The Mission Group Regulatory News (TMG)

10 Nov 2006 15:30

Thistle Mining Inc.10 November 2006 THISTLE MINING INC. Toronto, November 10, 2006. Results for the third quarter ended September 30,2006 Thistle Mining Inc. ("Thistle" or the "Company") (AIM:TMG) wishes to announcethat the Company's unaudited Consolidated Financial Statements and ManagementsDiscussion and Analysis ("MD & A") for the three month period ended September30, 2006 will be filed on SEDAR (www.sedar.com) today. The Company is pleased to disclose an improvement in financial results as theresult of a stronger gold price and improved production for the third quarter2006 at its South African operations. For the quarter, a consolidated net profitof $0.01 per share was earned. The search for a strategic partner for theCompany's Masbate gold project is progressing rapidly. The Company is indiscussions with a potential partner with a view to achieving a mutuallysatisfactory outcome, however, there can be no assurance that these discussionswill result in a transaction. All dollar references in this announcement are in US $. A full copy of theCompany's third quarter report for 2006 can be obtained from the Company'swebsite: www.thistlemining.com. Management's Discussion and Analysis 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 September 30, 2006including the notes thereto. Historical results, including trends which mightappear, should not be taken as indicative of future operations or results.Further details regarding the Company and its business and operations may beobtained from the Company's continuous disclosure documents filed from time totime with the Canadian securities regulatory authorities, including theCompany's annual information form (the "AIF"). These continuous disclosuredocuments are available through the SEDAR website maintained by the Canadiansecurities regulators, which may be accessed at www.sedar.com or on theCompany's website, which may be accessed at www.thistlemining.com. All financialdata herein have been prepared in accordance with Canadian generally acceptedaccounting principles ("GAAP") and all dollar references are in thousands of USdollars unless otherwise indicated. Certain information in this MD&A contains forward-looking statements within themeaning of applicable securities laws including, among others, statements madeor implied under the headings "Overall Performance", "Results of Operations" , "Summary of 2006 Third 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$ remains at current levels and the South African Rand (or "ZAR") maintainsits current level against the US$. It is also assumed that there will be nomajor disruptions in production including failure of infrastructure, seismicactivity, underground fires and labour unrest. The Company cautions that thislist of factors is not exhaustive. Although the forward-looking statementscontained in this MD&A are based upon what the Company believes are reasonableassumptions, there can be no assurance that actual results will be consistentwith these forward-looking statements. Statements in relation to "resources" and "reserves" are deemed to beforward-looking statements, as they involve the implied assessment, based oncertain estimates and assumptions, that the reserves described can be profitablyextracted in the future. All forward-looking statements in this MD&A are qualified by these cautionarystatements. These forward-looking statements are made as of the date hereof andthe Company, except as required by applicable law, assumes no obligation toupdate or revise them to reflect new information or the occurrence of futureevents or circumstances. Due to the realignment in equity interest and capital structure of ThistleMining Inc. under the restructuring plan that followed the Company filingprotection under the Companies' Creditors Arrangement Act ("CCAA") on January 7,2005, the Company was required to perform as at July 1, 2005, a comprehensiverevaluation of its balance sheet referred to as "fresh start accounting,'' whichincluded a number of adjustments. Accordingly, transactions before and after theapplication of "fresh start accounting" from 30 June 2005 are separatelydisclosed in the 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 $1.7 million in the third quarter of 2006 compared to cash flow used in operations of $1.6 million in the third quarter of 2005. The improvement reflects an increase in sales. Cash flow generated by operations was $2.9 million for the first nine months of 2006 compared to cash flow used in operations of $16.0 million for the first six months of 2005 and $1.6 million in the third quarter of 2005. • Investment in property, plant and equipment, as well as additions to mining properties, increased in the third quarter of 2006 relative to the third quarter of 2005. Total funds invested amounted to $3.6 million in the third quarter of 2006 and $3.2 million in the third quarter of 2005. In the third quarter of 2006, $2.2 million was invested at President Steyn Gold Mines (Free State) (Pty) Ltd. ("PSGM") principally on underground mine development and $1.4 million was invested in the Company's Masbate gold project. The total invested in property, plant and equipment as well as additions to mining properties for the first nine months of 2006 increased to $7.4 million compared to $4.6 million in the first six months for 2005 and $3.2 in the third quarter of 2005. • Following the improvement in operational cash flow no additional financing was raised in the third quarter of 2006. Additional funding of $0.7million was raised for the first nine months of 2006 compared to $22.8 million raised in the first six months of 2005 and a further $5.0 million raised in the third quarter of 2005. • The consolidated net profit in accordance with Canadian GAAP for the third quarter of 2006 was $0.7 million. The consolidated net loss in accordance with Canadian GAAP for the first nine months 2006 was $4.2 million, or $0.09 per share compared to $14.4 million, or $6.23 per share, in the first six months of 2005 and a net loss of $9.9 million, or $0.22 per share in the third quarter of 2005. The basic and diluted net loss per share 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 third quarter of 2006 was 40,912 oz, a decrease of 17% compared to the same period in 2005. Gold sold in the first nine months of 2006 was 112,301 oz, a decrease of 17% compared to the same period in 2005. The relative decrease in production arises from the fall of ground at PSGM's Number 1 Incline Shaft on February 18, 2006, 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. • Compared to the third quarter of 2005, PSGM's unit cash costs increased by 10.7% to $518 per ounce of gold and total costs decreased by 2.0% to $542 per ounce of gold. It should be noted that Cash cost per ounce sold is not a recognized measure under Canadian GAAP and therefore a reconciliation to the cost of sales per ounce is included under South African Operations. The increase in unit cash costs follows the relative decrease in quarter on quarter production by 17% and the impact of total labour costs increases of 12.7% which trend was offset by a weaker ZAR:US$ exchange rate. Compared to the first nine months of 2005, PSGM's unit cash costs increased by 0.4% to $530 and total costs decreased by 0.9% to $567 per ounce of gold, respectively. • The Company realized an average spot price of $618 per ounce of gold in the third quarter of 2006, slightly lower than the average spot price of $620 for the third quarter of 2006. The price realized is $179 per ounce higher than that realized in the third quarter of 2005. For the first nine months of 2006, the Company realised an average spot price of $600 per ounce which is $168 higher than that realised in the corresponding period in 2005. • The yield for the third quarter of 2006 averaged 5.06 g/tonne compared to an average of 5.86 g/tonne in the third 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 5.57 g/tonne for the third quarter. • Forecast gold sold at PSGM for 2006 has been revised downwards from the previous forecast from 157,500 oz to approximately 147,800 oz. Cash costs for 2006 are forecast to be $530 to $535 per ounce, and total costs are expected to be in the range of $565 to $570 per ounce. • A shareholders agreement is in the process of being concluded 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. The proposed transaction price is not expected to have a material impact on the financial condition of the Company as it recognises inter group debt between PSGM and Thistle of $134 million as at September 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. • The South African government has now outlined the terms of the Mineral and Petroleum Royalty Bill ("Royalty Bill") to be implemented with effect from May 1, 2009. It is now proposed that the South African gold mining industry will pay 1.5% of its revenues to the South African National Treasury some 1.5% lower than in the first draft of the legislation. Marginal mining companies, defined as producers whose cash operating costs exceeded cash income would receive up to a 75% reduction in the royalty rates. The South African government now proposes to table the bill in Parliament early in 2007 after reviewing any further industry comments and consultations • The search for a strategic partner for the Company's Masbate project is progressing rapidly. The company is engaged with a potential partner that may lead to a mutually satisfactory outcome. There can however be no assurance that these discussions will result in a transaction. Macquarie Securities (Asia) Pte Limited as financial advisor to the Company is assisting in this process. The combination or merger of Philippine Gold Ltd ("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 an uplift in shareholder value. • Detailed engineering design work on developing the Masbate project is continuing. During September PGO committed itself to the purchase of suitably sized second hand milling equipment for $2.8 million of which $0.6 million had been paid in the third quarter of 2006. By doing so PGO is not exposed to the long lead times relating to the procurement of new milling equipment which has increased from some 50 weeks to 90 weeks. On July 25, 2006 PGO and its Philippine subsidiaries jointly and severally mandated BNP Paribas to arrange and underwrite the project finance for the Masbate project on an exclusive basis. Project financing terms are currently under discussion. There can however be no assurance that BNP Paribas and PGO will conclude a project financing arrangement. Q3 2006 Q3 2005 9 months 6 months 2006 Fresh 2005 Fresh Start Pre Fresh Start Pre Fresh Start Start Sales ($ millions) 25.7 22.3 68.9 37.5Net profit (loss) ($ millions) 0.7 (10.0) (4.2) (14.4)Profit (loss) per share ($)1 0.01 (0.22) (0.09) (6.23)Cash generated by (used in) operations ($ millions) 1.7 (1.6) 2.9 (16.0)Gold sold (000's oz) 41 49 112 85Cash costs ($/oz) 2 518 468 530 562Total costs ($/oz) 542 553 567 583 Notes to table: 1 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 2 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. 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 Highlights(in thousands of dollars, except per share amounts) 3 months 3 months 9 months 6 months 30 September 30 September 30 September 30 June 2005 2006 2005 2006 Pre fresh start Fresh start Fresh start Fresh start Sales 25,742 22,274 68,908 37,498Gross profit (loss) 3,286 (5,060) 4,897 (12,006)Net profit (loss) before discontinued 657 (9,954) (4,273) (14,381)operationsNet profit (loss) per share before 0.01 (0.22) (0.09) (6.23)discontinued operations - basic and diluted1Net profit (loss) 657 (9,954) (4,273) (14,381)Net profit (loss) per share - basic and 0.01 (0.22) (0.09) (6.23)diluted 1Cash generated by (used in) operating 1,715 (1,577) 2,934 (15,965)activitiesTotal assets 80,124 75,986 80,124 74,231Total long term financial liabilities 32,376 42,404 32,376 41,385Cash dividends declared per share Nil Nil Nil Nil Notes to table: 1 The net loss per share - basic and diluted (both before and after discontinued operations) for periods prior to 30 June 2005 has been adjusted in respect 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 40,912 oz and 49,260 oz and in the thirdquarter of 2006 and 2005 respectively and (ii) the price realized of $618 and$439 per oz in the third quarter of 2006 and 2005 respectively. Gold sold of112,301 oz and 134,545 oz, at a price of $600 and $432 per oz, was realised forthe first nine 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 $22.5 million and $27.3 million in the third quarter of 2006 and 2005respectively. At PSGM gross ZAR cash costs have increased from ZAR 120 millionto ZAR 150 million from the second quarter to the third quarter of 2006following an increase in production and: • the implementation of a total labour cost increase, as agreed to with both labour unions in December 2005, by an effective 12.7% from June 20, 2006, • an increase in the average number of employees by 4%, • payment made in terms of additional shifts worked in previous periods of ZAR1.4 million, and • a seasonal increase in power tariffs. The cost of sales for the period analysed also need to be reviewed in thecontext of the Section 189 restructuring that resulted in a reduction of 28%reduction in the labour force in October 2005 and weakening of the average ZAR:US$ exchange rate by 11% in the third quarter of 2006 relative to the sameperiod in 2005. 