The Mission Group Regulatory News (TMG)

15 Aug 2006 07:00

Thistle Mining Inc.14 August 2006 THISTLE MINING INC. Results for the second quarter ended June 30, 2006 Thistle Mining Inc. ("Thistle" or the "Company") (AIM:TMG) wishes to announcethe Company's unaudited Consolidated Financial Statements and Management'sDiscussion and Analysis ("MD & A") for the three month period ended June 30 ,2006, which will be filed on SEDAR (www.sedar.com). A full copy of thisreport can also be obtained from the Company's website: www.thistlemining.com. Thistle Mining Inc. second quarter results for the period ended June 30, 2006Management's Discussion and Analysis August 14, 2006 For the three months ended June 30, 2006 The following management's discussion and analysis ("MD&A") for 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 quarter ended June 30, 2006 includingthe notes thereto. Historical results, including trends which might appear,should not be taken as indicative of future operations or results. Furtherdetails regarding the Company and its business and operations may be obtainedfrom the Company's continuous disclosure documents filed from time to time withthe Canadian securities regulatory authorities, including the Company's annualinformation form (the "AIF"). These continuous disclosure documents areavailable through the SEDAR website maintained by the Canadian securitiesregulators, which may be accessed at www.sedar.com or on the Company's website,which may be accessed at www.thistlemining.com. All financial data herein havebeen prepared in accordance with Canadian generally accepted accountingprinciples ("GAAP") and all dollar references are in thousands of US dollarsunless 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 2006 Second 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, amongother things, risks related to: the mining industry (including operational risksin exploration development and production; delays or changes in plans withrespect to 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 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 South African Rand (or "ZAR") remains strongagainst the US$. It is also assumed that there will be no major disruptions inproduction including failure of infrastructure, seismic activity, undergroundfires and labour unrest. The Company cautions that this list of factors is notexhaustive. Although the forward-looking statements contained in this MD&A arebased upon what the Company believes are reasonable assumptions, there can be noassurance that actual results will be consistent with these forward-lookingstatements. 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 Consolidated Financial Statements and this MD & A. All numbers contained in this MD & A unless otherwise stated are on a historicalbasis. Overall Performance Highlights • Cash flow generated by operations was $2.3 million in the second quarter of 2006 compared to cash flow used in operations of $7.9 million in the second quarter of 2005. The improvement reflects an increase in sales and a 6.3% reduction in unit cash costs. Cash flow generated by operations was $1.2 million for the first six months of 2006 compared to cash flow used in operations of $16.0 million for the first six months of 2005. • Investment in property, plant and equipment, as well as additions to mining properties, decreased in the second quarter of 2006 relative to the second quarter of 2005. Total funds invested amounted to $2.0 million in the second quarter of 2006 and $2.5 million in the second quarter of 2005. In the second quarter of 2006, $1.3 million was invested at President Steyn Gold Mines (Free State) (Pty) Ltd. ("PSGM") principally on development and $0.7 million was invested in the Company's Philippine project. The total invested in property, plant and equipment as well as additions to mining properties for the first six months of 2006 decreased to $3.8 million compared to $4.6 million in the corresponding period for 2005. • Following the improvement in operational cash flow and a decrease in investments, no additional financing was raised in the second quarter of 2006. Additional funding of $0.7million was raised for the first six months of 2006 compared to $22.8 million raised in the corresponding six month period of 2005. • The consolidated net loss in accordance with Canadian GAAP for the second quarter of 2006 was $0.3 million, or $0.01 per share compared to $6.7 million, or $2.91 per share in the second quarter of 2005. The consolidated net loss in accordance with Canadian GAAP for the first six months 2006 was $4.9 million, or $0.11 per share compared to $14.4 million, or $6.23 per share, in the corresponding period of 2005. The net loss per share - basic and diluted for periods prior to 30 June 2005 has been adjusted in respect of the consolidation of 200 shares for 1 on 30 June 2005. • Gold sold in the second quarter of 2006 was 36,521 oz, a decrease of 14% compared to the same period in 2005. Production for the quarter was adversely effected by a fall of ground at PSGM's Number 1 Incline Shaft on February 18, 2006 which has turned out to be more disruptive to production than initially anticipated, the decision to stop unprofitable production from the Number 1A Ventilation Shaft in February 2006 and production problems experienced at the Big Bertha section. The Number 1 Incline Shaft was re-commissioned during July 2006 and production from this section has resumed. PSGM has limited capacity to absorb these production shocks. Gold sold in the first six months of 2006 was 71,389 oz, a decrease of 16% compared to the same period in 2005. • Compared to the second quarter of 2005, PSGM's unit cash costs decreased by 6.3% to $519 and total costs decreased by 3.6% to $556 per ounce of gold, respectively. (Cash cost per ounce sold is not a recognized measure under Canadian GAAP. A reconciliation to the cost of sales per ounce is included under South African Operations). The decrease in unit cash cost occurred despite a reduction in production reflecting the reduced cost of production that followed the restructuring of PSGM's labour force in the last quarter of 2005. Compared to the first six months of 2005, PSGM's unit cash costs decreased by 4.4% to $537 and total costs decreased by 0.3% to $581 per ounce of gold, respectively. • The Company realized an average spot price of $626 per ounce of gold in the second quarter of 2006, slightly lower than the average spot price of $628 for the second quarter of 2006. The price realized is $199 per ounce higher than that realized in the second quarter of 2005. For the first six months of 2006 the Company realised an average spot price of $590 per ounce which is $162 higher than that realised in the corresponding period in 2005. • The focus on quality of mining as opposed to emphasis on volume has resulted in an increase in gold yields. The yield for the second quarter of 2006 averaged 5.84 g/tonne compared to an average of 4.93 g/tonne in the second quarter of 2005 and 5.43 g/tonne and 4.56 g/tonne for calendar years 2005 and 2004 respectively. If low grade surface material is excluded the yield from underground sources amounted to 6.25 g/tonne for the second quarter. • Forecast gold production at PSGM for 2006 has been revised downwards from the previous forecast from 160,000 oz to approximately 157,500 oz. This reduction follows the impact of the fall of ground at PSGM's Number 1 Incline Shaft. With the recent weakening of the South African rand ("ZAR") to US$, cash costs for 2006 are forecast to be less than previously predicted and are now expected to be between $500 and $525 per ounce, and total costs are expected to be in the range of $540 to $565 per ounce, all assuming foreign exchange rates of ZAR 6.70 to 7.20 to the US$ for the second half of 2006 • Work on the feasibility study for the Golden Triangle project at PSGM has confirmed the potential of this project. The study undertaken by Murray and Roberts Cementation ("M & R") estimates the peak cash drawdown at $41 million and cash and total unit costs at $298 and $467 per oz respectively at current ZAR: US $ exchange rates. Management believe that the capital drawdown and project returns can be improved upon by integrating conventional ore handling approaches with trackless development. It has also become apparent that the project should be evaluated as part of PSGM's life of mine plan. A decision on this project is now expected to be made early in 2007. The results of the feasibility study will be released at this time. • Discussions with Lefa La Gauta Pty Ltd ("Lefa La Gauta"), a majority shareholder in a black economic empowerment ("BEE") consortium, to acquire an initial 15% equity stake in PSGM are at an advanced stage. The proposed transaction price is not expected to have a material impact on the financial condition of the Company as it recognises intercompany debt between PSGM and Thistle of $136 million as at June 30, 2006. A shareholders agreement will need to be concluded before the transaction becomes binding. In accordance with South African legislation, the transfer of equity to a BEE group is a necessary step for the purpose of qualifying for the grant of new order mining rights. • Following the completion of a bankable feasibility study for the Masbate project in May, the Board of Directors (the "Board") has decided to begin a process to explore strategic alternatives for the Masbate project in the Philippines with a view to enhancing shareholder value, including but not limited to the combination, sale or merger of Philippine Gold Ltd ("PGO"), to or with another entity. The Board is