20FR12G

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 20-F

[X]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[  ]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended________________________________

OR

[  ]

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

For the transition period from ____________ to __________

OR

[  ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ………………………………

Keegan Resources Inc.

(Exact name of Registrant as specified in its charter)

__________British Columbia, Canada_____________

(Jurisdiction of incorporation or organization)

1204 - 700 West Pender Street, Vancouver, British Columbia V6C 1G8

(Address of principal executive offices)

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the Company’s classes of capital or common stock as of the close of the period covered by the annual report.     14,411,168

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ___No   xxx

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   Accelerated filer   Non-accelerated filer  xxx

Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 xxx   Item 18 ___

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    No    N/A  xxx

Page 2 of 109

Index to Exhibits on Page 57

2

Keegan Resources Inc.

FORM 20-F REGISTRATION STATEMENT

TABLE OF CONTENTS

Part I		Page
Item 1.	Identity of Directors, Senior Management and Advisors	5
Item 2.	Offer Statistics and Expected Timetable	6
Item 3.	Key Information	6
Item 4.	Information on the Company	12
Item 5.	Operating and Financial Review and Prospects	25
Item 6.	Directors, Senior Management and Employees	34
Item 7.	Major Shareholders and Related Party Transactions	40
Item 8.	Financial Information	41
Item 9.	The Offer and Listing	42
Item 10.	Additional Information	43
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 12.	Description of Securities Other Than Equity Securities	56

Part II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	56
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	56
Item 15.	Controls and Procedures	56
Item 16.	Reserved	56
Item 16A.	Audit Committee Financial Expert	56
Item 16B.	Code of Ethics	56
Item 16C.	Principal Accountant Fees and Services	56
Item 16D.	Exemptions from the Listing Standards for Audit Committee	56
Item 16E.	Purchases of Equity Securities by Keegan  and Affiliated Purchasers	56

Part III
Item 17.	Financial Statements	56
Item 18.	Financial Statements	56
Item 19.	Exhibits	57

3

INTRODUCTION

Keegan Resources Inc. (“Keegan” or the “Company”) was incorporated as “Quicksilver Ventures Inc.” on September 23, 1999 under the British Columbia Company Act. Pursuant to a resolution passed at a meeting of the shareholders of the Company that was held on August 13, 2004, the Company changed its name from Quicksilver Ventures Inc. to Keegan Resources Inc.

BUSINESS OF KEEGAN RESOURCES INC.

Keegan Resources Inc. is principally a mineral company engaged in the acquisition and exploration of mineral properties.

There are no known proven reserves of minerals on Keegan’s properties.  Keegan does not have any commercially producing mines or sites, nor is Keegan in the process of developing any commercial mines or sites.  Keegan has not reported any revenue from operations since incorporation.  As such, Keegan is defined as an “exploration-stage company”.

FINANCIAL AND OTHER INFORMATION

In this Registration Statement, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute “forward-looking statements”. Some, but not all, forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend,” statements that an action or event “may,” “might,” “could,” “should,” or “will” be taken or occur, or other similar expressions. Although the Company has attempted to identify important factors that could cause actual results to differ materially from expected results, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Registrant, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors inclu de, among others, the following risks: the risks associated with outstanding litigation, if any, risks associated with project development; the need for additional financing; operational risks associated with mining and mineral processing; fluctuations in metal prices; title matters; uncertainties and risks related to carrying on business in foreign countries; environmental liability claims and insurance; reliance on key personnel; the potential for conflicts of interest among certain officer, directors or promoters of the Registrant with certain other projects; the absence of dividends; currency fluctuations; competition; dilution; the volatility of the Registrant’s common share price and volume; and tax consequences to U.S. Shareholders. We are obligated to keep our information current and revise any forward-looking statements because of new information, future events or otherwise.

4

PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

1.A.1.  Directors

Table No. 1 lists as of 9/1/2006 the names of the Directors of Keegan.

Table No. 1

Directors

______________________________________________________________________________

______________________________________________________________________________

Name	Age	Date First Elected of Appointed
Richard J. Haslinger   (1) (2)	41	05/11/2004
Daniel T. McCoy        (3)	45	11/25/2004
Robert J. McLeod       (1) (3)	35	02/23/2005
Gordon J. Fretwell     (1) (4)	53	02/24/2004
Tony M. Ricci          (3)	43	12/09/2005

(1)

Member of Audit Committee.

(2)

448 West 22^nd Ave. Vancouver, BC V5Y 2G5

(3)

1204 – 700 West Pender Street, Vancouver, B.C. V6C 1G8

(4)

1780 – 400 Burrard Street, Vancouver, B.C. V6C 3A6

______________________________________________________________________________

______________________________________________________________________________

1.A.2.  Senior Management

Table No. 2 lists, as of 9/1/2006, the names of the Senior Management of the Company.  The Senior Management serves at the pleasure of the Board of Directors.

Table No. 2

Senior Management

______________________________________________________________________________

______________________________________________________________________________

Name and Position	Age	Date of First Appointment
Daniel T. McCoy, President & CEO	45	11/25/2004
Tony M. Ricci, Chief Financial Officer	43	12/09/2005
Michael Bebek, Corporate Secretary	30	12/01/2005

______________________________________________________________________________

______________________________________________________________________________

Mr. McCoy’s business functions, as President and CEO of the Company, include strategic planning, business development, operations, financial administration, accounting, liaison with auditors-accountants-lawyers-regulatory authorities-financial community/shareholders; and preparation/payment/organization of the expenses/taxes/activities of the Company, and reporting to the Board of Directors.

Mr. Ricci’s functions as Chief Financial Officer include financial administration; accounting and financial statements; liaison with auditors, accountants, and financial community/shareholders; and preparation/ payment/organization of the expenses/taxes/activities of the Company. He assists in ensuring the Company’s compliance with all statutory and regulatory compliance.

Mr. Bebek’s functions as Corporate Secretary include assisting the President/CEO and insuring the Company’s compliance with all statutory and regulatory requirements; maintenance of corporate records and recording minutes of meetings.

5

1.B.  Advisors

The Company’s Canadian Legal Counsel:

McCullough O’Connor Irwin

1100-888 Dunsmuir St

Vancouver,BC

V6C 3K4

Contact: Jonathan McCullough

Telephone: 604-687-7077

Gordon J. Fretwell Law Corporation

1780-400 Burrard St

Vancouver, B.C. CANADA       

V6C 3A6

Contact: Gordon J. Fretwell

Telephone: 604-689-1280

The Company’s Bank is:

Bank Of Montreal

595 Burrard St

Vancouver, B.C. CANADA V7X 1L7

Telephone: 604-665-2643

1.C Auditors

The Company’s auditor is:    

Amisano Hanson

Suite 640, 750 West Pender Street

Vancouver, B.C. CANADA V6C 2T7

Telephone: 604-689-0188

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

--- No Disclosure Necessary ---

ITEM 3.  KEY INFORMATION.

3.A.1.  Selected Financial Data

3.A.2.  Selected Financial Data

The selected financial data of the Company for Fiscal 2006, 2005 and 2004 ended March 31^st was derived from the financial statements of the Company that have been audited by Amisano Hanson, independent Chartered Accountants. The selected financial data of the Company for Fiscal 2003 and 2002 ended March 31^st was derived from the financial statements of the Company that were audited by Tony M. Ricci Inc., independent Chartered Accountant; these financial statements are not included herein.

The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Registration Statement.

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.

Table No. 3 is derived from the financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and Canadian/USA Generally Accepted Auditing Standards (GAAS).  All material numerical differences between Canadian GAAP and US GAAP, as applicable to the Company, are described in footnotes to the financial statements.

