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<SEC-DOCUMENT>0001137171-05-000130.txt : 20050203
<SEC-HEADER>0001137171-05-000130.hdr.sgml : 20050203
<ACCEPTANCE-DATETIME>20050202180637
ACCESSION NUMBER:		0001137171-05-000130
CONFORMED SUBMISSION TYPE:	6-K/A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20041130
FILED AS OF DATE:		20050203

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DRC RESOURCES CORP                                      /FI
		CENTRAL INDEX KEY:			0000800166
		STANDARD INDUSTRIAL CLASSIFICATION:	METAL MINING [1000]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-31722
		FILM NUMBER:		05570672

	BUSINESS ADDRESS:	
		STREET 1:		#601 - 595 HOWE STREET
		CITY:			VANCOUVER BC CANADA
		STATE:			A1
		ZIP:			V6C  2T5
		BUSINESS PHONE:		(604) 687-1629
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K/A
<SEQUENCE>1
<FILENAME>f6k.htm
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<TITLE>Filed by Filing Services Canada Inc. 403 717-3898</TITLE>
<META NAME="author" CONTENT="Bradley J. Dick">
<META NAME="date" CONTENT="11/15/2004">
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<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>U.S. SECURITIES AND EXCHANGE COMMISSION</B></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt" align=center><B>Washington, D.C. 20549</B></P>
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<P style="margin:0pt; line-height:16pt; font-family:Times New Roman; font-size:14pt" align=center><B>FORM 6-K/A</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>AMENDED
REPORT OF FOREIGN PRIVATE ISSUER</B></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>PURSUANT TO RULE 13a-16 or 15d-16 OF</B></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>THE SECURITIES EXCHANGE ACT OF 1934</B></P>
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<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>For the month of November, 2004</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>Commission File Number 1-31722</P>
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<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; line-height:16pt; font-family:Times New Roman; font-size:14pt" align=center><B>DRC RESOURCES CORPORATION</B></P>
<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; font-family:Times New Roman" align=center><I>(Exact name of registrant as specified in its charter)</I></P>
<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; font-family:Times New Roman; font-size:11pt" align=center><BR></P>
<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; line-height:13pt; font-family:Times New Roman; font-size:11pt" align=center><B>595 Howe Street, Suite #601, Vancouver, British Columbia, Canada &nbsp;V6C 2T5</B></P>
<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; line-height:13pt; font-family:Times New Roman; font-size:11pt" align=center><B>(604) 687-1629</B></P>
<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; font-family:Times New Roman" align=center><I>(Address of principal executive offices)</I></P>
<P style="margin:0pt; padding-left:32.4pt; text-indent:-32.4pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:32.4pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.</P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:32.4pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Form 20-F&nbsp;<U>__X__</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form 40-F&nbsp;<U>___</U></P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:32.4pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(1):&nbsp;___</P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:32.4pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):&nbsp;___</P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:36pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.</P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:36pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Yes&nbsp;<U>_X__</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;__<U> _</U></P>
<P style="margin-top:12pt; margin-bottom:0pt; text-indent:36pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>If &quot;Yes&quot; is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): <U>82- 713___</U>.</P>
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<P style="margin:0pt; padding-left:36pt; padding-right:36pt; font-family:Times New Roman; font-size:12pt" align=center><BR></P>
<P style="margin:0pt; padding-left:36pt; padding-right:36pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>EXHIBIT INDEX</B></P>
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<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">The following is a list of Exhibits included as part of this Report on Form 6-K.</P>
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<P style="margin-top:0pt; margin-bottom:-14pt; padding-left:72pt; text-indent:-72pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>1</P>
<P style="margin:0pt; padding-left:72pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>MD&amp;A 3<SUP>rd</SUP> Quarter 2004, dated November 12, 2004</P>
<P style="margin-top:0pt; margin-bottom:-14pt; padding-left:72pt; text-indent:-72pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>2</P>
<P style="margin:0pt; padding-left:72pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>&nbsp;3<SUP>rd</SUP> Quarter 2004 Audited Financial Statements</P>
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<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>SIGNATURES</B></P>
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<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
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<TABLE style="font-size:10pt" cellspacing=0><TR><TD valign=top width=289.2>&nbsp;</TD><TD valign=top width=349.2 colspan=2><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>DRC RESOURCES CORPORATION</B></P>
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<TR><TD valign=top width=289.2>&nbsp;</TD><TD valign=top width=349.2 colspan=2><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>(Registrant)</P>
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<TR><TD valign=top width=289.2>&nbsp;</TD><TD valign=top width=349.2 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=top width=289.2><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Date:&nbsp;&nbsp;February
    2, 2005</P>
</TD><TD valign=top width=48><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>By:</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=301.2><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B><I>&#147;Christopher J. Bradbrook&#148;</I></B></P>
</TD></TR>
<TR><TD valign=top width=289.2>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=301.2><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Christopher J. Bradbrook,</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>President and Chief Executive Officer</P>
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<P style="margin:0pt; line-height:27pt; font-family:Arial; font-size:25pt" align=center><B><I>DRC RESOURCES CORPORATION</I></B></P>
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<P style="margin:0pt; line-height:24pt; font-family:Arial; font-size:22pt" align=center><B><I>2004 </I></B></P>
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<P style="margin:0pt; line-height:24pt; font-family:Arial; font-size:22pt" align=center><B><I>THIRD QUARTER REPORT</I></B></P>
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<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt"><B><I>Content</I></B></P>
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  <li>
    <p style="line-height: 14pt; font-family: Symbol; font-size: 12pt; margin: 0pt"><FONT FACE="Arial"><B><I>Letter &nbsp;to Shareholders<br>
    </I></B></FONT></li>
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    <p style="margin:0pt; font-family:Arial; font-size:12pt"><FONT FACE="Arial"><B><I>Management Discussion and Analysis<br>
    </I></B></FONT></li>
  <li>
    <p style="margin:0pt; font-family:Arial; font-size:12pt"><FONT FACE="Arial"><B><I>Financial Statements
    (Unaudited) September 30, 2004<br>
    </I></B></FONT></li>
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<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt" align=center>&nbsp;</P>
<P style="line-height: 14pt; font-family: Arial; font-size: 12pt; border-top: 1 solid #000000; margin: 0pt" align=center><B><I>#601 - 595 Howe Street, Vancouver, B. C. &nbsp;V6C 2T5</I></B></P>
<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt" align=center><B><I>Telephone: (604) 687-1629 ~ Fax: (604) 687-2845</I></B></P>
<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt" align=center><B><I>E-mail address: drcresources@uniserve.com</I></B></P>
<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt" align=center><B><I>Website: drcresources.com</I></B></P>
<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt" align=center><B><I>TSX Symbol &#150; DRC</I></B></P>
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<P style="page-break-before:always; margin:0pt; line-height:20pt; font-family:Times New Roman; font-size:12pt"><B>To Our Shareholders:</B></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>It is a pleasure to be able to write my very first message to DRC Resources&#146; shareholders as President and CEO. &nbsp;During the 3<SUP>rd</SUP> quarter ended September 30, 2004 the Company made significant progress in several key areas.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Work continued towards finalizing all requirements to initiate the 2000 metre exploration decline at the Company&#146;s Afton copper-gold Project near
Kamloops, British Columbia. &nbsp;Subsequent to the end of the period we were pleased to be able to announce (on October 26, 2004) that mobilization of equipment and contractors had begun. &nbsp;The final contract for the exploration decline and ancillary underground development was awarded to Procon Mining and Tunnelling Ltd.
(Procon). &nbsp;Procon is a British Columbia-based mining contractor with extensive experience in underground mine development. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>This is an important step in the advancement of the project, as it will support the work required to complete a bankable feasibility study and conduct additional exploration work. &nbsp;Total costs for this work are expected to be approximately US$14.5 million. &nbsp;Definition diamond drilling, bulk sampling and technical studies will be carried out concurrently with development of the decline, and are designed to provide the information necessary to better define mineralization and to upgrade resources to the reserve category. &nbsp;The feasibility study will include commissioning an independent mine engineering consulting group to finalize a plan for placing the Afton Copper-Gold Project into production. &nbsp;</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>&nbsp;</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>In July we were pleased to announce the results of 6 diamond drill holes on the Company&#146;s 100% owned Ajax Property, located 10 km east of the Afton Property. &nbsp;This drilling indicated the presence of a large copper-gold system which was intersected over a strike length of approximately 400 meters and to a vertical depth of 300 meters below surface. &nbsp;The results of this work are particularly encouraging as they indicate mineralization continues much deeper than the base of the shallow pits where copper-gold ore was mined in the early 1990&#146;s.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>In August the Company&#146;s Form 20F Registration Statement filing was accepted by the United States Securities and Exchange Commission. &nbsp;This now allows the Company&#146;s shares to trade in the United States. &nbsp;The 20F Registration is an extremely important step in the evolution of DRC Resources, and an important tool to enable us to achieve our goal of realizing shareholder value and gives us access to the world&#146;s largest pool of investors. &nbsp;We continue to be excited about the prospects for the Company and look forward to articulating our enthusiasm to investors throughout North America.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>For the immediate future, DRC&#146;s main focus will continue to be the exploration and development of the Afton Copper-Gold Project. &nbsp;Specifically we look forward to making meaningful progress on the exploration decline and to begin delineation and exploration drilling in and near the mineralized zone. &nbsp;We will also be accelerating our investor relations effort throughout, Canada, the United States and Europe to introduce the Company and its investment potential to new investors.</P>
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<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>To date the Company has outlined a Measured and Indicated Mineral Resource of 68.7 Million Tonnes grading 1.68% Copper Equivalent or 2.61g/t Gold Equivalent (1.08% Cu, 0.85 g/t Au, 2.62 g/t Ag, 0.12 g/t Pd), which contains approximately 1.6 billion pounds of copper, and 1.9 million ounces of gold. &nbsp;A 2004 advanced scoping study completed by Behre Dolbear and Company Ltd., indicates that this project would have initial capital expenditures of US$120 million and (at conservative metal prices of US$0.85 per pound copper, and US$375 per ounce gold) when viewed as a primary copper mine, could potentially produce the metal at a cash (direct) operating cost of US$0.15 per pound of copper, and when viewed as a primary gold mine, could produce the metal at negative cash operating cost per ounce of gold. &nbsp;According to the British Columbia Ministry of Energy &amp; Mines, the Afton Proje
ct is the largest advanced exploration project in South Central B.C. &nbsp;The Company is also exploring its nearby, 100%-owned, Ajax and Pothook properties.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC is in excellent financial condition with cash of US$21 million and no debt. &nbsp;The company has only 13.7 million shares outstanding and 15.2 million shares fully diluted.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; padding-right:-18pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>On behalf of the Board of Directors, I would like to welcome our new shareholders and thank our long-term investors for their continued interest and support. &nbsp;Management will continue its best efforts to ensure that investor confidence in the Afton Project is rewarded.</P>
<P style="margin:0pt; padding-right:-18pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; padding-right:-18pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Chris Bradbrook</P>
<P style="margin:0pt; padding-right:-18pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">President &amp; CEO</P>
<P style="margin:0pt; padding-right:-18pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">November 12, 2004</P>
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<P style="page-break-before: always; line-height: 16pt; font-family: Times New Roman; font-size: 14pt; margin: 0pt" align=center><B><U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS </U></B></P>
<P style="font-family: Times New Roman; font-size: 14pt; margin: 0pt" align=center><BR></P>
<P style="font-family: Times New Roman; margin: 0pt" align=center><B><U>OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION AT SEPTEMBER 30, 2004</U></B></P>
<P style="font-family: Times New Roman; margin: 0pt" align=center><BR></P>
<P style="font-family: Times New Roman; margin: 0pt" align=center><B>&nbsp;<U>DATED NOVEMBER 12, 2004</U></B></P>
<P style="margin:0pt; text-indent:36pt; font-family:Times New Roman; font-size:14pt" align=justify><BR></P>
<P style="margin:0pt; text-indent:36pt; font-family:Times New Roman; font-size:14pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Management&#146;s Discussion and Analysis (&#147;MD&amp;A&#148;) of financial condition and results of operation of DRC Resources Corporation (&#147;the Company&#148; or &#147;DRC&#148;) for the third quarter ended September 30, 2004 should be read in conjunction with the Company&#146;s consolidated financial statements and corresponding notes for the period ending September 30, 2004. &nbsp;The focus of this discussion is on material changes and information relating to the current period and may exclude certain information disclosed in the previous period&#146;s discussion. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC prepares and files its consolidated financial statements and MD&amp;A in Canadian (&#147;CDN&#148;) dollars and in accordance with Canadian generally accepted accounting principles (&#147;GAAP&#148;).</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>&nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Overview</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC Resources Corporation with head office located in Vancouver, British Columbia, was incorporated in 1980. &nbsp;The Company is a development stage resource company engaged in the acquisition, evaluation, exploration and development of mineral interests. &nbsp;The Company&#146;s presently issued 13,691,766 million issued shares are listed on the Toronto Stock Exchange
(TSX symbol DRC). &nbsp;The Company&#146;s main project, the Afton Copper-Gold Project, and also the Ajax Project are located 10 kilometres west of
Kamloops, British Columbia. The Company also owns a mineral interest in Ontario which is being maintained with no further work program presently planned. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company&#146;s business is managed by directors and executives with professional backgrounds and many years experience in the mining industry, augmented by independent geological and mining professionals (qualified persons) retained to advise the Company on its main project.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>In evaluating the Company&#146;s financial condition and performance, management looks at DRC&#146;s relative position in the context of reporting mineral exploration companies in Canada. &nbsp;In that context, management sees the Company as emerging from junior to advanced exploration stage, in which its decision making capabilities will undergo more rigorous testing as DRC moves toward the development and production stages on its advanced Afton Copper-Gold Project. &nbsp;How effectively the Company meets the new issues and challenges will depend upon the management of priorities for the development of the Afton Copper-Gold Project. &nbsp;Management perceives the advancement of DRC&#146;s status as due to selection of highly qualified technical advisors, on-site attention of management to conduct exploration work, understanding of what constitutes a successful </P>
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<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>exploration attempt and careful cash management. &nbsp;All of those qualities must continue and be improved to meet the challenges of higher cost activities (underground vs. surface exploration). &nbsp;While a generally improved economic climate in the mining industry has greatly assisted in the money raising area, the main risks to achievement of objectives will be increased competition for both expert personnel and contract labour which is expected to result in a general increase in costs and, possibly, delay in getting jobs done. &nbsp;Hence, staffing and cost management are expected to be the main challenges to company stewardship in the near term.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Progress and Outlook</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>On August 23, 2004, the Company announced that its Form 20F Registration Statement filing was accepted by the United States Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934. &nbsp;The Registration Statement
(CIK #0000800166, File No. 1-31722), which allows the Company&#146;s shares to trade in the United States, can be viewed at <FONT COLOR=#0000FF><U>www.sec.gov.</U></FONT></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The 12(g) Registration and the Standard &amp; Poor&#146;s Investor Relations Program (<FONT COLOR=#0000FF><U>www.advisorinsight.com)</U></FONT> permits the introduction of DRC Resources Corporation and its Afton Copper-Gold Project to a large investor base, and raises the Company&#146;s profile within the North American investment community.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC Resources has changed the Auditors for the Company to comply with the financial filing requirements for United States registered companies. &nbsp;DeVisser Gray, a Vancouver-based Chartered Accounting firm registered under the Canadian Public Accountability Board
(CPAB) and the United States Public Company Accounting Oversite Board (PCAOB) has been appointed as the Company&#146;s Auditors.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>During the third quarter 2004 the Company focused on the design, budget requirements and personnel to implement a plan to excavate an underground exploration decline for the Afton Copper-Gold Project (&#147;Afton Project&#148;), located near
