Investment in KWG Resources Inc.

(i) KWG is an exploration stage mining company with diamond and base metal properties in Ontario, Canada. As at March 31, 2008, the Company owns 26,209,017 (June 30, 2007 - 39,913,827) common shares or 9.70% (June 30, 2007 - 21.63%) of KWG. At March 31, 2008, the fair value of the investment in KWG was $2,096,721 (June 30, 2007 - $2,195,260) based on quoted market prices.

(ii) Change in status of investment in KWG:

Prior to March 6, 2008, the investment in KWG was accounted for by the equity method as the Company was considered to exercise significant influence over KWG. The status of the investment in KWG changed on March 6, 2008. Management determined that on March 6, 2008, they lost the ability to exercise significant influence over this investee. The following facts were taking into consideration by management for their determination of the degree of influence they had over KWG as of March 6, 2008: (1) On March 6, 2008, the ownership of common shares of KWG decreased below 10% from 21.63% at June 30, 2007 (as of March 31, 2008 the ownership was 9.70%); (2) The Company is gradually disinvesting KWG as funds are required; (3) The Company did not have representation in committees other than the Audit and Finance Committee; (4) Representation on the Board of Directors of KWG is not sufficient to enable the Company to exercised any significant influence over the policy making process; (5) No important transactions occurred between the Company and the investee for more than two years and there are no contracts signed between these two companies that would results in one company being dependent over the other one.

Based on the above facts, the Company concluded that since March 6, 2008 it can no longer exercise significant influence on KWG. Under CICA Section 3855, the investment was then classified as held-for-trading and measured at fair value on the consolidated balance sheet. Changes in fair value are recognized in net income. On March 6, 2008, the Company has recorded the following transition adjustments in its consolidated financial statements as resulting from the change in status of the investment: an increase of $728,579 in investments, representing a fair value adjustment to the value of marketable securities and a gain in net income of $728,579 (net of taxes of nil).