6

Table No. 3a

Selected Financial Data

(CDN$ in 000, except per share data)

________________________________________________________________________________

________________________________________________________________________________

	Year Ended 3/31/06	Year Ended 3/31/05	Year Ended 3/31/04	Year Ended 3/31/03	Year Ended 3/31/02
CANADIAN GAAP
Revenue	Nil	Nil	Nil	Nil	Nil
Income (Loss) for the Period	($2,989)	($629)	($56)	($32)	($22)
Basic Income (Loss) Per Share	($0.31)	($0.09)	($0.01)	($0.01)	($0.01)
Dividends Per Share	Nil	Nil	Nil	Nil	Nil
Wtg. Avg. Shares (000)	9,602	6,648	4,590	4,747	3,910
Period-end Shares	12,164	8,011	3,465	4,798	4,703
Working Capital	$625	$664	$414	$469	$487
Mineral Properties	$1,449	$529	Nil	Nil	Nil
Long-Term Debt	Nil	Nil	Nil	Nil	Nil
Capital Stock	$4,982	$1,674	$433	$534	$519
Shareholders’ Equity (Deficit)	$2,112	$1,239	$414	$469	$487
Total Assets	$2,372	$1,288	$454	$484	$496
US GAAP
Net Loss	($4,095)	($661)	($56)	($32)	N/A
Loss Per Share	($0.435)	$0.10)	($0.01)	($0.01)	N/A
Mineral Properties	$343	$498	N/A	N/A	N/A
Shareholders’ Equity	$1,006	$1,208	N/A	N/A	N/A
Total Assets	$1,266	$1,257	N/A	N/A	N/A

Table No. 3b

Selected Financial Data

(CDN$ in 000, except per share data

	Quarter Ended 6/30/06	Quarter Ended 6/30/05
Canadian GAAP
Revenue	Nil	Nil
Income (Loss) for Period	($369)	($388)
Basic Income (Loss)/Share	($0.03)	($0.05)
Dividends per Share	Nil	Nil
Wtg. Avg. Shares (000)	12,981	8,013
Period-end Shares (000)	13,209	8,083
Working Capital	$144	$249
Mineral Properties	$2,741	$778
Long-term Debt	Nil	Nil
Capital Stock	$6,041	$1,736
Shareholders’ Equity	$2,929	$1,071
Total Assets	$3,017	$1,110
U.S. GAAP
Net Loss	($1,304)	($507)
Loss Per Share	($0.10)	($0.06)
Mineral Properties	N/A	N/A
Shareholders’ Equity	N/A	N/A
Total Assets	N/A	N/A

7

3.A.3.  Exchange Rates

In this Registration Statement, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended March 31^st and for the three-month periods ended June 30^th.  The average rates for the periods, and the range of high and low rates for the periods.  The data for each month during the most recent eight months is also provided.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar.  The average rate means the average of the exchange rates on the last day of each month during the period.

Table No. 4

U.S. Dollar/Canadian Dollar

______________________________________________________________________________

______________________________________________________________________________

Period	Average	High	Low	Close
August 2006		1.13	1.11	1.11
July 2006		1.14	1.11	1.13
June 2006		1.12	1.10	1.12
May 2006		1.12	1.10	1.10
April 2006		1.17	1.12	1.12
March 2006		1.17	1.13	1.17
February 2006		1.16	1.14	1.14
January 2006		1.17	1.14	1.14
Three Months Ended 6/30/2006	1.11	1.17	1.10	1.12
Three Months Ended 6/30/2005	1.25	1.27	1.21	1.25
Fiscal Year Ended 3/31/2006	1.19	1.27	1.13	1.17
Fiscal Year Ended 3/31/2005	1.30	1.40	1.18	1.21
Fiscal Year Ended 3/31/2004	1.35	1.48	1.27	1.31
Fiscal Year Ended 3/31/2003	1.55	1.60	1.47	1.47
Fiscal Year Ended 3/31/2002	1.57	1.61	1.51	1.60
Fiscal Year Ended 3/31/2001	1.51	1.58	1.47	1.58

______________________________________________________________________________

3.B.  Capitalization and Indebtedness

Table No. 5 sets forth the capitalization and indebtedness of the Company as of 9/25/2006.

Table No. 5

Capitalization and Indebtedness

As of September 25, 2006

______________________________________________________________________________

Total shares issued and outstanding	14,114,871
Total Shares Authorized	unlimited
Stock Options Outstanding	1,425,000
Warrants Outstanding	986,350
Preference Shares Outstanding	Nil
Capital Leases:	Nil
Guaranteed Debt:	Nil
Secured Debt:	Nil

8

3.C.  Reasons For The Offer And Use Of Proceeds

--- No Disclosure Necessary ---

3.D.  Risk Factors

Risks Pertaining to Keegan:

Cumulative Unsuccessful Exploration Efforts By Keegan Personnel Could Result In the Company Having to Cease Operations:

The expenditures to be made by Keegan in the exploration of its properties as described herein may not result in discoveries of mineralized material in commercial quantities.  Most exploration projects do not result in the discovery of commercially mineable ore deposits and this occurrence could ultimately result in Keegan having to cease operations. Management feels that if exploration efforts were unsuccessful for a period of ten years, the Company would cease operations. If that were the case, investors would lose their entire investment in the company.

Keegan Has No Reserves on the Properties in Which It Has an Interest and If Reserves Are Not Defined the Company Could Have to Cease Operations:

The properties in which Keegan has an interest or the concessions in which Keegan has the right to earn an interest are in the exploratory stage only and are without a known body of ore.  If Keegan does not ultimately find a body of ore, it would have to cease operations. As stated above, management believes that if reserves are not defined on any of the properties on which Keegan has an interest after a period of ten years, the Company would cease operations. If that were the case, investors would lose their entire investment in the Company.

Keegan Has No Positive Cash Flow and No Recent History of Significant Earnings and Is Dependent Upon Public and Private Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing shareholders:

None of Keegan ’s properties have advanced to the commercial production stage and Keegan has no history of earnings or positive cash flow from operations. Keegan does not know if it will ever generate material revenue from mining operations or if it will ever achieve self-sustaining commercial mining operations. Historically, the only source of funds available to Keegan has been through the sale of its common shares. Any future additional equity financing would cause dilution to current stockholders.

Keegan currently has 1,425,000 share purchase options outstanding and 2,228,100 share purchase warrants outstanding. If all of the share purchase warrants and share purchase options were exercised, the number of common shares issued and outstanding would increase from 13,209,418 (as of 6/30/2006) to 16,862,518.  This represents an increase of 27.6% in the number of shares issued and outstanding and would result in significant dilution to current shareholders.

Dilution Through Employee/Director/Consultant Options Could Adversely Affect Keegan’s Stockholders

Because the success of Keegan is highly dependent upon its respective employees, the Company has granted to some or all of its key employees, Directors and consultants options to purchase common shares as non-cash incentives.  To the extent that significant numbers of such options may be granted and exercised, the interests of the other stockholders of the Company may be diluted. There are currently 1,425,000 share purchase options outstanding, which, if exercised, would result in an additional 1,425,000 common shares being issued and outstanding. (For a breakdown of dilution, refer to the risk factor entitled: “Keegan Has Minimal Positive Cash Flow and No Recent History of Significant Earnings and Is Dependent Upon Public and Private Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing shareholders”)

9

The Amount of Capital Necessary to Meet All Environmental Regulations Associated with the Exploration Programs of Keegan Could Be In An Amount Great Enough to Force Keegan to Cease Operations:

The current and anticipated future operations of Keegan, including further exploration activities require permits from various Federal and Provincial governmental authorities in Canada, the United States and the Republic of Ghana.   Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and other matters.  Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in resource exploration may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.

Large increases in capital expenditures resulting from any of the above factors could force Keegan to cease operations. If that were the case, investors would lose their entire investment in the Company.

The Risks Associated with Penny Stock Classification Could Affect the Marketability of the Common Stock of Keegan and Shareholders Could Find It Difficult to Sell Their Stock:

Keegan’s stock is subject to “penny stock” rules as defined in 1934 Securities and Exchange Act rule 3a51-1.  The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.  Keegan ’s common shares are subject to these penny stock rules. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities.  Penny stocks generally are equity securities with a price of less than U.S. $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 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 monthly account statements showing the market value of each penny stock held in the customer’s account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such 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 agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Company’s common shares in the United States and shareholders may find it more difficult to sell their shares.

10

Keegan is Dependent on Key Personnel and the Absence of Any of These Individuals Could Result in the Company Having to Cease Operations:

While engaged in the business of exploring mineral properties, the nature of Keegan  ’s business, its ability to continue its exploration of potential exploration projects, and to develop a competitive edge in the marketplace, depends, in large part, on its ability to attract and maintain qualified key management personnel.  Competition for such personnel is intense and the Company may not be able to attract and retain such personnel.  Keegan’s growth will depend, on the efforts of its Senior Management, particularly its President, Daniel T. McCoy, its Chief Financial Officer, Tony Ricci, its Corporate Secretary, Michael Bebek and its Board of Directors that includes Richard Haslinger, Robert McLeod, and Gordon Fretwell, in addition to Mr. McCoy and Mr. Ricci.

U.S. Investors May Not Be Able to Enforce Their Civil Liabilities Against Us or Our Directors, Controlling Persons and Officers

It may be difficult to bring and enforce suits against Keegan.  Keegan is a corporation incorporated in the province of British Columbia under the British Columbia Corporations Act.  A majority of the Company's directors must be residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada.  As a result, it may be difficult for U.S. holders of our common shares to effect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them.  In addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.

However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions.  Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example:

  a)

where the U.S. court where the judgment was rendered had no jurisdiction according to applicable Canadian law;

  b)

the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;

  c)

the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;

  d)

a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;

  e)

the outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;

  f)

the judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or

  g)

there has not been compliance with applicable Canadian law dealing with the limitation of actions.

11

As a "foreign private Keegan ”, Keegan is exempt from the Section 14 proxy rules and Section 16 of the 1934 Securities Act May Result in Shareholders Having Less Complete and Timely Data

The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data.  The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.

Risks Pertaining to the Industry

Mineral Prices May Not Support Corporate Profit for Keegan:

The resource exploration industry is intensely competitive and even if commercial quantities of mineral resources are developed (which is not guaranteed), a profitable market may not exist for the sale.  If a profitable market does not exist, Keegan could have to cease operations.

Operating Hazards and Risks Associated with the Exploration-stage Mining Industry Could Result in Keegan Having to Cease Operations:

Resource exploration activities generally involve a high degree of risk.  Hazards such as unusual or unexpected formations and other conditions are involved.  Operations in which Keegan has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of exploration facilities, damage to life and property, environmental damage and legal liability for any or all damage.  Keegan  may become subject to liability for cave-ins and other hazards for which it cannot insure or against which it may elect not to insure where premium costs are disproportionate to the Company’s perception of the relevant risks.  The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration activities and could force Keegan to cease operations.

ITEM 4.  INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Introduction

Keegan ’s executive office is located at:

Suite 1204, 700 West Pender Street

Vancouver, British Columbia, Canada V6C 1G8

Telephone: (604) 683-8193

Facsimile: (604) 683-8194

Website: www.keganresources.com

Email: info@keeganresources.com

The contact person is: Mr. Daniel T. McCoy, President.

Keegan's fiscal year ends March 31^st.

Keegan's common shares trade on the TSX Venture Exchange under the symbol: “KGN”.

The authorized capital of Keegan consists of an unlimited number of common shares without par value and an unlimited number of  preferred shares with par value.

12

As of March 31, 2006 there were 12,164,418 common shares issued and outstanding. As of the latest interim period for which financial statements are available (6/30/2006) there were 13,209,418 common shares issued and outstanding. According to the Company’s transfer agent, Pacific Corporate Trust Company, on September 25, 2006 there were 14,114,871 common shares issued and outstanding.

In this Registration Statement, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).

Incorporation and Name Changes

Keegan Resources Inc. (“Keegan or the “Company””) was incorporated as “Quicksilver Ventures Inc.” on September 23, 1999 under the British Columbia Company Act. Pursuant to a resolution passed at a meeting of the shareholders of the Company that was held on August 13, 2004, the Company changed its name from Quicksilver Ventures Inc. to Keegan Resources Inc.

Financings

The Company has financed its operations through funds raised in loans, public/private placements of common shares, shares issued for property, shares issued in debt settlements, and shares issued upon exercise of stock options and share purchase warrants.

________________________________________________________________________________ ___________________________________________________________________________

Fiscal Year	Nature of Share Issuance	Number of Shares	Amount
Fiscal 2000	Nil
Fiscal 2001	Private Sale of Escrow Shares (1)	1,333,334	$100,000
Fiscal 2002	Initial Public Offering (2)	3,300,000	$495,000
	Exercise of Agent’s Options (2)	70,000	$10,500
Fiscal 2003	Pursuant to the Exercise of Share Purchase Options	95,000	$14,250.00
Fiscal 2004	Nil
Fiscal 2005	Private Placement (3)	3,200,000	$320,000
	Private Placement (4)	870,500	$652,875
	Finders’ fees associated with the private placements (5)	33,900	$33,900
	Exercise of stock options (6)	100,000	$15,000
	Payment for resource properties (7)	341,159	$295,486
Fiscal 2006	Issued for resource property payment (8)	246,059	$218,736
	Private Placement (9)	3,000,000	$2,400,000
	Exercise of share purchase warrants (10)	785,300	$745,505
	Exercise of share purchase options (11)	122,500	$112,700
Fiscal 2007 to date	Exercise of share purchase warrants (12)	2,132,750	$2,105,900

(1)

When the Company was still in the private stage it sold 1,333,334 escrow shares, in a private sale, to investors at a price of $0.08 per escrow share. These shares were not tradable and were held in escrow by the Company’s transfer agent. These escrow shares were subsequently cancelled during the fiscal year ended 3/31/2004.

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(2)

On June 22, 2001, Keegan announced that it had completed its initial public offering. This offering consisted of the sale of 3,300,000 common shares at a price of $0.15 per share. 70,000 Agent’s options were associated with this offering. The Agent’s options were part of the fee charged by the agent. These options allowed the Agent, Research Capital Corporation, to purchase 70,000 common shares at a price of $0.15 per common share.

(3)

This private placement consisted of the sale of 3,200,000 common shares at a price of $0.10 per share. These shares were subject to a hold period until August 28, 2004. Mr. Robert Guistra, an unaffiliated third party, arranged this sale. Mr. Guistra was paid a fee of $10,000 as consideration for his arranging the private placement.

(4)

This private placement consisted of the sale of 870,500 units at a price of $0.75 per unit. Each unit consisted of one common share and one common share purchase warrant. Each common share purchase warrant entitled the holder to purchase one additional common share until January 31, 2007 at a price of $0.85. In consideration of arranging investors in this private placement, Leo Kosowan (an unaffiliated third party) was paid $10,500 as a finder’s fee in connection with the private placement. Dundee Securities Corp. received 15,700 units and Canaccord Capital Corp. received 18,200 units as finders’ fees in connection with this private placement. These units carried the same privileges as the units, which were sold in the private placement.

(5)

These finders’ fees were issued to Dundee Securities Corp. and Canaccord Capital Corp..

(6)

These options were exercised by former directors and officers of the Company.

(7)

These shares were issued in partial payment for the Horse Mountain property.

(8)

These shares were issued as finders’ fees and partial payment for the Black Velvet,  Regent, Fri and Asumara properties.

(9)

This private placement consisted of the sale of 3,000,000 units at a price of $0.80 per unit for proceeds of $2,400,000. Each unit consisted of one common share and one nontransferable share purchase warrant, entitling the holder to purchase, within two years, one additional common share of the Company at a price of $1 per share. The warrants are subject to an acceleration clause whereby if the shares of the Company trade above $2 for a period of 10 consecutive trading days, the Company has the right to require the earlier exercise of the warrants within 30 days of formal notice from the Company.

