1. NATURE AND CONTINUANCE OF OPERATIONS

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

These consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiary Minera Tres-Or S.A. de C.V., a company incorporated in Mexico.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the year.  Actual results could differ from these estimates.

Financial instruments

The Company's financial instruments consist of cash, accounts receivable, note receivable, due to related parties, accounts payable and accrued liabilities.  Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.  The fair value of these financial instruments approximate their carrying values, unless otherwise noted. 

Capital assets and amortization

Capital assets, being computer equipment, are recorded at cost less accumulated amortization.  Amortization is being provided for using the declining balance method at the rate of 30% per annum.  

Marketable securities

Marketable securities are recorded at the lower of cost and quoted market value.

Mineral properties

The Company records its interests in mineral properties and areas of geological interest at cost.  All direct and indirect costs relating to the acquisitions of these interests are capitalized on the basis of specific claim blocks or areas of geological interest until the properties to which they relate are placed into production, sold or abandoned.  These costs will be amortized over the estimated useful life of the related property following commencement of production.  Using the units of production method based on proven and probable reserves, or written-off if the mineral properties are sold or abandoned.

Deferred exploration costs

The Company defers all exploration expenses relating to mineral properties and areas of geological interest until the properties to which they relate are placed into production, sold or abandoned.  These costs will be amortized over the proven reserves available on the related property following commencement of production.  

Values 

The amounts shown for mineral properties and deferred exploration costs represent costs to date, and do not necessarily represent present or future values as they are entirely dependent upon the economic recovery of current and future reserves.

Cost of maintaining mineral properties

The Company does not accrue the estimated future costs of maintaining its mineral properties in good standing.

Environmental protection and rehabilitation costs

Liabilities related to environmental protection and rehabilitation costs are accrued and charged to income when their likelihood of occurrence is established.  This includes future removal and site restoration costs as required due to environmental law or contracts. 

Future income taxes

Future income taxes are calculated using the asset and liability method.  Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled.  The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment or enactment occurs.  To the extent that the Company does not consider it to be more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.

Stock based compensation

The Company periodically grants stock options to executive officers and directors, employees and consultants pursuant to the Canadian Venture Exchange Policy as described in Note 8.  No compensation expense is recognized for this plan when stock options are granted or extended.  Any consideration received on exercise of stock options is credited to capital stock.

Segmented information

The Company conducts substantially all of its operations in Canada in one business segment.

Comparative figures

Certain comparative figures have been reclassified to conform with the current year's presentation.

 3. MARKETABLE SECURITIES

            Marketable securities held at May 31, 2001 include 150,000 common shares of Broadlands Resources Ltd. received as an option payment at an agreed value of $27,000 to acquire a 50% interest in the Mann mineral property.  At February 28, 2001, the marketable securities were written down to the market value of $24,000.

4. CAPITAL ASSETS  

The following stock options were outstanding and exercisable at May 31, 2001:

Warrants

The following share purchase warrants were outstanding at May 31, 2001:

These financial statements include transactions with related parties as follows:

a) The Company paid or accrued $13,800 (2000 - $12,500) to a company controlled by a director for geological services which have been capitalized to deferred exploration costs. In addition the Company paid or accrued $4,200 (2000 - $2,500) to this Company for management services.

b) A total of 256,667 warrants were exercised by directors for total consideration of $42,467.

c) A total of 171,667 warrants were exercised by directors for total consideration of $28,200.

d) As at May 31, 2001, the Company owed $6,427 (2000 - $31,389) to directors.  The fair value of amounts due to related parties cannot be determined as there are no specific terms of repayment. 

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties unless otherwise noted.

10.    SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES

             Significant non-cash transactions for the year ended May 31, 2001 consisted of:

             a)  The Company issued 219,999 common shares at an agreed value of $44,000 pursuant to agreements to purchase mineral property claims. 

            b)  The Company issued 535,455 common shares in the amount of $117,800 in exchange for share subscriptions received.

            c)  The Company received 15,425 of its common shares as payment on a note receivable. 

             d)  The Company issued 1,131,980 common shares in the amount of $169,797 in exchange for share subscriptions received.

