan not be successful or the divestiture or other agreements for PSGMnot be concluded by the end of September 2007, there is a material uncertaintywhich may cast doubt on the ability of the Company and its subsidiaries tocontinue as going concerns and, therefore, that they may be unable to realisetheir assets and discharge their liabilities in the normal course of business. Retirement of an officer of the Company After two years of dedicated service Andy Graetz the CFO will be retiring as anofficer of the Company on June 30, 2007. The Company would like to thank him forhis valued contribution. The Board are grateful that Andy has agreed tocontinue to serve the Company on an ad hoc basis as an independent contractor.Anton Kakavelakis, the Company's current Controller, will assume the role of CFOwith effect from July 1, 2007. Management's Discussion and Analysis June 27, 2007 For the three months ended March 31, 2007 The following management's discussion and analysis ("MD&A") of the financialcondition and operating results of Thistle Mining Inc. ("Thistle" or the"Company") should be read in conjunction with the Company's unauditedConsolidated Financial Statements for the quarters ended March 31, 2007 andMarch 31, 2006 including the notes thereto. Historical results, including trendswhich might appear, should not be taken as indicative of future operations orresults. Further details regarding the Company and its business and operationsmay be obtained from the Company's continuous disclosure documents filed fromtime to time with the Canadian securities regulatory authorities, including theCompany's annual information form (the "AIF"). These continuous disclosuredocuments are available through the SEDAR website maintained by the Canadiansecurities regulators, which may be accessed at www.sedar.com or on theCompany's website, which may be accessed at www.thistlemining.com. All financialdata herein has been prepared in accordance with Canadian generally acceptedaccounting principles ("GAAP") and all dollar references are in thousands of USdollars unless otherwise indicated. Certain information in this MD&A contains forward-looking statements within themeaning of applicable securities laws including, among others, statements madeor implied under the headings "Overall Performance", "Results of Operations" , "Summary of 2007 First Quarter Financial Results" and " Liquidity and CapitalResources" relating to the Company's objectives, strategies to achieve thoseobjectives, the Company's beliefs, plans, estimates, and intentions, and similarstatements concerning anticipated future events, results, circumstances,performance or expectations that are not historical facts. Forward-lookingstatements generally can be identified by words such as "outlook", "objective","may", "will", "expect", "intend", "estimate", "anticipate", "believe","should", "plans" or "continue" or similar expressions suggesting futureoutcomes or events. Such forward-looking statements reflect the Company'scurrent beliefs and are based on information currently available to management. These statements are not guarantees of future performance and are based on theCompany's estimates and assumptions that are subject to risk and uncertaintiesinherent in the business of the Company and the risk factors discussed in theAIF and in other materials filed with the Canadian securities regulatoryauthorities from time to time, which could cause the actual results andperformance of the Company to differ materially from the forward-lookingstatements contained in this MD&A. Those risks and uncertainties include, among other things, risks related to: themining industry (including operational risks in exploration development andproduction; delays or changes in plans with respect to exploration ordevelopment projects or capital expenditures; the uncertainties involved in thediscovery and delineation of mineral deposits, resources or reserves; theuncertainty of mineral resource and mineral reserve estimates and the ability toeconomically exploit mineral resources and mineral reserves; the uncertainty ofestimates and projections in relation to production, costs and expenses; theuncertainty surrounding the ability of the Company to obtain all permits,consents and authorizations required for its operations and activities;competition for the acquisition, exploration and development of mineralinterests; and health and safety and environmental risks), the risk of gold andother commodity price and foreign exchange rate fluctuations; the ability of theCompany to fund the capital and operating expenses necessary to achieve itsbusiness objectives of the Company; the uncertainty associated with commercialnegotiations and negotiating with foreign governments; the risks associated withinternational business activities; the dependence on key personnel; the abilityto access capital markets; the indebtedness of the Company; and labour relationsmatters; and the risk of litigation or other claims against the Company. Material factors or assumptions that were applied in drawing a conclusion ormaking an estimate set out in the forward-looking statements include that thegeneral South African economy remains stable, the demand and price of gold inUS$ continues to increase and the Rand remains strong against the US$. It isalso assumed that there will be no major disruptions in production includingfailure of infrastructure, seismic activity, underground fires and labourunrest. The Company cautions that this list of factors is not exhaustive. Although the forward-looking statements contained in this MD&A are based uponwhat the Company believes are reasonable assumptions, there can be no assurancethat actual results will be consistent with these forward-looking statements. Statements in relation to "resources" and "reserves" are deemed to beforward-looking statements, as they involve the implied assessment, based oncertain estimates and assumptions, that the reserves described can be profitablyextracted in the future. All forward-looking statements in this MD&A are qualified by these cautionarystatements. These forward-looking statements are made as of the date hereof andthe Company, except as required by applicable law, assumes no obligation toupdate or revise them to reflect new information or the occurrence of futureevents or circumstances. Due to the realignment in equity interest and capital structure of ThistleMining Inc. under the restructuring plan that followed the Company filingprotection under the Companies' Creditors Arrangement Act ("CCAA") on January 7,2005, the Company was required to perform as at July 1, 2005, a comprehensiverevaluation of its balance sheet referred to as "fresh start accounting,'' whichincluded a number of adjustments. Accordingly, transactions before and after theapplication of "fresh start accounting" from 30 June 2005 are separatelydisclosed in the unaudited Consolidated Financial Statements and this MD&A. Allnumbers contained in this MD&A unless otherwise stated are on a historicalbasis. Description of the Business Thistle's subsidiaries operate a gold mine in South Africa and, prior to thedisposal of Philippine Gold Limited, a wholly-owned subsidiary, were exploringthe feasibility of developing the Masbate Gold Project ("Masbate Project") inthe Philippines. Thistle's principal operating company in South Africa,President Steyn Gold Mines (Free State) (Pty) Limited ("PSGM"), owns andoperates the President Steyn Gold Mine, including five shafts and a processingfacility in the Free State province of South Africa. On July 10, 2002, PSGM wasissued two mining licenses 8/2002 and 9/2002 in terms of s. 9(1) of the SouthAfrican Minerals Act, 1991. PSGM sold 165,277, 175,490 and 146,302 ounces ofgold in 2004, 2005 and 2006 respectively. Overall Performance Highlights • On March 19, 2007, the Company sold its interest in Philippine GoldLimited ("PGO") and its other interests in the Masbate Project. Accordingly theMasbate Project has been classified as a discontinued operation and itsfinancial results are separately disclosed with comparatives restated asappropriate. • Cash flow used in continuing operations was $5.4 million in thefirst quarter of 2007 compared to $1.0 million in the first quarter of 2006.Although the gross loss in the first quarter of 2007 is comparable to that ofthe first quarter of 2006, the decrease in cash generated reflects an increasein working capital of $4.2 million following an increase in receivables. • Investment in property, plant and equipment of continuingoperations, increased in the first quarter of 2007 relative to the first quarterof 2006. Total funds invested amounted to $1.4million in the first quarter of2007 and $1.1 million in the first quarter of 2006. • Financing raised was more in the first quarter of 2007 relative tothe corresponding quarter in 2006. Casten Holdings Limited ("Casten") and MCResources Limited ("MC") advanced $3.8 million for the first quarter of 2007compared to $0.68 million in the first quarter of 2006. For the quarter $0.7million was applied to funding a cash deficit at PSGM, with the balance appliedto funding the Philippine operations and corporate overheads. • The net loss before discontinued operations for the first quarter of2007 was $4.4 million, or $0.10 per share, compared to $4.6 million, or $0.10per share, in the first quarter of 2006. The total net earnings for the firstquarter of 2006 was $19.5 million, or $0.42 per share compared to a total netloss of $4.6 million, or $0.10 per share, in the first quarter of 2006. Thisreflects a $23.9 million gain on the sale of the Company's interest in theMasbate Project in the Philippines. • Gold sold in the first quarter of 2007 was 29,126 oz, a decrease of16.5% compared to the same period in 2006. Production was adversely affected bya number of issues including major electrical infrastructure failures at Number3 Shaft; problems at Number 2 shaft related to movement in the shaft and shaftsub incline arising from the commencement of limited mining of the Number 2shaft pillar; a decline in grade of the "A" reef working places at Number 2shaft and a fire in the 71C45 working place also at Number 2 shaft on 5 January2007. This stope was sealed off and the fire contained. The affected crews wererelocated to open other working places. During the quarter a second shaft feedercable was installed at Number 3 shaft and distribution infrastructure upgraded. • The gold yield from underground sources for the first quarter of2007 averaged 5.44 g/tonne compared to an average of 5.92 g/tonne in the firstquarter of 2006 and 5.70 g/tonne and 5.43 g/tonne for calendar years 2006 and2005 respectively. The drop off in yield reflects the lack of flexibility thatPSGM has to absorb the production shocks experienced in the first quarter of2007. • Compared to the first quarter of 2006, PSGM's unit cash costs (Cashcost per ounce sold is not a recognized measure under Canadian GAAP. Areconciliation to the cost of sales per ounce is included under South AfricanOperations) increased by 16% to $648 per ounce and total costs increased by 12%to $681 per ounce of gold, respectively. The relative increase in unit cash costoccurred mainly due to reduction in gold sales by 16.5%, expenditure onupgrading electrical infrastructure at Number 3 shaft and increases in the costof labour of 12.7 % which took effect at the June 2006 month end. These costincreases were partly offset by a weaker US $. Relative to the prior yearsquarter the US $ exchange rate has weakened from ZAR 6.12 to ZAR7.22 to the US$. • The Company realized an average price of $648 per ounce of gold inthe first quarter of 2007, slightly lower than the market average spot price of$649 for quarter. The price realized is $96 per ounce higher than that realizedin the first quarter of 2006. • Gold production at PSGM continues to be challenging due to a lack ofoperational flexibility compounded by infrastructure problems. Sales of gold forthe second, third and fourth quarters of 2007 are forecast at approximately31,200, 39,800 and 37,000 oz's at cash costs of approximately $670, $564 and$558 per oz respectively assuming an exchange rate of 7.25 ZAR:US$ for thesecond half of 2007. Traditionally the second half of the year is moreproductive than the first half. Although PSGM is currently forecast to meet itsobligations in the ordinary course of business there can be no assurance thatthe recent production problems experienced by PSGM will not persist. Goldproduction from PSGM in 2007 is anticipated to be approximately 137,200 oz, at acash cost and total cost of approximately $605 to $615 and $645 to $655 per ozrespectively assuming an average exchange rate of 7.20 ZAR:US $ for 2007. • Mindserv Limited, a wholly-owned South African subsidiary of theCompany that owns PSGM, concluded a shareholders agreement with IningiInvestments 167 (Pty) Ltd ("Iningi") (to be renamed Lefa La Gauta Pty Ltd) abroad-based black economic empowerment consortium pursuant to which Iningiacquired an initial 15% equity stake in PSGM effective on March 30, 2007. Thetransaction is a necessary step for PSGM to qualify for the grant of new ordermining rights in South Africa and as such, its strategic significance iscritical. • On January 31, 2007, the Company and CGA Mining Limited ("CGA")(ASX: CGX and TSX: CGA) entered into a Sale and Purchase Agreement ("SPA") forthe sale to a wholly-owned subsidiary of CGA (the "Purchaser") of 100% ofThistle's shareholding in PGO, a wholly-owned subsidiary of the Company, and itsother interests in the Masbate Project. The transaction closed on March 19,2007. The consideration payable for the sale and purchase of the Shares andPurchase Consideration") of which $30 million represented a cash considerationand US$21 million was paid in ordinary shares of CGA. At the agreed issue priceof the CGA Shares of A$0.65 per CGA Share and exchange rate of A$:US$ 1.2686,Thistle received 40,985,538 CGA Shares an approximate 25.4% interest in CGA. Thegain on the sale of the Company's interest in the Masbate Project amounted to$23.9 million or $0.52 per share. Following this transaction, the Company'stotal assets exceeded its total liabilities by $1.6 million. • On March 20, 2007, the Company paid $26.7 million of the PurchaseConsideration to MC and Casten as part payment of short term debt owing.Following this payment, the amount of principal, interest and withholding taxesoutstanding on April 1, 2007 amounted to $54.3 million. • Pursuant to the SPA, Thistle has provided a number of warranties tothe Purchaser and CGA and will remain subject to possible Purchaser Claims (asdefined therein) for a minimum period of 12 months. Although no formal claimsor actions related to the sale of the interest in the Masbate Project have beenreceived, CGA and the Purchaser have reserved their rights in connection withthe SPA and the events leading up to the completion of the sale. The Companybelieves that it has a good defence against possible claims that might be madein this regard. Should proceedings be instituted against the Company and thisinterpretation prove not to be the case, the matter could have a materialadverse effect on the Company. • The Board has decided to embark on a process to consider the futureof PSGM. This could lead to the divestiture of PSGM. The high risk nature ofoperating a single gold mine on a stand-alone basis and inability at present ofPSGM to self-fund all the capital expenditure needed to upgrade infrastructure,create more operational flexibility, develop the Golden Triangle and explore theEldorado reefs indicates that it could be appropriate to integrate PSGM into adiversified South African gold mining company. The Company is in the process offinalising arrangements with a South African based investment banker to act asits financial advisor in this process and is currently in early stagediscussions with an interested third party. The Company hopes to concludeagreements relating to the future of PSGM by September 2007. These agreementswould however be subject to shareholder approval. • On June 27, 2007, MC and Casten agreed to provide a credit line ofup to $666,600 per month for the three month period to September 2007 duringwhich period management hope to conclude divestiture or other agreements forPSGM. The credit line will be available for the purpose of funding corporatecosts including the cost of strategic initiatives relating to PSGM and toprovide a contingency in the event of below forecast performance by PSGM. Thecredit line is contingent on improved performance at PSGM to levels ofproduction of not less than 396, 396 and 384 kg's of gold for the months ofJuly, August and September 2007 respectively, adequate progress in strategicinitiatives relating to PSGM and other conditions. Given recent productionproblems experienced by PSGM there can be no assurance that these conditionswill be satisfied. Without the line of credit there may be a materialuncertainty which may cast doubt on the ability of the Company and itssubsidiaries to continue as going concerns. • On March 29, 2007 following an unwillingness of Casten and MC todefer short term debt and Under the Plan, the realization that PSGM would not beable to generate sufficient free cash flows to allow Thistle to meet itsfinancial obligations, Thistle announced that it was in financial hardship andsuspended trading on the AIM market of the London Stock Exchange Plc pendingsatisfactory resolution of this matter. • On April 11, 2007, Thistle entered into a non-binding memorandum ofagreement with its major creditors, MC and Casten, on the restructuring of debtowing to them (the "Plan"). The Plan contemplates two private placements to besupported by MC and Casten and is conditional on the transfer of Thistle'sownership interest in the CGA Shares to MC and Casten. Should the performance ofPSGM not improve to a level where the Company is self sufficient, the Plan isunlikely to be implemented. Furthermore should the Company divest itself of PSGMfor cash there will be no need to proceed with the private placements. • On May 11, 2007, Thistle entered into a debt standstill agreementwith MC and Casten (the "Standstill Agreement") pursuant to which MC and Castenagreed (amongst other matters) that should CGA's consent to the transfer ofThistle's ownership interest in the CGA Shares to MC and Casten not be obtainedby August 11, 2007, the Plan will lapse and MC and Casten will continue to deferrepayment of interest and principal on the loans they have