(10)

These share purchase warrants were issued in conjunction with (4) above.

(11)

These share purchase options were exercised by Dr. Dan McCoy (60,000) and the remainder (62,500) by Scott Gibson, a consultant to the Company.

(12)

These share purchase warrants were related to the private placements disclosed in (4) and (9) above. 179,000 share purchase warrants related to the private placement disclosed in (4) and 1,953,750 share purchase warrants related to the private placement disclosed in (9) above.

Capital Expenditures

Fiscal Year
Fiscal 2000	Nil
Fiscal 2001	Nil
Fiscal 2002	Nil
Fiscal 2003	Nil
Fiscal 2004	Nil
Fiscal 2005	$285,410 (1)
Fiscal 2006	$1,901,010 (2)

(1)

$51,660 of this was attributed to the purchase of furniture, equipment and leasehold improvements; $202,595 was attributed to mineral property acquisition costs; and, the balance of $31,155 was attributed to deferred exploration costs. The mineral property acquisition costs were associated with the Horse Mountain and Asumura properties. The deferred exploration costs were associated with the Horse Mountain property.

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(2)

$1,816 of this was attributed to the purchase of furniture, equipment and leasehold improvements; $180,471 was attributed to mineral property acquisition costs; and, the balance of $1,718,723 was attributed to deferred exploration costs. The mineral property acquisition costs were associated with the Fri Property (which was written off at fiscal year end); Regent Gold/Silver Property; the Asumara Gold Project; and, the Black Velvet Gold Project. The deferred exploration costs were associated with the same properties.

4.B.  BUSINESS OVERVIEW

Historical Corporate Development

Keegan is a natural resource company currently engaged in the acquisition and exploration of mineral resources in Canada, the United States of America and West Ghana. Traditionally, the Company has been involved in the exploration for mineral resources.

After Keegan became public on June 22, 2001, the Company searched for resource property acquisitions. At the time Keegan was classified as a “capital pool company”.

Under the TSX Venture Exchange’s Policy 2.4, a company with only minimal working capital is allowed to list on the Exchange for the purposes of negotiating an acquisition of, or the participation in, assets or businesses. Such companies are classified as a “Capital Pool Company”, or “CPC” and are governed by a specific set of rules and regulations.

The sole purpose of a CPC is to identify and evaluate existing businesses or assets for possible acquisition, which if acquired, would provide the company for a full listing on the TSX-V. The only business a CPC is allowed to conduct prior to its Initial Public Offering and listing on the TSX-V is to prepare for its offering. This typically consists of raising a limited amount of seed capital, establishing a management team and board of directors, as well as hiring professionals to assist in the offering, including an auditor, legal counsel, and an agent for the Offering.

The minimum total of seed capital raised must be equal to or greater than $100,000. The maximum gross proceeds from the IPO must be at least $200,000 but not exceed $1,900,000. Once the IPO is completed, the company will use the net proceeds to seek and finance a business in order to complete its “Qualifying Transaction” (“QT”). Once a suitable asset or business has been identified, the CPC will attempt to negotiate an acquisition or participation in the asset or business. The management of the CPC will negotiate with the targeted acquisition regarding acquisition terms. The Board of Directors of the CPC will examine proposed acquisitions on the basis of business fundamentals before approving any proposed transaction.

From the date of listing on the TSX-V, the CPC originally had 18 months (now 24 months) to complete its QT. If the CPC had not completed its QT in that timeframe, the CPC’s shares would be suspended from trading, and possibly face delisting, until such time as a QT has been approved and completed.

The CPC may used cash, secured or unsecured debt, the issuance of securities, or a combination thereof, in order to finance its acquisition as its QT. Any QT is subject to approval by the majority of the minority shareholders of the CPC, approval from the TSX-V, and sponsorship of a TSX-V member firm. Trading in the CPC stock will initially be halted from trading before the announcement of a pending QT. The stock will remain halted until the Exchange has completed any preliminary background investigations into the proposed transaction and sponsor firm has been retained.

All securities, which will be held by Principals of the proposed post-QT issuer, are required to be held in escrow. Shares will be released from escrow subject to a formula prescribed in the CPC Escrow Agreement, which is subject to approval, by the TSX-V.

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Once the QT is complete, the company will resume trading on the TSX-V under its new name and symbol.

On June 11, 2003, Keegan announced that it had entered into a letter of intent to purchase an interest in a property located in Australia. On July 22, 2003, Keegan announced that it had decided not to proceed with this transaction. Keegan decided not to proceed with this transaction because upon further examination of the property, management decided that it did not warrant additional work.

On September 5, 2003, Keegan announced that it entered into another letter of intent to purchase a 100% interest in some mining claims located in British Columbia. This agreement was also terminated during the year ended March 31, 2004 because upon further examination of the property, management decided that it did not warrant additional work.

Keegan had not completed a “QT” by December 2003. The directors of the Company scheduled an extraordinary general meeting of its shareholders to request shareholder approval to the proposed listing of Keegan’s shares on the NEX Exchange. The NEX Exchange is a separate board of the TSX Venture Exchange for companies previously listed on the TSX Venture Exchange or the Toronto Stock Exchange, which have failed to maintain compliance with the ongoing financial listing standards of either of these stock exchanges. (Keegan had not completed a “qualifying transaction” in the time permitted by the TSX Venture Exchange so it did not meet the financial listing standards.) Shareholder approval was obtained and Keegan’s common shares began trading on the NEX Stock Exchange on February 12, 2004.

On September 7, 2004, Keegan entered into agreements with the Hunter Dickinson Group, Inc. (“HDG”), Anaconda Gold Corp. (“Anaconda”) and Barrick Gold Exploration Inc. (“Barrick”) whereby it acquired the right to earn an interest in the Horse Mountain Project located in Nevada.

On January 31, 2005, Keegan announced that the TSX Venture Exchange had accepted the transaction pertaining to the Horse Mountain Project as the “qualifying transaction” for the Company and that it no longer considered Keegan to be a Capital Pool Company.  Keegan was reclassified by the TSX Venture Exchange as a “Gold Ore Mining” company. At this time Keegan’s common share trading moved from the NEX Stock Exchange to the TSX Venture exchange. The share symbol of the Company changed from “QSV.H” to “QSV”.

On March 1, 2005, the Company began trading on the TSX Venture Exchange under the name Keegan Resources with the stock symbol of “KGN”.

On March 4, 2005, Keegan announced that it had entered into an option agreement to acquire a 100% interest in the Regent Gold Silver Project located in Mineral County, Nevada.

On March 11, 2005, Keegan announced that it had entered into an option agreement to acquire the Asumura Gold Project located in West Ghana.

On May 31, 2005, Keegan announced that it had entered into an option agreement to acquire a 100% interest in the Fri Property located in Nye County, Nevada. During Fiscal 2006, ended 3/31/2006, the Company decided not to pursue its options agreement pertaining to the Fri Property. Management came to this conclusion because, after completing preliminary exploration work, they decided that the results did not warrant further work.

On December 7, 2005, Keegan announced that it had entered into an option agreement to acquire a 100% interest in the Black Velvet Gold Project located in Pershing County, Nevada.

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During Fiscal 2006, ended 3/31/2006, management announced that it had decided not to pursue the Company’s option to earn an interest in the Horse Mountain Claims and that as a result, $1,018,587 in acquisition and deferred exploration expenditures associated with the property were written-off. Management took this action because it decided to concentrate the Company’s efforts on its more recent acquisitions.

Plan Of Operations

Source of Funds for Fiscal 2006/2007, Ending March 31^st

Keegan ’s primary source of funds since incorporation has been through the issuance of common shares.

Keegan had a working capital balance of $625,226 on 3/31/2006. Keegan intends to use its working capital to complete exploration work on the properties in which it has an interest and for general working capital.