 11.            INCOME TAXES

             A reconciliation of income taxes at statutory rates with the reported taxes follows:

            Renunciation of flow through shares during the year and previous year resulted in an income tax recovery of $44,912 (2000 - $38,986) respectively. 

            Renounced flow through shares for the years ended February 28, 1999 and 2000 were adjusted to deficit and share capital. 

            Subject to certain restrictions, the Company has operating losses of approximately $1,900,000 available to reduce taxable income of future years.  Unless utilized, these losses will expire through 2008.  In addition, the Company has exploration and development expenditures of approximately $1,687,000 available to reduce taxable income of future years.  Future tax benefits, which may arise as a result of these losses and resource expenditures, have not been recognized in these financial statements. 

            Details of future income tax assets are as follows: 

12.       CONTINGENCIES

            As at May 31, 2001, the Company is both plaintiff and defendant in several claims.  The outcome of these legal claims cannot be determined at this time.  No provision for gains or losses arising from these legal claims have been made in these financial statements.  Any losses arising as a result of these legal claims will be recorded in the period the losses are determined.

13.     SUBSEQUENT EVENTS 

            The following transactions occurred subsequent to May 31, 2001: 

            a)  On July 4, 2001, the Company completed a non-brokered private placement of 723,500 units of the Company at $0.25 per unit.  The number of units was increased from 600,00 units to 723,500 (353,500 being flow-through units) as referred to in its news release of May 9, 2001. Each unit consists of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to acquire one common share of the Company exercisable to acquire one common share at $0.50 per share for a period of one year. 

            b)  On July 6, 2001 the directors exercised 394,576 options at $0.15 for net proceeds to the Company of $59,186.40.  

            c)  On July 16, 2001, directors and officers exercised 78,000 warrants at $0.10 for net proceeds of $7,800.

            d)  On July 18, 2001, the Company entered into an agreement to acquire 837mining claim units in the Sudbury Mining Division of Ontario. The claims are contiguous and adjoin the Company's 100% owned 900 claim units. Consideration to acquire 837 claim unitsincludes $30,000 on signing of the agreement and the issuance of 60,000 shares upon receipt of the apporval of the Canadian venture Exchange.  In addition, the agreement requires Tres-Or to make three cash payments totaling $165,000 to the Vendors and issue common shares payable in two installments of $60,000 shares each.  The Vendors retain a 2.5% NSR.  Tres-Or may at its option purchase 1% of the vendors NSR for $1,000,000 at any time prior to commercial porduction of gold, PGE minerals, base metals, diamonds or any other mineral discovered on the claims.  Tres-Or has a First Right of Refusal to buy back the remaining 1.5% NSR. The Company is also required to issue an additional 100,000 common shares to the vendor one day prior to commercial production subject to regulatory approval.  No work commitment is required under this purchase agreement.

SCHEDULE A:  FINANCIAL INFORMATION  for the period ended May 31, 2001.

1.       Analysis of expenses and deferred costs for the current fiscal year to date: 

      Refer to Schedule A Financial Statements – Statement of Deferred Exploration Costs for expenditures made on property investigations, exploration and development during the fiscal year. 

2.       Related party transactions: 

The Company entered into the following transactions with related parties: 

             a) The Company paid or accrued $13,800 (2000 - $12,500) to a company controlled by a director for geological services which have been capitalized to mineral properties.  In addition the Company paid or accrued $4,200 (2000 - $2,500) to this Company for management services. 

             b) A total of 256,667 warrants were exercised by directors for total consideration of $42,467.

             c) As at May 31, 2001, the Company owed $6,427 (2000 - $31,389) to directors. 

3.   For the quarter under review: 

a)    Summary of securities issued during the quarter: