10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended August 31, 2011

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _______ to ______

Commission file number: 0-29392

CALAIS RESOURCES INC.

(Exact name of registrant as specified in its charter)

British Columbia (State or other jurisdiction of incorporation or organization)	98-0434111 (IRS Employer Identification No.)
4415 Caribou Road P.O. Box 653 Nederland, Colorado (Address of principal executive offices)	80466-0653 (Zip Code)

Registrant’s telephone number, including area code: (303) 258-3806

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [ ]

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes[  ]  No [  ]  (not required)

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]  Accelerated filer [  ]   Non-accelerated filer [  ]  Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [  ]  No [X]

As of October 14, 2011 the registrant had 157,811,422 shares of common stock outstanding.

TABLE OF CONTENTS

		Page
Part I – Financial Information
	Item 1. Financial Statements.	3
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	15
	Item 4. Controls and Procedures.	15
Part II – Other Information
	Item 1. Legal Proceedings.	18
	Item 1A. Risk Factors.	18
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
	Item 3.  Defaults Upon Senior Securities.	19
	Item 4. (Removed and Reserved).	19
	Item 5. Other Information.	19
	Item 6. Exhibits.	20
	Signatures	21

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PART I – FINANCIAL INFORMATION.

CALAIS RESOURCES, INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED BALANCE SHEETS

	As of
	August 31, 2011			May 31, 2011
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$	94,351		$	913,182
Prepaid expenses and other assets		81,226			39,961
Total current assets		175,577			953,143
Restricted cash		15,400			15,400
Note receivable		60,000			60,000
Fixed assets, net		15,213			15,313
Total assets	$	266,190		$	1,043,856
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	$	926,458		$	1,631,568
Convertible debenture		676,256			702,964
Notes payable		10,253,878			10,253,878
Total current liabilities		11,856,592			12,588,410
Royalty interest		150,000			150,000
Environmental remediation liabilities		50,000			50,000
Total liabilities		12,056,592			12,788,410
Shareholders' Deficit
Common stock, no par value, unlimited shares authorized, 153,844,986, and 149,184,986 shares issued and outstanding as of August 31, 2011 and May 31, 2011, respectively		36,645,229			35,866,729
Deficit accumulated in the exploration stage		(48,194,361	)		(47,371,579	)
Accumulated other comprehensive loss		(241,270	)		(239,704	)
Total Shareholders' Deficit		(11,790,402	)		(11,744,554	)
Total Liabilities and Shareholders' Deficit	$	266,190		$	1,043,856

See accompanying notes to the unaudited consolidated financial statements.

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CALAIS RESOURCES, INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended August 31,						December 30, 1986 (inception) through
	2011			2010			August 31, 2011
Sales	$	-		$	-		$	-
Operating Costs and Expenses
Costs applicable to sales		307,820			-			307,820
General and administrative expense		444,893			184,599			12,759,870
Exploration and business development expenses		18,937			15,937			12,400,890
Depreciation and amortization expense		100			-			202,802
Total operating costs and expenses		771,750			200,536			25,671,382
Loss from Operations		(771,750	)		(200,536	)		(25,671,382	)
Other (income) and expenses
Loss on impairment		-			-			9,808,572
(Gain) loss on settlement of debts		-			(20,214	)		(3,388,742	)
Interest and financing fees		207,160			213,531			14,646,505
Foreign currency transaction loss		407			-			1,368,278
Other (income) expense		(156,535	)		-			88,366
Total other (income) and expenses		51,032			193,317			22,522,979
Loss before income taxes		(822,782	)		(393,853	)		(48,194,361	)
Income tax expense (benefit)		-			-			-
Net loss	$	(822,782	)	$	(393,853	)	$	(48,194,361	)
Other comprehensive loss (income) - foreign currency translation adjustments		1,566			12,431			241,270
Comprehensive loss	$	(824,348	)	$	(406,284	)	$	(48,435,631	)
Basic and diluted weighted-average number of common shares outstanding		151,608,139			85,410,751
Basic and diluted loss per common share	$	(0.01	)	$	(0.00	)

See accompanying notes to the unaudited consolidated financial statements.

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CALAIS RESOURCES, INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended August 31,			Three Months Ended August 31,			December 30, 1986 (inception) through
	2011			2010			August 31, 2011
Cash flows from operating activities:
Net loss	$	(822,782	)	$	(393,853	)	$	(48,194,361	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion expense		-			-			105,655
Amortization of deferred financing costs		-			-			3,369,936
Depreciation and depletion		100			-			201,135
Non-cash interest expense		206,763			207,073			12,046,663
Loss on impairment of mineral properties		-			-			8,824,989
Loss on impairment of investment		-			-			983,583
Common shares issued in connection with trust deed modification		-			-			90,000
Common shares issued in connection with debt settlement		-			-			1,048,053
Common shares issued for services		-			50,000			1,524,441
Warrants cancelled for services		-			-			(18,173	)
Warrants issued in connection with debt restructure		-			-			155,007
Losses (gains) recognized in connection with debt settlement		-			(20,214	)		(3,098,846	)
Gain on sale of property, plant and equipment		(156,500	)		-			(151,627	)
Loss on disposal of property, plant and equipment		-			-			8,040,143
Loss on abandonment of mineral properties		-			-			300,600
Loss on default of exploration development agreement		-			-			456,090
Loss on foreign exchange		407			-			1,687,048
Environmental remediation liability		-			-			50,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses		(41,265	)		(28,582	)		(122,568	)
Increase (decrease) in accounts payable and other current liabilities		(911,873	)		112,779			1,606,156
(Increase) decrease in other operating assets and liabilities		-			10,321			(202,667	)
Net cash (used in) operating activities		(1,725,150	)		(62,476	)		(11,298,742	)
Cash flows from investing activities:
Purchase of mineral properties & equipment		-			-			(17,481,692	)
Dispositions of equipment		156,500			-			317,852
Net additions to equipment		-			-			(183,542	)
Deferred exploration expenditures		-			-			(143,071	)
Deposit on equipment		-			-			(17,880	)
Acquisition of shares of subsidiary		-			-			(715,932	)
Advance to subsidiary		-			-			(177,875	)
Payable under option agreement		-			-			716,481
Refundable deposit on purchase of shares of subsidiary		-			-			(73,847	)
Net cash provided by (used in) investing activities		156,500			-			(17,759,506	)

See accompanying notes to the unaudited consolidated financial statements.

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CALAIS RESOURCES, INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(UNAUDITED)

	Three Months Ended August 31,			Three Months Ended August 31,			December 30, 1986 (inception) through
	2011			2010			August 31, 2011
Cash flows from financing activities:
Proceeds from sale of common shares	$	778,500		$	52,000		$	22,583,579
Proceeds from sale of private equity		-			-			345,000
Proceeds from borrowings long term-debt		-			-			17,029,960
Proceeds from borrowing on shareholder note		-			-			282,000
Repayments of long term debt		-			-			(11,902,794	)
Repayments of debt - convertible debentures		(28,681	)		(5,000	)		(501,305	)
Advances to affiliated companies, shareholders and directors		-			-			(106,730	)
Restricted cash		-			-			(31,789	)
Share subscriptions received in advance		-			-			518,415
Net cash provided by financing activities		749,819			47,000			28,216,336
Effect of foreign exchange		-			-			936,263
Net change in cash and cash equivalents		(818,831	)		(15,476	)		94,351
Cash at beginning of period		913,182			27,919			-
Cash at end of period	$	94,351		$	12,443		$	94,351
Supplemental Cash Flow Information
Interest expense paid in cash	$	397		$	6,458		$	1,203,730
Interest received	$	-		$	-		$	3,999
Debt restructuring - warrants issued	$	-		$	-		$	412,407
Common shares issued in connection with debt restructuring and settlement of accrued liabilities	$	-		$	836,539		$	4,987,140
Common shares issued in connection with accrued liabilities	$	-		$	760,000		$	1,175,651
Common shares issued for debt restructuring	$	-		$	-		$	556,321
Common shares issued for settlement	$	-		$	76,539		$	1,999,451
Common shares issued for debt restructuring and settlements	$	-		$	-		$	1,255,717
Common shares issued for acquisition of property	$	-		$	-		$	32,500
Shares issued for mineral  property development	$	-		$	-		$	96,315
Shares issued for repayment of shareholder advances	$	-		$	-		$	9,240,146

See accompanying notes to the unaudited consolidated financial statements.

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CALAIS RESOURCES, INC.

(A Mining Company in the Exploration Stage)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2011

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Calais Resources, Inc. was incorporated under the laws of the Province of British Columbia, Canada, on December 30, 1986.  Calais Resources, Inc. and its subsidiaries (collectively with its subsidiaries, referred to herein as “Calais”, “we”, “us” or “our”) is currently in the process of exploring various mineral interests, primarily gold and silver.  We are headquartered in Colorado, and have mining interests in Colorado and Nevada.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to the valuation of deferred tax assets accruals for liabilities and the fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

Our activities to date have primarily consisted of raising capital and acquiring and exploring our mining interests.  We have had no significant revenue in our history.  Accordingly, we are considered to be in the exploration stage.

Our fiscal year end is May 31st.  Through May 31, 2004, we reported our financial information using Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) using the Canadian dollar as our functional and reporting currency.  During the fiscal year ended May 31, 2005, we changed our reporting basis to the United States Generally Accepted Accounting Principles (“U.S. GAAP”) and our functional and reporting currency to the United States dollar (“U.S. dollar”).    Accordingly, historical cumulative financial information included in this Quarterly Report on Form 10-Q has been restated using U.S. GAAP with a functional and reporting currency of the U.S. dollar, unless otherwise noted.  All references herein to “$” and “US$” refer to U.S. dollars.  Unless otherwise specified, all dollar amounts are expressed in United States dollars.  All references to Common Shares refer to shares of our common stock (without par value) unless otherwise indicated.

NOTE 2 – LIQUIDITY

As of August 31, 2011, we had a working capital deficit of $11,681,015, and for the three months then ended cash used in operating activities amounted to $1,725,150.  To date, we have not generated any revenues from operations and have incurred losses since inception resulting in a deficit accumulated during the development stage of $48,194,361 through August 31, 2011.  Further losses are anticipated as we continue to be in the exploration stage, as defined in ASC Topic 915, Development Stage Entities.

Our ability to continue as a going concern depends upon our ability to generate profitable operations in the future and/or to raise additional funds through equity or debt financing.  Since inception, we have raised $23,446,994 through the issuance of equity securities and $17,311,960 through the issuance of debt instruments, which has been used primarily to provide operating funds, repay long term debt, and acquire mineral interests.  Subsequent to August 31, 2011, we have acquired an additional $420,000 through financing, as described more fully in Note 12.  There is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us or at all.  If we cannot obtain needed funds for implementing our mine plan after completion of the feasibility study, we may be forced to curtail or cease our activities.  Equity financing, if available, may result in substantial dilution to existing stockholders. All of these factors cause substantial doubt about our ability to continue as a going concern.  These financial statements do not include any

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adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Foreign Currency

We have recorded amounts payable related to a convertible debenture that is denominated in Canadian dollars. As of August 31, 2011 and 2010 adjustments resulting from liabilities denominated in a foreign currency have been reported as other comprehensive loss in our financial statements.

Impairment of Long-Lived Assets

We review and evaluate long-lived assets for impairment at least once per year, or more often when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. During the three months ended August 31, 2011 and 2010 we did not record any impairment expense.

Reclassifications

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the presentation in the current period financial statements.

Recent Accounting Pronouncements

The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the SEC, and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on U.S. GAAP and the impact on the Company. 

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820), which requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. We do not have any assets or liabilities classified as Level 3. We have adopted the Level 1 and Level 2 amendments accordingly. As the update only pertained to disclosures, it had no impact on our financial position, results of operations, or cash flows upon adoption.

Use of Estimates and Significant Estimates

Certain amounts in our financial statements are based upon significant estimates including environmental remediation obligations, accrued liabilities and a provision for income taxes. Actual results could materially differ from those estimates.

NOTE 4 – MINERAL INTERESTS

There were no material changes to our mineral properties from those disclosed in the audited annual consolidated financial statements for the year ended May 31, 2011.

During the quarter ended August 31, 2011 we began test mining operations at our Cross mine. We have begun test processing at an out of state facility. We have incurred $307,820 in costs associated with these operations, while we have not generated revenues through August 31, 2011.

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On August 11, 2011 we renewed a convertible debenture payable to Aardvark Agencies Inc. “AAI” which contained repurchase rights for interests in our Caribou properties, including the price payable for the reacquisition (a total of Cdn$747,728) and AAI’s right to convert that debenture before it is paid (Note 6).

NOTE 5 – DEBT

As of August 31, 2011 and May 31, 2011, we had one outstanding note payable in the amount of $10,253,878 (the “Brigus Note”).  The original maturity date for the note was February 1, 2011.  On January 15, 2011, we received forbearance under the terms of an agreement effectively extending the maturity date of the debt through June 30, 2011. On June 8, 2011, we and the note holder extended the maturity of the note through October 31, 2011. In connection with this forbearance we paid the note holder $1,000,000 which was applied against interest due on the promissory notes.  The note bears interest at 8% and is secured by a lien on our Caribou property.

We continue to explore financing opportunities related to the October 31, 2011 maturity date of the Brigus Note.

As of August 31, 2011 and May 31, 2011, we have accrued interest in the amount of $296,764 and $1,090,001, respectively.

NOTE 6 – DEBENTURES

A summary of convertible debentures outstanding is as follows:

	August 31, 2011			May 31, 2011
Debenture (a)	$	676,256		$	702,964
Total debenture payable		676,256			702,964
Less: Current portion		(676,256	)		(702,964	)
Long-term portion	$	-		$	-

(a) This debenture is unsecured, non-interest bearing, and initially matured in May 2011.  This debenture is owned by Marlowe Harvey who was the President and a director of ours until he resigned as President in 2000 and as a director in November 2003.  The debenture is convertible into common stock at $1.23 in Canadian Dollars at the holder’s discretion and contains no restrictive covenants.