advanced to Thistleuntil the end of May 2008. Should such consent be obtained by August 11, 2007,the Plan may be implemented. However in certain circumstances the agreement willbe of no force and effect. These relate mainly to economic circumstances ofThistle, a material adverse change in the financial position or prospects ofThistle or its subsidiaries or any material legal claims being made againstThistle or its subsidiaries. • The Plan is considered to be a "related party transaction"' underthe provisions of Ontario Securities Commission Rule 61-501 ("Rule 61-501").Thistle has relied on the "financial hardship" exemptions from the valuation andminority shareholder approval requirements of Rule 61-501. The independentdirectors of Thistle and the Thistle board as a whole have each unanimouslydetermined that (i) Thistle is in serious financial difficulty, (ii) the termsof the Plan are designed to improve Thistle's financial position and (iii) theterms of the Plan are reasonable in the circumstances to Thistle. • The Plan contemplates that the Company's 25.4% interest in CGA is tobe transferred and deferred payments in terms of the CGA Transaction are to beassigned to MC and Casten for a total of approximately $ 25.5 million. Inaddition, MC and Casten have agreed to fully underwrite a private placement ofapproximately 44.45 million shares at a share price of £0.20 (Great BritishPound) per share ("First Private Placement"). The proceeds of this privateplacement are to be applied in paying down in full the principal of outstandingdebt, assume certain bank guarantees in respect of PSGM and provide workingcapital of $1.75 million. Following the credit line entered into on June 27,2007, the quantum of the private placement will be adjusted to reflect anyincrease in indebtedness owed to MC and Casten. In addition the $1.75 millionworking capital provision will be withdrawn. The First Private Placement is tobe made to MC and Casten, pro rata to their existing shareholdings, and selectqualified investors. MC and Casten will satisfy their payment obligations forthe subscription of Thistle shares by converting their principal debtoutstanding into such shares, except that MC and Casten may pay cash to replacecash held on deposit to assume certain bank guarantees of approximately $1.58million. • Should the First Private Placement proceed as planned theoutstanding debt owing to MC and Casten will consist only of deferred interestwhich on April 1, 2007 amounted to CAD $6.90 million and US $6.54 millionrespectively ("Remaining Indebtedness"). A second private placement (the "SecondPrivate Placement") is contemplated under the Plan whereby the consideration forshares shall be paid by MC and Casten by way of set-off against the RemainingIndebtedness. The Second Private Placement is however subject to certainconditions, including the change in the country of domicile of Thistle. • Under the Plan the payment of the interest on the RemainingIndebtedness is to be deferred until the earlier of the change in domicile andthe Second Private Placement has been effected or April 1, 2008. The payment ofthe Remaining Indebtedness shall be deferred until the earliest of April 1,2010, the conclusion of the Second Private Placement or the occurrence ofcertain events. • Following the execution of the Standstill Agreement the suspensionof the Company's shares to trading on AIM was restored on May 22, 2007. • Having reviewed the cash flow forecasts of the Company and itssubsidiaries, given agreement to move forward with the Plan or StandstillAgreement whichever is applicable and given the credit line entered into with MCand Casten on June 27, 2007 for $666,600 per month for the three month period upto September 2007 during which period management expect to conclude divestitureor other agreements for PSGM, it is management's belief that existing cashresources, net cash to be generated from operations and the sale of assets andthe credit line provided, will be sufficient to meet the Company's anticipatedrequirements. In making this statement management has assumed that currentmarket prices will prevail, that the revised production forecasts for the yearwill be met and that the restructuring under the Plan will be successful or thedivestiture or other agreements for PSGM will be concluded by the end ofSeptember 2007. Accordingly the financial statements have been prepared on thebasis of accounting policies applicable to a going concern. Should PSGM not besuccessful in achieving sufficient levels of profitable operations within thecontingency provided in the credit line entered into with MC and Casten on June27, 2007, and / or there be a material award adverse to PSGM under the M Halland Associates claim, and/or either the restructuring under the Plan not besuccessful or the divestiture or other agreements for PSGM not be concluded bythe end of September 2007, there is a material uncertainty which may cast doubton the ability of the Company and its subsidiaries to continue as going concernsand, therefore, that they may be unable to realise their assets and dischargetheir liabilities in the normal course of business. Q1 2007 Q1 2006 Fresh Start Fresh Start Sales ($ millions) 18.9 19.8 Net loss before discontinued operations ($ millions) (4.4) (4.6) Net loss per share before discontinued operations ($) (0.10) (0.10) Net earnings / (loss) ($ millions) 19.5 (4.6) Earnings / (loss) per share ($) 0.42 (0.10) Cash used in operations ($ millions) (5.4) (1.0) Gold sold (000's oz) 29 35 Cash costs ($/oz) 644 555 Total costs ($/oz) 681 608 Outlook Thistle's gold production from PSGM in 2007 is anticipated to be approximately137,200 oz, at a cash cost and total cost of approximately $605 to $615 per ozand $645 to $655 per oz respectively assuming an exchange rate of 7.20 ZAR:US $.Sales of gold for the second, third and fourth quarters of 2007 are forecast tobe approximately 31,200 oz, 39,800 oz and 37,000 oz at a cash cost ofapproximately $670, $564 and $558 per oz respectively assuming an exchange rateof 7.25 ZAR:US $ for the second half of 2007. Traditionally the second half ofthe year is more productive than the first half. The forecast is, however,subject to uncertainty which could cause actual production to differ materially. Major risks include failure of infrastructure, market prices, seismicactivity, fires and labour unrest. Despite higher forecast production during the third quarter, PSGM is notexpected to generate any appreciable free cash flow during this quarter assumingcurrent gold prices. The July cost of labour increase of approximately 10.2 %,higher winter electricity tariffs as well as increased capital expenditurefollowing commitments made during the first quarter in upgrading infrastructurewill squeeze cash margins. The gross cost position will relax somewhat when thelower electrical tariffs take effect during the fourth quarter and as capitalcommitments reduce. Recent press commentary in South Africa indicates that Eskom, the electricalutility provider in South Africa, may need to increase tariffs by as much 18%with effect from early 2008 in order to fund increased maintenance and expansionof generating capacity. PSGM's business plan has provided for an increase in electricity of 6% in linewith the cost of inflation. Should the 18% tariff hike be implemented unit costscan be expected to increase by $10 per oz. Capital expenditures at PSGM isforecast to be approximately $9.0 million in 2007 assuming an exchange rate of7.20 South African rand per US $. At forecast gold prices it is anticipated thatcash from operations will be sufficient to fund this capital expenditure. Financial Restructuring in 2005 A financial restructuring was implemented with the Company filing for protectionin Canada under the CCAA in the Ontario Superior Court of Justice (the "Court")on January 7, 2005. Pursuant to the CCAA, Thistle undertook a restructuring ofits debt effective on June 30, 2005. This resulted in the conversion to equity of certain convertible loans togetherwith another long term loan and a portion of its outstanding demand loans. PostCCAA Debt was advanced to Thistle by Casten and MC to advance the development ofthe Masbate Project and to provide working capital to the PSGM Mine. Pursuant tothe terms of a memorandum of agreement between Thistle and Casten and MC,respectively, dated March 28, 2006, Casten and MC agreed to a deferral on thepayment of principal and interest on all loans until April 1, 2007. The total indebtedness of the Company including interest and withholding tax toMC and Casten as at December 31, 2006 amounted to $74.6 million of which $43.1million was classified as short term debt. On March 20, 2007, the Company paid$26.7 million of the CGA Purchase Consideration as part payment of short termdebt owing. Following this payment, the amount of principle, interest andwithholding tax outstanding on April 1, 2007 amounted to approximately $54.3million. Financial Restructuring in 2007 On March 29, 2007 following notification by MC and Casten of their unwillingnessto defer short term debt and interest due and payable in terms of the Memorandumof Agreements entered into on March 28, 2006 and the realization that PSGM wouldnot be able to generate sufficient free cash flows to allow Thistle to meet itsfinancial obligations, Thistle announced that it was in financial hardship andsuspended trading on the AIM market of the London Stock Exchange Plc pendingsatisfactory resolution of this matter. On April 11, 2007, Thistle entered a non-binding memorandum of agreement withits major creditors MC and Casten on the restructuring of the debt owing to them(the "Plan"). The execution of the Plan contemplates two private placements tobe underwritten by MC and Casten and is conditional on the transfer of Thistle'sownership interest in CGA to MC and Casten. Should the performance of PSGM not improve to a level where the Company is selfsufficient (refer to "Outlook" section of this MD & A) the Plan is unlikely tobe implemented. Furthermore should the Company divest itself of PSGM for cashthere will be no need to proceed with the private placements. On May 11, 2007, Thistle entered into a debt standstill agreement with MC andCasten (the "Standstill Agreement") pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of Thistle'sownership interest in the CGA Shares to MC and Casten not be obtained by August11, 2007, the Plan will lapse and MC and Casten will continue to defer repaymentof interest and principal on the loans they have advanced to Thistle until May31, 2008. Should such consent be obtained by August 11, 2007, the Plan may beimplemented. In certain circumstances the agreement by MC and Casten to defer repayment ofinterest and principal will be of no force and effect. These include thefollowing: • a material deterioration in the economic circumstances applicable toThistle or any of its subsidiaries; • any other material adverse change in the business, assets,liabilities, condition (financial or otherwise) and prospects of President SteynGold Mines (Free State) (Pty) Limited occurring after the date hereof; • completion of any private placement, rights issue or fund raising; • the (direct or indirect) sale, disposal, transfer, scheme, plan,consolidation, amalgamation, merger, compromise, arrangement, distribution orreorganization of or involving Thistle or its assets; • any event of default in relation to any of the RemainingIndebtedness or under any loan or facility agreement to which Thistle or any ofits subsidiaries is a party from time to time; • any corporate action or proceeding is commenced or instituted forthe winding up, liquidation, receivership, dissolution, bankruptcy orre-organization (or similar event) of Thistle, any of its subsidiaries or any oftheir respective revenues or assets; • any legal or other proceedings being commenced against Thistle orany of its subsidiaries; or • any breach, in any material respect, occurring or reasonably likelyto occur in respect of any of the terms or conditions of the Plan. The Plan is considered to be a "related party transaction"' under the provisionsof Ontario Securities Commission Rule 61-501 ("Rule 61-501"). The independentdirectors of Thistle and the Thistle board as a whole have each unanimouslydetermined that (i) Thistle is in serious financial difficulty, (ii) the termsof the Plan are designed to improve Thistle's financial position and (iii) theterms of the Plan are reasonable in the circumstances to Thistle. The Plancontemplates: i. The transfer of Thistle's interest in the CGA Shares to MC and Casten for $21.0 million. ii. An undertaking to pay, when due, amounts payable to Thistle by the Purchaser to MC and Casten for US $4.5 million (the "Deferred Payment"). In terms of the CGA Transaction $1.0 million and $4.0 million less any amount(s) which are required to meet any substantiated warranty and indemnity claims that may be made by CGA are payable on dates not later than August 20, 2007 and March 20, 2008 respectively. Under the Plan, notwithstanding any assignment by Thistle of its rights to the Deferred Payments to MC and Casten, the sole responsibility and liability for any and all CGA claims shall remain with Thistle. To the extent that any part of $5 million in escrow is not paid to MC and Casten such amount(s) shall be and shall be deemed to constitute a loan to Thistle from MC and Casten which loan shall be deemed to have commenced from April 1, 2007, and shall otherwise be on and subject to the terms and conditions set out in paragraph below. iii. Commitment by MC and Casten to underwrite in full a private placement of approximately 44.45 million shares at £0.20 (Great British Pound) per share by MC and Casten at no commission to MC and Casten (the "First Private Placement"). The private placement will raise approximately US $17.3 million before charges. The private placement is to be made to MC and Casten pro rata to their existing shareholdings, and select qualified existing investors under conditions of financial hardship. The £0.20 (Great British Pound) per share represents the average Thistle share price between the announcement of the shareholder approval of the CGA Transaction on March 19, 2007 and March 28, 2007 (the day preceding the suspension of trading of Thistle stock on AIM). In the event that no other investors subscribe for the Thistle common shares to be offered to them pursuant to the private placement, MC and Casten will each increase their holding in Thistle from 35% to an estimated 42.35%. The Plan is designed to significantly improve Thistle's financial position.Should the Plan be affected the proceeds of the Plan are to be applied asfollows: i. The $21.0 million consideration for the transfer of CGA shares and the $4.5 million amount will be applied to repay outstanding CCAA debt owed by Thistle to MC and Casten. This CCAA debt amounts to CAD $22.57 million and US $ 20.00 million respectively as at April 1, 2007; approximately US $1.58 million of the net proceeds of the private placement is intended to be used to replace cash held on deposit and to assume certain bank guarantees that have been provided by Meridian Capital Limited (the parent company of MC) to Standard Bank South Africa on behalf of PSGM in respect of various trade creditors and the South African Department of Minerals and Energy; and ii. The balance of the net proceeds of the private placement of approximately US $1.75 million in cash will be used to fund Thistle's budgeted working capital requirements for the remainder of 2007. Following the credit line entered into on June 27, 2007, the quantum of the private placement will be adjusted to reflect any increase in indebtedness owed to MC and Casten. In addition the $1.75 million working capital provision will be withdrawn. Should the First Private Placement proceed as planed, Thistle will continue toowe deferred interest to MC and Casten ("Remaining Indebtedness") which on April1, 2007 amounted to CAD $6.90 million and US $6.54 million respectively. Theblended interest rates for this debt at current exchange rates amounts toapproximately 11.33% per annum. A second private placement (the "Second Private Placement") is contemplatedunder the Plan whereby the consideration for shares shall be paid by MC andCasten by way of set-off against the Remaining Indebtedness. The Second PrivatePlacement is however subject to the change in the country of domicile of theThistle. Under the Plan, subject to satisfactory legal, commercial and taxdiligence, MC and Casten may within a period of twelve months request Thistle tocall a shareholders meeting for the purpose of authorizing such a change indomicile. The subscription price of the shares under the Second Private Placement will beequal to the weighted average closing price per Thistle share on AIM for the 10trading days immediately prior to the second business day prior to thecompletion of the Second Private Placement. Under the Plan, the payment of the interest on the Remaining Indebtedness is tobe deferred until the earlier of the change in domicile and the Second PrivatePlacement has been effected or April 1, 2008 and thereafter shall be payablequarterly on March 31, June 30, September 30 and December 31 in each calendaryear. Such interest shall be compounded quarterly in arrears on March 31, June30, September 30 and December 31 in each calendar year. The payment of the Remaining Indebtedness shall be deferred until the earliestof April 1, 2010 or the occurrence of certain events including: • the (direct or indirect) sale, disposal, transfer, scheme, plan,consolidation, amalgamation, merger, compromise, arrangement, distribution orsituation of or involving Thistle or all or substantially all or a majority ofthe assets or rights of Thistle and/or its subsidiaries or which results in achange in control of Thistle; • completion of the Second Private Placement and any privateplacement, rights issue or fund raising; • any event of default in relation to any of the RemainingIndebtedness or under any loan or facility agreement to which Thistle or any ofits subsidiaries is a party from time to time; • any legal or other proceedings being commenced against Thistle orany of its subsidiaries for the repayment of any debt or amount due, or forexecution against (or the perfection of any security in respect of) any of itsor their respective assets, or any corporate action or legal proceedings arecommenced for the winding-up, dissolution, administration, receivership,liquidation, bankruptcy, re-organisation