of the opinion that the combination or merger of PGO with a suitable partner has the potential to create more shareholder value than developing the project on a stand- alone basis. The desire is that any transaction be accretive to both parties in that it will create critical mass and unlock synergies resulting in possible uplift in shareholder value. PGO holds the Company's Philippine assets including the Masbate project. The Company has engaged Macquarie Securities (Asia) Pte Limited as its exclusive financial advisor in this process. There can be no assurance that the exploration of strategic alternatives will result in a transaction. • In parallel with this initiative, work has commenced on the detailed design and engineering of the Masbate processing facilities and mine. In addition on July 25, 2006 PGO and its Philippine subsidiaries have jointly and severally mandated BNP Paribas to arrange and underwrite the project finance for the Masbate project on an exclusive basis. There can however be no assurance that the BNP Paribas and PGO will conclude a project financing arrangement. • Having reviewed the cash flow forecasts of the Company, it is management's belief that existing cash resources and net cash to be generated from operations will be sufficient to meet the Company's anticipated short term commitments. In making this statement, management has assumed that current market prices will prevail. At current gold prices PSGM is able to fund corporate costs and the immediate cash needs of the Company's Masbate project. The Company has also commenced paying interest on debt owed to its principal creditors. Q2 2006 Q2 2005 H1 2006 H1 2005 Fresh Start Pre Fresh Fresh Start Pre Fresh Start StartSales ($ millions) 23.3 18.7 43.2 37.5Net loss ($ millions) (0.3) (6.7) (4.9) (14.4)Loss per share ($) (0.01) (2.91) (0.11) (6.23)Cash generated by (used in) operations ($ millions) 2.3 (7.9) 1.2 (16.0)Gold sold (000's oz) 37 42 71 85Cash costs ($/oz) 1 519 554 537 562Total costs ($/oz) 556 577 581 583 1 Cash cost per ounce sold is not a recognized measure under Canadian GAAP. Areconciliation to the cost of sales per ounce is included under South AfricanOperations. 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 adjustments to the historical carrying value of itsassets and liabilities to fair value. The Company's reorganization equity valueamounted to $6.6 million. Consequently, transactions before and after theapplication of "fresh start accounting" from June 30, 2005, are separatelydisclosed in the Company's unaudited Consolidated Financial Statements for thethree months ending June 30, 2006. Selected Information - Financial HighlightsFor the period ended June 30 (in thousands of dollars, except per share amounts) 3 months 3 months 2005 6 months 6 months 2005 Pre fresh Pre fresh 2006 start 2006 start Fresh start Fresh startSales 23,329 18,710 43,166 37,498Gross profit / (loss) 3,051 (5,605) 1,611 (12,006)Net loss before discontinued operations (291) (6,714) (4,930) (14,381)Net loss per share before discontinued (0.01) (2.91) (0.11) (6.23)operations - basic and diluted 2Net loss (291) (6,714) (4,930) (14,381)Net loss per share - basic and diluted 2 (0.01) (2.91) (0.11) (6.23)Cash generated by (used in) operatingactivities 2,334 (7,943) 1,219 (15,965) Total assets 78,497 74,231 78,497 74,231Total Long Term Financial Liabilities 37,863 41,385 37,863 41,385Cash dividends declared per share Nil Nil Nil Nil 2 The net 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. The profitability of the Company is subject to a number of factors, includingthe Rand price of gold and the costs associated with various aspects of miningand processing operations and compliance with various regulatory requirements.Not all of the factors are within the control of management. Sales reflect (i) gold sold which was 36,521 oz and 42,376 oz and in the secondquarter of 2006 and 2005 respectively and (ii) the price realized of $626 and$427 per oz in the second quarter of 2006 and 2005 respectively. Gold sold of71,389 oz and 85,285 oz, at a price of $590 and $428 per oz, was realised forthe first six months of 2006 and 2005 respectively. The increase in the goldprice received has more than offset the decline in gold sold over the periodanalysed. The cost of sales including the profit or loss on sale of property, plant andequipment, the net impact of derivative financial instruments, accretionrelating to the reclamation provision and depreciation, depletion and impairmentwas $20.3 million and $24.3 million in the second quarter of 2006 and 2005respectively. The cost of sales including the profit or loss on sale ofproperty, plant and equipment, the net impact of derivative financialinstruments, accretion relating to the reclamation provision and depreciation,depletion and impairment was $41.6 million and $49.5 million in the first sixmonths of 2006 and 2005 respectively. Despite unit increases in labour and thecost of services and consumables, gross costs have been well contained in Randterms. This follows the restructuring of the labour force at PSGM in the fourthquarter of 2005. Major contributors to the net loss include: (i) General and administrative expenses which were $0.7 millionand $0.8 million in the second quarter of 2006 and 2005 respectively; (ii) Cost of interest which amounted to $2.4 million and $0.6million in the second quarter of 2006 and 2005 respectively. Interest in thesecond quarter of 2006 reflects the cost of pre and post CCAA loans advanced byCasten and MC; and (iii) Foreign exchange gains (losses) which amounted to ($0.8)million and $0.8 million in the second quarter of 2006 and 2005 respectively. Results of Operations SOUTH AFRICA The principal operating companies in South Africa are President Steyn Gold Mines(Free State) (Pty) Limited ("PSGM") and TM Training Initiative (Pty) Limited ("TMTI"), which operate the mines and the training college attached to the minesite, respectively. Metal Prices In the second quarter of 2006 the Rand weakened to levels last seen in January2004 and with a relative increase in the US$ gold price over the period theresult is the highest Rand gold price since Thistle's investment in PSGM. Theupward trend has provided relief to the beleaguered South African goldproducers. A chart showing the ZAR Gold Price from January 2004 to July 2006 isincluded in the 2006 second quarter report filed on SEDAR. 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. Sadly, however, fiveemployees of Thistle lost their lives during the first six months of 2006 inthree separate accidents all of which occurred in the first quarter. Themanagement and the Board extend their heartfelt condolences to the family andfriends of those employees that lost their lives. The Company remains focused on achieving its safety target, namely a Lost TimeInjury ("LTI") Rate of 10 per 1 million hours worked, a reportable rate of 5 per1 million hours and, most importantly, zero fatalities. For the three month period ended June 30, 2006, the LTI and reportable rateamounted to 15.4 and 10.2 per one million man hours respectively. This comparesto rates achieved in the twelve month period ended December 31, 2005 of 17.9 and10.1 respectively and is an improvement on the rates achieved for the firstthree months of 2006 of 30.8 and 19.5 per one million man hours respectively.Fall of ground incidents continue to be the main cause of reportable accidentsand, regrettably, fatalities at PSGM. PSGM has appointed IRCA Global, aconsulting firm that is an international risk management solution provider toreview safety systems at PSGM. Production and Cost of Production 4th Quarter 2005 2nd Quarter 3rd Quarter 1st Quarter 2nd Quarter 2005 2005 Restated 2006 2006Tonnes milled 268,884 268,237 218,301 189,808 199,823Recovered grade g/tonne 4.93 5.86 5.56 5.92 5.84Plant recovery % 95.4 96.5 95.8 95.5 95.6Ounces sold 42,376 49,260 40,945 34,868 36,521 Realised US$/oz 427 439 482 552 626Cash costs US$/oz3 554 468 493 555 519Cash costs R/tonne milled 553 569 605 629 598 Avg. exch. Rate ZAR/US$ ZAR6.42 ZAR6.43 ZAR6.51 ZAR6.12 ZAR6.43Avg. gold price ZAR/oz 2,743 2,824 3,139 3,377 4,025 Average employees at work 5,313 5,234 4,741 3,821 3,806Productivity: Annual tonnes per man 202 205 184 199 210 Cost of sales US$/oz 577 553 595 608 556Adjusted for:Depreciation, depletion, impairment (19) (31) (74) (42) (41)Derivative fair value adjustments - - (23) (11) 1Movement in provisions (2) (53) 69 - 3Loss on sale of property, plant &equipment - - 6 - -Other non operating costs (2) (1) (68) - -Cash costs US$/oz 554 468 493 555 519 3 Cash cost per ounce sold is not a recognized measure under Canadian GAAP. Second quarter 2006 sales of gold were 36,521 oz compared with 42,376 oz in thesame quarter of 2005 and 34,868 oz in the first quarter of 2006. Gold productionhas decreased due to the decision to stop all unprofitable working places andmore recently the fall of ground accident at the Number 1 Incline Shaft onFebruary 18, 2006 which is proving to be more disruptive to production thanoriginally anticipated and production problems from the Big Bertha section. TheSection 189 restructuring in late 2005 has also had an adverse impact onproduction. The first and second quarter are traditionally challenging for SouthAfrican gold miners owing to the preponderance of public holidays. The general focus on profitable mining has led to an improvement in therecovered grade from 4.00 g/t in the first quarter of 2004 to 5.28 g/t, 4.93 g/t, 5.86 g/t and 5.56 g/t in the first, second, third and fourth quarters of 2005respectively. The average recovered grade had improved from 4.56 g/t