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 $64.0 million in the first nine months of 2006 and$49.5 million in the first six months of 2005 and $27.3 million in the thirdquarter of 2005. Other major contributors to the net profit or loss include: (i) General and administrative expenses which were $1.1 million and $1.1 million in the third quarter of 2006 and 2005 respectively; (ii) Cost of interest which amounted to $2.2 million and $1.7 million in the third quarter of 2006 and 2005 respectively. Interest reflects the cost of pre and post CCAA loans advanced by Casten and MC; and (iii) Foreign exchange gains (losses) which amounted to $0.5 million and ($2.1) million in the third quarter of 2006 and 2005 respectively. Results of Operations SOUTH AFRICA The principal operating companies in South Africa are President Steyn Gold Mines(Free State) (Pty) Limited ("PSGM") and TM Training Initiative (Pty) Limited ("TMTI"), which operate the mines and the training college attached to the minesite, respectively. Metal Prices In the third quarter of 2006 the Rand weakened further to levels last seen inJuly 2003 and with a marginal decrease in the US$ gold price over the period theresult is the highest Rand gold price since Thistle's investment in PSGM. Achart showing the ZAR Gold Price from January 2004 to September 2006 is includedin the 2006 third 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 nine 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 20 per 1 million hours worked, a reportable rate of 5 per1 million hours and, most importantly, zero fatalities. For the third quarter of 2006 the LTI and reportable rate amounted to 16.9 and8.0 per one million man hours respectively. This compares to rates achieved inthe twelve month period ended December 31, 2005 of 17.9 and 10.1 respectivelyand is an improvement on the rates achieved for the first quarter of 2006 of30.8 and 19.5 per one million man hours respectively. The rates achieved for thesecond quarter of 2006 were 15.4 and 10.2 per one million man hoursrespectively. Fall of ground incidents continue to be the main cause ofreportable accidents and, regrettably, fatalities at PSGM. Production and Cost of Production 4th Quarter 3rd Quarter 2005 1st Quarter 2nd Quarter 3rd Quarter 2005 Restated 2006 2006 2006 Tonnes milled 268,237 218,301 189,808 199,823 248,997Recovered grade g/tonne 5.86 5.56 5.92 5.84 5.06Plant recovery % 96.5 95.8 95.5 95.6 95.1Ounces sold 49,260 40,945 34,868 36,521 40,912 Realised US$/oz 439 482 552 626 618Cash costs US$/oz1 468 493 555 519 518Cash costs R/tonne milled 569 605 629 598 602 Avg. exch. Rate ZAR/US$ ZAR6.43 ZAR6.51 ZAR6.12 ZAR6.43 ZAR7.14Avg. gold price ZAR/oz 2,824 3,139 3,377 4,025 4,413 Average employees 5,234 4,741 3,821 3,806 3,959Productivity: Annual tonnes per man 205 184 199 210 252 Cost of sales US$/oz 553 595 608 556 542Adjusted for:Depreciation, depletion, impairment (31) (74) (42) (41) (20)Derivative fair value adjustments - (23) (11) 1 (4)Movement in provisions (53) 69 - 3 -Loss on sale of property, plant &equipment - (6) - - -Other non operating costs (1) (68) - - -Cash costs US$/oz 468 493 555 519 518 Notes to table: 1 Cash cost per ounce sold is not a recognized measure under Canadian GAAP. Third quarter 2006 sales of gold were 40,912 oz compared with 49,260 oz in thesame quarter of 2005 and 34,868 oz in the first quarter of 2006 and 36,521 inthe second quarter of 2006. Relative to the third quarter of 2005 goldproduction in the third quarter of 2006 has decreased following the decision tostop unprofitable working places and production problems from the Big Berthasection. The first and second quarters 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, second and third quarter of 2006 increased to 5.92 g/t, 5.84 g/t and5.06 g/t respectively. The grade in the third quarter also reflects thetreatment of 30,022 tonnes of low grade surface material. The recovered gradefrom underground sources amounted to 5.57 g/tonne for the quarter. During the third quarter of 2006, the South African operations realised aneffective gold price of $618 per ounce which is marginally lower than theaverage market price of $620 per ounce over the same period and is $8 per ouncelower than the price realised in the second quarter of 2006. The price realisedfor the first nine months of 2006 is $600 per ounce. Cash operating costs for the third quarter of 2006 were $518 per ounce ofproduction, compared with $468 and $519 per oz for the third quarter of 2005 andthe second quarter of 2006, respectively. Major factors affecting these unit costs are • production, • the ZAR: US$ exchange rate, • the restructuring of costs following the rationalization of labour in the last quarter of 2005 • the implementation of a total labour cost increase, as agreed to with both labour unions in December 2005, by an effective 12.7% from June 20, 2006, • an increase in the average number of employees by 4% from the second to the third quarter of 2006, • payment made in terms of additional shifts worked in previous periods of ZAR1.4 million in the third quarter of 2006, and • a seasonal increase in power tariffs in the third quarter of 2006. Following the conclusion of a three year wage agreement between PSGM and bothlabour unions in December 2005, the total cost of employment has increased by12.7% 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, 3,806 and 3,959employees in the first, second and third quarters of 2006 respectively. A summary of production per shaft, comparing the third quarter of 2006 with thecorresponding period in 2005 and the first nine months of 2006 to thecorresponding period in 2005 is shown below. The impact of the fall of groundaccident at the Number 1 Incline Shaft which disrupted production over a fivemonth period commencing in February 2006 and the decision to stop operations atthe Number 1 Ventilation Shaft in the first quarter of 2006 is evident. Thefocus on quality of production is also apparent. Quarter 3 Quarter 3 9 months 9 months 2006 2005 2006 2005Steyn 1 ShaftTonnes milled tonnes 41,585 95,097 121,308 262,219Recovered grade g/t 4.80 4.93 4.77 4.59Gold recovered ounces 6,414 15,058 18,618 38,726 Steyn 2 ShaftTonnes milled tonnes 71,716 66,695 206,238 206,068Recovered grade g/t 6.36 6.17 6.86 5.70Gold recovered ounces 14,665 13,240 45,467 37,758 Steyn 3 ShaftTonnes milled tonnes 105,674 106,445 265,022 298,742Recovered grade g/t 5.34 6.50 5.65 5.80Gold recovered ounces 18,137 22,245 48,189 55,712 Steyn 9 Shaft (now suspended)Tonnes milled tonnes - - - 15,431Recovered grade g/t - - - 6.83Gold recovered ounces - - - 3,390 Surface SourcesTonnes milled tonnes 30,022 - 46,060 4,505Recovered grade g/t 1.34 - 1.28 -Gold recovered ounces 1,297 - 1,891 - Summary of Results Quarter 3 Quarter 3 9 months 9 months 2006 2005 2006 2005TOTAL SHAFTSTonnes ex underground tonnes 218,975 268,237 592,568 782,460Surface sources tonnes 30,022 - 46,060 4,505Total tons milled tonnes 248,997 268,237 638,628 786,965Recovered grade 5.06 5.86 5.56 5.36 g/tGold recovered ounces 40,514 50,543 114,165 135,586 Development on reef m 637 778 1,738 2,571Development off reef m 1,449 1,676 3,432 4,730 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 higher ounces being recorded in the financial resultsthan were actually produced in the period. Gold sales for the quarter amountedto 40,912 oz relative to production of 40,514 oz. Eldorado Reef Project The Eldorado Formation (Elsbergs) contains significant economic gold reefs alongthe western margin of the northern section of the Free State Goldfield. Thereefs have been successfully mined in localized areas in the past at Number 3Shaft. Limited current mining is taking place in the Big Bertha section whereaccess is relatively easy. In September the Board of directors agreed that workshould commence on an extensive drilling programme to explore the economicpotential of the unmined Eldorado reefs along the strike length of 6 kmaccessible from Number 3 Shaft workings. This will be undertaken via theexisting underground infrastructure covering some forty crosscut lines. Anestimated 11 500 meters of drilling will be carried out from 46 and 54 Levelsover a period of 3 to 4 years. The aim is to delineate some 11.8 million tonnescontaining an estimated 2.4 million ounces of gold. Should the explorationprogramme prove successful this will have the effect of increasing the resourcesat Number 3 shaft by up to 40% to 7.6 million ounces. The cost of the programmeis estimated to be $ 6.9 million or $3.00 per estimated resource oz and is to befunded from available PSGM generated cash flows. Exploration work is planned tocommence in early 2007. 