Kamloops, British Columbia. &nbsp;As a mineral exploration company, the future liquidity of DRC will be affected principally by the level of exploration expenditures and by its ability to raise capital through the equity markets. &nbsp;Completion of a $24.15 million financing at the beginning of November, 2003 put the Company in a cash position more than sufficient to fund planned exploration expenditures and meet ongoing obligations as they become due. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company is moving forward with its plan to advance the Afton Project through the feasibility stage by carrying out an underground exploration and development program as recommended in the February 2004 update of Behre Dolbear &amp; Company&#146;s advanced Scoping Study that included an economic evaluation of the Afton Project,
Kamloops, B.C in compliance with National Policy 43-101 (filed on SEDAR). </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
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<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Advanced Scoping Study confirmed that one of several possible mining methods had the potential for development of an underground bulk tonnage mining operation at Afton. &nbsp;The relevant project statistics are outlined below:</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size: 10pt" cellspacing=0 height="776"><TR><TD style="border: 0.5pt solid #000000" valign=top width=590.4 colspan=7 height="21"><P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B><font size="2">Afton Project Statistics</font></B></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="22"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Mineral Resource</font></P>
</TD><TD valign=top width=167.467 height="22"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Measured and Indicated<SUP>1</SUP></font></P>
</TD><TD valign=top width=143.6 colspan=2 align="right" height="22"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">68,700,000 tonnes</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=88 align="right" height="22"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">1.68% Cu <SUB>Eq</SUB></font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="21">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=167.467 height="21"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Inferred Resource</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=143.6 colspan=2 align="right" height="21"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">7,450,000 tonnes</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=88 align="right" height="21"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">1.61% Cu <SUB>Eq</SUB> </font> </P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="20"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Mineral Resource Within the</font> </P>
</TD><TD valign=top width=167.467 height="20"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Measured and Indicated</font></P>
</TD><TD valign=top width=143.6 colspan=2 align="right" height="20"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">46,983,000 tonnes</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=88 align="right" height="20"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">1.72% Cu <SUB>Eq</SUB></font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Proposed Mine Plan</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=167.467 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Inferred Resource</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=143.6 colspan=2 align="right" height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">4,543,000 tonnes</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=88 align="right" height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">1.72% Cu <SUB>Eq</SUB></font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="54"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Total Resource Material to be Recovered by the Mine Plan</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=167.467 height="54"><P style="font-family: Times New Roman; font-size: 11pt; line-height: 14pt; margin: 0pt" align=justify><font size="2"><BR></font></P>
<P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">All Categories<SUP>2</SUP></font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=143.6 colspan=2 align="right" height="54"><P style="font-family: Times New Roman; font-size: 11pt; line-height: 14pt; margin: 0pt"><font size="2"><BR></font></P>
<P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">51,526,000 tonnes</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=88 align="right" height="54"><P style="font-family: Times New Roman; font-size: 11pt; line-height: 14pt; margin: 0pt"><font size="2"><BR></font></P>
<P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">1.72% Cu <SUB>Eq</SUB></font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Metallurgical Recovery</font></P>
</TD><TD valign=top width=167.467 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Copper</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=231.6 colspan=3 align="right" height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">90%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=167.467 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Gold</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=231.6 colspan=3 align="right" height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">90%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=167.467 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Silver</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=231.6 colspan=3 align="right" height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">75%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=167.467 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Palladium</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=231.6 colspan=3 align="right" height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt"><font size="2">74%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Mining Method</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=399.067 colspan=4 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">Underground Panel (Block) Caving</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=382.933 colspan=5 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Production Rate (Mine &amp; Mill)</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">9,000 tonnes per day</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Mine Life</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">17.8 years</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Average Annual Production</font></P>
</TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Copper</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">29,350 &nbsp;tonnes</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Gold</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">71,000 ounces</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Silver</font> </P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">178,100 ounces</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Palladium</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">7,700 ounces</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="21"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Initial Capital Cost<SUP>3</SUP></font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="21">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="21"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$140,034,000</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=382.933 colspan=5 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Working Capital and Initial Inventory</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$9,700,000</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">On-going Capital</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$191,351,000</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Unit Operating Cost</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">(at full production)</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$9.77/tonne milled</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Net Present Value</font></P>
</TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">0%</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$418,206,437</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">5%</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$203,578,770</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">7.5%</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$140,373,936</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">10%</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">$94,306,153</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Internal Rate of Return</font></P>
</TD><TD valign=top width=191.6 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">(pre-tax)</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="19"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">26.68%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">(after tax)</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">19.94%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=191.333 colspan=3 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=justify><font size="2">Payback Period</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=191.6 colspan=2 height="18">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=207.467 colspan=2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 11pt; margin: 0pt" align=right><font size="2">3.7 years</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=64.8 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Notes:</font></P>
</TD><TD valign=top width=64.2 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">1</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="18"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">Afton Main Zone Only (@ 0.7% Cu <SUB>Eq</SUB> cut-off grade)</font> </P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000" valign=top width=64.8 height="16">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD valign=top width=64.2 height="16"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">2</font></P>
</TD><TD style="border-right: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="16"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">See Note on Page 17, Section 3.0</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=64.8 height="17">
    <p style="line-height: 14pt"><font size="2">&nbsp;</font></p>
  </TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=64.2 height="17"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">3</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="17"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">Currency used throughout is $Canadian</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=64.8 height="28"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Metal</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=64.2 height="28"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Price &nbsp;Used US$)</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="28"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">Recovery</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=64.8 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Copper</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=64.2 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">$0.85/lb.</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">90%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=64.8 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Gold</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=64.2 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">$375/oz.</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">90%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=64.8 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Silver</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=64.2 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">$5.25/oz.</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">75%</font></P>
</TD></TR>
<TR><TD style="border-left: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=64.8 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">Palladium</font></P>
</TD><TD style="border-bottom: 0.5pt solid #000000" valign=top width=64.2 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt" align=justify><font size="2">$200/oz.</font></P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 0.5pt solid #000000" valign=top width=461.4 colspan=5 height="15"><P style="line-height: 14pt; font-family: Times New Roman; font-size: 8pt; margin: 0pt"><font size="2">74%</font></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0pt; text-indent:36pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Significant additional expenditure will be required to establish that development of the Afton Project is feasible as a large high-grade copper-gold mine. &nbsp;Rising copper demand and prices have increased interest in advanced projects such as the Afton and are expected to make production financing obtainable.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC employs a comprehensive QA/QC program including the use of standards and internal and external check samples. &nbsp;Behre Dolbear has reviewed the QA/QC program and is of the opinion that it meets or exceeds industry standards. &nbsp;Industry-accepted </P>
<BR>
<BR>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<BR>
<BR>
<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>methods were used for grade estimation using ordinary kriging (a method of determining a weighted average in such a way that the geostatistical estimation variance of the weighted average is minimized). &nbsp;The assays were composited into 10 metre down-hole composites. &nbsp;Reasonableness of grade interpolation was reviewed by visual inspection of sections displaying block model grades, drill-hole composites and geology with good agreement being observed. &nbsp;In accordance with National Instrument 43-101, both the updated Mineral Resource Study and the updated advanced Scoping Study were filed on SEDAR.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>The resources developed by DRC Resources are not reserves and, until such time as resources are proven to be reserves, there is a risk that the Company may not achieve ongoing operations from which it may derive significant income. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company has held and is continuing discussions with senior members of the mining and minerals processing industries with the objective of moving the Afton Project through the feasibility stage to production. &nbsp;The Company is in process of confidential discussions concerning production financing with a number of mining companies, smelters and financial institutions.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Michael W.P. Hibbitts, Vice President of Exploration &amp; Development, a qualified person, has been charged with responsibility for managing the design, implementation and supervision of the underground exploration program to advance the Afton Project through the feasibility stage. &nbsp;In June, 2004 the Company invited 5 major Canadian mining contract companies to tender for excavation of a 2000 metre decline (tunnel) and Ancillary Underground Development for the Afton Copper-Gold Project. &nbsp;The main purpose of the decline is to provide underground access for the definition diamond drill program, bulk sampling and technical studies, which will be carried on concurrently with development of the decline, in order to complete the Afton Feasibility Study. &nbsp;</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>&nbsp;</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Subsequent to the end of the third quarter the Company awarded the contract for the Exploration Decline and Ancillary Underground Development for the Afton Copper-Gold Project to Procon Mining &amp; Tunnelling Ltd., a Canadian mining contractor with its head office in British Columbia, with over 10 years of experience in underground mine development. &nbsp;Its corporate clients include major Canadian and international mining companies. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Mobilization for the excavation of the Afton Exploration Decline is scheduled to begin in early November, 2004. &nbsp;All development work is scheduled to be completed by November 15, 2005. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Selected Quarterly Information</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The selected financial data appearing below for the third quarter ending September 30, 2004, 2003, and 2002 are set forth in Canadian dollars and extracted from the Consolidated Financial Statements (filed on SEDAR). </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<BR>
<BR>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<BR>
<BR>
<P style="page-break-before:always; margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC&#146;s financial statements are prepared in accordance with generally accepted accounting principles
(GAAP) that apply in Canada. &nbsp;The selected financial data appearing in the first table below is presented in accordance with Canadian &nbsp;GAAP and should be read in conjunction with, and is qualified in its entirety by reference to DRC Resources&#146; audited Consolidated Financial Statements. </P>
<P style="margin-top:0pt; margin-bottom:4pt; font-family:Times New Roman; font-size:8pt" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="background-color:#DFDFDF; border:0.5pt solid #000000" valign=top width=216>&nbsp;</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Quarter Ended September 30, 2004</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Quarter Ended</B></P>
<P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>September 30, 2003</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; padding-right:-19.25pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Quarter Ended </B></P>
<P style="margin:0pt; padding-right:-19.25pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>September 30, 2002</B></P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Operating Revenue</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>85,525</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>21,496</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>30,085</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:3pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Net Income (Loss)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:3pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(146,626)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:3pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(105,943)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:3pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(62,734)</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Income (Loss) per Share</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(0.01)</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Total Assets</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; padding-right:-0.55pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>30,729,760</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>6,098,807</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>6,773,988</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Net Assets</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>29,697,423</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>5,876,397</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>6,507,589</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Deferred Income Taxes</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>892,880</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>206,266</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>183,537</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Cash Dividends per share</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>Nil</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>Nil</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>Nil</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Deficit</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(3,075,938)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(2,161,588)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>(1,652,298)</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Capital Stock</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>32,773,361</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>8,037,985</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>8,159,887</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216><P style="margin-top:3pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt">Weighted Average Number of Shares</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:6pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>13,356,110</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:6pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>9,197,028</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:6pt; margin-bottom:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=right>8,771,266</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>During the third quarter of 2004, $1,368,000 was received by the Company for the exercise of 455,000 stock options. &nbsp;With approximately $26 million in cash assets, DRC currently has sufficient funds to meet its obligations and to carry out its exploration plans for at least the next 24 months. &nbsp;There is no assurance that DRC will in the future be able to obtain all the financing it requires on acceptable terms and conditions, or at all. &nbsp;The only sources of future funds presently available to DRC are the sale of equity capital or the offering of an interest in its properties to be earned by another person or firm carrying out further exploration or development of the properties. </P>
