SB-2/A 1 mainbody.htm MAINBODY mainbody
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2/A
Amendment No. 3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Colombia Goldfields Ltd.
(Exact name of Registrant as specified in its charter)
 
Delaware 
1400
76-0730088
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer Identification Number)
 
 
 
#208-8 King Street East, Toronto, Ontario, Canada
M5C 1B5
(Name and address of principal executive offices)
(Zip Code)
 
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 (800)-927-9800
(Name, address and telephone number of agent for service)
 
Registrant's telephone number, including area code: 416-203-3856
 
 
 
 
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  |__|

If any of the securities being registered on the Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box |X|

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  |__|

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  |__|

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. |__|
 
TITLE OF EACH
CLASS OF
SECURITIES
TO BE
REGISTERED
 
 
AMOUNT TO BE
REGISTERED
PROPOSED
MAXIMUM
OFFERING
PRICE PER
SHARE (1)
PROPOSED
MAXIMUM
AGGREGATE
OFFERING
PRICE (1)
 
AMOUNT OF
REGISTRATION
FEE
Common Stock
9,170,000 shares
$1.21
$11,095,700
$1,405.83 (2)
 
(1)  
Pursuant to Rule 457(c) under the Securities Act, the proposed maximum offering price per share and the proposed maximum aggregate offering price have been determined on the basis of the average of the bid and asked price as of a specified date within five business days prior to the date of filing this registration statement.
(2)  
Previously Paid

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
 
COPIES OF COMMUNICATIONS TO:
Cane Clark LLP
3273 East Warm Springs Rd.
Las Vegas, NV 89120
(702) 312-6255 Fax: (702) 944-7100


SUBJECT TO COMPLETION, Dated August 9, 2007

PROSPECTUS
COLOMBIA GOLDFIELDS LTD.
9,170,000 SHARES OF COMMON STOCK

The selling shareholders named in this prospectus are offering up to 9,170,000 shares of common stock offered through this prospectus. We will not receive any proceeds from the sale of shares in this offering. We have not made any arrangements for the sale of these securities.
 
Our common stock is presently quoted on the over-the-counter bulletin board (the “OTCBB”) administered by the National Association of Securities Dealers (“NASD”) and our stock trading symbol is CGDF. As a result, the actual price of the stock will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders. The offering price will thus be determined by market factors and the independent decisions of the selling shareholders. On July 12, 2007 the last sale price of our common stock as reported by the OTCBB was $1.34 per share.
 
The purchase of the securities offered through this prospectus involves a high degree of risk. See section entitled "Risk Factors" on page 8-15.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
The Date of This Prospectus Is: August 9, 2007


 
 
Page


SUMMARY INFORMATION
 
Colombia Goldfields Ltd.
 
We were incorporated in the state of Nevada on March 25, 2003 under the name Secure Automated Filing Enterprises Inc. and reincorporated in the state of Delaware on July 31, 2006. From the date of our incorporation until March 2005, we provided electronic filing services to companies that are required to electronically file reports with the Securities and Exchange Commission (‘SEC”). After this time, we reorganized our operations and our current focus is on the acquisition and development of our interests in mining properties located in western Colombia. We are an exploration stage company and there is no assurance that commercially exploitable reserves of gold exists on any of our property interests. In the event that commercially exploitable reserves of gold exist on any of our property interests, we cannot guarantee that we will make a profit. If we cannot acquire or locate gold deposits, or if it is not economical to recover the gold deposits, our business and operations will be materially and adversely affected. The disclosure that follows is a summary of each of the property interests.
 
On September 22, 2005, we entered into an Assignment Agreement with Investcol Limited ("Investcol"), a corporation organized and existing under the laws of Belize, where Investcol assigned, transferred, and conveyed to us all of its rights under a Contract for Purchase Option of Mining Concessions (“Original Option Contract”) entered into with CIA Servicios Logisticos de Colombia Ltda., a corporation organized and existing under the laws of Colombia. As a result of this Assignment Agreement with Investcol, we acquired an option to purchase certain mining and mineral rights on property known as Concession 6602, 1343, and 6329 located in Caramanta Municipality, Antioquia Department, Medellin, Colombia. In consideration for the assignment of this interest, we paid to Investcol $500,000 and issued Investcol 1,000,000 shares of our common stock. On September 25, 2006, we entered into a Master Agreement to acquire 94.99% of the issued and outstanding shares of Gavilan Minerales S.A. (“Gavilan”), a Colombia corporation, for the purchase price of $300,000 and the issuance of 1,150,000 shares of our common stock. Cia Servicios Logisticos de Colombia Ltda. was the primary shareholder of Gavilan. Gavilan holds proper legal title to Concessions 6602, 1343, and 6329. As a result of our acquisition of Gavilan, we became the title holder of these Concessions and no exploratory work obligations on these Concessions.
 
Also on September 22, 2005, we entered into an agreement with Investcol to manage the exploration operations on these interests. We paid Investcol an office fee of $7,500 on a monthly basis through July 31, 2006.
 
We acquired an interest in certain mining rights and options to acquire mining rights in the Zona Alta portion of the Marmato deposit located in western Colombia as a result of our acquisition of an equity interest in RNC (Colombia) Limited ("RNC"), a Belize corporation and a wholly-owned subsidiary of Investcol Limited. Pursuant to a Stock Purchase Agreement we entered into on January 12, 2006 with Investcol and RNC, we acquired 25% of RNC’s issued and outstanding stock in consideration for the issuance of 1,000,000 shares of our common stock to Investcol and a $1,200,000 non-interest bearing demand loan to RNC. Thereafter on April 28, 2006, we acquired an additional 25% of RNC’s issued and outstanding common stock, resulting in us


owning 50% of RNC’s issued and outstanding common stock, in consideration for the issuance of 2,000,000 shares of our common stock to Investcol and a $4,000,000 non-interest bearing demand loan to RNC. Thereafter, we acquired an additional 25% of RNC’s issued and outstanding common stock, resulting in our owning 75% of RNC’s issued and outstanding common stock, in consideration for the issuance of 4,200,000 shares of our common stock to Investcol, payment of $200,000 to Investcol, a commitment to provide a $5,000,000 non-interest bearing loan to RNC by December 31, 2006, and commitment to provide sufficient funds to RNC to complete the feasibility study on the Marmato Mountain Project pursuant to the First Amendment to the Stock Purchase Agreement (the “First Amendment”) of the Stock Purchase Agreement executed on August 22, 2006. On December 14, 2006, we entered into a Second Amendment to the Stock Purchase Agreement (the “Second Amendment”) and acquired an additional 15% interest in RNC, resulting in us owning 90% of RNC, in exchange for the issuance of 4,000,000 shares of our common stock to Investcol. Subject to the revised terms of the Second Amendment, we have the option to acquire the final 10% interest in RNC until May 1, 2009 resulting in our owning 100% of RNC, in consideration for exchange for the purchase price of $15,000,000. This payment can be made in either cash, shares of our common stock, or any combination thereof. Any shares issued shall be valued at 90% if the average closing price of our common stock as reported on a national securities exchange or national market or quotation system over the 30 day period immediately preceding the deliver of notice to Investcol of our intent to exercise this option.
 
RNC is the beneficial holder of 94.99% of the issued and outstanding stock of Compania Minera de Caldas S.A. ("Caldas"), a Colombia corporation that (i) owns certain mining rights, (ii) has options to acquire mining rights and (iii) has exclusive rights to evaluate certain property, all located in the Zona Alta portion of the Marmato deposit located in western Colombia.
 
On April 10, 2006, we acquired from Investcol its rights to acquire certain mining contracts to exclusively engage in mining activities on Concessions 6993, 7039, 6821, and 6770 (the “Contracts”) and options to acquire the exclusive rights to engage in mining activities on Concessions HET-31, 32, 26, 27, and HETG-01 (the “Options”) all located within an area referred to as the Caramanta location in western Colombia. In consideration for this acquisition, we issued to Investcol one million restricted shares of our common stock and paid to Investcol $350,000. As a result of our acquisition of Gavilan on September 25, 2006 pursuant to the terms of the Master Agreement described above, we also became the title holder to Concessions 6993, 7039, 6821, 6770, HET-31, 32, 26, 27, and HETG-01 and no longer have to satisfy any minimum exploratory work obligations on these Concessions.
 
On August 30, 2006, Caldas entered into a Transfer of Properties and Sale Agreement with Sociedad KEDAHDA S.A (“KEDAHDA”), a Colombia corporation, and acquired the Mining Title, Mining Application, and Mining Data for property located in the Marmato Mountain Gold District located in Colombia identified Title 5956, Applications 6455, 6455-B, 6418, 6418-B, 6418-C, 6170, D15-151, 622-17, 623-17, 615-17, 616-17 and 628-17. Pursuant to an Agreement with Caldas, we paid the purchase price of $500,000 for these entire property interests and Caldas agreed to hold the title for these property interests in their name for our benefit. Title to these property interests are being held by Caldas in order to secure the approval for the transfer of title by Colombian mining authorities in accordance with the applicable laws of the Republic of Colombia.


Our principal office is located at #208-8 King Street East, Toronto, Ontario, Canada M5C 1B5.

Our fiscal year end is December 31.
 
The Offering
 
Securities Being Offered
Up to 9,170,000 shares of our common stock.
   
Offering Price and Alternative Plan of Distribution
 
The offering price of the common stock being registered will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders. The offering price will thus be determined by market factors and the independent decisions of the selling shareholders.
   
Minimum Number of Shares To Be Sold in This Offering
 
None
   
Securities Issued and to be Issued
 
65,816,849 shares of our common stock are issued and outstanding as of August 9, 2007. All of the common stock to be sold under this prospectus will be sold by existing shareholders.
   
Use of Proceeds
 
We will not receive any proceeds from the sale of the common stock by the selling shareholders.

Summary Financial Information
 
Balance Sheet Data
As of
March 31, 2007
  
As of
December 31, 2006 
  
As of
December 31, 2005 
Cash and cash equivalents
Total Assets
Liabilities
Total Stockholder’s Equity
$
 
3,941,968
52,708,614
16,243,759
36,464,855
  
$
 
882,913
45,007,379
15,797,195
29,210,184
  
$
 
1,565,640
1,765,341
83,004
1,682,337
                 
Statement of Operations  
Three Months Ended
March 31, 2007 
    
Fiscal Year Ended
December 31, 2006 
    
Fiscal Year Ended
December 31, 2005  
Revenue
Net Loss for Reporting Period
$
$
 0
 2,503,431
   $
$
0
6,278,684
  
$
$
0
1,491,470


Risk Factors
 
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. Due to any of these risks, you may lose all or part of your investment.
 
We need to raise substantial funds in order to acquire additional exploration and mining properties or interests and commence exploration activities.
 
We have incurred a net loss of $10,333,078 for the period from our inception on March 25, 2003 to March 31, 2007. As of March 31, 2007, we had cash and cash equivalents in the amount of $3,941,968, which we anticipate will be used in its entirety to fund our second quarter operations and property purchases. At March 31, 2007, we also had a working capital deficiency of approximately $2.1 million. We presently are not generating any revenue and do not anticipate that we will generate any revenue from operations in the near future. Our business plan includes completing the acquisition of the remaining 10% equity interest in RNC (Colombia) Limited, which may require additional funds of as much as $15,000,000 on or before May 1, 2009. As a result, we will require at least $15,000,000 to implement our business plan over the twelve to thirty-six months in addition to any funds we require to continue our exploration activities. We currently do not have any arrangements for financing and we may not be able to obtain financing. If we are unable to obtain additional financing when sought, we will be required to curtail our business plan. Any additional equity financing may involve substantial dilution to our then existing shareholders. There is a significant risk to investors who purchase shares of our common stock because there is a risk that we may not be able to generate and/or raise enough resources to remain operational for an indefinite period of time.
 
Because we have only recently commenced business operations, we face a high risk of business failure due to our inability to predict the success of our business.
 
We have a very limited operating history upon which an evaluation of our future success or failure can be made. It was only recently that we took steps in a plan to engage in the acquisition of interests in exploration and development properties in western Colombia, and it is too early to determine whether such steps will lead to success. It is premature to evaluate the likelihood that we will be able to operate our business successfully. To date, we have been involved primarily in the acquisition of property interests and mining rights in western Colombia and have not commenced any exploration activities. We have not earned any revenues from our current operations as of the date of this prospectus.

Because we presently do not carry title insurance and do not plan to secure any in the future, we are vulnerable to loss of title.
 
We do not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. Currently, we are in the process of investigating the title of mineral concessions for which we hold the options to acquire either directly or through our equity interest in RNC (Colombia) Limited. We cannot give any assurance that title to such


properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties. The possibility also exists that title to existing properties or future prospective properties may be lost due to an omission in the claim of title. As a result, any claims against us may result in liabilities we will not be able to afford resulting in the failure of our business.
 
Because our property interest and exploration activities in Colombia are subject to political, economic and other uncertainties, situations may arise that could have a significantly adverse material impact on us.
 
Our property interests and proposed exploration activities in western Colombia are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, mining licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, changing political conditions and international monetary fluctuations. Future government actions concerning the economy, taxation, or the operation and regulation of nationally important facilities such as mines could have a significant effect on us. Any changes in regulations or shifts in political attitudes are beyond our control and may adversely affect our business. Exploration may be affected in varying degrees by government regulations with respect to restrictions on future exploitation and production, price controls, export controls, foreign exchange controls, income taxes, expropriation of property, environmental legislation and mine and/or site safety. No assurances can be given that our plans and operations will not be adversely affected by future developments in Colombia
 
Because we are subject to various governmental regulations and environmental risks, we may incur substantial costs to remain in compliance.
 
Our operations are subject to Colombian and local laws and regulations regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials. Any changes in these laws could affect our operations and economics. Environmental laws and regulations change frequently, and the implementation of new, or the modification of existing, laws or regulations could harm us. We cannot predict how agencies or courts in Colombia will interpret existing laws and regulations or the effect of these adoptions and interpretations may have on our business or financial condition. We may be required to make significant expenditures to comply with governmental laws and regulations.
 
Any significant mining operations will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off. No assurances can be given that such environmental issues will not have a material adverse effect on our operations in the future. Exploration activities may give rise to significant liabilities on our part to the government and third parties and may require us to incur substantial costs of remediation.

Additionally, we do not maintain insurance against environmental risks. As a result, any claims against us may result in liabilities we will not be able to afford resulting in the failure of our business.


Because of the unique difficulties and uncertainties inherent in mineral exploration business, we face a high risk of business failure.
 
Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. Only a small proportion of the properties that are explored are ultimately developed into producing mines. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. Weather conditions can increase delays resulting in additional costs and expenses. The search for valuable minerals also involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards for which we cannot insure or for which we may elect not to insure. At the present time, we have no coverage to insure against these hazards. The payment of such liabilities may have a material adverse effect on our financial position. In addition, there is no assurance that the expenditures to be made by us in the exploration of the mineral claims will result in the discovery of commercially exploitable mineral deposits. We may be forced to revise our exploration program at an increased cost if we encounter unusual or unexpected formations. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts.
 
Because we will be subject to compliance with government regulation which may change, the anticipated costs of our exploration program may increase.
 
We have and will in the future engage consultants to assist it with respect to our operations in Colombia. We are beginning to deal with the various regulatory and governmental agencies, and the rules and regulations of such agencies, in connection with the Marmato and Caramanta transactions. No assurances can be given that it will be successful in our efforts. Further, in order for us to operate and grow our business in Colombia, we need to continually conform to the laws, rules and regulations of such country and local jurisdiction. It is possible that the legal and regulatory environment pertaining to the exploration and development of gold mining properties will change. Uncertainty and new regulations and rules could increase our cost of doing business, or prevent us from conducting our business.
 
Our due diligence activities with respect to our property interests cannot assure that these properties will ultimately prove to be commercially viable.
 
Our due diligence activities have been limited, and to a great extent, we have relied upon information provided to us by Investcol Limited. Accordingly, no assurances can be given that the properties or mining rights we possess will contain adequate amounts of gold for commercialization. Further, even if we recover gold from such mining properties, we cannot guarantee that we will make a profit. If we cannot acquire or locate commercially exploitable gold deposits, or if it is not economical to recover the gold deposits, our business and operations will be materially adversely affected. At present, none of our properties have proven or probable reserves and the proposed programs are an exploratory search for proven or probable reserves. The mining areas presently being assessed by us may not contain economically recoverable volumes of minerals or metals. We have relied and may continue to rely, upon consultants and others for operating expertise.


In the event that we are unable to successfully compete within the mineral exploration business, we may not be able to achieve profitable operations.
 
The mineral exploration business is highly competitive. This industry has a multitude of competitors and many competitors dominate this industry. Many of our competitors have greater financial resources than us. As a result, we may experience difficulty competing with other businesses when conducting mineral exploration activities or in the retention of qualified personnel. No assurances can be given that we will be able to compete effectively.
 
Due to numerous factors beyond our control which could affect the marketability of gold including the market price for gold, we may have difficulty selling any gold if commercially viable deposits are found to exist.
 
The availability of markets and the volatility of market prices are beyond our control and represent a significant risk. Even if commercially viable deposits of gold are found to exist on our property interests, a ready market may not exist for the sale of the reserves. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. These factors could inhibit our ability to sell gold in the event that commercial viable deposits are found to exist. 
 
Because of the speculative nature of exploration for gold properties, there is substantial risk that our business will fail.
 
The search for gold as a business is extremely risky. We cannot provide any assurances that the gold mining interests that we have acquired will contain commercially exploitable reserves of gold. Exploration for minerals is a speculative venture necessarily involving substantial risk. The expenditures made and to be made by us in connection with the our interests in the Marmato Mountain Gold District and Caramanta Municipality, as well as the further exploration of the properties, will be substantial and may not result in the discovery of commercially exploitable reserves of gold.
 
In the event that commercially viable deposits are found to exist, there is a risk that we may not have to requisite resources and expertise to place the property into commercial production.

We have no prior experience in placing mineral properties into production and our ability to do so will be dependent upon us using the services of appropriately experienced personnel or entering into agreements with other major resource companies that can provide such expertise. There can be no assurance that we will have available to us the necessary expertise when and if it places its resource property into production.


Because our operations are located outside of the United States, U.S. investors may face difficulty in effecting service of process against us and our executive officers or directors.
 
All of our operations are located outside of the United States. As a result, it may not be possible for you to:
 
·  
enforce judgments obtained in U.S. courts based on civil liability provisions of the U.S. federal securities laws against us or our executive officers and directors; or
·  
enforce judgments of U.S. courts based on civil liability provisions of the U.S. federal securities laws in the courts of foreign jurisdictions against judgments obtained against us or our executive officers and directors;
 
Because our Chief Executive Officer, J. Randall Martin, is also an officer and director of Investcol Limited, situations may arise that would present a conflict of interests, which may result in decisions disadvantageous to our shareholders.
 
Mr. Martin, our President and Chief Executive Officer, is also an officer and director of Investcol Limited (“Investcol”), the party from which we acquired our equity interest in RNC (Colombia) Limited and other interests, applications and options in mining rights in western Colombia. Investcol has been retained to direct and supervise our mining operations in Colombia. Although the terms of each of these agreements with Investcol were negotiated and agreed to prior to Mr. Martin's appointment as President and Chief Executive Officer, future situations may develop where Mr. Martin's interest as a principal of Investcol conflicts with his fiduciary duties as an officer and director of our company. Although, we will attempt to minimize or eliminate Mr. Martin's ability to influence any of our decisions affecting Investcol, should a conflict occur it is possible that any such conflict could be resolved in the interests of Investcol instead of our shareholders.  Mr. Martin has indicated his intention to resign his positions with Investcol should conflicts of interest arise in the future. 
 
Because of potential conflicts of interest, our President may not be able or willing to devote a sufficient amount of time to our business operations causing our business to fail.
 
Our Chief Executive Officer, Mr. Martin, is also an officer and director of Investcol and he may become affiliated with other mining companies. We do not maintain a key man life insurance policy for Mr. Martin. Our executive officers do not devote their full time to our operations. If the demands of our business require the full business time of Mr. Martin or our other executive officers and directors, it is possible that they may not be able to devote sufficient time to the


management of our business, as and when needed. If our management is unable to devote a sufficient amount of time to manage our operations, our business will fail.
 
Because our success is dependent upon a limited number of people, our business may fail if those individuals leave the company.
 
The ability to identify, negotiate and consummate transactions that will benefit us are dependent upon the efforts of our management team and Investcol. We have engaged Investcol to provide support for our management and supervise exploration and development activities in Colombia. The loss of the services of any member of management or the principals of Investcol could have a material adverse effect on us.

If we fail to maintain an effective system of internal control, we may be able to accurately report our financial results or prevent fraud resulting in current and potential stockholders losing confidence in our financial reporting.
 
Effective internal controls are necessary for us to provide reliable financials reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We are currently working towards Sarbanes Oxley 404 compliance, but there can be no assurance that we will be compliant within the deadlines imposed by Sarbanes Oxley.
 
New legislation, including the Sarbanes-Oxley Act of 2002, may make it more difficult for us to retain or attract officers and directors.
 
The Sarbanes-Oxley Act of 2002 was enacted in response to public concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934. As a public company, we are required to comply with the Sarbanes-Oxley Act. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We continue to evaluate and monitor developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.


Because our common stock is quoted and traded on the over-the-counter bulletin board, short selling could increase the volatility of our stock price.
 
Short selling occurs when a person sells shares of stock which the person does not yet own and promises to buy stock in the future to cover the sale. The general objective of the person selling the shares short is to make a profit by buying the shares later, at a lower price, to cover the sale. Significant amounts of short selling, or the perception that a significant amount of short sales could occur, could depress the market price of our common stock. In contrast, purchases to cover a short position may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on over-the-counter bulletin board or any other available markets or exchanges. Such short selling if it were to occur could impact the value of our stock in an extreme and volatile manner to the detriment of our shareholders.
 
Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase our common stock.
 
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors must rely on sales of their own common stock after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends should not purchase our common stock.
 
Because our stock price can be volatile, investors may not be able to recover any of their investment.
 
Stock prices in general, and stock prices of mineral exploration companies in particular, have experienced extreme volatility that often have been unrelated to the operating performance or any specifics of the company. Factors that may influence the market price of our common stock include:
 
(i)  
actual or anticipated changes or milestones in our operations;
(ii)  
our ability or inability to acquire gold mining properties or interests in such properties in Colombia;
(iii)  
our ability or inability to generate revenues;
(iv)  
increased competition within Colombia and elsewhere;
(v)  
government regulations, including mineral exploration regulations that affect our operations;

 
(vi)  
predictions and trends in the gold mining exploration industry;
(vii)  
volatility of gold market prices;
(viii)  
sales of common stock by "insiders"; and
(ix)  
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors.

Our stock price may also be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuation, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations, may adversely affect the market price of our common stock.

Because our common stock is quoted on the over-the-counter bulletin board administered by the NASD and is subject to the “Penny Stock” rules, the level of trading activity in our stock may be reduced.
 
Broker-dealer practices in connection with transactions in "penny stocks" are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges or quoted on the over-the-counter bulletin board administered by the NASD). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.
 
Because our shares are quoted on the over-the-counter bulletin board, we are required to remain current in our filings with the SEC and our securities will not be eligible for quotation if we are not current in our filings with the SEC.
 
Our shares are quoted on the over-the-counter bulletin board and we are required to remain current in our filings with the SEC in order for shares of our common stock to remain eligible for quotation on the over-the-counter bulletin board. In the event that we become delinquent in our required filings with the SEC, quotation of our common stock will be terminated following a 30 day grace period if we do not make our required filing during that time. If our shares are not eligible for quotation on the over-the-counter bulletin board, investors in our common stock may find it difficult to sell their shares.


Forward-Looking Statements

This prospectus includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,”“expect,”“intend,”“predict,”“project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this prospectus. Factors that can cause or contribute to these differences include those described under the headings “Risk Factors” and “Management Discussion and Analysis.”

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual result may vary materially from what we projected. Any forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified in this prospectus that would cause actual results to differ before making an investment decision.
 
Use of Proceeds
 
We will not receive any proceeds from the sale of the common stock offered through this prospectus by the selling shareholders.
 
Determination of Offering Price
 
All shares being offered will be sold by existing shareholders without our involvement, consequently the actual price of the stock will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders. The offering price will thus be determined by market factors and the independent decisions of the selling shareholders.
 
Selling Shareholders
 
The selling shareholders named in this prospectus are offering all of the shares of common stock being registered by this prospectus. The shares include the 9,020,000 common shares that the selling shareholders acquired from us by the selling shareholders in an offering that was exempt from registration under Regulation S of the Securities Act of 1933 and completed on March 21, 2007. Also included in this prospectus are 150,000 shares of common stock issued to a consultant as compensation for services rendered.


At the time of the purchase, no selling shareholder had any agreements or understandings to distribute the securities.
 
The following table provides information regarding the beneficial ownership of our common stock held by each of the selling shareholders as of June 30, 2007, including:
 
1.  The number of shares owned by each prior to this offering;
2.   The total number of shares that are to be offered by each;
3.   The total number of shares that will be owned by each upon completion of the offering;
4.   The percentage owned by each upon completion of the offering; and
5.   The identity of the beneficial holder of any entity that owns the shares.

The named party beneficially owns and has sole voting and investment power over all shares or rights to the shares, unless otherwise shown in the table. The numbers in this table assume that none of the selling shareholders sells shares of common stock not being offered in this prospectus or purchases additional shares of common stock, and assumes that all shares offered are sold. The percentages are based on 65,816,849 shares of common stock outstanding on August 9, 2007.
 
Name and Address of Selling Shareholder
 
Shares Owned Prior to This Offering
 
Total Number Of Shares To Be Offered For Selling Shareholder Account
Total Shares To Be Owned Upon Completion of This Offering
Percent Owned Upon Completion Of This Offering
Proprietary Partners Fund Ltd. (1)
Rodus Building 4th Floor, P.O. Box 4064
Road Town, Tortola, British Virgin Islands
250,000
250,000
0
0%
HARE & Co. (2)
c/o Baker Steel Capital Managers LLP
86 Jermyn Street
London, England SWIY6JD
940,000
940,000
0
0%
HARE & Co. (2)
c/o Baker Steel Capital Managers
86 Jermyn Street
London, England SWIY6JD
240,000
240,000
0
0%
GERLACH & Co. (2)
c/o Baker Steel Capital Managers
86 Jermyn Street
London, England SWIY6JD
1,060,000
1,060,000
0
0%
 
 GERLACH & Co. (2)
c/o Baker Steel Capital Managers
86 Jermyn Street
London, England SWIY6JD
260,000
260,000
0
0%
Galena Special Situations Master Fund Limited (3)
c/o International Management Services Ltd.
4th Floor Harbour Centre, P.O. Box 61Gt
Grand Cayman, Cayman Islands,
British West Indies
300,000
300,000
0
0%
GESICO International S.A. (4)
c/o HSBC Guyerzeller Bank
Genferstrasse 8
Zurich, Switzerland, 8027
835,000
500,000
335,000
0.5%
Grange Nominees Limited (5)
P.O. Box 116, Trafalgar Court, Admiral park
St. Peter Port, Guernsey, Channel Islands
GY1 3EZ
100,000
100,000
0
0%
Cavan Vetier for Samaria (6)
Bridport & Co. (JSY) Ltd.
Union House, Union Street, St Hellier, Jersey
JE23RF
52,500
52,500
0
0%
Cavan Vetier for Kleio (6)
Bridport & Co. (JSY) Ltd.
Union House, Union Street, St Hellier, Jersey
JE23RF  
22,500
22,500
0
0%
Craig Warren
21 Otler Crescent
Toronto, Ontario, M5N 2W3
25,000
25,000
0
0%
Swissfirst Bank (Liechtenstein) AG (8)
Austrasse 61
Vaduz, Liechtenstein, 9490
200,000
200,000
0
0%
Absolute East West Master Fund (9)
One Cayman House, 215 North Church Street
P.O. Box 10630 APO, Grand Cayman
Cayman Islands
3,000,000
3,000,000
0
0%

 
Bank Julius Baer & Co. Limited (10)
Bahnhofstrasse 36
Zurich, Switzerland, 8010
70,000
70,000
0
0%
Credit Agricole (Suisse) S.A (7) (11)
66, Rue Du Stand
Geneva, Switzerland, 1204
1,021,192
175,000
846,192
1.3%
Evergreen Investment Corporation (12)
1 chemin la Foge
Commugny, Switzerland 1291
150,000
25,000
125,000
0.2%
Bansco & Co. (13)
In Trust for Salida Multi Strategy A/C #78200003
Scotia Plaza 40, King Street West
Toronto Ontario, M5W 2X6
900,000
900,000
0
0%
T. Finn & Co. (13)
c/o Ogier Fiduciary Services (Cayman) Limited
PO Box 1234 GT, Queensgate House
South Church Street, George Town. Grand Cayman (Cayman Islands)
900,000
900,000
0
0%
Global Business Partners AG (14)
Hafenwag 8
CH-8808 Pfaffkon
Switzerland
150,000
150,000
0
0%

None of the selling shareholders;
 
(1)  
has had a material relationship with us other than as a shareholder at any time within the past three years; or
(2)  
has been one of our officers or directors.

(1)  
Martin Lechner, Luca Pessarini, and Stefan Muller are the beneficial owners of the shares held by Proprietary Partners Fund Ltd.
(2)  
Trevor Steel and David Baker are the beneficial owners of the shares held by HARE & Co. and GERLACH & Co.
(3)  
Cedric Chone is the beneficial owner of the shares held by Galena Special Situations Master Fund Limited
(4)  
Tobias Rietmann and Roberto Rizzo are the beneficial owners of the shares held by GESICO International S.A.
(5)  
Enrico Shohet is the beneficial owner of the shares held by Grange Nominees Limited
(6)  
Cavan Vetier and Jason Bell are the beneficial owners of the shares held by Cavan Vetier for SAMARIA and Cavan Vetier for KLEIO.
(7)  
Claude Olivier and Alain Candellero are the beneficial owners of 75,000 of the shares held by Credit Agricole (Suisse) SA
(8)  
Markus Foser and Juergen Coop are the beneficial owners of the shares held by Swissfirst Bank (Liechtenstein) AG
(9)  
Florian Homm is the beneficial owner of the shares held by Absolute East West Master Fund
(10)  
Urs Mettler is the beneficial owner of the shares held by Bank Julius Baer & Co. Ltd.
(11)  
Henry Shohet is the beneficial owner of 100,000 of the shares held by Credit Agricole (Suisse) SA
(12)  
Martin C. Hubble is the beneficial owner of the shares held by Evergreen Investment Corporation
(13)  
Danny Greg is the beneficial owner of the shares held by Bansco & Co. In Trust for Salida Multi Strategy A/C #78200003) and T. Finn & Co. FBO BTR Global Growth Trading Limited
(14)  
Heinz Hofliger is the beneficial owner of the shares held by Global Business Partners AG


Plan of Distribution
 
The selling shareholders may sell some or all of their common stock in one or more transactions, including block transactions:
 
1. 
on such public markets or exchanges as the common stock may from time to time be trading;
2.  in privately negotiated transactions;
3.  through the writing of options on the common stock;
4.  in short sales,
5.  in any combination of these methods of distribution; or
6   any other method permitted by applicable law.
  
Our common stock is quoted on the over-the-counter bulletin board administered by the NASD, so the offering price of the stock will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders. The offering price will thus be determined by market factors and the independent decisions of the selling shareholders. The sales price to the public may be:
 
1. 
the market price of our common stock prevailing at the time of sale;
2.  a price related to such prevailing market price of our common stock, or;
3.  such other price as the selling shareholders determine from time to time.
 
The shares may also be sold in compliance with the Securities and Exchange Commission's Rule 144.
 
In general, under Rule 144 of the Securities Act as currently in effect, a person who has beneficially owned restricted securities for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of the following:
 
·  
one percent of the number of shares of common stock then outstanding, or
·  
the average weekly trading volume of the common stock during the four calendar weeks preceding the sale. However, pursuant to the rules and regulations promulgated under the Securities Act, the OTC Bulletin Board, where our common stock is quoted, is not an “automated quotation system” referred to in Rule 144(e). As a consequence, this market-based volume limitation allowed for securities listed on an exchange or quoted on NASDAQ is unavailable for our common stock.


 Sales under Rule 144 are also subject to requirements with respect to manner-of-sales requirements, notice requirements and the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell his or her shares without complying with the manner-of-sale, public information, volume limitation or notice provisions of Rule 144.
 
The selling shareholders may also sell their shares directly to market makers acting as agents in unsolicited brokerage transactions. Any broker or dealer participating in such transactions as an agent may receive a commission from the selling shareholders, or if they act as agent for the purchaser of such common stock, from such purchaser. The selling shareholders will likely pay the usual and customary brokerage fees for such services. If applicable, the selling shareholders may distribute shares to one or more of their partners who are unaffiliated with us. Such partners may, in turn, distribute such shares as described above. Under such circumstance, all unidentified security holders will be identified in pre-effective or post-effective amendment(s) or prospectus supplement(s), as applicable.
 
We can provide no assurance that all or any of the common stock offered being registered hereby will be sold by the selling shareholders.
 
We are bearing all costs relating to the registration of the common stock. The selling shareholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.
 
The selling shareholders must comply with the requirements of the Securities Act and the Exchange Act in the offer and sale of the common stock. In particular, during such times as the selling shareholders may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be an underwriter, they must comply with applicable law and may, among other things:
 
1.  
not engage in any stabilization activities in connection with our common stock;
2.  
furnish each broker or dealer through which common stock may be offered, such copies of this prospectus, as amended from time to time, as may be required by such broker or dealer; and;
3.  
not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act.
 
Legal Proceedings
 
We are not currently a party to any legal proceedings. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
 
Our agent for service of process in Delaware is Corporation Service Company, 2711 Centerville Rd., Wilmington, Delaware 19808.


Directors, Executive Officers, Promoters And Control Persons
 
Our executive officers and directors and their respective ages as of August 9, 2007 are as follows:
 
Name
Age
Position(s) and Office(s) Held
J. Randall Martin
50
President, Chief Executive Officer and Director
James Kopperson
40
Chief Financial Officer
Dr. Stewart Redwood
46
Vice President of Exploration
Thomas Ernest McGrail
56
Director
David Bikerman
47
Director
Terry Lyons
57
Director
James Verraster
51
Director
Edward Flood
61
Director
Jonathan Berg
63
Director

Set forth below is a brief description of the background and business experience of executive officers and directors.
 
J. Randall Martin. On March 1, 2006, our Board of Directors appointed J. Randall Martin to act as our Chief Executive Officer, President, and as a member of our Board. Most recently, Mr. Martin served as Chairman and CEO of RNC Gold from May 13, 2005 to February 28, 2006 and served as CEO from December 2003 to May 13, 2005. Following its inception as a private company in 2000, he proceeded to list RNC Gold on the Toronto TSX in December of 2003. At the end of February 2006, RNC Gold completed a successful amalgamation with Yamana Resources, a Toronto-based intermediate gold producer. RNC Gold operated three gold mines located in Nicaragua and Honduras with combined annual gold production capacity of over 150,000 ounces. RNC Gold also completed a feasibility study on a gold project in Panama and conducted extensive exploration programs in Mexico, Honduras, and Nicaragua. Mr. Martin previously worked with AMAX Inc. (a worldwide base metals mining company), DRX, Inc. (a junior exploration company), Martin Marrietta, Behre Dolbear (an international mining consulting company) and Greenstone Resources Limited (a Central American gold producer). He has a B.Sc. in mining engineering from the Krumb School of Mines at Columbia University where he completed graduate work in mining and mineral economics.  Mr. Martin is Chairman and a principal of RNC (Management) Limited, a privately-held mine management and investment company. 
 
James Kopperson. On December 1, 2006, the Board of Directors appointed Mr. Jim Kopperson to act as our Chief Financial Officer. Mr. Kopperson is a Chartered Accountant and holds a Masters Degree in Accounting from the University of Waterloo. From 1994 to 1997, Mr. Kopperson served in the Office of the Chief Accountant at the Ontario Securities Commission. From 1997 to 1999, he was Senior Manager at KPMG, LLP, an international accounting and consulting firm. From 1999 to 2002 he was an Audit and Securities Reviewing Partner with KPMG, LLP. From 2002 to 2005, he was Chief Financial Officer of RDM Corporation, a publicly traded transaction processing and manufacturing company. In 2006, Mr. Kopperson served as interim Chief Financial Officer for Photowatt Technologies, an alternative energy company.