to 5.44 g/t in 2004 and 2005 respectively. In line with this trend the average grade forthe first quarter and second quarter of 2006 increased to 5.92 g/t and 5.84 g/trespectively. The grade in the second quarter also reflects the treatment of16,038 tonnes of low grade surface material. The recovered grade fromunderground sources amounted to 6.25 g/tonne for the quarter. During the second quarter of 2006, the South African operations realised aneffective gold price of $626 per ounce which is marginally lower than theaverage market price of $628 over the same period and is $74 per ounce higherthan the price realised in the first quarter of 2006. Accordingly the pricerealised for the first six months of 2006 is $590 per ounce. Cash operating costs for the second quarter of 2006 were $519 per ounce ofproduction, compared with $554 and $555 per oz for the second quarter of 2005and the first quarter of 2006, respectively. Major factors affecting these unitcosts are production, the weakening ZAR: US$ exchange rate and the restructuringof costs following the rationalization of labour in the last quarter of 2005.Gross costs continue to be well controlled despite increases in labour costs andconsumables. Following the conclusion of a three year wage agreement between PSGM and labourunions in December 2005, the total cost of employment is expected to increase by9 1/2 % effective June 20, 2006. In South African gold mines, labour representssome 50% to 60% of gross cash costs. The labour complement has reduced from5,313 employees in the second quarter of 2005 to 3,821 and 3,806 employees inthe first and second quarters of 2006 respectively. A summary of production per shaft, comparing the second quarter of 2006 with thecorresponding period in 2005 and the first six months of 2006 to thecorresponding period in 2005 is illustrated below. The impact of the fall ofground accident at the Number 1 Incline Shaft and the decision to stopoperations at the Number 1 Ventilation Shaft is evident. The focus on qualityof production is also apparent. Quarter 2 Quarter 2 6 months 2006 6 months 2005 2006 2005Steyn 1 ShaftTonnes milled tonnes 32,929 87,721 79,723 167,121Recovered grade g/t 5.08 4.39 4.76 4.40Gold recovered ounces 5,376 12,372 12,203 23,668 Steyn 2 ShaftTonnes milled tonnes 65,599 70,256 134,522 139,373Recovered grade g/t 7.09 5.63 7.12 5.47Gold recovered ounces 14,943 12,720 30,801 24,518 Steyn 3 ShaftTonnes milled tonnes 85,257 106,402 159,348 192,296Recovered grade g/t 6.06 5.12 5.86 5.41Gold recovered ounces 16,611 17,512 30,051 33,467 Steyn 9 Shaft (now suspended)Tonnes milled tonnes - - - 15,431Recovered grade g/t - - - 6.83Gold recovered ounces - - - 3,390 Surface SourcesTonnes milled tonnes 16,038 4,505 16,038 4,505Recovered grade g/t 1.09 - 1.09 -Gold recovered ounces 561 - 561 - Summary of Results Quarter 2 Quarter 2 6 months 2006 6 months 2005 2006 2005TOTAL SHAFTSTonnes ex underground tonnes 183,785 264,379 373,593 514,223Surface sources tonnes 16,038 4,505 16,038 4,505Total tons milled tonnes 199,823 268,884 389,631 518,728Recovered grade 5.84 4.92 5.88 5.10 g/tGold recovered ounces 37,492 42,603 73,618 85,042 Development on reef m 477 1,181 1,101 1,793Development off reef m 889 1,706 1,891 3,054 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 36,521 oz relative to production of 37,492 oz. Golden Triangle Project Work on the feasibility study for the Golden Triangle project at PSGM hasconfirmed the potential of this project. In the feasibility study which wasundertaken by Murray and Roberts Cementation ("M & R") the Basal Reef orebody isaccessed from twin declines developed from the Number 9 Shaft loading level.Lateral development is to be undertaken using trackless equipment with ore andwaste removal being undertaken via conveyors. Stoping operations are to beundertaken using conventional mining methods common to the South African miningindustry. The peak cash drawdown for the project is estimated at $41 million andcash and total unit costs estimated at $298 and $467 per oz respectively atcurrent ZAR: US $ exchange rates. Management believe that the capital drawdownand project returns can be improved upon by integrating conventional orehandling approaches with trackless development. It has also become apparent thatthe project should be evaluated as part of PSGM's life of mine plan. A decisionon this project is now expected to be made in early 2007. The Golden Triangle Area holds promise for consolidating PSGM's miningactivities and producing more predictable results. For additional informationrelating to the Golden Triangle project and mineral reserve and mineral resourceestimates on PSGM, please refer to the technical report titled "43-101 Documentfor President Steyn Gold Mines Situated in the Witwatersrand Basin, Free StateGoldfield, South Africa" dated March 16, 2006, which was prepared by PeterCamden-Smith, an independent qualified person for the purpose of NationalInstrument 43-101, and is available to the public on 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 BEE and socio-economic objectives of the MPRDA 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 or its attributableunits of production by May 1, 2009, and (ii) 26% ownership by HDSA's in that company or its attributableunits of production by May 1, 2014. The Charter states that such transfers musttake place in a transparent manner and for fair market value. Discussions with Lefa La Gauta, a majority shareholder in a broad based BEEconsortium comprising of professional mining engineers and women to acquire aninitial 15% equity stake in PSGM are at an advanced stage. Third partyadvisers have provided advice as to the fair value for PSGM in a BEEtransaction. The proposed transaction price is not expected to have a materialimpact on the financial condition of the Company as it fully recognisesintercompany debt of $136 million between PSGM and Thistle. No dividends will bedeclared by PSGM until debt and interest obligations have been met in accordancewith established loan agreements and adequate provision has been made forworking capital. A shareholders agreement will need to be concluded before theBEE transaction becomes binding. The South African government is also contemplating introducing for enactment aMineral and Petroleum Royalty Bill ("Royalty Bill") which is likely to see theimplementation of a royalty on gross sales value with effect from May 1, 2009.The royalty rate that was reflected on initial release of the draft in March2003 was 3%. South Africa's national treasury made no further mention of thelegislation in unveiling the national budget February 15, 2006. It is not clearwhen a next draft of the Royalty Bill will be released. COMPAGNIE INTERNATIONALE DE DEVELOPPEMENT MINER (SA) ("CIDEM") On June 7, 2006 CIDEM a wholly owned subsidiary of the Company domiciled inFrance, signed an agreement with Mines de la Lucette whereby the guaranteeprovided by CIDEM in respect of rehabilitation works at certain old mine sitesin France and Corsica was cancelled for payment of EUR190, 000. In terms of thisagreement the proceeds of the escrow account which backed the guaranteeamounting to EUR390, 000 was released to CIDEM. Mines de la Lucette has assumedfull liability for all rehabilitation work including required regulatorysign-off. As the rehabilitation liability was provided for at EUR40, 000 a lossof EUR150, 000 has been recorded, which loss is included under other gains andlosses in the income statement. PHILIPPINES Masbate Project The Masbate bankable feasibility study was completed in May 2006. Net attributable probable mineral reserves for this project as at March 31, 2006amount to 23.9 million tonnes at 1.65 g/tonne to yield 1.27 million oz. TheMasbate's mineral reserve and mineral resource estimate is based on informationprepared by or under the supervision of an independent "qualified person", asdefined required by National Instrument 43-101 of the Canadian SecuritiesRegulators. The financial results of the all equity case for the Masbate project as afunction of the gold and oil prices and as reported in the NI 43 101 report forthis project follows. SummaryTonnes Ore Mt 37.4Tonnes Waste Mt 126.9Stripping Ratio 3.40Average Yield g/t 1.35Oz Produced koz 1,623Initial capital $ k 92,809Cash Cost per oz $/oz $348Total Cost per oz $/oz $417 Gold Price $/oz 450 500 600WTI Oil Price $/bbl 50 53 66Pay back period years 6.8 4.8 3.0IRR Equity 6.3% 14.2% 27.2%NPV of cash flows to PGO discounted @ 5% $k 6,248 47,804 130,021NPV of cash flows to PGO discounted at @ 0% $k 39,678 97,715 213,209 The Net Present Value ("NPV") and Internal Rate of Return ("IRR") are derivedfrom cashflows attributable to PGO. PGO is a wholly owned subsidiary of theCompany incorporated in the United Kingdom, which has a 40% direct interest inFilminera, a company incorporated in the Philippines. Filminera owns the licenseto explore and mine for gold, silver and other minerals within the contract areathat covers approximately 83.36 sq km in terms of a Mineral Production SharingAgreement for a term of 25 year commencing in July 1997. The remaining 60% ofFilminera is owned by a Philippine registered company Open Pit HoldingsCorporation ("Open Pit"). PGO also has a 100% interest in PGPRC a company alsoincorporated in the Philippines. PGPRC will be the company responsible forbuilding a processing plant and treating ore sold to it by Filminera. For additional information relating to the Masbate project refer to thetechnical report titled "Masbate Gold Project, Masbate Island, Philippines FormNI-43 101F1 Technical Report" dated April 30,2006 which is available to thepublic at