<P style="margin:0pt; text-indent:72pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Operating Results</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>During the third quarter 2004 the main focus of the Company has been the final engineering design for the underground workings and tendering the underground exploration decline for the Afton Project in Kamloops, B.C. as described in the Progress and Outlook section above. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company has expended over $5.5 million on the Afton Project exploration program to date which includes, but is not limited to, the cost of an economic evaluation by the Company&#146;s mine engineering consultants, Behre Dolbear &amp; Company Ltd., metallurgical test work, geophysical surveys, upgrading access roads, and the surface diamond drill exploration program consisting of 109 diamond drill holes for a total of 53,000 metres (175,000 ft).</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<BR>
<BR>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<BR>
<BR>
<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The advanced Scoping Study on the Afton Main Mineral Zone prepared by Behre Dolbear and Company Ltd., is based on a Mineral Resource (all categories) of 76 million tonnes and indicates that panel cave mining and conventional flotation technology are viable methods of application for mining and processing of 51.5 Million Tonnes of the Mineral Resource. &nbsp;The Study indicates an estimated life of mine cash operating cost of US$0.15 per pound of copper and a total operating cost of less than US$0.40 per pound of copper, both costs being net of precious metal credits. &nbsp;A copper price of US$0.85 per pound was used in the economic calculation for this study. &nbsp;Persistence of the current robust metals market, in which copper prices have exceeded US$1.20 per pound, would enhance the economic potential of the Afton Project. &nbsp;&nbsp;The Company is proceeding directly to the feasi
bility stage and implementing the final design of the underground workings. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The present estimate of $17,952,000 (including a 30% contingency) for exploration and development costs over the next 18 months through feasibility compares closely with the scoping study by the Company&#146;s principal project consultant, Behre Dolbear &amp; Company Ltd. ($17,748,000 without contingencies), to cover all required underground development, diamond drilling, standby consulting professionals and the internal administrative, planning and supervisory group costs. &nbsp;Recent reviews and engineering recommendations for changes to the underground exploration program indicate a potential for reducing overall costs by some 20%. &nbsp;The change involves reducing the length of the decline and placement in a more advantageous location for the underground exploration program. &nbsp;A $12 million exploration expenditures program is budgeted for the next 12 months.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company invited tenders for the decline construction contract in late second quarter and, subsequent to the end of the third quarter, awarded the contract to Procon Mining &amp; Tunnelling Ltd. (as described in the Progress and Outlook section above). </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>This program will be funded out of available working capital. &nbsp;It is expected that budgeted costs may be modified and adjusted downward to reflect the exact method of underground development implemented. </P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC&#146;s exploration program in 2004 is also designed to test several other areas of the Afton Project property, the Pothook and Ajax mineral zones by surface diamond drilling where indicated. &nbsp;The exploration programs will be paid for out of working capital.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC Resources completed 6 diamond drill holes on the Company&#146;s 100% owned Ajax Property, located 10 km east of the Afton Property,
Kamloops, B.C. &nbsp;The purpose of the diamond drill program was to test for sulphide mineralization between the two Ajax open pits and below the previously mined depths. &nbsp;Drilling intersected a large near surface copper sulphide system with an associated gold credit between and deeper than the previously mined Ajax East and Ajax West pits. &nbsp;The Ajax Property, consisting of 77 mineral claims, covering 4500 acres, is connected by an existing 10 km mine haulage road to the Afton Copper-Gold Property to the west. &nbsp;(For drill holes location, refer to maps on Company&#146;s website: &nbsp;<FONT COLOR=#0000FF><U>www.drcresources.com)</U></FONT></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:11pt" align=justify><BR></P>
<BR>
<BR>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<BR>
<BR>
<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The results of the exploration program represent a significant departure from the shallow surface pits where the copper-gold ore was mined by the previous operator in the early nineteen nineties. The exploration drill program has outlined copper-gold mineralization with an interpreted vertical depth of 300 metres below surface and with an apparent thickness of 400 metres, which is consistent with the zone mined in the two open pits. &nbsp;Three of the six drill holes were drilled over a strike length of approximately 400 metres. &nbsp;Three drill holes completed to the northwest of the Ajax East and West pits did not intersect the mineralized zone as the holes were collared too far in the foot wall of the zone. &nbsp;</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Ajax East and West pits have been described as porphyry deposits in geological publications. &nbsp;The Company is encouraged by the size and depth of the system and intends to continue to explore for a higher grade core. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:11pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Significant assay results for three drill holes intersecting the mineral zone over a length of 400 metres and to a depth of 300 metres below surface are as follows:</P>
<P style="margin-top:11pt; margin-bottom:2.75pt; line-height:13pt; font-family:Times New Roman; font-size:11pt" align=center><B><U>ASSAY INTERSECTIONS FOR AX-01 @ -55</U></B><FONT FACE="Symbol"><B><U>&#176;</U></B></FONT><B><U>/121</U></B><FONT FACE="Symbol"><B><U>&#176;</U></B></FONT></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="border-bottom:1.5pt solid #000000" valign=top width=120><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Core Length (m)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=80.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Depth (m)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Copper (%)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Gold (g/t)</B></P>
</TD></TR>
<TR><TD valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>51</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267><P style="margin:0pt; padding-right:-9.85pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>75-126</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.232</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.145</B></P>
</TD></TR>
<TR><TD valign=top width=120>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD></TR>
<TR><TD valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>121</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>156-277</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.240</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.169</B></P>
</TD></TR>
<TR><TD valign=top width=120>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD></TR>
<TR><TD valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>63</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>307-370</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.362</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.165</B></P>
</TD></TR>
<TR><TD valign=top width=120>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>31.2</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=80.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>421-452.2</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.249</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.126</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin-top:11pt; margin-bottom:2.75pt; line-height:13pt; font-family:Times New Roman; font-size:11pt" align=center><B><U>ASSAY INTERSECTIONS FOR AX-02 @ -52</U></B><FONT FACE="Symbol"><B><U>&#176;</U></B></FONT><B><U>/120</U></B><FONT FACE="Symbol"><B><U>&#176;</U></B></FONT></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="border-bottom:1.5pt solid #000000" valign=top width=120><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Core Length (m)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=80.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Depth (m)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Copper (%)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Gold (g/t)</B></P>
</TD></TR>
<TR><TD valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>194</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267><P style="margin:0pt; padding-right:-9.85pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>26-220</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.223</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.141</B></P>
</TD></TR>
<TR><TD valign=top width=120>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>123</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=80.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>277-400</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.221</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.082</B></P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin-top:11pt; margin-bottom:2.75pt; line-height:13pt; font-family:Times New Roman; font-size:11pt" align=center><B><U>ASSAY INTERSECTION FOR AX-04 @ -55</U></B><FONT FACE="Symbol"><B><U>&#176;</U></B></FONT><B><U>/120</U></B><FONT FACE="Symbol"><B><U>&#176;</U></B></FONT></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="border-bottom:1.5pt solid #000000" valign=top width=120><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Core Length (m)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=80.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Depth (m)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Copper (%)</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=92.267><P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>Gold (g/t)</B></P>
</TD></TR>
<TR><TD valign=top width=120><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>278</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=80.267><P style="margin:0pt; padding-right:-9.85pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>27-305</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.233</B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD><TD valign=top width=92.267><P style="margin:0pt; line-height:13pt; font-family:Times New Roman; font-size:11pt"><B>0.159</B></P>
</TD></TR>
</TABLE>
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<P style="margin:0pt; font-family:Times New Roman; font-size:11pt"><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Note: &nbsp;Certain technical reports outlining the above have been filed on
SEDAR. &nbsp;A direct link to SEDAR may be found on the Company&#146;s website: <FONT COLOR=#0000FF><U>www.drcresources.com.</U></FONT></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<BR>
<BR>
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<BR>
<BR>
<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Summary of Quarterly Information</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>The selected financial data appearing below for the last completed 8 quarterly periods beginning December 31, 2002 and ending September 30, 2004 are set forth in Canadian dollars and extracted from the audited and interim Consolidated Financial Statements (filed on SEDAR). </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC&#146;s financial statements are prepared in accordance with generally accepted accounting principles
(GAAP) that apply in Canada. &nbsp;The selected financial data appearing in the first table below is presented in accordance with Canadian
GAAP. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>The following selected financial data should be read in conjunction with, and is qualified in its entirety by reference to DRC&#146;s audited and interim Consolidated Financial Statements. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>The Afton and Ajax exploration programs are the only significant expenditures in progress. &nbsp;All exploration has been funded by external financing through issue of securities of DRC. &nbsp;The Company has no current ongoing mining operations. &nbsp;Income is derived solely from interest on available working capital that is earmarked for expenditure in exploration and development. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>Foreign currency fluctuations had a very limited negative effect on DRC other income and expenses. &nbsp;It should be noted that forecasts of revenues described in the Scoping Study on the Afton project could be negatively impacted by a rising Canadian dollar (or devaluing US dollar), since all such future concentrate product sales would be conducted in US currency, while production costs would be incurred in Canadian dollars. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify>For purposes of illustrating management explanation and discussion of the Company&#146;s financial condition and results of operations, please refer to the following table of comparative selected quarterly financial information.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="background-color:#DFDFDF; border:0.5pt solid #000000" valign=top width=120><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Quarter Ending </B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Sep 30</B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2004</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>June &nbsp;30</B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2004</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=60><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Mar 31</B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2004</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Dec 31 </B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2003</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Sep 30</B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>&nbsp;2003</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>June 30 </B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2003</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Mar 31 </B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2003</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>Dec 31 </B></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><B>2002</B></P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:2.5pt; margin-bottom:0pt; font-family:Times New Roman">Net Operating Revenue (Loss)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>85,525</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>199,034</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=60><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>171,306</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>108,482</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>21,613</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(8,747)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(4,615)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>114,260</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; font-family:Times New Roman">(Loss) &nbsp;Before Taxes </P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(140,903)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(18,310)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=60><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>71,505</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(415,702)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(70,410)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(141,907)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(103,856)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(368,551)</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; font-family:Times New Roman">&nbsp;(Loss) per Share</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=60><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.04)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.02)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.04)</P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin:0pt; font-family:Times New Roman">Net Income(Loss) </P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(146,126)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(20,442)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=60><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>62,395</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(1,218,371)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(105,943)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(182,930)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(119,800)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(185,907) </P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=120><P style="margin-top:2.5pt; margin-bottom:0pt; font-family:Times New Roman">&nbsp;(Loss) per Share</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=60><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.13)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.02)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.01)</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=72><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=right>(0.02)</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin-top:0pt; margin-bottom:6pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Liquidity &amp; Capital Resources</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B><I>Working Capital</I></B> <B><I>at Quarter-end</I></B> </P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>DRC Resources had working capital of $26,186,696, $3,480,065 and $3,467,864 and no debt at September 30th in, respectively, the years 2004, 2003 and 2002. &nbsp;Net equity financings of $4,904,120 in 2000, $1,935,515 in 2002 and $22,500,250 in 2003 were the principal sources of working capital.</P>
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<P style="page-break-before:always; margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>During the third quarter 2004 interest income, a small oil and gas royalty and foreign exchange gains (loss) provided for approximately 37.71% of the Company&#146;s administrative costs. &nbsp;In the same period in 2003 and 2002 interest and royalty income provided for, respectively, approximately 14.09% and 22.54% of the Company&#146;s administrative costs. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>In 2000 DRC Resources&#146; working capital increased significantly due to funding provided by a $5 million Special Warrants Private Placement Offering, which put the Company in a position to make a commitment to a large exploration program on its Afton Copper-Gold Project. &nbsp;In 2002 a $2.1 million private placement of flow-through shares was added to exploration funding and in 2003 a $24.15 million private place of common shares significantly increased the working capital.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Interest income on its working capital combined with a favourable exploration cost experience on the Afton Copper-Gold Project leave DRC with working capital adequate to meet its administrative costs and property maintenance programs through the year 2005. &nbsp;DRC&#146;s working capital is sufficient to meet all its present requirements as an exploration company. &nbsp;In order to be in a position to move to the development stage of its Afton Copper-Gold Project, DRC realized that it would be expected to raise as much as 10% of the expected capital requirement of about $140 million, in order to attract an institutional lender or mine financing partner, such as a smelter, to the project. &nbsp;The $24.15 million financing in November 2003 achieved this objective, with the result that the Company is now engaged in discussions concerning project financing, project participation and concentrate sales arrangements
 with a number of mining companies, international smelters and financial institutions that have expressed an interest in the Afton Copper-Gold Project.</P>
<P style="margin-top:5pt; margin-bottom:5pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B><I>Contractual Obligation for Acquisition of the Afton Copper-Gold Property</I></B></P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>By Option to Purchase Agreement (&#147;the Option&#148;) dated September 22, 1999, DRC Resources acquired the exclusive right for 90 days to purchase a 100% undivided working interest in the Afton 1 &#150; 11, incl. mineral claims, Record Nos. 372023 &#150; 372026 incl. and 372641 &#150; 372647 incl. (the &#147;Original Claims&#148;) as to 50% from Westridge Enterprises Ltd., a non-reporting British Columbia company wholly owned by John H.