Dr. Stewart D. Redwood. On December 1, 2006, our Board of Directors appointed Dr. Redwood to act as Vice President of Exploration. Dr. Redwood has accumulated 25 years of mineral exploration experience. He has a degree in geology from Glasgow University and obtained his Ph.D from Aberdeen University for his work on the gold and silver deposits of Bolivia. From 1987 to 1989 he was a Higher Scientific Officer with the British Geological Survey in Scotland. From 1989 to 1994 he was Director of Exploration for Mintec S.A., a Bolivian consulting firm. From 1994 to 1999, Dr. Redwood joined Inmet Mining Corporation as Senior Geologist in South and Central America. In 2000, he worked as Chief Geologist for AngloGold South America Ltd. on the company’s gold exploration in South America. From 2000 to 2004, Dr. Redwood co-founded and served as the COO and director of Exploration & Discovery Latin America (Panama) Inc. to carry out gold exploration in the Dominican Republic, Central America and Peru. From 2002 to 2005, he was the Chief Geologist of Minmet plc, a company conducting exploration and mining in Brazil, Sweden and Spain. From 2004 to 2005, he was President, CEO and director of GoldQuest Mining Corp., a company involved in gold exploration in the Dominican Republic. From 2005 until joining our company, Dr. Redwood provided geological consulting to various firms.
 
Thomas Ernest McGrail. On June 14, 2005, our Board of Directors appointed Mr. McGrail to serve as a member of the Board. Mr. McGrail has an extensive background in mining development and operation. From January 2002 to the present, Mr. McGrail has served as construction manager for Minero Cerro Quema. Mr. McGrail’s responsibilities include obtaining all appropriate government approvals prior to commencing mining operations and participating in the feasibility study. Also from January 2002 to the present, Mr. McGrail has acted as a consultant to Minerales de Copan for a project located in Honduras. From April 2001 to July 2002, Mr. McGrail served as general manager for Desarrollo Minera de Nicaragua, S.A. and also acted as the interim general manager for this company on a mining project from August 2004 to October 2004. Mr. McGrail served as president and general manager of HEMCO de Nicaragua, S.A. from June 1999 to April 2001.

David Bikerman. On July 31, 2006, Mr. Bikerman was elected to serve as a member of our Board. Mr. Bikerman has been in the mining field for over twenty years and is experienced in all aspects of mining enterprises from exploration through operations. He is the founder of Bikerman Engineering & Technology Associates, Inc. where he offers expert services to the mining industry in financial modeling, exploration and geologic model preparation, geo-statistical and reserve analyses, environmental plans, project feasibility, and project design and management.

Mr. Bikerman is President, China Operations and advisor to the Board for East Delta Beta Resources Corp. and is President and CEO of Sino Silver Corp. Most recently, Mr. Bikerman served as the Manager of Mining for RNC Resources Ltd. until it was sold in 2006. He was Vice President and Chief Engineer for Greenstone Resources Ltd. from 1993 to 1996 and was responsible for technical analysis, project design, and engineering for a Central American gold project. He was Vice President and Manager of Mining of Minas Santa Rosa, S.A. (Panama) and was a member of the Board of Minera Nicaraguense, S. A. (Nicaragua). He worked for five years as an Associate at Behre Dolbear & Co., an international minerals industry consultant based in New York, N.Y.


Mr. Bikerman holds three degrees in mining engineering. In 1981, he earned his Bachelor of Science in Mining Engineering from the University of Pittsburgh. In 1985, he earned his Master of Science in mining engineering from the Henry Krumb School of Mines at Columbia University in New York. In 1995, he earned his Engineer of Mines, also from the Henry Krumb School of Mines at Columbia University.

Terry Lyons. On March 14, 2007, our Board of Directors appointed Mr. Lyons to serve as a member of the Board. Mr. Lyons is the non-executive Chairman of Northgate Minerals Corporation and a director and officer of several public corporations including Canaccord Capital Inc. (Chairman, Audit Committee), Diamonds North Resources as well as several private corporations. He is a past director of Battle Mountain Gold Company, former Chairman of Westmin Resources Limited and is the past Chairman of the Mining Association of British Columbia. After completing a Bachelor of Science in Civil Engineering, Mr. Lyons attended the University of Western Ontario, graduating with an MBA in 1974.

James Verraster. On March 14, 2007, our Board of Directors appointed Mr. Verraster to serve as a member of the Board. Mr. Verraster is one of the founders and the CEO of Auramet Trading LLC, a global physical precious metals trading, merchant banking and advisory firm. Mr. Verraster has been successful in the Metals Trading and Finance Industry for 30 years. He was a significant contributor to the growth and development of the Rhode Island Hospital Trust National Bank precious metals lease portfolio to industrial end users which, in the mid-1980's, became the largest of any financial institution in the US. In 1996, Standard Bank hired Mr. Verraster to create and head up a comprehensive precious metals financing and physical precious metals trading business. He successfully attracted talented and experienced individuals who assisted in making Standard one of the leading banks dealing in precious metals. Mr. Verraster holds a B.Sc and is an MBA candidate in Accounting and Finance at Bryant College, Providence Rhode Island.

Edward Flood. On March 14, 2007, our Board of Directors appointed Mr. Flood to serve as a member of the Board. Mr. Flood has recently accepted the position of Managing Director, Investment Banking, Haywood Securities, UK, Limited. He was the founding President and has been a member of the board of directors of Ivanhoe Mines Ltd. since the company was formed in 1994. His 35-plus years of experience in the international mining field has helped guide Ivanhoe's growth and the establishment of the company as a significant presence in Asia's mineral exploration and mining sectors. Before joining Ivanhoe, Mr. Flood was a principal at Robertson Stephens & Co., an investment bank in San Francisco, USA. He was a member of Robertson Stephens' investment team for the Contrarian Fund, a public mutual fund concentrated on natural resources development projects around the world. He holds a bachelor's degree and a master's degree in Geology.

Jonathan Berg. On March 14, 2007, our Board of Directors appointed Mr. Berg to serve as a member of the Board. Mr. Berg is Vice President of Finance and Chief Administrative Officer of Pericor Therapeutics, Inc., a development stage bio-pharmaceutical company. Prior to his present position, he was President of Berg Capital Corporation, a registered investment advisor, focusing on institutional and high net worth individual clients. Mr. Berg has previously acted as a consultant on corporate structure, and raised funds for a number of small companies in the energy, technology, healthcare and consumer electronics fields. He holds a B.Sc. from the University of California, Berkley and an MBA from the University of Pennsylvania.


Term of Office

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws.

Our officers are appointed by our board of directors and hold office until removed by the board.

Significant Employees

We have no significant employees other than our officers and directors who act as consultants to the company.

Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

Involvement in Certain Legal Proceedings
 
To the best of our knowledge, during the past five years, none of the following occurred with any director, person nominated to become a director, executive officer, or control person of our company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
 
Security Ownership of Certain Beneficial Owners and Management
 
The following table sets forth, as of August 9, 2007, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 65,816,849 shares of common stock issued and outstanding on August 9, 2007.
 
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Except as described in the footnotes to this table, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by them. Except as otherwise indicated, the address of each person named in this table is c/o Colombia Goldfields Ltd., #208-8 King Street East, Toronto, Ontario Canada M5C 1B5.


 Title of class
Name and address
of beneficial owner (1)
Amount of beneficial ownership
Percent of class
Executive Officers and Directors
Common
J. Randall Martin
1,000,000 shares
1.5% (2)
Common
Stewart D. Redwood
500,000 shares
0.8% (3)
Common
Thomas Ernest McGrail
210,000 shares
0.3% (4)
Common
David Bikerman
10,000 shares
0% (5)
Common
James Kopperson
0 shares
0%(6)
Common
Terry Lyons
10,000 shares
0% (7)
Common
James Verraster
10,000 shares
0% (8)
Common
Edward Flood
10,000 shares
0% (9)
Common
Jonathan Berg
10,000 shares
0% (10)
Total of all Directors and Executive Officers
1,760,000 shares
2.7%
More than 5% Beneficial Owners
Common                                        Investcol Limited (11)
 
13,200,000 shares
20.1%

(1)  
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
(2)  
Mr. Martin was granted options to purchase 500,000 shares of common stock at an exercise price of $1.65 per share of which 250,000 of these options are exercisable within 60 days.
(3)  
Mr. Redwood was granted options to purchase 100,000 shares of common stock at an exercise price of $1.90 per share of which 50,000 of these options are exercisable within 60 days.
(4)  
Mr. McGrail was granted options to purchase 200,000 shares of common stock at an exercise price of $0.75 per share of which 150,000 of these options are exercisable within 60 days. Mr. McGrail also holds options to purchase 100,000 shares of common stock at an exercise price of $1.17 and none of these options have vested and/or are exercisable within 60 days.
(5)  
Mr. Bikerman was granted options to purchase 200,000 shares of common stock at an exercise price of $1.35 per share of which 100,000 of these options are exercisable within 60 days. Mr. Bikerman also holds options to purchase 100,000 shares of common stock at an exercise price of $1.17 and none of these options are exercisable within 60 days.
(6)  
Mr. Kopperson was granted options to purchase 100,000 shares of common stock at an exercise price of $1.20 per share of which 25,000 of these options are exercisable within 60 days. Mr. Kopperson also holds options to purchase 300,000 shares of common stock at an exercise price of $1.15 per share and 75,000 of these options are exercisable within 60 days.
(7)  
Mr. Lyons was granted options to purchase 300,000 shares of common stock at an exercise price of $1.18 per share of which none of these options are exercisable within 60 days.
(8)  
Mr. Verraster was granted options to purchase 300,000 shares of common stock at an exercise price of $1.18 per share of which none of these options are exercisable within 60 days.
(9)  
Mr. Flood was granted options to purchase 300,000 shares of common stock at an exercise price of $1.18 per share of which none of these options are exercisable within 60 days.
(10)  
Mr. Berg was granted options to purchase 300,000 shares of common stock at an exercise price of $1.18 per share of which none of these options are exercisable within 60 days.


(11)  
Mr. Martin is an officer and director of Investcol Limited. Pursuant to Rule 13d-4 of the Securities and Exchange Act of 1934, Mr. Martin disclaims beneficial ownership over the shares held by Investcol Limited. The shares held by Investcol Limited have not been included in the calculation of beneficial ownership for Mr. Martin.
 
Description of Securities
 
Our authorized capital stock consists of 200,000,000 shares of common stock and 10,000,000 shares of preferred stock, with a par value of $0.00001 per share. As of August 9, 2007, there were 65,816,849 shares of our common stock and 0 shares of our preferred stock issued and outstanding.
 
Common Stock
 
Our common stock is entitled to one vote for each outstanding share held by him, her, or it on each matter voted at a stockholders' meeting, including the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present, in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of our common stock representing five percent (5%) of our capital stock issued, outstanding, and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger, or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors.
 
In the event of any merger or consolidation with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other securities, or property (including cash) all holders of our common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash).
 
Holders of our common stock have no pre-emptive rights, no conversion rights, and there are no redemption provisions applicable to our common stock.
 
Preferred Stock
 
Our Board of Directors is authorized to issue all or any of the shares of the preferred stock in one or more series, fix the number of shares, determine or alter for each such series voting powers or other rights, qualifications, limitations, or restrictions thereof. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.


Dividend Policy
 
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
 
In the event that a dividend is declared, common stockholders on the record date are entitled to share ratably in any dividends that may be declared from time to time on the common stock by our board of directors from funds legally available.
 
There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The DGCL provides that a corporation may pay dividends out of surplus, out the corporation's net profits for the preceding fiscal year, or both provided that there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation's stock raving a distribution preference.
 
Delaware Anti-Takeover Laws
 
Delaware General Corporation Law (“DGCL”) Section 203 provides state regulation over the acquisition of a controlling interest in certain Delaware corporations unless our Articles of Incorporation or Bylaws provide that the provisions of these sections do not apply. Our Articles of Incorporation and Bylaws do not state that these provisions do not apply. The DGCL creates a number of restrictions on the ability of a person or entity to acquire control of a Delaware corporation by setting down certain rules of conduct and voting restrictions in any acquisition attempt, among other things.
 
Interests of Named Experts and Counsel
 
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
 
Cane Clark, LLP our independent legal counsel, has provided legal advice in connection with this registration statement and the offer and sale of our securities. The Stewart Law Firm has provided an opinion with respect to the validity of the issuance of our common stock, the subject of this registration statement, under Delaware law.
 
Vellmer & Chang, independent chartered accountants, has audited our financial statements for the included in this prospectus and registration statement to the extent and for the periods set forth in their audit report. Vellmer & Chang has presented their report with respect to our audited financial statements for the year ended December 31, 2005. The report of Vellmer & Chang is included in reliance upon their authority as experts in accounting and auditing.
 
PricewaterhouseCoopers LLP, independent chartered accountants, has audited our financial


statements for the fiscal year ended December 31, 2006 included in this prospectus and registration statement. The report of PricewaterhouseCoopers LLP is included in reliance upon their authority as experts in accounting and auditing.
 
Mr. William J. Lewis, a consulting geologist, has provided us with a technical report on the Marmato and Caramanta projects in the Departments of Caldas and Antioquia in the Republic of Colombia. We employed him on a flat rate consulting fee.
 
Disclosure of Commission Position of Indemnification for Securities Act Liabilities
 
In accordance with the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 
Organization within the Last Five Years
 
We were incorporated in the state of Nevada on March 25, 2003 under the name Secure Automated Filing Enterprises Inc. and reincorporated in the state of Delaware on July 31, 2006. From the date of our incorporation until March 2005, we provided electronic filing services to companies that are required to electronically file reports with the Securities and Exchange Commission (‘SEC”). After this time, we reorganized our operations and our current focus is on the acquisition and development of our interests in mining properties located in western Colombia. On May 13, 2005, we changed our name to Colombia Goldfields Ltd.
 
We are an exploration stage company and there is no assurance that commercially exploitable reserves of gold exists on any of our property interests. In the event that commercially exploitable reserves of gold exist on any of our property interests, we can not guarantee that we will make a profit. If we can not acquire or locate gold deposits, or if it is not economical to recover the gold deposits, our business and operations will be materially adversely affected.


Description of Business
 
Our Business

We are actively advancing two separate projects known as the Marmato Mountain Development Project and the Caramanta Exploration Project, both of which are located in Colombia’s Marmato Mountain Gold District. These projects are separated by approximately seven kilometers and our focus is on securing the region between Caramanta and Marmato and any other outlying targets that have the potential for mining.

We have been purchasing mineral licenses in the Zona Alta portion of the Marmato project since 2005. Our objective is to purchase all of the mineral licenses and then consolidate them into a single license. As part of our acquisition program at the Marmato and Caramanta projects we have also initiated a review of the available geological data for the projects and are in the process of compiling all information into a comprehensive database. We have identified a number of immediate exploration targets at both the Marmato and Caramanta locations.

With the Marmato and Caramanta projects, we have acquired a portion of a major historical gold producing district in Colombia. At the present time a number of small miners are still working the Zona Alta of the Marmato project and Mineros Nacionales is mining the Zona Baja at a rate of 300t/d. Very little exploration has been conducted in the past within the area of the Marmato and Caramanta projects to adequately determine the true extent of the remaining mineralization. Therefore, the potential economic viability of the project remains unknown, however we are optimistic that we will be successful in identifying a viable bulk tonnage, low grade gold and silver deposit with our Marmato and Caramanta projects. A number of other targets remain on the Marmato and Caramanta projects which we intend to explore further at a later date.

We have advanced our ownership interests in these projects as follows:

(A) Caramanta Project

(i) Caramanta Project - concessions 6602, 1343 and 6329

On September 22, 2005, we entered into an Assignment Agreement with Investcol Limited (“Investcol”) where Investcol assigned, transferred, and conveyed to us all of its rights under a contract for Purchase Option of Mining Concessions (“Original Option Contract”) entered into with Cia Servicios Y Logisticos Ltda. As the result of the Assignment Agreement, we acquired an option to purchase certain mining, mineral and exploration rights on property known as Concessions 6602, 1343 and 6329 located in Caramanta Municipality, Antioquia Department, Medellin, Colombia for $10,000, on condition that $2,990,000 be invested in exploratory work on the property over a three year period. As consideration for these rights, we issued 1,000,000 restricted shares of common stock to Investcol at a deemed fair market value of $ 0.25 per share for total consideration of $ 250,000.

Pursuant to the Assignment Agreement, we also committed to fund the $2,990,000 exploratory work as follows:
 
(a)  
$500,000 upon the closing of the Assignment Agreement;
 
 
 (b)  
$750,000 during the 12 month period commencing June 25, 2006; and on the earlier of June, 2006 or commencement of the second exploration phase, one million restricted shares of our common shares;
(c)  
$1,740,000 during the 12-month period commencing June 25, 2007.

In addition, we agreed to pay Investcol $7,500 per month as an office fee through July 31, 2006. On September 25, 2006 the Assignment Agreement was superseded in connection with our agreement to buy the Mining Concessions outright as described in (iii) below.

(ii) Caramanta Project - concessions 6993,7039,6821 and 6770 and HET 31, 32, 26, 27 and, HETG 01

On February 16, 2006 we entered into a Letter of Intent “LOI” with Investcol to acquire Investcol’s rights in a Contract for Purchase entered into with Cia Servicios y Logisticos Ltda. (“Cia Servicios”) The LOI outlined a proposed transaction where we intended to acquire Investcol’s rights in certain mining contracts to exclusively engage in mining activities on concessions 6993, 7039, 6821 and 6770 (the “Contracts”) and options that Investcol holds to acquire the exclusive rights to engage in mining activities on concessions HET 31, 32, 26, 27 and HETG 01 (the “Options”) all located within an area in Colombia referred to as the Caramanta location.

The LOI was non-binding and subject to final negotiation and the execution of a definitive agreement. On April 10, 2006, we entered into a definitive agreement with Investcol finalizing this transaction (the “Assignment Agreement”). In connection with the Assignment Agreement, we paid Investcol total consideration of $350,000 and issued 1,000,000 restricted shares of our common stock. Under the terms of the Assignment Agreement, Investcol agreed to pay the exercise price of $150,000 on the Options whose titles remained in the name of Cia Servicios until the final exploration commitments have been made. The final option payments were made prior to July 30, 2006.

On September 25, 2006 the Assignment Agreement was superseded in connection with our agreement to acquire the Mining Concessions outright as described below.

(iii) Acquisition of 100% of the Caramanta Exploration Properties

On September 25, 2006, we, through the acquisition of the outstanding shares of Gavilan Minerales, S.A., (“Gavilan”), acquired full legal title to the Caramanta project concessions described in items 3(i) and 3(ii) above. Consideration paid for the acquisition included $300,000 cash and the issuance of 1,150,000 restricted common shares at a fair value of $1.41 per share. In addition, a $50,000 finders fee was paid to Investcol. The total acquisition cost of $1,971,500 was allocated to the net assets acquired as follows:

Mineral and exploration properties and rights
$
1,780,841
Property, plant and equipment
 
190,659
 
$
1,971,500
 

The purchase of mineral and exploration properties and rights was recorded as part of mineral property rights acquisition and exploration expenditures in fiscal 2006. As a result of our acquisition of Gavilan, we no longer have any minimum exploratory work obligations related to the Caramanta concessions.

(B) Marmato Project
 
On January 12, 2006, we entered into a Stock Purchase Agreement with Investcol and RNC (Colombia) Limited (the "Agreement"), whereby we would (i) acquire twenty-five percent (25%) of the issued and outstanding stock of RNC (Colombia) Limited, a Belize corporation ("RNC") and (ii) hold an option to acquire the remaining seventy five percent (75%) of RNC's issued and outstanding stock over a period of time. RNC is the beneficial holder of 94.99% of the issued and outstanding stock of Compania Minera De Caldas, S.A. ("Caldas"), a Colombia corporation that (i) owns certain mining, mineral and exploration rights, (ii) has options to acquire mining, mineral and exploration rights and (iii) has exclusive rights to evaluate certain property, all located in the Zona Alta portion of the Marmato project in Colombia. 

Pursuant to the Stock Purchase Agreement, we had the option to:

a) 
Acquire 25% of the total outstanding shares of RNC by the issuance of 1,000,000 of our common shares to Investcol and the advance to RNC of a $1,200,000 non-interest bearing loan. We completed the acquisition of 25% of RNC by the issuance of 1,000,000 shares of our restricted common stock to Investcol and the advancement of $1,200,000 by way of a non-interest bearing loan to RNC in the second quarter of fiscal 2006;
   
b)  
Acquire an additional 25% of RNC by issuance of 2,000,000 of our common shares to Investcol and the advance of an additional $4,000,000 non-interest bearing loan to RNC. We completed the acquisition of the second 25% of RNC by the issuance to Investcol of 2,000,000 shares of our restricted common stock and the advancement of $4,000,000 by way of a non-interest bearing demand loan to RNC in the second quarter of fiscal 2006;
   
c)  
Acquire an additional 25% of RNC by the issuance of 4,000,000 of our common shares to Investcol and the advance of an additional $15,000,000 non-interest bearing loan to RNC on or before October 30, 2006. On August 22, 2006 we amended the January 12, 2006 Stock Purchase Agreement with Investcol and RNC (Colombia) Limited and concurrently exercised our option to increase interest in RNC from 50% to 75% in the third quarter of fiscal 2006. Under the terms of the amended agreement, we issued 4,200,000 common shares and paid $200,000 to Investcol. In connection with this transaction we committed to provide an additional $5,000,000 by way of non-interest bearing demand loan to RNC by December 31, 2006 and provide sufficient funds to RNC, upon terms satisfactory to the Company, to complete a full bankable feasibility study of the Marmato Project; and
   
d)  
Acquire the final 25% of RNC for a price equal to the 25% of the value of Caldas determined by a bankable feasibility study prepared by a certified mineral property evaluator, or other acceptable third party. We can make payment of the purchase price in either cash or our common shares. The terms of the agreement were amended on August 22, 2006. Under the terms of the amended agreement, we held an option to acquire the remaining 25% of RNC on or before May 1, 2009 for a purchase price equal to 25% of the fair value of Caldes, as determined by a forthcoming feasibility study. The purchase price, pursuant to the amended agreement, was limited to a maximum of $15,000,000 plus 4,000,000 of our common shares. Payment of the purchase price could be satisfied in either cash or our common shares, or any combination thereof.


 On December 14, 2006, the parties executed a Second Amendment to the Stock Purchase Agreement (the “Second Amendment”) in order to revise the consideration required to exercise our option to acquire the remaining 25% of the issued and outstanding stock of RNC. Subject to the revised terms set forth in the Second Amendment, we had the option to acquire an additional 15% interest in RNC, in exchange for the issuance of 4,000,000 common shares to Investcol. In connection with the execution of the Second Amendment, we exercised our option, resulting in us acquiring an additional 15% of RNC in exchange for us issuing 4,000,000 common shares valued at $5,120,000 in the fourth quarter of fiscal 2006, bringing our total ownership to 90%. The revised terms set forth in the Second Amendment provide us with the option to acquire the remaining 10% of RNC until May 1, 2009 in exchange for a purchase price of $15,000,000. The purchase price can be made in either cash, shares of our common stock, or any combination thereof.

(C ) The Kedahda Properties

On August 30, 2006 we purchased, through certain mining exploration properties in the Republic of Colombia and the related geochemical and other proprietary geological data from a wholly owned subsidiary of Anglo Gold Ashanti, Sociedad Kedahda, S.A., for $500,000 cash consideration.
 
Competition

The mineral exploration industry, in general, is intensely competitive and even if commercial quantities of reserves are discovered, a ready market may not exist for the sale of the reserves.
 
Most companies operating in this industry are more well-established and have greater resources to engage in the production of mineral claims. We were incorporated on March 25, 2003 and restructured our operations in the first quarter of 2005 to pursue the exploration and development of mining properties located in Colombia. As a result, our operations are not well-established.

Given the scope of our planned exploration activities, our resources at the present time are limited. As a result of continuing losses, we may exhaust all of our resources and be unable to complete the exploration of any of our property interests. There is also significant competition to retain qualified personnel to assist in conducting mineral exploration activities. If a commercially viable deposit is found to exist and we are unable to retain additional qualified personnel, we may be unable to enter into production and achieve profitable operations. These factors set forth above could inhibit our ability to compete with other companies in the industry and entered into production of the mineral claims if a commercial viable deposit is found to exist.
 
Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental


protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our not receiving an adequate return on invested capital.
 
Gold Mining properties that produce at a cost higher than the prevailing market gold price generally cease operations whereas lower cost producers prosper. In the event a commercially viable deposit is found to exist, our method of competition will be to produce gold at a lower cost than the prevailing gold market price. We may be forced to cease operations if we are unable to produce at a cost lower cost than the prevailing gold market price.

Patents, Licenses, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts

We do not own, either legally or beneficially, any patent or trademark.

Research and Development

We did not incur any research and development expenditures in the fiscal years ended December 31, 2006 or 2005.

Subsidiaries
 
We own certain mining rights and options to acquire mining rights in the Zona Alta portion of the Marmato deposit located in western Colombia as a result of our acquisition of a 90% equity interest in RNC (Colombia) Limited ("RNC"), a Belize corporation and a previously a wholly-owned subsidiary of Investcol Limited. We also own 94.99% of Gavilan Minerales S.A., a Colombia corporation.

Existing and Probable Governmental Regulation
 
We have and will, in the future, engage consultants to assist us with respect to our operations in Colombia. We are beginning to deal with the various regulatory and governmental agencies, and the rules and regulations of such agencies, in connection with our property interests in Colombia. No assurances can be given that we will be successful in our efforts. Further, in order for us to operate and grow our business in Colombia, we need to continually conform to the laws, rules and regulations of such country and local jurisdiction. It is possible that the legal and regulatory environment pertaining to the exploration and development of gold mining properties will change. Uncertainty and new regulations and rules could increase our cost of doing business, or prevent us from conducting our business.
 
The Marmato and Caramanta projects are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, mining licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, changing political conditions and international monetary fluctuations. Future government actions concerning the economy, taxation, or the operation and regulation of nationally important facilities such as mines could have a significant effect on our business. No assurances can be given that the our plans and operations will not be adversely affected by future developments in Colombia


Title to land (in Western legal terms) is often unclear. Disputes over land ownership are common, especially in the context of resource developments. Identifying all the affected landowners or related stakeholders, and structuring compensation arrangements that are both fair and acceptable to all of them, is often extremely difficult. We believe that the satisfactory resolution of any local landowner or related stakeholder concerns is essential to the eventual development and operation of modern gold mines in the Marmato and Caramanta projects. The failure to adequately address any such landowner or related stakeholder issues will disrupt our plans. Although we will spend considerable time, effort and expense in an attempt to resolve any landowner or related stakeholder issues associated with our planned operations, no assurance can be given that disruptions arising out of landowner or related stakeholder dissatisfaction will not occur.
 
In Colombia, except for a few exceptions, the subsoils are owned by the State. The State may authorize private parties to explore and develop mineral deposits under concession contracts. Until 2001, they could also be developed under Exploration and Exploitation Contracts executed with specialized agencies of the Colombian State. However, as of 2001, Colombia’s New Mining Code permits only concession contracts, which are awarded by a single entity and are subject to a standard set of conditions.
 
The concession contract grants to a concessionaire, in an exclusive manner, the faculty to carry out within the given area, the studies, works and installations necessary in order to establish the existence of the minerals, object of this contract, and to exploit them according to the principles, rules and criteria belonging to the accepted techniques of geology and mining engineering. It covers also the faculty to install and build within the mentioned area and outside it, the equipment, services and works necessary for an efficient exercise of the rights set forth in the Colombian Mining Code. The concession contract will be agreed on for a term that the proponent requests, and up to a maximum of thirty (30) years. Such term will start from the date of inscription of the contract at the National Mining Register.

The concession contract has three phases:

1. Exploration Phase.
 
a.  
Starts once the contract is inscribed in the National Mining Registry (Registro Minero Nacional, RMN).
b.  
Valid for 3 years plus a 2 year extension.
c.  
Annual property tax.
d.  
Requires an annual Environmental Mining Insurance Policy for 5% of the value of the planned exploration expenditure for the year.
e.  
Present a mine plan (PTO) and an Environmental Impact Study (EIA) for the next phase.
 
2. Construction Phase.

a.  
Valid for 3 years plus a 1 year extension.
b.  
Annual property tax payments continue as in Exploration Phase.
c.  
Requires an annual Environmental Mining Insurance Policy for 5% of the value of the planned investment as defined in the PTO for the year.
d.  
Environmental License issued on approval of Environmental Impact Study.


3. Exploitation Phase.
 
a.  
Valid for 30 years minus the time taken in the exploration and construction phases, which means that it is 21 to 24 years and is renewable for 30 years.
b.  
Annual Environmental Mining Insurance Policy required.
c.  
No annual property tax.
d.  
Pay royalty based on regulations at time of granting of the Contract.
 
We plan to apply for a master mining license which would include the exploration and mining rights for our Marmato Mountain Development Project.
 
Compliance with Environmental Laws

The Marmato and Caramanta Projects are subject to Colombian and local laws and regulations regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials. Any significant mining operations will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off. No assurances can be given that such environmental issues will not have a material adverse effect on our operations in the future.

The Colombian Mining Law 685 of 2001 requires an Environmental Mining Insurance Policy for each concession contract. In addition, this provision states that an Environmental Impact Study has to be presented at the end of the Exploration Phase if the concession is to proceed to the Construction Phase, and that this must be approved and an Environmental License issued before the Exploitation Phase can begin.

Exploration activities require an Environmental Management Plan and a Superficial Water Concession.

We have presented an Environmental Management Plan for drilling to the Departmental authority CORPOCALDAS (Corporación Autónoma Regional de Caldas or Caldas Regional Autonomous Corporation). This Plan includes a preliminary phase to close down the small mines and mills in the Zona Alta to stop the source of much of the contamination. We are currently in discussions with the Colombian government regarding the closure in the Zona Alta of the small mines and the related environmental liability.

A suitable water source has been identified for drilling water that will require a 2,000 m pipe, and the application for the Superficial Water Permit is being prepared. Existing water permits in the zone are also being investigated as an alternative.

We have also started an environmental monitoring program to prepare an Environmental Baseline Study and future environmental studies.

Exploitation requires in addition an Environmental License, Permit for Springs, Forest Use Permit, Certificate of Vehicular Emissions, Emissions Permit and River Course Occupation Permit.


The Zona Alta has environmental issues due to past and current mining activities including:

·  
Surface disturbance and degradation including deforestation.

·  
Ground instability, collapse, landslides affecting mountain slopes and Marmato town.

·  
Absence of waste rock dumps and tailings ponds and dumping of waste rock down mountain slopes and into the Cascabel River and of tailings into rivers which drain into the Cauca River.

·  
Contamination of water by mercury, cyanide, acid drainage, heavy metals and solids. In addition contamination of water by untreated sewage from Marmato town which has no drainage or treatment system, and by agricultural chemicals and waste from cultivation of coffee, bananas etc.

·  
Potential liability of prior operations which had no waste dumps or tailings pond and discharges tailings directly into the Cascabel River which drains into the Cauca River.

The Colombian and/or local government currently does not but could in the future require us to remedy such consequences. The costs of such remediation could be material. Future environmental laws and regulations could impose increased capital or operating costs on us and could restrict the development or operation of any gold mines.

Employees

We have 74 employees, primarily consisting of administrative and technical staff in Colombia. We also retain consultants to assist in operations on an as-needed basis.


Plan of Operation
 
Introduction

This MD&A is intended to supplement and complement our unaudited interim consolidated financial statements and notes thereto for the three months ended March 31, 2007 and audited consolidated financial statements and notes thereto for the year ended December 31, 2006 prepared in accordance with United States generally accepted accounting principles, or US GAAP (collectively, our “Financial Statements”). You are encouraged to review our Financial Statements in conjunction with your review of this MD&A. Additional information relating to our Company, is available at www.sec.gov.com. All dollar amounts in our MD&A are in US dollars, unless otherwise specified.

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Management’s statements contained in this report that are not historical facts are forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believe, expect, intend,” “estimate,” “project,” “prospects,” or similar expressions.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates and commodity prices, competition, and changes in generally accepted accounting principles, as well as items described under “Risks and Uncertainties" elsewhere in this MD&A. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

First Quarter Fiscal 2007 and Fiscal 2006 Overview

During the first quarter of fiscal 2007 and fiscal 2006 considerable progress was made towards our objective of defining and consolidating our ownership of a bulk-mineable ore body in the Marmato region of Colombia. Our objective is to consolidate a new gold district around the Marmato Mountain in Colombia by:

·  
Acquiring the rights to an historic prospective gold project in Marmato (the “Marmato Mountain Development Project”);
·  
Acquiring certain surrounding properties in the Caramanta region (the “Caramanta Exploration Project”); and
·  
Planning for and executing the acquisition of additional ancillary properties.

Our focus in fiscal 2007 is to continue to advance the Marmato Mountain Development Project towards production through:

·  
The acquisition of Colombian mineral concessions and mineral rights;
 
 
·  
Commencing the resettlement of the Town of Marmato;
·  
Commencing drilling and sampling programs;
·  
The preparation of revised resource estimates; and
·  
Commencing the preparation of a feasibility study.

In the first quarter of fiscal 2007 we advanced our business plan by:
 
·  
Raising approximately $9.0 million to fund our mineral acquisition and exploration activities.
·  
Increasing our mineral and exploration rights ownership to 96 of 121 mineral properties from existing Colombian titleholders in exchange for cash consideration of approximately $3.5 million;
·  
Continuing data collection for a baseline study; and
·  
Commencing drilling and sampling on the Marmato Mountain
 
In fiscal 2006 we advanced our business plan by:

·  
Increasing our ownership interest in RNC (Colombia) Ltd. to 90% and acquiring ancillary properties in order to consolidate the Marmato Project in exchange for share and cash consideration totaling $17.8 million;
·  
Acquiring the mineral and exploration rights to 90 of 121 mineral properties from existing Colombian titleholders in exchange for cash consideration of approximately $10.6 million; and
·  
Raising in excess of $10.8 million to fund our acquisition and exploration activities.

As of April 30, 2007, the Zona Alta portion of the Marmato project in Colombia hosts approximately 275 total small mines which Compañia Minera de Caldas, S.A. (“Caldas”), a 94.99% owned subsidiary of RNC (Colombia) Limited (“RNC”) which we presently have a 90% interest in, is seeking to purchase individually. Eighty-five (85) of these mines have registered titles in the Ministry of Mines in Caldas. We refer to these mines as Category 1. Thirty-six (36) mines are located in an area called CHG-081 in which there is one mining contract.  We refer to these mines as Category 2. Once all of these Category 2 mines have been purchased, Caldas will own the entire CHG-081 contract.  Our objective is to secure ownership to these one hundred and twenty one (121) properties.  Approximately ninety (90) of the remaining mines have made applications for legalization under the previous mining law. We refer to these mines as Category 3.  Of the applications made, management believes that less than thirty (30) will be approved.  Approximately sixty-four (64) are illegal mines.

Our Business

We were incorporated under the laws of the State of Nevada, U.S.A., on March 25, 2003 and changed our name from Secure Automated Enterprises, Inc. to Colombia Goldfields Ltd. on May 13, 2005. At that time we changed our operational focus from providing electronic filings services for public access document submissions to the U.S. Securities Exchange Commission, to the acquisition of, exploration for, and development of mineral properties. On July 31, 2006, our jurisdiction of incorporation was changed to the state of Delaware.


We are currently in the exploration stage and our current focus is on the acquisition and development of mineral interests in mining properties located in the Marmato Mountain Gold District located in Colombia. The disclosure that follows is a discussion of each of the properties that we have an interest in and our results of operations for the three months ended March 31, 2007 and March 31, 2006 and the fiscal years ended December 31, 2006 and December 31, 2005.

Principal factors affecting our results of operations

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, and we maintain our accounts in U.S. Dollars.

We believe that the key determinants of our operating and financial results are the following:
 
(a)  
Raising in excess of $10.8 million to fund our acquisition and the state of capital markets, which affects our ability to finance exploration activities;
 
(b)  
The valuation of mineral properties as exploration results provide further information relating to the underlying reserves of such properties; and
 
(c)  
Prices for metals, particularly, gold.
 
There is no assurance that commercially exploitable reserves of gold exist on any of our property interests. In the event that commercially exploitable reserves of gold exist on any of our property interests, there is no guarantee that we will make a profit. If we cannot acquire or locate gold deposits, or if it is not economical to recover the gold deposits, our business and operations will be materially adversely affected.

Revenues

We have not yet completed our economic feasibility studies to establish the existence of proven or probable reserves for these properties and, as a result, to date we have not recognized any revenues from mining activities for the period since incorporation to March 31, 2007.

Expenses

Our primary expenses consist of mineral property rights exploration expenditures and general and administrative expenses.

Critical accounting policies

The following are the accounting policies that we consider to be Critical Accounting Policies. Critical Accounting Policies are those that are both important to the portrayal our financial condition and results and those that require the most difficult, subjective, or complex judgments, often as result of the need to make estimates about the effect of matters that are subject to a degree of uncertainty.

Going Concern

We incurred a net loss in excess of approximately $10.3 million for the period from inception on March 23, 2003 to March 31, 2007 and are not presently generating any revenue. Furthermore, we have used in excess of $18 million during this period to fund our operations and mineral acquisitions program. At March 31, 2007, we have a working capital deficiency of approximately $2.1 million. Our future is dependent upon our ability to obtain additional financing and future acquisition, exploration and development of profitable operations form our mineral properties. We plan to seek additional financing in private and/or public equity offerings to secure funding for our operations. Our business plan includes completing the acquisition of the remaining 10% equity interest in RNC (Colombia) Limited which may require additional funds of as much as $15 million on or before May 1, 2009. In addition, we estimate that we require at least an additional $15


million to fund our fiscal 2007 operations. We currently do not have any arrangements for additional financing, except for a $3.5 million bridge loan between our President, a shareholder, and a company controlled by these individuals entered into on June 12, 2007. There can be no assurance that such additional financing will be available to us on acceptable terms or at all. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may should we cease to continue as a going concern.

Basis of Presentation

Entities that are controlled by us, either directly or indirectly, are consolidated. Control is established by our ability to determine strategic, operating, investing and financing policies without the co-operation of others. We analyze our level of ownership, voting rights and representation on the board of directors in determining if control exists by any one, or a combination of these factors.

Our consolidated financial statements include the accounts of (i) Colombia Goldfields Ltd., a Delaware Corporation (ii) Our 90% interest in RNC (Colombia) Limited, a Belize corporation and its 94.99% owned subsidiary - Compania Minera De Caldas, S.A., a Colombia corporation, iii) Our 94.99% interest in Gavilan Minerales, S.A. (“Gavilan”) a Colombia Corporation. All significant inter-company transactions and balances are eliminated upon consolidation.

Mineral Property Rights Acquisition and Exploration Expenditures

Title on mineral properties and mining and exploration rights involve certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. We cannot give any assurance that title to such properties will not be challenged or impugned and we cannot be certain that we will have valid title to our mining properties. We rely on title opinions by legal counsel who base such opinions on the laws of countries in which we operate.

Our mineral property rights acquisition and exploration activities consist of

i)  
The acquisition of mineral concessions;
ii)  
The acquisition of mineral and exploration rights from existing titleholders;
iii)  
The exploration of acquired mineral properties and related activities; and
iv)  
The allocation of stock based compensation related to certain participants in our stock option plan.

Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property.  Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations.   Costs of abandoned projects are charged to operations upon abandonment. We evaluate to determine if these costs are in excess of their net recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. In the event of an impairment, the carrying amount is adjusted to fair value. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs is based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.


Asset Retirement Obligations

We apply SFAS No. 143, Accounting for Asset Retirement Obligations that requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. SFAS No. 143 requires us to record a liability for the present value of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability will be accreted until it has been fully incurred, and the asset will be amortized over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As at March 31, 2007 and December 31, 2006, we do not have any asset retirement obligations.

Stock-Based Compensation

On January 1, 2006, we applied SFAS No. 123(R), Share-Based Payment, to account for stock options and similar equity instruments issued. Accordingly, compensation expense attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and recognized over the expected vesting period. For all stock option awards granted on or after January 1, 2006, we recognized compensation using the fair value method of accounting for stock-based compensation. The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model and the resultant compensation expenses are classified in our consolidated statement of operations based on the classification of the underlying option plan participants’ related compensation expenses. In the event stock options are forfeited, any previously recognized compensation expense related to unvested and expiring awards is recognized in earnings during the period of forfeiture. The majority of our stock based compensation relates to either i) mineral exploration activities associated with our exploration personnel or ii) general and administrative expenses associated with our administrative employees, directors, and consultants.

Although the assumptions used to record stock compensation expense reflect management’s best estimates, they involve inherent uncertainties based on market conditions generally outside of our control. If other assumptions were used, stock-based compensation expense could be significantly impacted. As stock options are exercised, the proceeds received on exercise, in addition to the previously recognized amounts related to those stock options, are credited to stockholders’ equity.

Selected Financial Information

The following table sets forth selected financial information for the three months ended March 31, 2007, and 2006 and the years ended December 31, 2006, and 2005. This summary of selected financial information is derived from, and should be read in conjunction with, and is qualified in its entirety by reference to, our audited financial statements and related note disclosures.
 
  
 
 
Three Months Ended
March 31, 2007
  
Three Months ended
March 31, 2006
  
Cumulative
from Inception
(March 25, 2003
through
March 31, 2007
Statement of Loss and Deficit
 
  
 
  
 
Total Expenses
  
2,937,870
    
1,336,791
    
11,824,328
Net loss
  
(2,503,431)
 
  
(1,333,239)
 
  
(10,333,078)
Loss per Share- basic and diluted
  
(0.04)
 
  
(0.04)
 
  
N/A
 
Balance Sheet Data
  
As at March 31, 2007
    As at December 31, 2006  
As at March 31, 2007
Total Assets
  
52,708,614
    
45,007,379*
    
52,708,614
Total Long-Term Debt
  
-
    
-*
    
-
Total Liabilities
  
16,243,759
    
15,797,195*
    
16,243,759
Total Shareholders’ Equity (Deficiency)
  
36,464,855
    
29,210,184*
    
36,464,855

* As at December 31, 2006


  
 
 
Year Ended
December 31, 2006
  
Year ended
December 31, 2005
  
Cumulative
from Inception
(March 25, 2003
through
December 31, 2006
Statement of Loss and Deficit
 
  
 
  
 
Total Expenses
  
7,325,668
    
1,492,233
    
8,886,458
Net loss
  
(6,278,684)
 
  
(1,491,470)
 
  
(7,829,647)
Loss per Share- basic and diluted
  
(0.15)
 
  
(0.06)
 
  
N/A
 
Balance Sheet Data
  
As at December 31, 2006
    
As at December 31, 2005
    
As at December 31, 2006
Total Assets
  
45,007,379
    
1,765,341
    
45,007,379
Total Long-Term Debt
  
-
    
-
    
-
Total Liabilities
  
15,797,195
    
83,004
    
15,797,195
Total Shareholders’ Equity (Deficiency)
  
29,210,184
    
1,682,337
    
29,210,184
 
The Caramanta and Marmato Projects
 
We are actively advancing two separate projects known as the Marmato Mountain Development Project and the Caramanta Exploration Project, both of which are located in Colombia’s Marmato Mountain Gold District. These projects are separated by approximately seven kilometers and our focus is on securing the region between Caramanta and Marmato and any other outlying targets that may contain similar mineralization or that have the potential for mining. We have advanced our ownership interests in these projects in fiscal 2006 and 2007 as follows:
 
(A) Caramanta Project
 
(i) Caramanta Project - concessions 6602, 1343 and 6329
 
On September 22, 2005, we entered into an Assignment Agreement with Investcol Limited (“Investcol”) where Investcol assigned, transferred, and conveyed to us all of its rights under a contract for Purchase Option of Mining Concessions (“Original Option Contract”) entered into with Cia Servicios Y Logisticos Ltda. As the result of the Assignment Agreement, we acquired


an option to purchase certain mining, mineral and exploration rights on property known as Concessions 6602, 1343 and 6329 located in Caramanta Municipality, Antioquia Department, Medellin, Colombia for $10,000, on condition that $2,990,000 be invested in exploratory work on the property over a three year period. As consideration for these rights, we issued 1,000,000 restricted shares of common stock to Investcol at a deemed fair market value of $ 0.25 per share for total consideration of $ 250,000.

Pursuant to the Assignment Agreement, we also committed to fund the $2,990,000 exploratory work as follows:

(a)  
$500,000 upon the closing of the Assignment Agreement;
(b)  
$750,000 during the 12 month period commencing June 25, 2006; and on the earlier of June, 2006 or commencement of the second exploration phase, one million restricted shares of our common shares;
(c)  
$1,740,000 during the 12-month period commencing June 25, 2007.
 
On September 25, 2006 the Assignment Agreement was superseded in connection with our agreement to buy the Mining Concessions outright as described in (iii) below.

(ii) Caramanta Project - concessions 6993,7039,6821 and 6770 and HET 31, 32, 26, 27 and, HETG 01

On February 16, 2006 we entered into a Letter of Intent “LOI” with Investcol to acquire Investcol’s rights in a Contract for Purchase entered into with Cia Servicios y Logisticos Ltda. (“Cia Servicios”) The LOI outlined a proposed transaction where we intended to acquire Investcol’s rights in certain mining contracts to exclusively engage in mining activities on concessions 6993, 7039, 6821 and 6770 (the “Contracts”) and options that Investcol holds to acquire the exclusive rights to engage in mining activities on concessions HET 31, 32, 26, 27 and HETG 01 (the “Options”) all located within an area in Colombia referred to as the Caramanta location.

The LOI was non-binding and subject to final negotiation and the execution of a definitive agreement. On April 10, 2006, we entered into a definitive agreement with Investcol finalizing this transaction (the “Assignment Agreement”). In connection with the Assignment Agreement, we paid Investcol total consideration of $350,000 and issued 1,000,000 restricted shares of our common stock. Under the terms of the Assignment Agreement, Investcol agreed to pay the exercise price of $150,000 on the Options whose titles remained in the name of Cia Servicios until the final exploration commitments have been made. The final option payments were made prior to July 30, 2006.

On September 25, 2006 the Assignment Agreement was superseded in connection with our agreement to acquire the Mining Concessions outright as described below.


(iii) Acquisition of 100% of the Caramanta Exploration Properties

On September 25, 2006, we, through the acquisition of the outstanding shares of Gavilan Minerales, S.A., (“Gavilan”), acquired full legal title to the Caramanta project concessions described in items A(i) and A(ii) above. Consideration paid for the acquisition included $300,000 cash and the issuance of 1,150,000 restricted common shares at a fair value of $1.41 per share. In addition, a $50,000 finders fee was paid to Investcol. The total acquisition cost of $1,971,500 was allocated to the net assets acquired as follows:

Mineral and exploration properties and rights
$
1,780,841
Property, plant and equipment
 
190,659
 
$
1,971,500

The purchase of mineral and exploration properties and rights was recorded as part of mineral property rights acquisition and exploration expenditures in fiscal 2006. As a result of our acquisition of Gavilan, we no longer have any minimum exploratory work obligations related to the Caramanta concessions.

(B) Marmato Project
 
On January 12, 2006, we entered into a Stock Purchase Agreement with Investcol and RNC (Colombia) Limited (the "Agreement"), whereby we would (i) acquire twenty-five percent (25%) of the issued and outstanding stock of RNC (Colombia) Limited, a Belize corporation ("RNC") and (ii) hold an option to acquire the remaining seventy five percent (75%) of RNC's issued and outstanding stock over a period of time. RNC is the beneficial holder of 94.99% of the issued and outstanding stock of Compania Minera De Caldas, S.A. ("Caldas"), a Colombia corporation that (i) owns certain mining, mineral and exploration rights, (ii) has options to acquire mining, mineral and exploration rights and (iii) has exclusive rights to evaluate certain property, all located in the Zona Alta portion of the Marmato project in Colombia. 

Pursuant to the Stock Purchase Agreement, we:

(a)
Acquired 25% of the total outstanding shares of RNC by the issuance of 1,000,000 of our common shares to Investcol and the advance to RNC of a $1,200,000 non-interest bearing loan. We completed the acquisition of 25% of RNC by the issuance of 1,000,000 shares of our restricted common stock to Investcol and the advancement of $1,200,000 by way of a non-interest bearing loan to RNC in the second quarter of fiscal 2006;
   
(b)
Acquired an additional 25% of RNC by issuance of 2,000,000 of our common shares to Investcol and the advance of an additional $4,000,000 non-interest bearing loan to RNC. We completed the acquisition of the second 25% of RNC by the issuance to Investcol of 2,000,000 shares of our restricted common stock and the advancement of $4,000,000 by way of a non-interest bearing demand loan to RNC in the second quarter of fiscal 2006;
   
(c)
Held the option to acquire an additional 25% of RNC by the issuance of 4,000,000 of our common shares
 

  
to Investcol and the advance of an additional $15,000,000 non-interest bearing loan to RNC on or before October 30, 2006. On August 22, 2006 we amended the January 12, 2006 Stock Purchase Agreement with Investcol and RNC (Colombia) Limited and concurrently exercised our option to increase interest in RNC from 50% to 75% in the third quarter of fiscal 2006. Under the terms of the amended agreement, we issued 4,200,000 common shares and paid $200,000 to Investcol. In connection with this transaction we committed to provide an additional $5,000,000 by way of non-interest bearing demand loan to RNC by December 31, 2006 and provide sufficient funds to RNC, upon terms satisfactory to the Company, to complete a full bankable feasibility study of the Marmato Project; and
   
(d)  
Held the option to acquire the final 25% of RNC for a price equal to the 25% of the value of Caldas determined by a bankable feasibility study prepared by a certified mineral property evaluator, or other acceptable third party. The purchase price was payable in either cash or our common shares. The terms of the agreement were amended on August 22, 2006. Under the terms of the amended agreement, we held the option to acquire the remaining 25% of RNC on or before May 1, 2009 for a purchase price equal to 25% of the fair value of Caldes, as determined by a forthcoming feasibility study. The purchase price, pursuant to the amended agreement, was limited to a maximum of $15,000,000 plus 4,000,000 of our common shares. Payment of the purchase price could be satisfied in either cash or our common shares, or any combination thereof.

On December 14, 2006, the parties executed a Second Amendment to the Stock Purchase Agreement (the “Second Amendment”) in order to revise the consideration required to exercise our option to acquire the remaining 25% of the issued and outstanding stock of RNC. Subject to the revised terms set forth in the Second Amendment, we had the option to acquire an additional 15% interest in RNC, in exchange for the issuance of 4,000,000 common shares to Investcol. In connection with the execution of the Second Amendment, we exercised our option, resulting in us acquiring an additional 15% of RNC in exchange for us issuing 4,000,000 common shares valued at $5,120,000 in the fourth quarter of fiscal 2006, bringing our total ownership to 90%. The revised terms set forth in the Second Amendment provide us with the option to acquire the remaining 10% of RNC until May 1, 2009 in exchange for a purchase price of $15,000,000. The purchase price can be made in either cash, shares of our common stock, or any combination thereof.

(C ) The Kedahda Properties

On August 30, 2006 we purchased, through certain mining exploration properties in the Republic of Colombia and the related geochemical and other proprietary geological data from a wholly owned subsidiary of Anglo Gold Ashanti, Sociedad Kedahda, S.A., for $500,000 cash consideration.
 
Results of Operations - First Quarter 2007 Compared With First Quarter 2006.

For the three months ended March 31, 2007, we incurred a net loss of $2,503,431 (2006 -$1,333,239). We generated interest income of $9,729 in the first quarter of fiscal 2007 (2006-$3,552). The primary contributors to our net loss were mineral property rights acquisition and exploration expenses of $1,472,016 (of which $215,125 relates to non-cash stock-based compensation charges) and general and administrative expenses of $1,447,040 (2006 - $758,724) (of which $350,427 relates to non-cash stock based compensation charges).

Our exploration activities typically involve the following activities and expenditures:


i)  
The acquisition of mineral concessions: To March 31, 2007 this has consisted primarily of payments for the assignment contracts and subsequent full legal titles associated with the Caramanta project, the acquisition of the Marmato project via our purchases of RNC (Colombia), and the purchase of the Kedahda properties. The concessions we acquire typically exclusively grant to the concessionaire the faculty to carry out within the given area, the studies, works and installations necessary in order to establish the existence of the minerals, and to exploit them according to the principles, rules and criteria belonging to the accepted techniques of geology and mining engineering. During the three months ended March 31, 2007, we did not acquire any mineral concessions.

ii)  
The acquisition of mineral and exploration rights from existing Colombian titleholders. This typically involves staged payments to affected landholders and related stakeholders. The procedure for payment is normally a payment of 25% of the total negotiated purchase price on signing, 25% of the total negotiated purchase price when all documentation has been submitted to the local mining department, and the final 50% payment when the mining claim has been registered in our name. Satisfactory resolution of local landowner or relative concerns is essential to the eventual development and operation of modern gold mines on the Marmato project. As at April 30, 2007, we have reached agreements with the titleholders to secure 96 titles deemed desirable in our business plan. During the three months ended March 31, 2007, we expended a total of $3,579,810 on mineral exploration rights and have obligations at March 31, 2007 to make payments of $5,770,312 pursuant to amounts owing under our purchase agreements; and

iii)  
The evaluation of acquired mineral properties and related activities. This typically involves the payment of salaries, wages, and other exploration costs in the host country directly attributable to field activities furthering our mineral concessions and rights. During the three months ended March 31, 2007, we expended a total of $1,472,016 on the exploration of acquired mineral properties.

As a result of our fiscal 2007 efforts to explore and evaluate the Marmato Region, our mineral property exploration expenses increased significantly, to $1,472,016 for the three months ended March 31, 2007 from $572,623 for the three months ended March 31, 2006.

General and administrative expenses also increased during fiscal 2007, to $1,447,040 in fiscal 2007 from $758,724 in fiscal 2006, reflecting our transition from a start-up enterprise to a Company with an active exploration program and infrastructure sufficient to support field activities. The primary component of general and administrative expenses in the first quarter of fiscal 2007 was allocated stock based compensation, which totalled $350,427. The remainder, consisted primarily of consulting fees paid to directors, officers, and shareholders, and expenses related to accounting, legal, investor relations, and expenses associated with Sarbanes Oxley and other regulatory compliance.

The increase in our other operating expenses in fiscal 2007, primarily amortization expenses, related to the amortization of office equipment, computers, and vehicles. For the three months ended March 31, 2007, we incurred a net loss of $2,503,431 (2006- $1,333,239). The primary contributors to our net loss were mineral property exploration expenses of $1,447,040, and a deferred income tax recovery of $424,710 related to deductable temporary differences associated with our Colombian subsidiaries.
 

During the first quarter of fiscal 2007, we used cash of $1,825,555 in operations (2006-$534,714). The majority of our operating cash requirements consisted of costs incurred in our Colombian operations, and consulting fees, travel expenses, and audit and legal fees related to regulatory compliance. During the first quarter of fiscal 2007, we issued a total of 9,020,000 common shares for net proceeds of $8,478,800. We also issued 541,200 warrants to placing agents and 650,000 common shares to consultants to the Company for services rendered, however no cash was generated from these issuances. During the first three months of fiscal 2007, we expended $14,380 on the purchase of capital assets and $3,579,810 acquiring mineral exploration rights, resulting in a net cash increase of $3,059,055 for the three months ended March 31, 2007.

As at March 31, 2007, we held cash and cash equivalents of $3,941,968. Our working capital deficiency of $2,113,349 consisted of i) Cash and cash equivalents of $3,941,968; ii) Prepaid expenses and deposits of $368,628, consisting primarily of advances for mineral and exploration rights and prepaid Marmato exploration expenditures; iii) Prepaid consulting fees of $485,000 related to unamortized stock-based compensation associated with direct stock awards and iv) Accounts payable and accrued liabilities of $6,908,945, consisting primarily of amounts owing to Marmato titleholders under our mineral and exploration rights purchase agreements. These amounts relate primarily to staged payments owing under our agreements to acquire exploration rights from existing Colombian titleholders as described elsewhere in this MD&A.

Results of Operations - First Quarter 2006 Compared With First Quarter 2005

We generated interest income of $3,552 for the three months ended March 31, 2006, but did not generate any revenue during the reporting period from our current operations.

During the three months ended March 31, 2005, we generated $763 from our prior business plan which was discontinued in the first quarter of 2005 to pursue the acquisition and development of mining properties located in the Marmato Mountain Gold District located in Colombia.

We incurred operating expenses of $1,336,791 for the three months ended March 31, 2006, compared to operating costs and expenses of $23,187 for the same three month period in the prior year. The increase in our operating expenses for the three months ended March 31, 2006 when compared to the same reporting period in the prior year is attributable to expenditures relating to mineral property exploration operations under our new business plan and stock based compensation. Our expenses for the three months ended March 31, 2006 consisted primarily of mineral property exploration expenses of $572,623, and general and administrative expenses of $758,724.

We incurred a net loss of $1,333,239 in the three months ended March 31, 2006, as compared to a net loss of $22,424 in the three months ended March 31, 2005.
 
Results of operations - fiscal year 2006 compared with fiscal year 2005.
 
Our current operations are focused on the acquisition and development of the aforementioned interests in mining properties located in the Marmato Mountain Gold District located in Colombia. We do not anticipate earning any revenues from operations until such time that commercial production commences on the mining properties for which we currently hold an
 
 
interest or may acquire an interest in the future. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our property interests, or if such resources are discovered, that we will enter into commercial production. In addition, numerous regulatory, practical, legal and other obstacles could adversely affect our ability to achieve profitable operations.

In the first quarter of fiscal 2005, we discontinued our electronic filing services operations and, as a result, historical income and expenses relating to those discontinued oppositions have been classified as discontinued operations for all comparative periods presented.

For the year ended December 31, 2006, we incurred a net loss of $6,278,684 (2005-$1,491,470). We generated interest income of $118,034 (2005-$NIL). The primary contributors to our net loss were mineral property rights acquisition and exploration expenses of $3,298,438 (of which $213,595 relates to non-cash stock-based compensation charges) and general and administrative expenses of $3,962,960 (of which $1,779,562 relates to non-cash stock based compensation charges).

Our exploration activities typically involve the following activities and expenditures:

i)  
The acquisition of mineral concessions: to December 31, 2006 this has consisted primarily of payments for the assignment contracts and subsequent full legal titles associated with the Caramanta project, the acquisition of the Marmato project via our purchases of RNC (Colombia), and the purchase of the Kedahda properties. The concessions we acquire typically exclusively grant to the concessionaire the faculty to carry out within the given area, the studies, works and installations necessary in order to establish the existence of the minerals, and to exploit them according to the principles, rules and criteria belonging to the accepted techniques of geology and mining engineering. In fiscal 2006, we expended a total of $22,200,841 acquiring mineral concessions.
   
ii)  
The acquisition of mineral and exploration rights from existing Colombian titleholders. This typically involves staged payments to affected landholders and related stakeholders. The procedure for payment is normally a payment of 25% of the total negotiated purchase price on signing, 25% of the total negotiated purchase price when all documentation has been submitted to the local mining department, and the final 50% payments when the mining claim has been registered in our name. Satisfactory resolution of local landowner or relative concerns is essential to the eventual development and operation of modern gold mines on the Marmato project. As at December 31, 2006, we reached agreements with the titleholders to secure 90 of 121 titles deemed desirable in our business plan. In fiscal 2006, we expended a total of $10,639,071 acquiring mineral and exploration rights; and
   
iii)  
The evaluation of acquired mineral properties and related activities. This typically involves the payment of salaries, wages, and other exploration costs in the host country directly attributable to field activities furthering our mineral concessions and rights. In fiscal 2006, we expended a total of $3,084,843 on the exploration of acquired mineral properties.


As a result of our fiscal 2006 efforts to explore and evaluate the Marmato Region, our mineral property exploration expenses increased significantly, from $1,179,298 for the year ended December 31, 2005 to $3,298,438 for the year ended December 31, 2006.

General and administrative expenses also increased during fiscal 2006, from $309,100 in fiscal 2005 to $3,962,960 in fiscal 2006 (of which $1,779,562 relates to non-cash stock based compensation charges), reflecting our transition from a start-up enterprise to a Company with an active exploration program and infrastructure sufficient to support field activities. The primary component of general and administrative expenses in fiscal 2006 was allocated stock based compensation, which totaled $1,779,562. The remainder, $2,183,398 consisted primarily of consulting fees paid to directors, officers, and shareholders of $885,130, and balance relating to accounting, legal, investor relations, and travel expenses associated with the ramp up of our exploration activities.

The increase in our other operating expenses in fiscal 2006, primarily amortization expenses, related to the amortization of office equipment, computers, and vehicles. For the year ended December 31, 2006, we incurred a net loss of $6,278,684 (2005- $1,491,470). The primary contributors to our net loss were mineral property exploration expenses of $3,298,438, general and administrative expenses of $3,962,960 (of which $1,779,562 relates to non-cash stock based compensation charges) and a future income tax recovery of $928,950 related to deductable temporary differences associated with our Colombian subsidiaries.

During fiscal 2006, we used cash of $4,800,669 in operations (2005-$1,339,165). The majority of our operating cash requirements consisted of costs incurred to establish our Colombian operations, primarily consulting fees, travel expenses, and audit and legal fees. During fiscal 2006, we issued a total of 13,350,000 common shares as consideration for i) the acquisition of the 90% of RNC and ii) the acquisition of Gavilan. We received no cash from these issuances, but did receive net proceeds of $10,821,874 in connection with the separate issuance of 13,097,749 common shares. In fiscal 2006, we expended $465,058 on the purchase of capital assets and $6,238,874 acquiring mineral exploration rights, resulting in a net cash usage of $682,727 for the year ended December 31, 2006.

As at December 31, 2006, we held cash and cash equivalents of $882,913. Our working capital deficiency of $4,978,411 consisted of i) Cash and cash equivalents of $882,913; ii) Prepaid expenses and deposits of $176,347, consisting primarily of advances for mineral and exploration rights and prepaid Marmato exploration expenditures; and iii) Accounts payable and accrued liabilities of $6,037,671, consisting primarily of amounts owing to Marmato titleholders under our mineral and exploration rights purchase agreements. These amounts relate primarily to staged payments owing under our agreements to acquire exploration rights from existing Colombian titleholders as described earlier in this MD&A.

Results of operations - fiscal year 2005 compared with fiscal year 2004

For the fiscal year ended December 31, 2005, we incurred a net loss of $1,491,470, compared to $23,094 in the fiscal year ended December 31, 2004.


Our general and administrative expenses in fiscal 2005 were $309,100 (2004-$28,258). The primary components of general and administrative expenses were legal and consulting fees in connection with our mineral exploration business.
 
Mineral property acquisition and exploration expenditures of $1,179,298 (2004-$NIL) were incurred during fiscal 2005. We expended $260,000 towards mineral concessions and $919,298 on exploration activities. Further information with respect to these expenditures is provided in Note 3 to our consolidated financial statements.
Changes in our other operating expenses, primarily amortization, were not significant.

During fiscal 2005, we used $1,339,165 in cash for operations (2004-generated $1,194 from operations). The majority of the fiscal 2005 operating cash requirements consisted of mineral property acquisition and administrative expenditures as described above.

We raised $2,822,900 during fiscal 2005 through the issuance of common stock and share purchase warrants as described in Note 5 to our consolidated financial statements and expended $22,780 on the purchase of capital assets and website development costs (2004-$NIL), resulting in net increase in cash of $1,460,955 (2004-$101,194).

At December 31, 2005, we held cash and cash equivalents of $1,565,640 and our working capital was $1,663,392.

Quarterly Results
 
 
2007
  
2006
  
2005
 
Q1
  
Q4
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
Q1
Net Loss
 $
(2,503,431)
  
$
(1,398,195)
 
$
(1,945,622)
 
$
(1,601,628)
 
$
(1,333,239)
 
$
(1,027,485)
 
$
(339,225)
 
$
(87,336)
 
$
(37,424)
Net loss per share
      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- basic and diluted
 $
(0.04)
  
$
(0.03)
 
$
(0.04)
 
$
(0.04)
 
$
(0.04)
 
$
(0.04)
 
$
(0.01)
 
$
(0.00)
 
$
(0.00)

In the fourth quarter of fiscal 2006 we generated a net loss of $1,398,195 and used $2,963,232 cash in our operations. $1,735,500 cash was generated from the issuance of common shares pursuant to the exercise of 3,471,000 warrants, and $1,114,751 cash was used in the purchase of mineral rights and property and equipment. As discussed elsewhere in the MD&A, the increase in quarterly net loss over the last nine quarters is consistent with the discontinuance of our secure automated filing operations in fiscal 2005 and the ramp up of mineral exploration activities in fiscal 2006 and fiscal 2007.
 
Liquidity and Capital Resources

Our cash and working capital positions as at the dates indicated were as follows:

 
   
March 31, 2007 
    
December 31, 2006 
Cash and cash equivalents
$
3,941,968
  
$
882,913
Working capital
$
(2,113,349)
 
$
(4,978,411)
 
We have historically relied on equity capital to fund our operations and mineral property acquisition and exploration activities. For the cumulative period March 25, 2003 to March 31, 2007, we raised in excess of $22 million from the issuance of common shares and share purchase warrants and used in excess of $18 million to fund operations and exploration activities, leaving approximately $4 million in cash reserves at March 31, 2007.
 
In order to continue to advance our operations while we source additional equity financing, on February 27, 2007 we entered into a $3,700,000 promissory note with our President, a shareholder, and a company controlled by these individuals. The short-term bridge loan, secured by our investment in RNC (Colombia) Ltd. was due and payable upon closing of a planned equity financing but in no case later than April 15, 2007.
 
Upon repayment, a $185,000 loan origination fee is was payable to the note holders. The note accrued interest at 10% per annum, with monthly interest payments commencing February 28, 2007.  

On March 21, 2007, we completed a private equity offering of 9,020,000 common shares at $1.00 per share. The net proceeds received from the offering were $8,478,800. In connection with this private equity offering, we paid as a commission $541,200 and issued agents warrants to purchase 541,200 shares of our common stock with each warrant exercisable for a period of 36 months from the closing of the offering at an exercise price of $1.00 per share. On March 26, 2007, the $3,700,000 loan, including the loan origination fee of $185,000 and accrued interest of $45,911, was repaid.  At April 30, 2007, our cash reserves were approximately $2 million, which we anticipate will be used in its entirety to fund second quarter 2007 operations and property purchases.
 
Based upon our current financial condition, we anticipate that the current cash on hand is insufficient to operate our business through the end of the current fiscal year. We intend to fund operations through additional debt and/or equity financing arrangements, (which may be insufficient to fund expenditures) or other cash requirements. We plan to seek additional financing in a public equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired and we may lose our option to purchase certain mining and mineral rights. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

In order to finance continuing operations and make payments related to the acquisition of identified properties and the exercise of our rights to the remaining options we hold, additional funding will be required from external sources. Management estimates that a minimum of $15 million will be required over the next twelve months to adequately fund our business plan.
 
On June 12, 2007, we entered into a $3,500,000 promissory note between us and our President, a shareholder, and a company controlled by these individuals. The loan, collateralized by our investment in RNC, is due and payable upon closing a planned equity financing, but in no case later than August 15, 2007. Upon repayment, a $52,500 fee is payable to the note holders. The note bears interest at 10% per annum, with monthly interest payments commencing June 30, 2007.
 
We intend to complete a private equity offering to raise up to $11.5 million from the sale of units comprised of common shares and warrants.  As of the date of this prospectus, we have not completed this private offering, however we anticipate doing so by the middle of August.
 
Off-balance sheet arrangements
 
We do not enter into off-balance sheet arrangements and have no off-balance sheet obligations at March 31, 2007.
 

Contractual obligations

We have a two year consulting contract with Mr. J. Randall Martin, our President and Chief Executive Officer. Under the contract, Mr. Martin is entitled to receive a monthly compensation of $10,000, and is eligible to participate in our share compensation arrangements. In addition, Mr. Martin is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. If, Mr. Martin’s contract is terminated without cause, he is entitled receive a lump sum equal to 12 months monthly compensation. Under the contract, Mr. Martin has disclaimed any rights to all intellectual property created by him or jointly with others while with us. In addition, following termination of the contract, Mr. Martin will be subject to a one year non-competition covenant.

We have a two year consulting contract with Dr. Stewart Redwood our VP of Exploration. Under the contract, Mr. Redwood is entitled to receive compensation at the rate of $750 per day and is eligible to participate in our share compensation arrangements. In addition, he is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. We also granted Dr. Redwood 500,000 restricted shares in the first quarter 2007. Should Dr. Redwood’s contract with us be terminated with cause or by his resignation before the period of two years has elapsed, he is required to return pro rata portion of the shares based on the time remaining on the contract.
 
We have a two year consulting contract with Mr. Ian Park, the President of Caldas. Under the contract Mr. Park is entitled to receive monthly compensation of USD $12,500 and may be entitled to a bonus (subject to board approval) and is eligible to participate in our share compensation arrangements. In addition, Mr. Park is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. Mr. Park can terminate his contract with us at any time upon 30 days written notice and upon receipt of such notice; we have the right to accelerate the termination date. Under the contract, Mr. Park has disclaimed any rights to all intellectual property created by him or jointly with others while with us. In addition, following the termination of the contract, Mr. Park will be subject to a one year non-competition covenant.
 
We have entered into a two year renewable contract with Mr. Thomas Lough. Mr. Lough is the President and a director of Investcol Limited. We purchased our 90% interest and have an option to acquire to remaining 10% interest in RNC (Colombia) Limited from Investcol Limited. In exchange for management services provided by Mr. Lough in connection with our Colombian operations, the contract provides for compensation of $800 per day. Mr. Lough is also eligible to participate in our share compensation arrangements. In addition he is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties.
 
Related Party Transactions
 
Certain transactions described under The Caramanta and Marmato Projects elsewhere in this MD&A are considered related party transactions. During certain prior periods we also paid management and consulting fees to directors, senior officers and shareholders and for certain of these periods, we paid office rental fees to a company related to a former director. Further


information on these transactions is provided in our accompanying consolidated financial statements for the three months ended March 31, 2007 and March 31, 2006 under Note 8 - “Related Party Transactions”.
 
Risks and Uncertainties
 
Going Concern
 
The Company has incurred a net loss for the period from inception on March 25, 2003 to March 31, 2007 and has no source of operating revenue. The Company’s future is dependent upon its ability to obtain financing and the future exploration and development of profitable operations from its mineral properties. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future. Management intends to continue relying upon the issuance of securities to finance the development of the business. As disclosed in Note 12 to our March 31, 2007 financial statements, subsequent to March 31, 2007 we entered into a $3.5 million bridge loan to continue operations. There can be no assurance that the Company will continue to be successful in raising the funds necessary to maintain operations, or that a self-supporting level of operations will ever be achieved. If the Company is unable to secure additional funding, the implementation of its business plan will be impaired and the Company may lose its option to purchase certain mining and mineral rights. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result should the Company cease to continue as a going concern.
 
Ownership of Mineral Rights
 
Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. We cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties.  For example, there is a risk that the Colombian government may in the future grant additional titles in excess of the Company's expectations to currently illegal miners.  Furthermore, although the Company believes that mechanisms exist to integrate the titles of mineral properties currently not owned by the Company, there is a risk that this process could be time consuming and costly.  The Company's plan to move the town of Marmato is subject to the risks inherent in any relocation project involving the movement of an established town and its residents to a new location.
 
Foreign Exchange Risk
 
A substantial portion of our operating expenses is denominated in U.S. dollars, with the remainder largely in either Colombian pesos or Canadian dollars. Fluctuations in currency exchange rates have a significant impact on our results from operation and corresponding financial stability. Historically, we have not entered into derivative contracts either to hedge existing risks or for speculative purposes and do not currently foresee doing so in the future. As a result, fluctuations in exchange rates could materially impact reported results in the future.


Environmental Risk

Environmental legislation and regulations affect our operations and exploration projects. Such legislation and regulations apply to us along with other companies in the mining and metals industry. These types of legislation and regulations require us to obtain operating licenses, permits and other approvals and impose standards and controls on activities relating to our mining exploration activities. Environmental assessments are required before undertaking significant changes to existing operations. In addition to current requirements, we expect that additional environmental regulations will likely be implemented to protect the environment and quality of life, given issues of sustainable development and other similar requirements. Although at December 31, 2006 we have no asset retirement or remediation obligations there can be no certainty this situation will continue.

Changes in environmental legislation could have a material adverse effect on our operations and business plan. The complexity and breadth of these issues make it extremely difficult to predict their future impact on us. Compliance with environmental legislation can require significant expenditures and failure to comply with environmental legislation may result in the imposition of fines and penalties, liability to clean up costs, damages, and the loss of important permits.

There can be no assurance that we will at all times be in compliance with all environmental regulations or that steps to bring us into compliance would not materially adversely affect our business, results of operations, financial condition or liquidity. We may also be subject to claims from persons alleging that they have suffered significant damages as a result of the environmental impact of our operations.
 
Governmental Regulations

The mining and metals industry is subject to regulation and intervention by governments in such matters as control over the development and abandonment of mine sites (including restrictions on production) and possible expropriation or cancellation of contract and mineral rights. Before proceeding with major projects, including significant changes to existing operations, we must obtain certain regulatory approvals. The regulatory approval process can involve stakeholder consultation, environmental impact assessments and public hearings, among other things. In addition, regulatory approvals may be subject to conditions, including the obligation to post security deposits and other financial commitments. Failure to obtain regulatory approvals, or failure to obtain them on a timely basis could result in delays and abandonment or restructuring of projects and increased costs, all of which could negatively affect our profitability and cash flows. In addition, such regulations may be changed from time to time in response to economic or political conditions, and the implementation of new regulations or the modification of existing regulations affecting the mining and metals industry could increase our costs and have a material adverse impact on business, results of operations, financial condition and liquidity.

There can be no assurance that we will be in compliance with all applicable laws or regulations at all times or that steps to bring us into compliance would not materially adversely impact our business, results of operations, liquidity or financial condition.


Recently Issued Accounting Standards, Not Yet Adopted

The FASB has issued FIN 48, which prescribes rules on the accounting for uncertainty in income tax positions. FIN 48 requires all material tax positions to undergo a new two-step recognition and measurement process. All material tax positions in all jurisdictions in all tax years in which the statute of limitations remains open upon the initial date of adoption are required to be assessed. In order to recognize a tax asset it must be more likely than not a tax position will be sustained upon examination based solely on its technical merits. If the recognition standard is not satisfied, then no tax benefit otherwise arising from the tax position can be recorded for financial statement purposes. If the recognition standard is satisfied, the amount of tax benefit recorded for financial statement purposes will be the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. FIN 48 is effective for our fiscal 2007 year. The implementation of FIN 48 did not have a material impact on our financial position, results of the operations, or cash flows for the three months ended March 31, 2007.

Share Data

At August 9, 2007, we have 65,816,849 common shares outstanding. In addition, we have outstanding:

i)  
3,977,500 stock options, each of which is exercisable into one common share; and
   
ii)  
7,431,906 common share purchase warrants, each of which is exercisable into one common share.

Fiscal 2007 Outlook

We have been purchasing mineral licenses in the Zona Alta portion of the Marmato project since 2005. Our objective is to purchase all of the mineral licenses and then consolidate them into a single license. As part of our acquisition program at the Marmato and Caramanta projects, we have also initiated a review of the available geological data for the projects and are in the process of compiling all information into a comprehensive database. We have identified a number of immediate exploration targets at both the Marmato and Caramanta locations.

Our 2006 exploration program consisted of two parts. The first part consisted of evaluating the underground mineralization on the Marmato project by channel sampling all of the cross-cuts underground to which CGL had access. The second part of the program consisted of channel sampling within the various pits located at the El Salto prospect and chip sampling outcrops located along the creek beds within the Caramanta project. Our 2006 exploration program was successful in confirming the nature of the mineralization which previous operators encountered during their exploration programs at Marmato. We can now combine the historical exploration work conducted by the various operators with the results of our 2006 exploration program to determine further exploration targets in the immediate area in fiscal 2007.

With the Marmato and Caramanta projects, we have acquired a portion of a major historical gold producing district in Colombia. At the present time a number of small miners are still working the Zona Alta of the Marmato project and Mineros Nacionales, a non-affiliated company, is mining the Zona Baja at a rate of 300t/d. Very little exploration has been conducted in the past within the area of the Marmato and Caramanta projects to adequately determine the true extent of the remaining mineralization. Therefore, the potential economic viability of the project remains unknown. A number of other targets remain on the Marmato and Caramanta projects which intend to explore further at a later date.
 
As a result of the 2006 exploration program, we are planning a more comprehensive exploration program on the Marmato and Caramanta projects in fiscal 2007. The next phase of the exploration program will consist of further chip and channel sampling, detailed geological mapping, as well as conducting diamond drilling on a number of the mineral showings, metallurgical testing, environmental studies, a scoping study and resource estimation in addition to further mineral property and infrastructure acquisitions.


Description of Property
 
Our principal offices are located at #208-8 King Street East, Toronto, Ontario, Canada M5C 1B5.
 
Our office in Medellin is located at Carrera 34 No. 5G 86, Medellin, Poblado, Colombia.

Marmato Mountain Development Project
 
Location & Access
 
The Marmato project is located in the Departments of Caldas and Antioquia, Colombia and is approximately 80 km due south of the city of Medellín, which is the capital of Antioquia. The latitude and longitude for the Marmato project is approximately 5°28’24” N, 75°35’57”W.
 
The Zona Alta of the Marmato project is located on Cerro El Burro, which is also known unofficially as Alto del Burro, on the west side of urban centre of Marmato at Universal Transverse Mercator (UTM) coordinates, Zone 18N 433,493E - 605,232N. The datum used for the UTM coordinates was WGS84 Zone 18N.
 
The Marmato mining property is divided into two levels vertically comprising the Zona Alta and the Zona Baja. This division was made in 1954 and allowed concession contracts to be defined by horizontal levels. The Zona Alta is mined by numerous small miners and we are in the process of purchasing the individual mineral licenses which comprise the Zona Alta. We hold our interest in the Marmato project through our wholly-owned Colombian subsidiary Minera de Caldas. Minera de Caldas holds a number of mineral licenses in the Marmato Zona Alta (Upper Zone) which has an area of 178.9489 ha.
 
The properties are a three-hour drive from Medellín, via the Medellín to Cali highway (the highways do not have route numbers) which is part of the Pan American Highway. The route from Medellín is via Itaguí (7 km), Caldas (12 km), Alto de Minas (13 km), Santa Barbara (27 km), La Pintada (26 km), La Guaracha del Rayo (32 km) and turn onto a secondary road to Marmato (8 km, the road is asphalted in the initial part and unsurfaced for the rest).
 
The topography in the Marmato area is abrupt with a relief of about 1,600 m between the Cauca River at 600 m altitude on the east side of the project and the peaks of the nearby mountains of
 

up to 2,200 m altitude. There is craggy outcrop in the upper parts of the mountain, and large landslides and talus slopes have formed as a result of mining activities. The Marmato veins outcrop on an east-facing mountain slope called Cerro El Burro with the mineralized area bounded by the El Pantano stream on the north side and the Cascabel stream on the south. The Cauca is a major north-flowing river in a deep valley that separates the Western and Central Cordilleras.

Description of Our Interest in Property
 
We acquired an interest in certain mining rights and options to acquire mining rights in the Zona Alta portion of the Marmato deposit located in western Colombia as a result of our acquisition of an equity interest in RNC (Colombia) Limited ("RNC"), a Belize corporation and a wholly-owned subsidiary of Investcol Limited. Pursuant to a Stock Purchase Agreement we entered into on January 12, 2006 with Investcol and RNC, we acquired 25% of RNC’s issued and outstanding stock. Thereafter on April 28, 2006, we acquired an additional 25% of RNC’s issued and outstanding common stock, resulting in our owning 50% of RNC’s issued and outstanding common stock. Thereafter, we acquired an additional 25% of RNC’s issued and outstanding common stock, resulting in our owning 75% of RNC’s issued and outstanding common stock, in consideration for the issuance of 4,200,000 shares of our common stock to Investcol, payment of $200,000 to Investcol, a commitment to provide a $5,000,000 non-interest bearing loan to RNC by December 31, 2006, and commitment to provide sufficient funds to RNC to complete the feasibility study on Marmato Mountain Project pursuant to the First Amendment to the Stock Purchase Agreement (the “First Amendment”) to the Stock Purchase Agreement executed on August 22, 2006.
 
On December 14, 2006, we entered into a Second Amendment to the Stock Purchase Agreement (the “Second Amendment”) and concurrently acquired an additional 15% interest in RNC, resulting in our owning 90% of RNC, in exchange for the issuance of 4,000,000 shares of our common stock to Investcol. Subject to the revised terms of the Second Amendment, we have the option to acquire the final 10% interest in RNC until May 1, 2009 which would result in our owning 100% of RNC, in consideration for exchange for the purchase price of $15,000,000. This payment can be made in either cash, shares of our common stock, or any combination thereof. Any shares issued shall be valued at 90% of the average closing price of our common stock as reported on a national securities exchange or national market or quotation system over the 30 day period immediately preceding the deliver of notice to Investcol of our intent to exercise this option. RNC is the beneficial holder of 94.99% of the issued and outstanding stock of Caldas, a Colombia corporation that (i) owns certain mining rights, (ii) has options to acquire mining rights and (iii) has exclusive rights to evaluate certain property, all located in the Zona Alta portion of the Marmato project in Colombia.
 
As of March 21, 2007, the Zona Alta portion of the Marmato project in Colombia hosts approximately 275 total small mines which Caldas is seeking to purchase individually. Eighty-five (85) of these mines have registered titles in the Ministry of Mines in Caldas. We refer to these mines as Category 1. Thirty-six (36) mines are located in an area called CHG-081 in which there is one mining contract and we refer to these mines as Category 2. Once all of these Category 2 mines have been purchased, Caldas will own the entire CHG-081 contract. Approximately ninety (90) of the remaining mines have made applications for legalization.


Approximately sixty-four (64) are illegal mines. We refer to these mines as Category 3. Of the applications made, management believes that less than thirty (30) will be legalized.
 
The procedure for purchase is normally a payment of 25% of the total negotiated purchase price down on signing, 25% of the total negotiated purchase price when all documentation has been submitted to the local mining department and the final 50% payment is when the mining claim has been registered in the company’s name.
 
Certain mining properties have been purchased or optioned and are awaiting final payment once the documentation and registration is complete. The total number of legal mines acquired by Caldas at March 20, 2007 is 95. Minera de Caldas is also purchasing the existing mills on the Zona Alta and has so far purchased ten of the out of a total of approximately 25. Once the purchases have been completed the mills will be shut down and dismantled. The mines will also be closed except for maintenance to keep the tunnels open for future sampling and drilling.
 
The locations of those mines purchased or optioned by Caldas are disclosed in the map below in red. The locations of those mines which remain to be purchased are shown in black.


Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems


arising from the frequently ambiguous conveyance history characteristic of many mining properties. We cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties.  For example, there is a risk that the Colombian government may in the future grant additional titles in excess of the Company's expectations to currently illegal miners.  Furthermore, although the Company believes that mechanisms exist to integrate the titles of mineral properties currently not owned by the Company, there is a risk that this process could be time consuming and costly.  The Company's plan to move the town of Marmato is subject to the risks inherent in any relocation project involving the movement of an established town and its residents to a new location.
 
Over the past 12 months, Cia Minera de Caldas has begun work by conducting a social evaluation of the district including a mining census to determine the social viability of constructing an open-pit gold mine. The mines operating at Marmato Mountain are currently operated underground by small scale miners using primitive mining methods.
 
On August 30, 2006, Caldas entered into a Transfer of Properties and Sale Agreement with Sociedad KEDAHDA S.A (“KEDAHDA”), a Colombia corporation, and acquired the Mining Title, Mining Application, and Mining Data for property located in the Marmato Mountain Gold District located in Colombia identified Title 5956, Applications 6455, 6455-B, 6418, 6418-B, 6418-C, 6170, D15-151, 622-17, 623-17, 615-17, 616-17 and 628-17.

Pursuant to an Agreement with Caldas, we paid the purchase price of $500,000 for these entire property interests and Caldas agreed to hold the title for these property interests in their name for our benefit. Title to these property interests are being held by Caldas in order to secure the approval for the transfer of title by Colombian mining authorities in accordance with the applicable laws of the Republic of Colombia.
 
History of Previous Operations
 
The Marmato deposit has been mined since pre-Colombian times. In the late 1800s to early 1900s, Western Andes Mining Company Ltd., an English company, mined at Marmato. Subsequently Marmato was mined by the Colombian Mining and Exploitation Company which made significant improvements and installed a new beneficiation plant at La Palma (now the site of Mineros Nacionales plant in the Zona Baja). The mine was expropriated in 1925 (Law 87) and the company received £3 million in compensation (Municipio de Marmato, 2004).

From 1925, the mines were owned by the government and leased to contractors. For the first six years the mines remained closed, then were leased from 1931-1934 to Roberto Luis Restrepo and Alfredo Londoño, and from 1935-1938 to Uribe Afanador. From 1938 the National Government administered the mines directly. They were contracted to José Miguel Lizarralde in 1938-1940, and to Gustavo White from 1940.

Marmato was divided into two zones, Alta (Upper) and Baja (Lower), in 1954 (Decree 2223). The following year the government signed a contract with a North American, Julio E. Hurtado, who transferred them to the Mining Enterprises Corporation. The contract covered mining in both the Zona Alta and the Zona Baja. This venture failed and the mines were returned to the government. As a result of conflicts between this company and the contractors in the Zona Alta,


the government decided to exploit the Zona Alta and the Zona Baja separately. The Zona Alta would continue to be exploited by contractors.

Gulf Resources Exploration Co. (Gulf Resources) explored Marmato in 1978 but the results of this program are not known.

In 1981, Marmato became part of the Aporte Minero scheme and was managed by a succession of state mining companies ECOMINAS (1981 to 1992), MINERALCO (1992 to 1997) and MINECOL (1997 to 2004), and since then by the Unidad de Delegación Minera de Caldas (Caldas Mining Delegation Unit) (Municipio de Marmato, 2004). The “Exclusion Zone of the Marmato Mining District” (Zona de Exclusion del Distrito Minero de Marmato), was created in the Zona Alta in 1998.

A subsidiary of the Phelps Dodge Corporation (Phelps Dodge) called Minera Phelps Dodge de Colombia S.A. (Minera Phelps Dodge) explored the Zone Baja of Marmato in 1984 and 1985. It carried out surface and underground sampling and drilled 7 underground core holes, and defined a proven reserve of 102,900 t @ 7.83 g/t Au and 24 g/t Ag, and a total reserve (proven, probable and possible) of 754,600 t at the same grade (historical reserves which predate NI-43-101; Conquistador, 1998).

Electrical and EM surveys at Marmato were described in a paper by Calvache et al (1985) but no data are available for this program.

In 1988, William Hill Mining Consultants reviewed the Marmato project for Greenstone Resources Limited, Canada, as part of a bid process.

In 1993, Mineros Nacionales S.A. (Mineros Nacionales) started mining the Zona Baja with a 300 tpd underground mine under contract No. 041-89M. This is an Aporte Minero contract which is still valid and is now administered by the Delegada Minera de Caldas. The contractor pays the state a royalty of 4% plus an additional sliding royalty based on the gold price, currently above 6%. The following year Mineros de Antioquia S.A. (renamed Mineros S.A. in 2004) acquired 51.75% of Mineros Nacionales and upgraded the mine and mill. The plant has a flotation circuit to make a sulphide concentrate, gravimetric separation by cyclones, and agitated cyanide leach with gold precipitation by zinc (Merrill Crowe process) and smelting. In the late 1990s, 24 underground core holes and 3 reverse circulation holes were drilled in the 1160 (Maruja) and 1210 (Zancudero) levels. Also by the late 1990s the mine and mill were operating at 300 t/d with grades ranging between 5 g/t and 12 g/t gold. By 2005, Mineros Nacionales was owned 94.5% by Mineros S.A.

Conquistador Mines Ltd. (Conquistador) a Vancouver-listed junior company which later changed its name to Western Platinum Holdings and is now called Orsa Ventures Corp. (Orsa) explored Marmato between 1996 and 2000 through its Colombian subsidiary Corona Goldfields S.A. (Corona Goldfields). Orsa had an option to explore the Zona Baja over 4 years and to acquire 50.1% of Mineros Nacionales (bought 13.15% which was later sold in 2001), and acquired several mines in the Zona Alta. Conquistador drilled 44 holes (14,678 m), and commissioned Mineral Resources Development Inc. (MRDI) to complete a resource estimate and scoping study in 1998. Conquistador carried out no further work on the project due to the expiration of the option contract.


Conquistador carried out surface mapping of fracture systems, veins and alteration, and detailed mapping of underground cross-cuts. It took 1,147 channel samples totalling 2,847 m from surface trenches and underground cross-cuts. Samples were cut by hand chisel from channels 2.0 m long x 5 cm wide x 3 cm deep. It also drilled 30 surface diamond drill holes totalling 11,146 m and 14 underground diamond holes totalling 3,375 m for a total of 30 diamond drill holes totalling 14,678 m. Diamond core was sawn in half with one half sampled in 2.0 m intervals for assay and the other half retained. The location and existence of the drill core is not certain: it was originally stored at the Barringer Lab in Medellín (according to MRDI, 1998) but this is now closed and it is presently believed to be stored at the Mina Baja of Mineros Nacionales in Marmato and access is not available to CGL. Conquistador reported that the results of preliminary metallurgical tests showed ready leachability of gold but the appendix of the MRDI report with the results is not available.

At the same time, between 1995 and 1997, another junior Canadian mining company called Gran Colombia Resource Inc. (Gran Colombia), now called Wavve Telecommunications Inc. carried out exploration of the Echandia and Chaburquia properties on the northern portion of the Marmato system. Gran Colombia drilled 75 diamond drill holes for 15,000 m. A scoping study was made by Geosystems International, Denver, in 1997 which concluded that there was not sufficient grade continuity for a bulk-tonnage resource and mining operation, and no further work was carried out. In 1996, Gran Colombia purchased 48.25% of Mineros Nacionales which it then sold in 1997.

We and our subsidiary Minera de Caldas began exploration of Marmato and surrounding areas in 2005. The objective is to identify a potentially bulk mineable, low grade gold and silver resource. We have carried out property acquisition in the Zona Alta of Marmato, along with underground sampling, surveying and mapping, and preliminary metallurgical testwork. We plan to conduct further exploration and a drilling program to define a mineral resource and carry out a scoping study for the Marmato project. This work is continuing and the company plans to carry out exploration drilling on one or more gold-silver targets in future programs.

Mineralization

Mineralization at Marmato is hosted by a steeply-dipping sheeted vein system of sulphide veinlets with dominant northwest to west-northwest trend. The width of individual veinlets varies from <1 mm to 10s of cm and in places they can form a veinlet stockwork.

The known vertical extent of mineralization is greater than 600 m, from Cerro El Burro (1,705 m altitude) to the lowest level of Mineros Nacionales at 1,110 m. The vertical extent of mineralization within the Upper Zone is between 406 m and 498 m.

The wider veinlets are mined in numerous small mines accessed by horizontal adits. The mapped distribution of mine workings is over a width across strike of about 1,300 m (of which 1,000 m are within the Marmato concession), with the main concentration of mine workings occurring in a zone about 800 m wide, and along a strike length of 880 m. The mine entrances are on the southeast end on the mountain-side and the veins trend northwest into the mountain. The mineralization is open along strike to the northwest and the strike length may be longer than the 880 m indicated above.


The veins and mines are distributed in two zones, a north zone and a south zone which are separated by a lower grade zone with fewer mines. The veins show a tendency to converge to the northwest under Cerro El Burro suggesting that this may be a focus for the vein system.

Gold mineralization at Marmato is hosted by massive sulphide veinlets which vary from <1 mm to some 10s of cm in width. The veinlets are formed predominantly of coarse pyrite (5 mm to 10 mm) and coarse, black, iron-rich sphalerite (marmatite) is common along with galena and chalcopyrite. The veinlets have minor gangue which is comprised of quartz, calcite, sericite and, in places, chlorite. Vein textures include massive sulphide, coarsely banded, and open space filling. Cross-cutting vein textures are very rare. Disseminated pyrite and sphalerite occur in the phyllic altered wall rock. Fault breccias are common along with ground sulphides; however, no hydrothermal breccias are known.

The sulphides described in a petrographic study (Cuellar & Mora, 1985) are:

·  
Pyrite. The predominant sulphide. Early euhedral to massive pyrite has inclusions of arsenopyrite and pyrrhotite and often has a cataclastic texture with sphalerite, galena and chalcopyrite in fractures.

·  
Sphalerite. The second most abundant sulphide. Has exsolution of chalcopyrite. Mostly formed in second stage. Early sphalerite has cataclastic texture.

·  
Galena. Is formed in the second stage of mineralization.

·  
Chalcopyrite. Infills fractures in pyrite and exsolutions in pyrite and sphalerite.

·  
Pyrrhotite. Minor and only observed as exsolution lamellae in sphalerite and with pyrite.

·  
Bornite. Minor and is associated with chalcopyrite in granular aggregates.

·  
Arsenopyrite. Minor and occurs with early pyrite.

·  
Chalcocite. Minor supergene mineral coating chalcopyrite, bornite and galena.

·  
Covellite. Minor supergene mineral coating and in fractures in chalcopyrite.

Unconfirmed minerals include marcasite, pyrargyrite, gold tellurides, tetrahedrite, fluorite, adularia, barite, rhodonite and rhochrosite (Rossetti & Colombo, 1999; Warden & Colley, 1990; Escuela de Minas de Marmato, 2004).

Gold occurs as free grains between 9 microns and 600 microns in size associated with sulphide grain aggregates, gangue minerals, iron oxides and as small grains encapsulated in pyrite (Escuela de Minas de Marmato, 2004). This study calculated that 99% of gold grains would be liberated by a 75 micron grind. The gold was described as electrum although no silver percentages were given. The majority of the gold associated with sulphides is non-refractory as shown by high recoveries from preliminary cyanide bottle roll tests.


Two phases of primary mineralization plus a supergene stage are described (Cuellar & Mora, 1985; Rubiano, 1986):

1.  
Pyrite (with pyrrhotite exsolution laminae), iron-rich sphalerite (marmatite, with exsolutions of mackinawite ((iron, nickel, cobalt) S1-x), chalcopyrite, pyrrhotite), chalcopyrite (with exsolutions of mackinawite, cubanite-II (CuFe2S3) and starsphalerite) with rare bornite, arsenopyrite and pyrrhotite. The inclusions in pyrite, sphalerite and chalcopyrite formed by exsolution of iron, copper and sulphur on cooling of minerals formed at high temperature. The presence of cubanite-II and iron-rich sphalerite indicates a high temperature of formation.

2.  
Fe-poor sphalerite replaced the pyrite and chalcopyrite of Stage 1; chalcopyrite in fractures in other minerals; galena replaces all other minerals; arsenopyrite; melnicovite (FeS2 gel)-pyrite; melnicovite-marcasite; rare inclusions in galena of sulphosalts of silver (acanthite, Ag2S; polybasite, (Ag, Cu)16Sb2S11; freibergite (Ag, Cu, Fe)12Sb4S13 (Rossetti & Colombo, 1999) and gold. These minerals have a lower temperature of formation.

3.  
Supergene minerals are covellite, chalcocite, iron oxides and hydroxides, and minor malachite.

The pyrite has oxidized to jarosite to form a jarositic cap on the Marmato deposit. This is accompanied by supergene argillic alteration (white clay). The depth of oxidation is shallow and most or all of the small mines work sulphides, although oxidation may be much deeper along highly fractured zones. MRDI (1998) reports partial oxidation of sulphide veinlets to an elevation of 900 m in drill hole MU-002. MRDI also reports that veins are greater than 50% oxidized above an elevation of 1,300 m (Zona Alta), however observations by us do not support this and unoxidized sulphide veins are dominant in all of the mines sampled.

Exploration, Drilling, & Sampling

Topography

A detailed topographic map with 2 m contour intervals derived from Ikonos satellite imagery was commissioned and has been received. The new topographic provides a detailed base map for improved accuracy when plotting the results of the exploration programs. In addition, it will be utilized for engineering studies for planning for a potential open pit mining operation, waste rock and tailings location sites, and town relocation planning.

Geological Mapping
 
We conducted detailed surveying and mapping of the accessible underground workings within the Zona Alta to which we had access, between December, 2005 and May, 2006. A number of mines remain to be surveyed once agreements are reached with the owners. The initial detailed surveying of the underground mines was conducted using a compass and tape, with the entrances surveyed by differential GPS. A more detailed survey of all mines was started in December 2006 and is currently in progress using a total station and theodolite which will define the true extent and volume of the various mine openings underground. Detailed geological mapping on surface has been carried out.


Geophysics
 
No ground geophysical surveys have been carried out by us. Ikonos satellite imagery was commissioned and received and the products include satellite images, detailed topographic maps with 2 meter contour interval, digital terrain model (DTM), and spectral interpretation.

Drilling
 
A diamond drilling commenced on the Marmato project in February 2007. Currently one drill rig is operating and two more drill rigs are planned to be added shortly, including a drill rig to drill from the underground mines. So far no sample assays have been received. The plan is to complete an initial drilling program of 8,000 meters by September 2007 in order to carry out a preliminary mineral resource estimate. It is estimated that a total of 60,000 meters of drilling will require to be carried out during 2007 and 2008 in order to define mineral resources and reserves.

Sampling

We sampled all accessible mine faces in the Zona Alta in December, 2005 and January, 2006. This sampling program was conducted primarily as a tool to value the mines prior to purchasing them. During the sampling of the accessible mine faces, 283 samples were taken from 50 mines with samples taken from faces (vein, footwall, hangingwall, stockwork) and backs, as well as samples of muck, mill products and concentrates. Samples were taken using hand chisels and sampling channels up to 2.0 m long by 5 cm wide and 1 cm deep. The samples were analyzed for gold and silver by the Inspectorate America Corporation (Inspectorate). The weighted average grade of all vein samples taken (total number 114, excluding other samples) was 8.77 g/t gold and 48.78 g/t silver over 0.32 m. The gold grades range from 0.17 g/t to 172.87 g/t, with silver ranging from 0.6 g/t to 676.6 g/t, and vein widths ranging from 0.01 m to 2.00 m.

We took continuous channel samples of all accessible cross-cuts from February, 2006 to May, 2006. The objective of this program was to check the grade of disseminated mineralization between the veins for evaluation of the bulk tonnage potential. A total of 303 samples were taken from cross-cuts in 14 mines with a total sampled length of 1.74 m. After cleaning the mine wall the samples were taken using hand chisels to sample intervals of 2.0 m (vary from 0.01 m to 1.74 m) lengths by 5 cm wide by 1 cm deep. Veins over 0.15 m wide were sampled separately.

In December 2006 a new program of taking continuous channel samples of additional cross-cuts and underground mines was started and this program is currently still underway. Samples are taken in the same form as the previous program and in April 2007 sampling started using an electric rock hammer and a rock saw.

Caramanta Exploration Projects
 
Location & Access
 
The Caramanta project is located in the Departments of Caldas and Antioquia, Colombia and is approximately 80 km due south of the city of Medellín, which is the capital of Antioquia. The El Salto prospect in the Caramanta project, is 4.5 km north of Marmato at UTM coordinates Zone 18N 433,934E - 609,670N. The datum used for the UTM coordinates was WGS84 Zone 18N.

We hold our interest in the Caramanta project through our wholly-owned Colombian subsidiary Minera de Caldas. Minera de Caldas holds a number of mineral licenses in the Marmato Zona Alta (Upper Zone) which has an area of 178.9489 ha, and several exploration licenses in the area surrounding the Marmato Zona Alta totalling 32,063.6813 ha which are referred to as the Caramanta project.


Marmato is about a three-hour drive from Medellin on the paved Pan American Highway. Access to El Salto is by continuation of the road north from Marmato to the end of La Loma at about 1,350 m altitude, where we have refurbished a small house as a base camp. This road is in poor condition. From La Loma a steep path descends some 300 m into the Quebrada San Francisco and the mine workings on the north side.

The El Salto prospect lies on a steep ridge between Rio Arquia on the north side, which marks the limit between Caldas and Antioquia Departments, and its tributary Quebrada San Francisco, on the south side. These flow into the Cauca River 2 km to the east.
 
The topography of the area is steep with a relief of over 1,800 m from the River Cauca at about 600 m altitude. The climate is sub-tropical humid and the area is heavily wooded with clearings for grazing. The known mineralization lies at an altitude of about 1,050 m to above 1,100 m.

Description of Our Interest in Property
 
On September 22, 2005, we entered into an Assignment Agreement with Investcol Limited (“Investcol”), a corporation organized and existing under the laws of Belize, where Investcol assigned, transferred, and conveyed to us all of its rights under a Contract for Purchase Option of Mining Concessions (“Original Option Contract”) entered into with CIA Servicios Y Logisticos Ltda., a corporation organized and existing under the laws of Colombia. As a result of the Assignment Agreement with Investcol, we acquired an option to purchase certain mining and mineral rights on property known as Concession 6602, 1343, and 6329 located in Caramanta Municipality, Antioquia Department, Medellin, Colombia (the “Property”).
 
On April 10, 2006, we entered into an Assignment Agreement with Investcol where Investcol assigned, transferred, and conveyed to us all of its rights under a Contract for Purchase (“Purchase Contract”) entered into with CIA Servicios Logisticos de Colombia Ltda. As a result of the Assignment Agreement with Investcol, we acquired Investcol’s rights to acquire certain mining contracts to exclusively engage in mining activities on Concessions 6993, 7039, 6821, and 6770 (the “Contracts”) and options that Investcol holds to acquire the exclusive rights to engage in mining activities on Concessions HET-31, 32, 26, 27, and HETG-01 (the “Options”) all located within an area in Colombia referred to as the Caramanta location.
 
On September 25, 2006, we entered into a Master Agreement to acquire all of the issued and outstanding shares of Gavilan Minerales S.A. (“Gavilan”), a Colombia corporation, for the purchase price of $300,000 and the issuance of 1,150,000 shares of our common stock. Cia Servicios Logisticos de Colombia Ltda. (“Cia Servicios Logisticos”), a Colombian corporation, is the primary shareholder of Gavilan. Gavilan holds proper legal title to several properties located in western Colombia known as Concessions 6602, 1343, 6329, 6993, 7039, 6821, 6770, HET-31, 32, 26, 27, and HETG-01 (the “Properties”) which we held an option to acquire. As a result of our acquisition of Gavilan, we will become the title holder of these Properties and no longer have to satisfy any minimum exploratory work obligations on these Properties. We own, have optioned or have made applications for 32,063.6813 ha of exploration licenses in the Caramanta project area 

Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising for the frequently ambiguous conveyance history characteristic of many mining properties. Currently, we are in the process of investigating the title of the Property for which we hold the option to acquire certain mining and mineral rights. We cannot give any assurance that


title to such properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties.

History of Previous Operations

The Caramanta project surrounding the Marmato project has also experienced small scale mining since the pre-colonial times, however, we are unaware of any modern systematic exploration program has been conducted on large portions of the project area. At the present time, both underground and surface artisanal mining is being conducted on a number of mineral showings in the area of the Caramanta project.

El Salto Prospect

Artisanal miners have been working a number of small pits at the El Salto prospect within the Caramanta project. At the present time there are eleven small pits which have been worked in the past or are still in the process of being worked. The eleven pits are listed under the following names; Martin D, Humberto A, Humberto B, Fortunato, El Armario, El Tierrero, Martin, La Ventana, La Cueva, Mateo, and Machongai.

There is no recorded historical mining, although the artisanal mining has been carried out at El Salto for approximately the past two decades. At present, there are about a dozen artisanal miners working in three groups. The artisanal mines comprise a series of coalescing open pits of about 5 m to 30 m diameter and up to 20 m to 30 m deep. These pits have been dug by hand with dynamite used to break-up the rock for easier extraction. A small compressor for drilling was installed about three years ago. The coarse broken rock (0.5 m to 1 m in size) is rolled into a water channel draining each pit. Water is accumulated in small reservoirs above each pit and periodically released into the pit. The water flow carries and rolls the broken rock down the channel causing some crushing and further breaking down the rock into smaller pieces. Downstream the water cascades the broken rock over a series of wooden grizzlies, made of logs with the undersize material passing into sluices. The sluices are then cleaned up using pans to recover the free gold. The mining method is primitive and the percentage of gold recovered by this mining method is believed to be low.

Most of the artisanal miners are mining the oxide zone of the mineral deposit in the pits, but some are now mining the sulphide zone.

The creeks in the El Salto area have also experienced alluvial mining along their extent and few areas have been untouched.

However, no large scale exploration appears to have been conducted in the Caramanta area and to our knowledge there is no record of any exploration diamond drilling having been conducted on the mineral showings in this area.


Mineralization

Mineralization at the El Salto prospect and on other areas within the Caramanta project is very similar in style to the Marmato project. The veins and veinlets are massive sulphide formed by pyrite with minor black sphalerite and galena, and a low percentage of quartz and calcite gangue. Visible native gold occurs with both the sulphides and oxides.

The mineralization occurs in quartz veins (up to 1.0 m wide) and veinlets with multiple directions. The quartz veins and veinlets are massive with crude banding of the sulphides at some margins. Multiple veins locally form a hydrothermal breccia texture and the phyllites have ribbon textured quartz veins.

The sulphide content of the veins is usually low and in the order of zero up to a few percent, but can be as much as 50% in some. The main sulphide is coarse grained, cubic, striated pyrite; however, small amounts of black and brown sphalerite, galena and sulphosalts also occur. Minor copper mineralization was observed in one locality as sooty chalcocite coating pyrite in a quartz vein, with surficial oxidation to chalcanthite.

Most of the gold recovered by the miners is very fine grained and pale colored. Coarse gold was observed, associated with sulphides, in one location in quartz veinlets within phyllites. The miners report coarse gold (to 1 cm) in places which is likely supergene.

Some veins were sheared by later faulting which resulted in the development of soft white clays and the grinding of pyrite to a fine grain size.

Exploration, Drilling, & Sampling

Topography

A detailed topographic map with 2 m contour intervals derived from Ikonos satellite imagery was commissioned and this map provides a detailed base map for improved accuracy when plotting the results of the exploration programs.
 
Geological Mapping

Geological mapping and surveying has been carried out at the El Salto prospect (1:600 scale) and on License 1343 (1:6,000 scale). This work is continuing and a detailed geological map of the property is in progress.

Geophysics

No ground geophysical surveys have been carried out by us. Ikonos satellite imagery was commissioned and received and the products include satellite images, detailed topographic maps with 2 meter contour interval, digital terrain model (DTM), and spectral interpretation.
 
Drilling

We have not conducted any drilling on the Caramanta project as of August 9, 2007.


Sampling

Since March, 2006, we have carried out surface channel sampling on the outcrops and open pit mine workings within the El Salto prospect, on License 1343 and in other areas of the Caramanta project. This sampling program is on-going and results from some of the later sampling remain outstanding. The samples were taken using hand chisel and sampling lengths of up to 2.0 m by 10 cm wide and 5 cm deep. In addition, we are taking samples of soils in areas of no rock outcrop. The samples are analyzed for gold and 35 elements.

We purchased a database of geochemical sample results as part of the August 30, 2006, Transfer of Properties and Sale Agreement between Caldas and Sociedad KEDAHDA S.A. (“KEDAHDA”), a Colombia corporation. This database includes the results of stream sediment sampling conducted by KEDAHDA over the whole of the Caramanta project and the results of soil sampling and rock sampling carried out in selected areas by KEDHADA. We have reinterpreted this data and have identified several areas with anomalies of gold which we are currently following up by geological mapping, rock and channel sampling and soil sampling.
 
Proposed Program of Exploration and/or Development for the Marmato and Caramanta Projects

Our 2006 exploration program consisted of two parts. The first part consisted of evaluating the underground mineralization on the Marmato project by channel sampling all of the cross-cuts underground to which we had access. The second part of the program consisted of channel sampling within the various pits located at the El Salto prospect and chip sampling outcrops located along the creek beds within the Caramanta project.

Our 2006 exploration program was successful in confirming the nature of the mineralization which previous operators encountered during their exploration programs at Marmato. We can now combine the historical exploration work conducted by the various operators with the results of our 2006 exploration program to determine further exploration targets in the immediate area.

As a result of the 2006 exploration program, we have planned a more comprehensive exploration program on the Marmato and Caramanta projects and have started to carry out these programs. The next phase of the exploration program will consist of further chip and channel sampling, detailed geological mapping, as well as conducting diamond drilling on a number of the mineral showings, metallurgical testing, environmental studies, a scoping study and resource estimation in addition to further mineral property and infrastructure acquisitions.

In order to reduce risk, we have decided to divide Phase 1 into two sections (stage A and stage B). At Marmato, stage A will include 10,000 samples from the chip and channel sampling program, detailed geologic mapping as well as conducting 8,000 m of diamond drilling. The information gathered will be used to estimate an inferred resource by the end of the third quarter of 2007. At Caramanta, the stage A program will include an initial 2,000 m of drilling on the El salto project.

With successful indications from stage A activities, we would seek an additional $16.0 million in financing in order to complete Phase 1 and prepare for Phase 2. At Marmato, stage B of Phase 1 would include a further 22,000 m of drilling, metallurgical testing, and completion of an environmental report and scoping study. It is also anticipated that a further 8,000 m of exploration drilling at Caramanta would occur.
 
To successfully achieve the total Phase 1 drilling program of 30,000 m at Marmato and 10,000 m at Caramanta numerous drills will be required. At Marmato, we assume that a surface drill could average 750 m of drilling per month while the underground drill could average 600 m per month. With these productivity rates a surface drill began operation at Marmato in February, 2007, and shortly we will add a second surface drill along with an underground drill.


A third surface drill would be added in May, 2007 while a fourth surface drill would be required by September. At Caramanta one surface drill is schedule to commence in June, 2007 with a second added by September. No underground drilling is anticipated at Caramanta.

Other property acquisitions and acquisition of additional surface rights would occur only upon completion of the phase 1 stage A and stage B programs.

Assuming successful completion of Phase 1, we will immediately commence with Phase 2 of the exploration program. Phase 2 includes an additional 30,000 m of drilling at Marmato and 10,000 m of drilling at Caramanta. Also, we would complete the geology and mapping, metallurgical testing, geotechnical testing and apply for the required permits. During Phase 2, we would complete the reserve estimate and complete a feasibility study. Acquisition of new properties and surface rights in other areas around the mountain would continue.

As with the end of the previous phase, during Phase 2 we would have 4 surface drills and one underground drill operating at Marmato and 2 surface drills operating at Caramanta.

Phase 1 of exploration will see expenditures of approximately US $23,700,000 over two stages. If the first phase is successful then we will spend a further US $11,400,000 during the second phase which will include further drilling, increased regional exploration, further metallurgical testwork, mining and environmental permitting, and possibly prefeasibility and feasibility studies. If both phases of the exploration and acquisition programs are completed we will spend an estimated US $35,100,000.
 
Certain Relationships and Related Transactions
 
Except as disclosed below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since the beginning of our last fiscal year on January 1, 2006 or in any presently proposed transaction which, in either case, has or will materially affect us.

Pursuant to a Stock Purchase Agreement (“Agreement”) we entered into on January 12, 2006 with Investcol Limited and RNC (Colombia) Limited, a Belize corporation and a wholly-owned subsidiary of Investcol ("RNC"), the exercise of an option pursuant to the Stock Purchase Agreement on April 28, 2006, First Amendment to the Agreement executed on August 22, 2006, and the Second Amendment to the Agreement executed on December 14, 2006, we acquired ninety percent (90%) of the issued and outstanding stock of RNC and hold an option to acquire the remaining ten percent (10%) of RNC's issued until May 1, 2009. This option to acquire the final 10% interest in RNC until May 1, 2009, resulting in our owning 100% of RNC, can be exercised for the purchase price of $15,000,000. This payment can be made in either cash, shares of our common stock, or any combination thereof. Any shares issued shall be valued at 90% if the average closing price of our common stock as reported on a national securities exchange or national market or quotation system over the 30 day period immediately preceding the deliver of notice to Investcol of our intent to exercise this option. In consideration for this acquisition, we
 

issued a total of 11,200,000 shares of our common stock to Investcol, paid $200,000 to Investcol, and provided non-interest bearing demand loans totaling to RNC in the amount of $10,200,000.
 
On April 10, 2006, we acquired Investcol’s rights in certain mining contracts to exclusively engage in mining activities on Concessions 6993, 7039, 6821, and 6770 (the “Contracts”) and options that Investcol holds to acquire the exclusive rights to engage in mining activities on Concessions HET-31, 32, 26, 27, and HETG-01 (the “Options”) all located within an area in Colombia referred to as the Caramanta location. In consideration for this acquisition, we issued to Investcol one million restricted shares of our common stock and paid to Investcol $350,000.
 
Mr. Martin, our Chief Executive Officer and member of our board of directors, was appointed as an officer and director of Investcol on February 23, 2006 and continues to serve in this capacity. Mr. Martin was also appointed as an officer and director of RNC (Colombia) Limited, a subsidiary of Investcol, on February 23, 2006 and continues to serve in this capacity.

Luis Gabriel Correa Ocampo, who served as our Vice President of Exploration from June 2005 to December 2006, was employed also by Cia Servicios Logísticos de Colombia Ltda. as its Chief Geologist until August 2006.

We retained Dr. Stewart D. Redwood to prepare a report in December 2005 entitled “The Geological Model of the Marmato Gold Deposit, Colombia” and in February 2006 to prepare a report entitled “The Exploration Potential of the El Salto Gold Prospect, Caldas, Colombia.” Subsequent to preparing these reports, our board of directors appointed Dr. Redwood to serve as our Vice President of Exploration on December 1, 2006.
 
On August 15, 2006, we entered into a consulting agreement with James Kopperson where Mr. Kopperson provided services to us at the rate of Cdn $200.00 / hr. Mr. Kopperson was later appointed to act as our Chief Financial Officer on December 1, 2006. We do not currently have any consulting arrangement with Mr. Kopperson.

On February 27, 2007, we entered into a promissory note (“Note”) with our Chief Executive Officer, J.R. Martin, T.W. Lough, and RNC (Management) Limited (the “Lenders”) for the purpose of providing us with short-term financing to sustain our operations and to continue our acquisition of property interests in the Zona Alta portion of the Marmato project in Colombia. This Note is for $3,700,000 and is payable upon the completion of an ongoing private equity offering or April 15, 2007, whichever is first. Mr. Martin provided $2,000,000 of the total financing, Mr. Lough provided $1,000,000 of the total financing, and RNC (Management) Limited provided the remaining $700,000. Mr. Lough is the President and a director of Investcol Limited. We purchased our 90% interest and have an option to acquire to remaining 10% interest in RNC (Colombia) Limited from Investcol Limited. The outstanding principal amount of this Note bears interest at a rate of ten percent (10%) per annum. In consideration of this Note, we agreed to pay each Lender a fee equal to five percent (5%) of the initial loan amount provided by the Lender.  On March 26, 2007, the loan was repaid.

On June 12, 2007, we entered into promissory notes (the “Notes”) with our Chief Executive Officer, J.R. Martin, T.W. Lough, and RNC (Management) Limited (the “Lenders”) for the purpose of providing us with short-term financing to sustain our operations and to continue our acquisition of property interests in the Zona Alta portion of the Marmato project in Colombia. These Notes are for a total of $3,500,000 and are payable upon the completion of our next private equity offering or August 15, 2007, whichever is first. Mr. Martin provided $2,000,000 of the total financing, Mr. Lough provided $1,000,000 of the total financing, and RNC (Management) Limited provided the remaining $500,000. Mr. Lough is the President and a director of Investcol Limited. We purchased our 90% interest and have an option to acquire to remaining 10% interest in RNC (Colombia) Limited (“RNC”) from Investcol Limited.


The outstanding principal amount of these Notes bears interest at a rate of ten percent (10%) per annum. In consideration of these Notes, we agreed to pay each Lender a fee equal to one and one-half percent (1.5%) of the initial loan amount provided by the Lenders. Each of the Notes is secured by our equity ownership in RNC, our 90% majority-owned subsidiary. We have the option at any time to prepay all or part of the principal balance without any associated bonus or penalty being paid to the Lender.
 
Market for Common Equity and Related Stockholder Matters
 
Market Information

Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by the NASD. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the symbol “CGDF.”

The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Fiscal Year Ending December 31, 2006
Quarter Ended
 
High $
 
Low $
March 31, 2006
 
2.29
 
1.33
June 30, 2006
 
2.83
 
1.20
September 30, 2006
 
1.83
 
0.9
December 31, 2006
 
1.74
 
1.07
 
Fiscal Year Ended December 31, 2005
Quarter Ended
 
High $
 
Low $
March 31, 2005
 
10.05
 
0.25
June 30, 2005
 
1.05
 
0.5
September 30, 2005
 
0.9
 
0.7
December 31, 2005
 
1.55
 
0.65

On July 12, 2007, the last sales price of our common stock was $1.34.
 
Penny Stock
 
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;


(d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
 
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
 
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
 
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
 
Holders of Our Common Stock
 
As of December 31, 2006, we had approximately seventy-seven (77) holders of record of our common stock and several other stockholders hold shares in street name.

Dividends
 
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
 
The DGCL provides that a corporation may pay dividends out of surplus, out the corporation's net profits for the preceding fiscal year, or both provided that there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation's stock raving a distribution preference.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
In January 2006, we adopted the Colombia Goldfield Ltd. 2006 Stock Incentive Plan, which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance shares and performance units, and stock awards our officers, directors or employees of, as well as advisers and consultants. This plan was confirmed by the stockholders of our Company on July 31, 2006 at the annual shareholders meeting.

Under the 2006 Colombia Goldfield Ltd. Stock Incentive Plan, we initially reserved 3,500,000 shares of common stock for the granting of options and rights. In June 2006, our Board of


Directors approved an amendment to the Colombia Goldfields Ltd. 2006 Stock Incentive Plan for the purpose of increasing the total number of shares of common stock that may be issued pursuant to Awards granted under the 2006 Plan to five million (5,000,000) shares. Such options and rights are to be granted at or above the fair market value of our common stock on the date of grant. All stock options and rights are to vest over a period as determined by the board of directors and expire not more than ten years from the date of granted.

Sunbsequently, the Board of Directors has approved additional amendments to the Colombia Goldfields Ltd. 2006 Stock Incentive Plan to: (i) increase the number of shares of common stock authorized to be issued under the Plan by 1,500,000 shares to a total of 6,500,000 shares; (ii) provide that the Board may not amend the Plan without the approval of the Stockholders if the amendment reduces the exercise price of or extends the term of an option held by a director, officer or person who owns more than 10% of the Shares; and (iii) provide that, except if not permitted by applicable regulatory authorities, if any Award may not be exercised due to a black-out period self-imposed by the Company or if after a black-out period the Optionee has fewer than 10 business days until the expiry date of any vested Option, the term of such Award may be extended to a date which expires 10 business days following the end of such black-out period; (iv) provide that (a) the number of Shares issuable to directors, officers or persons who own more than 10% of the Shares, at any time, under all security-based compensation arrangements including the Plan, cannot exceed 10% of the number of issued and outstanding Shares; and (b) the number of Shares issued to directors, officers or persons who own more than 10% of the Shares, within any one year period, under all security-based compensation arrangements including the 2006 Plan, cannot exceed 10% of issued and outstanding Shares; and (v) expand the definition of "Eligible Individual" under the 2006 Plan to include bona fide consultants to the Company.
 
These additional amendments to the Colombia Goldfields Ltd. 2006 Stock Incentive Plan are subject to shareholder approval at the annual meeting of shareholders of Colombia Goldfields Ltd., which will be held on August 17, 2007, at 11:00 am Eastern Standard Time.
 
The following table provides information about our compensation plans under which shares of common stock may be issued upon the exercise of options as of December 31, 2006.

Equity Compensation Plans as of December 31, 2006
 
A
B
C
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and right
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
Equity compensation plans
approved by security
holders
 
2,787,500
 
$1.16
 
2,212,500
Equity compensation plans
not approved by security
holders
 
-
 
-
 
-
Total
2,787,500
$1.16
2,212,500

Subsequent to December 31, 2006, we issued 1,640,000 options as equity compensation for services rendered.


Executive Compensation
 
Summary Compensation Table
 
The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended 2006 and 2005.

SUMMARY COMPENSATION TABLE
Name
and
principal
position
Year
Salary
 ($)
Bonus
($)
 
 
 
 
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings ($)
All Other 
Compensation
($)
Total
($)
Daniel Hunter (1)
Former CEO & COO
2006
2005
-
-
-
-
-
-
492,606
-
-
-
-
-
90,870
22,500
583,476
22,500
J. Randall Martin
CEO
2006
2005
-
-
-
-
-
-
619,905
-
-
-
-
-
90,000
-
709,905
-
Kenneth Phillippe (2)
Former CFO
2006
2005
-
-
-
-
-
-
164,202
-
-
-
-
-
36,200
-
200,402
-
Luis Gabriel Correa Ocampo (3)
Former VP of Exploration
2006
2005
-
-
-
-
-
-
54,734
-
-
-
-
-
28,009
11,617
82,743
11,617
Stewart Redwood (4)
VP of Exploration
2006
2005
-
-
-
-
-
-
145,438
-
-
-
-
61,875
-
207,313
-
James Kopperson (5)
CFO
2006
2005
-
-
-
-
-
-
421,837
-
-
-
-
-
49,214
-
471,051
-
 
(1)  
Mr. Hunter resigned as our Chief Operating Officer and as a member of our board of directors on December 31, 2006.
 
(2)  
Mr. Phillippe resigned as our Chief Financial Officer on December 1, 2006, but has agreed to continue to serve as a consultant. The information provided in the summary compensation table includes all compensation paid to Mr. Phillippe for the full fiscal year of the reported periods.
 
(3)  
Luis Gabriel Correa Ocampo resigned as our Vice President of Exploration on December 1, 2006, but continues to serve as an employee of our subsidiary, Caldas. The information provided in the summary compensation table includes all compensation paid to Mr. Ocampo for the full fiscal year of the reported periods.

 
(4)  
Stewart Redwood was appointed Vice President of Exploration on December 1, 2006. Prior to his appointment as Vice President of Exploration, Dr. Redwood was retained as a consultant to prepare geological reports. The information provided in the summary compensation table includes all compensation paid to Dr. Redwood for the full fiscal year of the reported periods. On March 22, 2007, we issued 500,000 restricted shares of the Company’s common stock to Dr. Redwood. The aggregate value of this issuance was $915,000.
 
(5)  
James Kopperson was appointed Chief Financial Officer on December 1, 2006. Prior to his appointment as Chief Financial Officer, Mr. Kopperson rendered services to us as a consultant. The information provided in the summary compensation table includes all compensation paid to Mr. Kopperson and entities for which Mr. Kopperson is a principal for the full fiscal year of the reported periods.
 
Narrative Disclosure to the Summary Compensation Table
 
We do not compensate our executive officers by the payment of salaries or bonus compensation.
 
Consulting Agreements
 
The amounts disclosed as “All Other Compensation” relate to consulting fees earned by our executive officers for the periods indicated.
 
On August 1, 2006, we entered into Consulting Services Agreements (the “Agreements”) with our President and Chief Executive Officer, J. Randall Martin, our Chief Operating Officer, Daniel Hunter, and our Chief Financial Officer, Kenneth Phillippe. The Agreements are effective for a period of two (2) years commencing May 1, 2006 and may be terminated by mutual consent, for cause (as defined in the Agreements), or without cause. In the event of termination without cause, the Agreements provide that the officer will receive a lump sum payment equal to twelve (12) months of consulting fees and that any stock options granted to the officer shall vest immediately. Following termination the Agreements, each of the individuals is subject to a one-year covenant not to compete within the Republic of Colombia and a one-year covenant not to solicit any of our consultants or employees. Under the Agreements, which are effective as of May 1, 2006, these individuals have agreed to devote their best efforts, skill, and sufficient time to carrying out their responsibilities under the Agreements. The Agreements also require that each of these individuals act in substantial accordance with all reasonable instructions of our board of directors and that they provide all management and operation services as may be requested by the board.
 
Under the terms of the Consulting Services Agreement, J. Randall Martin receives monthly compensation of $10,000 commencing May 1, 2006 and has received $90,000 in consulting fees for the fiscal year ended December 31, 2006 which is recorded in the summary compensation table above in “All Other Compensation.”

Under the terms of the Consulting Services Agreement, Daniel Hunter received monthly compensation of $9,000 plus applicable Canadian Good and Services Tax commencing May 1, 2006 totaling $90,870 in consulting fees for the fiscal year ended December 31, 2006 which is recorded in the summary compensation table above in “All Other Compensation.” The


Consulting Services Agreement with Mr. Hunter was terminated on December 31, 2006, the date of his resignation. From March 2005 to December 2005, we paid Mr. Hunter a monthly consulting fee of $2,500 and a total of $22,500 which is recorded in the summary compensation table above in “All Other Compensation.”

Under the terms of the Consulting Services Agreement, Kenneth Phillippe receives monthly compensation of $3,000 plus applicable Canadian Good and Services Tax commencing May 1, 2006 and received $36,200 in consulting fees for the fiscal year ended December 31, 2006 which is recorded in the summary compensation table above in “All Other Compensation.” Subsequent to the fiscal year ended December 31, 2006, the Consulting Services Agreement with Kenneth Phillippe was terminated.

On October 1, 2006, we entered into a Consulting Agreement with Stewart Redwood. Under the terms of the Consulting Agreement, Dr. Redwood is paid a daily fee of $750 for each day of service inclusive of travel days and days required to write and complete reports and has received $61,875 in consulting fees for the fiscal year ended December 31, 2006 which is recorded in the summary compensation table above in “All Other Compensation.” This Consulting Agreement is automatically renewable for successive one-year periods in the absence of notice terminating this Agreement and this Agreement can be terminated immediately for cause or upon one month notice at any time in all other circumstances. Pursuant to the Consulting Agreement, on March 22, 2007, we issued of 500,000 shares of our common stock to Dr. Redwood as a stock award. In the event that Dr. Redwood is terminated for cause or he should submit his resignation prior to October 1, 2008, Dr. Redwood will be obligated to return a pro-rata portion of the 500,000 shares issued based upon a period of two years.

On August 15, 2006, we entered into a consulting agreement with James Kopperson where Mr. Kopperson provided services to us at the rate of Cdn $200.00/hr. Mr. Kopperson was later appointed to act as our Chief Financial Officer on December 1, 2006. We do not currently have any consulting agreement with Mr. Kopperson.

Stock Option Grants

We grant stock options to our executive officers based on their level of experience and contributions to the company.

All options granted to our executive officers have the following attributes: i) two year vesting period, 25% every six months from the date of grant ii) ten year life. The aggregate fair value of these options was computed in accordance with FAS 123R and is reported in the summary compensation table above in the column titled “Option Awards.” Further information regarding our Equity Compensation Plans and Awards, including valuation assumptions used in the preparation of these tables, is included in note 5 to our September 30, 2006 interim financial statements included in this prospectus.

We did not grant any stock options to our executive officers during the fiscal year ended December 31, 2005. During the fiscal year ended 2006, we granted our executive officers stock options as follows:  

 
·  
On January 6, 2006, we granted Daniel Hunter options to purchase 450,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. At the time of Mr. Hunter’s resignation on December 31, 2006, 112,500 options had vested and are exercisable until December 31, 2007. The remaining 337,500 stock options were forfeited.

·  
On January 6, 2006, we granted Kenneth Phillippe options to purchase 150,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. 50,000 of these options were exercised on May 3, 2007 and the remaining 100,000 options were forfeited.

·  
On March 17, 2006, we granted J. Randall Martin options to purchase 500,000 shares of our common stock at the exercise price of $1.65 per share with an expiration date of March 17, 2016.

·  
On March 24, 2006, we granted Stewart Redwood options to purchase 100,000 shares of our common stock at the exercise price of $1.90 per share with an expiration date of March 24, 2016.

·  
On September 22, 2006, we granted James Kopperson options to purchase 100,000 shares of our common stock at the exercise price of $1.20 per share with an expiration date of September 22, 2016. On November 24, 2006, we granted James Kopperson options to purchase 300,000 shares of our common stock at the exercise price of $1.15 per share with an expiration date of November 24, 2016.
 
At no time during the last fiscal year was any outstanding option repriced or otherwise modified. There was no tandem feature, reload feature, or tax-reimbursement feature associated with any of the stock options we granted to our executive officers or otherwise.


Outstanding Equity Awards at Fiscal Year-End

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2006.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS
STOCK AWARDS
 
 
 
 
 
 
 
 
 
 
 
Name
 
 
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
 
 
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
 
 
 
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
 
 
 
 
 
 
 
 
 
Option
Exercise
Price
($)
 
 
 
 
 
 
 
 
 
 
Option
Expiration
Date
 
 
 
 
Number
of
Shares
or Units
of
Stock That
Have
Not
Vested
(#)
 
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Daniel Hunter
112,500
0 (1)
-
0.75
01/06/2016
-
-
-
-
J. Randall Martin
125,000
375,000 (2)
-
1.65
03/17/2016
-
-
-
-
Kenneth Phillippe
37,500
112,500 (3)
-
0.75
01/06/2016
-
-
-
-
Luis Gabriel Correa Ocampo
12,500
37,500 (4)
-
0.75
01/16/2016
-
-
-
-
James Kopperson
 
-
-
100,000 (5)
300,000 (6)
-
-
1.20
1.15
09/22/2016
11/24/2016
-
-
-
-
-
-
-
-
Stewart Redwood
25,000
75,000 (7)
-
1.90
03/24/2016
-
-
-
-
 
(1)  
At the time of Mr. Hunter’s resignation on December 31, 2006, 112,500 options had vested and are exercisable until December 31, 2007. The remaining 337,500 stock options were forfeited.
(2)  
125,000 become vested and exercisable on March 17, 2007, 125,000 become vested and exercisable on September 17, 2007, and the remaining 125,000 become vested and exercisable on March 17, 2008.
(3)  
37,500 became vested and exercisable on January 6, 2007, 37,500 become vested and exercisable on July 6, 2007, and the remaining 37,500 become vested and exercisable on January 6, 2008.
(4)  
12,500 became vested and exercisable on January 6, 2007, 12,500 become vested and exercisable on July 6, 2007, and the remaining 12,500 become vested and exercisable on January 6, 2008.

 
(5)  
25,000 become vested and exercisable on March 22, 2007, 25,000 become vested and exercisable on September 22, 2007, 25,000 become vested and exercisable on March 22, 2008, and the remaining 25,000 become vested and exercisable on September 22, 2008.
(6)  
75,000 become vested and exercisable on May 24, 2007, 75,000 become vested and exercisable on November 24, 2007, 75,000 become vested and exercisable on May 24, 2008, and the remaining 75,000 become vested and exercisable on November 24, 2008.
(7)  
25,000 become vested and exercisable on March 24, 2007, 25,000 become vested and exercisable on September 24, 2007, and the remaining 25,000 become vested and exercisable on March 24, 2008.

Compensation of Directors

The table below summarizes all compensation of our directors as of December 31, 2006.

DIRECTOR COMPENSATION
Name
Fees Earned or
Paid in
Cash
($)
 
Stock Awards
($)
 
Option Awards
($)
Non-Equity
Incentive
Plan
Compensation
($)
Non-Qualified
Deferred
Compensation
Earnings
($)
All
Other
Compensation
($)
Total
($)
Daniel Hunter   
-
-
492,606
-
-
90,870
583,476
J. Randall Martin
-
-
619,905
-
-
90,000
709,905
Harry Hopmeyer (1) 
-
-
547,340
-
-
57,500
604,840
Thomas Ernst McGrail
-
-
218,936
-
-
81,200
300,136
Hernando Molina Velez (2) 
-
-
218,936
-
-
47,606
266,542
Robert E. Van Tassell (2) 
-
-
218,936
-
-
-
218,936
David Bikernan
-
-
255,380
-
-
-
255,380
 
(1)  
On November 14, 2006, Mr. Hopmeyer passed away.  125,000 vested options are exercisable by Mr. Hopmeyer's heirs until November 18, 2007 and 375,000 unvested options expired.
(2)  
On August 31, 2006, Hernando Molina Velez resigned as a member of our board of directors. All of Mr. Molina’s 200,000 vested and unvested options have expired.
(3)  
On March 15, 2007, Mr. Van Tassell resigned as a member of our board of directors. 100,000 vested options are exercisable until March 15, 2008 and 100,000 unvested options have expired.

Narrative Disclosure to the Director Compensation Table

We did not pay any cash compensation to our directors during the fiscal year ended December 31, 2006.

Commencing in June 2007, each member of the board of directors is entitled to receive $500 for attendance at a board meeting whether in-person or telephonically.


Consulting Fees

The amounts disclosed as “All Other Compensation” in the Director Compensation table above relate to consulting fees earned by directors for consulting services performed during the fiscal year ended December 31, 2006.

The consulting fees received by J. Randall Martin and Daniel Hunter were earned in connection with the Consulting Services Agreement each entered into on August 1, 2006 which is described in the narrative disclosure to the summary compensation table above. These consulting fees have been included in the column titled “All Other Compensation” in both the summary compensation able for our executive officers and the director compensation table above.

On August 1, 2006, we entered into Consulting Services Agreement (the “Agreement”) with Harry Hopmeyer, the Chairman of our board of directors. The Agreement is effective for a period of two (2) years commencing May 1, 2006 and may be terminated by mutual consent, for cause (as defined in the Agreement), or without cause. In the event of termination without cause, the Agreement provides that Mr. Hopmeyer will receive a lump sum payment equal to twelve (12) months of consulting fees and that any stock options granted to the officer shall vest immediately. Following termination the Agreement, Mr. Hopmeyer is subject to a one-year covenant not to compete within the Republic of Colombia and a one-year covenant not to solicit any of our consultants or employees. Under the Agreement, which was effective as of May 1, 2006, Mr. Hopmeyer agreed to devote his best efforts, skill, and sufficient time to carrying out his responsibilities under the Agreement. The Agreement also required that each Mr. Hopmeyer act in substantial accordance with all reasonable instructions of our board of directors and that he provide all management and operation services as may be requested by the board.

Under the terms of the Agreement, Mr. Hopmeyer received monthly compensation of $5,000 plus applicable Canadian Good and Services Tax commencing May 1, 2006 totaling $57,500 in consulting fees for the fiscal year ended December 31, 2006 which is recorded in the director compensation table above in “All Other Compensation.” The Consulting Services Agreement with Mr. Hopmeyer was terminated on November 14, 2006 following his passing.

During the fiscal year ended December 31, 2006, we retained Thomas Ernst McGrail to provide consulting services to us on an as-needed basis at the rate of $600 per day. During the fiscal year ended December 31, 2006, we paid Mr. McGrail a total of $81,200 in consulting fees which is included in the column titled “All Other Compensation” in the director compensation table above.

During the fiscal year ended December 31, 2006, we retained Hernando Molina Velez to provide legal services to us relating the local legal issues in Colombia. We paid Mr. Velez an average monthly fee of approximately $4,000 for the fiscal year ended December 31, 2006. During the fiscal year ended December 31, 2006, we paid Mr. Velez a total of $47,606 in legal fees which is included in the column titled “All Other Compensation” in the director compensation table above.

Stock Awards

No stock awards were issued to members of our board of directors during the fiscal year ended December 31, 2006. In June 2007, our board of directors approved the issuance of a stock award of 10,000 shares to each outside member in consideration for services rendered as a member of the board for the current fiscal year.


Stock Option Grants

Directors receive stock option awards annually as follows: Chairman of the Board receives options to purchase 400,000 to 500,000 shares of our common stock and all other members of the board who do not also serve as executive officers receive options to purchase 200,000 to 300,000 shares of our common stock.

All options granted to our directors have the following attributes: i) two year vesting period, 25% every six months from the date of grant ii) ten year life. The aggregate fair value of these options was computed in accordance with FAS 123R and is reported in the director compensation table above in the column titled “Option Awards.” Further information regarding our Equity Compensation Plans and Awards, including valuation assumptions used in the preparation of these tables, is included in note 5 to our December 31, 2006 audited consolidated financial statements.

During the fiscal year ended 2006, we granted our directors stock options as follows:

·  
On March 17, 2006, we granted J. Randall Martin options to purchase 500,000 shares of our common stock at the exercise price of $1.65 per share with an expiration date of March 17, 2016. 125,000 of these stock options have vested and are exercisable, 125,000 become vested and exercisable on March 17, 2007, 125,000 become vested and exercisable on September 17, 2007, and the remaining 125,000 become vested and exercisable on March 17, 2008.
·  
On January 6, 2006, we granted Daniel Hunter options to purchase 450,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. At the time of Mr. Hunter’s resignation on December 31, 2006, 112,500 options had vested and are exercisable until March 31, 2007. The remaining 337,500 stock options with an associated compensation expense of $369,454 were forfeited.
·  
On January 6, 2006, we granted Harry Hopmeyer options to purchase 500,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. At the time of Mr. Hopmeyer passing, options to purchase 125,000 shares of our common stock had vested and are exercisable until November 14, 2007 and the remaining 375,000 unexercised options, with an associated compensation expense of $410,505, were forfeited.
·  
On January 6, 2006, we granted Thomas Ernst McGrail options to purchase 200,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. 100,000 of these stock options have vested and are exercisable, 50,000 become vested and exercisable on July 6, 2007, and the remaining 50,000 become vested and exercisable on January 6, 2008
·  
On January 6, 2006, we granted Hernando Molina Velez options to purchase 200,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. 100,000 of these stock options have vested and are exercisable, 50,000 become vested and exercisable on July 6, 2007, and the remaining 50,000 become vested and exercisable on January 6, 2008
·  
On January 6, 2006, we granted Robert E. Van Tassell options to purchase 200,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 6, 2016. 100,000 of these stock options have vested and are exercisable, 50,000 become vested and exercisable on July 6, 2007, and the remaining 50,000 become vested and exercisable on January 6, 2008.
·  
On July 31, 2006, we granted David Bikerman options to purchase 200,000 shares of our common stock at the exercise price of $1.35 per share with an expiration date of July 31, 2016. 50,000 of these stock options become vested and are exercisable on January 31, 2007, 50,000 become vested and exercisable on July 31, 2007, 50,000 become vested and exercisable on January 31, 2008, and the remaining 50,000 become vested and exercisable on July 31, 2008.
 

Financial Statements
 
Index to Financial Statements:
 
Audited Financial Statements for the fiscal year ended December 31, 2006
 
   
Report of Independent Registered Public Accounting Firm;
   
   
   
   
   
   
Unaudited Financial Statements for the fiscal quarter ended March 31, 2007
   
F-25 Interim Consolidated Balance Sheet as of March 31, 2007 (unaudited);
   
F-26 Interim Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006 and from inception (March 25, 2003) through March 31, 2007 (unaudited);
   
F-27 Interim Consolidated Statements of Stockholders’ Equity (Deficiency) for the period from inception (March 25, 2003) through March 31, 2007 (unaudited);
   
F-30 Interim Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006 and from inception (March 25, 2003) through March 31, 2007 (unaudited);
   
F-31 Notes to Interim Consolidated Financial Statements;


Report of Independent Auditors
 
To the stockholders of Colombia Goldfields Limited:
 
We have audited the accompanying consolidated balance sheet of Colombia Goldfields Limited (the "Company") as of December 31, 2006, and the related consolidated statement of operations, of stockholders' equity (deficiency) and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Company as of December 31, 2005 and for the year, and cumulative period since inception, then ended, were audited by other auditors whose report dated April 10, 2006 expressed an unqualified opinion on those statements.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the 2006 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has no source of operating revenue, and is dependent on its ability to obtain financing and upon the future exploration and development of profitable operations from its mineral properties. These factors together raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Pricewaterhouse Coopers LLP
 
Chartered Accountants
Toronto, Canada
March 21, 2007
 
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 


Vellmer & Chang
Chartered Accountants *
505 - 815 Hornby Street
Vancouver, B.C, V6Z 2E6
Tel: 604-687-3776
Fax: 604-687-3778
E-mail: info@vellmerchang.com
* denotes a firm of incorporated professionals

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Colombia Goldfields Ltd.
(formerly Secure Automated Filing Enterprises Inc.)
(An Exploration stage company)

We have audited the balance sheet of Colombia Goldfields Ltd. (formerly Secure Automated Filing Enterprises Inc.) (“the Company”) as at December 31, 2005 and the related statements of operations, stockholders’ equity and cash flows for the year then ended and for the period cumulative from inception on March 25, 2003 to December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and the results of its operations and it’s cash flows for the year then ended and for the period cumulative from inception on March 25, 2003 to December 31, 2005 in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s business is in the exploration stage and has no source of revenue. As at December 31, 2005, the Company has recurring loss and requires financing, either through issuing shares or debt, to fund its mineral exploration commitments. These factors together raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
Vancouver, Canada    
“VELLMER & CHANG”  
April 10, 2006
Chartered Accountants

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
 
US Dollars
December 31,
2006
 
December 31,
2005
ASSETS
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
Cash and cash equivalents
$
882,913
 
$
1,565,640
Prepaid expenses and deposits
 
176,347
 
 
22,554
Exploration expenditure advances (Note 6)
 
-
 
 
158,202
 
 
1,059,260
 
 
1,746,396
 
 
 
 
 
 
Mineral and exploration properties and rights (Note 3)
 
43,528,386
 
 
-
Property and equipment, net of accumulated amortization (Note 4)
 
419,733
 
 
1,445
Website Development Cost, net of accumulated amortization (Note 4)
 
-
 
 
17,500
 
$
45,007,379
 
$
1,765,341
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
$
6,037,671
 
$
83,004
 
 
 
 
 
 
Non Current
 
 
 
 
 
Deferred income tax liability (Notes 3 and 7)
 
9,759,524
 
 
-
 
 
15,797,195
 
 
83,004
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY (DEFICIENCY)
 
 
 
 
 
 
 
 
 
 
 
Common stock (Notes 5 & 11)
 
565
 
 
296
Authorized:
200,000,000 common shares, $0.00001 par value
 
 
 
 
 
Issued and Outstanding:
56,036,849 common shares (December 31, 2005, 29,589,100 common shares)
 
 
 
 
 
 
 
 
 
 
 
Additional paid-in capital (Note 5)
 
37,039,266
 
 
1,465,354
 
 
 
 
 
 
Share subscriptions (Note 5)
 
-
 
 
1,767,650
 
 
37,039,831
 
 
3,233,300
Deficit accumulated during the exploration stage
 
(7,829,647)
 
 
(1,550,963)
 
 
29,210,184
 
 
1,682,337
 
 
 
 
 
 
 
$
45,007,379
 
$
1,765,341

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS  
 
US Dollars
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
Cumulative
from inception
(March 25, 2003)
through
December 31,
2006
(unaudited)
 
 
 
 
 
 
REVENUES
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mineral property exploration expenses (Notes 3 and 5)
 
3,298,438
 
 
1,179,298
 
 
4,477,736
General and administrative (Note 5)
 
3,962,960
 
 
309,100
 
 
4,340,617
Amortization
 
64,270
 
 
3,835
 
 
68,105
Total operating expenses
 
7,325,668
 
 
1,492,233
 
 
8,886,458
 
 
 
 
 
 
 
 
 
Other income
 
(118,034)
 
 
-
 
 
(118,034)
Loss from continuing operations
 
(7,207,634)
 
 
(1,492,233)
 
 
(8,768,424)
 
 
 
 
 
 
 
 
 
Income from discontinued operations (Note 1)
 
-
 
 
763
 
 
9,827
Loss before future income taxes
 
(7,207,634)
 
 
(1,491,470)
 
 
(8,758,597)
Deferred income tax recovery (Note 7)
 
(928,950)
 
 
-
 
 
(928,950)
NET LOSS
$
(6,278,684)
 
$
(1,491,470)
 
$
(7,829,647)
LOSS PER SHARE - BASIC DILUTED
 
 
 
 
 
 
 
 
Earnings (loss) from continuing operations
$
(0.15)
 
$
(0.06)
 
 
 
Earnings (loss) from discontinued operations
 
-
 
 
0.00
 
 
 
Net loss per share - basic & diluted
$
(0.15)
 
$
(0.06)
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
 
 
 
 
 
 
 
 
Basic and diluted
 
42,677,419
 
 
25,260,136
 
 
 
 
See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)  
 
 
 
US Dollars
 
Common
Shares
 
 
 
Stock
Amount
 
Additional
Paid-in
Capital
 
Share
Subscriptions Received
 
Deficit
Accumulated
During The
Exploration
Stage
 
Total
Stockholders’
Equity
(Deficiency)
Period Ended December 31, 2003 (see Note 1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.000125 per share on March 25, 2003
 
8
 
$
-
 
$
1
 
$
-
 
$
-
 
$
1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.000125 per share on May 5, 2003
 
16,000,000
 
 
160
 
 
1,840
 
 
-
 
 
-
 
 
2,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repurchase of common stock for cash at $0.000125 per share on October 31, 2003
 
(8,000,008)
 
 
(80)
 
 
(920)
 
 
-
 
 
-
 
 
(1,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Donated Capital
 
-
 
 
-
 
 
35,200
 
 
-
 
 
-
 
 
35,200
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss for the twelve months ended December 31, 2003
 
-
 
 
-
 
 
-
 
 
-
 
 
(36,399)
 
 
(36,399)
Balance, December 31, 2003
 
8,000,000
 
 
80
 
 
36,121
 
 
-
 
 
(36,399)
 
 
(198)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2004:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.00625 per share on December 20, 2004
 
16,000,000
 
 
160
 
 
99,840
 
 
-
 
 
-
 
 
100,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Donated Capital
 
-
 
 
-
 
 
19,200
 
 
-
 
 
-
 
 
19,200
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss for the twelve months ended December 31, 2004
 
-
 
 
-
 
 
-
 
 
-
 
 
(23,094)
 
 
(23,094)
Balance December 31, 2004
 
24,000,000
 
 
240
 
 
155,161
 
 
-
 
 
(59,493)
 
 
95,908
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2005:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for mineral concession at $0.25 per share on September 22, 2005
 
1,000,000
 
 
10
 
 
249,990
 
 
-
 
 
-
 
 
250,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of 4,221,000 common stock for cash at $0.25 per share and 368,100
common stock for finder fee on October 14, 2005
 
4,589,100
 
 
46
 
 
1,055,204
 
 
-
 
 
-
 
 
1,055,250
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forgiveness of advances from a related party
 
 
 
 
 
 
 
4,999
 
 
-
 
 
-
 
 
4,999
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share Subscriptions Received
 
-
 
 
-
 
 
-
 
 
1,767,650
 
 
-
 
 
1,767,650
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss for the twelve months ended December 31, 2005
 
-
 
 
-
 
 
-
 
 
-
 
 
(1,491,470)
 
 
(1,491,470)
Balance, December 31, 2005
 
29,589,100
 
$
296
 
$
1,465,354
 
$
1,767,650
 
$
(1,550,963)
 
$
1,682,337

See accompanying Notes to Consolidated Financial Statements
 
 
 
 
US Dollars
 
 
 
Common
Shares
 
 
 
 
Stock
Amount
 
Additional
Paid-in
Capital
 
Share Subscriptions
Received
 
Deficit
Accumulated
 During The
Exploration
Stage
 
 
Total
Stockholders’ Equity
(Deficiency)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2005
 
29,589,100
 
$
296
 
$
1,465,354
 
$
1,767,650
 
$
(1,550,963)
 
$
1,682,337
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2006:
 
3,126,083
 
 
31
 
 
1,688,054
 
 
(1,767,650)
 
 
-
 
 
(79,565)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.60 per share on January 24, 2006,
net of $187,565 finders fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for Mineral concessions at $1.90 per share on February 14, 2006
 
1,000,000
 
 
10
 
 
1,899,990
 
 
-
 
 
-
 
 
1,900,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock For Mineral concession at $2.25 per share on April 10, 2006
 
1,000,000
 
 
10
 
 
2,249,990
 
 
-
 
 
-
 
 
2,250,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $1.50 per unit
(common shares & warrants less finders fee of $585,060 on April 26, 2006
 
6,500,666
 
 
65
 
 
6,416,112
 
 
-
 
 
-
 
 
6,416,177
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of share purchase warrants with April 26, 2006 common stock issuance
 
-
 
 
-
 
 
2,749,762
 
 
-
 
 
-
 
 
2,749,762
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for Mineral concessions of $2.74 per share on April 28, 2006
 
2,000,000
 
 
20
 
 
5,479,980
 
 
-
 
 
-
 
 
5,480,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for Mineral concessions at $1.10 per share on August 22, 2006
 
4,200,000
 
 
42
 
 
4,619,958
 
 
-
 
 
-
 
 
4,620,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for Mineral concessions at $1.41 per share on September 25, 2006
 
1,150,000
 
 
16
 
 
1,621,484
 
 
-
 
 
-
 
 
1,621,500
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common shares per exercise of 3,471,000 warrants on October 14, 2006.
 