or similar event relating to orinvolving Thistle, any of its subsidiaries or any of their respective revenues,assets or rights; or • any breach, in any material respect, occurring or reasonably likelyto occur in respect of any of the terms or conditions of the Plan. As noted above, should CGA's consent to transfer Thistle's 25.4% interest in CGAnot be obtained by August 11, 2007, MC and Casten have agreed in principle tocontinue to defer repayment of interest and principal on the loans they haveadvanced to the Company until the end of May 2008. However, in the circumstancesnoted above the agreement by MC and Casten to defer the repayment of interestand principal will be of no force and effect. Going Concern Having reviewed the cash flow forecasts of the Company and its subsidiaries,given agreement to move forward with the Plan or Standstill Agreement whicheveris applicable and given the credit line entered into with MC and Casten on June27, 2007 for $666,600 per month for the three month period up to September 2007during which period management expect to conclude divestiture or otheragreements for PSGM, it is management's belief that existing cash resources, netcash to be generated from operations and the sale of assets and the credit lineprovided, will be sufficient to meet the Company's anticipated requirements. Inmaking this statement management has assumed that current market prices willprevail, that the revised production forecasts for the year will be met and thatthe restructuring under the Plan will be successful or the divestiture or otheragreements for PSGM will be concluded by the end of September 2007. Accordinglythe financial statements have been prepared on the basis of accounting policiesapplicable to a going concern. Should PSGM not be successful in achieving sufficient levels of profitableoperations within the contingency provided in the credit line entered into withMC and Casten on June 27, 2007, and / or there be a material award adverse toPSGM under the M Hall and Associates claim, and/or either the restructuringunder the Plan not be successful or the divestiture or other agreements for PSGMnot be concluded by the end of September 2007, there is a material uncertaintywhich may cast doubt on the ability of the Company and its subsidiaries tocontinue as going concerns and, therefore, that they may be unable to realisetheir assets and discharge their liabilities in the normal course of business. South Africa Over the last two years management has taken steps to restore the profitabilityof PSGM. These initiatives include: (i) the placing of Number 7 and 9 Shafts on care and maintenance; (ii) the closure of Number 1 A Ventilation Shaft and other loss making working places; (iii) the implementation of a Section 189 Restructuring at PSGM on October 19, 2005 which led to the voluntary and involuntary retrenchments of 52 and 1,347 employees respectively, or 27% of the then workforce thereby reducing costs at the time by 20%; and (iv) the sale of non core business assets. Despite the aforementioned initiatives, the lack of sufficient pre-developedmining areas and lack of historical investment in infrastructure are constraintsthat have held back PSGM's production capacity. The recent electricaldistribution problems, compressor and pump failures at Number 3 shaft indicatethat there is an urgent need to upgrade infrastructure to reduce the risk ofproduction disruptions. During the first quarter of 2007 the risk of disruptionsto production has been reduced through the commissioning of a second shaftfeeder cable and the upgrading of pumps and compressors. The development of thehigh grade "B" reef channel at Number 3 shaft in close proximity to the shaftshould help secure PSGM's production forecast for 2007. Fresh Start Accounting Due to the realignment in equity interest and capital structure of Thistle underthe restructuring plan, the Company was required to perform as at July 1, 2005,a comprehensive revaluation of its balance sheet referred to as "fresh startaccounting,'' which included the following significant adjustments. The Company has adjusted the historical carrying value of its assets andliabilities to fair value, reflecting the allocation of the Company'sreorganization equity value of $6.6 million. In addition, under fresh startaccounting, the Company translated its reclamation provision using June 30,2005, rates and fair valued other accruals. Consequently, transactions before and after the application of "fresh startaccounting" from June 30, 2005, are separately disclosed in the Company'sunaudited Consolidated Financial Statements for the three months ended March 31,2007. Selected Information - Financial Highlights For the three months ended March 31 (in thousands of dollars, except per share amounts) 2007 2006 Fresh start Fresh start Sales 18,940 19,837 Gross loss (1,121) (1,440) Net loss before discontinued operations (4,370) (4,551) Net loss per share before discontinued operations - basic and diluted (0.10) (0.10) Net gain on the sale of the Company's interest in the Masbate Project. 23,871 -- Net earnings / (loss) 19,457 (4,639) Net earnings / (loss) per share - basic and diluted 0.42 (0.10) Cash used in operating activities (5,446) (963) Total assets 78,629 77,532 Total Long Term Financial Liabilities 37,124 69,947 Cash dividends declared per share Nil Nil The net earnings / (loss) per share - basic and diluted (both before and afterdiscontinued operations) for periods prior to 30 June 2005 has been adjusted inrespect of the consolidation of 200 shares for 1 on 30 June 2005. Theprofitability of the Company is subject to a number of factors, including theRand price of gold and the costs associated with various aspects of miningoperations including acquisition, exploration and development of mininginterests, mining and processing of gold and compliance with various regulatoryrequirements. Not all of the factors are within the control of management. Sales reflect (i) gold sold which was 29,126 oz and 34,868 oz in the firstquarter of 2007 and 2006 respectively and (ii) the price realized of $648 and$552 per oz in the first quarter of 2007 and 2006 respectively. The increase inthe gold price received has offset the decline in gold sold over the periodanalysed. The cost of sales was $20.1 million and $21.3 million in the firstquarter of 2007 and 2006 respectively. Despite increases in the cost of labour of 12.7 % which took effect at the endof June, 2006 and the added costs of upgrading infrastructure at Number 3 shaft,costs in US $ were contained relative to the prior year's quarter following theweakening of the US$ by 18% from ZAR 6.12 to R7.22 to the US$. The sale of the Company's interest in the Masbate Project resulted in anextraordinary gain of $23.9 million. Other contributing items include: (i) General and administrative expenses which were $0.8 million and $0.6 million in the first quarter of 2007 and 2006 respectively; (ii) Cost of interest which amounted to $2.5 million and $2.4 million in the first quarter of 2007 and 2006 respectively; and (iii) Foreign exchange losses which amounted to $0.2 million and $0.2 million in the first quarter of 2007 and 2006 respectively. Results of Operations SOUTH AFRICA The principal operating company in South Africa is President Steyn Gold Mine(Free State) (Pty) Ltd ("PSGM"). Thistle's total interest in TM TrainingInitiative (Pty) Limited, which operates a training college attached to the minesite, was sold on November 9, 2006. Due to the insignificant amounts involvedthis subsidiary has not been disclosed as a discontinued operation. Health and Safety The safety of our staff is a core value and is paramount to our success. We areworking to provide employees with a safe workplace and are pleased to reportthat, as at the date of this report, no fatal incidents have occurred sinceNovember 16, 2006. The Company remains focused on achieving its safety target, namely a Lost TimeInjury ("LTI") Rate of 18 per 1 million hours worked a reportable rate of 5 per1 million hours and, most importantly, zero fatalities. For the three month period ended March 31, 2007, the LTI and Reportable rateamounted to 14.9 and 7.0 per one million man hours respectively. This comparesfavourably to rates achieved in the twelve month period ended December 31, 2006of 18.6 and 10.9 respectively and the first quarter of 2006 of 17.9 and 10.1respectively. Although these metrics compare to safety statistics realized inthe neighbouring gold mines, PSGM management considers the rates to be high.Material handling and fall of ground incidents continue to be the main cause ofreportable accidents at PSGM. Gold Market The market price of gold averaged $649 per ounce in the first quarter of 2007representing an increase of $95 per ounce or 17% against the average marketprice for the first quarter of 2006. The highest closing London PM fix for goldfor the first quarter of 2007 was $687 per ounce. In rand terms, the gold priceincreased on average by 38% in the first quarter of 2007 compared to the firstquarter of 2006. World newly mined gold supply is diminishing. Gold production in South Africa,North America and Australia is falling with this trend being partly offset byincreases in production in Indonesia, Russia and China. As reserves are depletedand without major new discoveries, the supply shortfall will not be arrested inthe near term. Gold prices could also be exacerbated by reduced Central Bank sales as they seekto diversify away from the US dollar. According to Goldfields Mineral Services,the primary gold supply deficit is worsening; investors have rediscovered themerits of gold as a vehicle for portfolio diversification and its role as a US$currency hedge. Although exploration expenditure has increased, given the longlead times between exploration success and mine development strong prices appearreasonably well assured for the next five years. Management believes the South African Rand gold price will continue to be strongand is predicted to be range bound between R135, 000 to R155,000 per kg during2007. South African Operations - Summary of quarterly results 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2006 2006 2006 2006 2007 Tonnes milled total 189,808 199,823 248,997 220,604 202,238Tonnes milled from underground sources 189,808 183,785 218,975 187,569 162,835Tonnes milled from surface sources -- 16,038 30,022 33,035 39,403Average recovered grade g/tonne 5.92 5.85 5.06 4.49 4.64Average recovered grade underground g/tonne 5.92 6.26 5.57 5.10 5.44Average recovered grade surface g/tonne -- 1.15 1.35 1.05 1.37Plant recovery % 95.5 95.6 95.1 95.0 94.4Ounces sold 34,868 36,521 40,912 34,001 29,126 Realised US$/oz 552 626 618 612 648Cash costs US$/oz 555 519 518 580 644Cash costs R/tonne milled 629 598 602 597 671 Avg. exch. Rate ZAR/US$ ZAR6.12 ZAR6.43 ZAR7.14 ZAR7.25 ZAR7.22Avg. gold price ZAR/oz 3,377 4,025 4,413 4,437 4,678 Average employees at work 3,821 3,806 3,959 4,052 3,987Productivity: Annual tonnes per man 199 210 252 218 203 Cost of sales US$/oz 608 556 542 611 681Adjusted for:Depreciation, depletion, impairment (42) (41) (20) (52) (45)Derivative fair value adjustments (11) 1 (4) (2) -Movement in provisions - 3 - 24 8Other non operating costs - - - (1) -Cash costs US$/oz 555 519 518 580 644 Total cash cost per ounce, which is not a recognised measure under CanadianGAAP, is calculated by dividing total cash costs by the ounces sold for theperiod. Total cash costs include mine operating costs such as mining,processing, administration, royalties and production taxes, but excludeamortization, reclamation costs, financing costs and capital development andexploration. First quarter 2007 sales of gold were 29,126 oz compared with 34,868 oz in thesame quarter of 2006 and 34,001 oz in the fourth quarter of 2006. Production wasadversely effected by a number of issues including major electricalinfrastructure failures at Number 3 Shaft; problems at Number 2 shaft related tomovement in the shaft and shaft sub incline arising from the commencement oflimited mining of the Number 2 shaft pillar and a fall off in grade at the "A"reef working places at Number 2 shaft. In addition on January 5, 2007 anunderground fire started in the 71C45 stope at Number 2 shaft. This area hasbeen sealed off to contain the fire and affected production crews relocated toopen other working places. The lack of sufficient pre-developed mining areas to absorb the productionshocks has resulted in a reduction in underground production and drop off ingold yield. The average yield from underground sources has declined from 6.26and 5.57 grams per tonne experienced in the second and third quarters of 2006 to5.10 and 5.44 grams per tonne in the fourth quarter of 2006 and first quarter of2007 respectively. The underground grade is expected to stabilise atapproximately 5.40 grammes per tonne from July 2007 onwards for the remainder of2007 from the increased exploitation of the "B" reef at Number 3 shaft. Sincethe second quarter of 2006, underground production has been augmented by surfacematerial recovered from the Number 9 shaft plant cleanup. The first and second quarter are traditionally challenging for South Africangold miners owing to the preponderance of public holidays. During the first quarter of 2007, the South African operations realised aneffective gold price of US$648 per ounce which is marginally lower that theaverage market price of US$649 over the same period and is $96 per ounce morethan the price realised in the same period in 2006. Cash operating costs for the first quarter of 2007 were $644 per ounce ofproduction, compared with $555 and $580 per oz for the first and last quarter of2006, respectively. Major factors affecting these unit costs are: • gold production; • the ZAR:US$ exchange rate. Relative to the first quarter of 2006 theUS $ exchange rate has weakened from ZAR 6.12 to R7.22 to the US$; • the costs of refurbishing infrastructure at Number 3 shaft; and • the total cost of labour. In South African gold mines, the cost oflabour represents some 50% to 60% of gross cash costs. Following the conclusion of a three year wage agreement between PSGM and labourunions in December 2005, the total cost of employment has increased by 12.7%effective June 20, 2006. Following restructuring in late 2005 the labourcomplement has remained stable at approximately 3,800 to 4,100 employees. A summary of production per shaft, comparing the first quarter of 2007 with thecorresponding period in 2006, is as follows: Quarter 1, 2007 Quarter, 1 2006Steyn 1 ShaftTonnes milled Tonnes 34,974 46,794Recovered grade g/t 4.96 4.54Gold recovered Ounces 5,581 6,827 Steyn 2 ShaftTonnes milled Tonnes 47,441 68,923Recovered grade g/t 5.46 7.16Gold recovered Ounces 8,334 11,798 Steyn 3 ShaftTonnes milled Tonnes 80,420 74,091Recovered grade g/t 5.62 5.64Gold recovered Ounces 14,543 13,440 Surface OperationsTonnes milled Tonnes 39,403 --Recovered grade g/t 1.37 --Gold recovered Ounces 1,732 -- Quarter 1, 2007 Quarter 1, 2006TOTAL SHAFTSTonnes milled Tonnes 202,238 189,808Recovered grade g/t 4.64 5.92Gold recovered Ounces 30,190 36,126 DevelopmentDevelopment on reef M 390 623Development off reef M 996 992 It is the Company's policy to recognize sales when gold is delivered to theprecious metal refinery. Refinery delivery cut-off arising at the end of thequarter has resulted in lower ounces being recorded in the financial resultsthan were actually produced in the period. Gold sales for the quarter amountedto 29,126 oz relative to production of 30,190 oz. There are two growth projects at PSGM, namely the Eldorado Reef Project and theGolden Triangle Project. These projects are expected to help sustain productionat PSGM beyond 2012. Eldorado Reef Project The Eldorado Formation (Ellsberg's) contains significant economic gold reefsalong the western margin of the northern section of the Free State Goldfield.The reefs have been successfully mined in localized areas in the past at Number3 Shaft. During September 2006 the Board of directors agreed that work should commence onan extensive drilling programme to explore the economic potential of the unminedEldorado reefs along the strike length of 6 km accessible from Number 3 Shaftworkings. This will be undertaken via the existing underground infrastructurecovering some forty crosscut lines. An estimated 11 500 meters of drilling willbe carried out from 46 and 54 Levels over a period of 3 to 4 years. The aim isto delineate some 11.8 million tonnes containing an estimated 2.4 million ouncesof gold. Should the exploration programme prove successful this will have the effect ofincreasing the resources at Number 3 shaft by up to 40% to 7.6 million ounces.The cost of the programme is estimated to be $6.9 million or $3.00 per estimatedresource oz and is to be funded from available PSGM generated cash flows. Golden Triangle Project A feasibility study for the Golden Triangle No. 9 shaft to access ground below 9shafts was completed on January 31, 2007. The Golden Triangle Project providesaccess to a measured and indicated mineral resource quantified at 2.77 milliontonnes containing an estimated 1.04 million ounces of gold. Thistle believesthat the Golden Triangle Project holds promise for consolidating PSGM's miningactivities and producing more predictable results. The Golden Triangle Projectis considered to be viable at current gold prices and exchange rates. At a gold price of $550 per oz the inflation adjusted internal rate of return ofthe project is calculated to be 13%. The maximum cash draw down is anticipatedto be $37.8 million in current value terms. The Golden Triangle Project isanticipated to have an average cash and total cost of $361 and $477 per ozrespectively. For additional information relating to the Golden Triangle Project refer to thetechnical report titled "43-101 Document for President Steyn Gold Mine 9 ShaftProject situated in the Witwatersrand Basin, Free State Goldfield, South Africa"dated January 28, 2007, which is filed on SEDAR at www.sedar.com. Mineral and Petroleum Resources Development Act, 2002, the Mining Charter andRoyalty Bill The Mineral and Petroleum Resources Development Act, 2002 ("MPRDA") contains thetransitional arrangements from the old mining law system which was contained inthe Minerals Act, 1991, to the new mining law system contained in the MPRDA.Security of tenure in respect of active mining operations is protected for aperiod not exceeding five years from May 1, 