Kruzick, a director, the President and CEO of the Company at that time, and as to 50% from Indo-Gold Development Ltd., a non-reporting British Columbia company owned by John Ball, a geologist. &nbsp;The Option provided for consideration to be a 10% Net Profit Royalty to and a property management agreement with the
optionors, with exercise to be by carrying out exploration work and paying Common Shares of DRC Resources as follows:</P>
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<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="background-color:#DFDFDF; border-left:2pt double #000000; border-top:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=162><P style="margin-top:2.5pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>Due Date</B><FONT FACE="Times New Roman Bold"><B><SUP>(1)</SUP></B></FONT></P>
</TD><TD style="background-color:#DFDFDF; border-top:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="background-color:#DFDFDF; border-left:0.5pt solid #000000; border-top:2pt double #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin-top:2.5pt; margin-bottom:2.5pt; font-family:Times New Roman" align=center><B><I>Option Payment</I></B></P>
</TD><TD style="background-color:#DFDFDF; border-top:2pt double #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin-top:2.5pt; margin-bottom:0pt; font-family:Times New Roman"><B>Status</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:2pt double #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin-top:2.5pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>Exploration ($)</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:2pt double #000000; border-right:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin-top:2.5pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>Status</B></P>
</TD></TR>
<TR><TD style="border-left:2pt double #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman">On regulatory approval </P>
</TD><TD valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=right>1,000,000 Shares</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>Paid</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right><BR></P>
</TD><TD style="border-right:2pt double #000000" valign=top width=78>&nbsp;</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 1 &nbsp;(2000)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>-</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>400,000 </P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Performed</P>
</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 2 &nbsp;(2001)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>200,000 Shares</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Paid</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>600,000</P>
</TD><TD style="border-right:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Performed</P>
</TD></TR>
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<div align="center">
  <center>
<TABLE style="page-break-before:always; font-size:10pt" cellspacing=0><TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000" valign=top width=162><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify>Year 3 &nbsp;(2002)</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>200,000 Shares</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Paid</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>1,000,000</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Performed</P>
</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 4 &nbsp;(2003)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>200,000 Shares</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Paid</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>1,000,000</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=center>Performed</P>
</TD></TR>
<TR><TD style="border-left:2pt double #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 5 &nbsp;(2004)</P>
</TD><TD valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>200,000 Shares</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>1,000,000</P>
</TD><TD style="border-right:2pt double #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=right>Performed</P>
</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 6 &nbsp;(2005)</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>200,000 Shares</P>
</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>1,000,000</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000" valign=top width=78><P style="margin:0pt; font-family:Times New Roman" align=right>Performed</P>
</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 7 &nbsp;(2006)</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>500,000</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000" valign=top width=78>&nbsp;</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 8 &nbsp;(2007)</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>500,000</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000" valign=top width=78>&nbsp;</TD></TR>
<TR><TD style="border-left:2pt double #000000; border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">Year 9 &nbsp;(2008)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=18>&nbsp;</TD><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=132>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>500,000</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:2pt double #000000; border-bottom:0.5pt solid #000000" valign=top width=78>&nbsp;</TD></TR>
<TR><TD style="border-left: 2pt double #000000; border-bottom: 3 double #000000" valign=top width=162><P style="margin:0pt; font-family:Times New Roman">TOTALS</P>
</TD><TD valign=top width=18 style="border-bottom: 3 double #000000">&nbsp;</TD><TD style="border-left: 0.5pt solid #000000; border-right: 0.5pt solid #000000; border-bottom: 3 double #000000" valign=top width=132><P style="margin:0pt; font-family:Times New Roman" align=right>2,000,000 Shares</P>
</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 3 double #000000" valign=top width=78>&nbsp;</TD><TD style="border-right: 0.5pt solid #000000; border-bottom: 3 double #000000" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=right>6,500,000</P>
</TD><TD style="border-right: 2pt double #000000; border-bottom: 3 double #000000" valign=top width=78>&nbsp;</TD></TR>
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<P style="margin:0pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:-12pt; font-family:Times New Roman" align=justify><I>Note: </I>(1) </P>
<P style="margin:0pt; text-indent:49.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>The initial option payment was due and paid following acceptance of the filing of the Formal Option by the then governing regulatory body, the Canadian Venture Exchange. &nbsp;Subsequent option payments are due to be paid in full on or before the anniversary of the Due Date on November 10<SUP>th</SUP> in all future years unless otherwise agreed upon by both parties.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B><I>Contractual Obligation for the Development of the Afton Copper-Gold Project</I></B></P>
<P style="margin-top:5pt; margin-bottom:5pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company entered into a consulting services agreement with Mr. Michael W.P. Hibbitts, Vice President of Exploration and Development on March 22, 2004. &nbsp;The terms of the contract are as follows:</P>
<ul>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Term: &nbsp;Month to Month.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Cash compensation: a base retainer fee $11,000 per month served. </FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Stock Options: &nbsp;He was granted options to purchase 100,000 common share at an exercise price of $6.50 in accordance with
    DRC Resources&#146; Stock Option Plan.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Expenses: &nbsp;He will be reimbursed all reasonable out-of-pocket expenses incurred by him in carrying out his duties </FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Bonus: &nbsp;He will be paid a cash payment of $18,000 upon performing the services and completing the feasibility study on the Afton Project according to the agreed timeline.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Transportation: &nbsp;He will be provided with a truck for use on and in connection with the Afton Project</FONT></li>
</ul>
<P style="margin-top:5pt; margin-bottom:5pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Other than relatively nominal property maintenance costs on projects does not have any other commitments for material expenditures in either the near or long term. &nbsp;</P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company&#146;s source of liquidity is its cash and cash equivalents. &nbsp;However, this is supplemented by interest earned and these sources of cash are considered sufficient to meet near-term financial requirements.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Off-Balance Sheet Arrangements</B></P>
<P style="margin-top:0pt; margin-bottom:6pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The Company has service contracts with two persons who are directors and/or members of administrative, supervisory or management bodies.</P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Since founding DRC Resources, John H. Kruzick has provided the Company&#146;s direction and management as a consultant through a private company, Westridge Enterprises Ltd., controlled by him and paid on a per diem services basis with reimbursed for out-of-pocket expenses. &nbsp;By Services Agreement made and approved April 23, 2003 and amended October 13, 2004 by the Board of Directors, John H. Kruzick&#146;s engagement as </P>
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<P style="page-break-before:always; margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Chairman of the Board was formalized on a retainer basis on the following terms and conditions:</P>
<ul>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Term: &nbsp;Five years commencing April 2003 through March 2007.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Cash compensation: He was paid a base retainer fee $500 per day served during year 2003 (beginning in April, 2003). The base retainer fee is to be increased annually as deemed appropriate for services performed subject to approval by a majority of the board of directors.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Director&#146;s Fees: &nbsp;As member of the Board of Directors he is to be entitled to any approved directors&#146; fees.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Retainer during Illness: &nbsp;He will be paid the per diem fee on the basis of 20 days per month for up to six months from the date when any illness renders him unable to fulfill his duties.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Benefits During Illness: &nbsp;he will receive benefits other than contract fees for up to 2 years after any illness renders him unable to fulfill his duties.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Stock Options: &nbsp;He may be granted options to purchase its stock in accordance with DRC Resources&#146; Stock Option Plan.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Expenses: &nbsp;He will be reimbursed all reasonable out-of-pocket expenses incurred by him in carrying out his duties.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination: &nbsp;The Board of Directors may terminate Kruzick&#146;s employment at any time, with or without cause.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination by Company Without Cause: &nbsp;If his services are terminated without cause, Mr. Kruzick will receive accrued service fees and a lump sum payment equal to the average monthly fee paid for the previous year times the number years he has been with the Company.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination Without Cause by
    Kruzick: &nbsp;If Mr. Kruzick terminates his employment without cause prior to the expiration of the Agreement, he will be paid all accrued, but unpaid fees and expenses.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination With Cause by DRC Resources: &nbsp;If Mr. Kruzick&#146;s employment is terminated by DRC Resources for cause, other than moral turpitude or dishonesty on Kruzick&#146;s part, prior to the expiration of this Agreement, he will be paid a lump sum severance payment equal to the compensation of one month of service fees for each year of past contract services rendered (based on the average monthly fee paid for the previous year), together with any accrued, but unpaid expenses</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Reporting: &nbsp;Mr. Kruzick is to be a permanent member and chairman of the Executive Committee, report to the Board of Directors at regular quarterly Board meetings and at the annual general meeting of DRC Resources and otherwise be accountable to the Board of Directors.</FONT></li>
</ul>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Since May 12, 1981, Sharon L. Ross has provided the Company with secretarial and office administrative services as a consultant through a private company, Allshare Holdings Ltd., controlled by her and paid on a per diem services basis with reimbursed for out-of-pocket expenses. &nbsp;By Services Agreement made and approved April 23, 2003 </P>
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<P style="page-break-before:always; margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>by the Board of Directors, Sharon L. Ross&#146; engagement as Corporate Secretary to perform the duties customary to that position was formalized on the following terms and conditions:</P>
<ul>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Term: &nbsp;Five years commencing April 2003 through March 2007.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Cash compensation: She was paid a base fee of $35 per hour served during year 2003 (beginning in April, 2003), The base fee is to be increased annually as deemed appropriate for services performed subject to approval by a majority of the board of directors.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Director&#146;s Fees: As member of the Board of Directors she is to be entitled to any approved directors&#146; fees.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Retainer during Illness: &nbsp;Mrs. Ross will be paid the per diem fee on the basis of 128 hours per month for up to six months from the date when any illness renders her unable to fulfill her duties.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Benefits During Illness: &nbsp;She will receive benefits other than contract fees for up to 2 years after any illness renders her unable to fulfill her duties.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Stock Options: &nbsp;She may be granted options to purchase its stock in accordance with DRC&#146;s Stock Option Plan.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Expenses: &nbsp;She will be reimbursed all reasonable out-of-pocket expenses incurred by her in carrying out her duties.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination: &nbsp;the Board of Directors may terminate Mrs. Ross&#146; engagement at any time, with or without cause.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination by Company Without Cause: &nbsp;If her services are terminated without cause, Mrs. Ross will receive accrued service fees and a lump sum payment equal to the average monthly fee paid for the previous year times the number years she has been with the Company.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination Without Cause by Ross: &nbsp;If Mrs. Ross terminates her engagement without cause prior to the expiration of the Agreement, she will be paid all accrued, but unpaid fees and expenses.</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin-top: 0pt; margin-bottom: 6pt" align="justify"><FONT FACE="Times New Roman">Termination With Cause by DRC Resources: &nbsp;If Mrs. Ross&#146; engagement is terminated by DRC Resources for cause, other than moral turpitude or dishonesty on her part, prior to the expiration of the Agreement, she will be paid a lump sum severance payment equal to the compensation of one month of service fees for each year of past contract services rendered (based on the average monthly fee paid for the previous year), together with any accrued, but unpaid expenses</FONT></li>
  <li>
    <p style="line-height: 13.6pt; font-family: Symbol; font-size: 12pt; margin: 0pt" align="justify"><FONT FACE="Times New Roman">Function and Reporting: &nbsp;Mrs. Ross reports to the President, is to be a member and act as secretary of the Executive Committee of the Board of Directors, is to consult with the Executive Committee, as required, in respect of extraordinary matters arising in the course of day-to-day business and be accountable to the Board of Directors.</FONT></li>
</ul>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<BR>
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<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
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<P style="page-break-before:always; margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt"><B>Related Party Transactions</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>During the quarter ending September 30, 2004, the Company paid $17,731 compared to $15,886 in the same period of 2003, for secretarial and accounting services invoiced by Allshare Holdings Ltd., a private company in which a director has a 50% interest. &nbsp;During the quarter ending September 30, 2004 the Company paid $39,750 compared to $36,000 in the same period of 2003 for consulting and deferred exploration costs invoiced by Westridge Enterprises Ltd., a private company owned by a director of the Company. &nbsp;A related person of the President was paid $21,600 for consulting services during the quarter ending September 30, 2004 compared to $15,875 for the same period in 2003. &nbsp;An officer of the Company was paid $ 35,060 for the quarter ended September 30, 2004 for consulting services for exploration and development of the Company&#146;s mineral projects. </P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Risks</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Mineral exploration is a high risk business and there is no assurance that economic mineral deposits will be found on any of DRC&#146;s mineral interests. &nbsp;Positive surface indications and drill results are no guarantee that an economic mineral deposit exists at depth. &nbsp;Fluctuating mineral commodity prices and exchange rates may adversely affect the economics of a mineral deposit. &nbsp;Financial markets can sometimes be negative toward junior exploration companies. &nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:12.3pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Capital</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>The information below relating to the capital structure of the Company is at October 26, 2004.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Authorized share capital: &nbsp;&nbsp;40,000,000 common shares without par value </P>
<P style="margin-top:6pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Issued and outstanding: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,691,766 common shares without par value</P>
<P style="margin-top:0pt; margin-bottom:6pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>Incentive Stock Options Outstanding:</P>
<div align="center">
  <center>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD style="background-color:#DFDFDF; border:1pt solid #000000" valign=top width=208><P style="margin:0pt; line-height:6pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>Number of Options</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:1pt solid #000000; border-right:1pt solid #000000; border-bottom:1pt solid #000000" valign=top width=208><P style="margin:0pt; line-height:6pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>Exercise Price</B></P>
</TD><TD style="background-color:#DFDFDF; border-top:1pt solid #000000; border-right:1pt solid #000000; border-bottom:1pt solid #000000" valign=top width=208><P style="margin:0pt; line-height:6pt; font-family:Times New Roman; font-size:12pt"><BR></P>
<P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center><B>Expiry Date</B></P>
</TD></TR>
<TR><TD style="border-left:0.9pt solid #000000; border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>50,000</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>$3.50</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>December 5, 2004</P>
</TD></TR>
<TR><TD style="border-left:0.9pt solid #000000; border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>100,000</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>$6.50</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>April 13, 2006</P>
</TD></TR>
<TR><TD style="border-left:0.9pt solid #000000; border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>345,000 </P>
<P style="margin-top:0pt; margin-bottom:2.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(Broker&#146;s Compensation Options)</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>$7.50</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>November 6, 2005</P>
</TD></TR>
<TR><TD style="border-left:0.9pt solid #000000; border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>600,000</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>$4.60</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>October 12, 2009</P>
</TD></TR>
<TR><TD style="border-left:0.9pt solid #000000; border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.2pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>50,000</P>
<P style="margin-top:0pt; margin-bottom:2.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(Service Compensation Options)</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>$4.60</P>
</TD><TD style="border-right:0.9pt solid #000000; border-bottom:0.9pt solid #000000" valign=top width=208><P style="margin-top:0pt; margin-bottom:2.9pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=center>October 13, 2006</P>
</TD></TR>
</TABLE>
  </center>
</div>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<BR>
<BR>
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<P style="page-break-before:always; margin:0pt; line-height:12.35pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Subsequent Events</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>On October 18, 2004, Mr. Christopher J. Bradbrook was appointed President and Chief Executive Officer of the Company to replace Mr. John H. Kruzick who was appointed Chairman of the Board and will remain an integral part of the Company&#146;s management team. &nbsp;Mr. Bradbrook brings a wealth of expertise and experience to DRC Resources, as a result of his more than 25-year career in the mining industry, in which his principal roles have encompassed many aspects of the industry, including: exploration, mine development, corporate development work, financial analysis, investor relations, and marketing.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:12.35pt; font-family:Times New Roman; font-size:12pt" align=justify><B>Additional Information</B></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:12.35pt; font-family:Times New Roman; font-size:12pt" align=justify>Additional information on the Company may be found on SEDAR at <FONT COLOR=#0000FF><U>www.sedar.com </U></FONT>or the Company&#146;s website at <FONT COLOR=#0000FF><U>www.drcresources.com </U></FONT>.</P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Times New Roman; font-size:12pt" align=justify>&nbsp;<FONT FACE="Arial"><B><I>Disclaimer</I></B></FONT></P>
<P style="margin:0pt; padding-left:9pt; line-height:14pt; font-family:Arial; font-size:12pt" align=justify><I>The information contained herein is prepared by the company and believed to be accurate but has not been independently audited or verified and is provided for informational purposes. &nbsp;This information is not to be construed as an offer nor as a recommendation to buy or sell securities. &nbsp;DRC Resources Corporation, its officers and directors assume no responsibility for use of this information in any way whatsoever and do not guarantee its accuracy.</I></P>
<P style="margin:0pt; font-family:Arial; font-size:12pt"><BR></P>
<P style="margin:0pt; line-height:14pt; font-family:Arial; font-size:12pt"><B><I>Cautionary Note </I></B></P>
<P style="margin:0pt; padding-left:9pt; line-height:14pt; font-family:Arial; font-size:12pt" align=justify><I>It should be noted that some of the statements contained in this presentation are not historical facts but may be forward-looking statements. &nbsp;Estimates and statements that describe the Company&#146;s future plans, objectives or goals are examples of forward-looking statements and such statements may include words to the effect that the Company or management expects a stated condition or result to occur. &nbsp;Since forward-looking statement address future events and conditions, by their very nature they involve inherent risks and uncertainties. &nbsp;Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as the productivity of the Company&#146;s mining properties, changes in general economic conditions and conditions in the financial markets, changes in demand and prices for the minerals, legislative, environmental and o
ther regulatory, political and competitive developments in areas in which the Company operates.</I></P>
<P style="margin:0pt; font-family:Arial; font-size:12pt"><BR></P>
<P style="margin:0pt; font-family:Arial; font-size:12pt" align=justify><B><I>US Investors Should Note: &nbsp;</I></B><I>The United States Securities and Exchange Commission permits mining companies, in their filings with the SEC to disclose only those mineral deposits that a company can economically and legally extract or produce. &nbsp;We may use certain terms in our publications such as &#147;resources&#148;, that are prescribed by Canadian regulatory policy and guidelines but are not provided for in the SEC guidelines on publications and filings.</I></P>
<P style="margin:0pt; padding-right:-18pt; font-family:Times New Roman; font-size:12pt"><BR></P>
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<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]</FONT></B>
</P>
<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">AUDITED CONSOLIDATED FINANCIAL STATEMENTS</FONT></B>
</P>
<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SEPTEMBER 30, 2004 AND DECEMBER 31, 2003 AND 2002</FONT></B>
</P>
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<br>
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<HR noshade align="center" width="100%" size=2>
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<B><FONT size=2 face="TimesNewRoman,Bold,Times New Roman,Times,serif">AUDITORS' REPORT</FONT></B>
</P>
<P align="justify">
<B><FONT size=2 face="TimesNewRoman,Bold,Times New Roman,Times,serif">To the Directors of DRC Resources Corporation</FONT></B>
</P>
<P align="justify">
<FONT size=2 face="TimesNewRoman,Times New Roman,Times,serif">We have audited the consolidated balance sheet of DRC Resources Corporation as at September 30, 2004 and the consolidated statements of operations and deficit, changes in shareholders' equity and cash flows for the nine month period then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.</FONT>
</P>
<P align="justify">
<FONT size=2 face="TimesNewRoman,Times New Roman,Times,serif">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.</FONT>
</P>
<P align="justify">
<FONT size=2 face="TimesNewRoman,Times New Roman,Times,serif">In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2004 and the results of its operations and its cash flows for the period then ended in accordance with Canadian generally accepted accounting principles. </FONT>
</P>
<P align="justify">
<FONT size=2 face="TimesNewRoman,Times New Roman,Times,serif">The consolidated financial statements as at and for the year ended December 31, 2003 were audited by other auditors who expressed an opinion without reservation on those financial statements in their report to the shareholders dated February 20, 2004.</FONT>
</P>
<P align="justify">
<FONT size=4 face="Arial,Arial,Helvetica,sans-serif">"De Visser Gray"</FONT>
</P>
<P align="justify">
<B><FONT size=2 face="TimesNewRoman,Bold,Times New Roman,Times,serif">CHARTERED ACCOUNTANTS</FONT></B>
</P>
<P align="justify">
<FONT size=2 face="TimesNewRoman,Times New Roman,Times,serif">Vancouver, British Columbia<br>
October 27, 2004</FONT>
</P>
<P align="justify">
<br>
<br>
</P>
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</FONT></B>
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<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
CONSOLIDATED BALANCE SHEETS<br>
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003</FONT></B>
</P>
<div align="center">
  <center>
<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="66%">&nbsp;</TD>
   <TD width="16%" align="right" colspan="2"><u><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Sept. 30,
    2004</B></FONT></u></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="16%" align="right" colspan="2"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><u>Dec. 31,
    2003</u></FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="100%" colspan="7">
<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">ASSETS</FONT></B>
</P>
   </TD>
</TR>
<TR>
   <TD width="66%">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CURRENT ASSETS</FONT></B>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash and cash equivalents</FONT>
   </TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,085,997</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,737,161</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Marketable security</FONT>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,500</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Accrued interest receivable</FONT>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">154,418</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">25,741</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Amounts receivable - government</FONT>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">39,485</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">58,832</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Prepaid expenses</FONT>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,357</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">20,000</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,289,257</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,843,234</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">MINERAL CLAIM INTERESTS - SCHEDULE</FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> [Notes 2 and 3] </FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,174,493</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,487,296</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INVESTMENT PROPERTY </FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[Note 4] </FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">110,867</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">PROPERTY AND EQUIPMENT </FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[Notes 2 and 5]</FONT>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">266,010</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,999</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 3 double #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,729,760</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,470,396</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="100%" colspan="7" align="center"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">LIABILITIES</FONT></B>