3,471,000
 
 
35
 
 
1,735,465
 
 
-
 
 
-
 
 
1,735,500
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for Mineral concessions at $1.28 per share on December 14, 2006.
 
4,000,000
 
 
40
 
 
5,119,960
 
 
-
 
 
-
 
 
5,120,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock based compensation
 
-
 
 
-
 
 
1,993,157
 
 
-
 
 
-
 
 
1,993,157
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss for the twelve months ended December 31, 2006
 
 
 
 
 
 
 
-
 
 
-
 
 
(6,278,684)
 
 
(6,278,684)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2006
 
56,036,849
 
$
565
 
$
37,039,266
 
$
-
 
$
(7,829,647)
 
$
29,210,184

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS  
 
 
Year Ended
December 31, 2006 
 
 Year Ended
December 31, 2005 
 
Cumulative
Inception
(March 25, 2003)
through
December 31, 2006 
(unaudited)
OPERATING ACTIVITIES:
 
 
  
 
 
 
 
 
  
 
 
Net loss
$
(6,278,684)
 
$
(1,491,470)
 
$
(7,829,647)
Items not requiring cash outlay:
 
 
 
 
 
 
 
 
- Consulting fees
 
-
 
 
-
 
 
52,400
- Website design and software development
 
-
 
 
-
 
 
2,000
- Amortization
 
64,270
 
 
3,835
 
 
68,105
- Mineral property exploration
 
-
 
 
250,000
 
 
250,000
- Stock based compensation
 
1,993,157
 
 
-
 
 
1,993,157
- Deferred income taxes
 
(928,950)
 
 
-
 
 
(928,950)
Changes in non-cash working capital items
 
 
 
 
 
 
 
 
- Accounts receivable
 
-
 
 
910
 
 
-
- Prepaid expenses and deposits
 
(153,793)
 
 
(22,554)
 
 
(176,347)
- Exploration expenditure advances
 
158,202
 
 
(158,202)
 
 
-
- Accounts payable and accrued liabilities
 
345,129
 
 
79,317
 
 
428,133
- Due to/from related parties
 
-
 
 
(1,001)
 
 
4,999
Net cash provided by (used in) operating activities
 
(4,800,669)
 
 
(1,339,165)
 
 
(6,136,150)
 
 
 
 
 
 
 
 
 
FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of securities, net of finder fees
 
10,821,874
 
 
1,055,250
 
 
11,978,125
Proceeds of share subscription
 
-
 
 
1,767,650
 
 
1,767,650
Net cash provided by financing activities
 
10,821,874
 
 
2,822,900
 
 
13,745,775
 
 
 
 
 
 
 
 
 
INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Purchase of mineral exploration rights
 
(6,238,874)
 
 
-
 
 
(6,238,874)
Purchase of equipment
 
(465,058)
 
 
(1,780)
 
 
(466,838)
Website development costs
 
-
 
 
(21,000)
 
 
(21,000)
Net cash used in investing activities
 
(6,703,932)
 
 
(22,780)
 
 
(6,726,712)
 
 
 
 
 
 
 
 
 
INCREASE (DECREASE) IN CASH
$
(682,727)
 
$
1,460,955
 
$
882,913
 
 
 
 
 
 
 
 
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
 
1,565,640
 
 
104,685
 
 
-
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
882,913
 
$
1,565,640
 
$
882,913
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
 
 
 
 
 
Interest expense
$
-
 
$
-
 
$
-
Taxes
$
-
 
$
-
 
$
-

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
NOTE 1 - GOING CONCERN AND NATURE OF OPERATIONS
 
The Company was incorporated under the laws of the State of Nevada, U.S.A., on March 25, 2003. The Company changed its name from Secure Automated Enterprises, Inc. to Colombia Goldfields Ltd. on May 13, 2005. The Company changed its operational focus from providing electronic filings services for public access document submissions to the U.S. Securities Exchange Commission, to acquisition of, exploration for, and development of mineral properties. The Company is currently in the exploration stage. On July 31, 2006 the Company’s jurisdiction of incorporation was changed to the state of Delaware.
 
In the first quarter of 2005, the Company discontinued its electronic filings services operations and historical income and expenses relating to these discontinued operations have been classified as discontinued operations in the Statements of Operations for all comparative periods presented.
 
As at December 31, 2006, the Company has incurred a cumulative net loss since inception on March 25, 2003 of $7,829,647 and has no source of operating revenue. The Company’s ability to meet its obligations and continue as a going concern is dependent on the ability to identify and complete future funding. While the Company has been successful in raising financing to date, there can be no assurance that it will be able to do so in the future.

These consolidated financial statements have been prepared using U.S generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due. In addition to the Company’s working capital requirements and its cumulative losses during the year ended December 31, 2006 and since inception, the Company must also secure sufficient funding to meet its spending and purchase option obligations with respect to its mineral properties in order to maintain its option to purchase certain mining and mineral rights. These circumstances lend substantial doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, as to the appropriateness of the use of accounting principles applicable to a going concern. As disclosed in Note 11, subsequent to December 31, 2006 and in recognition of these circumstances, the Company raised funding of $9,020,000 through a private placement of additional share capital in March 2007 and intends to continue relying upon the issuance of securities to finance exploration, meet contractual obligations and continue as a going concern. As of the date of the approval of the consolidated financial statements, there is no assurance that these initiatives will be sufficient or successful.

The Company’s ability to continue as a going concern is dependent upon its ability to fund its working capital and exploration requirements and, eventually, upon the future exploration and development of profitable operations from its mineral properties. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the going concern assumption were not appropriate, and these adjustments could be material.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.

Use of Estimates

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

Consolidation

Entities which are controlled by the Company, either directly or indirectly, are consolidated. Control is established by the Company’s ability to determine strategic, operating, investing and financing policies without the co-operation of others. The Company analyzes its level of ownership, voting rights and representation on the board of directors in determining if control exists by any one, or a combination of these factors.

These consolidated financial statements include the accounts of (i) Colombia Goldfields Ltd., formerly a Nevada corporation, (ii) the Company’s 90% interest in RNC (Colombia) Limited (“RNC”), a Belize corporation and its 94.99% owned subsidiary - Compania Minera De Caldas, S.A. (“Caldas”), a Colombia corporation, (iii) the Company’s 94.99% interest in Gavilan Minerales, S.A. (“Gavilan”) a Colombia corporation. All significant inter-company transactions and balances have been eliminated upon consolidation.

In accordance with Interpretation No. 46R, Consolidation of Variable Interest Entities (“FIN 46R”), variable interest entities (VIEs) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

At January 12, 2006 and in connection with the adoption of FIN 46R, the Company concluded that RNC and its 94.99% owned subsidiary, Caldas, S.A., were VIEs since the Company provided the principal financial support to these entities and the Company was their primary beneficiary. Under FIN 46R transition rules, the financial statements of RNC and Caldas, S.A. were considered VIEs and the Company’s 25% interest has been included within the Company’s consolidated financial statements for the period January 12, 2006 to April 28, 2006.

In connection with the Company’s April 28, 2006 acquisition of an additional 25% of RNC, the Company also received rights to nominate three of the four members of RNC’s board of directors. As such, the Company determined that control over RNC existed as of April 28, 2006, and these financial statements reflect the consolidation of the Company’s 50% interest in RNC, for the period April 29, 2006 to August 22, 2006.

On August 22, 2006 the Company acquired an additional 25% of RNC, bringing the Company’s total ownership to 75% at August 22, 2006. These financial statements reflect the consolidation of the Company’s 75% interest in RNC for the period August 23, 2006 to December 14, 2006.

On September 25, 2006 the Company acquired 94.99% of the outstanding shares of Gavilan. These financial statements reflect the consolidation of Gavilan for the period of September 25, 2006 to December 31, 2006.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
On December 14, 2006 the Company acquired a further 15% of RNC, bringing the Company’s total to December 31, 2006 ownership to 90%. These financial statements reflect the consolidation of the Company’s 90% interest in RNC for the period December 15, 2006 to December 31, 2006.

Since the non-controlling shareholder of RNC and Gavilan has no obligation to contribute any additional capital and the Company was the primary entity obligated to fund future exploratory work, no non-controlling interest related to RNC or Gavilan has been recognized in the consolidated statement of operations for the period January 1, 2006 to December 31, 2006 and in the consolidated balance sheet at December 31, 2006.

Mineral Property Rights Acquisition and Exploration Expenditures

Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property, plant and equipment costs, to determine if these costs are in excess of their net recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated
salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

Asset Retirement Obligations

The Company applies SFAS No. 143, Accounting for Assets Retirement Obligations which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. SFAS No. 143 requires the Company to record a liability for the present value of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability will be accreted until it has been fully incurred and the asset will be amortized over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As at December 31, 2006 and December 31, 2005 the Company does not have any asset retirement obligations.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at December 31, 2006 the Company has cash and cash equivalents in the amount of $782,913 (2005-$1,476,361) in excess of federally insured limits.

Property and Equipment

Property and equipment are carried at cost. For the significant components of property and equipment, depreciation is provided for using the following method and time periods:

Asset
Basis
Period
 
 
 
Vehicles
Straight line
5 years
Buildings
Straight line
20 years
Office equipment & furniture
Straight line
3 to 10 years
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
The Company regularly reviews the carrying values of property and equipment based on expected future cash flows whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If this carrying value exceeds the recoverable amount, a write-down is charged to the statement of operations.

Environmental Costs

Environmental expenditures that related to current operations are charged to operations or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the company’s commitment to plan of action based on the then known facts.

Comprehensive Income

In accordance with SFAS 130, Reporting Comprehensive Income (“SFAS 130”), comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses when the Company has a functional currency other than US dollars, and minimum pension liabilities. For all periods presented the Company’s financial statements include do not include any of the additional elements that affect comprehensive income. Accordingly, net income and comprehensive income are identical.

Stock-Based Compensation

On January 1, 2006, the Company applied SFAS No. 123(R), Share-Based Payment, to account for stock options and similar equity instruments issued. Accordingly, compensation expense attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date and recognized over the expected vesting period. For all stock option awards granted on or after January 1, 2006, the Company recognizes compensation using the fair value method of accounting for stock-based compensation. The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model. In the event stock options are forfeited, any previously recognized compensation expense related to unvested and expiring awards is recognized in earnings during the period of forfeiture.

Although the assumptions used to record stock compensation expense reflect management’s best estimates, they involve inherent uncertainties based on market conditions generally outside of the control of the Company. If other assumptions were used, stock-based compensation expense could be significantly impacted. As stock options are exercised, the proceeds received on exercise, in addition to the previously recognized amounts related to those stock options, are credited to stockholders’ equity. The adoption of SFAS No. 123(R) did not have an impact on the Company’s historical financial statements as the Company had no stock options outstanding prior to adoption.

The Company provides direct stock awards to certain directors, officers, and consultants. Direct stock awards are typically subject to a two year vesting period. Direct stock awards are recorded at fair value on the grant date, with compensation expense recognized on a straight-line basis over the vesting period.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
Foreign Currency Translation

The Company’s functional currency is US dollars. Accordingly, foreign currency balances are translated into US dollars as follows:
 
i)
Monetary assets and liabilities are translated at the period-end exchange rate;
 
ii)
Non-monetary assets are translated at the rate of exchange in effect at their acquisition date; and

iii)
Revenue and expense items are translated at the average exchange rate for the respective period.

Foreign exchange gains and losses are recognized as period expenses.

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net earnings (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive. For the years ended December 31, 2006 and 2005, outstanding share purchase warrants and options to purchase common shares were excluded from the computation of diluted earnings per share as the impact of these instruments was antidilutive as a result of losses incurred in these years.

Income taxes

The Company accounts for income taxes using the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.
 
Long-Lived assets

Long-lived assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and EITF 04-3, Mining Assets: Impairment and Business Combinations.

Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. Fair value is generally determined using a discounted cash flow analysis.

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities and amounts due to and from related parties. The carrying value of these financial instruments approximates their fair value based on their liquidity or their short-term nature. The Company is not exposed to significant interest, credit or currency risk arising from these financial instruments.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
NOTE 3 - MINERAL PROPERTIES AND EXPLORATION RIGHTS

Title to mineral properties and mining and exploration rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. Currently, the Company is in the process of investigating the title of mineral concessions for which it holds the options to acquire. Therefore, the Company cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that the Company will have valid title to its mining properties. The Company relies on title opinions by legal counsel who base such opinions on the laws of countries in which the Company operates.

A) Caramanta Project

(i) Caramanta Project - Concessions 6602, 1343 and 6329

On September 22, 2005, the Company entered into an Assignment Agreement with Investcol Limited (“Investcol”), a related party, where Investcol assigned, transferred, and conveyed to the Company all of its rights under a contract for Purchase Option of Mining Concessions (“Original Option Contract”) entered into with Cia Servicios Y Logisticos Ltda. As the result of the Assignment Agreement, the Company acquired an option to purchase certain mining, mineral and exploration rights on property known as Concessions 6602, 1343 and 6329 located in Caramanta Municipality, Antioquia Department, Medellin, Colombia for $10,000, on condition that $2,990,000 is invested in exploratory work on the property over a three year period. The Company issued 1,000,000 common stock to Investcol at a deemed fair market value $0.25 per share for total consideration of $250,000. At the date of acquisition of these mineral rights the Company had not yet incorporated a Company in Colombia and had not gained the support of the Colombian federal or local governments. Due to these uncertainties, the initial $260,000 was considered mineral property exploration and was recorded as part of mineral property exploration expenses in the consolidated statement of operations in fiscal 2005.

Pursuant to the Assignment Agreement, the Company was committed to fund $2,990,000 exploratory work as follows:

(a)  
$500,000 upon the closing of the Assignment Agreement;
(b)  
$750,000 during the 12 month period commencing June 25, 2006; and on the earlier of June, 2006 or commencement of the second exploration phase, one million restricted shares of the Company’s common shares; and
(c)  
$1,740,000 during the 12-month period commencing June 25, 2007.

In addition, the Company agreed to pay Investcol $7,500 per month as an office fee through July 31, 2006.

On September 25, 2006 the Assignment Agreement was superseded in connection with the Company’s agreement to acquire the Mining Concessions. (See note 3(A)(iii) below for further details)

(ii) Caramanta Project - Concessions 6993, 7039, 6821 and 6770 and HET 31, 32, 26, 27 and HETG 01

On February 16, 2006 the Company entered into a Letter of Intent (“LOI”) with Investcol to acquire Investcol’s rights in a Contract for Purchase (“Purchase Contract”) entered into with Cia Servicios y Logisticos Ltda. The LOI outlined a proposed transaction where the Company intended to acquire Investcol’s rights to acquire mining contracts to exclusively engage in mining activities on concessions 6993, 7039, 6821 and 6770 (the “Contracts”) and options that Investcol holds to acquire the exclusive rights to engage in mining activities on concessions HET 31, 32, 26, 27 and HETG 01 (the “Options”) all located within an area in Colombia referred to as the Caramanta location.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
The LOI was non-binding and subject to final negotiation and the execution of a definitive agreement. On April 10, 2006, the Company entered into a definitive agreement with Investcol finalizing this transaction (“Assignment Agreement”). In consideration for this Assignment Agreement, the Company paid Investcol total consideration in the amount of $350,000 and issued 1,000,000 restricted shares of common stock. Under the terms of the Assignment Agreement, Investcol agreed to pay the exercise price of $150,000 on the Options whose titles will remain in the name of Cia Servicios until the final exploration commitments have been made. The final option payments were made prior to July 30, 2006.

On September 25, 2006 the Assignment Agreement was superseded in connection with the company’s agreement to acquire the Mining Concessions. (See note 3(A)(iii) below for further details)

(iii) Caramanta Project - Acquisition of the Caramanta Exploration Properties

On September 25, 2006 the Company, through the acquisition of the outstanding shares of Gavilan, acquired full legal title to the Caramanta project concessions described in Notes 3A(i) and 3A(ii) above. Consideration paid for the acquisition included $300,000 cash and the issuance of 1,150,000 restricted common shares at a fair value of $1.41 per share. In addition, a $50,000 finder’s fee was paid to Investcol. The total acquisition cost of $1,971,500 was allocated to the net assets acquired as follows:

Mineral and exploration and properties rights
$
1,780,841
Property, plant and equipment
 
190,659
 
$
1,971,500

The purchase was recorded as part of i) acquired mineral and exploration properties and rights and ii) property, plant and equipment in fiscal 2006. As a result of the acquisition of Gavilan, the Company no longer has any minimum exploratory work obligations related to the Caramanta concessions.

B) Marmato Project
 
On January 12, 2006, the Company entered into a Stock Purchase Agreement with Investcol and RNC (the "Agreement"), whereby the Company (i) acquired twenty-five percent (25%) of the issued and outstanding stock of RNC, a Belize corporation ("RNC") and (ii) held an option to acquire the remaining seventy five percent (75%) of RNC's issued and outstanding stock over a period of time. RNC is the beneficial holder of 94.99% of the issued and outstanding stock of Caldas, a Colombia corporation that (i) owns certain mining, mineral and exploration rights, (ii) has options to acquire mining, mineral and exploration rights and (iii) has exclusive rights to evaluate certain property, all located in the Zona Alta portion of the Marmato project in Colombia. 

Pursuant to the Stock Purchase Agreement, the Company:

a)  Acquired 25% of the outstanding shares of RNC (total 25% of RNC) by the issuance of 1,000,000 common shares of the Company to Investcol and the advance to RNC of a $1,200,000 non-interest bearing loan. Total consideration of $1,900,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.
 
b)   Acquired an additional 25% of RNC (total 50% of RNC) by the issuance of 2,000,000 shares of the Company to Investcol and the advance of an additional $4,000,000 non-interest bearing loan to RNC in two instalments of $1,000,000 and $3,000,000 on or before March 15, 2006 and April 30, 2006, respectively. On March 10, 2006, the Company entered an extension agreement with Investcol to extend the terms to April 30, 2006, and completed the transaction on April 28, 2006. Total consideration of $5,480,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
c)   Held the option to acquire an additional 25% of RNC (total 75% of RNC) by the issuance of 4,000,000 common shares of the Company to Investcol and the advance of an additional $15,000,000 non-interest bearing loan to RNC on or before October 30, 2006. On August 22, 2006, the Company amended its January 12, 2006 Stock Purchase Agreement with Investcol and RNC and concurrently exercised its option to increase the Company’s interest in RNC from 50% to 75%. Under the terms of the amended agreement, the Company issued 4,200,000 common shares and paid $200,000 to Investcol. In connection with this transaction, the Company committed to providing an additional $5,000,000 by way of non-interest bearing demand loan to RNC by December 31, 2006 and providing sufficient funds to RNC, upon terms satisfactory to the Company, to complete a full bankable feasibility study of the Marmato Project. Total consideration of $ 4,820,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.
 
d)   Has the option to acquire an additional 25% of RNC (total 100% of RNC) until May 1, 2009 for a price equal to the 25% of the value of Caldas determined by a bankable feasibility study prepared by a certified mineral property evaluator, or other acceptable third party. Payment of the purchase price can be made by the Company in either cash or the Company’s common shares. Under the terms of the August 22, 2006 amended agreement, the Company continues to hold an option to acquire the remaining 25% of RNC on or before May 1, 2009 for a purchase price equal to 25% of the fair value of Caldas determined by a feasibility study. The purchase price, pursuant to the amended agreement, is limited to a maximum of $15,000,000 plus 4,000,000 shares of the Company. Payment of the purchase price can be satisfied in either cash or common shares of the Company, or any combination thereof. On December 14, 2006 the parties executed a Second Amendment to the Stock Purchase Agreement (the “Second Amendment”) in order to revise the consideration required to exercise the Company’s option to acquire the remaining 25% of the issued and outstanding stock of RNC. Subject to the revised terms set forth in the Second Amendment, the Company has the option to acquire an additional 15% interest in RNC, in exchange for the issuance of 4,000,000 common shares of the Company to Investcol. In connection with the execution of the Second Amendment, the Company exercised its option, resulting in the Company acquiring an additional 15% of RNC, bringing the Company’s total ownership to 90%. The revised terms set forth in the Second Amendment provide that the Company has the option to acquire the remaining 10% of RNC until May 1, 2009 in exchange for a purchase price of $15,000,000. The purchase price can be made in either cash, shares of our common stock, or any combination thereof. Total consideration of $5,120,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.
 
 C) Kedahda Properties
 
On August 30, 2006 the Company, purchased certain mining exploration properties in the Republic of Colombia and the related geochemical and other proprietary geological data from a wholly-owned subsidiary of Anglo Gold Ashanti, Sociedad Kedahda, S.A., for $500,000 cash consideration. The purchase was recorded as part of acquired mineral and exploration properties and right in fiscal 2006.
 
Mineral Property Rights Acquisition and Exploration Expenditures

The Company’s mineral property acquisition and exploration expenditures consist of

I)  The acquisition of mineral concessions;
II)   The acquisition of mineral and exploration rights from existing titleholders;
III)   The exploration of acquired mineral properties and related activities; and
IV)   Stock-based compensation allocated pursuant to FAS 123(R)

The following table summarizes the Company’s mineral concession acquisitions, mineral rights acquisitions, and mineral exploration expenses as recorded in the Company’s Consolidated financial statements for the period March 25, 2003 to December 31, 2006:

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
 
 
 
 
 
Year Ended
December 31, 2006
 
 
 
 
Year Ended
December 31, 2005
 
Cumulative
From Inception
(March 25, 2003)
Through
December 31, 2006
(unaudited)
 
 
 
 
 
 
 
I)
Acquisition of mineral concessions
$
22,200,841
 
$
-
 
$
22,200,841
II)
Acquisition of mineral and exploration rights
 
10,639,071
 
 
-
 
 
10,639,071
 
Total acquired mineral and exploration properties and rights
 
32,839,912
 
 
-
 
 
32,839,912
III)
Exploration of acquired mineral properties
 
3,084,843
 
 
1,179,298
 
 
4,264,141
IV)
Stock based Compensation
 
213,595
 
 
-
 
 
213,595
 
Total mineral property exploration expenses
 
3,298,438
 
 
1,179,298
 
 
4,477,736
 
Total mineral property rights acquisition
and exploration expenditures
$
36,138,350
 
$
1,179,298
 
$
37,317,648

Capitalized Mineral and Exploration Properties and Rights

Acquired mineral and exploration properties and exploration rights at December 31, 2006 of $32,839,912 have been recorded at amounts necessary to reflect temporary differences associated with the differences between their accounting and tax bases. As a result, these properties are recorded in the consolidated balance sheet at December 31, 2006 at $43,528,386.

NOTE 4 - PROPERTY AND EQUIPMENT

 
As at December 31, 2006
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Furniture and office equipment
$
171,656
 
$
(11,292)
 
$
160,364
Building
 
87,033
 
 
(1,451)
 
 
85,582
Vehicles
 
193,149
 
 
(19,362)
 
 
173,787
 
 
 
 
 
 
 
 
 
Total
$
451,838
 
$
(32,105)
 
$
419,733
 
 
 
 
 
 
 
 
 
Website Development Cost
$
36,000
 
$
(36,000)
 
 
-

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

As at December 31, 2005
Cost
 
Accumulated
Amortization
 
Net book
Value
Furniture and Office equipment
$
1,780
 
$
(335)
 
$
1,445
Website Development Cost
$
21,000
 
$
(3,500)
 
$
17,500

NOTE 5 - STOCKHOLDERS’ EQUITY

Common Stock

 
December 31, 2006
 
December 31, 2005
Authorized:
 
 
 
200,000,000 common shares,
 
 
 
$0.00001 par value
 
 
 
Issued and Outstanding:
 
 
 
56,036,849 common shares (December 31, 2005: 29,589,100 shares)
$
565
 
$
296

i)  
During the year ended December 31, 2006, the Company completed the following transactions:
 
 
a)
On January 10, 2006, the Company issued 3,126,083 common shares at $0.60 per share for gross proceeds of $1,875,650. The Company paid finders fees in the amount of $187,565, for net proceeds of $1,688,085.

 
b)
On February 14, 2006, the Company issued 1,000,000 common shares at fair value of $1.90 per share to Investcol in connection with the acquisition of 25% ownership of RNC (See Note 3).

 
c)
On April 10, 2006, the Company issued 1,000,000 common shares at fair value of $2.25 per share to Investcol to acquire rights in certain properties in the Caramanta area of Colombia. See Note 3)

 
d)
On April 26, 2006 the Company completed a private equity offering of 6,500,666 Units at $1.50 per Unit to a total of 26 investors. Each Unit consists of one (1) share of common stock, par value $0.00001, and one (1) Warrant (the “Warrant”) to purchase one (1) share of common stock, exercisable for twenty-four (24) months from the closing of the offering. The exercise price for the Warrant is priced at $2.50. The gross proceeds received from this offering were $9,751,000. Assuming that the investors exercise all of the Warrants, the gross proceeds received from the exercise of the Warrants will equal $16,251,665.
 
In connection with this private equity offering, the Company paid as a commission $585,060 and issued warrants to purchase 390,040 shares of the Company’s common stock with each warrant exercisable for a period of thirty-six (36) months from the closing of the offering at the exercise price of $2.00 per share. Assuming that all of these warrants are exercised, the Company will receive gross proceeds of $780,080.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

The Company has allocated the total net proceeds from the offering of $9,165,939 to the various underlying equity instruments comprising the equity offering, based on the estimated relative fair value of each instrument at the offering date, as follows:

Common shares
$
65
Additional paid in capital - common shares
 
6,416,112
Additional paid in capital - share purchase warrants
 
2,749,762
Total gross proceeds from private equity offering
$
9,165,939
 
e) On April 28, 2006, in connection with the acquisition of the second 25% of RNC, the Company issued 2,000,000 common shares at a fair values of $2.74 to Investcol. (See Note 3).
 
f) On August 22, 2006 in connection with the acquisition of the third 25% of RNC, the Company issued 4,200,000 common shares at a value of $1.10 per share to Investcol. (See Note 3).
 
g)   On September 25, 2006 in connection with the Company’s acquisition of 100% of the Caramanta Exploration Properties, the Company issued 1,150,000 restricted common shares at a value of $1.41 (see Note 3).

h)   On October 14, 2006 3,471,000 share purchase warrants were exercised for net proceeds to the Company of $1,735,500 and 3,471,000 common shares were issued upon exercise.

i)  On December 14, 2006 in connection with the acquisition of the forth 15% of RNC, the Company issued 4,000,000 common shares at a value of $1.28 per share to Investcol.

ii)   During the fiscal year ended December 31, 2005, the Company:
 
a)  Issued 1,000,000 restricted common shares valued at an estimated market price of $0.25 per share, pursuant to an option to acquire a 100% interest in certain mining and mineral and exploration rights on three gold properties known as the Caramanta concessions in the Marmato Mountain mining district, Colombia.
 
b)   Completed a private placement and issued 4,221,000 units at a price of $0.25 per share for net proceeds of $1,055,250. Each unit consisted of one common share and one non-transferable warrant, entitling the holder to acquire one additional common share at a price of $0.50, exercisable on or before October 14, 2006. The Company also issued 368,100 shares as a finders’ fee relating to this private offering. The Company has allocated the total gross proceeds from the offering of $1,055,250 to the various underlying equity instruments comprising the equity offering, based on the estimated relative fair value of each instrument at the offering date, as follows:
 
Common shares
$
46
Additional paid in capital - common shares
 
712,204
Additional paid in capital - share purchase warrants
 
343,000
Total gross proceeds from private equity offering
$
1,055,250

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

iii)  
During the fiscal year ended December 31, 2004, the Company:
 
a)  
Completed an initial public offering and issued 16,000,000 common shares at a price of $0.00625 per share for total proceeds of $100,000.

Warrants

As at December 31, 2006, the following warrants were issued and outstanding:

# Warrants
Exercise Price
Expiry Date
6,500,666
$2.50 per share
April 25, 2008
390,040
$2.00 per share
April 25, 2009
6,890,706
$2.47 per share
 
 
Assuming all warrants are exercised, the Company would potentially receive $17,031,745.

Stock Options and Other Stock-Based Compensation

In fiscal 2006, the Company adopted the 2006 Stock Incentive Plan, (the “Plan”) which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance shares and performance units, and stock awards to officers, directors or employees of, as well as advisers and consultants to, the Company.

All stock options and rights are to vest over a period determined by the Board of Directors and expire not more than ten years from the date granted. On July 31, 2006 the Company received shareholder approval for an amended Stock Incentive Plan. Pursuant to the amended Plan, the number of shares that may be issued for awards granted under the 2006 plan was increased from 3,500,000 to 5,000,000.

Pursuant to the Plan, during fiscal 2006 the Company granted 3,500,000 stock options to employees, directors, officers and consultants of the Company. These stock options vest at a rate of 25% every six months over a period of two years, and expire over a life of 10 years. For the year ended December 31, 2006, the Company recorded a total of $1,878,782 in stock based compensation expense related to these grants in the consolidation statement of operations.

On October 1, 2006 the Company agreed to grant 500,000 common shares to a consultant providing services to the Company. Pursuant to the terms of the Consulting Agreement, should the Consultant’s employment terminate by the Consultant’s resignation before the period of two years has elapsed, the Consultant is required to return a pro rata portion of the shares based on the time remaining in the contract. In the case of a change in control of the Company by merger or sale of a majority stake or otherwise, the shares held by the Consultant will immediately vest. The fair value of the common stock award, based on the market price of the Company’s common shares at the agreement date, was $915,000. The Company accounts for this award by recognizing compensation expense ratably over twenty-four months, commencing on the agreement date. For the year ended December 31, 2006, the Company recorded a total of $114,375 in stock based compensation expense related to this award in the fiscal 2006 consolidated statement of operations.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

The following table summarizes stock-based compensation recorded in the consolidated statements of operations:

 
 
Year Ended
December 31, 2006
 
 
Year Ended
December 31, 2005
 
Cumulative
from Inception
(March 25, 2003)
through
December 31, 2006
(unaudited)
Mineral property rights acquisition and exploration expenditures
$
213,595
 
$
-
 
$
213,595
General and administrative
 
1,779,562
 
 
-
 
 
1,779,562
Total stock-based compensation
$
1,993,157
 
$
-
 
$
1,993,157

As at December 31, 2006 there was $1,361,810 of unrecognized compensation cost related to unvested stock options. The cost is expected to be recognized as follows: Fiscal 2007 - $1,176,296; Fiscal 2008 - $185,514; Fiscal 2009 - $NIL. At December 31, 2006 there was $800,625 unrecognized compensation cost related unvested direct stock awards. The cost is expected to be recognized as follows: Fiscal 2007-$457,500; Fiscal 2008 - $343,125.

A summary of stock options granted and exercised is as follows:

 
 
Shares
 
Weighted Average
Exercise Price
Options outstanding at December 31, 2005
 
-
 
$
-
Granted in fiscal 2006
 
3,500,000
 
 
1.08
Exercised in fiscal 2006
 
-
 
 
-
Forfeited and expired in fiscal 2006
 
(712,500)
 
 
0.75
Options outstanding at December 31, 2006
 
2,787,500
 
$
1.16

 
Year Ended
December 31, 2006
 
Year Ended
December 31, 2005
Weighted average grant date fair value of options granted during the period
$
1.08
 
$
-
 
 
 
 
 
 
Weighted average fair value of options vested during the period
$
0.99
 
$
-

A summary of stock options outstanding and exercisable at December 31, 2006 is as follows:

 
Range of
Exercise
Prices
 
 
Number
Outstanding
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (yrs)
 
 
Number
Exercisable
Weighted
Average
Exercise
Price
$0.75 - $1.00
1,037,500
$ 0.75
9.02
437,500
$ 0.75
$1.01 - $2.00
1,750,000
1.41
9.54
150,000
1.69
$0.75 - $2.00
2,787,500
$ 1.16
9.35
587,500
$ 0.99

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 4.45%, dividend yield 0%, a historic volatility of 92%, and expected term of 10 years, equal to the full life of the options as the Company does not expect any options to be exercised early.

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company, during the normal course of operations, engages in transactions with certain directors, senior officers, and shareholders of the Company.

Significant related party transactions reflected within the Company’s consolidated financial statements include:

i)  
The acquisition of the Company’s interest in the Caramanta and Marmato projects as described in notes 3(A) and 3(B) from Investcol, a company controlled by certain shareholders of the Company;

ii)  
Management and consulting fees paid to certain directors, senior officers, and shareholders of the Company; and

iii)  
Office rent paid to a Company related to a former director of the Company.
 
i) During the year ended December 31, 2006 the Company:

a)  
Paid $186,306 for management and consulting fees to directors of the Company.

b)  
Paid $356,168 for management and consulting fees to senior officers of the Company.

c)  
Paid $332,400 for management and consulting fees to shareholders of the Company.

d)  
Paid $10,256 for office rent to a company related to a former director of the Company.

Included in prepaid expenses at December 31, 2006 is $30,000 related to a company controlled by shareholders of the Company. Included in accounts payable and accrued liabilities at December 31, 2006 is $49,213 owing to a company controlled by shareholders of the Company.

ii) During the year ended December 31, 2005 the Company:

a)  
Paid $29,875 for management fees to directors and former senior officers of the Company.

b)  
Paid $37,500 for administration of exploration activities to a shareholder of the Company.

c)  
Paid $2,122 for consulting to a director of the Company.

d)  
Paid $11,250 for office rent to a company related to a director of the Company.