www.sedar.com. The Masbate's mineral reserve and mineral resource estimate is based oninformation prepared by or under the supervision of a "qualified person", asthat term is defined in NI 43-101. The qualified persons responsible for theMasbate project's mineral reserve and mineral resource estimates as at March 31,2006 listed below are independent of the Company for the purposes of NI 43-101and were at the time the estimates were prepared consultants. Both qualifiedpersons have no direct vested interests in any tenements in the Philippines. Inestimating the applicable mineral reserves and mineral resources, the qualifiedpersons used assumptions, parameters and methods appropriate for the Masbateproject and have verified the underlying data as appropriate in theirprofessional opinion (including sampling, analytical and test data). Mineral ResourcesName and e mail address Company , LocationAndrew James Vigar. Mining Associates, Level 5, 80 Albert Street, Brisbane, Queenslandandrew@minasc.com 4001, Australia (Telephone +61-7-3012 8499). Mineral ReservesName and e mail address Company , LocationStewart Charles Lewis. IMC Consultants Pty Ltd, Level 40, Riverside Centre, 123 Eaglelewiss@imcal.com.au Street, Brisbane, Queensland 4001, Australia (Telephone +61-7-3226 9100). On June 19, 2006 the Company announced that its Board has decided to begin aprocess to explore strategic alternatives for the Company's Masbate gold projectlocated on the island of Masbate in the Philippines with a view to enhancingshareholder value. These alternatives include but are not limited to thecombination or merger of PGO to or with another gold mining entity. PGO holdsthe Company's Philippine assets including the Masbate Project. The Board is ofthe opinion that the combination or merger of PGO with a suitable partner hasthe potential to create more shareholder value than developing the project on astand- alone basis. The desire is that any transaction be accretive to bothparties in that it will create critical mass and unlock synergies resulting in apossible uplift in shareholder value. The Company has engaged MacquarieSecurities (Asia) Pte Limited to act as its exclusive financial advisor in thisprocess. As at the date of this report a detailed information memorandum has beendistributed to selected parties who fit the target profile, have expressed aninterest in the project and have executed a confidentiality agreement to thesatisfaction of the Company. These interested parties have been requested tosubmit indicative non binding offers for the acquisition of all or part of theshares of PGO within a set timeframe. Following a review of the indicativeoffers the Company together with its financial advisor proposes to select alimited number of potential partners who will be given access to furtherinformation to conduct a detailed due diligence. After due diligence, potentialpartners will be invited to submit final unconditional offers. It is anticipatedthat a transaction could be completed during the fourth quarter of 2006. Therecan however be no assurance that the exploration of strategic alternatives willresult in a transaction. In parallel with this initiative, work has commenced on the detailed design andengineering of the Masbate processing facilities and mine. In addition on July25, 2006 PGO, Filminera and PGPRC jointly and severally mandated BNP Paribas ("BNP") to arrange and underwrite the project finance for the Masbate project onan exclusive basis. There are two distinct phases outlined in the mandate: (i) Phase 1 - obtain credit approval for the underwriting ofthe accordance with a term sheet and guarantees to be negotiated and agreed; and (ii) Phase 2 - syndicate the debt and execute all legalagreements allowing for the drawdown of the facilities. The parties have agreed that BNP credit approval will only be sought once: a. guarantees and the terms of the term sheet, hedging structureand related agreements have been agreed to; and b. a decision has been made on the preferred strategic directionof the Company. There can be no assurance that BNP and PGO will conclude an agreement on theterms and guarantees and enter into a project financing arrangement It is estimated that an amount of $3.0 million will be incurred for the Masbateproject for the six months ending December 31, 2006 on detailed design work andactivities needed to support the project financing. Open Pit Holdings Corporation On May 3, 2006, the Company exercised part of its rights for a nominalconsideration and acquired 40% of Open Pit, raising its beneficial interest inFilminera to 64%. Summary of 2006 Second Quarter Financial Results South African Operations The South African sub-group cash EBITDA (defined below) for the second quarterof 2006 was an inflow of $4.5 million resulting in a cumulative inflow of $4.4million for the first six months of 2006. After depreciation and amortization of$2.9 million and foreign exchange gain on translation of $0.4 million, anoperating profit of $1.9 million was recorded for the six months compared to aloss of $5.0 million in the same period in 2005. An operating profit of $3.7million was recorded for the second quarter of 2006 for the South Africanoperations. 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 six months ended June 30, 2006 increased to $43.2 million from$37.5 million in the corresponding period in 2005 due to an increase in the goldprice realized. This price increase was large enough to offset a decline inounces sold of 14%. Included in sales is $23.3 million realised in the secondquarter of 2006 compared with $18.7 million in the corresponding period of 2005.The Company realized an average price of $626 per ounce of gold in the secondquarter of 2006 which is approximately $119 per ounce higher than that realizedin the second quarter of 2005. Total ounces sold for the South African operations in the first six months of2006 amounted to 71,389 oz compared to 85,285 oz sold in the correspondingperiod in 2005. Total ounces sold for the South African operations in the secondquarter of 2006 amounted to 36,521 oz compared to 42,376 oz sold in thecorresponding period in 2005. Sales for the six months ended June 30, 2005 of $37.5 million were incorporatedin the "fresh start accounting" adjustments at July 1, 2005. Gross Profit / Loss For the six months ended June 30, 2006, the Company reported a gross profit of$1.6 million compared to a gross loss of $12 million over the same period in2005. A gross profit of $3.1 million was reported for the second quarter of 2006compared to a gross loss of $5.6 million in the same period in 2005. The lossesincurred are attributable to poor operating performance at PSGM The cost of sales including the profit or loss on sale of property, plant andequipment, the net impact of derivative financial instruments, accretionrelating to the reclamation provision and depreciation, depletion and impairmenthas declined to $41.6 million in the first six months of 2006 from $49.5 millionin the same period in 2005. Cost of sales including the profit or loss on saleof property, plant and equipment, the net impact of derivative financialinstruments, accretion relating to the reclamation provision and depreciation,depletion and impairment for the second quarter of 2006 and 2005 was $20.3 and$24.3 million respectively. This improvement reflects the labour restructuringat PSGM and tighter cost controls. The gross loss in 2005 was incorporated inthe "fresh start accounting" adjustments at July 1, 2005. General and Administrative Expenses and Restructuring Charges The general and administration expenses of $1.4 million for the first six monthsof 2006, of which $0.7 million was incurred in the second quarter, representsmainly salaries and expenses relating to senior management and directors andprofessional and consultancy fees. The amount expensed in the first six monthsof 2005 was $1.1 million, of which $0.8 million was incurred in the secondquarter. The restructuring charges of $2.0 million incurred in the first six months of2005 include DIP financing fees, legal fees and charges by the CCAA monitor. Thegeneral and administration expenses and restructuring charges for the first sixmonths of 2005 were incorporated in the "fresh start accounting" adjustments atJuly 1, 2005. Interest Interest of $4.8 million for the first six months of 2006, of which $2.4 millionwas incurred in the second quarter, represents mainly the interest on theservicing of debt from Casten and MC (Refer to the Liquidity and CapitalResources section). The interest for the first six months of 2005 of $1.0million was incorporated in the "fresh start accounting" adjustments at July 1,2005. Foreign Currency Gain/Loss The foreign currency loss for the first six months of 2006 of $1.0 million, ofwhich $0.8 million was realised in the second quarter, represents the nettranslation gain on the conversion of monetary assets and liabilities of theSouth African operations as well as a loss on the revaluation of the Canadiandollar denominated debt and other non US $ creditors' balances. In the sameperiod in 2005, the foreign currency gain was $1.5 million. Net loss per share The net loss per share before discounting operations (basic and diluted) and thenet loss per share (basic and diluted) for periods prior to July 1, 2005 havebeen adjusted for the effect of the consolidation of 200 shares for 1 under theCCAA restructuring process. The net loss for the first six months of 2006amounted to $0.11 per share and compares to a net loss of $6.23 per share in thecomparable period in 2005. The net loss for the second quarter of 2006 amountedto $0.01 per share and