Use of Funds for Fiscal 2006/2007

During Fiscal 2007 and Fiscal 2008, respectively, Keegan estimates that it might expend $1,000,000 and $1,200,000 on general/administrative expenses including property evaluation costs prior to acquisition.  During Fiscal 2006 and Fiscal 2007 respectively, Keegan estimates that it might expend $3,000,000 and $6,000,000 on property acquisition/exploration expenses.

Anticipated Changes to Facilities/Employees

Management of Keegan anticipates no changes to either facilities or employees in the near future.

United States vs. Foreign Sales/Assets

Keegan has had no revenue during the past five fiscal years.

At 3/31/2006 Keegan’s assets were located in Canada, the United States and West Ghana.  At 12/31/2005 all of Keegan ’s assets were located in Canada, the United States and West Ghana.

 3/31/2002:  Canada - $496,327           

 3/31/2003:  Canada - $483,806     

 3/31/2004:  Canada - $454,423

 3/31/2005:  Canada - $759,054, U.S. - $485,619, Ghana - $ 43,617

 3/31/2006:  Canada – $923,165, U.S. - $604,269, Ghana - $844,778

Material Effects of Government Regulations

The current and anticipated future operations of Keegan including further exploration activities, require permits from various Canadian, U.S. and West Ghanaian, Federal, Provincial, and/or state governmental agencies.  Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters.  Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on Keegan and cause increases in capital expenditures which could result in a cessation of operations by Keegan.  Keegan has had no material costs related to compliance and/or permits in recent years, and anticipates no material costs in the next year.

Seasonality

Dependency upon Patents/Licenses/Contracts/Processes

Sources/Availability of Raw Materials

--- No Disclosure Necessary ---

4.C. Organization Structure

Keegan Resources Inc. (“Keegan or the “Company””) was incorporated as “Quicksilver Ventures Inc.” on September 23, 1999 under the British Columbia Company Act. Pursuant to a resolution passed at a meeting of the shareholders of the Company that was held on august 13, 2004, the Company changed its name from Quicksilver Ventures Inc. to Keegan Resources Inc.

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4.D.  Property, Plant and Equipment

This section first discloses where Keegan’s office is located in Canada and then describes the mineral properties in which Keegan has an interest. In the description of the mineral properties, it is disclosed that these properties are only exploration stage properties and that a substantial amount of capital will have to be spent on each property before management will know if they contain commercially viable mineral deposits.

Keegan’s executive offices are located in rented premises of approximately 1,788 sq. ft. at Suite 1204, 700 West Pender Street, Vancouver, British Columbia CANADA V6C 1G8.  Keegan began occupying these facilities on May 3, 2004.  Monthly rent is $4,118.

1. The Regent Gold Project

The Regent Gold Project is without known reserves and the work being done by Keegan is exploratory in nature. Keegan’s interest in this property stemmed from earlier exploration work, as described below, that was done in the area.

Acquisition of Interest

Keegan entered into an agreement with Ventures Nevada Inc., a private company wholly owned by Jerry Baughman and Fabiola Baughman of Reno, Nevada. Under the terms of this agreement, Keegan can acquire 100% of the Regent Gold Silver Project in Mineral County Nevada. Keegan must complete $3Million USD of work on the property and deliver cash payments totaling $305,000 USD and a total of 500,000 shares of Keegan Resources to Jerry and Fabiola Baughman over a period of six years. After meeting these commitments, Keegan will have an undivided 100% interest in the property subject to a 2.5% Net Smelter Return, 60% of which may be purchased by Keegan for $3 million USD. The first year’s option payments consist of payments of $80,000 USD and 150,000 shares with a first year work commitment of $250,000 USD. Keegan also staked additional claims in the perimeter of the land owned by Ventures Nevada Inc.

Location

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The Regent Gold Project is located in Mineral County Nevada, approximately 60 km southeast of Fallon, Nevada at a latitude of 39.03 and a longitude of 118.42. The property consists of 72 unpatented mining claims and an additional 36 unpatented claims staked by Quicksilver Ventures Nevada, Inc., a wholly owned subsidiary of Keegan Resources Inc. The additional claims are staked but have not yet been filed. The property is wholly under the jurisdiction of the Bureau of Land Management (BLM). The regional office of the BLM responsible for permit approval on the property is located in Carson City, Nevada.

Accessibility, Climate, Infrastructure and Physiography

Gentle to moderate topographic relief at elevations of 1650-1800m characterizes the Regent Gold Project area. Temperatures range from -15 to 40 degrees centigrade, with daytime temperatures ranging from –5 degrees centigrade ⁱⁿ the winter to 40 degrees centigrade in the summer. Annual precipitation is 12 – 17 cm, falling predominantly in December through April. Major mines in the region operate 365 days per year.

Fallon, the nearest full service town, is about 70 kilometers by road. Paved state highway and graveled county roads extend all the way to the property and are adequate for tracked or rubber tired drilling or excavating equipment to access the property.

History

The Rawhide gold, silver district (2.5 km SE of Regent) was discovered on Christmas day in 1906. Within a few years, up to 10,000 people occupied the historical town of Rawhide. Most of the historical mining in both the Rawhide and Regent areas took place during this time. By 1909, most of the easily accessible veins that were economic using technology of the day had been mined. By 1910, the population had dropped significantly and the final resident left in 1966. A total of 80,000 ounces of gold and 600,000 ounces of silver were mined in the district throughout these years. Only minor activity took place until the 1980’s. Newmont Mining Corporation (“Newmont”), an unrelated public company, was the first modern mining exploration company to explore at Regent, drilling a total of 111 holes. Kennecott Mining Co. (“Kennecott”), an unrelated public company, acquired the Rawhide property in 1982 and began operations in 1990, pouring the first gold/silve r dore bar in April of that same year. By the end of 2004, over 1.4 million ounces of gold and 10 million ounces of silver had been recovered by traditional open pit - heap leach methods.

During exploration and development of the Rawhide district, Kennecott also acquired and explored the Regent property, drilling a total of 469 holes, thus bringing the total number of drill holes on the Regent property to 580. Of these holes, 573 are reverse circulation holes; only 7 are core. The average depth of the holes is 477 feet; only five holes exceed 800 feet in depth. Less than 20% of the holes are angled. Kennecott also performed a ground magnetic survey over the region.

Newmont and Kennecott designed their exploration programs to delineate bulk tonnage resources. According to unpublished memos written by Mine Development Associates of Reno, Kennecott delineated a resource of 51,901 ounces of gold and 473,627 ounces of silver at an average grade of 0.022 opt Au and 0.196 opt Ag using a $300 US gold price. The Regent resource was permitted for mining, but plans to mine were aborted due to sub US$300 gold prices when Kennecott ceased mining at Rawhide in 2002. At that time, Kennecott ended its active gold exploration programs in the Great Basin due to low gold prices as well as a change in corporate strategy.

Between 1995 and 2001 Jerry Baughman slowly gained control of the Regent property by staking lapsed claims and obtaining quit claim deeds from other parties no longer interested in the district. By 2001, the Baughman’s and newcomer Nevada Sunrise Mining, LLC were the only two parties remaining. In 2002, Nevada Sunrise commissioned Mine Development Associates (MDA) of Reno, Nevada to deliver a new reserve model. MDA performed their estimate on the low-grade resource at various gold price levels. By 2004 Nevada Sunrise Mining, LLC quitclaimed all of their property to the Baughman’s in exchange for interests in other of Baughman’s properties.

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The property was brought to the attention of Keegan Resources Inc. by Hunter Dickinson Inc. Hunter Dickinson was attracted to the property because significant high-grade drill intercepts both within and outside of Kennecott’s resource area at Regent represents a similar scenario to that which resulted in the Hollister discovery by one of the Hunter Dickinson companies. Hunter Dickinson collected 117 surface rock chip samples, re-logged approximately 7,600m of RC drill chips and 600m of diamond drill core and compiled drill cross-sections and a geologic map of the Regent property as part of its property assessment. This sampling confirmed the presence of high-grade, gold-silver, epithermal quartz veins exposed at surface previously indicated by the high-grade intercepts at depth.