2004, during which period the holderof the old order mining right must apply for conversion to a new form of miningright, failing which the old order mining right ceases to exist. In order to beable to convert old order mining rights to new order mining rights, a holdermust submit a prescribed social and labour plan and undertake to "give effect to" the Black Economic Empowerment ("BEE") and socio-economic objectives of theMPRDA Act (the "Objectives"). The Objectives are embodied in the broad-based socioeconomic empowerment charterwhich was signed by the Department of Minerals and Energy of South Africa, theSouth African Chamber of Mines and others on October 11, 2002 (the "Charter"),and its appendix known as the Scorecard which followed on February 18, 2003.The Charter is based on seven key principles, two of which are focused onownership targets for historically disadvantaged South Africans ("HDSA's") andbeneficiation, and five of which are operationally oriented and cover areasfocused on improving conditions for HDSA's. Regarding ownership targets, theCharter (as read with the Scorecard) requires each mining company to achieve thefollowing HDSA ownership targets for the purpose of qualifying for the grant ofnew order rights: (i) 15% ownership by HDSAs in that company by May 1, 2009, and (ii) 26% ownership by HDSA's in that company by May 1, 2014. The Charter states that such transfers must take place in a transparent mannerand for fair market value. On December 12, 2006, Mindserv Limited, a wholly owned South African subsidiaryof Thistle that owns PSGM, concluded a shareholders agreement with IningiInvestments 167 (Pty) Ltd. (to be renamed Lefa La Gauta Pty Ltd), a majorityshareholder in a broad based Black Economic Empowerment consortium comprised ofprofessional mining engineers, to acquire an initial 15% equity stake in PSGM.Although the transaction is not expected to have a material impact on thefinancial condition of PSGM, it is a necessary step for PSGM to qualify for thegrant of new order mining rights in South Africa. The agreement is subject to asignificant suspensive condition which closed on 30 March 2007. The South African government has introduced for enactment a Mineral andPetroleum Royalty Bill ("Royalty Bill") which will lead to the implementation ofa royalty on gross sales value with effect from May 1, 2009. It is now proposedthat the South African gold mining industry will pay 1.5% of its revenues to theSouth African National Treasury some 1.5% lower than in the first draft of thelegislation. Marginal mining companies, defined as producers whose cash operating costsexceeded cash income would receive up to a 75% reduction in the royalty rates.The South African government now proposes to table the bill in Parliament earlyin 2007. Strategic Initiatives The Board has decided to embark on a process to consider the future of PSGM.This could lead to the divestiture of PSGM. The high risk nature of operating asingle gold mine on a stand-alone basis and inability at present of PSGM toself-fund all the capital expenditure needed to upgrade infrastructure, createmore operational flexibility, develop the Golden Triangle and explore theEldorado reefs indicates that it could be appropriate to integrate PSGM into adiversified South African gold mining company. The Company is in the process offinalising arrangements with a South African based investment banker to act asits financial advisor in this process and is currently in early stagediscussions with an interested third party. The Company hopes to concludeagreements relating to the future of PSGM by September 2007. These agreementswould however be subject to shareholder approval. PHILIPPINES (Discontinued operation) Sale of interest in the Masbate Project Following a decision by the Board in 2006 to explore strategic alternatives forthe Company's Masbate gold project located on the island of Masbate in thePhilippines with a view to enhancing shareholder value, the Company agreed tosell its interest in that project to Central Asia Gold Limited (the "Purchaser")a wholly owned subsidiary of CGA Mining Limited ("CGA"). The final terms of the CGA Transaction were approved by Thistle's Board onJanuary 31, 2007 and the Share Purchase Agreement ("Original SPA") and relateddocumentation were executed on this date. Pursuant to the Original SPA, theconsideration payable for Thistles interest in Philippine Gold Ltd ("PGO") andthe assignment of debt owing by PGO to Thistle to the Purchaser was, inaggregate, US$51 million of which US$21 million was payable in ordinary sharesof CGA (the "CGA Shares"). The issue price of the CGA Shares was to be based onthe lesser of A$0.65 per share and the volume weighted average price at whichthe CGA Shares were traded on the Australian Stock Exchange (the "ASX") in the10 consecutive trading days immediately prior to the completion date of the CGATransaction ("Completion Date"). As a result of the market volatility in earlyApril, Thistle and CGA agreed to amend the Original SPA to provide that theissue price of the CGA Shares would be fixed at A$0.65 per CGA Share (the "Revised Formula"). All other terms and conditions of the Original SPA remainedunchanged. At special meetings held on March 16, 2007 the shareholders of Thistle and CGAapproved the acquisition of 100% of the shares of PGO and Thistle's otherinterests in the Masbate gold project by CGA subject to the terms and conditionsset out in the original agreement dated January 31, 2007 and as amended on March15, 2007. The transaction closed on March 19, 2007 at which time all the conditionsprecedent were met. The Purchase Consideration has been and will be satisfiedby: • the issue by CGA to Toowong Mining BV, a new wholly-owned subsidiaryof Thistle ("Toowong") registered in the Netherlands, of 40,985,538 fully paidordinary shares representing an approximate 25.4% of CGA's paid up capital; • the payment by the Purchaser to Thistle on March 19, 2007, of US$25million in cash, less the deposit of US$500,000 that has already been paid bythe Purchaser to Thistle; and • the payment by the Purchaser into escrow (the "Escrow") within sixmonths of US$5 million required to meet any substantiated warranty and indemnityclaims that may have been made by the Purchaser, on a date not later than twelvemonths from the date of Completion. In addition to the above, on March 19, 2007 Thistle was reimbursed US$4.4million in working capital and capital expenditures in respect of the MasbateProject. A gain of $23.9 million was realised on the sale of the Company's interest inthe Masbate Project in the first quarter of 2007 determined as outlined below: $ 000'sCash proceeds on sale (including reimbursements and deposit received in 2006) 29,387Proceeds receivable on September 19, 2007 and March 19, 2008 5,000Shares received in CGA 21,000 Total proceeds on sale of Masbate Project 55,387Less: Thistle's net investment in PGO (29,813)Less: Transaction costs for the first of quarter 2007 (1,344)Less: Fair value adjustment on shares received in CGA (359) Gain on sale of interest in Masbate Project 23,871 On completion of the CGA Transaction, Thistle contributed the CGA Shares toToowong. Under Section 85.1(3) of the Canadian Tax Act, the sale of the PGOshares (being shares of one foreign affiliate (PGO)) for the CGA Shares (beingshares of another foreign affiliate) will not trigger a tax event. For additional information relating to the sale of the Company's interest in theMasbate Project refer to the shareholder circular dated February 14, 2007 titled"To Approve the sale of Shares of Philippine Gold Limited and Related Assets toCGA Mining Limited. Notice of Meeting and Management Information Circularrespecting the Special Meeting of Shareholders to be held on March 16, 2007". Summary of 2007 First Quarter Financial Results South African Operations The South African sub-group cash EBITDA in the first three months of 2007 was aninflow of $0.2 million. After depreciation and amortization of $1.3 million andforeign exchange gain on translation of $0.1 million, an operating loss of $1.0million was recorded for the three months compared to a loss of $1.8 million inthe same period in 2006. EBITDA is derived based on earnings before interest, taxes, depreciation andamortization and foreign exchange losses on translation. EBITDA is not arecognized measure under Canadian GAAP. Management believes that, in additionto net income (loss), EBITDA is a useful supplemental measure as it providesinvestors with an indication of cash available for distribution prior to debtservice, capital expenditures and income taxes. Investors should be cautioned,however, that EBITDA should not be construed as an alternative to net income(loss) determined in accordance with GAAP as an indicator of the Company'sperformance or to cash flows from operating, investing and financing activitiesas a measure of liquidity and cash flows. The Company's method of calculatingEBITDA may differ from other companies and, accordingly, EBITDA may not becomparable to measures used by other companies. Corporation Sales Sales for the three months ended March 31, 2007 decreased to $18.9 million from$19.8 million in the corresponding period in 2006 due to a decline in ouncessold of 16.5%. Although the Company realized an average price of $648 per ounceof gold in the first quarter of 2007, which is approximately $96 per ouncehigher than that realized in the first quarter of 2006, the price increase wasnot large enough to offset the decline in ounces sold. Total ounces sold for theSouth African operations in the first quarter of 2007 amounted to 29,126 ozcompared to 34,868 oz sold in the first quarter of 2006. Gross Loss For the quarter ended March 31, 2007, the Company reported a gross loss of $1.1million compared to $1.4 million over the same period in 2006. The cost of saleshas declined to $20.1 million in the first quarter of 2007 from $21.3 million inthe corresponding quarter in 2006. Costs were contained in US $ terms followingthe weakening of the US$ by 18% from ZAR 6.12 to R7.22 to the US$. Costs in ZARterms reflect the 12.7% increase in the cost of labour effective from the end ofJune 2006 and costs associated with the refurbishment of infrastructure atNumber 3 shaft. The losses incurred are attributable to poor operatingperformance at PSGM. General and Administrative Expenses and Restructuring Charges The general and administration expenses of $0.8 million for the three monthsended March 31, 2007 represents mainly salaries and expenses relating to seniormanagement and directors and professional and consultancy fees. The amountexpensed in the first quarter of 2006 was $0.6 million. Interest Interest of $2.5 million for the three months ended March 31, 2007 representsmainly the interest on the servicing of the debt from Casten and MC. Theinterest for the first quarter of 2006 amounted to $2.4 million. Foreign Currency Gain/Loss The foreign currency loss for the first quarter ended March 31, 2007 of $0.2million represents the net translation gain on certain assets and liabilities ofthe South African operations as well as the loss on the revaluation of theCanadian dollar denominated debt. In the same period in 2006, the foreigncurrency loss was $0.2 million. Earnings / (loss) per share The earnings per share for the first quarter of 2007 of $0.42 per share iscalculated on the basis of the net earnings of $19.5 million and the dilutedweighted average number of common shares in issue during the period of 46.2million. The loss per share of $0.10 for the first quarter of 2006 is calculatedon the basis of the net loss of $4.6 million and the weighted average number ofcommon shares in issue during the period of 46.2 million. The loss per share before discontinued operations for the first quarter of 2007of $0.10 per share is calculated on the basis of the net loss beforediscontinued operations of $4.4 million and the diluted weighted average numberof common shares in issue during the period of 46.2 million. The productionperformance of PSGM remains the driver of the Company's profitability. Share options to purchase 930,000 common shares at GBP0.17 per share wereoutstanding and exercisable at March 31, 2007 but were not included in thecomputation of diluted earnings per share because they would be anti-dilutive. Total Assets The Company's total assets at March 31, 2007 decreased by $4.1 million fromDecember 31, 2006 due to the disposal of the Philippine mining properties, aspart of the sale of PGO, offset by the acquisition of a 25.4% interest in CGAMining Limited, accounted for as an investment subject to significant influence.During the three months ended March 31, 2007 $1.4 million was capitalizedprincipally on underground development in South Africa. Cash Flows Cash used in operating activities in the first quarter of 2007 (cash operatingloss, adjusted for movements in current assets and liabilities) amounted to $5.4million against a cash outflow of $1.0 million for the same period in 2006.Although the gross loss in the first quarter of 2007 is comparable to that ofthe first quarter of 2006, the decrease in cash generated reflects an increasein working capital of $4.2 million following an increase in receivables. The keydriver in the increase in cash outflow is the decrease in gold sales for thethree months ended March 31, 2007. Plant Property and Equipment (in thousands of dollars) Philippine South African assets assets TotalNet book value at December 31, 2006 3,169 19,091 22,260Additions 3 1,394 1,397Disposals -- (31) (31)Disposal of discontinued operation (3,164) -- (3,164)Depreciation (8) (945) (953) Net book value at March 31, 2007 -- 19,509 19,509 Additions for PSGM relates mainly to underground development needed to sustainproduction. The South African operations have elected not to obtain insurance inrespect of business interruption and machinery breakdown including loss ofprofits and damage to property, plant and equipment. The operations, however,carry general liability and transport of bullion insurance. Mining Properties (in thousands of dollars) Philippines South African resource resource Properties properties Total Balance at December 31, 2006 28,199 22,812 51,011Additions 921 -- 921Change in estimate -- (22) (22)Disposal of discontinued operation (29,120) -- (29,120)Depletion -- (483) (483)Balance at March 31, 2007 -- 22,307 22,307 Reclamation Provision At March 31, 2007 the Company has a provision of approximately $6.3 millionrecorded for environmental liabilities in South Africa. The Company makes annualcontributions to the rehabilitation trust fund created in accordance withstatutory requirements, to provide for the estimated cost of pollution controland rehabilitation during and at the end of the life of the mine. The funds heldin trust are invested in a mixed portfolio of cash, bonds, property and equityinstruments. The Company intends to fund the ultimate rehabilitation costs fromthe money invested with the trust fund. As at March 31, 2007 the balance of therehabilitation trust fund was $2.0 million. The total liability will be fundedover the life of the mine currently estimated to be 14 years. The calculation ofthe liability is based on the future projected cost of the rehabilitationamounting to $9.5 million discounted at a real rate of 4.398%. Income Tax Payable Income tax payable of $0.7 million recorded at March 31, 2007 represents thetaxes payable in respect of the South African subsidiaries on the foreignexchange gains in the shareholders loans. Contractual Obligations The Company rents premises and leases equipment under operating leases thatexpire over the next two years. Operating lease expenses in the first threemonths of 2007 were $38,000 (for the same period in 2006, $47,000). The following is a schedule of future minimum rental and lease paymentsrequired: Year 2007 2008 Total$ 000's 30 20 50 Off balance sheet arrangements The Company does not enter into off-balance sheet arrangements with specialpurpose entities in the normal course of its business nor does it have anyunconsolidated affiliates. Summary of Quarterly Results Fresh Fresh Fresh Fresh Fresh Fresh Fresh Pre fresh Start Start Start Start Start Start Start Start Q1/2007 Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Q3/2005 Q2/2005 Total revenue $ 18,940 20,972 25,742 23,329 19,837 20,315 22,274 18,710 Earnings (loss) beforediscontinued operations $ (4,370) (3,674) 657 (291) (4,639) (6,697) (9,954) (6,714) Earnings (loss) beforediscontinued operations pershare (basic and diluted) $ (0.10) (0.08) 0.02 (0.01) (0.10) (0.14) (0.21) (2.90) Gain on the sale of the Company's interest in theMasbate Project 23,871 -- -- -- -- -- -- -- Net earnings (loss) US$ 19,457 (3,674) 657 (291) (4,639) (6,697) (9,954) (6,714) Earnings (loss) per share(basic and diluted) $ 0.42 (0.08) 0.01 (0.01) (0.10) (0.15) (0.22) (2.91) Tonnes Milled from Underground sources 162,835 187,569 218,975 183,785 189,808 218,301 268,237 264,379 Recovered grade - underground sources 5.44 5.10 5.57 6.26 5.92 5.56 5.86 4.93 Tonnes Milled - Surface sources 39,403 33,035 30,022 16,038 - - - 4,505 Recovered grade - Surface sources 1.37 1.05 1.35 1.15 - - - - Tonnes milled 202,238 187,569 218,975 183,785 189,808 218,301 268,237 268,884 Recovered grade g/t 4.64 4.49 5.06 5.85 5.92 5.56 5.86 4.93 Total Development Meters 1,386 1,602 2,086 1,366 1,615 1,896 2,475 2,227 Gold sold oz 29,126 34,001 40,912 36,521 34,868 40,945 49,260 42,376 CAD$/ US$ exchange rate 1.15 1.17 1.12 1.12 1.17 1.17 1.19 1.25 ZAR / US$ exchange rate 7.22 7.25 7.14 6.43 6.12 6.51 6.43 6.42 Average gold price realized US$ per ounce 648 612 618 626 555 482 439 427 Cash cost R/tonne milled 671 597 602 598 629 613 569 553 The net earnings / (loss) per share - basic and diluted (both before and afterdiscontinued operations) for periods prior to 30 June 2005 has been adjusted inrespect of the consolidation of 200 shares for 1 on 30 June 2005. Total revenues are generally affected by the average price of gold and theperformance of the South African operations. The prevailing trend over therecent 24-month period is an increase in the US $ gold price combined with aweakening of the US $. This has resulted in record high ZAR gold prices. During the first quarter of 2007, the lack of sufficient pre-developed miningareas to absorb production shocks has resulted in a reduction in undergroundproduction and drop off in yield. The impact of the section 189 restructuringwhich resulted in a reduction of 27% in