compares to a net loss of $2.91 per share in thecomparable period in 2005. The production performance of PSGM remains the driverof the Company's profitability. Total Assets The Company's total assets as at June 30, 2006 decreased by $1.3 million fromDecember 31, 2005 mainly due to a decrease in cash of $1.3 million. During the six months ended June 31, 2006 $2.3 million was capitalizedprincipally on underground development in South Africa. Total expenditures inthe Philippines during the six months ended June 30, 2006 amounted to $1.5million. These expenditures relate to fees paid to technical consultants for theMasbate project as well as Makati and site overheads. These expenditures havebeen capitalized under "mining properties". Cash Flows Cash generated by operating activities in the first six months of 2006 (cashoperating profit or loss, adjusted for movements in current assets andliabilities) amounted to $1.2 million, which includes cash inflow of $2.3million from the second quarter, against a cash outflow of $16.0 million for thesame period in 2005, including an outflow of $7.9 million for the second quarterof 2005. The key driver in the reduction in cash outflow is the decrease in thecost of sales following the Section 189 restructuring. Despite a reduction ingold production, sales for the six months ended June 30, 2006 increased by $5.7million relative to the corresponding period of 2005 due to an increase in thegold price realized. Plant Property and Equipment(in thousands of dollars) Philippine South African Total assets assetsNet book value at December 31, 2005 405 17,632 18,037Additions 1 2,321 2,322Disposals - (138) (138)Depreciation (18) (2082) (2,100)Net book value at June 30, 2006 388 17,733 18,121 Additions for PSGM relates mainly to underground development needed to sustainproduction. Mining Properties(in thousands of dollars) Philippines resource South African Total properties resource propertiesBalance at December 31, 2005 24,480 25,021 49,501Additions 1,519 - 1,519Depletion - (1,045) (1,045)Balance at June 30, 2006 25,999 23,976 49,975 Additions for the Philippine's relates to work undertaken to complete theMasbate bankable feasibility study and purchase of land. Reclamation Provision At June 30, 2005 the Company has a provision of approximately $9.3 millionrecorded for environmental liabilities in South Africa and the Philippines. In South Africa, the Company makes annual contributions to the rehabilitationtrust fund created in accordance with statutory requirements, to provide for theestimated cost of pollution control and rehabilitation during and at the end ofthe life of the mine. The funds held in trust are invested in short terminterest bearing securities. The Company intends to fund the ultimaterehabilitation costs from the money invested with the trust fund. As at June 30,2006 the balance of the rehabilitation trust fund was $1.5 million. The totalliability will be funded over the life of the PSGM mine currently estimated tobe 13 years. The calculation of the liability is based on the future projectedcost of the rehabilitation in the amount of $8.6 million discounted at a realrate of 3.85%. Income Tax Payable Income tax payable of $0.9 million recorded at June 30, 2006 represents the taxpayable in respect of unrealised foreign exchange gains made by the SouthAfrican subsidiaries. Contractual Obligations The Company rents premises and leases equipment under operating leases thatexpire over the next three years. Operating lease expenses for the first sixmonths of 2006 were $97,000 (for the same period in 2005 - $115,000). Thefollowing is a schedule of future minimum rental and lease payments required: Year 2006 2007 2008 TotalFuture minimum lease payments ($'000s) 65 53 20 138 Accounts payable and accrued liabilities 30 June 2005 31 December Fresh start 2005 Fresh startTrade accounts payable 5,532 5,448Taxation and social security 21 31Accruals 4,926 6,535Accrued interest and finance charges on debt 8,230 3,854Other accounts payable 2,715 2,857 21,424 18,725 The accrued interest and finance charges relate to outstanding interest, a 3%finance fee and interest on outstanding interest in respect of the debt owed toMC and Casten (Refer to the Liquidity and Capital Resources section). Themajority of accruals relate to payroll costs in South Africa and include leaveand other payroll provisions. The decrease in the accruals relative to thefourth quarter of 2005 is related to the strengthening of the Rand and the lowerlabour cost following the Section 189 restructuring in the fourth quarter of2005. Summary of Quarterly Results Fresh Fresh Fresh Start Fresh Pre fresh Pre fresh Start Start Restated Start Start Start Restated4 Restated Q2/2006 Q1/2006 Q4/2005 Q3/2005 Q2/2005 Q1/2005 Q4/2004 Q3/2004Total revenue $ 23,329 19,837 20,315 22,274 18,710 18,788 18,917 25,943Income (loss) beforediscontinued operations $ (291) (4,639) (6,697) (9,954) (6,714) (7,667) 3,042 (55,908) Income (loss) beforediscontinued operationsper share (basic anddiluted)5 (0.01) (0.10) (0.15) (0.22) (2.91) (3.32) 1.32 (28.49) Net income (loss) $ (291) (4,639) (6,697) (9,954) (6,714) (7,667) 8,668 (55,806)Net Income (loss) per share(basic and diluted) (0.01) (0.10) (0.15) (0.22) (2.91) (3.32) 3.76 (28.43) Tonnes milled 199,823 189,808 218,301 268,237 268,884 249,884 223,475 273,215Recovered grade g/t 5.84 5.92 5.56 5.86 4.93 5.28 5.23 4.58Gold sold oz 36,521 34,868 40,945 49,260 42,376 42,909 38,564 43,799CAD$/ $ exchange rate 1.12 1.17 1.17 1.19 1.25 1.23 1.20 1.30ZAR / $ exchange rate 6.43 6.12 6.51 6.43 6.42 5.97 5.95 6.34Average gold price 626 552 482 439 427 428 439 402realized $ per ounceCash costs ZAR Millions 120 119 132 153 149 145 157 140Cash costs ZAR/tonne 598 629 605 569 553 582 703 513 4 In periods prior to 2004 the Company filed its financial statements inaccordance with UK generally accepted accounting principles. These figures havebeen restated in accordance with Canadian GAAP. 5 The net loss per share - basic and diluted for periods prior to 30 June 2005has been adjusted in respect of the consolidation of 200 shares for 1 on 30 June2005 Total revenues are affected by the average price of gold as well as by goldproduction levels. The prevailing trend over the recent 24-month period is an increase in recoveredgrade. This trend reflects various initiatives to improve the quality of miningand includes the placing of Numbers 7, 9 and 1 A Ventilation Shafts during (Q42004, Q1 2005 and Q1 2006 respectively) on care and maintenance, the curtailmentof production in working places that do not contribute to cash flow, and theimplementation of grade control measures, such as the reduction in mining widthto reduce dilution. Gold production has declined reflecting the reduction inmilled tonnage. At this time PSGM currently does not have flexibility to absorbthe impact of the closure of unprofitable working places. Over the 24-month period analysed, the gold price realized includes the impactof hedging activities. Sales for Q3, 2004 includes $12.2 million net gain onderivative financial instruments. On August 10, 2004, the Company's hedge bookwas closed out. Since then, the Company is un-hedged from a cash flow point ofview. The last two quarters have seen a dramatic increase in the gold pricerealized. This increase has been more than sufficient to offset the decrease ingold production experienced for the same period. Net earnings are generally affected by the performance of the South Africanoperations. Over the period analysed ZAR costs at PSGM have been well containeddespite real increases in the cost of labour and consumables. The significantreduction in costs during the first quarter of 2006 reflects the labourrationalization that was effected in October 2005. The costs associated with theSouth African operation are greatly affected by the ZAR:US$ exchange rate. Thestability of the Rand relative to the US $ in the past eight quarters isnoteworthy. Adjustments applied in the fourth quarter of 2004 include corporaterestructuring costs of $0.4 million. Adjustments applied in the fourth quarterof 2005 include impairments to assets at TMTI amounting to $0.6 million,impairment of South African mining properties of $1.0 million, a revaluationadjustment of put options bought by PSGM in October 2005 at $1.0 million andrestructuring costs relating to the implementation of the Section 189Restructuring at PSGM of $2.8 million. Liquidity and Capital Resources As of June 30, 2006, Thistle had cash and short-term investments of $2.9million, a decrease of $1.3 million from the start of the year. Consolidatedshort and long-term debt balances at June 30, 2006, were $61.3 million comparedwith $59.5 million at December 31, 2005. At June 30, 2006, Thistle was incompliance with all debt covenants and default provisions. As at December 31, 2004, the Company's consolidated debt was $82.3 million.During the six-month period ended June 30, 2005, this debt increased byapproximately $22.8 million to $105.1 million, primarily due to financing duringthe CCAA process. Upon implementation of the restructuring plan, certain debtwas restructured with approximately $60.0 million being converted into newconsolidated common shares of Thistle, leaving a net debt of approximately $45.1million as at June 30, 2005. This debt is broken down as follows: Restructured debt outstanding as at June 30, 2005 Currency Interest Current Long term rate portion (1) portion MC Cdn $ 10% 818,750l 1,146,250Casten Cdn $ 10% 818,750l 1,146,250Total Cdn $ 10% 1,637,500 2,292,500 MC Cdn $ 12% 5,625,000 7,875,000Casten Cdn $ 12% 5,625,000 7,875,000Total Cdn $ 12% 11,250,000 15,750,000 