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 August 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  

Schedule B: SUPPLEMENTARY INFORMATION