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 Black Economic Empowerment ("BEE") and socio-economic objectives of theMPRDA Act (the "Objectives"). The Objectives are embodied in the broad-based socioeconomic empowerment charterwhich was signed by the Department of Minerals and Energy of South Africa, theSouth African Chamber of Mines and others on October 11, 2002 (the "Charter"),and its appendix known as the Scorecard which followed on February 18, 2003.The Charter is based on seven key principles, two of which are focused onownership targets for historically disadvantaged South Africans ("HDSA's") andbeneficiation, and five of which are operationally oriented and cover areasfocused on improving conditions for HDSA's. Regarding ownership targets, theCharter (as read with the Scorecard) requires each mining company to achieve thefollowing HDSA ownership targets for the purpose of qualifying for the grant ofnew order rights: (i) 15% ownership by HDSAs in that company or its attributable units of production by May 1, 2009, and (ii) 26% ownership by HDSA's in that company or its attributable units of production by May 1, 2014. The Charter states that such transfers must take 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 party advisershave provided advice as to the fair value for PSGM in a BEE transaction. Theproposed transaction price is not expected to have a material impact on thefinancial condition of the Company as it fully recognises inter group debt of$134 million between PSGM and Thistle. No dividends will be declared by PSGMuntil debt and interest obligations have been met in accordance with establishedloan agreements and adequate provision has been made for working capital. The South African government has introduced for enactment a Mineral andPetroleum Royalty Bill ("Royalty Bill") which will lead to the implementation ofa royalty on gross sales value with effect from May 1, 2009. It is now proposedthat the South African gold mining industry will pay 1.5% of its revenues to theSouth African National Treasury some 1.5% lower than in the first draft of thelegislation. Marginal mining companies, defined as producers whose cashoperating costs exceeded cash income would receive up to a 75% reduction in theroyalty rates. The South African government now proposes to table the bill inParliament early in 2007 after reviewing any industry comments andconsultations. PHILIPPINES Masbate Project 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 with another gold mining entity. PGO holds theCompany's Philippine assets including the Masbate Project. The Board is of theopinion that the combination or merger of PGO with a suitable partner has thepotential to create more shareholder value than developing the project on astand-alone basis. The Company has engaged Macquarie Securities (Asia) PteLimited to act as its exclusive financial advisor in this process. Following an approach to prospective partners, a number of interested partiessubmitted indicative non binding offers for the acquisition of all or part ofthe shares of PGO on September 1, 2006. Following a review of the these offersthe Company identified a number of potential partners who were given access to adata room and the project site to enable them to conduct a detailed duediligence. On October 27, 2006 unconditional bids were tabled. Discussions havenow commenced that may lead to a mutually satisfactory outcome. There canhowever be no assurance that these discussions will result in a transaction. In parallel with this initiative, work continues with 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 can be no assurance that BNP and PGO will conclude anagreement on the terms and guarantees and enter into a project financingarrangement. During September PGO committed itself to the purchase of suitably sized secondhand milling equipment for $2.8 million of which $0.6 million had been paid inthe third quarter of 2006. By taking this initiative, PGO has avoided the longlead times relating to the procurement of new milling equipment which hasincreased from some 50 weeks to 90 weeks. It is estimated that an amount of $3.9 million will be incurred for the Masbateproject for the three months ending December 31, 2006 on detailed design workand activities needed to support the project financing. Included in this amountis also an amount of $2.35 million on the purchase of second hand millingequipment. 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. Summary of 2006 Third Quarter Financial Results South African Operations The South African sub-group cash EBITDA (defined below) for the third quarter of2006 was an inflow of $4.1 million resulting in a cumulative inflow of $8.5million for the first nine months of 2006. After depreciation and amortizationof $3.8 million and foreign exchange gain on translation of $0.9 million, anoperating profit of $5.6 million was recorded for the nine months compared to aloss of $16.5 million in the same period in 2005. An operating profit of $3.7million was recorded for the third 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 nine months ended September 30, 2006 increased to $68.9 millionfrom $37.5 million for the first six months in 2005 and $22.3 million for thethird quarter of 2005 due to an increase in the gold price realized. The priceincrease was large enough to offset a decline in ounces sold of 17%. Included insales is $25.7 million realised in the third quarter of 2006 compared with $22.3million in the corresponding period of 2005. The Company realized an averageprice of $618 per ounce of gold in the third quarter of 2006 which isapproximately $179 per ounce higher than that realized in the third quarter of2005. Total ounces sold for the South African operations in the first nine months of2006 amounted to 112,301 oz compared to 134,545 oz sold in the correspondingperiod in 2005. Total ounces sold for the South African operations in the thirdquarter of 2006 amounted to 40,912 oz compared to 49,260 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 nine months ended September 30, 2006, the Company reported a grossprofit of $4.9 million compared to a gross loss of $12 million for the first sixmonths in 2005 and a gross loss of $5.1 million for the third quarter of 2005. Agross profit of $3.3 million was reported for the third quarter of 2006 comparedto a gross loss of $5.1 million in the same period in 2005. The improvement inprofitability is attributable to an improvement in the gold price despite adecrease in production combined with reduced operating costs that followed theSection 189 restructuring at PSGM in October 2005. 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 $64.0 million in the first nine months of 2006 from $49.5million for the first six months of 2005 and $27.3 million for the third quarterof 2005. 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 impairmentfor the third quarter of 2006 and 2005 was $22.5 and $27.3 million respectively.This improvement reflects the labour restructuring at PSGM and tighter costcontrols. The gross loss for the first six months in 2005 was incorporated in the "freshstart accounting" adjustments at July 1, 2005. General and Administrative Expenses and Restructuring Charges The general and administration expenses of $2.4 million for the first ninemonths of 2006, of which $1.1 million was incurred in the third quarter,represents mainly salaries and expenses relating to senior management anddirectors and professional and consultancy fees. The amount expensed in thefirst six months of 2005 and the third quarter of 2005 was $1.1 million and $1.1million respectively. 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 $6.7 million for the first nine months of 2006, of which $2.2million was incurred in the third 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 nine months of 2006 of $0.5 million, ofwhich a gain of $0.5 million was realised in the third quarter, represents thenet translation 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. The gain in thefirst six months of 2005 and the loss in the third quarter of 2005 were $1.5million and ($2.1) million respectively. Net profit (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 nine months of 2006amounted to ($0.09) per share and compares to a net loss of ($6.23) per share inthe first six months of 2005 and ($0.22) in the third quarter of 2005. The netprofit for the third quarter of 2006 amounted to $0.01 per share and compares toa net loss of ($0.22) per share in the comparable period in 2005. The productionperformance of PSGM remains the driver of the Company's profitability. Total Assets The Company's total assets as at September 30, 2006 increased by $0.4 millionfrom December 31, 2005 mainly due to a decrease in cash of $3.0 million, anincrease in accounts receivable of $2.1 million and an increase in property,plant and equipment of $1.1 million. During the nine months ended September 30, 2006 $4.5 million was capitalizedprincipally on underground development in South Africa. Total expenditures inthe Philippines during the nine months ended September 30, 2006 amounted to $2.9million. 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 nine months of 2006 (cashoperating profit or loss, adjusted for movements in current assets andliabilities) amounted to $2.9 million, which includes cash inflow of $1.7million from the third quarter, against a cash outflow of $16.0 million for thefirst six months of 2005 and an outflow of $1.6 million for the third quarter of2005. The key driver in the turnaround in cash flow is the increase in the goldprice and decrease in the cost of sales following the Section 189 restructuring.Despite a reduction in gold production, sales for the third quarter of 2006increased by $3.5 million relative to the corresponding period of 2005 due to a41% increase in the gold price realized from $439 to $618 per oz. Plant Property and Equipment(in thousands of dollars) Philippine South African Total assets assets Net book value at December 31, 2005 405 17,632 18,037Additions 5 4,534 4,539Disposals - (138) (138)Depreciation (28) (3,239) (3,267) Net book value at September 30, 2006 382 18,789 19,171 Additions for PSGM relates mainly to underground development needed to sustainproduction. Mining Properties(in thousands of dollars) Philippines resource South African Total properties resource properties Balance at December 31, 2005 24,480 25,021 49,501Additions 2,895 - 2,895Disposals - (1,309) (1,309)Depletion - (827) (827)Balance at September 30, 2006 27,375 22,885 50,260 Additions for the Philippines relate to work undertaken to complete the Masbatebankable feasibility study, purchase of land and detailed engineering designwork. The disposal of $1.3 million in the third quarter at PSGM relates to areduction in the reclamation provision due to the rescheduling of rehabilitationactivities. A $0.6million reversal of depletion was recognised in the thirdquarter to account for the reduction in reclamation assets in excess of theircarrying value. Reclamation Provision At September 30, 2005 the Company has a provision of $8.0 million recorded forenvironmental liabilities in South Africa and the Philippines. The decrease inthe provision of $1.2 million since December 31, 2005 is due to the reschedulingof rehabilitation activities in South Africa to the end of the life of the mine.The carrying value of the corresponding asset under mining properties has beenreduced accordingly. 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 atSeptember 30, 2006 the balance of the rehabilitation trust fund was $1.4million. The total liability will be funded over the life of the PSGM minecurrently estimated to be 14 years. The calculation of the liability is based onthe future projected cost of the rehabilitation in the amount of $8.9 milliondiscounted at a real rate of 4.398%. Jet Demolition (Pty) Ltd has been contracted to commence demolition andrehabilitation work of the old Freddies metallurgical plant located at Number 9shaft. It is estimated that some 6,000 oz of gold will be recovered at a cost ofapproximately $330 per oz. Income Tax Payable Income tax payable of $0.9 million recorded at September 30, 2006 represents thetax payable in respect of unrealised foreign exchange gains made by a SouthAfrican subsidiary. Contractual Obligations The Company rents premises and leases equipment under operating leases thatexpire over the next three years. Operating lease expenses for the first ninemonths of 2006 were $142,000 (for the same period in 2005 - $244,000). Thefollowing is a schedule of future minimum rental and lease payments required: Year 2006 2007 2008 Total Future minimum lease payments ($'000s) 25 51 19 95 In addition, PGO has made commitments to purchase suitably sized second handmilling equipment on which payments of $2.2 million will be made in the fourthquarter of 2006. Accounts payable and accrued liabilities 30 September 31 December 2005 2005 Fresh start Fresh start Trade accounts payable 5,223 5,448Taxation and social security 58 31Accruals 5,906 6,535Accrued interest and finance charges on debt 9,910 3,854Other accounts payable 2,846 2,857 23,943 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 weakening of the Rand and the lowerlabour cost following the Section 189 restructuring in the fourth quarter of2005. Liquidity and Capital Resources As of September 30, 2006, Thistle had cash and short-term investments of $1.1million, a decrease of $3.0 million from the start of the year. Consolidatedshort and long-term debt balances at September 30, 2006, were $61.3 millioncompared with $59.5 million at December 31, 2005. At September 30, 2006,Thistle was in compliance 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 September 30, 2005 Currency Interest Current Long term rate portion 1 portion MC Cdn $ 10% 982,500 982,500Casten Cdn $ 10% 982,500 982,500Total Cdn $ 10% 1,965,000 1,965,000 MC Cdn $ 12% 6,750,000 6,750,000Casten Cdn $ 12% 6,750,000 6,750,000Total Cdn $ 12% 13,500,000 13,500,000 MC $ 10% 5,000,000 5,000,000Casten $ 10% 5,000,000 5,000,000Total $ 10% 10,000,000 10,000,000 Notes to table: 1 Payment of debt restructured in terms of the Memorandum of Agreements. Subsequent to the end of the CCAA process up to December 31, 2005, additionaldebt of $12.6 million was advanced from MC and Casten with a further $0.680million advanced for the first quarter of 2006. In the second quarter of 2006an advance of $0.330 million was received under the terms of the Credit Facilitydiscussed in detail below. However this amount was repaid in full before the endof the second quarter. No further advances were received in the third quarter of2006. Debt incurred subsequent to CCAA as at September 30, Currency Interest Current Long term2006 rate portion1 portion MC $ 12% 6,640,000 NilCasten $ 12% 6,640,080 NilTotal $ 12% 13,280,080 Nil Notes to table: 1 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 September 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 years Debt 61,255 37,215 24,040 -- --Interest and loan advance fee payable 9,910 9,910 -- -- --Operating leases 95 67 28 -- --Purchase obligations 2,240 2,240 -- -- --Total contractual obligations 73,500 49,432 24,068 -- -- The purchase obligations relate to the purchase of milling equipment for theMasbate project. The Company incurred losses of $4.2 million during the nine months endedSeptember 30, 2006. At September 30, 2006, the Company's current liabilitiesexceeded its current assets by $51.3 million and the Company's total liabilitiesexceeded its total assets by $14.2 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 to the Company until April 1, 2007; and • Providing the Credit Facility of up to $8.62 million and deferring repayment of the additional loans until April 1, 2007 (see note 1 and 9 of the 2005 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 ofthat quarter. At current Rand gold prices, PSGM is able to generated sufficientsurplus cash flow to cover corporate costs and ordinary Masbate costs. Followingthe decision to buy the second hand SAG and Ball mills for the Masbate projectin order to mitigate long lead times associated with ordering new equipment itis anticipated that an amount of $3 million will need to be drawn from theCredit Facility during the fourth quarter of 2006. 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. Summary of Quarterly Results Fresh Fresh Fresh Fresh Start Fresh Pre fresh Pre fresh Start Start Start Restated Start Start Start Restated 1 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Q3/2005 Q2/2005 Q1/2005 Q4/2004 Total revenue $ 25,742 23,329 19,837 20,315 22,274 18,710 18,788 18,917Income (loss) beforediscontinued operations $ 657 (291) (4,639) (6,697) (9,954) (6,714) (7,667) 3,042Income (loss) beforediscontinued operationsper share (basic anddiluted)2 0.01 (0.01) (0.10) (0.15) (0.22) (2.91) (3.32) 1.32Net income (loss) $ 657 (291) (4,639) (6,697) (9,954) (6,714) (7,667) 8,668Net Income (loss) per 0.01 (0.01) (0.10)share(basic and diluted) (0.15) (0.22) (2.91) (3.32) 3.76Tonnes milled 248,997 199,823 189,808 218,301 268,237 268,884 249,884 223,475Recovered grade g/t 5.06 5.84 5.92 5.56 5.86 4.93 5.28 5.23Gold sold oz 40,912 36,521 34,868 40,945 49,260 42,376 42,909 38,564CAD$/ $ exchange rate 1.12 1.12 1.17 1.17 1.19 1.25 1.23 1.20ZAR / $ exchange rate 7.14 6.43 6.12 6.51 6.43 6.42 5.97 5.95Average gold price 618 626 552 482 439 427 428 439realized $ per ounceCash costs ZAR Millions 150 120 119 132 153 149 145 157Cash costs ZAR/tonne 602 598 629 605 569 553 582 703 Notes to table: 1 In periods prior to 2004 the Company filed its financial statements in accordance with UK generally accepted accounting principles. These figures have been restated in accordance with Canadian GAAP. 2. 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. 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. The grade in the thirdquarter also reflects the treatment of 30,022 tonnes of low grade surfacematerial. The recovered grade from underground sources amounted to 5.57 g/tonnefor the quarter. On August 10, 2004, the Company's hedge book was closed out and the Company isun-hedged from a cash flow point of view with the exception of put optionspurchased by PSGM on 2,000 oz's per month at a flat forward price of $490/oz forthe period January 2006 to December 2007. The 48,000 oz of gold puts purchasedrepresents approximately 15% of PSGM anticipated production over the 24 monthperiod. The last four quarters have seen a dramatic increase in the gold pricerealized. This increase has been more than sufficient to offset the decrease ingold production experienced for the same period. Net earnings are generally affected by the performance of the South Africanoperations. Over the period analysed ZAR costs at PSGM have been well containeddespite real increases in the cost of labour and consumables. The significantincrease in gross ZAR costs in the third quarter reflects the implementation oflabour cost increases as agreed to with both labour unions in December 2005, byan effective 12.7% from June 20, 2006, an increase in the average number ofemployees by 4%, payment made in terms of additional shifts worked in previousperiods of ZAR1.4 million, and an increase in power tariffs of 30% due to thehigh demand winter season. The significant reduction in costs during the first quarter of 2006 reflects thelabour rationalization that was effected in October 2005. The costs associatedwith the South African operation as reported in US$ are greatly affected by theZAR:US$ exchange rate. Although the Rand has been relatively stable to the US$over the period analysed the weakening in the third quarters is noteworthy. 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 TM Training Initiative (Pty) Limited ("TMTI") amounting to $0.6 million, impairment of South African mining propertiesof $1.0 million, a revaluation adjustment of put options bought by PSGM inOctober 2005 at $1.0 million and restructuring costs relating to theimplementation of the Section 189 Restructuring at PSGM of $2.8 million. 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. A secondhearing was held on October 9, 2006. On June 4, 2004 PSGM cancelled the contract with MH & A. Shortly thereafter MH &A disputed whether PSGM was lawfully entitled to cancel the contract andpresented a claim amounting to ZAR33million which PSGM denied. Under the termsof the contract, any dispute is to be decided through arbitration. MH & A didnot pursue this course of action but instead on June 28, 2004 applied for anurgent application to prevent PSGM from using and removing certain equipment.This application was dismissed with costs. Leave to appeal was granted but theappeal was also dismissed with costs on October 21, 2004. The Company's legal counsel has been advised verbally by the liquidator, thatthey intend instituting proceedings against PSGM for an amount of approximatelyZAR33 million. As and when proceedings are instituted, they will be defendedand conducted 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 Company's equity. (See "Liquidity and CapitalResources"). Proposed Transactions TM Training Initiative (Pty) Limited ("TMTI") The Company has signed agreements with subsidiaries of GoldFields Limited forthe sale of TMTI a 100% owned South African subsidiary operating a trainingfacility in the Free State Province of South Africa. The anticipated proceeds tothe Company on the sale of TMTI are approximately $460,000. Management