Included in prepaid expenses at December 31, 2005 is $9,585 pertaining to office rent paid to a company related to a former director of the Company. Included in accounts payable and accrued liabilities at December 31, 2005 is $19,883 payable to directors of the Company and to a company related to a director.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
NOTE 7 - INCOME TAXES

The potential benefit of net operating loss carry forwards has not been recognized in the financial statements. Since the Company has no source of operating revenue, it cannot be assured that it is more likely than not that such benefit will be realized in future years. The components of the net deferred tax asset, net deferred tax liability, differences between the statutory rate and the effective rate, and the valuation allowance are as follows:

a)  
Components of income tax provision:

The components of the Company’s provision for (recovery of) income taxes consists of the following:

 
Year ended
December 31, 2006
 
Year ended
December 31, 2005
Domestic
$
-
 
$
-
Foreign
 
(928,950)
 
 
-
 
$
(928,950)
 
$
-

For the year ended December 31, 2006 the Company’s loss before provision for income taxes was generated in the following jurisdictions: Domestic $3,732,634; Foreign $3,475,000.

b)  
Income tax rate reconciliation:

The effective income tax rate differs from the statutory rate that would be obtained by applying the U.S. Federal income tax rate to net income (loss) before income taxes. These differences result from the following items:

 
Year ended
December 31, 2006
 
Year ended
December 31, 2005
US federal income tax rate
 
34%
 
 
15%
 
 
 
 
 
 
Increase (decrease) in
Income tax rate resulting
From:
 
 
 
 
 
Losses not recognized for
 
 
 
 
 
tax purposes
 
(8.2%)
 
 
(15%)
Tax rate differences in
 
 
 
 
 
foreign subsidiaries
 
(3.5%)
 
 
-
Other permanent
 
 
 
 
 
Differences
 
(9.4%)
 
 
-
Effective income tax rate
 
12.9 %
 
 
- %
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
 
c)  
Component of future income tax provision:

The components of the temporary differences, which created the future income tax provision, are as follows:

 
Year ended
December 31, 2006
 
Year ended
December 31, 2005
Losses carried
 
 
 
Forward
$
(528,223)
 
$
(224,100)
Tax depreciation
 
 
 
 
 
less than (greater than)
 
 
 
 
 
accounting depreciation
 
(402,039)
 
 
-
Foreign exploration costs
 
(928,950)
 
 
-
 
$
(1,859,212)
 
$
(224,100)
Change in valuation
 
 
 
 
 
Allowance
 
930,262
 
 
224,100
Deferred income tax provision
$
(928,950)
 
$
-

d)  
Components of deferred tax asset and liability:

The components of the temporary differences which have created the deferred tax assets are:

 
December 31, 2006
 
December 31, 2005
Tax depreciation less than
 
 
 
(greater than) depreciation
$
402,039
 
$
-
Losses carried
 
 
 
 
 
Forward
 
752,323
 
 
224,100
 
 
1,154,362
 
 
224,100
Valuation allowance
 
(1,154,362)
 
 
(224,100)
Deferred tax asset
$
-
 
$
-

The components of the temporary differences, which have created the deferred tax liability, are:

 
December 31, 2006
 
December 31, 2005
Tax depreciation less than
 
 
 
(greater than) accounting depreciation
$
-
 
$
-
Tax basis less than accounting
 
 
 
 
 
basis for mineral concessions
 
(10,688,474)
 
 
-
Foreign exploration costs
 
928,950
 
 
-
Deferred tax liability
$
(9,759,524)
 
$
-

e)  
The Company has income tax losses available for carry forward of $2,210,000 which expire as follows:

Expiry Year
Domestic
 
Foreign
 
Total
   
 
  
 
  
2023
$
36,500
 
$
-
 
$
36,500
2024
 
23,000
 
 
-
 
 
23,000
2025
 
310,500
 
 
-
 
 
310,500
2026
 
1,840,000
 
 
-
 
 
1,840,000
Indefinite
 
-
 
 
-
 
 
-
 
$
2,210,000
 
$
-
 
$
2,210,000

NOTE 8 - NON-CASH ACTIVITIES

The Company has issued common shares as consideration for the acquisition of certain mineral rights as disclosed in Notes 3 and 5. During the fiscal year ended December 31, 2005, a related party forgave $4,999 and the amount was credited to additional paid-in capital.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE 9 - SEGMENTED INFORMATION

The Company has determined that it operates in a single reportable segment, being the acquisition of, exploration for, and development of mineral properties.

NOTE 10 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The FASB has issued FIN 48, which prescribes rules for the financial statements accounting for uncertainty in income tax positions.

FIN 48 requires all material tax positions to undergo a new two-step recognition and measurement process. All material tax positions in all jurisdictions in all tax years in which the statute of limitations remains open upon the initial date of adoption are required to be assessed. For a tax benefit to be recognized it must be more likely than not that a tax position will be sustained upon examination based solely on its technical merits. If the recognition standard is not satisfied, then no tax benefit otherwise arising from the tax position can be recorded for financial statement purposes. If the recognition standard is satisfied, the amount of tax benefit recorded for financial statement purposes will be the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. FIN 48 is effective for the Company’s fiscal 2007 year. The Company does not anticipate the adoption of FIN 48 will have a material impact on the Company’s financial position, results of the operations, or cash flows.

NOTE 11 - SUBSEQUENT EVENTS

(a)  
On February 27, 2007 the Company entered into a $3,700,000 promissory note between the Company and the Company’s President, a shareholder, and a Company controlled by these individuals. The loan, collateralized by the Company’s investment in RNC, was due and payable upon closing a planned equity financing, but in no case later than April 15, 2007. Upon repayment, an $185,000 fee was payable to the note holders. The note bears interest at 10% per annum, with monthly interest payments commencing February 28, 2007.

(b)  
On March 21, 2007 the Company completed a private equity offering of 9,020,000 common shares at $1.00 per common share. The gross proceeds received from the offering were $9,020,000.

In connection with this private equity offering, the Company is obligated to pay a commission of $541,200 and is obligated to issue agents’ warrants to purchase 541,200 shares of the Company’s common stock with each warrant exercisable for a period of 36 months from the closing of the offering at an exercise price of $1.00 per share.

(c)  
Subsequent to year-end, in March, 2007 the Company issued to certain directors and consultants 1,640,000 options to purchase common shares of the Company.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED BALANCE SHEETS    
 
US Dollars
March 31, 2007
(unaudited)
 
December 31,
2006
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
Cash and cash equivalents
$ 
3,941,968
 
$
882,913
Prepaid expenses and deposits
 
368,628
 
 
176,347
Prepaid consulting fees (Note 5)
 
485,000
 
 
-
 
 
4,795,596
 
 
1,059,260
 
 
 
 
 
 
Mineral and exploration properties and rights (Note 3)
 
47,268,969
 
 
43,528,386
Property and equipment, net of accumulated amortization (Note 4)
 
415,299
 
 
419,733
Prepaid consulting fees (Note 5)
 
228,750
 
 
-
 
$
52,708,614
 
$
45,007,379
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities (Note 6)
$
6,908,945
 
$
6,037,671
 
 
 
 
 
 
Non Current
 
 
 
 
 
Deferred income tax liability (Notes 3 and 7)
 
9,334,814
 
 
9,759,524
 
 
16,243,759
 
 
15,797,195
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Common stock (Note 5)
 
 
 
 
 
Authorized:
200,000,000 common shares, $0.00001 par value
 
661
 
 
565
Issued and Outstanding:
65,706,849 common shares (December 31, 2006, 56,039,849 common shares)
 
 
 
 
 
 
 
 
 
 
 
Additional paid-in capital (Note 5)
 
46,797,272
 
 
37,039,266
 
 
46,797,933
 
 
37,039,831
Deficit accumulated during the exploration stage
 
(10,333,078)
 
 
(7,829,647)
 
 
36,464,855
 
 
29,210,184
 
$
52,708,614
 
$
45,007,379
 
See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS     
 
US Dollars
Three
Months
Ended
March 31, 2007
(unaudited)
 
Three
Months
Ended
March 31, 2006
(unaudited)
 
Cumulative
from Inception
(March 25, 2003)
through
March 31, 2007
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mineral property exploration expenses (Notes 3 and 5)
 
1,472,016
 
 
572,623
 
 
5,949,752
General and administrative (Note 5)
 
1,447,040
 
 
758,724
 
 
5,787,657
Amortization
 
18,814
 
 
5,444
 
 
86,919
Total operating expenses
 
2,937,870
 
 
1,336,791
 
 
11,824,328
 
 
 
 
 
 
 
 
 
Other income
 
(9,729)
 
 
(3,552)
 
 
(127,763)
Loss from continuing operations
 
(2,928,141)
 
 
(1,333,239)
 
 
(11,696,565)
 
 
 
 
 
 
 
 
 
Income from discontinued operations (Note 1)
 
-
 
 
-
 
 
9,827
Loss before deferred income taxes
 
(2,928,141)
 
 
(1,333,239)
 
 
(11,686,738)
Deferred income tax recovery (Note 7)
 
(424,710)
 
 
-
 
 
(1,353,660)
NET LOSS
$
(2,503,431)
 
$
(1,333,239)
 
$
(10,333,078)
 
 
 
 
 
 
 
 
 
LOSS PER SHARE - BASIC AND DILUTED
$
(0.04)
 
$
(0.04)
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
 
 
 
 
 
 
 
 
Basic and diluted
 
57,211,516
 
 
32,395,377
 
 
 
 
See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)   
 
 
 
 
US Dollars
 
 
Common
Shares
 
 
 
Stock
Amount
 
 
Additional
Paid-in
Capital
 
Share Subscriptions
Received
 
Deficit
Accumulated During
The
Exploration
Stage
 
Total
Stockholders’ Equity
(Deficiency)
Period Ended December 31, 2003 (see Note 1):
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.000125 per share on March 25, 2003
 
8
 
$
-
 
$
1
 
$
-
 
$
-
 
$
1
Issue of common stock for cash at $0.000125 per share on May 5, 2003
 
16,000,000
 
 
160
 
 
1,840
 
 
-
 
 
-
 
 
2,000
Repurchase of common stock for cash at $0.000125 per share on October 31, 2003
 
(8,000,008)
 
 
(80)
 
 
(920)
 
 
-
 
 
-
 
 
(1,000)
Donated Capital
 
-
 
 
-
 
 
35,200
 
 
-
 
 
-
 
 
35,200
Net loss for the twelve months ended December 31, 2003
 
-
 
 
-
 
 
-
 
 
-
 
 
(36,399)
 
 
(36,399)
Balance, December 31, 2003
 
8,000,000
 
 
80
 
 
36,121
 
 
-
 
 
(36,399)
 
 
(198)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2004:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.00625 per share on December 20, 2004
 
16,000,000
 
 
160
 
 
99,840
 
 
-
 
 
-
 
 
100,000
Donated Capital
 
-
 
 
-
 
 
19,200
 
 
-
 
 
-
 
 
19,200
Net loss for the twelve months ended December 31, 2004
 
-
 
 
-
 
 
-
 
 
-
 
 
(23,094)
 
 
(23,094)
Balance December 31, 2004
 
24,000,000
 
 
240
 
 
155,161
 
 
-
 
 
(59,493)
 
 
95,908
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2005:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for mineral concession at $0.25 per share on September 22, 2005
 
1,000,000
 
 
10
 
 
249,990
 
 
-
 
 
-
 
 
250,000
Issue of 4,221,000 common stock for cash at $0.25 per share and 368,100 common stock for finder fee on October 14, 2005
 
4,589,100
 
 
46
 
 
1,055,204
 
 
-
 
 
-
 
 
1,055,250
Forgiveness of advances from a related party
 
 
 
 
 
 
 
4,999
 
 
-
 
 
-
 
 
4,999
Share Subscriptions Received
 
-
 
 
-
 
 
-
 
 
1,767,650
 
 
-
 
 
1,767,650
Net loss for the twelve months ended December 31, 2005
 
-
 
 
-
 
 
-
 
 
-
 
 
(1,491,470)
 
 
(1,491,470)
Balance, December 31, 2005
 
29,589,100
 
$
296
 
$
1,465,354
 
$
1,767,650
 
$
(1,550,963)
 
$
1,682,337

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)    
 
 
US Dollars
 
 
Common
Shares
 
 
 
Stock
Amount
 
 
Additional
Paid-in
Capital
 
Share Subscriptions
Received
 
Deficit
Accumulated During
The
Exploration
Stage
 
Total
Stockholders’ Equity
(Deficiency)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2005
 
29,589,100
 
$
296
 
$
1,465,354
 
$
1,767,650
 
$
(1,550,963)
$
1,682,337
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2006:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $0.60 per share on January 24, 2006, net of $187,565 finders fee
 
3,126,083
 
 
31
 
 
1,688,054
 
 
(1,767,650) 
 
 
-
 
 (79,565)
Issue of common stock for Mineral concessions at $1.90 per share on February 14, 2006
 
1,000,000
 
 
10
 
 
1,899,990
 
 
-
 
 
-
 
1,900,000
Issue of common stock For Mineral concession at $2.25 per share on April 10, 2006
 
1,000,000
 
 
10
 
 
2,249,990 
 
 
-
 
 
-
 
 2,250,000
Issue of common stock for cash at $1.50 per unit (common shares & warrants less finders fee of $585,060 on April 26, 2006
 
6,500,666
 
 
65
 
 
6,416,112
 
 
-
 
 
-
 
6,416,177
Issue of share purchase warrants with April 26, 2006 common stock issuance
 
-
 
 
-
 
 
2,749,762
 
 
-
 
 
-
 
2,749,762
Issue of common stock for Mineral concessions of $2.74 per share on April 28, 2006
 
2,000,000
 
 
20
 
 
5,479,980
 
 
-
 
 
-
 
5,480,000
Issue of common stock for Mineral concessions at $1.10 per share on August 22, 2006
 
4,200,000
 
 
42
 
 
4,619,958
 
 
-
 
 
-
 
 4,620,000
Issue of common stock for Mineral concessions at $1.41 per share on September 25, 2006
 
1,150,000
 
 
16
 
 
1,621,484
 
 
-
 
 
-
 
1,621,500
Issue of common shares per exercise of 3,471,000 warrants on October 14, 2006.
 
3,471,000
 
 
35
 
 
1,735,465
 
 
-
 
 
-
 
 1,735,500
Issue of common stock for Mineral concessions at $1.28 per share on December 14, 2006.
 
4,000,000
 
 
40
 
 
5,119,960
 
 
-
 
 
-
 
 5,120,000
Stock based compensation
 
-
 
 
-
 
 
1,993,157
 
 
-
 
 
-
 
 1,993,157
Net loss for the twelve months ended December 31, 2006
 
-
 
 
-
 
 
-
 
 
-
 
 
(6,278,684)
 
(6,278,684)
Balance December 31, 2006
 
56,036,849
 
$
565
 
$ 
37,039,266
 
$
-
 
$
(7,829,647)
$
29,210,184

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
 
US Dollars
 
Common
Shares 
 
 
Stock
Amount 
 
 
Additional
Paid-in
Capital 
 
 
Share
Subscriptions
Received 
 
 
Deficit
Accumulated
During
The
Exploration
Stage 
 
 
 
Total
Stockholders’
Equity
(Deficiency) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2006
 
56,036,849
 
$
565
 
$
37,039,266
 
$
-
 
$
(7,829,647)
 
$
29,210,184
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2007 (unaudited):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issue of common stock for cash at $1.00 per share less agents fee of $541,200 on March 21, 2007
 
9,020,000
 
 
90
 
 
8,074,434
 
 
-
 
 
-
 
 
8,074,524
Issue of agents’ warrants in connection with March 21, 2007 common stock issuance
 
 
 
 
 
 
 
404,276
 
 
-
 
 
-
 
 
404,276
Issue of common stock for consulting services
 
650,000
 
 
6
 
 
967,119
 
 
-
 
 
-
 
 
967,125
Stock based compensation - stock options
 
-
 
 
-
 
 
312,177
 
 
-
 
 
-
 
 
312,177
Net loss for the three months ended March 31, 2007
 
 
 
 
 
 
 
-
 
 
-
 
 
(2,503,431)
 
 
(2,503,431)
Balance March 31, 2007 (unaudited)
 
65,706,849
 
$
661
 
$
46,797,272
 
$
-
 
$
(10,333,078)
 
$
36,464,855

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Three
Months
Ended
March 31, 2007
(unaudited)
 
Three
Months
Ended
March 31, 2006
(unaudited)
 
Cumulative
Inception
(March 25, 2003)
through
March 31, 2007
(unaudited)
 
 
 
 
 
 
OPERATING ACTIVITIES:
 
 
 
 
 
Net loss
$
(2,503,431)
 
$
(1,333,239)
 
$
(10,333,078)
Items not requiring cash outlay:
 
 
 
 
 
 
 
 
- Consulting fees
 
-
 
 
-
 
 
52,400
- Amortization
 
18,814
 
 
5,444
 
 
88,919
- Mineral property exploration
 
-
 
 
-
 
 
250,000
- Stock based compensation
 
565,552
 
 
486,489
 
 
2,558,709
- Deferred income taxes
 
(424,710)
 
 
-
 
 
(1,353,660)
Changes in non-cash working capital items
 
 
 
 
 
 
 
 
- Accounts receivable
 
-
 
 
-
 
 
-
- Prepaid expenses and deposits
 
(192,281)
 
 
14,149
 
 
(368,628)
- Exploration expenditure advances
 
-
 
 
(53,659)
 
 
-
- Accounts payable and accrued liabilities
 
710,501
 
 
10,586
 
 
1,138,634
- Due to/from related parties
 
-
 
 
335,516
 
 
4,999
Net cash used in operating activities
 
(1,825,555)
 
 
(534,714)
 
 
(7,961,705)
 
 
 
 
 
 
 
 
 
FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of securities, net of finder fees
 
8,478,800
 
 
(79,565)
 
 
22,224,575
Issuance of bridge loan
 
3,700,000
 
 
-
 
 
3,700,000
Repayment of bridge loan
 
(3,700,000)
 
 
-
 
 
(3,700,000)
Net cash provided by (used in) financing activities
 
8,478,800
 
 
(79,565)
 
 
22,224,575
 
 
 
 
 
 
 
 
 
INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Purchase of mineral exploration rights
 
(3,579,810)
 
 
(254,400)
 
 
(9,818,684)
Purchase of equipment
 
(14,380)
 
 
(38,538)
 
 
(481,218)
Website development costs
 
-
 
 
(15,000)
 
 
(21,000)
Net cash used in investing activities
 
(3,594,190)
 
 
(307,938)
 
 
(10,320,902)
 
 
 
 
 
 
 
 
 
INCREASE (DECREASE) IN CASH
$
3,059,055
 
$
(922,217)
 
$
3,941,968
 
 
 
 
 
 
 
 
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
 
882,913
 
 
1,565,640
 
 
-
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
3,941,968
 
$
643,423
 
$
3,941,968
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
 
 
 
 
 
Interest and financing fees- bridge loan
$
230,911
 
$
-
 
$
230,911
Taxes
$
-
 
$
-
 
$
-

See accompanying Notes to Consolidated Financial Statements
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

NOTE 1 - GOING CONCERN AND NATURE OF OPERATIONS
 
The Company was incorporated under the laws of the State of Nevada, U.S.A., on March 25, 2003. The Company changed its name from Secure Automated Enterprises, Inc. to Colombia Goldfields Ltd. on May 13, 2005. The Company changed its operational focus from providing electronic filings services for public access document submissions to the U.S. Securities Exchange Commission, to acquisition of, exploration for, and development of mineral properties. The Company is currently in the exploration stage. On July 31, 2006, the Company’s jurisdiction of incorporation was changed to the state of Delaware.
 
In the first quarter of 2005, the Company discontinued its electronic filings services operations and historical income and expenses relating to these discontinued operations have been classified as discontinued operations in the Statements of Operations for all comparative periods presented.
 
The Company has incurred a cumulative net loss since inception on March 25, 2003 to March 31, 2007 of $10,333,078 and has no source of operating revenue. The Company’s ability to meet its obligations and continue as a going concern is dependent on the ability to identify and complete future funding. While the Company has been successful in raising financing to date, there can be no assurance that it will be able to do so in the future.

These consolidated financial statements have been prepared using U.S generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due. In addition to the Company’s working capital requirements and its cumulative losses during the period ended March 31, 2007 and since inception, the Company must also secure sufficient funding to meet its spending and purchase option obligations with respect to its mineral properties in order to maintain its option to purchase certain mining and mineral rights. These circumstances lend substantial doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, as to the appropriateness of the use of accounting principles applicable to a going concern. In recognition of these circumstances, the Company raised funding of $9,020,000 through a private placement of additional share capital in March 2007 and intends to continue relying upon the issuance of securities to finance exploration, meet contractual obligations and continue as a going concern. Subsequent to March 31, 2007 as disclosed in note 12(d), the Company entered into a $3,500,000 promissory note between the Company and the Company’s President, a shareholder, and a company controlled by these individuals. The loan is repayable upon the closing of a private equity financing, but in no case later than August 15, 2007. The Company is in the preliminary stages of raising additional equity capital, however there is no assurance that these initiatives will be sufficient or successful.

The Company’s ability to continue as a going concern is dependent upon its ability to fund its working capital and exploration requirements and, eventually, upon the future exploration and development of profitable operations from its mineral properties. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the going concern assumption were not appropriate, and these adjustments could be material.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007.

The consolidated balance sheet at March 31, 2007 has been derived from the audited financial statements at December 31, 2006 but these financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-KSB for the year ended December 31, 2006.

Use of Estimates

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

Consolidation

Entities which are controlled by the Company, either directly or indirectly, are consolidated. Control is established by the Company’s ability to determine strategic, operating, investing and financing policies without the co-operation of others. The Company analyzes its level of ownership, voting rights and representation on the board of directors in determining if control exists by any one, or a combination of these factors.

These consolidated financial statements include the accounts of (i) Colombia Goldfields Ltd., Delaware corporation (ii) the Company’s 90% interest in RNC (Colombia) Limited (“RNC”), a Belize corporation and its 94.99% owned subsidiary - Compania Minera De Caldas, S.A. (“Caldas”), a Colombia corporation, (iii) the Company’s 94.99% interest in Gavilan Minerales, S.A. (“Gavilan”) a Colombia corporation. All significant inter-company transactions and balances have been eliminated upon consolidation.

In accordance with Interpretation No. 46R, Consolidation of Variable Interest Entities (“FIN 46R”), variable interest entities (VIEs) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

At January 12, 2006 and in connection with the adoption of FIN 46R, the Company concluded that RNC and its 94.99% owned subsidiary, Caldas, S.A., were VIEs since the Company provided the principal financial support to these entities and the Company was their primary beneficiary. Under FIN 46R transition rules, the financial statements of RNC and Caldas, S.A. were considered VIEs and the Company’s 25% interest has been included within the Company’s consolidated financial statements for the period January 12, 2006 to April 28, 2006.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

In connection with the Company’s April 28, 2006 acquisition of an additional 25% of RNC, the Company also received rights to nominate three of the four members of RNC’s board of directors. As such, the Company determined that control over RNC existed as of April 28, 2006, and these financial statements reflect the consolidation of the Company’s 50% interest in RNC, for the period April 29, 2006 to August 22, 2006.

On August 22, 2006 the Company acquired an additional 25% of RNC, bringing the Company’s total ownership to 75%. These financial statements reflect the consolidation of the Company’s 75% interest in RNC for the period August 23, 2006 to December 14, 2006.

On September 25, 2006 the Company acquired 94.99% of the outstanding shares of Gavilan. These financial statements reflect the consolidation of Gavilan for the period of September 25, 2006 to March 31, 2007.

On December 14, 2006 the Company acquired a further 15% of RNC, bringing the Company’s total ownership to 90%. These financial statements reflect the consolidation of the Company’s 90% interest in RNC for the period December 15, 2006 to March 31, 2007.

Since the non-controlling shareholders of RNC and Gavilan have no obligation to contribute any additional capital and the Company was the primary entity obligated to fund future exploratory work, no non-controlling interest related to RNC or Gavilan has been recognized in the consolidated statements of operations for the period January 1, 2006 to March 31, 2007 and in the consolidated balance sheet at March 31, 2007.

Mineral Property Rights Acquisition and Exploration Expenditures

Costs of acquiring mining properties are capitalized upon acquisition. Pursuant to SFAS No. 34, Capitalization of Interest Costs, interest costs attributable to mineral property acquisitions are also capitalized.  Mine development costs incurred either to develop new ore deposits, expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property, plant and equipment costs, to determine if these costs are in excess of their net recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated
salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

Asset Retirement Obligations

The Company applies SFAS No. 143, Accounting for Assets Retirement Obligations which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. SFAS No. 143 requires the Company to record a liability for the present value of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability will be accreted until it has been fully incurred and the asset will be amortized over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As at March 31, 2007 and December 31, 2006 the Company does not have any asset retirement obligations.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  

Property and Equipment

Property and equipment are carried at cost. For the significant components of property and equipment, depreciation is provided for using the following method and time periods:

Asset
Basis
Period
Vehicles
Straight line
5 years
Buildings
Straight line
20 years
Office equipment & furniture
Straight line
3 to 10 years

The Company regularly reviews the carrying values of property and equipment based on expected future cash flows whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If this carrying value exceeds the recoverable amount, a write-down is charged to the statement of operations.

Environmental Costs

Environmental expenditures that related to current operations are charged to operations or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the company’s commitment to plan of action based on the then known facts.

Comprehensive Income

In accordance with SFAS 130, Reporting Comprehensive Income (“SFAS 130”), comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses when the Company has a functional currency other than US dollars, and minimum pension liabilities. For all periods presented, the Company’s financial statements do not include any of the additional elements that affect comprehensive income. Accordingly, net income and comprehensive income are identical.

Stock-Based Compensation

On January 1, 2006, the Company applied SFAS No. 123(R), Share-Based Payment, to account for stock options and similar equity instruments issued. Accordingly, compensation expense attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date and recognized over the expected vesting period. For all stock option awards granted on or after January 1, 2006, the Company recognizes compensation using the fair value method of accounting for stock-based compensation. The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model. In the event stock options are forfeited, any previously recognized compensation expense related to unvested and expiring awards is recognized in earnings during the period of forfeiture.

Although the assumptions used to record stock compensation expense reflect management’s best estimates, they involve inherent uncertainties based on market conditions generally outside of the control of the Company. If other assumptions were used, stock-based compensation expense could be significantly impacted. As stock options are exercised, the proceeds received on exercise, in addition to the previously recognized amounts related to those stock options, are credited to stockholders’ equity. The adoption of SFAS No. 123(R) did not have an impact on the Company’s historical financial statements as the Company had no stock options outstanding prior to adoption.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
 
The Company provides direct stock awards to certain directors, officers, and consultants. Direct stock awards are typically subject to a two year vesting period. Direct stock awards are recorded at fair value on the grant date, with compensation expense recognized on a straight-line basis over the vesting period.

Foreign Currency Translation

The Company’s functional currency is US dollars. Accordingly, foreign currency balances are translated into US dollars as follows i) Monetary assets and liabilities are translated at the period-end exchange rate ii) Non-monetary assets are translated at the rate of exchange in effect at their acquisition date; and iii) Revenue and expense items are translated at the average exchange rate for the respective period.

Foreign exchange gains and losses are recognized as period expenses.

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net earnings (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive. For the three months ended March 31, 2007 and 2006, outstanding share purchase warrants and options to purchase common shares were excluded from the computation of diluted earnings per share as the impact of these instruments was antidilutive as a result of losses incurred in these periods.

Income taxes

The Company accounts for income taxes using the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.
 
Long-Lived assets

Long-lived assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and EITF 04-3, Mining Assets: Impairment and Business Combinations.

Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. Fair value is generally determined using a discounted cash flow analysis.

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities and amounts due to and from related parties. The carrying value of these financial instruments approximates their fair value based on their liquidity or their short-term nature. The Company is not exposed to significant interest, credit or currency risk arising from these financial instruments.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

NOTE 3 - MINERAL PROPERTIES AND EXPLORATION RIGHTS

Title to mineral properties and mining and exploration rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. The Company cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that the Company will have valid title to its mining properties. The Company relies on title opinions by legal counsel who base such opinions on the laws of countries in which the Company operates.

A) Caramanta Project

(i) Caramanta Project - Concessions 6602, 1343 and 6329

On September 22, 2005, the Company entered into an Assignment Agreement with Investcol Limited (“Investcol”), a related party, where Investcol assigned, transferred, and conveyed to the Company all of its rights under a contract for Purchase Option of Mining Concessions (“Original Option Contract”) entered into with Cia Servicios Y Logisticos Ltda. As the result of the Assignment Agreement, the Company acquired an option to purchase certain mining, mineral and exploration rights on property known as Concessions 6602, 1343 and 6329 located in Caramanta Municipality, Antioquia Department, Medellin, Colombia for $10,000, on condition that $2,990,000 is invested in exploratory work on the property over a three year period. The Company issued 1,000,000 common stock to Investcol at a deemed fair market value $0.25 per share for total consideration of $250,000. At the date of acquisition of these mineral rights the Company had not yet incorporated a Company in Colombia and had not gained the support of the Colombian federal or local governments. Due to these uncertainties, the initial $260,000 was considered mineral property exploration and was recorded as part of mineral property exploration expenses in the consolidated statement of operations in fiscal 2005.

Pursuant to the Assignment Agreement, the Company was committed to fund $2,990,000 exploratory work as follows:

a)  
$500,000 upon the closing of the Assignment Agreement;
b)  
$750,000 during the 12 month period commencing June 25, 2006; and on the earlier of June, 2006 or commencement of the second exploration phase, one million restricted shares of the Company’s common shares; and
c)  
$1,740,000 during the 12-month period commencing June 25, 2007.

On September 25, 2006 the Assignment Agreement was superseded in connection with the Company’s agreement to acquire the Mining Concessions. (See note 3(A)(iii) below for further details)

(ii) Caramanta Project - Concessions 6993, 7039, 6821 and 6770 and HET 31, 32, 26, 27 and HETG 01

On February 16, 2006 the Company entered into a Letter of Intent (“LOI”) with Investcol to acquire Investcol’s rights in a Contract for Purchase (“Purchase Contract”) entered into with Cia Servicios y Logisticos Ltda. The LOI outlined a proposed transaction where the Company intended to acquire Investcol’s rights to acquire mining contracts to exclusively engage in mining activities on concessions 6993, 7039, 6821 and 6770 (the “Contracts”) and options that Investcol holds to acquire the exclusive rights to engage in mining activities on concessions HET 31, 32, 26, 27 and HETG 01 (the “Options”) all located within an area in Colombia referred to as the Caramanta location.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

The LOI was non-binding and subject to final negotiation and the execution of a definitive agreement. On April 10, 2006, the Company entered into a definitive agreement with Investcol finalizing this transaction (“Assignment Agreement”). In consideration for this Assignment Agreement, the Company paid Investcol total consideration in the amount of $350,000 and issued 1,000,000 restricted shares of common stock. Under the terms of the Assignment Agreement, Investcol agreed to pay the exercise price of $150,000 on the Options whose titles will remain in the name of Cia Servicios until the final exploration commitments have been made. The final option payments were made prior to July 30, 2006.

On September 25, 2006 the Assignment Agreement was superseded in connection with the company’s agreement to acquire the Mining Concessions. (See note 3(A)(iii) below for further details)

(iii) Caramanta Project - Acquisition of the Caramanta Exploration Properties

On September 25, 2006 the Company, through the acquisition of the outstanding shares of Gavilan, acquired full legal title to the Caramanta project concessions described in Notes 3A(i) and 3A(ii) above. Consideration paid for the acquisition included $300,000 cash and the issuance of 1,150,000 restricted common shares at a fair value of $1.41 per share. In addition, a $50,000 finder’s fee was paid to Investcol. The total acquisition cost of $1,971,500 was allocated to the net assets acquired as follows:

Mineral and exploration and properties rights
$
1,780,841
Property, plant and equipment
 
190,659
 
$
1,971,500

The purchase was recorded as part of i) acquired mineral and exploration properties and rights and ii) property, plant and equipment in fiscal 2006. As a result of the acquisition of Gavilan, the Company no longer has any minimum exploratory work obligations related to the Caramanta concessions.

B) Marmato Project
 
On January 12, 2006, the Company entered into a Stock Purchase Agreement with Investcol and RNC (the "Agreement"), whereby the Company (i) acquired twenty-five percent (25%) of the issued and outstanding stock of RNC, a Belize corporation ("RNC") and (ii) held an option to acquire the remaining seventy five percent (75%) of RNC's issued and outstanding stock over a period of time. RNC is the beneficial holder of 94.99% of the issued and outstanding stock of Caldas, a Colombia corporation that (i) owns certain mining, mineral and exploration rights, (ii) has options to acquire mining, mineral and exploration rights and (iii) has exclusive rights to evaluate certain property, all located in the Zona Alta portion of the Marmato project in Colombia. 

Pursuant to the Stock Purchase Agreement, the Company:

a)  
Acquired 25% of the outstanding shares of RNC (total 25% of RNC) by the issuance of 1,000,000 common shares of the Company to Investcol and the advance to RNC of a $1,200,000 non-interest bearing loan. Total consideration of $1,900,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.

b)
Acquired an additional 25% of RNC (total 50% of RNC) by the issuance of 2,000,000 shares of the Company to Investcol and the advance of an additional $4,000,000 non-interest bearing loan to RNC in two instalments of $1,000,000 and $3,000,000 on or before March 15, 2006 and April 30, 2006, respectively. On March 10, 2006, the Company entered an extension agreement with Investcol to extend the terms to April 30, 2006, and completed the transaction on April 28, 2006. Total consideration of $5,480,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

c)  
Held the option to acquire an additional 25% of RNC (total 75% of RNC) by the issuance of 4,000,000 common shares of the Company to Investcol and the advance of an additional $15,000,000 non-interest bearing loan to RNC on or before October 30, 2006. On August 22, 2006, the Company amended its January 12, 2006 Stock Purchase Agreement with Investcol and RNC and concurrently exercised its option to increase the Company’s interest in RNC from 50% to 75%. Under the terms of the amended agreement, the Company issued 4,200,000 common shares and paid $200,000 to Investcol. In connection with this transaction, the Company committed to providing an additional $5,000,000 by way of non-interest bearing demand loan to RNC by December 31, 2006 and providing sufficient funds to RNC, upon terms satisfactory to the Company, to complete a full bankable feasibility study of the Marmato Project. Total consideration of $ 4,820,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.

d)  
Held the option to acquire an additional 25% of RNC (total 100% of RNC) until May 1, 2009 for a price equal to the 25% of the value of Caldas determined by a bankable feasibility study prepared by a certified mineral property evaluator, or other acceptable third party. The purchase price was payable in either cash or the Company’s common shares. Under the terms of the August 22, 2006 amended agreement, the Company held an option to acquire the remaining 25% of RNC on or before May 1, 2009 for a purchase price equal to 25% of the fair value of Caldas determined by a feasibility study. The purchase price, pursuant to the amended agreement, was limited to a maximum of $15,000,000 plus 4,000,000 shares of the Company. Payment of the purchase price was payable in either cash or common shares of the Company, or any combination thereof. On December 14, 2006, the parties executed a Second Amendment to the Stock Purchase Agreement (the “Second Amendment”) in order to revise the consideration required to exercise the Company’s option to acquire the remaining 25% of the issued and outstanding stock of RNC. Subject to the revised terms set forth in the Second Amendment, the Company held the option to acquire an additional 15% interest in RNC, in exchange for the issuance of 4,000,000 common shares of the Company to Investcol. In connection with the execution of the Second Amendment, the Company exercised its option, resulting in the Company acquiring an additional 15% of RNC, bringing the Company’s total ownership to 90%. The revised terms set forth in the Second Amendment provide that the Company has the option to acquire the remaining 10% of RNC until May 1, 2009 in exchange for a purchase price of $15,000,000. The purchase price can be made in either cash, shares of our common stock, or any combination thereof. Total consideration of $5,120,000 related to this transaction was recorded as part of acquired mineral and exploration properties and rights in fiscal 2006.

 C) Kedahda Properties
 
On August 30, 2006 the Company, purchased certain mining exploration properties in the Republic of Colombia and the related geochemical and other proprietary geological data from a wholly-owned subsidiary of Anglo Gold Ashanti, Sociedad Kedahda, S.A., for $500,000 cash consideration. The purchase was recorded as part of acquired mineral and exploration properties and right in fiscal 2006.