MC $ 10% 4,166,667 5,833,333Casten $ 10% 4,166,667 5,833,333Total $ 10% 8,333,333 11,666,667 Subsequent to the end of the CCAA process up to December 31, 2006, additionaldebt of $12.6 million was advanced from MC Resources Ltd ("MC") and CastenHoldings Ltd ("Casten") with a further $0.680 million advanced for the firstquarter of 2006. In the second quarter of 2006 an advance of $0.330 million wasreceived under the terms of the Credit Facility discussed in detail below.However this amount was repaid in full before the end of the second quarter. Debt incurred subsequent to CCAA as at June 30, 2006 Currency Interest Current Long term rate portion6 portion MC $ 12% 6,640,000 NilCasten $ 12% 6,640,080 NilTotal $ 12% 13,280,080 Nil 6 Payment of debt restructured in terms of the Memorandum of Agreements Interest on the above debt is calculated and payable monthly, not in advance, onthe last day of each month, but payment of such interest and compound interesthas, by the Memorandum of Agreements, been deferred until April 1, 2007. Thepayment on April 1, 2007 will include all outstanding interest, loan advancefees and interest on outstanding interest to that date. In addition, the Company has an obligation to pay MC and Casten a loan advancefee in an amount equivalent to three per cent (3%) of the principal amountloaned. The Company also has an obligation to withhold and pay when due allwithholding taxes and other similar taxes payable in respect of interest andfees or other amounts paid. At June 30, 2006, the Company's payment obligations are as follows: Payments Due by Period Total Less than 1 1 - 2 years 3 - 5 After 5 year years yearsLong term debt 61,302 33,255 16,112 11,935 --Interest and loan advance fee payable 8,230 8,230 -- -- --Operating leases 138 98 40 -- --Purchase obligations -- -- -- -- --Total contractual obligations 69,780 41,693 16,152 11,935 -- The Company incurred losses of $4.9 million during the six months ended June 30,2006. At June 30, 2006, the Company's current liabilities exceeded its currentassets by $45.3 million and the Company's total liabilities exceeded its totalassets by $14.9 million. The under-performance of the South African operations in 2005 has resulted instrain on the Company's finances. Although implementation of the CCAArestructuring plan has significantly reduced the Company's financialliabilities, the balance sheet remains highly geared. On March 28, 2006, eachof MC and Casten entered into the Memorandum of Agreements wherein they agreedto continue to assist the Company by: • Deferring repayment of interest and principal on loans advanced tothe Company until April 1, 2007; and • Providing the Credit Facility of up to $8.62 million and deferringrepayment of the additional loans until April 1, 2007 (see note 1 and 9 of the2005 Annual Consolidated Financial Statements). The Memorandum of Agreements provide that MC's and Casten's commitmentsthereunder will be void and of no force or effect when there occurs certainevents listed in the Memorandum of Agreements including a material deteriorationin the economic circumstances applicable to Thistle or any material change inthe business, assets, liabilities, condition (financial or otherwise) andprospects of Thistle or any of its subsidiaries. Although advances in respect of the Credit Facility were received early in thesecond quarter of 2006, these advances were repaid in full before the end of thequarter. At current Rand gold prices, PSGM is able to generated sufficientsurplus cash flow to cover corporate costs and Masbate costs so that there willbe no need to draw on the Credit Facility. Casten and MC supported the Company through the CCAA restructuring and theimplementation of a new management strategy to return the Company to a positivecashflow position. The Company's balance sheet must be restructured to providea basis for moving forward. Management believes that this can be achievedthrough a rights issue or private placement to restructure existing debt, andthrough the sale of non-core or other assets. Contingent Liability Four senior staff of PSGM were subpoenaed to attend an enquiry on May 22, 2006in terms of the South African Companies Act by the liquidator of M Hall andAssociates ("MH & A"), a mining contractor previously engaged by PSGM. On June4, 2004 PSGM cancelled the contract with MH & A. Shortly thereafter MH & Adisputed whether PSGM was lawfully entitled to cancel the contract and presenteda claim amounting to ZAR33million which PSGM denied. Under the terms of thecontract, any dispute is to be decided through arbitration. MH & A did notpursue this course of action but instead on June 28, 2004 applied for an urgentapplication to prevent PSGM from using and removing certain equipment. Thisapplication was dismissed with costs. Leave to appeal was granted but the appealwas also dismissed with costs on October 21, 2004. The Company's legal counsel has been advised by the liquidator, that they intendinstituting proceedings against PSGM for an amount of approximately ZAR33million. As and when proceedings are instituted, they will be defended andconducted in the appropriate forum. Although the final result of the mattercannot be predicted with certainty, management does not expect the outcome ofthis matter to 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 was completed on the close ofbusiness on June 30, 2005, the issued and outstanding shares at March 15, 2005,were consolidated on a one new consolidated share for 200 existing shares basis.This resulted in 2,307,603 consolidated common shares. In addition, themajority of the convertible loans, together with another long-term loan, wereconverted into 11,538,015 new shares. A portion of the demand loans were alsoconverted under the restructuring process into 32,306,442 new shares. As aresult of the aforementioned, there were a total of 46,152,060 common sharesoutstanding upon completion of the restructuring, which continues to be thenumber of outstanding common shares as of December 31, 2005. In addition,2,882,000 options to purchase 2,882,000 common shares of Thistle areoutstanding. 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"). Proposed Transactions. TM Training Initiative (Pty) Limited The Company has signed a memorandum of understanding with a non related partyregarding the sale of TMTI a 100% owned South African subsidiary operating atraining facility in the Free State Province of South Africa. The anticipatedproceeds to the Company on the sale of TMTI are approximately $375,000.Management view this as a divestment in a non core asset that currently requiresnet funding of $150,000 per annum. Lefa La Gauta Pty Ltd The proposed transaction with Lefa La Gauta to acquire an initial 15% equitystake in PSGM is not expected to have a material impact on the financialcondition of the Company. Critical Accounting Estimates Thistle's significant accounting policies are described in note 2 to the 2005Audited Consolidated Financial Statements and the Company's MD & A for the yearended December 31, 2005. 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. Financial Instruments On October 24 2005, PSGM purchased put options for $1.5 million on USD gold forthe period January 2006 to December 2007 on 2,000 oz's per month at a flatforward price of $490/oz. The 48,000 oz of gold puts purchased representsapproximately 15% of PSGM anticipated production over the 24 month period. Thearrangement provides PSGM with some level of price protection should the $ goldprice decline from current levels. There is no margin provision or interestrate exposure on this asset. At June 30, 2006 the spot price of gold amountedto $613 per oz and the fair value of the put options was calculated to be $0.3million. The change in value of $0.1 million for the second quarter and $0.3million for the first six months of 2006 is disclosed separately under cost ofsales. Corporate Information Head Office President Steyn Gold Mines Alexey Kruzhkov Company Secretary Nominated advisorPrivate Bag X10206 London, United Kingdom Karen Hamilton Grant ThorntonWelkom, 9459 Johannesburg South Africa Corporate FinanceRepublic of South Africa Barry Goldberg London, United KingdomTel: +27 57 391 9114 Toronto, Ontario ListingFax: +27 57 391 9118 Bankers Jeffery Barnes Alternative Investment Royal Bank of Canada MarketCorporate Structure and Toronto, Ontario London, Symbol TMG Toronto, OntarioManagement Askar Alshinbayev Standard Bank LimitedDirectors London, United Kingdom Johannesburg, South AfricaChairman of the Board Registrar & Transfer AgentThe Right Honourable Legal CounselLord Lang of Monkton Officers CIBC Mellon Trust CompanyAyrshire, Scotland Chief Executive Officer Toronto, Ontario Heenan Blaikie LLP Gerrit Kennedy London, United Kingdom Toronto, OntarioPaul Marchand Johannesburg, South AfricaLondon, United Kingdom Auditors Werksmans Chief Financial Officer Johannesburg, South AfricaYuri Shafranik Andreas Graetz KPMG Inc.Moscow, Russia Johannesburg, South Johannesburg, South Africa Africa Financial Information Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statementsfor the three months ended June 30, 2006. All figures are in US$ unlessotherwise noted. The statements are presented in accordance with Canadian GAAP. These unaudited Consolidated Financial Statements of Thistle Mining Inc. havenot been reviewed by the auditors of the Company. This notice is being providedin accordance with section 4.3(3) (a) of National Instrument 51-102 - ContinuousDisclosure Obligations. Consolidated Balance Sheet (in thousands of US dollars, unaudited) June 30 2006 December 31 2005 Fresh start Fresh startASSETSCurrent