This debenture matured in May 2011.  On August 11, 2011 the convertible debenture was renewed for a period of ten years maturing on August 31, 2021. All terms contained in the debenture agreement remain consistent with the original note, as fully described in our annual report on Form 10-K for the period ended May 31, 2011.

NOTE 7 – SHAREHOLDERS’ DEFICIT

Common Stock   -   We have authorized an unlimited number of common shares of our no par value common stock.  Common shares outstanding as of August 31, 2011 and May 31, 2011 were 153,844,986 and 149,184,986, respectively.

Transactions involving our common stock during the three months ended August 31, 2011 were as follows:

·     We raised $778,500 in cash from accredited investors for the sale of units comprising 4,660,000 shares of restricted common stock and warrants to purchase 2,330,000 of common shares.  The common stock prices ranged from $0.10 to $0.20 per share and the warrants had exercise prices from $0.20 to $0.30 per share with expiration dates of June, July and August 2012.

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NOTE 8 – COMMON STOCK WARRANTS

The following table summarizes information about outstanding stock purchase warrants as of August 31, 2011:

	Number of WarrantsOutstanding		Exercise Price
Outstanding as of May 31, 2011		31,498,196		$0.12-$0.25
Issued		2,330,000		$0.20-$0.30
Expirations		-
Balance at August 31, 2011		33,828,196		$0.12-$0.30

Exercise Price		Number of Shares		Remaining Contractual Life in Years		Exercise Price Times Number of Shares		Weighted Average Exercise Price
$	0.12		11,246,141		1.25		1,349,537
$	0.12		4,136,259		1.5		496,351
$	0.12		5,060,496		1.5		607,260
$	0.12		480,000		1.8		57,600
$	0.12		8,249,900		9.9		989,988
$	0.20		2,825,400		1.5		565,080
$	0.25		875,000		9.2		218,750
$	0.30		955,000		1.0		286,500
			33,828,196				4,571,066	$0.14

NOTE 9 – LOSS PER SHARE

Basic loss per share is computed by dividing income available to common stockholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflect the potential of securities that could share in our earnings. All of the common shares underlying warrants outstanding as of August 31, 2011 and 2010 were excluded from diluted weighted average shares outstanding for each of the respective years because their effects were considered anti-dilutive

NOTE 10 – RELATED PARTY TRANSACTIONS

We have frequent transactions with related parties, employees and shareholders holding more than 10% of our outstanding common stock.  Transactions involving related parties during the three months ended August 31, 2011 were as follows:

·   Our notes payable balance as of August 31, 2011 consisted of one note payable to Brigus Gold Corp. (“Brigus”). When this note was consummated in February 2010, the counterparty to this note was Apollo Gold Corp., a predecessor of Brigus.  Our now-current CEO, R. David Russell, was the CEO of Apollo Gold Corp. at that time.

·   From time to time, our President and Vice President of Corporate Development incur expenses on behalf of the Company and are reimbursed by us. As of August 31, 2011, included in accounts payable are amounts due to the officers as reimbursement. These amounts are not considered to be material.

·   The Canadian-dollar denominated convertible debenture (Note 6) is owned by a company related to a shareholder and former director.

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NOTE 11 – COMMITMENTS AND CONTINGENCIES

There have been no material changes to our obligations as described in our annual report on Form 10-K issued in connection with the fiscal year ended May 31, 2011. We may from time to time become subject to various claims and litigation. The Company vigorously defends its legal position when these matters arise. The Company is neither a party to, nor the subject of, any material pending legal proceeding nor to the knowledge of the Company are there any such legal proceedings threatened against the Company.

NOTE 12 – SUBSEQUENT EVENTS

We have evaluated all of our activity and have concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the unaudited consolidated financial statements, except as disclosed below.

Employment Agreements

Effective September 1, 2011, the Company entered into employment agreements with certain directors and officers of the Company, which supercede prior existing agreements.  The employment agreements provide for increases in compensation, performance bonuses, stock grants, and other certain health and travel benefits.  The agreements have no termination date; however, they provide for termination related to circumstances relative to:  the employee’s voluntary termination; termination due either death or disability; the employee’s termination without cause; or termination resultant to the Company’s effective change of control, as defined in the employment agreements.

Debenture Settlements

Lynne Martin Settlement

On September 20, 2011, we paid the final installment on the Settlement Agreement with Lynne Martin, in the amount of $28,681.

Common Stock

Since August 31, 2011, we have issued 3,966,668 shares of our restricted common stock and 1,983,335 warrants to purchase our common shares for net cash proceeds of $420,000.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the accompanying financial statements and related notes included elsewhere in this report. It contains forward looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward looking statements.

In our effort to make the information in this report more meaningful, this Quarterly Report on Form 10-Q and documents incorporated by reference herein (or otherwise made by us or on our behalf) contain both historical and forward-looking statements. Such forward-looking statements are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “goal” or other similar words or variations that convey the uncertainty of future events or outcomes.   These statements are based on the beliefs an assumptions of our management based on information currently available to us. These statements by their nature are subject to certain risks, uncertainties and assumptions and will be influenced by various factors, some of which are beyond our control. Actual results could vary materially from future results expressed or implied by such forward-looking statements.  Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation, the following risk factors:

·      our ability to execute against our plans;

·      our ability to continue as a going concern;

·      the possible loss of our interest in our Caribou properties if we do not meet our debt obligations;

·      the potential that we will not obtain good title to our Manhattan project;

·      the volatility and low trading volume of our common stock;

·      our ability to secure additional capital;

·      the possibility we may never achieve any mineral production;

·      the future dilution to our shareholders from future capital-raising activities and payments to employees, directors and consultants;

·      the possibility our Board of Directors may issue authorized and unissued shares of common stock and preferred stock;

·      the effects the penny stock rules may have on the trading of our stock;

·      our dependence on a few key employees;

·      the influence of a few large shareholders on our business;

·      risks associated with our incorporation in Canada;

·      our lack of experience in mining and selling minerals;

·      operational and environmental risks associated with the mining industry;

·      the effect of government regulations on our business;

·      lack of clear title to our mineral prospects;

·      the fact our mineral interests are not yet proven;

·      fluctuation in the prices of gold and silver; and

·      the limited liquidity in our common stock due to a cease trade order issued by the British Columbia Securities Commission in February 2005 and an administrative action initiated by the Securities and Exchange Commission to revoke our registration as a reporting company under the Securities Exchange Act of 1934.

All forward-looking statements speak only as of the date made.  All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.  Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

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Executive Summary

We are a mineral exploration company engaged directly and indirectly through subsidiaries, in the acquisition and exploration of minerals and metals, primarily gold and silver.  Our business is currently in the exploratory or exploration stage as defined by Accounting Standards Codification (“ASC”) 915-10 and SEC Industry Guide 7 and, to date, our activities have not included development or mining operations.  Our primary property is the Caribou project (advanced exploration stage) located in Nederland, Colorado; we also have properties in Nye County, Nevada.

Recent Events

Mining and Milling Operations

During the quarter ended August 31, 2011, we began test mining operations at our Cross mine.  We have begun test processing at an out of state facility, in connection therewith we incurred $307,820 in costs associated with these operations.  While we have not generated revenues as of August 31, 2011, we expect to generate revenues beginning sometime during the last four months of calendar 2011.

Note Payable

On January 15, 2011, we received forbearance under the terms of an agreement effectively extending the maturity date of our 8% $10,253,878 note payable through June 30, 2011.  This note was originally due on February 1, 2011 and is secured by a lien on our Caribou property.  On June 8, 2011, we and Brigus extended the maturity under the forebearance to October 31, 2011, under the provision that we pay Brigus at least $1,000,000 on or before June 30, 2011, which would be applied against interest due on the promissory note covered by the Forebearance Agreement.  We paid Brigus $1,000,000 on June 8, 2011 thereby extending the maturity date to October 31, 2011.  We continue to explore financing opportunities related to the pending maturity of the Brigus note.

Common Stock

During the quarter ended August 31, 2011, we have issued 4,660,000 shares of our restricted common stock as follows:

·       4,660,000 for cash proceeds of $778,500

·       Since August 31, 2011, we have issued 3,966,668 shares of our restricted common stock and 1,983,335 warrants to purchase our common shares for net proceeds of $420,000.

Interim Financial Statements

The financial information with respect to the three months ended August 31, 2011 and 2010, discussed below, is unaudited. In the opinion of management, such information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for such periods.  The results of operations for interim periods are not necessarily indicative of the results of operations for the full fiscal years.

Results of Operations

During the three months ended August 31, 2011, we generated a net loss of $822,782 compared to a net loss of $393,853 during the three months ended August 31, 2010.  This increase of $428,929 or 109% results from the start of test mining operations at our Cross mine, as well as higher wages and benefits expense and higher consulting and professional fees in 2011 as compared to 2010, as discussed further below.  In addition, we recognized a gain on the sale of assets in the 2011 quarter compared to no gain or loss from sale of assets in the 2010 quarter.

Costs applicable to Sales

During the three months ended August 31, 2011, we began test mining operations at our Cross mine.  Consequently, we incurred $307,820 in costs applicable to future sales, as compared to $nil in the corresponding 2010 period. The

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increase in costs applicable to sales increased during the 2011 period as we began ore extraction on our Cross property.

General and Administrative Expense

For the three months ended August 31, 2011, general and administrative expense was $444,893 as compared to $184,599 in the corresponding 2010 period.  The increase of $260,294 (141%) was due to increased wages and benefits expense, and increased consulting and professional fees as discussed below.

Consulting and professional fees.  For the three months ended August 31, 2011 and 2010, consulting and professional fees were $239,159 and $84,486, respectively.  The increase of $154,673 (183%) during the three months ended August 31, 2011 is related primarily to accounting and legal services as we continued the process of attempting to regain compliance with our SEC and Canadian reporting requirements.

Wages and benefits expense. For the three months ended August 31, 2011 and 2010, wages and benefits expense amounted to $131,963 and $81,117, respectively. The increase of $50,846 (63%) results primarily from the addition of our CEO and Chairman of the Board in January 2011.

Other general and administrative expenses. Additional increases in general and administrative expenses of $54,775 during the fiscal 2011 period related to increased expenses primarily attributable to the increase in day to day operations of the Company and insurance coverage.

Other Income and Expenses

Gain on sale of assets.  During the quarter ended August 31, 2011, the Company sold fully depreciated and idle assets for $156,500 in cash proceeds.  The Company recognized the full amount as a gain on sale of assets in its current quarter financial statements, due to the write-down and full depreciation of all assets to zero in prior periods.

Interest and financing fees.  For the three months ended August 31, 2011 and 2010, interest and financing fees were $207,160 and $213,531 respectively.  The decrease in the 2011 period of $6,371 was due primarily to lower finance charges on accounts payable paid in cash.

Liquidity

Because we have not yet commenced our intended primary operations and are not yet generating revenue from any source, our liquidity is completely reliant on our ability to generate cash through capital-raising activities.  During the three months ended August 31, 2011, we issued 4,660,000 shares of our common stock for cash proceeds of $778,500.

Net cash flows from operating, investing and financing activities for the three months ended August 31, 2011 and 2010 were as follows:

As of August 31, 2011, we had a working capital deficit of $11,681,015 and cash of $94,351, while at May 31, 2011 we had a working capital deficit of $11,635,267 and cash of $913,182. The decrease in cash is primarily attributable to the fact that we have no revenues from operations and continue to incur expenses. We do not expect our working capital deficit to decrease or cash balance to increase in the near future.

	2011			2010
Net cash used in operating activities	$	(1,725,150	)	$	(62,476	)
Net cash provided by investing activities	$	156,500		$	-
Net cash provided by financing activities	$	749,819		$	47,000

Net cash used in operating activities. Net cash used in operating activities of $1,725,150 and $62,476 for the three month periods ended August 31, 2011 and 2010, respectively, are attributable to our net income adjusted for non-

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cash charges as presented in the consolidated statements of cash flows and changes in working capital as discussed above.

Net cash provided by investing activities. Net cash provided from investing activities of $156,500 and $nil for the three month periods ended August 31, 2011 and 2010, respectively, was due to proceeds received from the 2011 sale of fully depreciated and idle equipment.

Net cash provided by financing activities. Net cash provided by financing activities of $749,819 and $47,000 for the three month periods ended August 31, 2011 and 2010, respectively, was primarily attributable to proceeds received from the sale of common stock, partially offset by repayments on convertible debentures.

Going Concern

The report of our independent registered public accounting firm on the financial statements as of and for the year ended May 31, 2011, includes an explanatory paragraph relating to the significant doubts about our ability to continue as a going concern. As of August 31, 2011, we had an accumulated deficit of $48.2 million and have a working capital deficit of approximately $11.7 million. We require significant additional funding to commence our plan of operation. Our ability to establish ourselves as a going concern is dependent upon our ability to obtain additional funding in order to finance our planned operations.

Plan of Operation

For the remainder of our 2012 fiscal year and into 2013, our primary goals are to regain compliance with the SEC and British Columbia Securities Commission (“BCSC”) so that we can apply for a revocation of a 2004 Cease Trade Order from the BCSC.  We intend to continue to raise capital so that we may further explore extraction from our properties which began in August 2011, thereby bringing us out of the exploration stage. We cannot anticipate our exact cash requirements for the remainder of the fiscal year. We currently have maturing debt obligations and require a significant amount of capital to continue test mining at our Cross mine in addition we have ongoing lease payments on our mining properties and general and administrative expenses coupled with compliance related expenses. We will continue to need to raise capital to fund to fund our operations and to continue to exist.

Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements.

Critical Accounting Policies and Estimates

For a discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” contained in our annual report on Form 10-K for the year ended May 31, 2011 and incorporated by reference herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not required by Form 10-Q for Smaller Reporting Companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and

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reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Rule 13a-15 under the Exchange Act, requires us to carry out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2011.  This evaluation was conducted under the supervision and with the participation of David K. Young (our functioning principal executive officer and principal financial officer).  Based on this evaluation, Mr. Young concluded that the design and operation of our disclosure controls and procedures were not effective because of the identification of the material weaknesses in internal control over financial reporting described below that existed at May 31, 2011 and August 31, 2011.   In light of the material weaknesses described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles (“GAAP”).  Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

·      Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

·      Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

·      Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

Under the supervision and with the participation of our management, including David K. Young (our functioning principal executive officer and principal financial officer), we conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of May 31, 2011, the end of our most recently completed fiscal year.

As a result of our material weaknesses described below, management concluded that, as of May 31, 2011, our internal control over financial reporting was not effective based on the criteria in “Internal Control-Integrated Framework” issued by COSO.

Material Weakness in Internal Control over Financial Reporting

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment, management identified the following control deficiencies that represent material weaknesses at May 31, 2011: 

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·   We rely on external consultants for the preparation of our financial statements and reports.  As a result, our management may not be able to identify errors and irregularities in the financial statements and reports.

·   We relied on one of our officers for oversight of the financial reporting process and, therefore, there was an inherent lack of segregation of duties with certain aspects of the financial reporting process, and a limited independent governing board.

·   We relied on an external consultant for the administration functions, some of which did not have standard procedures in place for formal review by the one officer who was providing financial oversight for us.

The internal control weaknesses identified above with regard to the failure to consistently record transactions and inadequate segregation of duties with certain aspects of the financial reporting process will only be completely corrected if the Company expands and has the capacity to perform necessary accounting functions and adequately segregate the duties to mitigate the risk in financial reporting.  This expansion will depend mostly on the ability of management to fully execute its business operating strategy as outlined in this report and generate enough income to warrant growth in personnel.  With regard to the internal control deficiency identified above related to preventative measures to properly and accurately account for the recording of the non-cash aspects of certain debt and equity issuances, management has already taken steps to mitigate such risk going forward by utilizing external financial consulting services prior to the review by our principal independent accounting firm to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the Commission’s rule and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended August 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

There have been no changes to the disclosure contained in our annual report on Form 10-K for the fiscal year ended May 31, 2011, except as follows:

Securities and Exchange Commission Proceedings

The United States Securities and Exchange Commission (“SEC”) issued an order suspending trading in the common stock of Calais Resources Inc. (the “Company”) for the period from February 24, 2011 through March 9, 2011 because it had been delinquent in the filing of periodic reports since 2004.  Also on February 24, 2011, the SEC issued an order instituting public administrative proceedings against the Company pursuant to Section 12(j) of the Securities Exchange Act of 1934 (the “Exchange Act”) to suspend for a period not exceeding twelve months or revoke the registration of the Company’s common stock under Section 12 of the Exchange Act.

On July 25, 2011, the Administrative Law Judge issued an Initial Decision ordering revocation of the registration of the Company’s common stock under the Exchange Act.

On August 12, 2011, the Company filed a Petition for Review of the Initial Decision with the SEC.  On August 17, 2011, the SEC granted the Company’s petition for review and the Company filed its brief in support of the petition by the September 16, 2011 due date.  The SEC’s brief in opposition is due October 17, 2011 and any reply brief from the Company would need to be filed by October 31, 2011.

Because the Petition for Review has been filed, the Initial Decision shall not become final until the Commission rules on the Petition.

British Columbia Securities Commission Proceedings

The Company filed a Revocation Application under National Policy 12-202 with the British Columbia Securities Commission (“BCSC”), seeking to revoke the cease trade order that has been in place since February 2005.  The BCSC has issued comment letters on the Application and the Company has responded to those comments.  The latest comment letter is dated September 21, 2011 and the Company has filed a response to that letter.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a number of significant risks.  There have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended May 31, 2011.  We caution the reader to carefully consider such risk factors, which are more thoroughly described in the section entitled “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the year ended May 31, 2011 as well as any other Risk Factors described in subsequent filings with the Securities and Exchange Commission.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

				Warrants
Date of Sale	Name of Purchaser	Title of Securities	Shares of Stock	Number of Warrants	Exercise Price	Expiration Date	Consideration ($)
06/11	3 accredited investors	Common Stock	1,700,000	850,000	$0.30	06/12	340,000	(a)
07/11	2 accredited investors	Common Stock	1,050,000	525,000	$0.30	07/12	210,000	(a)
08/11	4 accredited investors	Common Stock	1,910,000	955,000	$0.20	08/12	228,500	(a)

(a) Issued for cash consideration.

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We relied upon the exemption from registration contained in Section 4(2) of the Securities Act, as these persons were deemed to be sophisticated with respect to the investment in the securities due to their financial condition and involvement in our business and had access to the kind of information which registration would disclose.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED)

None.

ITEM 5. OTHER INFORMATION.

As of September 1, 2011, we entered into employment agreements with our executive officers:  R. David Russell, David K. Young and Thomas S. Hendricks.

The employment agreement for Mr. Russell, our Chairman of the Board of Directors and Chief Executive Officer, provides for the following:

·      a minimum annual base salary of $380,000 and an annual performance bonus of no less than 60% of his annual base salary;

·      a restricted stock grant of 2,500,000 shares of our common stock if he successfully completes a debt restructuring between the Company and Brigus;

·      a restricted stock grant of 1,500,000 shares of our common stock if he completes a recapitalization or financing for the Company in the minimum amount of $5,000,000 within the first 18 months of employment;

·      a cash payment of $100,000 if either restricted stock event described above occurs;

·      an indefinite term;

·      automobile, aircraft, athletic and sport club allowances;

·      in the event of Mr. Russell’s death, a payment to his heirs equal to one year of salary and a one year bonus at 100% of salary and the vesting of all stock options and warrants;

·      in the event of Mr. Russell’s disability, a two-year salary payment and 100% bonus, the vesting of all stock options and health benefits for 36 months; and

·      in the event of a change of control or termination without cause, the vesting of all stock grants, a payment equal to three times the sum of his base salary and a 100% bonus, and cash payment equal to three years of the cost of COBRA health coverage and his automobile/sports club dues.

The employment agreement for Mr. Young, our President and Chief Operating Officer, provides for the following:

·      a minimum annual base salary of $380,000 and an annual performance bonus of no less than 60% of his annual base salary;

·      a restricted stock grant of 2,500,000 shares of our common stock if he successfully completes a debt restructuring between the Company and Brigus;

·      a restricted stock grant of 1,500,000 shares of our common stock if he completes a recapitalization or financing for the Company in the minimum amount of $5,000,000 within the first 18 months of employment;

·      a cash payment of $100,000 if either restricted stock event described above occurs;

·      an indefinite term;

·      automobile, athletic and sport club allowances;

·      in the event of Mr. Young’s death, a payment to his heirs equal to one year of salary and a one year bonus at 100% of salary and the vesting of all stock options and warrants;

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·      in the event of Mr. Young’s disability, a two-year salary payment and 100% bonus, the vesting of all stock options and health benefits for 36 months; and

·      in the event of a change of control or termination without cause, the vesting of all stock grants, a payment equal to three times the sum of his base salary and a 100% bonus, and cash payment equal to three years of the cost of COBRA health coverage and his automobile/sports club dues.

The employment agreement for Mr. Hendricks, our Vice President and General Manager, provides for the following:

·      a minimum annual base salary of $175,000;

·      an indefinite term;

·      an automobile allowance;

·      in the event of Mr. Hendricks’ death, the vesting of all stock options; and

·      in the event of a change of control or termination without cause, the vesting of all stock options, a payment equal to three times the sum of his base salary and a 50% bonus, and health coverage for 36 months.

ITEM 6. EXHIBITS.

Exhibit Number	Description
10.1	Employment Agreement with R. David Russell dated September 1, 2011
10.2	Employment Agreement with David K. Young dated September 1, 2011
10.3	Employment Agreement with Thomas S. Hendricks dated September 1, 2011
31	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.
32	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act.

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SIGNATURES

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.

	CALAIS RESOURCES INC.
October 14, 2011	By:	/s/ David K. Young
		David K. Young
		President, Chief Operating Officer and
		Acting Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT WITH R. DAVID RUSSELL

DATED SEPTEMBER 1, 2011

EMPLOYMENT AGREEMENT

              THIS AGREEMENT (“Agreement”) effective as of September 1, 2011

              BETWEEN:

Calais Resources Inc

PO Box 620247

Littleton, CO 80162

                                                (the “Company”)

-and-

                                                R. David Russell

                                                PO Box 461269

                                                Aurora, Colorado 80046

(the “Executive”)

RECITALS

WHEREAS the Executive is an Officer of the Company and is employed in the Business (as defined below) operated by the Company; and

WHEREAS the Company and Executive desire that the agreements and understandings pursuant to which Company has agreed to hire Executive and Executive has agreed to serve, be set forth in writing for the benefit of both parties:

NOW THEREFORE in consideration of the promises and mutual covenants herein contained, the parties hereto agree as follows:

1.           Defined Terms

(a) “Board” means the Board of Directors of the Company;

(b) "Business" means the business presently or hereafter carried on by the Company in the area of mineral resource exploration, development and production;

(c) “Disability” means the inability of the Executive as a result of illness or injury to perform his responsibilities as an employee of the Company for a period of 400 consecutive working days;

(d) “Effective Change of Control” means the occurrence, within a single transaction or series of related transactions occurring within the same 12-month period, of a change in the identity of persons who individually or collectively hold rights to elect, or to approve the election of, a majority of the members of the Board, including, without limitation, transactions consisting of one or more sales or other transfers of assets or equity securities, mergers, consolidations, amalgamations, reorganizations, or any similar transactions; and / or more than 50% ownership in the stock of the company. Also see "Reverse Merger" which also falls under the "Effective Change of Control".

(e) "Reverse Merger" means a merger or other business combination where Calais is the surviving company and is still in control of greater than 50% of the company stock, and there is a top Executive management change requested that would also constitute a control change and be handled the same as an "Effective Change of Control" for the Executive.

(f) “Stock Grant Plan” means the incentive stock grant plan of the Company for directors, officers, employees and other service providers of the Company.

(g) "Executive" means both Executive Chairman and Chief Executive Officer (CEO) positions combined.

2. Employment

(a) The Company (directly or through its United States and other subsidiaries) shall employ the Executive, and the Executive shall serve the Company and its subsidiaries as, Executive Chairman of the Board of Directors and Chief Executive Officer.  It is understood that the Board must vote on the Chairman position each year.  Note:  If there is a "Board Chairman Change" due to a board vote this is considered to be a termination without cause by majority vote of the Board and paragraph 6 (f) would apply for severability terms whether the Executive stays in the CEO position or not, therefore, paragraph 6 (f) still applies for damages.

(b) The Executive represents that he has the required skills and experience to perform the duties required of him as Executive Chairman of the Board of Directors and

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Chief Executive Officer and agrees to be bound by the terms and conditions of this Agreement. 

(c) The Executive will be employed by the Company on a full-time basis and will devote himself exclusively to the Business and will not be employed or engaged in any capacity in any other business that is in competition with the Business of the Company, without the prior written approval of the Company.

(d) The Executive acknowledges that in carrying out his duties and responsibilities:

i) the Executive shall comply with all lawful and reasonable instructions as may be given by the Board;

ii) the Executive will perform his duties with the highest level of integrity and in a manner which shall engender the Company’s complete confidence in the Executive’s relationship with other employees of the Company and with all persons dealt with by the Executive in the course of employment; and

iii) the Executive will perform his duties in a diligent, loyal, productive and efficient manner and use his best efforts to advance the Business and goodwill of the Company.

(e) The Executive is employed on a full-time basis for the Company and understands that the hours required to meet the objectives of his employment will vary and be irregular.

(f) The location of the Executive’s employment and official office under this Agreement shall be in the State of Colorado in the Denver area to start with and may remain there. The corporate office will be in the Denver area.  However, the Executive may choose to actually reside in states such as Nevada, Montana, California, Hawaii or Alaska at the sole discretion of the Executive.

(g) The Calais Company will hold the Executive harmless for any activities of the Company prior to the acceptance date of this contract.

3. Compensation and Benefits

As compensation for the services to be rendered by the Executive to the Company, the Company agrees to provide the remuneration and benefits set out in this paragraph 3.

(a) Base Salary and Partial Discretionary Bonus

The Executive shall be paid a minimum annual base salary of US$ 380,000.  Theamount of such salary shall be reviewed annually for increases by the Board but

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in no case can the salary be reduced by the board unless mutually agreed with the Executive and the Calais Board.  Said salary shall be subject to all deductions required by law or required by company policy and shall be paid monthly, in arrears, by check or deposit, or such other periodic installments as may be from time to time agreed.  In addition, the Executive is entitled to receive an annual performance bonus of up to 100% of the Executive annual base salary, in such amount as the Board in its sole discretion may determine above a guaranteed 60%.  However, the minimum will always be 60% of the performance bonus guaranteed. (From time to time the Executive may choose to take partial salary or no salary and accrue salary, however, the full salary will always remain as stated in this agreement or as per the future Board increases that may apply and would replace the current salary.)

"Any Bonus award to the Executive shall be paid in accordance with the Company's customary practices, but in no event later than the 15th day of the third calendar month following the close of the calendar year for which such bonus is earned."

(b) Stock Grants

The Executive shall be eligible to receive stock grants granted pursuant to the Stock Grant Plan, on such terms and conditions as the Board in its discretion may determine.