   </TD>
</TR>
<TR>
   <TD width="66%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CURRENT LIABILITIES</FONT></B>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Account payable and accruals</FONT>
   </TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">80,890</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">95,940</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Capital taxes payable</FONT>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">71,445</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Current portion of finance contract payable [Note 6]</FONT>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">22,671</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">103,561</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">167,385</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">FINANCE CONTRACT PAYABLE</FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> [Note 6] </FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">35,896</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">FUTURE INCOME TAXES </FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[Note 7[c]]</FONT>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">892,880</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">875,935</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,032,337</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,043,320</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="100%" colspan="7" align="center"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SHAREHOLDERS' EQUITY</FONT></B>
   </TD>
</TR>
<TR>
   <TD width="66%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SHARE CAPITAL </FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[Note 8]</FONT>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">32,773,361</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,398,361</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DEFICIT</FONT></B>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(3,075,938)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,971,285)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">29,697,423</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">27,427,076</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 3 double #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,729,760</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,470,396</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
</TABLE></center>
</div>
<P>
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">COMMITMENTS </FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[Note 13]</FONT><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
SUBSEQUENT EVENTS</FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> [Note 16]</FONT>
</P>
<P>
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">APPROVED BY THE BOARD:</FONT></B>
</P>
<P style="line-height: 21.6pt; margin-bottom: 0pt">
<I><FONT size=5 face="Arial,Italic,Arial,Helvetica,sans-serif"><u>"John Kruzick&quot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></I>
</P>
<P style="line-height: 12pt; margin-top: -12pt; padding-left: 154pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Director</FONT></B>
</P>
<P style="line-height: 21.6pt; margin-bottom: 0pt">
<I><FONT size=5 face="Arial,Italic,Arial,Helvetica,sans-serif"><u>"Ian Beardmore&quot;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></I>
</P>
<P style="line-height: 12pt; margin-top: -12pt; padding-left: 154pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Chief Financial Officer</FONT></B>
</P>
<P align="right">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">See accompanying notes.</FONT>
</P>
<P align="right">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_4"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT<br>
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND YEARS ENDED DECEMBER 31, 2003 AND 2002</FONT></B>
</P>
<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INCOME</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Interest income</FONT></TD>
   <TD width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">413,978</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">181,698</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">116,676</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Oil and gas royalties</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">762</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,713</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,743</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Gain on sale of marketable security</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,290</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Gain on sale of investment property</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">32,801</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Foreign exchange gain [loss]</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">304</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(74,929)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(4,159)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">456,135</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">108,482</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">114,260</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">EXPENSES</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Bank charges</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">350</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">572</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">437</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">B.C. capital tax</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,945</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Consulting and management fees</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">169,850</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">118,155</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">85,641</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Amortization</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,524</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,536</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,068</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Financing and sponsorship</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">52,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Insurance</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">14,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">11,503</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Office, secretarial services and stationary</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">98,992</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">83,163</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">81,886</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Professional fees</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">75,537</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">109,007</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">57,644</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Regulatory and filing fees</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">41,613</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">66,871</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">52,855</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Rent</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,898</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">22,103</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">19,861</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Telephone</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,945</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,541</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,826</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Transfer agent</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">7,695</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,031</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">7,379</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Travel and promotion</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">76,439</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">53,259</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">88,462</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Write-off of mineral claim interests</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,999</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Write-down of marketable security</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,250</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">543,843</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">524,184</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">482,811</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">LOSS FOR THE PERIOD BEFORE INCOME TAXES</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(87,708)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(415,702)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(368,551)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">FUTURE INCOME TAXES </FONT></B><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[Note 7]</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(16,945)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(802,669)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">182,644</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">LOSS FOR THE PERIOD</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,907)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DEFICIT, BEGINNING OF PERIOD</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,971,285)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,752,914)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,567,007)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DEFICIT, END OF PERIOD</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(3,075,938)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,971,285)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,752,914)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">WEIGHTED AVERAGE NUMBER OF SHARES ISSUED</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">13,356,110</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,746,722</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,828,466</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">LOSS PER SHARE</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.01)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.13)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.02)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
</TABLE><P align="right">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">&nbsp;See accompanying notes.</FONT>
</P>
<P align="right">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_5"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
CONSOLIDATED STATEMENTS OF CASH FLOWS<br>
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND YEARS ENDED DECEMBER 31, 2003 AND 2002</FONT></B>
</P>
<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%">&nbsp;</TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CASH PROVIDED BY [USED FOR]:</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">OPERATING ACTIVITIES</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Loss for the period</FONT></TD>
   <TD width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,907)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Items not requiring cash:</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 36pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Amortization</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,524</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,536</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,068</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 36pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Gain on sale of marketable security</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(8,290)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 36pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Gain on sale of investment property</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(32,801)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 36pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Write-off of mineral claim interests</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,999</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 36pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Write-down of marketable security</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,250</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 36pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Future income taxes</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">16,945</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">762,169</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(182,644)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%">&nbsp;</TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(100,275)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(443,665)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(348,234)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Net change in non-cash working capital items</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,182)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">191,095</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">407,102</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash [Used For] Provided By Operating Activities</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(285,457)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(252,570)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">58,868</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INVESTING ACTIVITIES</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Proceeds on sale of marketable security</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,790</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Proceeds on sale of investment property</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">143,668</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Payments for mineral claim interest exploration costs</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(687,197)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,742,663)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,173,040)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Acquisition of property and equipment</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(206,968)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(39,236)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash Used For Investing Activities</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(740,707)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,742,663)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,212,276)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">FINANCING ACTIVITIES</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Share capital issued for cash, net of issue costs</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,375,000</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">22,860,250</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,209,432</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash Provided By Financing Activities</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,375,000</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">22,860,250</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,209,432</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INCREASE IN CASH AND CASH EQUIVALENTS</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,348,836</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">20,865,017</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">56,024</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,737,161</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,872,144</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,816,120</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CASH AND CASH EQUIVALENTS, END OF PERIOD</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,085,997</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,737,161</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,872,144</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CASH AND CASH EQUIVALENTS COMPRISES:</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="14%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash</FONT></TD>
   <TD width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">92,764</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">27,760</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">65,781</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Term deposits and shot-term discount notes</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">25,993,233</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,709,401</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,806,363</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,085,997</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,737,161</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,872,144</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
</TABLE><P align="right">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">See accompanying notes.</FONT>
</P>
<P align="right">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_6"></A>

<P align="center">
<br>
<br>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY<br>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND YEARS ENDED DECEMBER 31, 2003 AND 2002</FONT></B>
</P>
<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%"></TD>
   <TD colspan=4 width="11%" align="center"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Common Stock</FONT></B></TD>
   <TD width="1%" align="center">&nbsp;</TD>
   <TD width="1%" colspan="2" rowspan="2" align="center" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Deficit</FONT></B></TD>
   <TD width="1%" align="center">&nbsp;</TD>
   <TD colspan=2 width="1%" rowspan="2" align="center" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Total
    Shareholders' Equity</FONT></B></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"></TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Shares</FONT></B></TD>
   <TD width="1%" align="center">&nbsp;</TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Amount</FONT></B></TD>
   <TD width="1%" align="center">&nbsp;</TD>
   <TD width="1%" align="center">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance as at December 31, 2001 </FONT></B>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,283,766</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">7,133,578</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,567,007)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,566,571</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued by private placement for cash</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">700,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,100,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,100,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Repurchase for cancellation</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(252,000)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(726,083)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(726,083)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Share issue costs</FONT>
   </TD>
   <TD width="11%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(164,485)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(164,485)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Tax effect on flow-through shares/ special warrants</FONT>
   </TD>
   <TD width="11%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(376,207)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(376,207)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> For mineral claim interests</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">400,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">120,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">120,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Loss for the year</FONT>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,907)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,907)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance as at December 31, 2002</FONT></B>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,131,766</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,086,803</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,752,914)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">6,333,889</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued for cash</FONT>
   </TD>
   <TD width="11%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Exercise of stock options</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">50,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">150,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">150,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Broker warrants</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">70,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">210,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">210,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued by private placement for cash</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,450,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,150,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,150,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Share issue costs</FONT>
   </TD>
   <TD width="11%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,649,750)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,649,750)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Tax effect on flow-through shares/ special warrants</FONT>
   </TD>
   <TD width="11%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(608,692)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(608,692)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> For mineral claim interests</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">200,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">60,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">60,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Loss for the year</FONT>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance as at December 30, 2003</FONT></B>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,901,766</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,398,361</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,971,285)</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">27,427,076</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued for cash</FONT>
   </TD>
   <TD width="11%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Exercise of stock options</FONT>
   </TD>
   <TD width="11%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">790,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,375,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="10%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="10%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,375,000</FONT></TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Loss for the period</FONT>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance as at September 30, 2004</FONT></B>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">13,691,766</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="10%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">32,773,361</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="10%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(3,075,938)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="10%" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">29,697,423</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</TD>
</TR>
</TABLE><P align="right">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">See accompanying notes.</FONT>
</P>
<P align="right">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_7"></A>

<P align="center"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>
<P align="center"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
SCHEDULE OF MINERAL CLAIM INTERESTS<br>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND YEAR ENDED DECEMBER 31, 2003</FONT></B>
</P>
<div align="center">
  <center>
  <table border="0" cellpadding="0" cellspacing="0" width="100%">
    <tr>
      <td width="66%"></td>
      <td width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
        2004</FONT></B></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31
        2003</FONT></B></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%">
<B><U><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Acquisition Costs</FONT></U></B>
      </td>
      <td width="1%" align="right"></td>
      <td width="15%" align="right"></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="15%" align="right"></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Kamloops "Afton" Claims</FONT>
      </td>
      <td width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">481,734</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">481,734</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Kamloops "Ajax-Python" Claims</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">48,732</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="15%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">48,732</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Timmins, Ontario Claims</FONT>
      </td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1&nbsp;</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, End Of Period</FONT></B>
      </td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">530,467</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="15%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">530,467&nbsp;</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
    </tr>
  </table>
  </center>
</div>
<P>
<B><U><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Deferred Exploration Costs</FONT></U></B>
</P>
<div align="center">
  <center>
  <table border="0" cellpadding="0" cellspacing="0" width="100%">
    <tr>
      <td width="52%"></td>
      <td width="1%" colspan="2" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Afton
        Claims</FONT></B></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" colspan="2" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Ajax-Python
        Claims</FONT></B></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" colspan="2" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
        2004</FONT></B></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" colspan="2" align="right"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31
        2003</FONT></B></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%" style="border-bottom: 1 solid #000000">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, Beginning Of
Period</FONT></B>
      </td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,897,533</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">59,296</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,956,829</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,822,859</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Assays and testing</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,147</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">10,769</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">11,916</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">77,018</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Drilling</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">65,070</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">121,930</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">187,000</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">984,845</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Engineering</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">168,838</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">19,950</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">188,788</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">437,603</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Geological consulting</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">142,849</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">25,195</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">168,044</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">158,050</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Labour</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">39,763</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,981</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">45,744</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">32,542</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Supplies and equipment</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">38,679</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,846</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">41,525</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,500</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Travel and accommodation</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">22,534</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,528</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,062</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">36,111</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Staking and filing fees</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">143</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,701</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,844</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">611</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Miscellaneous&nbsp;</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">7,694</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,580</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">13,274</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,994</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Grant recoveries [Note 2[e]]</FONT>