Hunter Dickinson decided not to enter into negotiations for the property, because of its current focus on advanced staged mine development opportunities.

Recent Activities by Keegan

Keegan has completed a four hole drill program on this property. One of these drill holes, Hole R05-02, intersected 52.5 feet at 2.7 g/t gold including 13.5 feet of 5.5 g/t gold and 3.7 feet of 12.6 g/t gold, whereas Hole R05-01 intersected 4.6 feet of 166 g/t silver. Hole R05-04, designed to intersect a down dip extension of the structure intercepted in R-05-02, encountered difficult drilling conditions in a clay zone at the projected structure. Over 36 feet were drilled without any core being recovered.

Currently, oriented core measurements, logs and geologic interpretations are being incorporated in the Company’s 3-D model and interpretation of the project in preparation for further drilling.

Planned Work Program

Keegan plans to take the approach to this project of drilling angled and partially oriented core holes to delineate veins with sufficient strike, width and thickness to be mined underground. The Company will initially target structures identified by historical high grade intercepts (greater than 5 ft, greater than 5 g/t Au), followed by systematic step out drilling along strike, depth and into other underexplored prospective areas within the “hydrothermal boundary” suggested by the magnetic low. To accomplish this goal, the Company has designed an exploration program with 5 top priority drill target areas (see map below). Two are within Kennecott’s mineralized area and the other three are spread out over a 2 km area within the magnetic anomaly. In addition, the Company intends to conduct some pediment soil orientation studies to efficiently explore prospective pediment on the property.

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2. The Asumura Project

The Asumura Project is without known reserves and the work being done by Keegan is exploratory in nature. Keegan’s interest in this property stemmed from earlier exploration work, as described below, that was done in the area.

Acquisition of Interest

Keegan entered into an agreement with GTE minerals an unrelated privately held Ghanaian company, which allows Keegan to acquire 100% of the Asumura Property by performing work expenditures totaling US$1Million, deliver cash payments adding together $100,000 USD and delivering shares of Keegan totaling US$100,000 in value over a period of three years. GTE will retain a 3.5% Net Smelter Return, 50% of which may be purchased for $2 million USD by Keegan.

Location

The property is located in the southwestern part of Ghana and is divided into two parts by the Bia River. The western part of the property is within the Western Region of Ghana in the Juabeso Bia District and the eastern part is in the Brong Ahafo Region of Ghana. The total area covers 81.3 square miles.

Accessibility, Climate, Infrastructure and Physiography

This property is accessible from the town of Kumasi by road, the majority of which is asphalt. (The last 22 miles is a laterite road. Laterite is a surface formation, found mostly in tropical areas, which is enriched in iron and aluminum.) Within the property, there is a good network of laterite roads and foot trails, which provide access for the exploration crews.

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Annual rainfall is between 58 inches and 78 inches and temperatures vary between 72 degrees and 97 degrees Fahrenheit with an average of about 84 degrees Fahrenheit. A major rainy season occurs from April to July followed by a minor one from September through October.

The closest town, Goaso, is about 24 miles away. It contains hotels, markets and restaurants, hospitals and medical clinics, a cell phone tower, a network of land phones connected to the Ghana Telephone system via radio, and an internet café with satellite dish.

The property itself is sparsely populated.

History

This property was once licensed by Anglo American (Nasdaq – AAUK), an unrelated public company. Keegan is unaware of any surface exploration that Anglo American carried out in the area.  There are no recorded mineral resources, reserves, or production from this property.

Recent Activities by Keegan

Keegan received final approval from the Ghanaian government during the latter part of 2005 to convert its holdings from reconnaissance to exploration concessions this conversion allowed exploration trenching and drilling to proceed.

The Company began drilling here shortly after received the approval from the government. Plans called for drilling a minimum of 50 reverse circulation drill holes focusing on two major target areas: the Twiapasi anomaly, where it has obtained trench intercepts up to six metres at 4.6 grams per tonne gold, and the Wagyakrom anomaly, a continuous, two-kilometer-long, greater­ than-50-part-per-billion gold-in-soil structure with coincident, strongly contrasting resistivity and high-chargeability IP anomalies.

Initial exploration work by Keegan resulted in the discovery of a 12 square kilometer area drained by stream sediments anomalous in gold.

These results came from Keegan’s first widely spaced soil grid within this anomalous area. The Company has collected 772 soil samples in this grid, 327 of which returned assays. Of importance is the discovery of the Manu 1 soil anomaly, which is a linear west-northwest trending anomaly consisting of 12 samples: four assayed between 100 and 244 parts per billion gold and eight assayed better than 25 parts per billion gold. These soils occur along three northwest oriented lines spaced 150 and 500 meters apart and one northeast oriented cross line. The Company collected samples along these lines at 25 meter spacing. Three of these four lines carry greater than 100 parts per billion gold. In total the anomaly is 1.4 kilometers long, 50 to 80 meters wide and open for expansion.

Subsequent to the work described above, Keegan received assays for an additional 643 samples (bringing the total number of soil samples on the Asumura concession to 1943). Of the new assays received, four exceeded 100 parts per billion gold, six exceeded 50 parts per billion gold, and 14 exceeded 25 parts per billion gold.

These assays also revealed two new anomalies located 4.6 kilometers to the southeast and 3.5 kilometers to the east-southeast of the center of the Manu 1 anomaly. Each of these anomalies contains one or more samples greater than 100 parts per billion gold and at least nine samples greater than 25 parts per billion gold. Both anomalies are open in at least two directions.

Subsequently, Keegan received assays for an additional 383 soil samples bringing the total number of soil sample assays on the Asumura concession at this point to 2317. Of the new assays received, seven exceeded 100 parts per billion gold including the two single highest assays to day, 1412 parts per billion gold and 495 parts per billion gold.

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Management believes that these results provide further confirmation that the Manu 1 anomaly remains continuous along its 3.4-kilometer east-west trending strike length, with a single new infill line having a high assay of 226 parts per billion gold directly on trend with the anomaly. The results also revealed two new parallel east-west trending anomalies 700 meters (Manu 2) and one kilometer (Manu 3) north of Manu 1. Manu 2 consists of two samples assaying 156 and 253 parts per billion gold taken 600 meters apart from separate lines. It is open to the west. Manu 3 consists of two samples assaying 1412 and 253 parts per billion gold taken 880 meters apart sampled from separate lines. It is open to both east and west.

The Company is defining the Manu 1, 2, and 3 anomalies with 100-meter spaced north-south lines. It will be using three soil crews to undertake the substantial amount of sampling required and the company is planning an induced polarization grid in the area along the same lines.

Continuing exploration work by Keegan resulted in the discovery of three distinct anomalies in the Twiapasi, Wagyakrom and Mangoase areas. The next phase will include further soil sampling, induced polarization testing and augur drilling.

The trench dug in the Twiapasi gold-in-soil anomaly, was 20 meters long and was sampled at 2-3 meters depth in two-meter long intervals along a horizontal profile.

In October 2006, the Company announced that it will commence a drill program on the property in late 2006 on both the Mangoase fault and the newly discovered Bia River structure. This program will follow up results obtained by an aeromagnetic survey as well as IP surveys and augur drilling.

3. The Black Velvet Gold Project

The Black Velvet Gold Project is without known reserves and the work being done by Keegan is exploratory in nature. Keegan’s interest in this property stemmed from earlier exploration work, as described below, that was done in the area.

Acquisition of Interest

The Company entered into an option agreement dated December 7, 2005 with Gerald Baughman and Fabiola Baughman, two individuals unrelated to Keegan, whereby the Company may acquire 100% interest in the Black Velvet Gold Project in Pershing County, Nevada.

Under the terms of the agreement, the Company will have the option to deliver cash payments of US$150,000 and 150,000 shares of the Company to the Optionors over a period of four years as follows:

Deliver cash payment of US$2,500 upon execution of the agreement; US$27,500 on December 1, 2006; US$30,000 on May 31, 2007; US$40,000 on May 31, 2008; and US$50,000 on May 31, 2009.