(c) Issuance of Restricted Stock Grant as a Bonus

Executive is entitled to a restricted stock grant of 2,500,000 shares of Calais Resources Restricted stock for: (a) successfully completing a debt restructuring between Calais Resources and Debt holder.  Debt restructuring can be defined as to be a 100% discounted payoff of the current $11 M debt, or scheduled payments and / or an equity component with or without a cash component; also (b) Executive is entitled to 1,500,000 shares of Calais restricted stock for recapitalization / financing for Calais Resources in the amount of a minimum of $5 M to a maximum of $25 M raised within the first 18 months of employment.  If Executive recapitalizes / finances the company in an amount of equal to $5 M or greater the Executive is entitled to 1,500,000 shares of Calais restricted stock. (Note If the recapitalization / financing amount is over the $5 M mark then a prorated increase of restricted stock grant will be awarded for an additional 250,000 restricted shares per $1 M raised above the $5 M mark to a maximum of $25 M.  Approximately $1.8 M was raised before the Executive was hired on a consulting basis and will also be count toward the first $5 M raised.) Any amount in either (a) or (b) can be a combined dollar amount equivalent for equity Financing and / or a combination of equity and a financial facility such as convertible, borrowed money, gold-silver loan and / or gold-silver derivative etc.  If a portion of the financing in section (b) is used to pay Brigus to settle or restructure the Calais - Brigus debt both respective stock grants apply

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independently to the Executive restricted stock grant payment.   In either case (a) or (b), of the Restricted Stock Grants, Calais is obligated to gross up both federal and state tax at no cost to the Executive when it is due.

(c)  A cash payment of US$ 100,000 will also be paid to the Executive if either (a) or (b) described above shall occur.  The cash payment will also be grossed up for federal and state taxes at no cost to the Executive.

(d) Automobile, Aircraft, Athletic, Sports Club Allowance

The Executive shall be entitled to receive an automobile allowance to cover normal day-to-day operating (including fuel) and maintenance costs paid by the company. The intent is for the company to provide a company vehicle for the Executive to use that is under a $75 K in value. After 80,000 miles on the odometer of the company owned vehicle, the Executive may purchase the vehicle for 25% of the "Low Blue Book" value and a new company vehicle would be allocated for the Executive.  Calais is obligated to Gross up both federal and state tax at no cost to the Executive if the Executive opts to purchase the used automobile with mileage over 80,000 miles.

If a lease / purchase of an aircraft by the company and / or by the executive on behalf of the company is done via lease / purchase contract and part of the transportation utilization to and from the Colorado location to the Nevada or other outlying projects, the company will cover the normal lease or payment costs and also day-to-day operating (including fuel) and maintenance costs. The intention is for a single engine aircraft under $ 750 K value.  In a change of control situation, if there is a payout for ownership for the lease / purchase of the aircraft, the Executive has the right to pay off the final payments of the lease / purchase agreement, & pay 25% of low blue book value for the aircraft, minus the lease payoff amount, and take title to the aircraft.  In a change of control, with either the Automobile and / or the Aircraft allowance, Calais is obligated to Gross up both federal and state tax at no cost to the Executive.

The Executive is allowed a membership and yearly or monthly fee payments by the company to an athletic club.  The Executive is also allowed a membership and yearly or monthly dues to a sports golf club. The athletic club and / or golf club selected may be located in any state of the Executives choosing.  Calais is obligated to Gross up both federal and state tax at no cost to the Executive for the athletic and / or golf club.

(d)           Health (Medical and Vision), Dental, Long Term Disability and Life Insurance

The Executive shall be entitled to receive and participate in health (medical and vision), dental, long-term disability and life insurance programs as are made

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available by the Company to other executive employees, provided that the Company may modify, suspend, or discontinue any or all of such benefits for its employees generally or for any group thereof, without obligation to replace any such modified, discontinued or suspended benefit with any other benefit or to otherwise compensate the Executive in respect thereof.  A concierge Doctor fee up to$1,500.00 per month for 2011 will also be paid to or on behalf of the executive and taxes grossed up if the executive has such an arrangement.  The amount will be increased proportionally per year if the Doctors concierge fees increase after 2011.

(e)           Indemnification and D&O Liability Insurance

To assure that Executive will be in a position to perform his duties to the Company without concern over unwarranted liability, the Company shall indemnify and advance reasonable defense expenses to the Executive to the full extent permitted by Colorado.  The Company shall also use its best efforts to purchase, at the earliest time practicable, one or more policies of directors and officer’s liability insurance in an amount adequate to protect the Executive against claims made against him for actions taken or not taken in the conduct of his duties to the Company.  (Note: The company will hold the Executive harmless for any legal actions and / or lawsuits that may arise after the executives employment starts and are specifically due to any and all legal actions that may arise due to previous financials that were not filed from 2005 - 2010 fiscal years and the first three quarters of fiscal year 2011 that may affect the company and / or due to Halt Trade orders by the BCSC and / or the Securities and Exchange Commission.)

4.           Vacation

The Executive will be entitled to thirty (35) working days or an equivalent of seven weeks of vacation during each twelve - (12) month period calculated from January 15, 2011 plus usual statutory and other public holidays, the timing of such vacation to be mutually agreed upon between the Executive and the Company.  Vacation entitlement not used in any 12-month period may be carried forward, provided that, if it is not used in the next 12-month period, the Executive shall be paid the cash equivalent of any unused vacation entitlement if requested. In the event of a change of control or reverse merger, all unused vacation will be paid out in cash. (Note:  The Executive is deemed to have been awarded / accrued 35 working days or seven weeks of vacation by signing this agreement and is eligible to use the vacation days in 2011.)

5.           Expenses

The Executive shall be reimbursed by the Company for business expenses incurred as a result of his work on behalf of the Company.  The Company shall reimburse the Executive for such expenses upon presentation of supporting documentation satisfactory

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to the Company in accordance with the tax principles applicable in Canada (at times when the Executive is resident in Canada) or in accordance with the tax principles applicable in the United States (at times when the Executive is resident in the United States) for such reimbursement and the Company's established reimbursement policies, as those policies may be modified from time to time in the Company's discretion.

(i)           The amount of reimbursements to which the Executive may become entitled in any one calendar year shall not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year;

(ii)           The Executive's right to reimbursement cannot be liquidated or exchanged for any other benefit or payment; and

(iii)           In no event will any expenses be reimbursed after the close of the calendar year following the calendar year in which that expense incurred."

6.           Terms of the Agreement and Termination

(a) This Agreement shall commence on the date hereof and shall be of indefinite term unless terminated pursuant to the provisions hereof.

(b) The Executive may terminate his employment pursuant to this Agreement by giving at least one (1) month’s advance notice in writing to the Company.  The Company may waive such notice, in whole or in part, and, if it does so, the Executive’s entitlement to remuneration and benefits pursuant to this Agreement will cease on the date such notice is waived.

(c) The Executive’s employment shall terminate upon the death (on or off the job) of the Executive, whereupon all stock options or warrants granted to the Executive shall immediately vest and shall be exercisable by the Executive’s heirs, executors, administrators or personal representatives in accordance with the terms of the Stock Grant Plan, but in no case less than a 12 month period to exercise. Also, a one-time payment to the Executives heirs in the amount of one year salary and a one year bonus at 100% of salary is paid within 30 days of the death in a lump sum or in 12 equal installments over a one year period. The benefit can be paid on a monthly basis by Calais if elected for both the salary and bonus if Calais does not elect to pay in one lump sum.  Calais is obligated to Gross up both federal and state tax at no cost to the heirs.

(d) The Executive’s employment shall be terminated upon the Disability of the Executive.  If Executive is terminated upon Disability, unvested stock options vest immediately.  A two year salary payment and 100% bonus will be paid out by month or in one lump sum. Health benefits will continue for a 36 month

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period. Calais is obligated to Gross up both federal and state tax at no cost to the disabled Executive for Salary, Bonus and medical benefits.

(e) In the event of a Change of Control, the Executive’s employment shall be deemed to have been terminated without cause (whether or not the Executive’s employment actually terminates at the time of the Change of Control) and the Executive shall become entitled to receive the following payments and benefits:

i) Any stock grants granted to the Executive but not vested shall be deemed to have immediately vested as of the date of the Change of Control;

(ii) The Company shall pay to the Executive a lump-sum cash payment in an amount equal to (a) three times the Executive’s base salary (at the annual rate in effect on the effective date of the Change of Control) plus (b) 100% of the Executive’s bonus entitlement (which is deemed to be 100% of annual pay) , times three.  (c)  all Federal and State taxes and Federal excise taxes (golden parachute taxes) shall be grossed-up.  Such payment shall be paid to the Executive within fifteen days following the effective date of the Change of Control; and

iii) The Executive shall be entitled to a lump-sum cash payment, in a dollar amount equal to (a) thirty-six times the Company’s monthly cost of COBRA health care coverage for the Executive and his spouse and eligible dependents under the Company’s employee group health plan at the level of coverage in effect for Executive and his spouse and eligible dependents at the time of the Change of Control, plus (b) three times the Executive’s annual automobile allowance pursuant to Section 3(d), plus (c) three times the Executive’s annual social/sports club dues allowance pursuant to section 3(f).  Such payment shall be paid to the Executive within fifteen days following the effective date of the Change of Control.

(f) The Executive’s employment may be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to this section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the following benefits and payments, and the Executive shall not have the duty to mitigate damages:

i) Any stock options or warrants granted to the Executive but not vested shall be deemed to have immediately vested as of the Executive’s termination date and will have 12 months to option or execute;

ii) The Company shall pay to the Executive a lump-sum cash payment inan amount equal to (a) three times the Executive’s base salary (at the

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annual rate in effect at the time the Executive’s employment is terminated) plus (b) 100% of the Executive’s bonus entitlement, times three. (c)  all Federal and State taxes and Federal excise taxes (parachute taxes) shall be grossed-up.   Such payment shall be paid to the Executive within fifteen days following the date of his Separation from Service (as such term is defined in Section 18); and

(iii)        The Executive shall be entitled to a lump-sum cash payment, in a dollar amount equal to (a) thirty-six times the monthly cost of COBRA continued health care coverage for the Executive and his spouse and eligible dependents under the Company’s employee group health plan at the level of coverage in effect for Executive and his spouse and eligible dependents at the time of his termination and calculated on the basis of cost of such COBRA coverage at that time, plus (b) three times the Executive’s annual automobile allowance pursuant to Section 3(d), plus (c) three times the Executive’s annual social/sports club dues allowance pursuant to section 3(f) .  Such payment shall be paid to the Executive within fifteen days following the date of the Executive’s Separation from Service (as such term is defined in Section 18).”

(g) In the event of a "Reverse Merger" and the Executive management changes ormanagement roles are altered and / or are requested and / or a change of presentlocation is requested by the Board then this is also considered that the  Executive’s employment to be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to  section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the same benefits and payments as per 6(f), and the Executive shall not have the duty to mitigate damages:

(h) In the event of a "Board Chairman Change" means if the full board, in any given year, votes the to change the Executives role, the Board of Directors has the right to elect any chairman each year at their sole discretion. If the Executive becomes only a Board of Director & CEO then this is also termed a "Change of Control" for this individual Executive this is also considered that the  Executive’s employment to be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the same benefits and payments as per 6(f), and the Executive shall not have the duty to mitigate damages:

(i) The corporate office is in the Denver area and will remain there unless the board votes otherwise.  If in the event of a reverse merger or other business combination and the corporate office is moved by board vote to another city or state more than 75 miles from its current location and the Executive is directed to move locations this then is also considered that the Executive’s employment to be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to section 6(f), in compensation for the

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Executive’s loss of employment, the Executive shall become entitled to receive the same benefits and payments as per 6(f), and the Executive shall not have the duty to mitigate damages:

(j) The Company may terminate the Executive’s employment without notice or payment in lieu of such employment, for cause.  For the purposes of this Agreement “cause” shall mean (i) the failure to follow written policies or directions of the Board not inconsistent with this Agreement or contrary to applicable law, (ii) neglect of responsibilities after the receipt of written notice setting forth the performance deficiencies and providing 120 days to cure such deficiencies. However, without cause, 6(f) applies loss of employment, the Executive shall become entitled for compensation for the Executive’s to receive the benefits and payments within 6(f), and the Executive shall not have the duty to mitigate damages.

(k) In all cases above under 6 ( a - j) ,  where the Executive has been deemed to have lost employment for any reason and subject to a customary exit agreement from the company, the company is prohibited from locking the Executive, within the exit agreement, from future work and / or non-compete clauses that would hinder the Executives future work. There will be no time frame inserted to areas of influence for areas of interest.  In no event can the company withhold severance payments under 6 (a - j) after 30 days if an exit agreement has not been agreed to and signed by both parties.

7. Notices

(a) Any notice required or permitted to be given to the Executive shall be sufficiently given if delivered to the Executive personally or mailed by registered mail to the Executive’s home address.

(b) Any notice required or permitted to be given to the Company shall be sufficiently given if delivered to the Secretary of the Company personally or if mailed by registered mail to the Company’s principal office, attention Corporate Secretary.

(c) Any notice given by registered mail shall be deemed to have been given forty-eight hours after the time it is posted.

8.           Entire Agreement

This Agreement terminates, replaces and supersedes all prior agreements, oral or written, between the parties hereto.  This Agreement contains the final and entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and they shall not be bound by any terms, conditions, statements, covenants, representations, or warranties, oral or written, with respect to the subject matter hereof not contained in this Agreement.

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9.           Headings

The headings in this Agreement are for convenience of reference only, and under no circumstances should they be construed as being a substantive part of this Agreement nor shall they limit or otherwise affect the meaning hereof.

10.           Warranty

Each of the parties hereto represents and warrants that there are no restrictions, agreements or limitations on such party’s right or ability to enter into and perform the terms of this Agreement.