the workforce in November 2005 onproduction is also apparent. Since the second quarter of 2006 production fromunderground has been augmented by the treatment of surface material sourcedmainly from the reclamation of the Number 9 shaft plant and rock dump. In total118,498 surface tons at an average grade of 1.25 g/t was milled over the period.The decline in grade from underground sources in the fourth quarter of 2006 andfirst quarter of 2007 reflects the decline in grade at the "A" reef operationsat Number 2 shaft and impact of an underground fire in the 71C45 stope at Number2 shaft on January 5, 2007. This area has been sealed off to contain the fireand affected production crews relocated to open other working places. Since August 10, 2004 the Company remains un-hedged from a cash flow point ofview. On October 24, 2005, PSGM purchased put options on USD gold for theperiod January 2006 to December 2007 on 2,000 ozs per month at a flat forwardprice of $490 per ounce. The put options are valued at fair value on balancesheet date with the movement in fair value for the period disclosed separatelyunder cost of sales. The costs associated with the South African operation are greatly affected bythe South African Rand: US $ exchange rate. Following the conclusion of the sale of the Company's interest in the MasbateProject on March 19, 2007, the company realised an extraordinary gain of $23.9million. Other notable factors affecting earnings over the second half of 2005include corporate and mine restructuring costs of $2.9 million and $0.2 millionaccretion in the reclamation provision at PSGM. Adjustments applied in thefourth quarter of 2005 include impairments to assets at TMTI amounting to $0.6million, impairment of South African mining properties of $1 million, arevaluation adjustment of put options bought by PSGM in October 2005 at $1million and restructuring costs relating to the implementation of the Section189 Restructuring at PSGM of $2.8 million. Adjustments applied in the fourthquarter of 2006 include a credit adjustment of $1 million relating to a decreasein the reclamation provision in South Africa, a revaluation adjustment of putoptions bought by PSGM in October 2005 of $0.6 million and $0.5 millionaccretion in the reclamation provision in South Africa. Transactions with Related Parties Casten and MC are the principal creditors and shareholders of the Company andown collectively 70% of the equity. (See "Liquidity and Capital Resources".) Liquidity and Capital Resources As of March 31, 2007, Thistle had cash and short-term investments of $4.0million, an increase of $3.8 million from continuing operations in December 31,2006. Consolidated short and long-term debt balances, including interest, feesand withholding tax, at March 31, 2007, were $54.6 million compared with $74.8million at the end of 2006. At March 31, 2007, Thistle was in compliance withall debt covenants and default provisions. As at June 30, 2005, the Company's consolidated debt was $105.1 million. Uponimplementation of the CCAA restructuring plan, certain debt was restructuredwith approximately $60.0 million being converted into new consolidated commonshares of Thistle, leaving a net debt of approximately $45.1 million as at June30, 2005. This debt is analyzed as follows: Restructured debt outstanding as at June 30, 2005 Currency Interest Current Long term rate portion portion MC Cdn $ 10% 1,310,000 655,000Casten Cdn $ 10% 1,310,000 655,000Total Cdn $ 10% 2,620,000 1,310,000 MC Cdn $ 12% 9,000,000 4,500,000Casten Cdn $ 12% 9,000,000 4,500,000Total Cdn $ 12% 18,000,000 9,000,000 MC US$ 10% 6,666,667 3,333,333Casten US$ 10% 6,666,666 3,333,334Total US$ 10% 13,333,333 6,666,667 Subsequent to the end of the CCAA process to March 19, 2007, additional debt of$19.6 million was advanced from MC and Casten analysed as follows: Debt incurred subsequent to CCAA as at March 19, 2007 Currency Interest Current Long term rate portion portion MC US$ 12% 9,795,000 NilCasten US$ 12% 9,795,080 NilTotal US$ 12% 19,590,080 Nil Interest is calculated and payable monthly, not in advance, on the last day ofeach month, but payment of such interest and compound interest has, by the Memorandum of Agreements agreedon between Casten and MC and the Company dated March 28, 2006, been deferreduntil April 1, 2007. For the three month period January 1, 2007 to March 19, 2007 an additionalamount of $3.75 million in aggregate was advanced to the Company by Casten andMC in order to meet corporate costs and fund the Philippine operations. On March 1, 2007, the Company signed Memorandum of Agreements with Casten and MCwith the effect that interest will only be paid after all the principal debt hasbeen repaid. On March 20 2007, the Company applied $26.7 million of the CGA PurchaseConsideration in full payment of the debt incurred subsequent to the end of theCCAA process and part payment of the restructured debt on June 30, 2005 leavingan amount of $54.3 million in respect of principal, interest and withholding taxpayable on April 1, 2007 in terms Memorandum of Agreements. The principal debtoutstanding at March 31, 2007 is analyzed as follows: Restructured debt outstanding as at March 31, 2007 Currency Interest Current Long term rate portion portion MC Cdn $ 10% 1,310,000 655,000Casten Cdn $ 10% 1,310,000 655,000Total Cdn $ 10% 2,620,000 1,310,000 MC Cdn $ 12% 4,822,164 4,500,000Casten Cdn $ 12% 4,822,164 4,500,000Total Cdn $ 12% 9,644,328 9,000,000 MC US$ 10% 6,666,667 3,333,333Casten US$ 10% 6,666,666 3,333,334Total US$ 10% 13,333,333 6,666,667 At March 31, 2007, the Company's payment obligations are analyzed as follows: Payments Due by Period Total Less than 1 1 - 2 years year Debt outstanding 39,830 24,064 15,766Interest and loan advance fee payable 14,725 -- 14,725Operating leases 50 40 10Purchase obligations -- -- --Total contractual obligations 54,605 24,104 30,501 The Company incurred losses of $4.4 million from continuing operations duringthe three months ended March 31, 2007 and continues to incur losses. At March31, 2007 the Company's current liabilities exceeded its current assets by $25.8million although the Company's total assets exceeded its total liabilities by$1.6 million. On May 11, 2007 a financial restructuring arrangement was entered into with MCand Casten that is outlined under "Financial Restructuring in 2007" included inthis M D & A. Having reviewed the cash flow forecasts of the Company and its subsidiaries,given agreement to move forward with the Plan or Standstill Agreement whicheveris applicable and given the credit line entered into with MC and Casten on June27, 2007 for $666,600 per month for the three month period up to September 2007during which period management expect to conclude divestiture or otheragreements for PSGM, it is management's belief that existing cash resources, netcash to be generated from operations and the sale of assets and the credit lineprovided, will be sufficient to meet the Company's anticipated requirements. Inmaking this statement management has assumed that current market prices willprevail, that the revised production forecasts for the year will be met and thatthe restructuring under the Plan will be successful or the divestiture or otheragreements for PSGM will be concluded by the end of September 2007. Accordinglythe financial statements have been prepared on the basis of accounting policiesapplicable to a going concern. Should PSGM not be successful in achieving sufficient levels of profitableoperations within the contingency provided in the credit line entered into withMC and Casten on June 27, 2007, and / or there be a material award adverse toPSGM under the M Hall and Associates claim, and/or either the restructuringunder the Plan not be successful or the divestiture or other agreements for PSGMnot be concluded by the end of September 2007, there is a material uncertaintywhich may cast doubt on the ability of the Company and its subsidiaries tocontinue as going concerns and, therefore, that they may be unable to realisetheir assets and discharge their liabilities in the normal course of business. Contingent Liabilities M Hall and Associates On June 4, 2004, PSGM cancelled a mining contract with M Hall and Associates ("MH & A"). Shortly thereafter MH & A disputed whether PSGM was lawfully entitledto cancel the contract and presented a claim amounting to ZAR33 million whichPSGM denied. Under the terms of the contract, any dispute is to be decidedthrough arbitration. MH & A did not pursue this course of action but instead onJune 28, 2004 applied for an urgent application to prevent PSGM from using andremoving certain equipment. This application was dismissed with costs. Leave toappeal was granted but the appeal was also dismissed with costs on October 21,2004. On May 22, 2006 and October 9, 2006 the liquidator of MH & A subpoenaedemployees of PSGM to attend enquiries in terms of the South African CompaniesAct. On May 25, 2007 the Company's was served with a summons from theliquidators of MH & A for an amount of ZAR40.5 million ($5.8 million at anexchange rate of ZAR 7.00 to US $). An amount of ZAR 33.0 million relates to therepudiation of the contract and ZAR 7.5 million relates to equipment used by themine. The Company has appointed a technical expert who together with theCompany's legal counsel will prepare a legal opinion on the prospects ofsuccess. The Company currently believes that it has a good defence against theclaim. Should this interpretation prove not to be the case, the matter couldhave a material adverse effect on the Company. Matjhabeng Municipality PSGM received a summons for ZAR1.756 million ($0.249 million) from theMatjhabeng Municipality in Welkom, South Africa, on March 9, 2007. Although itis not yet clear, Management believe that this is in respect of seweragecharges, for periods prior to the acquisition of PSGM by Thistle, which PSGM iscontesting. Although the final result of the matter cannot be predicted withcertainty, management does not currently expect the outcome of this matter tohave a material adverse effect on the Company. CGA Mining Limited Pursuant to the Sale and Purchase Agreement, Thistle has provided a number ofwarranties to Purchaser and CGA and will remain subject to possible PurchaserClaims (as defined therein) for a minimum period of 12 months. Although noformal claims or actions related to the sale of the interest in the MasbateProject have been received, CGA and the Purchaser have reserved their rights inconnection with the Sale and Purchase Agreement and the events leading up to thecompletion of the sale. The Company believes that it has a good defense againstpossible claims that might be made in this regard. Should proceedings beinstituted against the Company and this interpretation prove not to be the case,the matter could have a material adverse effect on the Company. Outstanding Share Data On June 30, 2005 and before the consolidation described below, the Company had461,520,685 common shares issued and outstanding. In addition, the 31,880,000directors and employees stock options outstanding as at December 31, 2004, werecancelled effective February 16, 2005. The share purchase warrants outstandingas at December 31, 2004, totalling 87,452,913 were also cancelled effectiveFebruary 16, 2005. As part of the restructuring under the CCAA, which wascompleted on the close of business on June 30, 2005, the issued and outstandingshares at March 15, 2005, were consolidated on a one new consolidated share for200 existing shares basis. This resulted in 2,307,603 consolidated commonshares. In addition, the majority of the convertible loans, together withanother long-term loan, were converted into 11,538,015 new shares. A portion ofthe demand loans were also converted under the restructuring process into32,306,442 new shares. As a result of the aforementioned, there were a total of46,152,060 common shares outstanding upon completion of the restructuring, whichcontinues to be the number of outstanding common shares as of March 31, 2006.Share options to purchase 930,000 common shares at GBP0.17 per share wereoutstanding and exercisable at March 31, 2007. Critical Accounting Estimates Thistle's significant accounting policies are described in note 2 to the 2006Audited Consolidated Financial Statements and the Company's MD & A for the yearended December 31, 2006. The preparation of the Company's consolidated financialstatements requires the use of estimates and assumptions that affect thereported amounts of assets and liabilities as well as revenue and expenses.Estimates are based on historical and anticipated results and trends and otherassumptions made by management about matters that are uncertain, at the time theaccounting estimate is made, and where different estimates that could reasonablyhave been used in the current period - or changes in the accounting estimatethat are reasonably likely to occur from period to period - would have amaterial impact on Thistle's financial statements. By their nature, estimatesare subject to an inherent degree of uncertainty. Actual results could differfrom those estimates. The following accounting policies have been identified as critical: • carrying value of mining properties, property, plant and equipmentevaluated at least annually using management's best estimates of futureproduction, sales prices, operating, capital costs and reclamation costs; • depletion, depreciation and amortization based on proven andprobable mineral reserves and the estimated life of assets; • stockpiles, metal in circuit and product inventories at the lower ofaverage cost or net realizable value; • financial instruments, recorded on the balance sheet at theestimated fair market value; • future income tax assets whose recognition is determined based onsignificant estimates related to expectations of future taxable income; • contingencies, when available information indicates that it isprobable that an asset has been impaired or a liability has been incurred andthe amount of loss can be reasonably estimated; • stock options, using the fair value method to value the Company'sstock based compensation plan based on the Black Scholes model; and • reclamation obligations, resulting from minimum standards for minereclamation established by various governmental agencies, which affect certainoperations of the Company. Management has discussed the development and selection of the above criticalaccounting policies with the Audit Committee of the Board of Directors. Changes in Accounting Policies including Initial adoption For details regarding changes in accounting policies refer to note 2 of theunaudited consolidated financial statements for the three months ended March 31,2007. Changes in internal controls over financial reporting During the most recent interim period, there have been no changes in theCompany's policies and procedures and other processes that comprise its internalcontrol over financial reporting, that have materially affected, or arereasonably likely to materially affect, the Company's internal control overfinancial reporting. Notice of Disclosure of Non-Auditor Review of Interim Financial Statements For the three month periods ended March 31, 2007 and 2006. Pursuant to National Instrument 51-102 - Continuous Disclosure Obligations,section 4.3(3)(a), if an auditor has not performed a review of the interimfinancial statements; the interim financial statements must be accompanied by anotice indicating that the financial statements have not been reviewed by anauditor. The accompanying unaudited interim consolidated financial statements of theCompany for the interim periods ended March 31, 2007 and 2006, have beenprepared in accordance with Canadian generally accepted accounting principlesand are the responsibility of the Company's management. The Company's independent auditors, KPMG Inc., have not performed a review ofthese interim consolidated financial statements in accordance with the standardsestablished by the Canadian Institute of Chartered Accountants for a review ofinterim financial statements by an entity's auditor. Corporate Information Head Office Registrar & Transfer Nominated advisor Bankers Agent President Steyn Gold Mines CIBC Mellon Trust Grant Thornton Royal Bank of Canada CompanyPrivate Bag X10206 Toronto, Ontario Corporate Finance Toronto, OntarioWelkom, 9459 London, United Kingdom London, United Kingdom Standard Bank LimitedRepublic of South Africa Johannesburg, South AfricaTel: +27 57 391 9114 Auditors Legal CounselFax: +27 57 391 9118 KPMG Inc. Heenan Blaikie LLP Listing Johannesburg, South Toronto, Ontario Alternative Investment Africa Market Werksmans London, Symbol TMG Johannesburg, South AfricaCorporate Structure and Management Directors Officers Chairman of the Board Alekseev Sergey Barry Goldberg Chief Executive OfficerThe Right Honourable Aleksandrovich Toronto, Ontario Gerrit KennedyLord Lang of Monkton Appointed February 7, Johannesburg, South Africa 2006Ayrshire, Scotland London, United Kingdom Alexey Kruzhkov London, United Kingdom Chief Financial OfficerPaul Marchand Askar Alshinbayev Andreas GraetzLondon, United Kingdom Resigned February 7, Johannesburg, South Africa 2006 London, United KingdomYuri Shafranik Company SecretaryResigned February 7, 2006 Jeffery Barnes Esme KennedyMoscow, Russia Toronto, Ontario Johannesburg South Africa Financial Information Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statementsfor the three months ended March 31, 2007 and March 31, 2006. All figures are inUS$ unless otherwise noted. The statements are presented in accordance withCanadian GAAP. For further information, please contact: Andreas Graetz, Chief Financial OfficerPresident Steyn Gold MinesPrivate Bag X 10206, Welkom, 9460, Free State, South AfricaTel: +27 57 391 9114Fax: +27 57 391 9118agraetz@disselgroup.com Consolidated Balance Sheets (in thousands of US dollars, unaudited) 31 March 31 December 2007 2006 Fresh start Fresh start note 3.5 note 3.5AssetsCurrent assetsCash and cash equivalents 3,956 233Accounts receivable 6,181 2,982Investments 47 98Inventories 3,915 3,431Derivative financial instruments 1 5Prepayments and deposits 42 54Discontinued operation (note 6) -- 676Total current assets 14,142 7,479 Investment subject to significant influence (note 4) 20,641 -Rehabilitation trust fund (Restricted use) 2,030 2,002Property, plant and equipment 19,509 19,091Mining properties 22,307 22,812Discontinued operation (note 6) -- 31,368Total Assets 78,629 82,752 Liabilities and