viewthis as a divestment in a non core asset that currently requires net funding of$196,000 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 equipment evaluated at least annually using management's best estimates of future production, sales prices, operating, capital costs and reclamation costs; • depletion, depreciation and amortization based on proven and probable mineral reserves and the estimated life of assets; • stockpiles, metal in circuit and product inventories at the lower of average cost or net realizable value; • financial instruments, recorded on the balance sheet at the estimated fair market value; • future income tax assets whose recognition is determined based on significant estimates related to expectations of future taxable income; • contingencies, when available information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated; • stock options, using the fair value method to value the Company's stock based compensation plan based on the Black Scholes model; and • reclamation obligations, resulting from minimum standards for mine reclamation established by various governmental agencies, which affect certain operations 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 September 29, 2006 the spot price of goldamounted to $598 per oz and the fair value of the put options was calculated tobe $0.09 million. The change in value of $0.17 million for the third quarterand $0.51 million for the first nine months of 2006 is disclosed separatelyunder cost of sales. Corporate Information Head Office President Steyn Gold Mines Alexey Kruzhkov Company Secretary Nominated advisorPrivate Bag X10206 London, United Kingdom Karen Hamilton Grant ThorntonWelkom, 9459 Johannesburg South Africa Corporate FinanceRepublic of South Africa Barry Goldberg London, United KingdomTel: +27 57 391 9114 Toronto, Ontario ListingFax: +27 57 391 9118 Bankers Jeffery Barnes Alternative Investment Royal Bank of Canada Market Corporate Structure and Toronto, Ontario London, Symbol TMG Toronto, OntarioManagement Askar Alshinbayev Standard Bank LimitedDirectors London, United Kingdom Johannesburg, South AfricaChairman of the Board Registrar & Transfer AgentThe Right Honourable Legal CounselLord Lang of Monkton Officers CIBC Mellon Trust CompanyAyrshire, Scotland Chief Executive Officer Toronto, Ontario Heenan Blaikie LLP Gerrit Kennedy London, United Kingdom Toronto, OntarioPaul Marchand Johannesburg, South AfricaLondon, United Kingdom Auditors Werksmans Chief Financial Officer Johannesburg, South AfricaYuri Shafranik Andreas Graetz KPMG Inc.Moscow, Russia Johannesburg, South Johannesburg, South Africa Africa Financial Information Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statementsfor the three months ended September 30, 2006. All figures are in US$ unlessotherwise noted. The statements are presented in accordance with Canadian GAAP.For further information, please contact:Andreas Graetz, Chief Financial OfficerPresident Steyn Gold MinesPrivate Bag X 10206, Welkom, 9460,Free State, South Africa Tel: +27 57 391 9114Fax: +27 57 391 9118agraetz@disselgroup.com 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) September 30 December 31 2005 2006 Fresh start Fresh startASSETSCurrent assetsCash and cash equivalents 1,141 4,153Accounts receivable 3,180 1,090Investments 468 798Inventories 4,305 3,918Derivative financial instruments 71 299Other assets 1,510 1,744 10,675 12,002Derivative financial instruments 18 300Property, plant and equipment 19,171 18,037Mining properties 50,260 49,501 80,124 79,840 LIABILITIES AND SHAREHOLDERS' DEFICIENCYCurrent LiabilitiesAccounts payable and accrued liabilities 23,943 18,725Current debt 37,215 89Income taxes payable 833 1,698Total current liabilities 61,991 20,512 Long term debt 24,040 59,408Reclamation provision 7,950 9,224Future income tax liabilities 386 717 94,367 89,861 Shareholders' Deficiency Common shares (note 4) 6,627 6,627Contributed surplus 54 3Deficit (20,924) (16,651)Total shareholders' deficiency (14,243) (10,021) 80,124 79,840 Going concern (note 2) See accompanying notes. Consolidated Statements of Operations (in thousands of US dollars, unaudited) Three months ended Nine months Six months ended ended 30 September 30 September 30 June 2006 2005 2006 2005 Fresh Fresh Fresh start Pre fresh start start start Sales 25,742 22,274 68,908 37,498Cost of sales (21,172) (25,735) (59,368) (47,973)Profit (loss) on sale of property,plant and equipment (131) - 89 -Net impact of derivative financialinstruments (165) - (510) -Accretion relating to reclamation provision (49) - (156) -Depletion and depreciation, and impairment (939) (1,599) (4,066) (1,531)Gross profit (loss) 3,286 (5,060) 4,897 (12,006) Costs and Expenses General and administrative expenses (1,056) (1,122) (2,417) (1,107)Restructuring charges - - - (2,043)Depreciation - (1) - (6)Interest (2,237) (1,743) (6,724) (977)Foreign currency gain (loss) 483 (2,059) (517) 1,502Other gains and (losses) 72 89 125 (42)Minority interest in net earnings - - - -Loss before income taxes and discontinuedoperations 548 (9,896) (4,636) (14,679)Discontinued operations - - - -Income tax (expense) / recovery 109 (58) 363 298Net profit (loss) for the period 657 (9,954) (4,273) (14,381) Net profit (loss) per share before discontinued operations - basic and diluted (note 4) 0.01 (0.22) (0.09) (6.23)Net profit (loss) per share - basic and diluted(note 4) 0.01 (0.22) (0.09) (6.23) See accompanying notes. Statement of Deficit (in thousands of US dollars, unaudited) Three months ended Nine months Six months ended ended 30 September 30 September 30 June 2006 2005 2006 2006 Fresh Fresh Fresh start Pre Fresh start start startDeficitBalance, beginning of the period (21,581) - (16,651) (162,327)Net profit (loss) for the period 657 (9,954) (4,273) (14,381) Balance, end of the period (20,924) (9,954) (20,924) (176,708) See accompanying notes. Statement of Cash Flows (in thousands of US dollars, unaudited) Three months ended Nine months Six months ended ended 30 September 30 September 30 June 2006 2005 2006 2006 Fresh Fresh Fresh start Pre Fresh start start start restatedOperating activitiesNet loss for the period from continuingoperations 657 (9,954) (4,273) (14,381)Add (deduct) items not affecting cash fromoperating activities Depletion and depreciation, and impairment 939 1,621 4,066 1,537Future income and mining tax provisions (99) (240) (331) 706Foreign exchange (483) 1,813 517 (1,502)Unrealized (gain) loss on derivative instruments 165 - 510 -(Gain) loss on investments (148) - (163) -Stock options issued 20 - 51 -(Profit) loss on sale of plant, property andequipment 131 - (89) -Other non-cash items (203) 1,353 (95) 2 979 (5,407) 193 (13,638) Changes in non-cash working capital balancesAccounts receivable (2,421) 445 (2,478) (179)Inventories (499) (405) (1,157) (654)Other assets (136) (23) (15) 387Accounts payable and accrued liabilities 3,752 3,477 7,137 352Income and mining taxes recoverable and payable 40 336 (746) (2,233) 736 3,830 2,741 (2,327) Cash flows generated (used) in operatingactivities 1,715 (1,577) 2,934 (15,965) Net change in discontinued operations - - - - Investing activitiesAdditions to mining properties (1,366) (1,401) (2,867) (1,875)Purchase of property, plant and equipment (2,217) (1,762) (4,539) (2,698)Proceeds on sale of property, plant andequipment - - 357 -Sale of investments 164 252 494 119Cash flows provided by (used in) investingactivities (3,419) (2,911) (6,555) (4,454) Financing activitiesCommon shares issued - - - -Principal payments under capital leaseobligations (16) - (71) -Net proceeds from borrowings - 5,000 680 22,758Cash flows provided by (used in) financingactivities (16) 5,000 609 22,758 Net (decrease) increase in cash and cashequivalents (1,720) 512 (3,012) 2,339Cash and cash equivalents, beginning ofperiod 2,861 4,183 4,153 1,844Cash and cash equivalents, end of period 1,141 4,695 1,141 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$4.2 million during the nine months ended September 30, 2006. At September 30,2006, the Company's current liabilities exceeded its current assets by $51.3million and the Company's total liabilities exceeded its total assets by $14.2million. 