11.           Severability

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable by a court of competent jurisdiction for any reason whatsoever (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

12.           Modification

Any modification of this Agreement must be in writing, agreed to and signed by both the Executive on the one hand and by the Company acting through an officer duly authorized to execute such modification on behalf of the Company or such modification shall have no effect and shall be void.  Note:  The Board of Directors cannot change any term within this agreement without written agreement with the Executive.  The Board cannot leverage wage increases, bonuses and / or stock options against term changes within this agreement.

13.           Waiver

The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or violation. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

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14.           Assignment of Rights

The rights that accrue to the Company under this Agreement shall pass to its successors or assigns.  The rights of the Executive under this Agreement are not assignable or transferable in any manner.

15.           Independent Legal Advice

The Executive acknowledges that he has read and understands this Agreement, and acknowledges that he has had the opportunity to obtain independent legal advice with respect to it.  Any Legal advice and or litigation will be paid for 100% by the Company within 7 days of the time any bill for services has been presented.

16.           Time of Essence

Time shall be of the essence of this Agreement.

17.           Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.  Any dispute between the Company and Executive shall be brought exclusively in the State or Federal Courts located in Denver, Colorado.  In the event of such dispute, the prevailing party shall be entitled to recover its reasonable attorney’s fees and costs.

18.           . Code Section 409A.

The parties intend that the provisions of this Agreement either (i) are grandfathered from the requirements of Section 409A of the Code or (ii) comply with the requirements of the short-term deferral exception of Section 409A of the Code and Treasury Regulations Section 1.409A-1(b)(4).  Accordingly, to the extent there is any ambiguity as to whether one or more provisions of this Agreement would otherwise contravene the requirements or limitations of Code Section 409A applicable to the grandfather rules or the short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Code Section 409A and the Treasury Regulations thereunder that apply to such rules or such exception.”

If and to the extent this Agreement may be deemed to create an arrangement subject to the requirements of Section 409A, then no amounts which become payable by reason of the Executive’s cessation of service shall actually be issued or distributed to the Executive prior to the earlier of (i) the first day of the seventh (7th) month following the date of his Separation from Service due to such cessation of service or (ii) the date of the Executive’s death, if the Executive is deemed at the time of such Separation from Service to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations issued under Code Section 409A, as

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determined by the Company in accordance with consistent and uniform standards applied to all other Code Section 409A arrangements of the Company, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Sectio409A(a)(2).  The deferred payments shall be paid in a lump sum on the first day of the seventh (7th) month following the date of the Executive’s Separation from Service or, if earlier, the first day of the month immediately following the date the Company receives proof of the Executive’s death.

IN WITNESS WHEREOF the parties have duly executed this Agreement effective as of the date first written above.

CALAIS RESOURCES INC

By:   /s/ David K. Young                    

       David K. Young

       President

EXECUTIVE

  /s/ R. David Russell                          

    R. David Russell

    Executive Chairman and CEO

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EX-10.2

EXHIBIT 10.2

EMPLOYMENT AGREEMENT WITH DAVID K. YOUNG

DATED SEPTEMBER 1, 2011

EMPLOYMENT AGREEMENT

              THIS AGREEMENT (“Agreement”) effective as of September 1, 2011

              BETWEEN:

Calais Resources Inc

PO Box 620247

Littleton, CO 80162

                                                (the “Company”)

-and-

                                                David K. Young

                                                 8839 W. Crestline Dr

Littleton, Colorado 80123

 (the “Executive”)

RECITALS

WHEREAS the Executive is an Officer of the Company and is employed in the Business (as defined below) operated by the Company; and

WHEREAS the Company and Executive desire that the agreements and understandings pursuant to which Company has agreed to hire Executive and Executive has agreed to serve, be set forth in writing for the benefit of both parties:

NOW THEREFORE in consideration of the promises and mutual covenants herein contained, the parties hereto agree as follows:

1.           Defined Terms

(a) “Board” means the Board of Directors of the Company;

(b) "Business" means the business presently or hereafter carried on by the Company in the area of mineral resource exploration, development and production;

(c) “Disability” means the inability of the Executive as a result of illness or injury to perform his responsibilities as an employee of the Company for a period of 400 consecutive working days;

(d) “Effective Change of Control” means the occurrence, within a single transaction or series of related transactions occurring within the same 12-month period, of a change in the identity of persons who individually or collectively hold rights to elect, or to approve the election of, a majority of the members of the Board, including, without limitation, transactions consisting of one or more sales or other transfers of assets or equity securities, mergers, consolidations, amalgamations, reorganizations, or any similar transactions; and / or more than 50% ownership in the stock of the company. Also see "Reverse Merger" which also falls under the "Effective Change of Control".

(e) "Reverse Merger" means a merger or other business combination where Calais is the surviving company and is still in control of greater than 50% of the company stock, and there is a top Executive management change requested that would also constitute a control change and be handled the same as an "Effective Change of Control" for the Executive.

(f) “Stock Grant Plan” means the incentive stock grant plan of the Company for directors, officers, employees and other service providers of the Company.

(g) "Executive" means Member of the Board of Directors, President and Chief Operating Officer (COO) positions combined.

2. Employment

(a) The Company (directly or through its United States and other subsidiaries) shall employ the Executive, and the Executive shall serve the Company and its subsidiaries as, Member of the Board of Directors, President and Chief Operating Officer.  It is understood that the shareholders must vote on the board position for each term.  Note:  If there is a "Board Change" for the Executive due to a shareholder vote this is considered to be a termination without cause by majority vote of the shareholders and paragraph 6 (f) would apply for severability terms whether the Executive stays in the President and COO position or not, therefore, paragraph 6 (f) still applies for damages.

(b) The Executive represents that he has the required skills and experience to perform the duties required of him as a Board Member, President and COO and agrees to be bound by the terms and conditions of this Agreement.

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(c) The Executive will be employed by the Company on a full-time basis and will devote himself exclusively to the Business and will not be employed or engaged in any capacity in any other business that is in competition with the Business of the Company, without the prior written approval of the Company.

(d) The Executive acknowledges that in carrying out his duties and responsibilities:

i) the Executive shall comply with all lawful and reasonable instructions as may be given by the Board;

ii) the Executive will perform his duties with the highest level of integrity and in a manner which shall engender the Company’s complete confidence in the Executive’s relationship with other employees of the Company and with all persons dealt with by the Executive in the course of employment; and

iii) the Executive will perform his duties in a diligent, loyal, productive and efficient manner and use his best efforts to advance the Business and goodwill of the Company.

(e) The Executive is employed on a full-time basis for the Company and understands that the hours required to meet the objectives of his employment will vary and be irregular.

(f) The location of the Executive’s employment and official office under this Agreement shall be in the State of Colorado in the Denver area to start with and may remain there. The corporate office will be in the Denver area.  However, the Executive may choose to actually reside in states such as Nevada, Montana, California, Hawaii or Alaska at the sole discretion of the Executive.

(g) The Calais Company will hold the Executive harmless for any activities of the Company prior to the acceptance date of this contract.

3. Compensation and Benefits

As compensation for the services to be rendered by the Executive to the Company, the Company agrees to provide the remuneration and benefits set out in this paragraph 3.

(a) Base Salary and Partial Discretionary Bonus

The Executive shall be paid a minimum annual base salary of US$ 380,000.  Theamount of such salary shall be reviewed annually for increases by the Board but in no case can the salary be reduced by the board unless mutually agreed with the Executive and the Calais Board.  Said salary shall be subject to all deductions

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required by law or required by company policy and shall be paid monthly, in arrears, by check or deposit, or such other periodic installments as may be from time to time agreed.  In addition, the Executive is entitled to receive an annual performance bonus of up to 100% of the Executive annual base salary, in such amount as the Board in its sole discretion may determine above a guaranteed 60%.  However, the minimum will always be 60% of the performance bonus guaranteed. (From time to time the Executive may choose to take partial salary or no salary and accrue salary, however, the full salary will always remain as stated in this agreement or as per the future Board increases that may apply and would replace the current salary.)

"Any Bonus award to the Executive shall be paid in accordance with the Company's customary practices, but in no event later than the 15th day of the third calendar month following the close of the calendar year for which such bonus is earned."

(b) Stock Grants

The Executive shall be eligible to receive stock grants granted pursuant to the Stock Grant Plan, on such terms and conditions as the Board in its discretion may determine.

(c) Issuance of Restricted Stock Grant as a Bonus

Executive is entitled to a restricted stock grant of 2,500,000 shares of Calais Resources Restricted stock for: (a) successfully completing a debt restructuring between Calais Resources and Debt holder.  Debt restructuring can be defined as to be a 100% discounted payoff of the current $11 M debt, or scheduled payments and / or an equity component with or without a cash component; also (b) Executive is entitled to 1,500,000 shares of Calais restricted stock for recapitalization / financing for Calais Resources in the amount of a minimum of $5 M to a maximum of $25 M raised within the first 18 months of employment.  If Executive recapitalizes / finances the company in an amount of equal to $5 M or greater the Executive is entitled to 1,500,000 shares of Calais restricted stock. (Note If the recapitalization / financing amount is over the $5 M mark then a prorated increase of restricted stock grant will be awarded for an additional 250,000 restricted shares per $1 M raised above the $5 M mark to a maximum of $25 M.  Approximately $1.8 M was raised before the Executive was hired on a consulting basis and will also be count toward the first $5 M raised.) Any amount in either (a) or (b) can be a combined dollar amount equivalent for equity Financing and / or a combination of equity and a financial facility such as convertible, borrowed money, gold-silver loan and / or gold-silver derivative etc.  If a portion of the financing in section (b) is used to pay Brigus to settle or restructure the Calais - Brigus debt both respective stock grants apply independently to the Executive restricted stock grant payment.   In either case (a)

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or (b), of the Restricted Stock Grants, Calais is obligated to gross up both federal and state tax at no cost to the Executive when it is due.

(c)  A cash payment of US$ 100,000 will also be paid to the Executive if either (a) or (b) described above shall occur.  The cash payment will also be grossed up for federal and state taxes at no cost to the Executive.

(d) Automobile, Athletic, Sports Club Allowance

The Executive shall be entitled to receive an automobile allowance to cover normal day-to-day operating (including fuel) and maintenance costs paid by the company. The intent is for the company to provide a company vehicle for the Executive to use that is under a $75 K in value. After 80,000 miles on the odometer of the company owned vehicle, the Executive may purchase the vehicle for 25% of the "Low Blue Book" value and a new company vehicle would be allocated for the Executive.  Calais is obligated to Gross up both federal and state tax at no cost to the Executive if the Executive opts to purchase the used automobile with mileage over 80,000 miles.

The Executive is allowed a membership and yearly or monthly fee payments by the company to an athletic club.  The Executive is also allowed a membership and yearly or monthly dues to a sports golf club. The athletic club and / or golf club selected may be located in any state of the Executives choosing.  Calais is obligated to Gross up both federal and state tax at no cost to the Executive for the athletic and / or golf club.

(d)           Health (Medical and Vision), Dental, Long Term Disability and Life Insurance

The Executive shall be entitled to receive and participate in health (medical and vision), dental, long-term disability and life insurance programs as are made available by the Company to other executive employees, provided that the Company may modify, suspend, or discontinue any or all of such benefits for its employees generally or for any group thereof, without obligation to replace any such modified, discontinued or suspended benefit with any other benefit or to otherwise compensate the Executive in respect thereof.  A concierge Doctor fee up to$1,500.00 per month for 2011 will also be paid to or on behalf of the executive and taxes grossed up if the executive has such an arrangement.  The amount will be increased proportionally per year if the Doctors concierge fees increase after 2011.

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(e)           Indemnification and D&O Liability Insurance

To assure that Executive will be in a position to perform his duties to the Company without concern over unwarranted liability, the Company shall indemnify and advance reasonable defense expenses to the Executive to the full extent permitted by Colorado.  The Company shall also use its best efforts to purchase, at the earliest time practicable, one or more policies of directors and officer’s liability insurance in an amount adequate to protect the Executive against claims made against him for actions taken or not taken in the conduct of his duties to the Company.

4.           Vacation

The Executive will be entitled to thirty (35) working days or an equivalent of seven weeks of vacation during each twelve - (12) month period calculated from January 15, 2011 plus usual statutory and other public holidays, the timing of such vacation to be mutually agreed upon between the Executive and the Company.  Vacation entitlement not used in any 12-month period may be carried forward, provided that, if it is not used in the next 12-month period, the Executive shall be paid the cash equivalent of any unused vacation entitlement if requested. In the event of a change of control or reverse merger, all unused vacation will be paid out in cash. (Note:  The Executive is deemed to have been awarded / accrued 35 working days or seven weeks of vacation by signing this agreement and is eligible to use the vacation days in 2011.)

5.           Expenses

The Executive shall be reimbursed by the Company for business expenses incurred as a result of his work on behalf of the Company.  The Company shall reimburse the Executive for such expenses upon presentation of supporting documentation satisfactory to the Company in accordance with the tax principles applicable in Canada (at times when the Executive is resident in Canada) or in accordance with the tax principles applicable in the United States (at times when the Executive is resident in the United States) for such reimbursement and the Company's established reimbursement policies, as those policies may be modified from time to time in the Company's discretion.

i) The amount of reimbursements to which the Executive may become entitled in any one calendar year shall not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year;

ii) The Executive's right to reimbursement cannot be liquidated or exchanged for any other benefit or payment; and

iii) In no event will any expenses be reimbursed after the close of the calendar year following the calendar year in which that expense incurred."

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6.           Terms of the Agreement and Termination

(a) This Agreement shall commence on the date hereof and shall be of indefinite term unless terminated pursuant to the provisions hereof.

(b) The Executive may terminate his employment pursuant to this Agreement by giving at least one (1) month’s advance notice in writing to the Company.  The Company may waive such notice, in whole or in part, and, if it does so, the Executive’s entitlement to remuneration and benefits pursuant to this Agreement will cease on the date such notice is waived.