Shareholders' deficitCurrent liabilitiesAccounts payable and accrued liabilities 15,071 14,106Current debt 24,064 43,083Income taxes payable 745 728Future income tax liabilities 41 50Discontinued operation (note 6) -- 1,872Total current liabilities 39,921 59,839 Long-term debt 30,491 31,761Retirement provision -- --Reclamation provision 6,261 6,178Future income tax liabilities 372 453Discontinued operation (note 6) -- 2,395Total liabilities 77,045 100,626 Shareholders' deficitCommon shares (note 5) 6,627 6,627Contributed surplus 98 97Accumulated other comprehensive income -- --Accumulated deficits (5,141) (24,598) Total shareholders' deficit 1,584 (17,874) Total Liabilities and Shareholders' deficit 78,629 82,752 Going concern (note 3.1)Subsequent events (note 3.1, 3.3, 3.4 and 7) See accompanying notes. Consolidated Statements of Earnings and Deficit (in thousands of US dollars, except net loss per share) Three months Three months(unaudited) ended ended 31 March 31 March 2007 2006 Fresh start Fresh start Sales 18,940 19,837Net impact of derivative financial instruments (4) (395)Cost of sales (18,499) (19,351)Accretion relating to reclamation provision (130) -Depletion and depreciation, and impairment (1,428) (1,531)Gross loss (1,121) (1,440) Costs and ExpensesGeneral and administrative expenses (808) (563)Interest expense (2,501) (2,352)Foreign currency loss (161) (231)Write down of investments - -Other gains and losses 173 82Loss before income taxes and discontinued operations (4,418) (4,504) Discontinued operations (note 6) 23,827 (88)Income tax recovery / (expense) 48 (47)Net earnings / (loss) 19,457 (4,639) Deficit, beginning of the period (24,598) (16,651)Deficit, end of the period (5,141) (21,290) loss per share before discontinued operations - basic and diluted (0.10) (0.10)Earnings / (loss) per share - basic and diluted 0.42 (0.10) See accompanying notes. Consolidated Statements of Comprehensive Income (in thousands of US dollars, unaudited) Three months Three months ended ended 31 March 31 March 2007 2006 Fresh start Fresh start Net earnings / (loss) 19,457 (4,639)Other comprehensive income (loss) - net of income tax - -Comprehensive income 19,457 (4,639) See accompanying notes. Consolidated Statements of Cash Flows (in thousands of US dollars) Three months ended Three months ended 31 March 31 March 2007 2006 Fresh start Fresh startOperating activitiesNet loss for the period from continuing operations (4,370) (4,551) Add / (deduct) items not affecting cash from operating activitiesDepletion and depreciation, and impairment 1,428 1,531Future income and mining tax provisions (90) (40)Foreign exchange loss 161 231Unrealized loss on derivative instruments 4 395Gain on investments (47) (70)Stock based compensation 1 16Accretion relating to reclamation provision 130 -Other movement in reclamation provision (25) -Other non-cash items 31 1 (2,777) (2,487) Changes in non-cash working capital balancesAccounts receivable (3,207) (324)Inventories (512) 489Other assets (30) 15Accounts payable and accrued liabilities 1,058 1,263Income and mining taxes recoverable and payable 22 81 (2,669) 1,524 Cash flows used in operating activities (5,446) (963) Cash provided / (used) by discontinued operations 2,076 (588) Investing activitiesAdditions to mining properties -- --Purchase of property, plant and equipment (1,394) (1,069)Proceeds on sale of property, plant and equipment -- --Contribution to rehabilitation trust fund -- --Proceeds on sale of discontinued operation 28,887 --Sale of investments 98 94Cash flows from / (used) in investing activities 27,591 (975) Financing activitiesPrincipal payments under capital lease obligations (29) (25)Interest accrued 2,481 --Repayment of borrowings (26,700) --Proceeds from borrowings 3,750 680Cash flows provided / (used) by financing activities (20,498) 655 Net increase / (decrease) in cash and cash equivalents 3,723 (1,871)Cash and cash equivalents, beginning of the period 233 3,632Cash and cash equivalents, end of the period 3,956 1,761 Interest Paid 9 18Taxes Paid -- -- See accompanying notes. Notes (forming part of the financial statements) (tabular amounts in thousands of USdollars unless specified) 1. Significant accounting policies Thistle Mining Inc ("Thistle" or "The Company") prepares its financialstatements in accordance with Canadian generally accepted accounting principles("Canadian GAAP"). With exception to changes in accounting policies institutedsince December 2006 as outlined in note 2 the accounting policies are consistentwith those used in the preparation of the Company's audited consolidatedfinancial Statements for the year ended December 31, 2006. These unaudited interim consolidated financial statements ("the statements")include the financial statements of the Company and its subsidiary undertakings.These statements do not include all disclosures required for annual financialstatements, and accordingly, should be read in conjunction with the Company'saudited consolidated financial Statements for the year ended December 31, 2006. 2. Changes in accounting policies Commencing January 1, 2007, the Company adopted the following Canadian Instituteof Chartered Accountants ("CICA") Handbook Sections: (a) Section 1506 "Accounting Changes", (b) Section 1530 "Comprehensive Income", (c) Section 3051 "Investments", (d) Section 3251 "Equity", (e) Section 3855 "Financial Instruments - Recognition and Measurement", (f) Section 3861 "Financial Instruments - Disclosure and presentation", and (g) Section 3865 "Hedges" No restatement of prior year's financial statements was required. The principalchanges due to the adoption of these sections, performed in terms of theirtransitional provisions where applicable, are summarised below: (a) Accounting Changes Under this section, changes in accounting policy are applied retrospectivelyunless doing so is impracticable or the change in accounting policy is made oninitial application of a primary source of Canadian GAAP in accordance with thespecific transitional provisions, if any. A change in accounting estimate isgenerally recognized prospectively and material prior period errors are amendedthrough restatements. New disclosures are required in respect of such accountingchanges. The adoption of this section did not affect comparatives. (b) Comprehensive Income Comprehensive income is the change in equity (net assets) of the Company fromtransactions and other events and circumstances from non-owner sources. Itincludes all changes in equity during a period except those resulting frominvestments by owners and distributions to owners. Other comprehensive income comprises revenues, expenses, gains and losses that,in accordance with primary sources of Canadian GAAP, are recognized incomprehensive income, but excluded from net income. The implications to the Company include: • A new statement of comprehensive income now forms part of the consolidated financial statements and displays current period net income and other comprehensive income. • As the Company does not have self-sustaining foreign operations, appraisal increase credits or donations from non-owners, comparatives are not restated. (c) Investments This section establishes standards for accounting for investments subject tosignificant influence and for measuring and disclosing certain othernon-financial instrument investments (such as works of art and other tangibleassets held for investment purposes). As the Company's only investment subjectto significant influence was acquired in the first quarter of 2007, the adoptionof this section did not affect the comparatives. (d) Equity This Section establishes standards for the presentation of equity and changes inequity during the reporting period. The implications to the Company include: • Accumulated other comprehensive income is a separate component of shareholders' deficit on the balance sheet. • A note to the accumulated other comprehensive income is required. • As the Company does not have self-sustaining foreign operations, appraisal increase credits or donations from non-owners, comparatives are not restated. (e) Financial Instruments - Recognition and Measurement • All financial instruments are classified into one of the followingcategories: held for trading, held to maturity investments, loans andreceivables, available for sale financial assets or other financial liabilities. • All financial instruments, including derivatives, are measured atfair value, except for loans and receivables, held to maturity investments andother financial liabilities which are measured at amortized cost. • Changes in fair value of held-for-trading financial assets arerecognized in net earnings and changes in fair value of available-for-salefinancial instruments are recorded in other comprehensive income until theinvestment is derecognized or impaired at which time the amounts would berecorded in net earnings. • The Company has adopted the policy to recognise transaction costs innet income. Upon adoption of this section, the Company designated its cash and cashequivalents, accounts receivable and other deposits as loans and receivables,which are measured at amortized cost. Derivative financial instruments areclassified as held for trading and measured at fair value. Current and long-termdebt, accounts payable and accrued liabilities are classified as other financialliabilities, which are measured at amortized cost, using the effective interestrate method. The adoption of this section had no material impact on the financial statementsof the Company and does not require the restatement of comparatives. (f) Financial Instruments - Disclosure and presentation This section establishes standards for presentation of financial instruments andnon-financial derivatives, and identifies the information that should bedisclosed about them. The adoption of this section had no material impact on thefinancial statements of the Company and does not require the restatement ofcomparatives. (g) Hedges This section establishes standards for when and how hedge accounting may beapplied. Hedge accounting is optional. The Company does not currently applyhedge accounting and consequently the adoption of this section did not impactthe consolidated financial statements. Recent pronouncements In February 2007, the CICA issued Section 1535, ''Capital Disclosures'' which iseffective for fiscal years beginning on or after October 1, 2007. This standardrequires disclosure of information that enables users of its financialstatements to evaluate the entity's objectives, policies and processes formanaging capital. In February 2007, the CICA issued Section 3862 ''Financial Instruments-Disclosure'' (''Section 3862'') and Section 3863 ''Financial Instruments -Presentation'' (''Section 3863''), which are effective for fiscal yearsbeginning on or after October 1, 2007. The objective of Section 3862 is toprovide financial statement disclosure to enable users to evaluate thesignificance of financial instruments for the Company's financial position andperformance and the nature and extent of risks arising from financialinstruments that the Company is exposed to during the reporting period and thebalance sheet date and how the Company is managing those risks. The purpose ofSection 3863 is to enhance the financial statement user's understanding of thesignificance of financial instruments to the Company's financial position,performance and cash flows. 3. Financial reorganization, going concern and fresh start accounting 3.1 Going Concern The accompanying unaudited consolidated financial statements have been preparedon a "going concern" basis in accordance with Canadian generally acceptedaccounting principles (''GAAP''). The going concern basis of presentationassumes that Thistle Mining Inc. ("Thistle" or the "Company") will continue inoperation for the foreseeable future and will be able to realize its assets anddischarge its liabilities and commitments in the normal course of business. The Company and its subsidiaries incurred losses of $4.4 million from continuingoperations during the three months ended March 31, 2007 and continue to incurlosses. At March 31, 2007 the Company's current liabilities exceeded its currentassets by $25.8 million although the Company's total assets exceeded its totalliabilities by $1.6 million. On March 19, 2007 all the conditions related to the sale of 100% of the sharesof Philippine Gold Limited, a wholly-owned subsidiary of Thistle, and Thistle'sother interests in the Masbate gold project to CGA Mining Limited ("CGA") wassatisfied and the transaction has been completed. Pursuant to this transaction(the "CGA Transaction") the consideration that was paid amounted to in aggregateUS$51 million of which US$21 million was payable in ordinary shares of CGA (the"CGA Shares"). Applying the pricing formula Thistle received 40,985,538 CGAShares on March 19, 2007. This represents an approximate 25.4% interest in CGA.In addition on March 19, 2007 Thistle received US $28,887,430. This paymentenabled Thistle to pay down US$26.7 million of the debt owing to MC ResourcesLimited ("MC") and Casten Holdings Limited ("Casten") on March 20, 2007. Pursuant to the Sale and Purchase Agreement ("SPA"), Thistle has provided anumber of warranties to Central Asia Gold Limited (the "Purchaser") and CGA andwill remain subject to possible Purchaser Claims (as defined therein) for aminimum period of 12 months. Although no formal claims or actions related tothe sale of the interest in the Masbate Project have been received, CGA and thePurchaser have reserved their rights in connection with the SPA and the eventsleading up to the completion of the sale. The Company believes that it has agood defense against possible claims that might be made in this regard. Shouldproceedings be instituted against the Company and this interpretation prove notto be the case, the matter could have a material adverse effect on the Company. The following events occurred subsequent to the end of the first quarter of2007: On April 11, 2007, Thistle entered into a non-binding agreement with each of MCand Casten on the restructuring of debt (the "Plan" refer note 3.3). On May 11,2007, Thistle entered into a debt standstill agreement with MC and Casten (the "Standstill Agreement" refer to note 3.4) pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of Thistle'sownership interest in CGA to MC and Casten not be obtained by August 11, 2007,the Plan will lapse and MC and Casten will, subject to certain conditions,continue to defer repayment of interest and principal on the loans they haveadvanced to Thistle until May 31, 2008. Under the Plan, the intention is that the Company's 25.4% interest in CGA is tobe transferred and the deferred payments in terms of the CGA Transaction beassigned to MC and Casten for a total of approximately $ 25.5 million. Inaddition, MC and Casten have agreed to fully underwrite a private placement (the"First Private Placement"), the proceeds of which are to be applied in payingdown in full the outstanding principal of the pre CCAA debt, assume certain bankguarantees in respect of the South African operations and provide workingcapital of $1.75 million. Following the credit line entered into on June 27,2007, the quantum of the private placement will be adjusted to reflect anyincrease in indebtedness owed to MC and Casten. In addition the $1.75 millionworking capital provision will be withdrawn. A second private placement (the "Second Private Placement") is contemplated under the Plan whereby theconsideration for shares shall be paid by MC and Casten by way of set-offagainst the Remaining Indebtedness. Should the performance of President Steyn Gold Mine (Free State) Pty Limited ("PSGM") not improve to a level where the Company is self sufficient the Plan isunlikely to be implemented. Furthermore should the Company divest itself of PSGMfor cash there will be no need to proceed with the First and Second PrivatePlacements. The Second Private Placement is subject to certain conditions,including the change in country of domicile of Thistle. In certain circumstances the debt deferment undertakings provided by MC andCasten under the Standstill Agreement will be of no force and effect. Theserelate mainly to economic circumstances of the Company, a material adversechange in the financial position or prospects of the Company or its subsidiariesand any material legal claims being made against the Company or itssubsidiaries. The Board has decided to embark on a process to consider the future of PSGM.This could lead to the divestiture of PSGM. The high risk nature of operating asingle gold mine on a stand-alone basis and inability at present of PSGM toself-fund all the capital expenditure needed to upgrade infrastructure, createmore operational flexibility, develop the Golden Triangle and explore theEldorado reefs indicates that it could be appropriate to integrate PSGM into adiversified South African gold mining company. The Company is in the process offinalising arrangements with a South African based investment banker to act asits financial advisor in this process and is currently in early stagediscussions with an interested third party. The Company hopes to concludeagreements relating to the future of PSGM by September 2007. These agreementswould however be subject to shareholder approval. On June 27, 2007, MC and Casten agreed to provide a credit line of up to$666,600 per month for the three month period to September 2007 during whichperiod management expect to conclude divestiture or other agreements for PSGM.The credit line will be available for the purpose of funding corporate costsincluding the cost of strategic initiatives relating to PSGM and to provide acontingency in the event of below forecast performance by PSGM over the period.The credit line is contingent on improved performance at PSGM to levels ofproduction of not less than 396, 396 and 384 kg's of gold for the months ofJuly, August and September 2007 respectively, adequate progress in strategicinitiatives relating to PSGM and certain other conditions. Given recentproduction problems experienced by PSGM there can be no assurance that theseconditions will be satisfied. Without the credit line there may be a materialuncertainty which may cast doubt on the ability of the Company and itssubsidiaries to continue as going concerns. Having reviewed the cash flow forecasts of the Company and its subsidiaries,given agreement to move forward with the Plan or Standstill Agreement whicheveris applicable and given the credit line entered into with MC and Casten on June27, 2007 for $666,600 per month for the three month period up to September 2007during which period management expect to conclude divestiture or otheragreements for PSGM, it is management's belief that existing cash resources, netcash to be generated from operations and the sale of assets and the credit lineprovided, will be sufficient to meet the Company's anticipated requirements. Inmaking this statement management has assumed that current market prices willprevail, that the revised production forecasts for the year will be met and thatthe restructuring under the Plan will be successful or the divestiture or otheragreements for PSGM will be concluded by the end of September 2007. Accordinglythe financial statements have been prepared on the basis of accounting policiesapplicable to a going concern. Should PSGM not be successful in achieving sufficient levels of profitableoperations within the contingency provided in the credit line entered into withMC and Casten on June 27, 2007, and / or there be a material award adverse toPSGM under the M Hall and Associates claim, and/or either the restructuringunder the Plan not be successful or the divestiture or other agreements for PSGMnot be concluded by the end of September 2007, there is a material uncertaintywhich may cast doubt on the ability of the Company and its subsidiaries tocontinue as going concerns and, therefore, that they may be unable to realisetheir assets and discharge their liabilities in the normal course of business. The lack of sufficient pre-developed mining areas and lack of historicalinvestment in infrastructure are constraints that have and are holding backPSGM's production capacity. The recent compressor and pump failures at Number 3shaft indicate that there is an urgent need to upgrade infrastructure to reducethe risk of production disruptions. The forecast includes expenditure to remedythe historical under spending and is expected to have positive effect on futureproduction. The unaudited consolidated financial statements do not reflect adjustments thatwould be necessary if the going concern basis was not appropriate. If the goingconcern basis was not appropriate for these unaudited consolidated financialstatements, then significant adjustments would be necessary in the carryingvalue of assets and liabilities, the reported revenues and expenses, and thebalance sheet classifications used. The appropriateness of the going concernbasis is dependent upon, among other things, future profitable operations, andthe ability to generate sufficient cash from operations and financingarrangements to meet obligations. 