Issue 10,000 common shares upon Exchange approval; 20,000 common shares on May 31, 2006; 30,000 common shares on May 31, 2007; 40,000 common shares on May 1, 2008; and 50,000 common shares on May 31, 2009.

During the three month period ended 12/31/2005, the Company paid US$2,500 and issued 10,000 common shares as per the terms of the agreement. After meeting these commitments, Keegan will have an undivided 100% interest in the property.

Location

The Black Velvet Gold Project consists of two unpatented Bureau of Land Management claims located in Pershing County Nevada about 26 miles west of the town of Lovelock. It covers an area of approximately 21 acres and is accessible by highway and gravel road.

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Accessibility, Climate, Infrastructure and Physiography

The main access to the Velvet Property is State Route 399, a two lane paved road which extends northwestward 35 km from he town of Lovelock in Pershing County, Nevada. An unimproved dirt road continues south 4 km to the Velvet Property. The climate is very dry, with very little vegetation.  Rainfall averages about 20 cm per year and temperature ranges from -5 to 35 degrees Celsius with high diurnal variations. Topography is gentle; several small creeks that are dry most of the year transverse the property.

History

The earliest record of prospecting and mining in the Velvet District occurred prior to 1913. Closest estimates to the amount of gold produced are approximately 10,000 ounces. In 1994 a private company unrelated to Keegan, by the name of Uranerz USA, completed a exploratory drilling program of approximately 8 holes on the Velvet Property.  They received assays showing 28.7 g/t Au over a drilled width of 8 meters starting at 75 meters feet below the surface. Uranerz drilled additional holes around this intercept without having a clear indication of the potential orientation or width of the intercept.  As they did not encounter similar assays in their further holes, they abandoned the property.  The property was intermittently held by various small prospectors until 2005, when Jerry Baughman acquired the property

Property Geology

The Velvet Property is a volcanic-hosted epithermal gold system within ash flow tuff intruded by rare basalt plugs.  There is little outcrop.  Some vein float occurs on the surface, but there is no definite indication as to their strike and dip.  The geologic target on the property is a high grade vein system similar to that present on Keegan’s Regent Property.

Recent Activities by Keegan

To date, Keegan has done no work on this property due to it’s current focus on it’s Ghana projects.

4. Esaase Gold Property

The Esaase Gold Property is without known reserves and the work being done by Keegan is exploratory in nature. Keegan’s interest in this property stemmed from earlier exploration work, as described below, that was done in the area.

Acquisition of Interest

Under an agreement dated May 9, 2006 between the Company and Sammetro Co. Ltd (“Sammetro”), the Company can earn a 100% interest (subject to the Ghanian Government retaining a 10% underlying interest and NSR) in the Esaase Project located in Ghana. To earn its interest, the Company must pay US$540,000, issue 780,000 common shares, and spend US$2,250,000 in exploration on the project, all over a 4 year period, to both Sammetro and to the Esaase Liquidating Committee (the “Committee”) under the following schedule:

a)

Payment of US$100,000 by May 17, 2006 (paid);

b)

Payment of US$100,000 by June 30, 2006 which payment Sammetro will deliever to the Committee (paid);

c)

Payment of US$40,000 on the first anniversary;

d)

Payment of US$300,000 to the Committee over a four year period;

e)

Issuance of 780,000 common shares to Sammetro over a four year period;

f)

expend US$2,250,000 on exploration over a four year period.

In addition, the Company is required to pay Sammetro US$50,000 on the fourth anniversary and every anniversary thereafter until production. Upon production, the Company is required to pay US$100,000 to Sammetro and US$200,000 to the Committee.

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A finder’s fee equal to 10% of the consideration paid to Sammetro is also due. To date, US$10,000 and 4,000 common shares have been issued as finder’s fees.

Location

This property is located in southwest Ghana.

Recent Activities by Keegan

In June 2006, Keegan announced that it had successfully completed title due diligence on the Esaase gold property in southeast Ghana and had begun a surface and underground exploration program.  Previous soil and rock sampling by the Company during technical due diligence uncovered a northeast trending mineralized bedrock fault and gold bearing lode quartz veins, which have historic shafts and adits.  There are numerous and extensive stockwork veined zones that have yet to be adequately sampled. The soils also revealed other parallel bedrock soil anomalies in more recessed terrains that have yet to be explored.

In October 2006, the Company initiated a 6,000 meter core drill program on the property. Approximately 30 holes are planned to test the 1,500 meter strike length where the Company has discovered widespread disseminated gold mineralization in its bedrock trenching program. The program is expected to take approximately three months to complete.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the Fiscal Years Ended 3/31/2006, and 3/31/2005 should be read in conjunction with the financial statements of Keegan and the notes thereto.

Overview

During Fiscal 2003, ended March 31^st, Keegan raised no capital through the sale of shares.

During Fiscal 2004, ended March 31^st, Keegan raised no capital through the sale of shares.

During Fiscal 2005, ended March 31^st, Keegan raised $972,875 through the sale of shares as described earlier.

During Fiscal 2006, ended March 31^st, Keegan raised $2,400,000 through the sale of shares as described earlier.

During Fiscal 2005 Keegan obtained interests in mineral properties located in the United States and during Fiscal 2006, Keegan obtained interests in mineral properties located in the United States and Ghana. These events are described earlier in this document in ITEM 4.D. Property, Plant and Equipment.

Results of Operations

The Fiscal Quarter Ended 6/30/2006 vs. The Fiscal Quarter Ended 6/30/2005

During the period, the Company reported a loss of $368,972 or $0.03 per share compared to a loss of $388,072 or $0.05 per share during the same period in the previous year, a decrease in loss by $19,100. The decrease in loss was primarily attributable to an increased corporate activity during the period ended June 30, 2005 as a result of various expenses incurred in connection with the property acquisitions described in ITEM 4.D. INFORMATION ON THE COMPANY, PROPERTY PLANT AND EQUIPMENT.

General and administrative expenses decreased by $27,002, from $389,085 during the period ended June 30, 2005 to $362,083 during the period ended June 30, 2006 as a result of decreases in consulting fees and wages and benefits by $32,257, professional fees by $2,753, regulatory fees by $5,728, stock based compensation by $31,094 offset by increases in office, rent and administration by $24,927, transfer gent and shareholder information by $5,160 and travel, promotion and investor relations by $13,508.

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During the period, the Company recorded stock compensation expense of $127,012 (2005 - $158,106) for stock options granted to directors, officers and consultants.

The decrease in consulting fees and wages and benefits by $32,257 was a result of various consulting fees paid during the period ended June 30, 2005 to various parties in connection with the Company's acquisition of interests in resource properties and evaluation of other potential acquisitions.

The decrease in professional fees in the amount of $2,753 and regulatory fees in the amount of $5,728 was a result of additional legal services and filing fees required during the period ended June 30, 2005 due to various property acquisitions.

The increase in office, rent and administration by $24,927 was a result of an insurance payment made to Marsh Canada of $27,700 during the period, which consists of short-term disability and other insurance benefits for the geologists and other employees working in the Asumura property in Ghana.

Transfer agent and shareholder information increased by $5,160 as a result of fees paid to media publishers for increased investor awareness and wide distribution of the Company's press releases.

The increase in travel, promotion and investor relations by $13,508 was a result of the Company's participation in mining conferences and road shows during the period.

Fiscal 2006 Ended 3/31/2006 vs. Fiscal 2005 Ended 3/31/2005

During the year, Keegan terminated the agreements to acquire an interest in both the Horse Mountain Property and the Fri Property. Consequently it wrote down $179,531 in acquisition and deferred expenditures pertaining to the Fri Property and $1,018,587 in acquisition and deferred expenditures pertaining to the Horse Mountain Property.

During the year ended March 31, 2006, Keegan reported a loss of ($2,989,019) or ($0.31) per share compared to a loss of ($629,372) or ($0.09) per share during the previous year, an increase in loss of $2,359,647.