(c) The Executive’s employment shall terminate upon the death (on or off the job) of the Executive, whereupon all stock options or warrants granted to the Executive shall immediately vest and shall be exercisable by the Executive’s heirs, executors, administrators or personal representatives in accordance with the terms of the Stock Grant Plan, but in no case less than a 12 month period to exercise. Also, a one-time payment to the Executives heirs in the amount of one year salary and a one year bonus at 100% of salary is paid within 30 days of the death in a lump sum or in 12 equal installments over a one year period. The benefit can be paid on a monthly basis by Calais if elected for both the salary and bonus if Calais does not elect to pay in one lump sum.  Calais is obligated to Gross up both federal and state tax at no cost to the heirs.

(d) The Executive’s employment shall be terminated upon the Disability of the Executive.  If Executive is terminated upon Disability, unvested stock grants vest immediately.  A two year salary payment and 100% bonus will be paid out by month or in one lump sum. Health benefits will continue for a 36 month period. Calais is obligated to Gross up both federal and state tax at no cost to the disabled Executive for Salary, Bonus and medical benefits.

(e) In the event of a Change of Control, the Executive’s employment shall be deemed to have been terminated without cause (whether or not the Executive’s employment actually terminates at the time of the Change of Control) and the Executive shall become entitled to receive the following payments and benefits:

i) Any stock granted to the Executive but not vested shall be deemed to have immediately vested as of the date of the Change of Control;

ii) The Company shall pay to the Executive a lump-sum cash payment in an amount equal to (a) three times the Executive’s base salary (at the annual rate in effect on the effective date of the Change of Control) plus (b) 100% of the Executive’s bonus entitlement, times three.  (c)  all Federal and State taxes and Federal excise taxes (golden parachute taxes)

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shall be grossed-up.  Such payment shall be paid to the Executive within fifteen days following the effective date of the Change of Control; and

iii) The Executive shall be entitled to a lump-sum cash payment, in a dollar amount equal to (a) thirty-six times the Company’s monthly cost of COBRA health care coverage for the Executive and his spouse and eligible dependents under the Company’s employee group health plan at the level of coverage in effect for Executive and his spouse and eligible dependents at the time of the Change of Control, plus (b) three times the Executive’s annual automobile allowance pursuant to Section 3(d), plus (c) three times the Executive’s annual social/sports club dues allowance pursuant to section 3(f).  Such payment shall be paid to the Executive within fifteen days following the effective date of the Change of Control.

(f) The Executive’s employment may be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to this section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the following benefits and payments, and the Executive shall not have the duty to mitigate damages:

i) Any stock grants or warrants granted to the Executive but not vested shall be deemed to have immediately vested as of the Executive’s termination date and will have 12 months to option or execute;

ii) The Company shall pay to the Executive a lump-sum cash payment inan amount equal to (a) three times the Executive’s base salary (at the annual rate in effect at the time the Executive’s employment is terminated) plus (b) 100% of the Executive’s bonus entitlement (which in this case is 100 % of annual salary), times three. (c)  all Federal and State taxes and Federal excise taxes (parachute taxes) shall be grossed-up.   Such payment shall be paid to the Executive within fifteen days following the date of his Separation from Service (as such term is defined in Section 18); and

iii) The Executive shall be entitled to a lump-sum cash payment, in a dollar amount equal to (a) thirty-six times the monthly cost of COBRA continued health care coverage for the Executive and his spouse and eligible dependents under the Company’s employee group health plan at the level of coverage in effect for Executive and his spouse and eligible dependents at the time of his termination and calculated on the basis of cost of such COBRA coverage at that time, plus (b) three times the Executive’s annual automobile allowance pursuant to Section 3(d), plus (c) three times the Executive’s annual social/sports club dues allowance pursuant to section 3(f) .  Such payment shall be paid to the Executive 

8

within fifteen days following the date of the Executive’s Separation from Service (as such term is defined in Section 18).”

(g) In the event of a "Reverse Merger" and the Executive management changes ormanagement roles are altered and / or are requested and / or a change of presentlocation is requested by the Board then this is also considered that the  Executive’s employment to be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to  section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the same benefits and payments as per 6(f), and the Executive shall not have the duty to mitigate damages:

(h) In the event of a "Board Change" means if the full board, in any given year, votes to change the Executives role, the Board of Directors has the right to elect any chairman each year at their sole discretion. If the Executive becomes only a President & COO then this is also termed a "Change of Control" for this individual Executive this is also considered that the  Executive’s employment to be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the same benefits and payments as per 6(f), and the Executive shall not have the duty to mitigate damages:

(i) The corporate office is in the Denver area and will remain there unless the board votes otherwise.  If in the event of a reverse merger or other business combination and the corporate office is moved by board vote to another city or state more than 75 miles from its current location and the Executive is directed to move locations this then is also considered that the Executive’s employment to be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is terminated pursuant to section 6(f), in compensation for the Executive’s loss of employment, the Executive shall become entitled to receive the same benefits and payments as per 6(f), and the Executive shall not have the duty to mitigate damages:

(j) The Company may terminate the Executive’s employment without notice or payment in lieu of such employment, for cause.  For the purposes of this Agreement “cause” shall mean (i) the failure to follow written policies or directions of the Board not inconsistent with this Agreement or contrary to applicable law, (ii) neglect of responsibilities after the receipt of written notice setting forth the performance deficiencies and providing 120 days to cure such deficiencies. However, without cause, 6(f) applies loss of employment, the Executive shall become entitled for compensation for the Executive’s to receive the benefits and payments within 6(f), and the Executive shall not have the duty to mitigate damages.

9

(k) In all cases above under 6 ( a - j) ,  where the Executive has been deemed to have lost employment for any reason and subject to a customary exit agreement from the company, the company is prohibited from locking the Executive, within the exit agreement, from future work and / or non-compete clauses that would hinder the Executives future work. There will be no time frame inserted to areas of influence for areas of interest.  In no event can the company withhold severance payments under 6 (a - j) after 30 days if an exit agreement has not been agreed to and signed by both parties.

7. Notices

(a) Any notice required or permitted to be given to the Executive shall be sufficiently given if delivered to the Executive personally or mailed by registered mail to the Executive’s home address.

(b) Any notice required or permitted to be given to the Company shall be sufficiently given if delivered to the Secretary of the Company personally or if mailed by registered mail to the Company’s principal office, attention Corporate Secretary.

(c) Any notice given by registered mail shall be deemed to have been given forty-eight hours after the time it is posted.

8.           Entire Agreement

This Agreement terminates, replaces and supersedes all prior agreements, oral or written, between the parties hereto.  This Agreement contains the final and entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and they shall not be bound by any terms, conditions, statements, covenants, representations, or warranties, oral or written, with respect to the subject matter hereof not contained in this Agreement.

9.           Headings

The headings in this Agreement are for convenience of reference only, and under no circumstances should they be construed as being a substantive part of this Agreement nor shall they limit or otherwise affect the meaning hereof.

10.           Warranty

Each of the parties hereto represents and warrants that there are no restrictions, agreements or limitations on such party’s right or ability to enter into and perform the terms of this Agreement.

10

11.           Severability

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable by a court of competent jurisdiction for any reason whatsoever (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

12.           Modification

Any modification of this Agreement must be in writing, agreed to and signed by both the Executive on the one hand and by the Company acting through an officer duly authorized to execute such modification on behalf of the Company or such modification shall have no effect and shall be void.  Note:  The Board of Directors cannot change any term within this agreement without written agreement with the Executive.  The Board cannot leverage wage increases, bonuses and / or stock options against term changes within this agreement.

13.           Waiver

The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or violation. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

14.           Assignment of Rights

The rights that accrue to the Company under this Agreement shall pass to its successors or assigns.  The rights of the Executive under this Agreement are not assignable or transferable in any manner.

15.           Independent Legal Advice

The Executive acknowledges that he has read and understands this Agreement, and acknowledges that he has had the opportunity to obtain independent legal advice with respect to it.  Any Legal advice and or litigation will be paid for 100% by the Company within 7 days of the time any bill for services has been presented.

11

16.           Time of Essence

Time shall be of the essence of this Agreement.

17.           Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.  Any dispute between the Company and Executive shall be brought exclusively in the State or Federal Courts located in Denver, Colorado.  In the event of such dispute, the prevailing party shall be entitled to recover its reasonable attorney’s fees and costs.

18.           . Code Section 409A

The parties intend that the provisions of this Agreement either (i) are grandfathered from the requirements of Section 409A of the Code or (ii) comply with the requirements of the short-term deferral exception of Section 409A of the Code and Treasury Regulations Section 1.409A-1(b)(4).  Accordingly, to the extent there is any ambiguity as to whether one or more provisions of this Agreement would otherwise contravene the requirements or limitations of Code Section 409A applicable to the grandfather rules or the short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Code Section 409A and the Treasury Regulations thereunder that apply to such rules or such exception.”

If and to the extent this Agreement may be deemed to create an arrangement subject to the requirements of Section 409A, then no amounts which become payable by reason of the Executive’s cessation of service shall actually be issued or distributed to the Executive prior to the earlier of (i) the first day of the seventh (7th) month following the date of his Separation from Service due to such cessation of service or (ii) the date of the Executive’s death, if the Executive is deemed at the time of such Separation from Service to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations issued under Code Section 409A, as determined by the Company in accordance with consistent and uniform standards applied to all other Code Section 409A arrangements of the Company, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Sectio409A(a)(2).  The deferred payments shall be paid in a lump sum on the first day of the seventh (7th) month following the date of the Executive’s Separation from Service or, if earlier, the first day of the month immediately following the date the Company receives proof of the Executive’s death.

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IN WITNESS WHEREOF the parties have duly executed this Agreement effective as of the date first written above.

CALAIS RESOURCES INC

By: /s/ R. David Russell                        

       R. David Russell

       Executive Chairman and CEO

EXECUTIVE

  /s/ David K. Young                                  

    David K. Young

    Board Member, President and COO

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EX-10.3

EXHIBIT 10.3

EMPLOYMENT AGREEMENT WITH THOMAS S. HENDRICKS

DATED SEPTEMBER 1, 2011

EMPLOYMENT AGREEMENT

              THIS AGREEMENT (“Agreement”) is effective as of September 1, 2011

BY AND BETWEEN:

Calais Resources Inc.

4415 Caribou Road. P.O. Box 653

Caribou, Nederland, CO 80466-0653

(the “Company”)

and

Thomas S. Hendricks

P.O. Box 653 - Caribou

Nederland, CO  80466-0653

(the “Executive”)

RECITALS

WHEREAS the Executive is an Officer of the Company, the former chief executive officer of the Company, and has, for the past 40 years, been in charge or associated with the development of the Company’s chief assets, and is currently employed in the Business (as defined below) operated by the Company;

WHEREAS the Company and Executive desire that the agreements and understandings pursuant to which Company has agreed to hire Executive and Executive has agreed to serve be set forth in writing for the benefit of both parties:

NOW THEREFORE in consideration of the promises and mutual covenants herein contained, the parties hereto agree as follows:

1.           Defined Terms

(a) “Board” means the Board of Directors of the Company;

(b) “Business” means the business presently or hereafter carried on by the Company in the area of mineral resource exploration, development and production;

(c) “Disability” means the inability of the Executive as a result of illness or injury to perform his responsibilities as an employee of the Company for a period of 180 consecutive days or 200 days out of 400 days;

(d) “Effective Change of Control” means the occurrence, within a single transaction or series of related transactions occurring within the same 12-month period, of a change in the identity of persons who individually or collectively hold rights to elect, or to approve the election of, a majority of the members of the Board, including, without limitation, transactions consisting of one or more sales or other transfers of assets or equity securities, mergers, consolidations, amalgamations, reorganizations, or any similar transactions; and

(e) “Stock Grant Plan” means the incentive stock grant plan of the Company for directors, officers, employees and other service providers of the Company.

2. Employment

(a) The Company (directly or through its United States and other subsidiaries) shall employ the Executive, and the Executive shall serve the Company and its subsidiaries as, Vice President and General Manageror in such other capacity or capacities as may be determined by the Board from time to time.

(b) The Executive represents that he has the required skills and experience to perform the duties required of him and agrees to be bound by the terms and conditions of this Agreement.

(c) The Executive will be employed by the Company on a full-time basis and will devote himself exclusively to the Business and will not be employed or engaged in any capacity in any other business that is in competition with the Business of the Company, without the prior written approval of the Company.

(d) The Executive acknowledges that in carrying out his duties and responsibilities:

i) the Executive shall comply with all lawful and reasonable instructions as may be given by the Board;

ii) the Executive will perform his duties with the highest level of integrity and in a manner which shall engender the Company’s complete confidence in the Executive’s relationship with other employees of the Company and with all persons dealt with by the Executive in the course of employment; and

2

iii) the Executive will perform his duties in a diligent, loyal, productive and efficient manner and use his best efforts to advance the Business and goodwill of the Company.

(e) The Executive understands that the hours required to meet the objectives of his employment will vary and be irregular.

(f) The location of the Executive’s employment under this Agreement shall be in the State of Colorado.

3. Compensation and Benefits

As compensation for the services to be rendered by the Executive to the Company, the Company agrees to provide the remuneration and benefits set out in this paragraph 3.

(a) Base Salary and Discretionary Bonus

The Executive shall be paid a minimum annual base salary of US$ 175,000.  The Board shall review the amount of such salary annually.  Said salary shall be subject to all deductions required by law or required by company policy and shall be paid monthly, in arrears, by check or deposit, or such other periodic installments as may be from time to time agreed.  In addition, the Executive may be entitled to receive a discretionary performance bonus in such amount, if any, as the Board in its sole discretion may determine.