3.2 2005 Financial Restructuring On January 7, 2005 (the "Filing Date"), the Company obtained protection underthe Companies' Creditors Arrangement Act from the Ontario Superior Court ofJustice (the "Court"). The Court subsequently granted extensions of theCompanies' Creditors Arrangement Act ("CCAA") protection to June 30, 2005. Thisallowed the Company to continue operating its business while it negotiated arestructuring plan with its creditors. On May 3, 2005 the Company's affectedcreditors approved the Company's Plan ("CCAA Plan") and the CCAA Plan wasapproved by the Court on May 10, 2005. The Company subsequently emerged fromCCAA protection and the CCAA Plan was implemented on June 30, 2005.The CCAA Planprovided, inter alia, for the following: 1) Two classes of creditors: a) Class One, consisting of Meridian Creditors, the holders of claims in respect of the Company's senior secured indebtedness; and b) Class Two, consisting of the Note-holder Creditors, the holders of claims relating to notes issued by the Company 2) The sale by Meridian Creditors to the Company, or its security agent, of a) Debt owing to Meridian Creditors by subsidiaries of the Company, guaranteed by the Company, and secured, totalling approximately $54.2 million together with interest thereon; and b) Debt owing to Meridian Creditors by a subsidiary of the Company totalling approximately Cdn $3.93 million together with interest thereon; 3) In consideration for such sale, the Meridian Creditors received from the Company, in aggregate: a) Secured notes evidencing indebtedness of $20 million b) Secured notes evidencing indebtedness of Cdn $3.93 million; and c) 70% of the post-implementation equity in the Company 4) The release of all claims of Note holder Creditors, totalling principal of $24.85 million plus interest thereon, in consideration for which Note- holder Creditors received 25% of the post-implementation equity in the Company; 5) The consolidation of existing common shares of the Company so that existing shareholders retained 5% of the post-implementation equity in the Company; 6) Payment in full by the Company of all proven claims of the Company's creditors as at the Filing Date (other than claims of Meridian Creditors and Note-holder Creditors); and 7) The delivery by the Company to the Meridian Creditors of secured notes evidencing the amount of the Company's outstanding debtor-in-possession financing owing to them as at the CCAA Plan implementation date. The CCAA process was completed on June 30, 2005 following which Casten and MCbecame the principal creditors of the Company and own collectively 70% of theequity. The balance of the equity is owned as to 25% by former creditors,including the secured loan note holders and as to 5% by former equityshareholders. 3.2 The Plan On April 11, 2007 Thistle entered into a non-binding agreement with its majorcreditors MC and Casten on the restructuring of debt (the "Plan"). Thecompletion of the Plan is conditional on the transfer of Thistle's ownershipinterest in CGA to MC and Casten. The Plan contemplates: • The transfer of Thistle's approximate 25.4% interest in CGA MiningLtd ("CGA") to MC and Casten for $21.0 million; • The assignment of, or undertaking to pay over, when due, to MC andCasten deferred payments owing in terms of the CGA Transaction for $4.5 million.In terms of the CGA Transaction $1 million and $4 million less any amount(s)which are required to meet any substantiated warranty and indemnity claims thatmay be made by CGA are payable on dates not later than 20 August 2007 and 20March 2008. Notwithstanding this, the sole responsibility and liability for anyand all CGA claims shall remain with Thistle. To the extent that any part ofthe $5 million is not paid to MC and Casten such amount(s) shall be and shall bedeemed to constitute a loan to Thistle from MC and Casten which shall be deemedto have commenced from April 1, 2007, and shall otherwise be on and subject tothe terms and conditions set out in the paragraph below. • Commitments by MC and Casten to underwrite in full a privateplacement of approximately 44.45 million shares at £0.20 (Great British Pound)per share at no commission to MC and Casten (the "First Private Placement"). TheFirst Private Placement will raise approximately US $17.3 million before costs.The private placement is to be made to MC and Casten pro rata to their existingshareholdings, and selected qualified existing investors under conditions offinancial hardship. In the event that other investors do not subscribe for theThistle common shares to be offered to them pursuant to the private placement,MC and Casten will each increase their holding from 35% to an estimated 42.35%. Should the Plan be affected, the proceeds of the above transactions are to beapplied as follows: i. The $21.0 million proceeds of the transfer of CGA shares, the assignment of deferred payments for $4.5 million and First Private Placement is intended to be used to repay outstanding CCAA debt owed by Thistle to MC and Casten. This amounts to CAD $22.57 million and US $20.00 million as at April 1, 2007;ii. Approximately US $1.58 million of the net proceeds of the First Private Placement is intended to be used to assume certain bank guarantees that have been provided by Meridian Capital Limited (the parent company of MC) to Standard Bank South Africa on behalf of PSGM in respect of various trade creditors and the South African Department of Minerals and Energy; and The balance of the net proceeds of the First Private Placement of approximatelyUS $1.75 million will be used to fund Thistle's working capital requirements forthe remainder of 2007. Following the credit line entered into on June 27, 2007,the quantum of the private placement will be adjusted to reflect any increase inindebtedness owed to MC and Casten. In addition the $1.75 million workingcapital provision will be withdrawn. Future cash flows are subject to a numberof risk factors, most significantly, the performance of PSGM, the US $ goldprice and ZAR: US $ exchange rates. Depending on these and other factors, theboard of directors of Thistle recognizes that it may be necessary for Thistle toraise further funds during 2007. There is no assurance that Thistle will besuccessful in its future fundraising efforts. The internal working capitalassessment relating to the First Private Placement assumed gold production fromPSGM for 2007 to be approximately 140,000 oz at a cash cost of between $575 to$580 per oz assuming an exchange rate of 7.30 South African rand per US $ and aUS $ gold price of $640 per oz. Although production is now forecast to beapproximately 137,200 oz at a cash cost of approximately $605 to $615 per ozassuming a 7.20 ZAR: US $ exchange rate, capital expenditure has been reviseddownwards from US $11.7 million to US $9.0 million. Should the performance of PSGM not improve to a level where the Company is selfsufficient the Plan is unlikely to be implemented. Furthermore should theCompany divest itself of PSGM for cash there will be no need to proceed with theFirst and Second Private Placements. Should the First Private Placement proceed as planed, Thistle will continue toowe deferred interest and fees to MC and Casten ("Remaining Indebtedness") whichon April 1, 2007 amounted to CAD $6.90 million and US $6.54 million. The blendedinterest rates for this debt at current exchange rates amounts to 11.33% perannum. A second private placement (the "Second Private Placement") is also contemplatedunder the Plan whereby the consideration for shares shall be paid by MC andCasten by way of set-off against the Remaining Indebtedness. The Second PrivatePlacement is however subject to certain conditions, including the change in thecountry of domicile of Thistle (the "Continuance"). Under the Plan, subject to satisfactory legal, commercial and tax diligence, MCand Casten may within a period of twelve months request Thistle to call ashareholders meeting for the purpose of authorizing such a change in domicile. The subscription price of the shares under the Second Private Placement will beequal to the weighted average closing price per Thistle share on AIM for the 10trading days immediately prior to the second business day prior to thecompletion of the Second Private Placement. Under the Plan, the payment of the interest on the Remaining Indebtedness is tobe deferred until the change in domicile has been effected and thereafter shallbe payable quarterly on March 31, June 30, September 30 and December 31 in eachcalendar year. Such interest shall be compounded quarterly in arrears on March31, June 30, September 30 and December 31. The payment of the Remaining Indebtedness is to be deferred until the earliestof April 1, 2010 or the occurrence of certain events including: • the (direct or indirect) sale, disposal, transfer, scheme, plan,consolidation, amalgamation, merger, compromise, arrangement, distribution orsituation of or involving Thistle or all or substantially all or a majority ofthe assets or rights of Thistle and/or its subsidiaries or which results in achange in control of Thistle; • completion of the Second Private Placement or any other privateplacement, rights issue or fund raising; • any event of default in relation to any of the RemainingIndebtedness or under any loan or facility agreement to which Thistle or any ofits subsidiaries is a party from time to time; • any legal or other proceedings being commenced against Thistle orany of its subsidiaries for the repayment of any debt or amount due, or forexecution against (or the perfection of any security in respect of) any of itsor their respective assets, or any corporate action or legal proceedings arecommenced for the winding-up, dissolution, administration, receivership,liquidation, bankruptcy, re-organisation or similar event relating to orinvolving Thistle, any of its subsidiaries or any of their respective revenues,assets or rights; or • any breach, in any material respect, occurring or reasonably likelyto occur in respect of any of the terms or conditions of the Plan. The Plan constitutes a "related party transaction" under the provisions ofOntario Securities Commission Rule 61-501 ("Rule 61-501"). Thistle has relied onthe "financial hardship" exemptions from the valuation and minority shareholderapproval requirements of Rule 61-501. The independent directors of Thistle andthe Thistle board as a whole have each unanimously determined that (i) Thistleis in serious financial difficulty, (ii) the terms of the Plan are designed toimprove Thistle's financial position and (iii) the terms of the Plan arereasonable in the circumstances to Thistle. The Plan constitutes a related party transaction for the purposes of theAlternative Investment Market of the London Stock Exchange ("AIM") rules. As such, the independent directors and the Thistle board of directors haveconcluded that, following consultation with Grant Thornton Corporate Finance (inits capacity as nominated adviser to Thistle), the terms of the privateplacement are fair and reasonable insofar as Thistle's shareholders areconcerned. In giving its advice, Grant Thornton Corporate Finance has taken intoaccount the directors' commercial assessment. Completion of the Plan is subject to certain customary conditions including butnot limited to the execution of definitive subscription agreements by Thistleand the investors and receipt of all necessary approvals, including anyregulatory approvals. There is however, no assurance that the Continuance orthe Second Private Placement will be undertaken as it remains subject to furtheranalysis by Thistle, MC and Casten. The implementation of the Plan will reducethe Company's financial liabilities and is expected to remove the need forcontinued financial support from MC and Casten. 3.4 The Standstill Agreement On May 11, 2007, Thistle entered into a debt standstill agreement with MC andCasten (the "Standstill Agreement") pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of Thistle'sownership interest in the CGA Shares to MC and Casten not be obtained by August11, 2007, the Plan will lapse and MC and Casten will continue to defer repaymentof interest and principal on the loans they have advanced to Thistle until May31, 2008. Should such consent be obtained by August 11, 2007, the Plan may beimplemented. In certain circumstances the agreement by MC and Casten to defer repayment ofinterest and principal will be of no force and effect. These include thefollowing: • a material deterioration in the economic circumstances applicable toThistle or any of its subsidiaries; • any other material adverse change in the business, assets,liabilities, condition (financial or otherwise) and prospects of President SteynGold Mines (Free State) (Pty) Limited occurring after the date hereof; • completion of any private placement, rights issue or fund raising;the (direct or indirect) sale, disposal, transfer, scheme, plan, consolidation,amalgamation, merger, compromise, arrangement, distribution or reorganization ofor involving Thistle or its assets; • any event of default in relation to any of the RemainingIndebtedness or under any loan or facility agreement to which Thistle or any ofits subsidiaries is a party from time to time; • any corporate action or proceeding is commenced or instituted forthe winding up, liquidation, receivership, dissolution, bankruptcy orre-organization (or similar event) of Thistle, any of its subsidiaries or any oftheir respective revenues or assets; • any legal or other proceedings being commenced against Thistle orany of its subsidiaries; or • any breach, in any material respect, occurring or reasonably likelyto occur in respect of any of the terms or conditions of the Plan. 3.5 Fresh start accounting Following implementation of the plan implemented under the CCAA, the Company hadto adopt "fresh start" accounting. This accounting has required that assets andliabilities be recorded at their fair values at the date of emergence from theCompany's reorganization proceedings, which was 30 June 2005. As a result, thereported amounts in the consolidated financial statements separate resultsbefore and after fresh start accounting. The Company has adjusted the historicalcarrying value of its assets and liabilities to fair value reflecting theallocation of the Company's reorganization equity value of $6.6 million. Inaddition the Company translated its reclamation provision and future taxliabilities using June 30, 2005 rates. The following table summarizes the impact of adjustments required to implementthe CCAA Plan and to reflect the adoption of fresh start accounting. (in thousands of US dollars) 30 June 2005 Fresh start 30 June 2005 Balance prior to accounting Balance after CCAA Plan CCAA Plan implementation ImplementationAssetsCurrent AssetsCash and cash equivalents 4,183 - 4,183Accounts receivable 1,627 - 1,627Investments 1,011 (52) 959Inventories 3,865 - 3,865Other assets 1,191 11 1,202 11,877 (41) 11,836 Property, plant and equipment 17,951 - 17,951Mining properties 44,403 - 44,403 74,231 (41) 74,190 Liabilities and Shareholders' deficitCurrent LiabilitiesAccounts payable and accrued liabilities 16,996 (1,112) 15,884Current debt 67,462 (59,980) 7,482Income taxes payable 1,559 - 1,559 Total current liabilities 86,017 (61,092) 24,925Long term debt 37,630 - 37,630Reclamation provision 3,000 1,296 4,296Future income tax liabilities 755 (43) 712 127,402 (59,839) 67,563 Shareholders' deficitCommon shares (note 11) 123,461 (116,834) 6,627Contributed surplus 2,735 (2,735) -Deficit (176,708) 176,708 -Equity adjustment from foreign currency translation (2,659) 2,659 - Total shareholders' deficit (53,171) 59,798 6,627 74,231 (41) 74,190 4. Investment subject to significant influence Thistle is considered to be able to influence the affairs of CGA. Thistle owns a25.4% interest in CGA and is party to an Investor