assetsCash and cash equivalents 2,861 4,153Accounts receivable 1,058 1,090Investments 484 798Inventories 4,230 3,918Derivative financial instruments 117 299Other assets 1,514 1,744 10,264 12,002Derivative financial instruments 137 300Property, plant and equipment 18,121 18,037Mining properties 49,975 49,501 78,497 79,840 LIABILITIES AND SHAREHOLDERS' DEFICIENCYCurrent LiabilitiesAccounts payable and accrued liabilities 21,424 18,725Current debt 33,255 89Income taxes payable 875 1,698Total current liabilities 55,554 20,512 Long term debt 28,047 59,408Reclamation provision 9,331 9,224Future income tax liabilities 485 717 93,417 89,861 Shareholders' Deficiency Common shares (note 4) 6,627 6,627Contributed surplus 34 3Deficit (21,581) (16,651)Total shareholders' deficiency (14,920) (10,021) 78,497 79,840 Going concern (note 2) See accompanying notes. Consolidated Statements of Operations (in thousands of US dollars, unaudited) Three months ended Six months ended 30 June 30 June 2006 2005 2006 2005 Fresh start Pre fresh Fresh start Pre fresh start startSales 23,329 18,710 43,166 37,498Cost of sales (18,845) (23,506) (38,196) (47,973)Profit / (loss) on sale of property, plant and equipment 220 - 220 -Net impact of derivative financial instruments 50 - (345) -Accretion relating to reclamation provision (107) - (107) -Depletion and depreciation, and impairment (1,596) (809) (3,127) (1,531)Gross profit / (loss) 3,051 (5,605) 1,611 (12,006) Costs and ExpensesGeneral and administrative expenses (711) (761) (1,362) (1,107)Restructuring charges - (526) - (2,043)Depreciation - (3) - (6)Amortization of deferred charges - - - -Interest (2,443) (649) (4,795) (977)Foreign currency gain / (loss) (770) 828 (1,000) 1,502Other gains and (losses) 281 (106) 362 (42)Minority interest in net earnings - - - -Loss before income taxes and discontinued operations (592) (6,822) (5,184) (14,679)Discontinued operations - - - -Income tax (expense) / recovery 301 108 254 298Net loss for the period (291) (6,714) (4,930) (14,381) Net loss per share before discontinued operations - basic (0.01)and diluted (note 4) (2.91) (0.11) (6.23)Net loss per share - basic and diluted (note 4) (0.01) (2.91) (0.11) (6.23) See accompanying notes. Statement of Deficit (in thousands of US dollars, unaudited) Three months ended Six months ended 30 June 30 June 2006 2005 2006 2005 Fresh start Pre fresh Fresh start Pre fresh start startDeficitBalance, beginning of the period (21,290) (169,994) (16,651) (162,327)Net loss for the period (291) (6,714) (4,930) (14,381) Balance, end of the period (21,581) (176,708) (21,581) (176,708) See accompanying notes. Statement of Cash Flows (in thousands of US dollars, unaudited) Three months ended Six months ended 30 June 30 June 2006 2005 2006 2005 Fresh start Pre fresh Fresh start Pre fresh start start restated restated Operating activitiesNet loss for the period from continuing operations (291) (6,714) (4,930) (14,381)Add (deduct) items not affecting cash from operatingactivitiesDepletion and depreciation, and impairment 1,596 812 3,127 1,537Future income and mining tax provisions (192) 706 (232) 706Foreign exchange 770 (828) 1,001 (1,502)Unrealized (gain) loss on derivative instruments (50) - 345 -(Gain) loss on investments 54 - (16) -Stock options issued 15 - 31 -Profit on sale of plant, property and equipment (220) - (220) -Other non-cash items 107 (1) 108 2 1,789 (6,025) (786) (13,638) Changes in non-cash working capital balancesAccounts receivable 243 (106) (57) (179)Inventories (1,147) (793) (658) (654)Other assets 106 33 121 387Accounts payable and accrued liabilities 2,210 609 3,385 352Income and mining taxes recoverable and payable (867) (1,661) (786) (2,233) 545 (1,918) 2,005 (2.327) Cash flows generated (used) in operating activities 2,334 (7,943) 1,219 (15,965) Net change in discontinued operations - - - Investing activitiesAdditions to mining properties (741) (1,196) (1,501) (1,875)Purchase of property, plant and equipment (1,252) (1,338) (2,322) (2,698)Proceeds on sale of property, plant and equipment 357 - 357 -Sale of investments 236 119 330 119Cash flows provided by (used in) investing activities (1,400) (2,415) (3,136) (4,454) Financing activitiesCommon shares issued - - - -Principal payments under capital lease obligations (30) - (55) -Net proceeds from borrowings - 11,611 680 22,758Cash flows provided by (used in) financing activities (30) 11,611 625 22,758 Net increase in cash and cash equivalents 904 1,253 (1,292) 2,339Cash and cash equivalents, beginning of period 1,957 2,930 4,153 1,844Cash and cash equivalents, end of period 2,861 4,183 2,861 4,183 See accompanying notes. Notes (forming part of the financial statements; unaudited) (tabular amounts in thousands of US dollars 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") and under historical cost accounting rules. 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'smost recent annual consolidated financial statements. 2. Financial reorganization and going concern The accompanying consolidated financial statements have been prepared on a"going concern" basis in accordance with Canadian GAAP. The going concern basisof presentation assumes that Thistle will continue in operation for the yearahead and will be able to realize its assets and discharge its liabilities andcommitments in the normal course of business. The Company incurred losses of$4.9 million during the six months ended June 30, 2006. At June 30, 2006, theCompany's current liabilities exceeded its current assets by $45.3 million andthe Company's total liabilities exceeded its total assets by $14.9 million. On March 28, 2006, each of MC Resources Ltd ("MC") and Casten Holdings Limited("Casten") entered into an arrangement with Thistle ("the Memorandum ofAgreements") wherein they agreed to continue to assist the Company by: • Deferring repayment of interest and principal on loans advanced to theCompany until April 1, 2007; and • Providing a credit facility ("Credit Facility") of up to $8.62 millionand to defer repayment of the additional loans until April 1, 2007. Inconnection with the Memorandum of Agreements, Thistle has pledged its shares inPhilippine Gold Limited, a wholly owned subsidiary of the Company incorporatedin the United Kingdom, which has a 40 % interest in Filminera Resource Company("Filminera") and a 100% interest in Philippine Gold Processing and RefiningCorporation ("PGPRC") both of which are incorporated in the Philippines, to thesupplier of the credit facility. The purpose of the Memorandum of Agreement is to provide comfort to the Companyand its subsidiaries to satisfy their obligations in the ordinary course ofbusiness and to provide additional financial support. However, in particularcircumstances the undertakings provided will be of no force and effect. Theserelate mainly to material deterioration in the economic circumstances applicableto the Company and material adverse change in the financial position of theCompany and its subsidiaries. Having reviewed the cash flow forecasts of the Company and its subsidiaries itis management's belief that existing cash resources and net cash to be generatedfrom operations will be sufficient to meet the Company's anticipatedrequirements and the Company will not need to draw down the Credit Facility. Inmaking this statement management has assumed that current gold prices willprevail. Accordingly the financial statements have been prepared on the basis ofaccounting policies applicable to a going concern. Should market conditions deteriorate or should the Company and its subsidiariesnot be successful in maintaining their profitability and should thosecircumstances arise in which the undertakings of the shareholders have no forceand effect, there is a material uncertainty which may cast significant doubt onthe 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. 2. Financial reorganization and going concern continued The consolidated financial statements do not reflect adjustments that would benecessary if the going concern basis was not appropriate. If the going concernbasis was not appropriate for these consolidated financial statements, thensignificant adjustments would be necessary in the carrying value of assets andliabilities, the reported revenues and expenses, and the balance sheetclassifications used. The appropriateness of the going concern basis isdependent upon, among other things, future profitable operations, and theability to generate sufficient cash from operations and financing arrangementsto meet obligations. On January 7, 2005 (the "Filing Date"), the Company obtained protection underthe Companies' Creditors Arrangement Act ("CCAA") from the Ontario SuperiorCourt of Justice (the "Court"). The Court subsequently granted extensions of theCCAA protection to June 30, 2005. This allowed the Company to continue operatingits business while it negotiated a restructuring plan with its creditors. On May3, 2005 the Company's affected creditors approved the Company's Plan ("Plan")and the Plan was approved by the Court on May 10, 2005. The Company subsequentlyemerged from CCAA protection and the Plan was implemented on June 30, 2005. The Plan provided, inter alia, for the following: 1. Two classes of creditors: • Class One, consisting of Meridian Creditors, the holders of claims inrespect of the Company's senior secured indebtedness; and • Class Two, consisting of the Note-holder Creditors, the holders of claimsrelating to notes issued by the Company; 2. The sale by Meridian Creditors to the Company, or its security agent,of:• Debt owing to Meridian Creditors by subsidiaries of the Company,guaranteed by the Company, and secured, totalling approximately $54.2 milliontogether with interest thereon; and• Debt owing to Meridian Creditors by a subsidiary of the Company totallingapproximately Cdn $3.93 million together with interest thereon; 3. In consideration for such sale, the Meridian Creditors received fromthe Company, in aggregate: • Secured notes evidencing indebtedness of $20 million;• Secured notes evidencing indebtedness of Cdn $3.93 million; and• 70% of the post-implementation equity in the Company; 4. The release of all claims of Note-holder Creditors, totalling principalof $24.85 million plus interest thereon, in consideration for which Note-holderCreditors received 25% of the post-implementation equity in the Company; 5. The consolidation of existing common shares of the Company so thatexisting shareholders retained 5% of the post-implementation equity in theCompany; 6. Payment in full by the Company of all proven claims of the Company'screditors as at the Filing Date (other than claims of Meridian Creditors andNote-holder Creditors); and 7. The delivery by the Company to the Meridian Creditors of secured notesevidencing the amount of the Company's outstanding debtor-in-possessionfinancing owing to them as at the 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. 