      </td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right">-</td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right">-</td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right">-</td>
      <td width="1%" align="right">&nbsp;</td>
      <td width="1%" align="right"></td>
      <td width="10%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,388</FONT></td>
      <td width="1%" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Tax effect of flow through shares</FONT>
      </td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">-</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">-</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">-</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(608,692)</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">486,717</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">200,480</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">687,197</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;&nbsp;&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,133,970</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;&nbsp;</td>
    </tr>
    <tr>
      <td width="52%" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, End Of Period</FONT></B>
      </td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,384,250</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">259,776</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,644,026</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,956,829</FONT></td>
      <td width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Mineral Claim Interests</FONT></B>
      </td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="10%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,174,493</FONT></td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></td>
      <td width="10%" align="right" style="border-bottom: 3 double #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,487,296</FONT></td>
      <td width="1%" align="right" style="border-bottom: 3 double #000000">&nbsp;</td>
    </tr>
  </table>
  </center>
</div>
<P align="right">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">See accompanying notes.</FONT>
</P>
<P align="right">
<br>
<br>
</P>
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<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">1</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">NATURE OF BUSINESS</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">DRC Resources Corporation is a public company incorporated under the Company Act (British Columbia). The common shares of the Company are traded on the Toronto Stock Exchange ("TSX").</FONT>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company is in the process of exploring its mineral claim interests to determine whether the properties contain ore reserves that are economically recoverable.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The continued operations of the Company and the recoverability of the amounts shown as mineral claim interests are dependent upon the existence of recoverable reserves, the ability of the Company to obtain financing to complete the developments, and upon future profitable production or proceeds from disposition of its mineral claim interests.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Although the Company has taken steps to verify title to mineral claim interests in which it has an interest in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Property title may be subject to unregistered prior agreements or transfers and may be affected by undetected defects.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">2</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SIGNIFICANT ACCOUNTING POLICIES</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">a]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Principles of Consolidation</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Dynamic Resources Corporation, Inc. All significant inter-company transactions and balances have been eliminated on consolidation.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">b]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash and Cash Equivalents</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cash and cash equivalents consist of cash on deposit with banks and highly liquid short-term interest bearing securities with maturities at purchase dates of five months or less.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">c] </FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral Claim Interests </FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company records its mineral claim interests at cost. Exploration expenditures relating to mineral claim interests that have economically recoverable reserves or significant mineralization, which in the view of management justify additional exploration and are deferred until such time as the mineral claim interest to which they relate is brought into production, or is sold, allowed to lapse or abandoned. The costs will be amortized on a unit of production basis following commencement of production or written off to operations if the mineral claim interest is abandoned. Mineral option payments are recorded when received and are charged against the related mineral claim interest cost. General exploration, overhead and administration costs are expensed in the year they are incurred.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company reviews capitalized costs on its mineral claim interests on a periodic, or annual, basis and will recognize an impairment in value based upon current exploration results and upon management's assessment of the future probability of profitable revenues from the mineral claim interests or from the sale of the mineral claim interests. Management's assessment of the mineral claim interest's estimated current fair market value may also be based upon a review of other mineral claim interest transactions that have occurred in the same geographic area as that of the mineral claim interest under review.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<br>
<br>
</P>
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<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">2</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SIGNIFICANT ACCOUNTING POLICIES [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">c]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral Claim Interests [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company has accounted for its mineral interests as tangible assets under the Canadian GAAP CICA Accounting Standards 3061. The standard states that "mining interests are items of property, plant and equipment represented by the capitalized costs of acquired mineral rights and the costs associated with exploration for and development of mineral reserves."</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Upon the issuance of CICA Accounting Standards 3062 for goodwill and other intangible assets the Company's management concluded that the definition given of an intangible asset ["an asset, other than a financial asset, that lacks physical substance". (3062.05(c))] does not apply to its mineral claim interests and therefore is not applicable to the Company. </FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under the Canadian GAAP Accounting Standards CICA 3061, the amortization of the asset would be over its useful life once the asset is in production. Under the Canadian GAAP Accounting Standard CICA 3062 a recognized intangible asset should be amortized over its useful life. Under each of these standards the amortization process would be the same in respect to the Company's mineral interests.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">d]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Property and Equipment</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Property and equipment are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method at a rate of 5% per annum for building, 20% per annum for transportation vehicles and 20% per annum for office and computer equipment.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">e] </FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Grant Recoveries </FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Grant recoveries represent British Columbia Mining Exploration Tax Credit claim refunds of 20% of eligible Canadian exploration expenditures. These grants are for qualifying exploration expenditures at a grassroots level for mineral claim interests in the Province of B.C.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">f]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Loss Per Share</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Basic loss per common share is computed by dividing the loss by the weighted average number of common shares outstanding during the year. Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method is used to determine the dilutive effect of stock options, warrants and other dilutive instruments. No dilutive loss per share has been presented as the effect would be antidilutive.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">g]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Use of Estimates</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The preparation of consolidated financial statements in conformity with Canadian generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Significant areas of estimate relate to mineral claim interests and related deferred exploration costs, future site restoration costs, and the future income tax asset valuation allowance. Actual results could differ from those estimates. By their nature, these estimates are subject to measurement uncertainty, and the impact on the consolidated financial statements of future changes in such estimates could be material.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<br>
<br>
</P>
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<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">2</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SIGNIFICANT ACCOUNTING POLICIES (CONT'D)</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">h]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Income Taxes</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company recognizes and measures, as assets and liabilities, income taxes currently payable or recoverable as well as future taxes which will arise from the realization of assets or settlement of liabilities at their carrying amounts, which differ from their tax bases. Future
tomeax assets and liabilities are measured using substantially enacted or enacted tax rates expected to apply to taxable
inc in the years in which such temporary differences are expected to be recovered or settled. A valuation allowance is recognized to the extent the recoverability of future income tax assets is not likely.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">i]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Foreign Currency Translation</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company's foreign operation is considered fully integrated with the Company and is translated into Canadian dollars using the weighted average rates for the period for items included in the statement of operations and deficit, except for amortization which is translated at historical rates, the rate prevailing at the balance sheet date for monetary assets and liabilities, and historical rates for all other items. Exchange gains or losses on translation are included in the current year's operations.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">j]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Adoption of New Accounting Standards</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Share capital includes flow-through shares issued pursuant to certain provisions of the Income Tax Act of Canada ("the Act"). The Act provides that, where the share issuance proceeds are used for exploration and development expenditures, the related income tax deductions may be renounced to subscribers. Accordingly, these expenditures provide no tax deduction to the Company.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company reduces share capital and deferred exploration costs by the estimated amount of the related future tax liability arising when the capital expenditures are incurred. </FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">k]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Stock-based Compensation</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company records compensation expense associated with stock options granted using a fair value method and records the expense as the options vest with the recipients. The adoption of this accounting policy has been applied prospectively to all stock options granted subsequent to January 1, 2003. During 2002, the Company followed the policy of disclosing on a pro-forma basis the effect of accounting for stock options granted to employees and directors on a fair value basis. Any consideration paid by the option holders to purchase shares is credited to share capital.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">There were no stock options granted to directors, officers, employees or consultants during 2003 or during the 2004 interim period. [See Note 8[c]]</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<font size="2">
<B><FONT face="Arial,Bold,Arial,Helvetica,sans-serif">3</FONT></B></font>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<font size="2">
<B><FONT face="Arial,Bold,Arial,Helvetica,sans-serif">MINERAL CLAIM INTERESTS</FONT></B></font>
</P>
<ul>
  <li>
    <p style="line-height: 12pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Kamloops, B.C. "Afton" Mineral Interest</FONT>
  </li>
</ul>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company entered into an option agreement dated September 22, 1999 to acquire the Afton Mineral Claims Group, located in the Kamloops Mining Division of B.C. Consideration is the issuance of 2,000,000 common shares of the Company in stages, with 1,000,000 shares issuable on the effective date of shareholders' approval of the agreement, and 200,000 shares annually for the next five years thereafter. The Company also agreed to complete an aggregate work commitment of $6,500,000 over nine years and the vendor retains a 10% net profit royalty in the property. The Company can purchase back the 10% net profit royalty interest on or before December 1, 2010 for $2,000,000. </FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
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<P align="center">
<br>
<br>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">3</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">MINERAL CLAIM INTERESTS [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">On July 19, 2000, 1,000,000 common shares of the Company were issued in accordance with the agreement. During the quarter ending March 31, 2002, the Company issued 200,000 common shares in accordance with the agreement for year two and in the quarter ending December 31, 2002, the Company issued 200,000 common shares in accordance with the agreement for year three. During the quarter ending December 31, 2003, the Company issued 200,000 common shares in accordance with the agreement for year four. The cost per share issued pursuant to the terms of the agreement was $0.30, for a total acquisition cost to the Company of $60,000. Claim work completed has extended the claims in good standing until March 8, 2011.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The President of the Company has a one-half interest in the option agreement above as one of the optionors. (See Notes 9 and 13)</FONT>
</P>
<ul>
  <li>
    <p style="line-height: 12pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Kamloops, B.C., "Ajax" Mineral Interest</FONT>
  </li>
</ul>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company owns a 100% interest in the Ajax - Python Claim Group, subject to a 2% net smelter royalty, consisting of 62 mineral claims and 5 crown grants in the Kamloops Mining Division of B.C. The cost of the claims acquired was 100,000 common shares of the Company at a market value of $0.50 per share. Claim work completed has extended the claims in good standing until September 26, 2011.</FONT>
</P>
<ul>
  <li>
    <p style="line-height: 12pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Timmins, Ontario, Mineral Interest</FONT>
  </li>
</ul>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company has a 100% interest in 11 units (440 acres) located in the Porcupine Mining Division of Ontario. The mineral claims are in good standing until October 14, 2006.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">4</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INVESTMENT PROPERTY</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">During the second quarter ending June 30, 2004, the Company sold its 25% interest in approximately 358 acres of land located in Texas, U.S.A., for cash proceeds of $143,646 ($107,698 U.S.), resulting in a gain of $32,801.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">5</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">PROPERTY AND EQUIPMENT</FONT></B>
</P>
<div align="center">
  <center>
<TABLE width="95%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" valign="bottom" align="center">&nbsp;</TD>
   <TD width="19%" align="center" colspan="2" rowspan="2" valign="bottom" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Cost</FONT></B></p>
   </TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="16%" align="center" colspan="2" rowspan="2" valign="bottom" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Accumulated
    Amortization</FONT></B></p>
   </TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="5" align="center" valign="bottom" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Net Book Value</FONT></B></p>
   </TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" valign="bottom" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="24%" align="center" colspan="2" valign="bottom" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
   </TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="21%" align="center" colspan="2" valign="bottom" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="center" valign="bottom">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Land</FONT>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">56,900</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">56,900</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Building</FONT>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="10%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">104,700</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,926</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="10%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">100,774</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Transportation vehicles</FONT>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="10%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">*93,607</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">25,916</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="10%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">67,691</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">17,814</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Office and computer equipment</FONT>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">73,009</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">32,364</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">40,645</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">11,185</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">328,216</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">62,206</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">266,010</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,999</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<P style="line-height: 12pt; padding-left: 9pt">
<I><FONT size=2 face="Arial,Italic,Arial,Helvetica,sans-serif">*inclusive of a leased vehicle acquired in 2004 at an original cost of $68,013. Refer also to note 6.</FONT></I>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_12"></A>

<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
<p align="center"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B></p>
<p style="line-height: 12pt; margin-bottom: -12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">6</FONT></B></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">FINANCE CONTRACT PAYABLE</FONT></B></p>
<div align="center">
  <center>

<TABLE width="95%" border=0 cellspacing=0 cellpadding=0>
<tr>
   <TD width="66%">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
  </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
  </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
</tr>
<tr>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">GMAC, 0%, repayable in monthly
    installments of $1,889, matures April 30, 2007</FONT></p>
  </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
  </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">58,567</FONT></p>
  </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
  </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">-</p>
  </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
</tr>
<tr>
   <TD width="66%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Less: current portion due within one year</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(22,671)</FONT></p>
  </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
  </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
</tr>
<tr>
   <TD width="66%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
  </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">35,896</FONT></p>
  </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
  </TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">-</p>
  </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
  </TD>
</tr>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">7</FONT></B></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INCOME TAXES</FONT></B></p>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">a]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Profit [loss] before income taxes are as follows:</FONT></p>
<div align="center">
  <center>

<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Canada</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(117,519)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(415,736)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(368,353)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">U.S.A.</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">29,811</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">34</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(198)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">TOTAL</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(87,708)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(415,702)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(368,551)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">b]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The provision for income taxes consist of the following:</FONT></p>
<div align="center">
  <center>

<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Future</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Canada</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">16,945</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">762,169</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(182,644)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">U.S.A.</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Large Corporations Tax</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Canada</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">40,500</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">U.S.A.</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">TOTAL INCOME TAX EXPENSE [RECOVERY]</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">16,945</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">802,669</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(182,644)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">c]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Temporary differences that give rise to future income taxes are as follows:</FONT></p>
<div align="center">
  <center>

<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="13%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="13%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Long-term future tax liability</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral Claim Interests</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">893,825</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">886,423</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Equipment</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(945)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(10,488)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">TOTAL LONG-TERM FUTURE INCOME TAX LIABILITY</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">892,880</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">875,935</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">d]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Temporary differences that could give rise to future income tax assets:</FONT></p>
<div align="center">
  <center>

<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="16%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="16%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Long-Term Future Income Tax Assets</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Loss carry forwards</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">792,258</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">646,062</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Share issue costs</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">447,913</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">612,791</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Total Long-Term Future Income Tax Assets</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,240,171</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,258,853</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Less Valuation Allowance</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,240,171)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,258,853)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">NET LONG-TERM FUTURE INCOME TAX ASSETS</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt"><br>
<br>
</p>
<HR noshade align="center" width="100%" size=2>
<A name="page_13"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">7</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">INCOME TAXES [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">e]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Subject to confirmation by the income tax authorities, the Company has the following undeducted tax pools:</FONT>
</P>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Sept. 30,</B></FONT>
    <FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>2004</B></FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Canadian Exploration Expenses</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,207,081</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">539,559</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Canadian Development Expenses</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">591,480</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">591,480</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Undepreciated Capital Costs</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">211,623</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">56,879</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Share Issue Costs</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,190,625</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,546,671</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Non-Capital Losses, expiring at various dates to 2011</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,105,950</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,717,336</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">8</FONT></B></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SHARE CAPITAL</FONT></B></p>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">a]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Authorized</FONT></p>
<p style="line-height: 12pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">40,000,000 common shares without par value</FONT></p>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">b]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued</FONT></p>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="16%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Amount</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, December 31, 2002</FONT></B></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,131,766</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,086,803</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="16%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued for cash</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Private placement, net of share issue costs</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,450,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">22,500,250</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="16%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued for cash</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Exercise of brokers warrants</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">70,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">210,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Exercise of stock options</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">50,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">150,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="16%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued for mineral claim interests</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">200,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">60,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="16%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Tax effect of flow-through shares/special warrants</FONT></p>
   </TD>
   <TD width="16%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(608,692)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, December 31, 2003</FONT></B></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">12,901,766</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,398,361</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="16%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Issued for cash</FONT></p>
   </TD>
   <TD width="16%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Exercise of stock options</FONT></p>
   </TD>
   <TD width="16%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">790,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,375,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, September 30, 2004</FONT></B></p>
   </TD>
   <TD width="16%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">13,691,766</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">32,773,361</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<ul>
  <li>
    <p style="line-height: 12pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Year 2004</FONT></p>
  </li>
</ul>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">During the period ended September 30, 2004, the Company issued 690,000 shares upon the exercise of stock options at $3.00 per share. Cash proceeds of $2,070,000 were received by the Company.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">During the period ended September 30, 2004, the Company issued $100,000 shares upon the exercise of stock options at $3.05 per share. Cash proceeds of $305,000 were received by the Company.</FONT>
</P>
<ul>
  <li>
    <p style="line-height: 12pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Year 2003</FONT>
  </li>
</ul>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">On November 6, 2003 the Company completed a private placement financing with a syndicate of underwriters. The Company realized gross proceeds of $24,150,000 (net - $22,500,250) on the issuance of 3,450,000 common shares, which included 450,000 underwriter options exercised, all at a price of $7.00 per share. The Company paid a commission of $1,569,750 and incurred fees of $80,000.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_14"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">8</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SHARE CAPITAL [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">b]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Issued [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">During the year the Company issued 50,000 shares upon the exercise of stock options at $3.00 per share. Cash proceeds of $150,000 were received by the Company.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">During the year the Company issued 70,000 shares upon the exercise of broker warrants at $3.00 per share. Cash proceeds of $210,000 were received by the Company.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">During the last quarter ending December 31, 2003, 200,000 shares were issued at a price of $0.30 per share for the 2003 year option payments in accordance with the Afton mineral claim option agreement.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">c]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Stock Options</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company presently has 150,000 stock options outstanding. Of these 50,000 stock options were granted prior to the implementation of the new stock option plan approved by the regulatory authorities in the year 2003. The new plan allows the Company to grant up to a total of 1,000,000 stock options. The 50,000 existing stock options outstanding do not form part of the new plan and will cease upon being exercised or upon expiry. All future stock options granted must be under the new stock option plan. The term of the stock options granted are fixed by the board of directors and are not to exceed ten years. The exercise prices of the stock options are determined by the board of directors but shall not be less than the closing price of the Company's common shares on the day preceding the day on which the directors grant the stock option, less any discount permitted by the TSX. The stock options vest immediately on the date of grant unless otherwise required b
y the exchange, however, a four month hold period applies to all shares issued under each stock option, commencing on the date of grant. </FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Other terms and conditions are as follows: all stock options are non-transferable; no more than a 5% of the issued shares may be granted to any one individual in any 12 month period; disinterested shareholder approval must be obtained for [i] any reduction in the exercise price of an outstanding option, if the holder is an insider, [ii] any grant of stock options to insiders, within a 12 month period, exceeding 5% of the Company's issued shares; and stock options will be reclassified in the event of any consolidation, subdivision, conversion or exchange of the Company's common shares.</FONT>
</P>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD align="center" width="52%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="center" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Options
    Outstanding</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="center" colspan=2 width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="center" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Remaining Life [Years]</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, December 31, 2002</FONT></B>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">890,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.04</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1.95</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Exercised</FONT>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(50,000)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.00</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, December 31, 2003</FONT></B>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">840,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.03</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">0.90</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Granted</FONT></TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">100,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">6.50</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Exercised</FONT>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(690,000)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.00</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 18pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Exercised</FONT>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(100,000)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.05</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Balance, September 30, 2004</FONT></B>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">150,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5.50</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1.65</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt"><br>
<br>
</p>
<HR noshade align="center" width="100%" size=2>
<A name="page_15"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">8</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SHARE CAPITAL [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">c]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Stock Options [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The expiry dates of the options are:</FONT>
</P>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="42%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">December 5, 2004</FONT></p>
   </TD>
   <TD align="right" width="18%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">50,000</FONT></p>
   </TD>
   <TD width="39%" align="center">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">options @ $3.50</FONT></p>
   </TD>
</TR>
<TR>
   <TD width="42%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">April 13, 2006</FONT></p>
   </TD>
   <TD align="right" width="18%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">100,000</FONT></p>
   </TD>
   <TD width="39%" align="center">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">options @ $6.50</FONT></p>
   </TD>
</TR>
</TABLE></center>
</div>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">On April 13, 2004, the Company granted the Vice President of Exploration and Development the option to purchase 100,000 common shares at an exercise price of $6.50 per share in accordance with the Company's Stock Option Plan. The options are subject to certain conditions before they can be exercised and expire on April 13, 2006.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">On September 18, 2002, 100,000 options @ $3.05 per share were granted for ongoing financial consulting services to a person related to the President. During the nine months ended September 30, 2004, all 100,000 options were exercised.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">d]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Underwriter Compensation Options</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">As at September 30, 2004, there are 345,000 non-assignable compensation options outstanding and exercisable entitling the syndicate of underwriters to purchase 345,000 shares of the Company at an exercise price of $7.50 per share expiring on November 6, 2005. [See Note 8[b]]</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">9</FONT></B>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">RELATED PARTY TRANSACTIONS</FONT></B>
</P>
<div align="center">
  <center>
<TABLE width="95%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">For consulting, administration and exploration costs charged by
    a private company controlled by the President/Director of the Company</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">114,750</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">146,375</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">112,845</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">For shares issued in payment on "Afton" mineral claim option
    agreement to the President/Director of the Company. 100,000 shares were issued during 2003 [cumulative total is 800,000
    shares to date.</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,000</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">60,000</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">For consulting services charged by a related person of the
    President</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">54,600</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">63,875</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">11,250</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">For geological consulting services on mineral claim interests
    charged by an Officer of the Company</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">68,060</FONT></p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">For secretarial and administrative services charged by a private
    company which a director has a 50% interest and any director's fees paid.</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">53,704</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">59,362</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">41,405</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
</TR>
</TABLE></center>
</div>
<p><br>
<br>
</p>
<HR noshade align="center" width="100%" size=2>
<A name="page_16"></A>

<P>
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">10</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SUPPLEMENTARY CASH FLOW INFORMATION</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The statement of cash flows reflected the new requirement under Section 1540 of the Canadian Institute of Chartered Accountants Handbook.</FONT>
</P>
<p style="line-height: 12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company conducted non-cash activities as follows:</FONT></p>
<div align="center">
  <center>
<TABLE width="95%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2002</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Financing Activities</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 3 double #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Common shares issued for mineral claim interests</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">60,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">120,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">11</FONT></B></p>
<p style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"> SEGMENTED INFORMATION</FONT></B></p>
<p style="line-height: 12pt; padding-left: 9pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company's operations consist of mineral exploration in Canada.
The other principal assets which are held in Canada consist primarily of cash, term deposits, and corporate notes.</FONT></p>
<div align="center">
  <center>
<TABLE width="95%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31.
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">CANADA</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Current Assets</FONT></p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,285,101</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,833,006</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral Claim Interests</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,174,493</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,487,296</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Property and Equipment</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">266,010</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,999</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,725,604</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,349,301</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">U.S.A.</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Current Assets</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,156</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">10,228</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000; padding-left: 18pt">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Investment Property</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">110,867</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,156</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">121,095</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="66%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">TOTAL ASSETS</FONT></B></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">30,729,760</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="15%" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">28,470,396</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 3 double #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">12</FONT></B></p>
<p style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"> FINANCIAL INSTRUMENTS</FONT></B></p>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company's financial instruments consist of cash, term deposits, corporate notes, amounts receivable, accounts payable and finance contract payable. 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 values of cash, term deposits, corporate notes, amounts receivable and accounts payable approximate their carrying values due to the relatively short period to maturity of these instruments. At September 30, 2004 the Company had $355,092 in US dollars, comprised of $3,294 in a current account and $351,798 in a bankers acceptance note, due November 15, 2004.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">13</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">COMMITMENTS</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company entered into an executive services contract with its President on April 23, 2003 to provide services as chief executive officer of the Company for a five year term on a per diem fee basis at $500 per day during 2003. The per diem fee is subject to review on an annual basis at the discretion of the board of directors. This contract has been amended as of October 18, 2004 to provide for services as chair of the Board of Directors. A new chief executive officer and President has been appointed as of that date.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under the terms of the option agreement to acquire the "Afton" Mineral Property, the Company is required to issue an additional 400,000 shares in 200,000 share instalments over the next two years and, to perform a work commitment of $6,500,000 over nine years. To September 30, 2004 $5,452,254 has been expended.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 9pt">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_17"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
[An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">13</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">COMMITMENTS [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">495,000 common shares are reserved for issuance for stock options and underwriter compensation options. [See notes 8[c] and 8[d]]</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">14</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">ENVIRONMENTAL RISKS</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Existing and possible future environmental legislation, regulations and action could give rise to additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted. Regulatory requirements and environmental standards are subject to constant evaluation and may be significantly increased, which could materially and adversely affect the business of the Company or its ability to develop its mineral claim interests on an economic basis. Before production can commence on any property, the Company must obtain regulatory and environmental approvals. There is no assurance that such approvals will be obtained on a timely basis or at all. The cost of compliance with changes in government regulations has the potential to reduce the profitability of operations or preclude entirely the economic development of mineral claim interests.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">15</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) which differ in certain material respects from United States generally accepted accounting principles and practices (U.S. GAAP).</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[a]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Mineral Claim Interests</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under Canadian GAAP, applicable to junior exploration companies, mineral claim interests acquisitions and exploration expenditures are recorded at cost if the mineral claim interests have economically recoverable reserves or significant mineralization which in the view of management justify additional exploration, as well as any interest and or other related costs incurred to finance these expenditures. (See Note 2(c))</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under U.S. GAAP, the recoverability of capitalized mineral claim interests expenditures are generally considered insupportable until a commercially mineable deposit is determined; therefore, all mineral claim interests expenditures are expensed as incurred.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[b]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Stock Option Compensation</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">For U.S. GAAP purposes, the Company has elected to continue the guidance set out in Accounting Principle Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for its employees stock options. Under APB 25, if the exercise price of the Company's employee stock option is below the market value of the underlying share on the date of the grant, APB 25 requires a stock compensation cost to be recognized. For the year ended December 31, 2002, the stock compensation cost was $72,500. For the year ended December 31, 2003 and the nine months ended September 30, 2004 the stock compensation cost was nil.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[c]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Pro Forma Information on Stock-Based Compensation</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under U.S. GAAP, compensation cost must be considered for all stock options granted requiring the Company to utilize both the intrinsic value-based and the fair value based methods of accounting and reporting stock-based compensation. Under Canadian GAAP, effective January 1, 2002, all stock-based awards made to non-employees must be measured and recognized using the fair value based method. The Company has elected to adopt the intrinsic value method, which recognizes compensation cost for awards to employees only when the market price exceeds the exercise price at date of grant, but requires pro-forma disclosure of earnings and earnings per share as if the fair value method had been adopted.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_18"></A>

<P>
<br>
<br>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">15</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[c]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Pro Forma Information on Stock-Based Compensation [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Further, Statement of Financial Accounting Standards No. 123: Accounting for Stock-Based Compensation ("SFAS 123") requires additional disclosure to reflect the results of the Company as if it had elected to follow SFAS 123. SFAS 123 requires a fair value based method of accounting for stock options using the Black-Scholes option pricing model. This model was developed for use in estimating the fair value of traded options and require the input of and are highly sensitive to subjective assumptions including the expected stock price volatility. Stock options granted by the Company have characteristics significantly different from those traded options. In the opinion of management, the existing model does not provide a reliable single measure of the fair value of stock options granted by the Company.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">In accordance with SFAS 123, the following is a summary of the changes in the Company's stock options for the following fiscal years:</FONT>
</P>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="28%">&nbsp;</TD>
   <TD align="center" colspan=4 width="11%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine Months Ended
    September 30, 2004</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="center" colspan=4 width="11%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year Ended
    December 31, 2003</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="center" colspan=4 width="11%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year Ended
    December 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD colspan=2 width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD colspan=2 width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD colspan=2 width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Balance exercisable at beginning of period</FONT>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">840,000</FONT></p>
   </TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.03</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">890,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.04</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">518,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.17</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Granted</FONT>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">100,000</FONT></p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">6.50</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">470,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.06</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Exercised</FONT>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(790,000)</FONT></p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.02</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(50,000)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.00</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Expired</FONT>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(33,000)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4.00</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Cancelled</FONT>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(65,000)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.00</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Options Price Reduction</FONT>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[1]</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1.00</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Balance exercisable at end of period</FONT>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">150,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5.35</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">840,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.03</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">890,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.04</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[1] Option price amended from $4.00 to $3.00 on 395,000 options</FONT>
</P>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="28%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD colspan=4 width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine Months Ended
    September 30, 2004</FONT></B></p>
   </TD>
   <TD align="center" width="1%"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD align="center" colspan=4 width="11%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year Ended
    December 31, 2003</FONT></B></p>
   </TD>
   <TD align="center" width="1%"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD align="center" colspan=4 width="11%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year Ended
    December 31, 2002</FONT></B></p>
   </TD>
   <TD align="center" width="1%"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
</TR>
<TR>
   <TD width="28%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD colspan=2 width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD colspan=2 width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="11%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Number Of
    Shares</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD colspan=2 width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Weighted
    Average Exercise Price</FONT></B></p>
   </TD>
   <TD width="1%" align="center"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
</TR>
<TR>
   <TD width="28%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Weighted-average fair value of options granted during the period</FONT>
   </TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;&nbsp;&nbsp;<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">100,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">6.50</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">NIL</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">0.00</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="11%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">470,000</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="10%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3.06</FONT>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
</TR>
</TABLE></center>
</div>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The stock options issued in the 2004 fiscal period have not yet vested. For the 2002 fiscal year, the weighted-average fair values for stock options were estimated at the date of grant or amendment using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 2.8% volatility factor of the expected market price of the Company's common stock of 56%; option lives of two years; and no expected dividends.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<br>
<br>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_19"></A>

<P>
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">15</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[c]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Pro Forma Information on Stock-Based Compensation [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The following is a summary of the Company's net loss and basic and diluted loss per share as reported and pro forma as if the fair value based method of accounting defined in SFAS 123 had been applied for the following fiscal periods:</FONT>
</P>
<div align="center">
  <center>
<TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="28%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="5" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine Months Ended
    September 30, 2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="5" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year Ended
    December 31, 2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="5" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year Ended
    December 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">As Reported</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Pro Forma</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">As Reported</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Pro
    Forma</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">As Reported</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Pro Forma</FONT></B></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Net loss for the
    period</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,907)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(301,188)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="28%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Basic and diluted
    loss per share</FONT></p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.01)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.01)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.13)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.13)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.02)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="10%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(0.03)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[d]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Application of U.S. GAAP to Financial Statements</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The impact of the application of U.S. GAAP to the Company's financial statements are summarized as follows:</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">BALANCE SHEETS</FONT></B>
</P>
<div align="center">
  <center><TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"></TD>
   <TD align="right" width="1%" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Sept. 30,
    2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2003</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Dec. 31,
    2002</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Assets</FONT></B></TD>
   <TD align="right" width="1%"></TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral claim interests under Canadian GAAP</FONT></TD>
   <TD width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,174,493</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,487,296</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">2,293,327</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Add back write-off of mineral claim interests under Canadian
    GAAP</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,999</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral claim interests expenditures expensed under U.S.