Agreement which regulates therelationship with CGA and certain aspects of CGA's management including theentitlement to a board seat. Investments in significantly influenced companies are accounted for using theequity method. Under the equity method, the original cost of the shares isadjusted for the Company's share of post-acquisition earnings or losses lessdividends. The excess of the cost of the shares of the associated company overthe net book value of its net assets on the date of acquisition, which amountedto $0.464 million, was recognized as goodwill and is not amortized. The excessof the cost of the shares over the net book value of its net assets iscalculated using the published financial results for CGA at March 31, 2007.Following consultation with CGA, there has been an insignificant movement inearnings between March 19, 2007 and March 31, 2007. Accordingly the statements of earnings for the first quarter of 2007 does notreflect the Company's share of post the acquisition earnings of the associatedcompany. (in thousands of US dollars) 31 December 31 December 2007 2006 Fresh start Fresh startInvestments in significantly influenced companies:CGA Mining Limited (25.4% interest) 20,641 - 20,641 - 5. Share capital On January 7, 2005 the Company commenced restructuring under CCAA. Under therestructuring and effective June 30, 2005, all of the Company's existing commonshares were consolidated on a one share for 200 existing shares basis andadditional common shares were issued to creditors affected by the CCAA Plan,such that MC and Casten collectively hold approximately 70% of the existingcompany shares, holders of secured and unsecured convertible loan notesapproximately 25% of the outstanding shares with the balance being held byprevious existing shareholders. a) Authorized Unlimited common shares without par value. Unlimited Class "A" preference shares b) Issued Common shares Number Amount of shares $000 January 1, 2005 461,520,685 108,883Cancellation of warrants - 14,578 June 30, 2005 461,520,685 123,461 Conversion of existing shares on a 200 for one basis as ofJune 30, 2005 2,307,603 123,461Conversion of various loans per CCAA Plan of arrangement 43,844,457 59,980Other fresh start accounting adjustments (note 3.5) - (176,814) June 30, 2005 Post CCAA, December 31, 2005,December 31, 2006, March 31, 2007 46,152,060 6,627 On June 30, 2005, the Company had 461,520,685 common shares issued andoutstanding. In addition, the 31,880,000 directors and employees stock optionsoutstanding as at December 31, 2004 were cancelled effective February 16, 2005.The share purchase warrants outstanding as at December 31, 2004 totalling87,452,913 were also cancelled effective February 16, 2005. As part of the restructuring under CCAA, which was completed on the close ofbusiness on June 30 2005, the issued and outstanding shares at March 15, 2005were consolidated on a one consolidated share for 200 existing shares basis.This resulted in 2,307,603 consolidated common shares. As a result of therestructuring, the majority of the convertible loans together with another longterm loan were converted under a new agreement. This resulted in 11,538,015 newshares being issued. A portion of the demand loans were converted under therestructuring agreement for 32,306,442 new shares. As a result of the foregoing,there were a total of 46,152,060 common shares outstanding upon completion ofthe restructuring, which is the same number of shares outstanding as at December31, 2005, December 31, 2006 and March 31, 2007. The net loss per share before discounting operations (basic and diluted) and thenet loss per share (basic and diluted) for periods prior to 1 July 2005 havebeen adjusted for the effect of the consolidation of 200 shares for 1 under theCCAA restructuring process detailed above. 6. Discontinued operation On January 31, 2007, the Company and CGA Mining Limited (previously namedCentral Asia Gold Limited) entered into a Sale and Purchase Agreement ("SPA")for the sale to a wholly-owned subsidiary of CGA ("the Purchaser") of 100% ofThistle's shareholding in Philippine Gold Limited ("PGO") and its otherinterests in the Masbate gold project. The transaction closed on March 19, 2007("Completion date"). Under the terms of the transaction, the considerationpayable for the sale and purchase of the Shares and Assets is, US$51 millionconstituted as follows: • 21 million being payable in ordinary shares of CGA. At the agreedissue price of the CGA Shares of A$0.65 per CGA Share and exchange rate of A$:US$ 1.2686 Thistle has received 40,985,538 CGA Shares. This represents anapproximate 25.4% interest in CGA. • the payment by the Purchaser to Thistle of $25 million in cash, lessthe deposit of $500,000 that was already been paid by the Purchaser to Thistlein December 2006; • the payment by the Purchaser into escrow (the "Escrow") of $4million and $1 million to Thistle, less any amount(s) which are required tomeet any substantiated warranty and indemnity claims that may have been made bythe Purchaser, on a date not later than six months from the date of Completion(the "Completion Date"); and • the payment to Thistle twelve months after Completion of the amountof $4 million paid into Escrow as referred to in sub-paragraph (c) above, lessany amount(s) required to meet any substantiated warranty and indemnity claimsthat may have been made by the Purchaser within twelve months of the CompletionDate. In addition to the above consideration the Company received a refund of $4.4million in working capital. Thistle has provided a first priority security to Thistle Holdings (the "FirstRanking Pledge") over all the issued and outstanding shares in Toowong assecurity for the performance by Thistle of all its obligations under theexisting security documents. The First Ranking Pledge will terminate uponrepayment of all amounts owing to MC and Casten under the existing securitydocuments and related credit agreements and loan notes. Under the terms of the SPA, Thistle has also provided a second priority securityto the Purchaser (the "Second Ranking Pledge") over the Toowong (ranking inpriority after the First Ranking Pledge) as security for the amount of anysubstantiated warranty or indemnity claims made by the Purchaser under the SPAand certain related agreements. If the amount of such claim is in excess of the amounts then held in Escrow, thePurchaser may instruct Thistle to: (a) either (at Thistle's sole discretion) cause Toowong to sell such number of CGA Shares on the market or provide loans to Toowong as are required to raise a sum (net of any permitted expenses) equal to the remaining amount due under all such claims; and (b) where CGA Shares are sold, cause the sale proceeds (net of any permitted expenses) to be paid to the Purchaser in or towards satisfaction of such claims or, where a loan is provided, cause that the loan to be paid to the Purchaser in or towards satisfaction of such claims. The Second Ranking Pledge will terminate 12 months after the Completion Date,unless a valid claim under the SPA or related agreements has been institutedprior to the end of that period in which event that pledge will remain in effectuntil the claim has been substantiated. The Second Ranking Pledge will alsoterminate on the date all amounts due under the existing loan documents havebeen repaid in full or fully converted into equity. At all times during the termof the aforementioned pledge agreements, and subject to no event of defaulthaving occurred there under, Toowong will be entitled to exercise all rightsattaching to the CGA Shares including, among other things, the right to vote andthe right to receive dividends. Thistle and Toowong will be subject to a 12 month "lock-up" from Completionunder which they will agree not to dispose of the CGA Shares during that period,subject to certain limited exceptions set out in an investor agreement enteredinto between Thistle, Toowong and CGA (the "CGA Investor Agreement"). Under the terms of the CGA Investor Agreement, for so long as Toowong and itsaffiliates own more than 10% of the voting shares of CGA, Toowong will beentitled to nominate one person to be appointed as a director to the board ofdirectors of CGA. The first director nominated by Toowong will be Andreas J.Graetz, the Company's Chief Financial Officer. A summary statement of earnings for Philippine Gold Limited is as follows: (in thousands of US dollars) Three months Three months ended ended(unaudited) 31 March 31 March 2007 2006 Fresh start Fresh start General and administrative expenses (43) (88)Foreign currency loss (1) -- Net loss (44) (88)Gain on sale of discontinued operation 23,871 -- 23,827 (88) Assets and liabilities held in discontinued operations: (in thousands of US dollars, unaudited) 31 March 31 December 2007 2006 Fresh start Fresh startAssetsCurrent assetsCash and cash equivalents -- 375Accounts receivable -- 36Investments -- 258Inventories -- 7 Total current assets 676 Property, plant and equipment -- 3,169Mining properties -- 28,199 Total Assets -- 32,044 LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities -- 1,872 Total current liabilities -- 1,872 Retirement provision -- 94Reclamation provision -- 2,301 Total Liabilities -- 4,267 7. Subsequent events The following significant events occurred after the balance sheet date: • Continuing production problems at PSGM Production at PSGM continues to be challenging due to a lack of operationalflexibility compounded by infrastructure problems. Sales of gold for the second,third and fourth quarters of 2007 are forecast at approximately 31,200 oz,39,800 oz and 37,000 oz at cash costs of approximately $670, $564 and $558 peroz respectively assuming an exchange rate of 7.20 ZAR:US$ for the second half of2007. Traditionally the second half of the year is more productive than thefirst half. Although PSGM is currently forecast to meet its obligations in theordinary course of business there can be no assurance that the recent productionproblems experienced by PSGM will not persist. PSGM has also elected not toobtain insurance in respect of business interruption and machinery breakdownincluding loss of profits and damage to property, plant and equipment. • PSGM strategic initiatives and credit line The Board has decided to embark on a process to consider the future of PSGM.This could lead to the divestiture of PSGM. The high risk nature of operating asingle gold mine on a stand-alone basis and inability at present of PSGM toself-fund all the capital expenditure needed to upgrade infrastructure, createmore operational flexibility, develop the Golden Triangle and explore theEldorado reefs indicates that it could be appropriate to integrate PSGM into adiversified South African gold mining company. The Company is in the process offinalising arrangements with a South African based investment banker to act asits financial advisor in this process and is currently in early stagediscussions with an interested third party. The Company hopes to concludeagreements relating to the future of PSGM by September 2007. These agreementswould however be subject to shareholder approval. On June 27, 2007, MC and Casten agreed to provide a credit line of up $666,600per month for the three month period to September 2007 during which periodmanagement hopes to finalize strategic initiatives relating to PSGM. The creditline will be available for the purpose of funding corporate costs including thecost of strategic initiatives relating to PSGM and to provide a contingency inthe event of below forecast performance by PSGM over the period. The credit lineis contingent on improved performance at PSGM to levels of production of notless than 396, 396 and 384 kg's of gold for the months of July, August andSeptember 2007 respectively, adequate progress in strategic initiatives relatingto PSGM and certain other conditions. Given recent production problemsexperienced by PSGM there can be no assurance that these conditions will besatisfied. Without the credit line there may be a material uncertainty which maycast doubt on the ability of the Company and its subsidiaries to continue asgoing concerns. • Possible CGA Claim Pursuant to the Sale and Purchase Agreement, Thistle has provided a number ofwarranties to Central Asia Gold Limited (the "Purchaser") and CGA and willremain subject to possible Purchaser Claims (as defined therein) for a minimumperiod of 12 months. Although no formal claims or actions related to the saleof the interest in the Masbate Project have been received, CGA and the Purchaserhave reserved their rights in connection with the Sale and Purchase Agreementand the events leading up to the completion of the sale. The Company believesthat it has a good defence against possible claims that might be made in thisregard. Should proceedings be instituted against the Company and thisinterpretation prove not to be the case, the matter could have a materialadverse effect on the Company. • Restructuring of Thistle's debt owing to MC and Casten and debtstandstill agreement Refer to note 3.3 and note 3.4 for detail on the restructuring of Thistle's debtowed to MC and Casten and debt standstill agreement. • M Hall and Associates ("MH & A") Claim On May 25, 2007 the Company's was served with a summons from the liquidators ofMH & A for an amount of ZAR40.5 million ($5.8 million at an exchange rate of ZAR7.00 to US $). An amount of ZAR 33.0 million relates to the repudiation of thecontract and ZAR 7.5 million relates to equipment used by the mine. The Companyhas appointed a technical expert who together with the Company's legal counselwill prepare a legal opinion on the prospects of success. The Company currentlybelieves that it has a good defence against the claim. Should thisinterpretation prove not to be the case, the matter could have a materialadverse effect on the Company. 8. Segment reporting Management has determined that the Company operates in one dominant industrysegment which involves the production and sale of gold. All of the Company'soperations, assets and employees engaged in operating activities are located inSouth Africa. The Company's exploration and development project located in thePhilippines was sold in the first quarter of 2007 (Refer note 6). 9. Economic dependence The Company is economically dependant upon its majority shareholders andcreditors, MC and Casten, due to the extent of the debt owed to them and theline of credit for the three month period ending September 30, 2007. Refer tonote 3.1 for details on the line of credit and to the "Liquidity and CapitalResources" section of the MD&A for loans advanced by MC and Casten. This news release contains forward-looking statements with the meaning ofapplicable securities laws including amongst others, statements made or impliedunder the headings "Overview", and "Highlights for the quarter ending March 31,2007 and subsequent events" above relating to the Company's objectives,strategies to achieve these objectives, future cash flow and financingrequirements, and similar statements concerning anticipated future events,results, circumstances, performance or expectations that are not historicalfacts. Such forward-looking statements reflect the Company's current beliefsand are based on information currently available to management. Thesestatements are not guarantees of future performance and are based on theCompany's estimates and assumptions that are subject to risk and uncertaintiesinherent in the business of the Company including those discussed in theCompany's materials filed with the Canadian securities regulatory authoritiesfrom time to time, which could cause the actual results and performance of theCompany to differ materially from the forward-looking statements contained inthis news release. Those risks and uncertainties include, among other things,risks related to: the mining industry (including operational risks inexploration development and production; delays or changes in plans with respectto exploration or development projects or capital expenditures; theuncertainties involved in the discovery and delineation of mineral deposits,resources or reserves; the uncertainty of mineral resource and mineral reserveestimates and the ability to economically exploit mineral resources and mineralreserves; the uncertainty of estimates and projections in relation toproduction, costs and expenses; the uncertainty surrounding the ability of theCompany to obtain all permits, consents and authorizations required for itsoperations and activities; competition for the acquisition, exploration anddevelopment of mineral interests; and health and safety and environmentalrisks), the risk of gold and other commodity price and foreign exchange ratefluctuations; the ability of the Company to fund the capital and operatingexpenses necessary to achieve the business objectives of the Company; theuncertainty associated with commercial negotiations and negotiating with foreigngovernments; the risks associated with international business activities; thedependence on key personnel; the ability to access capital markets; theindebtedness of the Company; and labour relations matters. Material factors orassumptions that were applied in drawing a conclusion or making an estimate setout in the forward-looking statements include that the general economy remainsstable, the demand and price of gold continues to increase and the Rand remainsstrong against the US$. It is also assumed that there will be no majordisruptions in production including failure of infrastructure, seismic activity,underground fires and labour unrest. The Company cautions that this list offactors is not exhaustive. Although the forward-looking statements contained inthis news release are based upon what the Company believes are reasonableassumptions, there can be no assurance that actual results will be consistentwith these forward-looking statements. All forward-looking statements in thisnews release are qualified by these cautionary statements. These forward-lookingstatements are made as of the date hereof and the Company, except as required byapplicable law, assumes no obligation to update or revise them to reflect newinformation or the occurrence of future events or circumstances. For further information, contact: Anton Kakavelakis, Group Financial Controller + 27 57 391 9026 or email toanton.kakavelakis@thistlemining.com Gerry Beaney, Grant Thornton Corporate Finance at +44 (0) 207 383 5100 This information is provided by RNS The company news service from the London Stock Exchange