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 the Company until April 1, 2007; and • Providing a credit facility ("Credit Facility") of up to $8.62 million and to defer repayment of the additional loans until April 1, 2007. In connection with the Memorandum of Agreements, Thistle has pledged its shares in Philippine Gold Limited, a wholly owned subsidiary of the Company incorporated in the United Kingdom, which has a 40 % interest in Filminera Resource Company ("Filminera") and a 100% interest in Philippine Gold Processing and Refining Corporation ("PGPRC") both of which are incorporated in the Philippines, to the supplier 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 anticipated operationalrequirements. In making this statement management has assumed that current goldprices will prevail. Accordingly the financial statements have been prepared onthe basis of accounting 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. 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 in respect of the Company's senior secured indebtedness; and • Class Two, consisting of the Note-holder Creditors, the holders of claims relating to notes issued by the Company; 2. The sale by Meridian Creditors to the Company, or its security agent, of: • Debt owing to Meridian Creditors by subsidiaries of the Company, guaranteed by the Company, and secured, totalling approximately $54.2 million together with interest thereon; and • Debt owing to Meridian Creditors by a subsidiary of the Company totalling approximately Cdn $3.93 million together with interest thereon; 3. In consideration for such sale, the Meridian Creditors received from the Company, in aggregate: • 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 principal of $24.85 million plus interest thereon, in consideration for which Note-holder Creditors received 25% of the post-implementation equity in the Company; 5. The consolidation of existing common shares of the Company so that existing shareholders retained 5% of the post-implementation equity in the Company; 6. Payment in full by the Company of all proven claims of the Company's creditors as at the Filing Date (other than claims of Meridian Creditors and Note-holder Creditors); and 7. The delivery by the Company to the Meridian Creditors of secured notes evidencing the amount of the Company's outstanding debtor-in-possession financing owing to them as at the 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. 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 94Conversion of loans 669,082 128December 31, 2004 461,520,685 108,883Cancellation of warrants - 14,578June 30, 2005 Pre CCAA 461,520,685 123,461Consolidation of existing shares on a 200 forone basis as of June 30, 2005 2,307,603 123,461Conversion of various loans per Plan of 43,844,457 59,980arrangementOther fresh start accounting adjustments - (176,814)Balance at 30 June 2005 Post CCAA, September 46,152,060 6,62730, 2006 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. On the May 15, 2006 the Masbate bankable feasibility study was completedindicating a commercially mineable deposit. Accordingly all acquisition,exploration and development costs incurred as from July 1, 2006 have beencapitalised to mining properties. Under Canadian GAAP, the capitalisation of allcosts is permitted whereas under US GAAP only directly related costs can becapitalised. As a result under US GAAP the indirect costs incurred in thePhilippines subsequent to June 30, 2006 remains an expense. 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. The application of U.S. GAAP would have impacted the Company's reported resultsfor third quarter of 2006 and 2005 as follows: 3 months 3 months 9 months 6 months 30 September 30 September 30 September 30 June 2006 2005 2006 2005 Fresh start Pre fresh Fresh start Fresh start start Net profit (loss) based on Canadian GAAP 657 (9,954) (4,273) (14,381)Impact on net earnings of US GAAP adjustments: - Exploration costs (167) (1,401) (1,686) (1,875)Net profit (loss) based on US GAAP 490 (11,355) (5,959) (16,256)Basic and diluted profit (loss) per share beforediscontinued operations based on US GAAP 0.01 (0.25) (0.13) (7.04)Basic and diluted profit (loss) per share basedon US GAAP 0.01 (0.25) (0.13) (7.04) 30 September 30 September 2006 2005 Fresh start Fresh start Shareholders deficiency based on Canadian GAAP: (14,243) (3,327)Impact on shareholder's equity of US GAAP adjustments - Exploration costs (6,341) (1,401) - Gain (loss) on mark to market of investments (112) (44)Shareholder's deficit based on US GAAP (20,696) (4,772) The statements of comprehensive profit (loss) for the three and nine monthsended September 30, 2006 and six months ended June 30, 2005 would be presentedas follows on a US GAAP basis: 3 months 3 months 9 months 6 months 30 September 30 September 30 September 30 June 2006 2005 2006 2005 Fresh start Pre fresh Fresh start Fresh start start Net profit (loss) based on US GAAP 490 (11,355) (5,959) (16,256)Other Comprehensive profit (loss) net of incometaxes: - Gain (loss) on mark to market of investments (162) (44) (197) (18) - Foreign currency translation gain - - - 2Comprehensive profit (loss) based on US GAAP (328) (11,399) (6,156) (16,272) The accumulated other comprehensive profit (loss) balances for the nine monthsended September 30, 2006 and the six months ended June 30, 2005 and December 31,2005 would be presented as follows on a US GAAP basis: Balance, December 31, 2004 (2,713)Movements (16)Balance, June 30, 2005 (2,729)Balance, July 1, 2005 after fresh start accounting adjustments -Movements subsequent to fresh start accounting 85Balance, December 31, 2005 85Movements (48)Balance, March 31, 2006 37Movements 13Balance, June 30, 2006 50Movements (162)Balance, September 30, 2006 (112) This news release contains forward-looking statements with the meaning ofapplicable securities laws including amongst others, statements made or impliedunder the headings "2006 third Quarter Results - Highlights" above relating tothe Company's objectives, strategies to achieve these objectives, future cashflow and financing requirements, and similar statements concerning anticipatedfuture events, results, circumstances, performance or expectations that are nothistorical facts. Such forward-looking statements reflect the Company's currentbeliefs and 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