2. Financial reorganization and going concern continued Although implementation of the Plan has significantly reduced the Company'sfinancial liabilities the Company required support from Casten and MC. Castenand MC advanced approximately $21.8 million in short term funding for the periodJanuary 7, 2005 to June 30, 2005 and a further $12.6 million for the period July1 to December 31, 2005. For the period January 1, 2006 to March 31, 2006 Castenand MC have provided approximately $0.68 million in support of the Company.Management believe that at current metal prices there is no need to draw down onthe Credit Facility. 3. 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 impactof adjustments required to implement the Plan and to reflect the adoption offresh start accounting. (in thousands of US dollars) 30 June 2005 Balance Fresh start 30 June 2005 prior to Plan accounting Balance after 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) 11,836Property, 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 - 1,559Total 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 4) 123,461 (116,834) 6,627Contributed surplus 2,735 (2,735) -Deficit (176,708) 176,708 -Equity adjustment from foreign currency (2,659) 2,659 -translationTotal shareholders' deficit (53,171) 59,798 6,627 74,231 (41) 74,190 4. Share capital On January 7, 2005 the Company commenced restructuring under CCAA. Under therestructuring, all of the Company's existing common shares were consolidated ona one share for 200 existing shares basis and additional common shares wereissued to creditors affected by the Plan, such that MC and Casten collectivelyhold approximately 70% of the existing company shares, holders of secured andunsecured convertible loan notes approximately 25% of the outstanding shareswith the balance being held by previous existing shareholders. a) Authorized Unlimited common shares without par value. Unlimited Class "A" preferenceshares. b) Issued Common shares Number Amount of shares $000 January 1, 2004 242,241,357 85,133Private placements 218,110,246 23,528Exercise of warrants 500,000 94 Conversion of loans 669,082 128 December 31, 2004 461,520,685 108,883Cancellation of warrants - 14,578 June 30, 2005 Pre CCAA 461,520,685 123,461Consolidation of existing shares on a 200 for one basis as of June30, 2005 2,307,603 123,461 Conversion of various loans per Plan of arrangement 43,844,457 59,980Other fresh start accounting adjustments - (176,814) Balance at 30 June Post CCAA, June 30, 2006 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 the 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. In addition, the majorityof the convertible loans together with another long term loan were convertedinto 11,538,015 new shares. A portion of the demand loans were also convertedunder the restructuring process into 32,306,442 new shares. As a result of theforegoing, there were a total of 46,152,060 common shares outstanding uponcompletion of the restructuring, which continues to be the number of outstandingcommon shares today. 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. 5. Reconciliation to United States GAAP Canadian GAAP varies in certain significant respects from the principles andpractices generally accepted in the United States ("US GAAP"). The Companyprepares its financial statements in accordance with Canadian GAAP. The effectof these principal differences on the Company's consolidated financialstatements is quantified below and described as follows: Deferred exploration costs Under Canadian GAAP, all costs related to the acquisition, exploration anddevelopment of non-producing mineral properties are capitalized. Under US GAAP,mining properties are permitted to capitalize acquisition, exploration anddevelopment costs only upon the determination of a commercially mineabledeposit. Effective December 31 2001 the Board reviewed the status of itsPhilippines project at Masbate. They decided that with the Gold price at $255per ounce and the then indicated cash cost of production at $190 the Masbateproject was projected to produce and inadequate return on investment and downgraded the then reserve to the resource category. As a result under US GAAP thecosts incurred in the Philippines subsequent to December 31, 2001 is an expense.Under fresh start accounting applied at July 1, 2005 a re-valuation of thePhilippines project was performed. As a result, all costs previously expensedunder US GAAP have been capitalised (as mineral rights) to reflect the project'sfair value at July 1, 2005. Comprehensive income Statement of Financial Accounting Standards No. 130 ("FAS 130") establishesstandards under US GAAP for reporting and displaying comprehensive income andits components (revenues, expenses, gains and losses) in a full set ofgeneral-purpose financial statements. FAS 130 requires that all items that arerequired to be recognized under accounting standards as components ofcomprehensive income be reported in a financial statement that is displayed withthe same prominence as other financial statements. FAS 130 requires companies to (i) classify items of other comprehensive incomeby their nature in a financial statement, and (ii) display the accumulatedbalance of other comprehensive income separately from capital stock, contributedsurplus and retained earnings in the shareholders' equity section of the balancesheet. Statement of Financial Accounting Standards No. 115 ("FAS 115") addresses theaccounting and reporting for investments in equity securities that have readilydeterminable fair values and for all investments in debt securities. FAS 115, asamended by FAS 130, requires investments which are classified asavailable-for-sale securities to be reported at fair value, with unrealizedgains and losses excluded from earnings and reported in other comprehensiveincome. 5. Reconciliation to United States GAAP continued The application of U.S. GAAP would have impacted the Company's reported resultsfor second quarter of 2006 and 2005 as follows: Three months Three months Six months Six months ended ended ended ended 30 June 30 June 30 June 30 June 2006 2005 2006 2005 Fresh start Pre fresh start Fresh start Pre fresh start Net loss based on Canadian GAAP 291 6,714 4,930 14,381Impact on net earnings of US GAAP adjustments: - Exploration costs 748 1,195 1,519 1,875Net loss based on US GAAP 1,039 7,909 6,449 16,256Basic and diluted loss per share beforediscontinued operations based on US GAAP 0.02 3.43 0.14 7.04 Basic and diluted loss per share based on USGAAP 0.02 3.43 0.14 7.04 30 June 30 June 2006 2005 Fresh start Pre fresh start Shareholders deficiency based on Canadian GAAP: (14,920) (53,171)Impact on shareholder's equity of US GAAP adjustments - Exploration costs (6,174) (5,395) - Gain / (loss) on mark to market of investments 50 (70)Shareholder's deficit based on US GAAP (21,044) (58,636) The statements of comprehensive loss for the three and six months ended June 30,2006 and June 30, 2005 would be presented as follows on a US GAAP basis: Three months Three months Six months Six months ended ended ended ended 30 June 30 June 30 June 30 June 2006 2005 2006 2005 Fresh start Pre fresh start Fresh start Pre fresh start Net loss based on US GAAP 1,039 7,909 6,449 16,256Other Comprehensive loss net of income taxes: - (Gain) / Loss on mark to market of investments (13) - (35) 18 - Foreign currency translation gain - - - (2)Comprehensive loss based on US GAAP 1,026 7,909 6,414 16,272 The accumulated other comprehensive loss balances for the six months ended June30, 2006 and June 30, 2005 would be presented as follows on a US GAAP basis: Balance, December 31, 2004 2,713Movements 16Balance, March 31, 2005 2,729Movements -Balance, June 30, 2005 2,729Balance, July 1, 2005 after fresh start accounting adjustments -Movements subsequent to fresh start accounting (85)Balance, December 31, 2005 (85)Movements 48Balance, March 31, 2006 (37)Movements (13)Balance, June 30, 2006 (50) This news release contains forward-looking statements with the meaning ofapplicable securities laws including amongst others, statements made or impliedunder the headings "Highlights" 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: Andy Graetz, Chief Financial Officer + 27 82 929 5562 or email toagraetz@disselgroup.com -------------------------- This information is provided by RNS The company news service from the London Stock Exchange