    GAAP</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(687,197)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,193,970)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(806,322)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cumulative historical adjustments</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(3,487,296)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,293,327)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,493,004)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral claim interests under U.S. GAAP</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Total Assets Under U.S. GAAP</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">26,555,267</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">24,983,100</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">4,199,498</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Shareholders' Equity</FONT></B></TD>
   <TD align="right" width="1%"></TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Deficit under Canadian GAAP</FONT></TD>
   <TD width="1%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(3,075,938)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,971,285)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,752,914)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Deduct net loss under Canadian GAAP</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">104,653</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1,218,371</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">185,907</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Add net loss under U.S. GAAP</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(791,850)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,412,340)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,064,130)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Cumulative historical adjustments</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(3,487,296)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,293,327)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,493,004)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Deficit under U.S. GAAP</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(7,250,431)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(6,458,581)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(4,124,141)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Total Shareholders' Equity Under U.S. GAAP</FONT></B></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">25,522,930</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">23,939,780</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">3,962,662</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt"><br>
<br>
</p>
<HR noshade align="center" width="100%" size=2>
<A name="page_20"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">15</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED
STATES [CONT'D]</FONT></B>
</P>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[d]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Application of U.S. GAAP to Financial Statements [Cont'd]</FONT></p>
<p style="line-height: 12pt; padding-left: 27pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">STATEMENTS OF OPERATIONS</FONT></B></p>
<div align="center">
  <center><TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt" align="center">
    <p style="text-indent: -9pt">&nbsp;</TD>
   <TD width="15%" align="center" colspan="2" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Nine</B></FONT>
    <FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Months</B></FONT>
    <FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Ended</B></FONT>
    <FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Sept. 30,</B></FONT>
    <FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>2004</B></FONT></TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="15%" align="center" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="center" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Loss for the period under Canadian GAAP</FONT></B></TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="14%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(104,653)</FONT></TD>
   <TD align="right" width="1%"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,218,371)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(185,907)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Add back write-off of</FONT>
    <FONT size=2 face="Arial,Arial,Helvetica,sans-serif">mineral claim interests under</FONT>
    <FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Canadian GAAP</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">1</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">5,999</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Mineral claim interests expenditures expensed under
    U.S. GAAP</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(687,197)</FONT></TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,193,970)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(806,322)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Stock option compensation 16[b]</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000">-</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(72,500)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Loss for the
    period under U.S. GAAP</FONT></B></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(791,850)</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,412,340)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,064,130)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; padding-left: 27pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">STATEMENTS OF CASH FLOWS</FONT></B></p>
<div align="center">
  <center><TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" align="center" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"></TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000"><b><font size="2" face="Arial,Bold,Arial,Helvetica,sans-serif">&nbsp;</font></b></TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2003</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" colspan="2" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="center" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Operating Activities</FONT></B></TD>
   <TD width="1%" align="right"></TD>
   <TD align="right" width="14%"></TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Loss for the period under U.S. GAAP</FONT></TD>
   <TD align="right" width="1%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="14%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(791,850)</FONT></TD>
   <TD align="right" width="1%"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,412,340)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,064,130)</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Non-cash issue of shares for mineral claim interests</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">60,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">120,000</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Non-cash stock compensation costs</FONT></TD>
   <TD width="1%" align="right"></TD>
   <TD width="14%" align="right">-</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt">-</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">72,500</FONT></p>
   </TD>
   <TD width="1%" align="right">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Other
    components of operating activities which are similar</FONT> <FONT size=2 face="Arial,Arial,Helvetica,sans-serif">under Canadian and U.S. GAAP</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"></TD>
   <TD width="14%" align="right" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(180,804)</FONT></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">965,801</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">244,775</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000; padding-left: 9pt">
    <p style="text-indent: -9pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Net cash used for operating activities under U. S. GAAP</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(972,654)</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,386,539)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(626,855)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<p style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[e]</FONT></p>
<p style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Loss Per Share</FONT></p>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under U.S. GAAP, the presentation of both basic and diluted earnings per share ("EPS") is required for all entities with complex capital structures including a reconciliation of each numerator and denominator. Basic EPS excludes dilutive securities and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding in the year. Diluted EPS reflects the potential dilution that could occur if dilutive securities were converted into common shares and is computed similarly to fully diluted EPS pursuant to previous accounting pronouncements. These requirements under U.S. GAAP apply equally to loss per share presentations.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"><br>
<br>
</FONT>
</P>
<HR noshade align="center" width="100%" size=2>
<A name="page_21"></A>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><br>
<br>
</FONT></B>
</P>

<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">15</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[e]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Loss Per Share [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The following is a reconciliation of the numerators and denominators of the basic and diluted loss per share calculations:</FONT>
</P>
<div align="center">
  <center><TABLE width="90%" border=0 cellspacing=0 cellpadding=0>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="15%" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Nine
    Months Ended Sept. 30, 2004</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>Year
    Ended Dec. 31,</B></FONT> <FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif"><B>2003</B></FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="15%" align="right" colspan="2" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">Year
    Ended Dec. 31, 2002</FONT></B></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Numerator, net loss for the year under U.S. GAAP</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(791,850)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(2,412,340)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">(1,064,130)</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Denominator:</FONT></TD>
   <TD align="right" width="1%"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="14%">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="14%">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
   <TD width="1%" align="right"><font size="2" face="Arial,Arial,Helvetica,sans-serif">&nbsp;</font></TD>
   <TD align="right" width="14%">&nbsp;</TD>
   <TD width="1%" align="right">&nbsp;</TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Weighted-average number of shares under Canadian GAAP</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">13,356,110</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,746,722</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,704,716</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Weighted-average number of shares under U.S. GAAP</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">&nbsp;</TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">13,356,110</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">9,746,722</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">8,704,716</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
<TR>
   <TD width="52%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Basic and diluted loss per share under U.S. GAAP</FONT></TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">0.06</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">0.25</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
   <TD align="right" width="1%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">$</FONT></p>
   </TD>
   <TD align="right" width="14%" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt"><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">0.12</FONT></p>
   </TD>
   <TD width="1%" align="right" style="border-bottom: 1 solid #000000">
    <p style="line-height: 12pt">&nbsp;</p>
   </TD>
</TR>
</TABLE></center>
</div>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Stock options and warrants outstanding were not included in the computation of diluted loss per share as their inclusion would be antidilutive.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[f]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Flow-Through Shares</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">Under U.S. GAAP, a liability is recognized on the sale of flow-through shares for the premium obtained by the Company, if any, of the sale price per share over the market value at the time of issuance. Under Canadian GAAP, no such premium is recognized. Upon renunciation of the flow-through share proceeds to investors, the liability under U.S. GAAP is reversed and the Company recognizes a deferred tax benefit for this amount. The Company follows the policy or renouncing fully to investors the proceeds of all flow-through financings received during the year, whether the underlying exploration expenditures have been incurred or not, as at its fiscal year end, which coincides with the personal taxation year of individuals in Canada. Accordingly, the Company under a pro-forma application of U.S. GAAP would have recognized no deferred tax benefits or amounts included in current operations, in connection with issuances of flow-through shares.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[g]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Recent Accounting Pronouncements</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The FASB has issued No. 143, "Accounting for Asset Retirement Obligations". This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company does not expect that the implementation of SFAS No. 143 will have a material impact on its financial position or results of operations.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The FASB has issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". Under this standard, exit costs and restructuring liabilities generally will be recognized only when incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect that the implementation of these guidelines will have a material impact on its financial position or results of operations.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt">
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<P align="center">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DRC RESOURCES CORPORATION<br>
 [An Exploration Stage Company]<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2004</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">15</FONT></B>
</P>
<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES [CONT'D]</FONT></B>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">[g]</FONT>
</P>
<P style="line-height: 12pt; margin-top: 0pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif"> Recent Accounting Pronouncements [Cont'd]</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Accounting Standards Board of the Canadian Institute of Chartered Accountants (CICA) has issued CICA 3063, "Impairment of Long-Lived Assets". This statement establishes standards for recognition, measurement and disclosure of the impairment of non-monetary long-lived assets, including property, plant and equipment, intangible assets with finite useful lives, deferred pre-operating costs and long-term prepaid assets. The Company does not expect that the implementation of this new standard will have a material impact on its financial position or results of operations.</FONT>
</P>
<P style="line-height: 12pt; padding-left: 27pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The CICA Handbook section, "Asset Retirement Obligations", has replaced the current guidance on future removal and site restoration costs included in CICA 3061, "Property, Plant and Equipment". The standard, which is similar to SFAS No. 143, is effective for years beginning on or after January 1, 2004. This standard requires recognition of a liability at its fair value for the obligation associated with the retirement of a tangible long-lived asset. A corresponding asset retirement cost would be added to the carrying amount of the related asset and amortized to expense over the useful life of the asset. The Company does not expect that the implementation of these guidelines will have a material impact on its financial position or results of operation.</FONT>
</P>
<P style="line-height: 12pt; margin-bottom: -12pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">16</FONT></B>
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<P style="line-height: 12pt; text-indent: 4.5pt; margin-top: 0pt; padding-left: 9pt" align="justify">
<B><FONT size=2 face="Arial,Bold,Arial,Helvetica,sans-serif">SUBSEQUENT EVENTS</FONT></B>
</P>
<P style="line-height: 12pt; padding-left: 9pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">In addition to items mentioned elsewhere in these notes, the following has occurred during the period subsequent to September 30, 2004:</FONT>
</P>
<ul>
  <li>
    <p style="line-height: 12pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The original contract for underground development work on the Afton property was not completed by the contractor as it did not meet the financial requirements and voluntarily withdrew on September 28, 2004. A new contractor has been asked to perform the work and DRC Resources Corporation is reviewing the contract terms presently.</FONT>
  </li>
  <li>
    <p style="line-height: 12pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">On October 12, 2004, the Company granted the new President and chief executive officer the option to purchase 600,000 common shares at an exercise price of $4.60 per share in accordance with the Company's Stock Option Plan. The options are exercisable on or before October 12, 2009.</FONT>
  </li>
  <li>
    <p style="line-height: 12pt" align="justify">
<FONT size=2 face="Arial,Arial,Helvetica,sans-serif">On October 13, 2004, the Company granted Orion Securities Inc. a compensation stock option for services rendered with respect to recruiting the new President and chief executive officer for the Company. The Company granted an option to purchase 50,000 common shares at an exercise price of $4.60 per share in accordance with the Company's Stock Option Plan. The options are exercisable on or before October 13, 2006.</FONT>
  </li>
  <li><FONT size=2 face="Arial,Arial,Helvetica,sans-serif">The Company issued 25,000 common shares for cash proceeds of $87,500 upon the exercise of 25,000 stock options at $3.50 per share.</FONT></li>
</ul>
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