(b) Stock Grant

The Executive shall be eligible to receive stock grants, granted pursuant to the Stock Grant Plan, on such terms and conditions as the Board in its discretion may determine.

(c) Automobile Allowance

The Executive shall be entitled to receive an automobile allowance to cover normal day-to-day operating (including fuel) and maintenance costs paid by the company.

(d)           Health (Medical and Vision), Dental, Long Term Disability and Life Insurance

The Executive shall be entitled to receive and participate in health (medical and vision), dental, long-term disability and life insurance programs offered by the Company to other executive employees and entitled, at his option, to continue to receive and participate in the health (medical and vision) (Humana), dental (Delta) insurance programs which the Company makes available as of the date of this Agreement.  In recognition of the Executive’s hands-on

3

participation in the oversight and maintenance of the Company’s principal mining assets in Caribou, the Company shall continue to provide disability insurance coverage to Executive under the policy currently provided to Executive by AFLAC or, at the Executive’s option, under a substitute policy in an amount and with benefits equivalent to the coverage currently provided to Executive by the Company.

(e)           Indemnification and D&O Liability Insurance

To assure that Executive will be in a position to perform his duties to the Company without concern over unwarranted liability, the Company shall indemnify and advance reasonable defense expenses to the Executive to the full extent permitted by Colorado.  The Company shall also use its best efforts to purchase, at the earliest time practicable, one or more policies of directors and officers liability insurance in an amount adequate to protect Executive against claims made against him for actions taken or not taken in the conduct of his duties to the Company.

4.           Vacation

The Executive will be entitled to twenty five (25) days of vacation during each twelve- (12) month period calculated from January 1, 2011 plus usual statutory and other public holidays, the timing of such vacation to be mutually agreed upon between the Executive and the Company.  Vacation entitlement not used in any 12-month period may be carried forward, provided that, if it is not used in the next 12-month period, the Executive shall be paid the cash equivalent of any unused vacation entitlement.

5.           Expenses

The Executive shall be reimbursed by the Company for business expenses incurred as a result of his work on behalf of the Company.  The Company shall reimburse the Executive for such expenses upon presentation of supporting documentation satisfactory to the Company in accordance with the tax principles applicable in the United States for such reimbursement and the Company’s established reimbursement policies, as those policies may be modified from time to time in the Company’s discretion.

6.           Terms of the Agreement and Termination

(a) This Agreement shall commence on the date hereof and shall be of indefinite term unless terminated pursuant to the provisions hereof.

(b) The Executive may terminate his employment pursuant to this Agreement by giving at least one (1) month’s advance notice in writing to the Company.  The Company may waive such notice, in whole or in part, and, if it does so, the

4

Executive’s entitlement to remuneration and benefits pursuant to this Agreement will cease on the date such notice is waived.

(c) The Executive’s employment shall terminate upon the death of the Executive, whereupon all stock options granted to the Executive shall immediately vest and shall be exercisable by the Executive’s heirs, executors, administrators or personal representatives in accordance with the terms of the Stock Grant Plan.

(d) The Executive’s employment shall be terminated upon the Disability of the Executive.

(e) In the event of an Effective Change of Control, the Executive’s employment shall be deemed to have been terminated without cause, and: (i) the Company shall be obligated to pay the Executive the severance payments calculated in accordance with subparagraph 6(f) hereof; and (ii) those certain stock options granted to Executive on July 8, 2004 in lieu of past due compensation shall, to the extent unvested, immediately and fully vest and be exercisable by Executive at will in accordance with the remaining terms provided therein.

(f) The Executive’s employment may be terminated without cause by majority vote of the Board.  In the event that the Executive’s employment is so terminated, or is deemed to have been terminated pursuant to subparagraph 6(e) hereof, any stock options granted but not vested shall be immediately vest, and the Company shall pay to the Executive 36 months salary, in compensation for the Executive’s loss of employment, together with a payment equal to 50% of any bonus entitlement of the Executive for each year in such 36 month period, plus any other compensation which the Executive is entitled to receive. Health (medical and vision), dental, long term disability and life insurance plan coverage in effect on the last day of employment shall continue, without material change, for a period of 36 months. The Executive shall not have the duty to mitigate damages.  For the purpose of calculating payments due to the Executive pursuant to this subparagraph 6(f), all Federal and State taxes and Federal excise taxes (parachute taxes) shall be grossed-up.  Such payment shall be paid to the Executive within fifteen days following the date of his Separation from Service (as such term is defined in Section 18); and

(g) The Company may terminate the Executive’s employment without notice or payment in lieu of such employment, for cause.  For the purposes of this Agreement “cause” shall mean (i) the failure to follow written policies or directions of the Board not inconsistent with this Agreement or contrary to applicable law, (ii) neglect of responsibilities after the receipt of written notice setting forth the performance deficiencies and providing 45 days to cure such deficiencies, (iii) acts of dishonesty, fraud, misrepresentation, insubordination, harassment or employment discrimination, and (iv) indictment for a felony.

5

7. Notices

(a) Any notice required or permitted to be given to the Executive shall be sufficiently given if delivered to the Executive personally or mailed by registered mail to the Executive’s home address.

(b) Any notice required or permitted to be given to the Company shall be sufficiently given if delivered to the Secretary of the Company personally or if mailed by registered mail to the Company’s principal office, attention Corporate Secretary.

(c) Any notice given by registered mail shall be deemed to have been given forty-eight hours after the time it is posted.

8.           Entire Agreement

This Agreement terminates, replaces and supersedes all prior agreements, oral or written, between the parties hereto.  This Agreement contains the final and entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and they shall not be bound by any terms, conditions, statements, covenants, representations, or warranties, oral or written, with respect to the subject matter hereof not contained in this Agreement.

9.           Headings

The headings in this Agreement are for convenience of reference only, and under no circumstances should they be construed as being a substantive part of this Agreement nor shall they limit or otherwise affect the meaning hereof.

10.           Warranty

Each of the parties hereto represents and warrants that there are no restrictions, agreements or limitations on such party’s right or ability to enter into and perform the terms of this Agreement.

11.           Severability

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable by a court of competent jurisdiction for any reason whatsoever (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or

6

unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

12.           Modification

Any modification of this Agreement must be in writing and signed by both the Executive on the one hand and by the Company acting through an officer duly authorized to execute such modification on behalf of the Company or such modification shall have no effect and shall be void.

13.           Waiver

The wavier by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or violation. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

14.           Assignment of Rights

The rights that accrue to the Company under this Agreement shall pass to its successors or assigns.  The rights of the Executive under this Agreement are not assignable or transferable in any manner.

15.           Independent Legal Advice

The Executive acknowledges that he has read and understands this Agreement, and acknowledges that he has had the opportunity to obtain independent legal advice with respect to it.

16.           Time of Essence

Time shall be of the essence of this Agreement.

17.           Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.  Any dispute between the Company and Executive shall be brought exclusively in the State or Federal Courts located in Denver, Colorado.  In the event of such dispute, the prevailing party shall be entitled to recover its reasonable attorneys fees and costs.

7

18.           . Code Section 409A

The parties intend that the provisions of this Agreement either (i) are grandfathered from the requirements of Section 409A of the Code or (ii) comply with the requirements of the short-term deferral exception of Section 409A of the Code and Treasury Regulations Section 1.409A-1(b)(4).  Accordingly, to the extent there is any ambiguity as to whether one or more provisions of this Agreement would otherwise contravene the requirements or limitations of Code Section 409A applicable to the grandfather rules or the short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Code Section 409A and the Treasury Regulations thereunder that apply to such rules or such exception.”

If and to the extent this Agreement may be deemed to create an arrangement subject to the requirements of Section 409A, then no amounts which become payable by reason of the Executive’s cessation of service shall actually be issued or distributed to the Executive prior to the earlier of (i) the first day of the seventh (7th) month following the date of his Separation from Service due to such cessation of service or (ii) the date of the Executive’s death, if the Executive is deemed at the time of such Separation from Service to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations issued under Code Section 409A, as determined by the Company in accordance with consistent and uniform standards applied to all other Code Section 409A arrangements of the Company, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Sectio409A(a)(2).  The deferred payments shall be paid in a lump sum on the first day of the seventh (7th) month following the date of the Executive’s Separation from Service or, if earlier, the first day of the month immediately following the date the Company receives proof of the Executive’s death.

8

IN WITNESS WHEREOF the parties have duly executed this Agreement effective as of the date first written above.

CALAIS RESOURCES, INC.

By:   /s/ David R. Russell                         

David R. Russell

Chairman of the Board

     EXECUTIVE

  /s/ Thomas S. Hendricks                       

       Thomas S. Hendricks

9

EX-31

EXHIBIT 31

RULE 13a-14(a) CERTIFICATION

I, David K. Young, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Calais Resources Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the issuer’s sole certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The issuer’s sole certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  October 14 , 2011	/s/ David K. Young
	David K. Young
	President, Chief Operating Officer and Acting Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the report on Form 10-Q of Calais Resources (the “Company”) for the quarter ended August 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  October  14,  2011	/s/ David K. Young
	David K. Young
	President, Chief Operating Officer and Acting Chief Financial Officer (Principal  Executive Officer and Principal Financial Officer)

XML

CONSOLIDATED BALANCE SHEETS [Parenthetical]	Aug. 31, 2011	May 31, 2011
Common stock, shares issued	153,844,986	149,184,986
Common stock, shares outstanding	153,844,986	149,184,986

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		300 Months Ended
	Aug. 31, 2011	Aug. 31, 2010	Aug. 31, 2011
Sales	$ 0	$ 0	$ 0
Operating Costs and Expenses
Costs applicable to sales	307,820	0	307,820
General and administrative expense	444,893	184,599	12,759,870
Exploration and business development expenses	18,937	15,937	12,400,890
Depreciation and amortization expense	100	0	202,802
Total operating costs and expenses	771,750	200,536	25,671,382
Loss from Operations	(771,750)	(200,536)	(25,671,382)
Other (income) and expenses
Loss on impairment	0	0	9,808,572
(Gain) loss on settlement of debts	0	(20,214)	(3,388,742)
Interest and financing fees	207,160	213,531	14,646,505
Foreign currency transaction loss	407	0	1,368,278
Other (income) expense	(156,535)	0	88,366
Total other (income) and expenses	51,032	193,317	22,522,979
Loss before income taxes	(822,782)	(393,853)	(48,194,361)
Income tax expense (benefit)	0	0	0
Net loss	(822,782)	(393,853)	(48,194,361)
Other comprehensive loss (income) - foreign currency translation adjustments	1,566	12,431	241,270
Comprehensive loss	$ (824,348)	$ (406,284)	$ (48,435,631)
Basic and diluted weighted-average number of common shares outstanding (in shares)	151,608,139	85,410,751
Basic and diluted loss per common share (in dollars per share)	$ (0.01)	$ 0

XML

DOCUMENT AND ENTITY INFORMATION	3 Months Ended
	Aug. 31, 2011	Oct. 14, 2011
Entity Registrant Name	CALAIS RESOURCES INC
Entity Central Index Key	0001044650
Current Fiscal Year End Date	--05-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	caauf
Entity Common Stock, Shares Outstanding		157,811,422
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Aug. 31, 2011
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2012

XML

SHAREHOLDERS' DEFICIT

3 Months Ended

Aug. 31, 2011

Stockholders' Equity Note [Abstract]

Stockholders Equity Note Disclosure Excluding Common Stock Warrants [Text Block]

NOTE 7 – SHAREHOLDERS’ DEFICIT

Common Stock    -   We have authorized an unlimited number of common shares of our no par value common stock.  Common shares outstanding as of August 31, 2011 and May 31, 2011 were 153,844,986 and 149,184,986, respectively.

Transactions involving our common stock during the three months ended August 31, 2011 were as follows:

·     We raised $778,500 in cash from accredited investors for the sale of units comprising 4,660,000 shares of restricted common stock and warrants to purchase 2,330,000 of common shares.  The common stock prices ranged from $0.10 to $0.20 per share and the warrants had exercise prices from $0.20 to $0.30 per share with expiration dates of June, July and August 2012.

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SUBSEQUENT EVENTS

3 Months Ended

Aug. 31, 2011

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 12 – SUBSEQUENT EVENTS

We have evaluated all of our activity and have concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the unaudited consolidated financial statements, except as disclosed below.

Employment Agreements

Effective September 1, 2011, the Company entered into employment agreements with certain directors and officers of the Company, which supercede prior existing agreements.  The employment agreements provide for increases in compensation, performance bonuses, stock grants, and other certain health and travel benefits.  The agreements have no termination date; however, they provide for termination related to circumstances relative to:  the employee’s voluntary termination; termination due either death or disability; the employee’s termination without cause; or termination resultant to the Company’s effective change of control, as defined in the employment agreements.

Debenture Settlements

Lynne Martin Settlement

On September 20, 2011, we paid the final installment on the Settlement Agreement with Lynne Martin, in the amount of $28,681.

Common Stock

Since August 31, 2011, we have issued 3,966,668 shares of our restricted common stock and 1,983,335 warrants to purchase our common shares for net cash proceeds of $420,000.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Aug. 31, 2011

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Foreign Currency

We have recorded amounts payable related to a convertible debenture that is denominated in Canadian dollars. As of August 31, 2011 and 2010 adjustments resulting from liabilities denominated in a foreign currency have been reported as other comprehensive loss in our financial statements.

Impairment of Long-Lived Assets

We review and evaluate long-lived assets for impairment at least once per year, or more often when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. During the three months ended August 31, 2011 and 2010 we did not record any impairment expense.

Reclassifications

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the presentation in the current period financial statements.

Recent Accounting Pronouncements

The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the SEC, and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on U.S. GAAP and the impact on the Company. 

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) , which requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. We do not have any assets or liabilities classified as Level 3. We have adopted the Level 1 and Level 2 amendments accordingly. As the update only pertained to disclosures, it had no impact on our financial position, results of operations, or cash flows upon adoption.