 Mineral Property Rights Acquisition and Exploration Expenditures

The Company’s mineral property acquisition and exploration expenditures consist of

I)  The acquisition of mineral concessions;
II)   The acquisition of mineral and exploration rights from existing titleholders;
III)   The exploration of acquired mineral properties and related activities; and
IV)   Stock-based compensation allocated pursuant to FAS 123(R)

The following table summarizes the Company’s mineral concession acquisitions, mineral rights acquisitions, and mineral exploration expenses as recorded in the Company’s Consolidated financial statements for the period from Inception (March 25, 2003) through March 31, 2007:

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS    
 
 
 
 
 
 
Three Months Ended
March 31, 2007
 
 
 
 
Three Months Ended
March 31, 2006
 
Cumulative
From
Inception
(March 25, 2003)
Through
March 31, 2007
I)
Acquisition of mineral concessions
$
-
  
$
1,900,000
 
$
22,200,841
 
 
 
 
 
 
 
 
 
 
II)
Acquisition of mineral and exploration rights
 
3,740,583
 
 
254,400
 
 
14,379,654
 
 
 
 
 
 
 
 
 
 
 
Total acquired mineral and exploration properties and rights
 
3,740,583
 
 
2,154,400
 
 
36,580,495
 
 
 
 
 
 
 
 
 
 
III)
Exploration of acquired mineral properties
 
1,256,891
 
 
507,074
 
 
5,521,032
 
 
 
 
 
 
 
 
 
 
IV)
Stock based Compensation
 
215,125
 
 
65,549
 
 
428,720
 
 
 
 
 
 
 
 
 
 
 
Total mineral property exploration expenses
 
1,472,016
 
 
572,623
 
 
5,949,752
 
 
 
 
 
 
 
 
 
 
 
Total mineral property rights acquisition and exploration expenditures
$
5,212,599
 
$
2,727,023
 
$
42,530,247

Capitalized Mineral and Exploration Properties and Rights

Acquired mineral and exploration properties and exploration rights at March 31, 2007 of $36,580,495 have been recorded at amounts necessary to reflect temporary differences associated with the differences between their accounting and tax bases. These differences arise primarily due to differences between the assigned values and tax bases of acquired Caramanta Project and Marmato Project mineral concessions. As a result, acquired mineral and exploration properties and rights are recorded in the consolidated balance sheets as follows:

 
March 31, 2007
 
December 31, 2006
Purchase of mineral exploration rights
$
36,580,495
 
$
32,839,912
 
 
 
 
 
 
Recognition of deferred tax liability upon acquisition
 
10,688,474
 
 
10,688,474
 
 
 
 
 
 
Mineral and exploration properties and rights
$
47,268,969
 
$
43,528,386

NOTE 4 - PROPERTY AND EQUIPMENT

As at March 31, 2007
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Furniture and office equipment
$
185,559
 
$
(18,690)
 
$
166,869
Building
 
87,181
 
 
(2,592)
 
 
84,589
Vehicles
 
193,478
 
 
(29,637)
 
 
163,841
Total
$
466,218
 
$
(50,919)
 
$
415,299
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     
 
 
 
As at December 31, 2006
 
 
Cost
 
 
Accumulated
Amortization
 
 
Net Book
Value
Furniture and office equipment
$
171,656
 
$
(11,292)
 
$
160,364
Building
 
87,033
 
 
(1,451)
 
 
85,582
Vehicles
 
193,149
 
 
(19,362)
 
 
173,787
Total
$
451,838
 
$
(32,105)
 
$
419,733

NOTE 5 - STOCKHOLDERS’ EQUITY

Common Stock

 
March 31, 2007
 
December 31, 2006
Authorized:
 
 
 
200,000,000 common shares, $0.00001 par value
 
 
 
 
 
 
 
Issued and Outstanding:
 
 
 
65,706,849 common shares December 31, 2006:56,036,849 shares)
$
661
 
$
565

i)  
During the three months ended March 31, 2007, the Company completed the following transactions:

a)  
On March 21, 2007, the Company completed a private equity offering of 9,020,000 common shares at $1.00 per common share. The gross proceeds received from the offering were $9,020,000. In connection with this private equity offering, the Company paid a commission of $541,200 and issued agents’ warrants to purchase 541,200 shares of the Company’s common stock with each warrant exercisable for a period of 36 months from the closing of the offering at an exercise price of $1.00 per share. The fair value of the agents’ warrants was $404,276 and has been accounted for as a reduction of the additional paid-in capital associated with the related March 21, 2007 common stock issuance.

 
b)  
On March 22, 2007, the Company issued 650,000 common shares to certain consultants to the Company for services rendered as described under “Stock Options and Other Stock-Based Compensation”.

ii)   During the year ended December 31, 2006, the Company completed the following transactions:
 
a)  
On January 10, 2006, the Company issued 3,126,083 common shares at $0.60 per share for gross proceeds of $1,875,650. The Company paid finders fees in the amount of $187,565, for net proceeds of $1,688,085.

b)  
On February 14, 2006, the Company issued 1,000,000 common shares at fair value of $1.90 per share to Investcol in connection with the acquisition of 25% ownership of RNC (See Note 3).

c)  
On April 10, 2006, the Company issued 1,000,000 common shares at fair value of $2.25 per share to Investcol to acquire rights in certain properties in the Caramanta area of Colombia. See Note 3)
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
 
 
d)  
On April 26, 2006, the Company completed a private equity offering of 6,500,666 Units at $1.50 per Unit to a total of 26 investors. Each Unit consists of one (1) share of common stock, par value $0.00001, and one (1) Warrant (the “Warrant”) to purchase one (1) share of common stock, exercisable for twenty-four (24) months from the closing of the offering. The exercise price for the Warrant is priced at $2.50. The gross proceeds received from this offering were $9,751,000. Assuming that the investors exercise all of the Warrants, the gross proceeds received from the exercise of the Warrants will equal $16,251,665.
 
In connection with this private equity offering, the Company paid as a commission $585,061 and issued warrants to purchase 390,040 shares of the Company’s common stock with each warrant exercisable for a period of thirty-six (36) months from the closing of the offering at the exercise price of $2.00 per share. Assuming that all of these warrants are exercised, the Company will receive gross proceeds of $780,080.

The Company has allocated the total net proceeds from the offering of $9,165,939 to the various underlying equity instruments comprising the equity offering, based on the estimated relative fair value of each instrument at the offering date, as follows:

Common shares
$
65
Additional paid in capital - common shares
 
6,416,112
Additional paid in capital - share purchase warrants
 
2,749,762
Total gross proceeds from private equity offering
$
9,165,939
 
 
e)  
On April 28, 2006, in connection with the acquisition of the second 25% of RNC, the Company issued 2,000,000 common shares at a fair values of $2.74 to Investcol. (See Note 3).

 
f)  
On August 22, 2006 in connection with the acquisition of the third 25% of RNC, the Company issued 4,200,000 common shares at a value of $1.10 per share to Investcol. (See Note 3).

 
g)  
On September 25, 2006 in connection with the Company’s acquisition of 100% of the Caramanta Exploration Properties, the Company issued 1,150,000 restricted common shares at a value of $1.41 (see Note 3).

h)   On October 14, 2006 3,471,000 share purchase warrants were exercised for net proceeds to the Company of $1,735,500 and 3,471,000 common shares were issued upon exercise.

i)  
On December 14, 2006 in connection with the acquisition of the forth 15% of RNC, the Company issued 4,000,000 common shares at a value of $1.28 per share to Investcol (See Note 3).
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
   
Warrants

As at March 31, 2007, the following warrants were issued and outstanding:

# Warrants
Exercise Price
Expiry Date
6,500,666
$2.50 per share
April 25, 2008
390,040
$2.00 per share
April 25, 2009
541,200
$1.00 per share
March 22, 2010
7,431,906
$2.36 per share
 

Stock Options and Other Stock-Based Compensation

Stock Options

In fiscal 2006, the Company adopted the 2006 Stock Incentive Plan, (the “Plan”) which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance shares and performance units, and stock awards to officers, directors or employees of, as well as advisers and consultants to, the Company.

All stock options and rights are to vest over a period determined by the Board of Directors and expire not more than ten years from the date granted. On July 31, 2006 the Company received shareholder approval for an amended Stock Incentive Plan. Pursuant to the amended Plan, the number of shares that may be issued for awards granted under the 2006 plan was increased from 3,500,000 to 5,000,000.

Pursuant to the Plan, during fiscal 2007 the Company granted 1,640,000 stock options to employees, directors, officers and consultants of the Company. These stock options vest at a rate of 25% every six months over a period of two years, and expire over a life of 10 years. For the three months ended March 31, 2007, the Company recorded a total of $312,177 in stock based compensation expense related to stock options in the consolidated statement of operations.

A summary of stock options granted and exercised is as follows:

 
 
Shares
 
Weighted Average
Exercise Price
Options outstanding at December 31, 2006
 
2,787,500
 
$
1.16
Granted in fiscal 2007
 
1,640,000
 
 
1.17
Exercised in fiscal 2007
 
-
 
 
-
Forfeited and expired in fiscal 2007
 
(275,000)
 
 
(0.75)
Options outstanding at March 31, 2007
 
4,152,500
 
$
1.19

 
Period Ended
March 31, 2007
 
Period Ended
March 31, 2006
 
 
 
 
Weighted average fair value of options granted during the period
$
0.98
 
$
0.99
 
 
 
 
 
 
Weighted average fair value of options vested during the period
$
1.20
 
$
-
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

A summary of stock options outstanding and exercisable at March 31, 2007 is as follows:

 
 
Range of
Exercise Prices
 
 
Number
Outstanding
 
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (yrs)
 
 
Number
Exercisable
 
Weighted
Average
Exercise
Price
$0.75 - $1.00
762,500
$ 0.75
8.77
637,500
$ 0.75
$1.01 - $2.00
3,390,000
1.29
9.61
475,000
1.56
$0.75 - $2.00
4,152,500
$ 1.19
9.46
1,112,500
$ 1.09

The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 4.45%, dividend yield 0%, a historic volatility of 76%, and expected term of 10 years, equal to the full life of the options as the Company does not expect any options to be exercised early.

Other Stock-Based Compensation

On October 1, 2006, the Company agreed to grant 500,000 common shares to a consultant providing services to the Company. Pursuant to the terms of the Consulting Agreement, should the Consultant’s employment terminate by the Consultant’s resignation before the period of two years has elapsed, the Consultant is required to return a pro rata portion of the shares based on the time remaining in the contract. In the case of a change in control of the Company by merger or sale of a majority stake or otherwise, the shares held by the Consultant will immediately vest. The fair value of the common stock award, based on the market price of the Company’s common shares at the agreement date, was $915,000. The shares were issued on March 22, 2007 and the Company accounts for this award by recognizing compensation expense ratably over twenty-four months, commencing on the agreement date. For the three months ended March 31, 2007, the Company recorded a total of $114,375 in stock based compensation expense related to this award in the fiscal 2007 consolidated statement of operations.

On January 15, 2007, the Company agreed to grant 150,000 common shares to a consultant for services rendered to the Company for the three months ended March 31, 2007. The fair value of the common stock award, based on the market price of the Company’s common shares at the agreement date, was $166,500. The shares were issued on March 22, 2007 and the Company accounts for this award by recognizing compensation expense ratably over three months, commencing on the agreement date. For the three months ended March 31, 2007, the Company recorded a total of $166,500 in stock based compensation expense related to this award in the fiscal 2007 consolidated statement of operations.

At March 31, 2007, there was $713,750 of unrecognized compensation cost related to unvested direct share awards. The cost is recorded as prepaid consulting fees in the Company’s consolidated balance sheet at March 31, 2007.

Summary of Stock-Based Compensation Expenses

The following table summarizes stock-based compensation recorded in the consolidated statements of operations:

 
Period
Ended
March 31, 2007
 
Period
Ended
March 31, 2006
 
Cumulative
from Inception
(March 25, 2003)
through
March 31, 2007
Mineral property rights exploration expenses
$
215,125
 
$
65,549
 
$
428,720
General and administrative
 
350,427
 
 
420,940
 
 
2,129,989
Total stock-based compensation
$
565,552
 
$
486,489
 
$
2,558,709
 
F-43
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     
 
As at March 31, 2007, there was $2,353,602 of unrecognized compensation cost related to unvested stock options. The cost is expected to be recognized as follows: Fiscal 2007 - $1,664,935; Fiscal 2008 - $649,569; Fiscal 2009 - $39,098.

At March 31, 2007, there was $713,750 unrecognized compensation cost related to unvested direct stock awards. The cost is expected to be recognized as follows: Fiscal 2007-$370,625; Fiscal 2008 - $343,125.

NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company in the normal course of business enters into contractual obligations with Colombian titleholders to acquire mineral and exploration rights. Upon signing, 25% of the negotiated purchase price is due and payable with an additional 25% due when all required documentation has been submitted to the local mining department and the final 50% due when the mining claim has been registered in the Company’s name. Included in accounts payable and accrued liabilities at March 31, 2007 is $5,770,312 (December 31, 2006 - $5,609,538) in amounts owing pursuant to these agreements.

NOTE 7 - INCOME TAXES

The potential benefit of net operating loss carry forwards has not been recognized in the financial statements. Since the Company has no source of operating revenue, it cannot be assured that it is more likely than not that such benefit will be realized in future years. The components of the net deferred tax asset, net deferred tax liability, differences between the statutory rate and the effective rate, and the valuation allowance are as follows:

a)  Components of income tax provision:

The components of the Company’s provision for (recovery of) income taxes consists of the following:

 
Three Months Ended
March 31, 2007
 
Three Months Ended
March 31, 2006
 
 
 
 
Domestic
$
-
 
$
-
Foreign
 
(424,710)
 
 
-
 
$
(424,710)
 
$
-

For the three months ended March 31, 2007 the Company’s loss before provision for income taxes was generated in the following jurisdictions: Domestic $1,231,141; Foreign $1,697,000.
 
COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
 
b)   Income tax rate reconciliation:

The effective income tax rate differs from the statutory rate that would be obtained by applying the U.S. Federal income tax rate to net income (loss) before income taxes. These differences result from the following items:

 
Three Months Ended
March 31, 2007
 
Three Months Ended
March 31, 2006
US federal income tax rate
 
34%
 
 
15%
 
 
 
 
 
 
Increase (decrease) in Income tax rate resulting
 
 
 
 
 
From:
 
 
 
 
 
Losses not recognized for tax purposes
 
(7.7%)
 
 
(15%)
Tax rate differences in foreign subsidiaries
 
(5.2%)
 
 
-
Other permanent Differences
 
(6.6%)
 
 
-
Effective income tax rate
 
14.5%
 
 
- %

c)   Component of deferred income tax provision:

The components of the temporary differences, which created the deferred income tax provision, are as follows:

 
Three Months Ended
March 31, 2007
 
Three Months Ended
March 31, 2006
 
 
 
 
Losses carried Forward
$
(314,037)
 
$
(224,100)
Tax depreciation less than (greater than) accounting depreciation
 
44,026
 
 
-
Foreign exploration costs
 
(424,710)
 
 
-
 
$
(694,721)
 
$
(224,100)
Change in valuation
 
 
 
 
 
Allowance
 
270,011
 
 
224,100
Deferred income tax provision
$
(424,710)
 
$
-

d)   Components of deferred tax asset and liability:

The components of the temporary differences which have created the deferred tax assets are:

 
March 31, 2007
 
December 31, 2006
 
 
 
 
Tax depreciation less than (greater than) depreciation
$
358,013
 
$
402,039
Losses carried
 
 
 
 
 
Forward
 
1,066,360
 
 
752,323
 
 
1,424,373
 
 
1,154,362
Valuation allowance
 
(1,424,373)
 
 
(1,154,362)
Deferred tax asset
$
-
 
$
-

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS     

The components of the temporary differences, which have created the deferred tax liability, are:

 
March 31, 2007
 
December 31, 2006
Tax depreciation less than (greater than) accounting depreciation
$
-
 
$
-
Tax basis less than accounting basis for mineral concessions
 
(10,688,474)
 
 
(10,688,474)
Foreign exploration costs
 
1,353,660
 
 
928,950
Deferred tax liability
$
(9,334,814)
 
$
(9,759,524)

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
   

e)  The Company has income tax losses available for carry forward of $3,135,000 which expire as follows:

Expiry Year
Domestic
Foreign
Total
2023
$ 36,500
$ -
$ 36,500
2024
23,000
-
23,000
2025
310,500
-
310,500
2026
1,840,000
-
1,840,000
2027
925,000
-
925,000
 
$ 3,135,000
$ -
$ 3,135,000

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company, during the normal course of operations, engages in transactions with certain directors, senior officers, and shareholders of the Company.

Significant related party transactions reflected within the Company’s consolidated financial statements include:

i)  
The acquisition of the Company’s interest in the Caramanta and Marmato projects as described in notes 3(A) and 3(B) from Investcol, a company controlled by certain shareholders of the Company;

 
ii)  
Management and consulting fees paid to certain directors, senior officers, and shareholders of the Company; and

iii)  Office rent paid to a Company related to a former director of the Company.

iv)   The issuance and repayment of a short-term bridge loan during the first quarter of fiscal 2007. On February 27, 2007 the Company entered into a $3,700,000 promissory note between the Company and the Company’s President, a shareholder, and a Company controlled by these individuals. The loan, collateralized by the Company’s investment in RNC, was due and payable upon closing a planned equity financing, but in no case later than April 15, 2007. Upon repayment, an $185,000 loan origination fee was payable to the note holders. The note bore interest at 10% per annum, with monthly interest payments commencing February 28, 2007. Subsequent to the private placement described in note 5(i), on March 26, 2007 a total of $3,930,911 (representing the principal amount of the promissory note of $3,700,000, the loan origination fee of $185,000, and accrued interest of $45,911) was paid to the loan of the holders in full satisfaction of all amounts owing.

i) During the three months ended March 31, 2007 the Company:
 
a)    
Paid $NIL for management and consulting fees to directors of the Company.
 
b)
Paid $99,576 for management and consulting fees to senior officers of the Company.
 
c)  
Paid $114,614 for management and consulting fees to shareholders of the Company.
 
d)  
Paid $230,911 for interest and administration fees on a bridge loan from shareholders of the Company.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
 
ii)  During the year ended December 31, 2006 the Company:

a) Paid $186,306 for management and consulting fees to directors of the Company.

b) Paid $356,168 for management and consulting fees to senior officers of the Company.

c) Paid $332,400 for management and consulting fees to shareholders of the Company.

d) Paid $10,256 for office rent to a company related to a former director of the Company.

Included in prepaid expenses at March 31, 2007 is $15,000 (December 31, 2006: $30,000) related to a company controlled by shareholders of the Company. Included in accounts payable and accrued liabilities at March 31, 2007 is $NIL (December 31, 2006: $49,213) owing to a company controlled by shareholders of the Company.

NOTE 9 - NON-CASH ACTIVITIES

The Company has issued common shares as consideration for the acquisition of certain mineral rights as disclosed in Notes 3 and 5.

NOTE 10 - SEGMENTED INFORMATION

The Company has determined that it operates in a single reportable segment, being the acquisition of, exploration for, and development of mineral properties.

NOTE 11 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The FASB has issued FIN 48, which prescribes rules for the financial statements accounting for uncertainty in income tax positions.

FIN 48 requires all material tax positions to undergo a new two-step recognition and measurement process. All material tax positions in all jurisdictions in all tax years in which the statute of limitations remains open upon the initial date of adoption are required to be assessed. For a tax benefit to be recognized it must be more likely than not that a tax position will be sustained upon examination based solely on its technical merits. If the recognition standard is not satisfied, then no tax benefit otherwise arising from the tax position can be recorded for financial statement purposes. If the recognition standard is satisfied, the amount of tax benefit recorded for financial statement purposes will be the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. FIN 48 is effective for the Company’s fiscal 2007 year of the adoption of FIN 48 did not have a material impact on the Company’s financial position, results of the operations, or cash flows for the three months ended March 31, 2007.

COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS  
 
NOTE 12 - SUBSEQUENT EVENTS
 
(a)  
On April 20, 2007 the Company filed a Registration Statement with the Securities and Exchange Commission (SEC) to register 9,170,000 common shares previously issued by the Company. Under the terms of the Company’s agreements with subscribers to the Company’s $9,020,000 March 21, 2007 private placement, if the SEC has not issued a Note of Effectiveness regarding the Registration Statement by September 30, 2007, the Company is obligated to pay the subscribers to the offering a cash penalty of 1.5% per month for each month of delay, or portion thereof.

(b)  
On May 3, 2007 the company issued 50,000 common shares pursuant to the exercise of 50,000 options for proceeds of $37,500.

(c)  
On June 6, 2007 the company issued 60,000 common shares to non-management directors of the company in connection with their annual remuneration

(d)  
On June 12, 2007 the Company entered into a $3,500,000 promissory note between the Company and the Company’s President, a shareholder, and a Company controlled by these individuals. The loan, collateralized by the Company’s investment in RNC, is due and payable upon closing a planned equity financing, but in no case later than August 15, 2007. Upon repayment, a $52,500 fee is payable to the note holders. The note bears interest at 10% per annum, with monthly interest payments commencing June 30, 2007.

NOTE 13 - RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the current period presentation.


Changes In and Disagreements with Accountants
 
No events occurred requiring disclosure under Item 304(b) of Regulation S-B.

On August 10, 2006, Vellmer & Chang (the “Former Accountant”) was dismissed as our accountant. We have engaged PricewaterhouseCoopers LLP as our principal accountants effective August 10, 2006. The decision to change accountants was approved by our Board of Directors. We did not consult with PricewaterhouseCoopers LLP on any matters prior to retaining the firm as our principal accountants.
 
The Former Accountant's audit reports on the financial statements for the fiscal years ended December 31, 2005 and December 31, 2004 contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles except that the audit reports on the financial statements of us for the fiscal years ended December 31, 2005 and December 31, 2004 contained an uncertainty about our ability to continue as a going concern.
 
During the years ended December 31, 2005 and December 31, 2004, and through the interim period ended August 10, 2006, there were no disagreements with the Former Accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to the satisfaction of the Former Accountant would have caused them to make reference thereto in their reports on the financial statements for such periods.
 
During the years ended December 31, 2005 and December 31, 2004, and through the interim period ended August 10, 2006, the Former Accountant did not advise us with respect to any of the matters described in paragraphs (a)(1)(iv)(A) and (B) of Item 304 of Regulation S−B.

Available Information

We have filed a registration statement on form SB-2 under the Securities Act of 1933 with the Securities and Exchange Commission with respect to the shares of our common stock offered through this prospectus. This prospectus is filed as a part of that registration statement, but does not contain all of the information contained in the registration statement and exhibits. Statements made in the registration statement are summaries of the material terms of the referenced contracts, agreements or documents of the company. We refer you to our registration statement and each exhibit attached to it for a more detailed description of matters involving the company, and the statements we have made in this prospectus are qualified in their entirety by reference to these additional materials. You may inspect the registration statement, exhibits and schedules filed with the Securities and Exchange Commission at the Commission's principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549. Please Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy Statements and information regarding registrants that files electronically with the Commission. Our registration statement and the referenced exhibits can also be found on this site.

If we are not required to provide an annual report to our security holders, we intend to still voluntarily do so when otherwise due, and will attach audited financial statements with such report.

 
Until ________________, all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


Part II
 
Information Not Required In the Prospectus
 
Item 24. Indemnification of Directors and Officers
 
Our Articles of Incorporation provide for indemnification of our directors, officers and employees as follows:
 
A director of our Company shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (the “DGCL”), or (iv) for any transaction from which the director derived any improper personal benefit. If the DGCL is hereafter amended to further reduce or to authorize, with the approval of our stockholder, further reductions in the liability of our directors for breach of fiduciary duty, then a director of our Company shall not be liable for any such breach to the fullest extent permitted by the DGCL as so amended.
 
To the extent permitted by applicable law, we are also authorized to provide indemnification of (and advancement of expenses to) such agents (and any other persons to which Delaware law permits us to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, voting of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Corporation, its stockholders and others.
 
Any repeal or modification of any of the foregoing provisions of the indemnification provision in our Articles of Incorporation or Bylaws shall be prospective and shall not adversely affect any right or protection of a director, officer, agent, or other person existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
 
Item 25. Other Expenses Of Issuance And Distribution
 
The estimated costs of this offering are as follows:
 
Securities and Exchange Commission registration fee
$
1,406
Federal Taxes
 
Nil
State Taxes and Fees
 
Nil
Listing Fees
 
Nil
Printing and Engraving Fees
 
500
Transfer Agent Fees
 
1,000
Accounting fees and expenses
 
25,000
Legal fees and expenses
 
20,000
 
 
 
Total
$
47,906

All amounts are estimates, other than the Commission's registration fee.


We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.
 
Item 26. Recent Sales of Unregistered Securities

We intend to complete a private equity offering to raise up to $11.5 million from the sale of units comprised of common shares and warrants.  As of the date of this prospectus, we have not completed this private offering, however we anticipate doing so by the middle of August.
 
On June 6, 2007, we issued 60,000 shares of our common stock to outside members of our board of directors in consideration for services rendered as a member of the board. These shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising. The stock certificates issued had the appropriate legends affixed to the restricted stock.
 
On May 3, 2007, we issued 50,000 shares of our common stock in exchange for the exercise of stock options previously issued to a consultant. We received gross proceeds of $37,500 upon the exercise of these warrants. These securities were issued pursuant to Section 4(2) of the Securities Act of 1933. We did not engage in any general solicitation or advertising. We issued the stock certificates and affixed the appropriate legends to the restricted stock.
 
On March 22, 2007, we issued a total of 650,000 shares of restricted common stock to two consultants for services rendered. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation of advertising. We issued the stock certificate and affixed the appropriate legends to the restricted stock.
 
On March 21, 2007, we completed a private equity offering of 9,020,000 shares of our common stock, par value $0.00001, at $1.00 per share. The gross proceeds we received from this offering were $ 9,020,000.  In connection with this private equity offering, we paid a commission of $541,200 and issued warrants to purchase 541,200 shares of our common stock with each warrant exercisable for a period of thirty-six (36) months from the closing of the offering at an exercise price of $1.00 per share. 
 
We completed this offering pursuant to Regulation S of the Securities Act.  Each investor represented to us that he was a non-US person as defined in Regulation S.  We did not engage in a distribution of this offering in the United States.  Each investor represented his intention to acquire the securities for investment only and not with a view toward distribution.  We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each investor in accordance with Regulation S and the transfer agent affixed the appropriate legends.  Each investor was given adequate access to sufficient information about us to make an informed investment decision.
 
On March 16, 2007, we granted to two members of our board of directors options to purchase a total of 200,000 shares of our common stock at the exercise price of $1.15 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.
 
On March 14, 2007, we granted newly appointed directors options to purchase a total of 1,200,000 shares of our common stock at the exercise price of $1.18 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.
 
On March 6, 2007, we granted to four consultants options to purchase a total of 240,000 shares of our common stock at the exercise price of $1.11 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.


On December 14, 2006, we issued 4,000,000 shares of our common stock to Investcol Limited as the consideration for the exercise of our option to acquire an additional fifteen percent (15%) of the issued and outstanding stock of RNC, resulting in us owning 90% of RNC. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
On November 27, 2006, we granted to two consultants, in connection with services to be rendered, options to purchase 450,000 shares of our common stock at the exercise price of $1.15 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These shares and options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.

We received proceeds of $1,735,500 in connection with the exercise of warrants previously issued in a private equity offering that was completed on October 14, 2005. On October 25, 2006, we issued a total of 3,471,000 shares of common stock in connection with the exercise of these warrants. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.

On September 25, 2006, we issued 1,150,000 shares of our common stock to Charles Major as part of the consideration paid to acquire certain properties located in the Caramanta Municipality in western Colombia. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
On September 22, 2006, we granted to a consultant, in connection with services to be rendered, options to purchase 100,000 shares of our common stock at the exercise price of $1.20 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These shares and options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.
 
On August 22, 2006, we issued 4,200,000 shares of our common stock to Investcol Limited as part of the consideration upon exercise of our option to acquire and additional twenty-five percent (25%) of the issued and outstanding stock of RNC (Colombia) Limited, a Belize corporation (“RNC”) and subsidiary of Investcol Limited. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
On July 31, 2006, we granted to a member of the board of directors options to purchase 200,000 shares of our common stock at the exercise price of $1.35 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. Also on this date, we granted to two consultants each options to purchase 200,000 shares of our common stock at the exercise price of $1.35 per share in connection with services to be rendered These options also vest completely over two years and are exercisable for a period of ten years from the date of issuance. These options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.


On April 28, 2006, we issued 2,000,000 shares of our common stock to Investcol Limited as part of the consideration upon exercise of our option to acquire an additional twenty-five percent (25%) of the issued and outstanding stock of RNC and wholly owed subsidiary of Investcol Limited. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
On April 26, 2006, we completed a private equity offering of 6,500,666 Units at $1.50 per Unit to a total of 26 investors.  Each Unit consists of one (1) share of common stock, par value $0.00001, and one (1) Warrant (the “ Warrant”) to purchase one (1) share of common stock, exercisable for twenty-four (24) months from the closing of the offering.  As a result, we issued a total of 6,500,666 shares of common stock and warrants to purchase 6,500,666 shares of our common stock in connection with this private equity offering. The exercise price for the Warrant is priced at $2.50.  The gross proceeds we received from sale of Units in this exempt offering were $9,751,000. 
 
In connection with this private equity offering, we paid as a commission $585,060 and issued warrants to purchase 390,040 shares of our common stock with each warrant exercisable for a period of thirty-six (36) months from the closing of the offering at the exercise price of $2.00 per share. 
 
We completed this offering pursuant to Regulation S of the Securities Act.  Each investor represented to us that he was a non-US person as defined in Regulation S.  We did not engage in a distribution of this offering in the United States.  Each investor represented his intention to acquire the securities for investment only and not with a view toward distribution.  We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each investor in accordance with Regulation S and the transfer agent affixed the appropriate legends.  Each investor was given adequate access to sufficient information about us to make an informed investment decision. 
 
In connection with this private equity offering, we have agreed to commence the filing of a registration statement to register the common stock in each Unit and the underlying common stock for each warrant. In the event that the registration statement is not effective within seven (7) months from the closing date of this offering, we will incur a cash penalty of 2.5% on each investor’s investment per month for each month until the registration statement is declared effective by the Securities and Exchange Commission.
 
On April 10, 2006, we issued 1,000,000 shares of our common stock to Investcol Limited as part of the consideration paid for transferring us certain mining contracts and options to acquire the exclusive rights to engage in mining activities. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
On March 24, 2006, we granted to a consultant, in connection with services to be rendered, options to purchase 100,000 shares of our common stock at the exercise price of $1.90 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These shares and options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.


On March 17, 2006, we granted to a member of the board of directors options to purchase 500,000 shares of our common stock at the exercise price of $1.65 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.
 
On February 14, 2006, we issued 1,000,000 shares of our common stock to Investcol Limited a part of the consideration for our acquisition of twenty-five percent (25%) of the issued and outstanding stock of RNC (Colombia) Limited, a Belize corporation ("RNC") and wholly owed subsidiary of Investcol Limited. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
On January 10, 2006, we completed a private equity offering of 3,126,083 shares of common stock at $0.60 per share to a total of twenty (20) investors.  The total amount we received from this offering was $1,875,650. 
 
We completed the offering pursuant to Regulation S of the Securities Act.  Each purchaser represented to us that he was a non-US person as defined in Regulation S.  We did not engage in a distribution of this offering in the United States.  Each purchaser represented his intention to acquire the securities for investment only and not with a view toward distribution.  We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser in accordance with Regulation S and the transfer agent affixed the appropriate legends.  Each investor was given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.  No registration rights were granted to any of the purchasers.
 
On January 6, 2006, we granted to our officers and directors options to purchase a total of 1,750,000 shares of our common stock at the exercise price of $0.75 per share with the options vesting completely over two years and exercisable for a period of ten years from the date of issuance. These options were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.

On October 14, 2005, we completed an offering of 4,221,000 Units at $0.25 per Unit to a total of twenty-three (23) investors.  Each Unit consisted of one (1) share of common stock, par value $0.00001, and one (1) Warrant (the “Warrant”) to purchase one (1) share of common stock, exercisable for twelve (12) months from the closing of the offering.  The exercise price for the Warrant is priced at $0.50.  The total amount we received from the sale of Units in this exempt offering was $1,055,250. In connection with this private equity offering, we issued 368,100 shares of common stock as a commission. 
 
We completed the offering pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended.  Each purchaser represented his intention to acquire the securities for investment only and not with a view toward distribution.  We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends.  Each investor was given adequate access to

 
sufficient information about us to make an informed investment decision.  None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.  No registration rights were granted to any of the purchasers.
 
On September 22, 2005, we issued 1,000,000 shares of our common stock to Investcol Limited as part of the consideration paid for assigning us certain mining and mineral rights. These shares were issued pursuant to Section 4(2) of the Securities Act. We did not engage in any general solicitation or advertising. The stock certificate was issued with the appropriate legends affixed to the restricted stock.
 
Item 27. Exhibits

Exhibit Number
Description
2.1
RNC Stock Purchase Agreement (1)
3.1
Articles of Incorporation, as amended (2)
3.2
By-Laws, as amended (2)
5.1
Opinion of The Stewart Law Firm, with consent to use (9)
10.1
Consulting Agreement with Stewart Redwood (3)
10.2
Assignment Agreement with Investcol Limited (4)
10.3
Agreement with Investcol Limited (4)
10.4
Assignment Agreement with Investcol Limited regarding Concessions 6993, 7039, 6821, and 6770 and options to acquire the exclusive rights to engage in mining activities on Concessions HET-31, 32, 26, 27, and HETG-01 (5)
10.5
Amendment to Agreement with Investcol Limited regarding Concessions 6993, 7039, 6821, and 6770 and options to acquire the exclusive rights to engage in mining activities on Concessions HET-31, 32, 26, 27, and HETG-01 (5)
10.6
Contract for Purchase of Concessions 6993, 7039, 6821, and 6770 and options to acquire the exclusive rights to engage in mining activities on Concessions HET-31, 32, 26, 27, and HETG-01 (5)
10.7
Consulting Services Agreement with J. Randall Martin (6)
10.8
Master Agreement for Acquisition of properties in Caramanta (7)
10.9
Second Amendment to Stock Purchase Agreement (8)
21.1
Subsidiaries of Small Business Issuer (4)
23.3
Consent of William J. Lewis (9)
23.4
Consent of The Stewart Law Firm as to the legality of the shares of common stock being registered (included in Exhibit 5.1)
 
(1)  
Incorporated by reference to Current Report on Form 8-K filed on February 26, 2006
(2)  
Incorporated by reference to Registration Statement on Form SB-2 filed on July 28, 2006
(3)  
Incorporated by reference to Annual Report on Form 10-KSB filed on March 30, 2007
(4)  
Incorporated by reference to Current Report on Form 8-K filed on September 28, 2005
(5)  
Incorporated by reference to Annual Report on Form 10-KSB filed on April 17, 2006
(6)  
Incorporated by reference to Current Report on Form 8-K filed on August 4, 2006
 

 (7)  
 Incorporated by reference to Current Report on Form 8-K filed on September 29, 2006
(8)  
Incorporated by reference to Current Report on Form 8-K filed on December 15, 2006
(9)  
Previously filed as an exhibit to the Registration Statement on Form SB-2 filed on April 20, 2007

Item 28. Undertakings
 
The undersigned registrant hereby undertakes:
 
1.  To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;
a.  
to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
b.  
to reflect in the prospectus any facts or events arising after the effective date of this registration statement, or most recent post-effective amendment, which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement, and;
c.  
to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in the registration statement.
2.   That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3.   To remove from registration by means of a post-effective amendment any of the securities being registered hereby which remain unsold at the termination of the offering.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable.
 
In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act of 1933, and we will be governed by the final adjudication of such issue.
 
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.


SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Toronto, Ontario, Canada, on August 9, 2007.
 
Colombia Goldfields Ltd.
 
 
 
 
 
 
By:
/s/ J. Randall Martin
By:
/s/ James Kopperson
 
J. Randall Martin
Chief Executive Officer
 
James Kopperson
Chief Financial Officer
Principal Accouting Officer
 
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated:
 
By:
/s/ J. Randall Martin
By:
/s/ David Bikerman
 
J. Randall Martin
Director
August 9, 2007
 
David Bikerman
Director
August 9, 2007
 
 
 
 
By:
/s/ Thomas Ernst McGrail
By:
/s/ Terry Lyons
 
Thomas Ernst McGrail
Director 
August 9, 2007
 
Terry Lyons
Director
August 9, 2007
 
 
 
 
By:
/s/ James Verraster
By:
/s/ Edward Flood
 
James Verraster
Director
August 9, 2007
 
Edward Flood
Director
August 9, 2007
 
 
 
 
By:
/s/ Jonathan Berg
 
 
 
Jonathan Berg
Director
August 9, 2007