Use of Estimates and Significant Estimates

Certain amounts in our financial statements are based upon significant estimates including environmental remediation obligations, accrued liabilities and a provision for income taxes. Actual results could materially differ from those estimates.

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LOSS PER SHARE

3 Months Ended

Aug. 31, 2011

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 9 – LOSS PER SHARE

Basic loss per share is computed by dividing income available to common stockholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflect the potential of securities that could share in our earnings. All of the common shares underlying warrants outstanding as of August 31, 2011 and 2010 were excluded from diluted weighted average shares outstanding for each of the respective years because their effects were considered anti-dilutive

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RELATED PARTY TRANSACTIONS

3 Months Ended

Aug. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 10 – RELATED PARTY TRANSACTIONS

We have frequent transactions with related parties, employees and shareholders holding more than 10% of our outstanding common stock.  Transactions involving related parties during the three months ended August 31, 2011 were as follows:

·   Our notes payable balance as of August 31, 2011 consisted of one note payable to Brigus Gold Corp. (“Brigus”). When this note was consummated in February 2010, the counterparty to this note was Apollo Gold Corp., a predecessor of Brigus.  Our now-current CEO, R. David Russell, was the CEO of Apollo Gold Corp. at that time.

·   From time to time, our President and Vice President of Corporate Development incur expenses on behalf of the Company and are reimbursed by us. As of August 31, 2011, included in accounts payable are amounts due to the officers as reimbursement. These amounts are not considered to be material.

·   The Canadian-dollar denominated convertible debenture (Note 6) is owned by a company related to a shareholder and former director.

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COMMON STOCK WARRANTS

3 Months Ended

Aug. 31, 2011

Stockholders' Equity Note [Abstract]

Common Stock Warrants [Text Block]

NOTE 8 – COMMON STOCK WARRANTS

The following table summarizes information about outstanding stock purchase warrants as of August 31, 2011:

	Number of WarrantsOutstanding		Exercise Price
Outstanding as of May 31, 2011		31,498,196		$0.12-$0.25
Issued		2,330,000		$0.20-$0.30
Expirations		-
Balance at August 31, 2011		33,828,196		$0.12-$0.30

Exercise Price		Number of Shares		Remaining Contractual Life in Years		Exercise Price Times Number of Shares		Weighted Average Exercise Price
$	0.12		11,246,141		1.25		1,349,537
$	0.12		4,136,259		1.5		496,351
$	0.12		5,060,496		1.5		607,260
$	0.12		480,000		1.8		57,600
$	0.12		8,249,900		9.9		989,988
$	0.20		2,825,400		1.5		565,080
$	0.25		875,000		9.2		218,750
$	0.30		955,000		1.0		286,500
			33,828,196				4,571,066	$0.14

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ORGANIZATION AND BASIS OF PRESENTATION

3 Months Ended

Aug. 31, 2011

Accounting Policies [Abstract]

Business Description and Basis of Presentation [Text Block]

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Calais Resources, Inc. was incorporated under the laws of the Province of British Columbia, Canada, on December 30, 1986.  Calais Resources, Inc. and its subsidiaries (collectively with its subsidiaries, referred to herein as “Calais”, “we”, “us” or “our”) is currently in the process of exploring various mineral interests, primarily gold and silver.  We are headquartered in Colorado, and have mining interests in Colorado and Nevada.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to the valuation of deferred tax assets accruals for liabilities and the fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

Our activities to date have primarily consisted of raising capital and acquiring and exploring our mining interests.  We have had no significant revenue in our history.  Accordingly, we are considered to be in the exploration stage.

Our fiscal year end is May 31st.  Through May 31, 2004, we reported our financial information using Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) using the Canadian dollar as our functional and reporting currency.  During the fiscal year ended May 31, 2005, we changed our reporting basis to the United States Generally Accepted Accounting Principles (“U.S. GAAP”) and our functional and reporting currency to the United States dollar (“U.S. dollar”).    Accordingly, historical cumulative financial information included in this Quarterly Report on Form 10-Q has been restated using U.S. GAAP with a functional and reporting currency of the U.S. dollar, unless otherwise noted.  All references herein to “$” and “US$” refer to U.S. dollars.  Unless otherwise specified, all dollar amounts are expressed in United States dollars.  All references to Common Shares refer to shares of our common stock (without par value) unless otherwise indicated.

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MINERAL INTERESTS

3 Months Ended

Aug. 31, 2011

Mineral Interest Disclosure [Abstract]

Mineral Interest Disclosure [Text Block]

NOTE 4 – MINERAL INTERESTS

There were no material changes to our mineral properties from those disclosed in the audited annual consolidated financial statements for the year ended May 31, 2011.

During the quarter ended August 31, 2011 we began test mining operations at our Cross mine. We have begun test processing at an out of state facility. We have incurred $307,820 in costs associated with these operations, while we have not generated revenues through August 31, 2011.

On August 11, 2011 we renewed a convertible debenture payable to Aardvark Agencies Inc. “AAI” which contained repurchase rights for interests in our Caribou properties, including the price payable for the reacquisition (a total of Cdn$747,728) and AAI’s right to convert that debenture before it is paid (Note 6).

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DEBT

3 Months Ended

Aug. 31, 2011

Debt Disclosure [Abstract]

Debt Disclosure Excluding Debentures [Text Block]

NOTE 5 – DEBT

As of August 31, 2011 and May 31, 2011, we had one outstanding note payable in the amount of $10,253,878 (the “Brigus Note”).  The original maturity date for the note was February 1, 2011.  On January 15, 2011, we received forbearance under the terms of an agreement effectively extending the maturity date of the debt through June 30, 2011. On June 8, 2011, we and the note holder extended the maturity of the note through October 31, 2011. In connection with this forbearance we paid the note holder $1,000,000 which was applied against interest due on the promissory notes.  The note bears interest at 8% and is secured by a lien on our Caribou property.

We continue to explore financing opportunities related to the October 31, 2011 maturity date of the Brigus Note.

As of August 31, 2011 and May 31, 2011, we have accrued interest in the amount of $296,764 and $1,090,001, respectively.

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DEBENTURES

3 Months Ended

Aug. 31, 2011

Debt Disclosure [Abstract]

Debenture Disclosure [Text Block]

NOTE 6 – DEBENTURES

A summary of convertible debentures outstanding is as follows:

	August 31, 2011			May 31, 2011
Debenture (a)	$	676,256		$	702,964
Total debenture payable		676,256			702,964
Less: Current portion		(676,256	)		(702,964	)
Long-term portion	$	-		$	-

(a) This debenture is unsecured, non-interest bearing, and initially matured in May 2011.  This debenture is owned by Marlowe Harvey who was the President and a director of ours until he resigned as President in 2000 and as a director in November 2003.  The debenture is convertible into common stock at $1.23 in Canadian Dollars at the holder’s discretion and contains no restrictive covenants.

This debenture matured in May 2011.  On August 11, 2011 the convertible debenture was renewed for a period of ten years maturing on August 31, 2021. All terms contained in the debenture agreement remain consistent with the original note, as fully described in our annual report on Form 10-K for the period ended May 31, 2011.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended		300 Months Ended
	Aug. 31, 2011	Aug. 31, 2010	Aug. 31, 2011
Cash flows from operating activities:
Net loss	$ (822,782)	$ (393,853)	$ (48,194,361)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion expense	0	0	105,655
Amortization of deferred financing costs	0	0	3,369,936
Depreciation and depletion	100	0	201,135
Non-cash interest expense	206,763	207,073	12,046,663
Loss on impairment of mineral properties	0	0	8,824,989
Loss on impairment of investment	0	0	983,583
Common shares issued in connection with trust deed modification	0	0	90,000
Common shares issued in connection with debt settlement	0	0	1,048,053
Common shares issued for services	0	50,000	1,524,441
Warrants cancelled for services	0	0	(18,173)
Warrants issued in connection with debt restructure	0	0	155,007
Losses (gains) recognized in connection with debt settlement	0	(20,214)	(3,098,846)
Gain on sale of property, plant and equipment	(156,500)	0	(151,627)
Loss on disposal of property, plant and equipment	0	0	8,040,143
Loss on abandonment of mineral properties	0	0	300,600
Loss on default of exploration development agreement	0	0	456,090
Loss on foreign exchange	407	0	1,687,048
Environmental remediation liability	0	0	50,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses	(41,265)	(28,582)	(122,568)
Increase (decrease) in accounts payable and other current liabilities	(911,873)	112,779	1,606,156
(Increase) decrease in other operating assets and liabilities	0	10,321	(202,667)
Net cash (used in) operating activities	(1,725,150)	(62,476)	(11,298,742)
Cash flows from investing activities:
Purchase of mineral properties & equipment	0	0	(17,481,692)
Dispositions of equipment	156,500	0	317,852
Net additions to equipment	0	0	(183,542)
Deferred exploration expenditures	0	0	(143,071)
Deposit on equipment	0	0	(17,880)
Acquisition of shares of subsidiary	0	0	(715,932)
Advance to subsidiary	0	0	(177,875)
Payable under option agreement	0	0	716,481
Refundable deposit on purchase of shares of subsidiary	0	0	(73,847)
Net cash provided by (used in) investing activities	156,500	0	(17,759,506)
Cash flows from financing activities:
Proceeds from sale of common shares	778,500	52,000	22,583,579
Proceeds from sale of private equity	0	0	345,000
Proceeds from borrowings long term-debt	0	0	17,029,960
Proceeds from borrowing on shareholder note	0	0	282,000
Repayments of long term debt	0	0	(11,902,794)
Repayments of debt - convertible debentures	(28,681)	(5,000)	(501,305)
Advances to affiliated companies, shareholders and directors	0	0	(106,730)
Restricted cash	0	0	(31,789)
Share subscriptions received in advance	0	0	518,415
Net cash provided by financing activities	749,819	47,000	28,216,336
Effect of foreign exchange	0	0	936,263
Net change in cash and cash equivalents	(818,831)	(15,476)	94,351
Cash at beginning of period	913,182	27,919	0
Cash at end of period	94,351	12,443	94,351
Supplemental Cash Flow Information
Interest expense paid in cash	397	6,458	1,203,730
Interest received	0	0	3,999
Debt restructuring - warrants issued	0	0	412,407
Common shares issued in connection with debt restructuring and settlement of accrued liabilities	0	836,539	4,987,140
Common shares issued in connection with accrued liabilities	0	760,000	1,175,651
Common shares issued for debt restructuring	0	0	556,321
Common shares issued for settlement	0	76,539	1,999,451
Common shares issued for debt restructuring and settlements	0	0	1,255,717
Common shares issued for acquisition of property	0	0	32,500
Shares issued for mineral property development	0	0	96,315
Shares issued for repayment of shareholder advances	$ 0	$ 0	$ 9,240,146

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LIQUIDITY

3 Months Ended

Aug. 31, 2011

Liquidity [Abstract]

Liquidity [Text Block]

NOTE 2 – LIQUIDITY

As of August 31, 2011, we had a working capital deficit of $11,681,015, and for the three months then ended cash used in operating activities amounted to $1,725,150.  To date, we have not generated any revenues from operations and have incurred losses since inception resulting in a deficit accumulated during the development stage of $48,194,361 through August 31, 2011.  Further losses are anticipated as we continue to be in the exploration stage, as defined in ASC Topic 915, Development Stage Entities .

Our ability to continue as a going concern depends upon our ability to generate profitable operations in the future and/or to raise additional funds through equity or debt financing.  Since inception, we have raised $23,446,994 through the issuance of equity securities and $17,311,960 through the issuance of debt instruments, which has been used primarily to provide operating funds, repay long term debt, and acquire mineral interests.  Subsequent to August 31, 2011, we have acquired an additional $420,000 through financing, as described more fully in Note 12.  There is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us or at all.  If we cannot obtain needed funds for implementing our mine plan after completion of the feasibility study, we may be forced to curtail or cease our activities.  Equity financing, if available, may result in substantial dilution to existing stockholders. All of these factors cause substantial doubt about our ability to continue as a going concern.  These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue as a going concern.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Aug. 31, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 11 – COMMITMENTS AND CONTINGENCIES

There have been no material changes to our obligations as described in our annual report on Form 10-K issued in connection with the fiscal year ended May 31, 2011. We may from time to time become subject to various claims and litigation. The Company vigorously defends its legal position when these matters arise. The Company is neither a party to, nor the subject of, any material pending legal proceeding nor to the knowledge of the Company are there any such legal proceedings threatened against the Company.

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CONSOLIDATED BALANCE SHEETS (USD $)	Aug. 31, 2011	May 31, 2011
ASSETS
Cash and cash equivalents	$ 94,351	$ 913,182
Prepaid expenses and other assets	81,226	39,961
Total current assets	175,577	953,143
Restricted cash	15,400	15,400
Note receivable	60,000	60,000
Fixed assets, net	15,213	15,313
Total assets	266,190	1,043,856
LIABILITIES
Accounts payable and accrued liabilities	926,458	1,631,568
Convertible debenture	676,256	702,964
Notes payable	10,253,878	10,253,878
Total current liabilities	11,856,592	12,588,410
Royalty interest	150,000	150,000
Environmental remediation liabilities	50,000	50,000
Total liabilities	12,056,592	12,788,410
Shareholders' Deficit
Common stock, no par value, unlimited shares authorized, 153,844,986, and 149,184,986 shares issued and outstanding as of August 31, 2011 and May 31, 2011, respectively	36,645,229	35,866,729
Deficit accumulated in the exploration stage	(48,194,361)	(47,371,579)
Accumulated other comprehensive loss	(241,270)	(239,704)
Total Shareholders' Deficit	(11,790,402)	(11,744,554)
Total Liabilities and Shareholders' Deficit	$ 266,190	$ 1,043,856