The primary reason for the increase in the loss was the write-down of both the Horse Mountain Property and the Fri Property in the amount of $1,198,118. Other significant factors were the increase in stock based compensation in the amount of $362,241; the increase in travel and promotion in the amount of $448,103; and, the increase in consulting fees in the amount of $261,244.

The Horse Mountain and Fri properties were both written off because management decided to concentrate the majority of the Company’s efforts on its properties in Ghana and its Regent property located in Nevada. Management felt that, as a result of the results obtained from the exploration work on the Horse Mountain Property and the Fri Property, it was prudent not to expend additional funds on either one.

The increase in stock based compensation resulted from continued vesting of options granted near the end of fiscal 2005 and an additional 280,000 options granted during the fiscal year ended March 31, 2006.

Travel and promotion increased because of Keegan’s increased involvement in Ghana. In prior years, much of Keegan’s efforts were concentrated only in Canada and Nevada. The involvement of the Company in Ghana increased expenses. Promotion increased because the Company increased its level of activity in the area of keeping investors advised of corporate activities. This included attending trade shows, an increased web presence and meetings with stockbrokers, analysts and fund managers in Canada.

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Consulting fees increased by $261,244 as compared to the prior fiscal year primarily due to consulting agreements entered into with the Company President and Corporate Secretary. Keegan entered into an agreement to purchase the Asumura Reconnaissance Concession on February 18, 2005. By the terms of this agreement, Keegan must complete US$1 million of exploration work by July 31, 2007; must pay US$100 thousand to the vendors by October 8, 2007; and, issue common shares to the vendor equivalent to US$100 thousand. Also, Keegan entered into an agreement to purchase the Regent Gold Silver Project located in Nevada on March 4, 2005. In the case of the Regent Gold Silver Project, the Company must complete US$3 million of exploration work by February 2010; must pay $270,000 to the vendor by February 2010 and must issue 500,000 common shares to the vendor by February 2011.

Fiscal 2005 Ended 3/31/2005 vs. Fiscal 2004 Ended 3/31/2004

During the year, Keegan entered into agreements with Hunter Dickinson Group Inc. (“HDG”), Anaconda Gold (USA) Inc. (“Anaconda”) and Barrick Gold Exploration Inc. (“Barrick”), whereby it acquired the right to earn an interest in the Horse Mountain Project in Nevada. The transactions with Anaconda and Barrick (collectively the “Acquisition”) served as Keegan’s Qualifying Transaction for the purposes of the policies of the Exchange.

During the year ended March 31, 2005, Keegan reported a loss of ($629,372) or ($0.09) per share compared to a loss of ($55,857) or ($0.01) per share during the previous year, an increase in loss of $573,515. The increase in loss was primarily attributable to various expenses incurred in the evaluation of potential businesses, due diligence in connection with Keegan’s Qualifying Transaction as well as the establishment of new corporate offices for Keegan.

Administrative expenses during the year ended March 31, 2005 were $601,137 compared to $60,638 during the same period in the previous year, an increase in expenses by $540,499. The increase in administrative expenses resulted from compensation expense of $194,961, foreign exchange loss of $31,956 and from increases in consulting fees by $111,060, office, rent and administration by $72,679, professional fees by $64,693, regulatory fees by $14,054, transfer agent fees by $34,687 and travel and promotion by $42,102.

In 2004, Keegan adopted a prospective application for stock based compensation whereby it accounts for awards to employees and consultants based on the fair value method. As a result, during the year, Keegan recorded compensation expense of $194,961 for stock options granted to directors and consultants.

The increase in consulting fees by $111,160 during the year was a result of various consulting agreements entered into by Keegan, its President & CEO, Corporate Secretary and consultants performing investor relations services. In addition, Keegan paid fees to various parties in connection with the acquisition of its interests in resource properties.

The increase in office, rent and administration by $72,679 was a result of Keegan’s signing of a lease agreement for its office premises for $3,767 per month, hiring of a temporary administrative staff, website development, office and computers set up and maintenance and other expenses such as printing, supplies and insurance.

The increase in professional fees by $64,693 was a result of increased legal and accounting services required in connection with Keegan’s Qualifying Transaction.

The increase in travel and promotion by $42,102 was a result of various mining conferences and road shows as well as various travels by Keegan’s directors who are based in Nevada to Vancouver. In addition, Keegan’s consultants incurred travel expenses during the evaluation of the resource properties located in Nevada.

27

Transfer agent and shareholder information expenses increased by $34,687 as a result of insurance purchased by Keegan in the amount of $19,000 in connection with its Filing Statement for its Qualifying Transaction, corporate profiles created for shareholder information and an increase in transfer fees due to increased shareholder activity.

Regulatory fees increased by $14,054 due to various fees paid to the Exchange for private placements, NEX maintenance, stock option plan, name change, etc. and for the Company’s Qualifying Transaction.

Fiscal 2004 Ended 3/31/2004 vs. Fiscal 2003 Ended 3/31/2003

Keegan had no income from operations during the fiscal years ended 3/31/2004 and 3/31/2003.

During the year-ended March 31, 2004, the Company reported a loss of ($55,857) or ($0.01) per share compared to a loss of ($31,563) or ($0.01) per share during the year ended March 31, 2003, an increase in loss by $24,294. The increase in loss was primarily attributable to additional administrative and general expenses incurred in connection with the Company’s intent to complete a “qualifying transaction” during the year. This effort consisted of searching for and examining potential property transactions. Administrative expenses during the period ended March 31, 2004 were $60,638 compared to $41,932 during the same period in the previous year, an increase in expenses by $18,706. The increase in administrative expenses resulted from an increase in professional fees by $14,813, promotion and entertainment by $1,745, regulatory fees by $1,615 and transfer agent fees by $2,857.

The only activities that Keegan was involved in during the year ended March 31, 2004 consisted of efforts to complete a “qualifying transaction”. These efforts involved entering into two option agreements to purchase an interest in mineral properties. Upon completing the examination of these properties, Keegan cancelled each one because management, after examination work, felt that neither property contained the economic potential required by the Company.

Fiscal 2003 Ended 3/31/2003 vs. Fiscal 2002 Ended 3/31/2002

Keegan had no income from operations during the fiscal years ended 3/31/2003 and 3/31/2002.

During the year-ended March 31, 2003, the Company reported a loss of ($31,563) or ($0.01) per share compared to a loss of ($22,082) or ($0.01) per share during the year ended March 31, 2002, an increase in loss by $9,481. The increase in loss was primarily attributable to additional administrative and general expenses incurred in connection with the Company’s intent to complete a “qualifying transaction” during the year. This effort consisted of searching for and examining potential property transactions. Administrative expenses during the period ended March 31, 2003 were $41,932 compared to $28,094 during the same period in the previous fiscal year, an increase in expenses by $13,838. The increase in administrative expenses resulted from an increase in professional fees by $7,245 and office, rent and administration in the amount of $7,502. Other expenses were minimal and essentially the same in both fiscal years.

The only activities that Keegan was involved in during the year ended March 31, 2003 consisted of efforts to complete a “qualifying transaction”. These efforts involved entering into two option agreements to purchase an interest in mineral properties. Upon completing the examination of these properties, Keegan cancelled each one because management, after examination work, felt that neither property contained the economic potential required by the Company.

Liquidity and Capital Resources

The Quarter Ended 6/30/2006

The Company reported working capital of $143,661 at June 30 2006 compared to working capital of $625,226 at June 30, 2005, representing a decrease in working capital by $481,565. As at June 30, 2006, the Company had net cash on hand of $184,486 compared to $838,809 at June 30, 2005.

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The following shows the Company's contractual obligations:

Contractual Obligations	Total	1 – 3 Years	4 – 5 Years	After 5 Years
Lease commitments (1)	$163,508	$150,621	$12,887	Nil

(1) The Company has entered into lease agreements for its corporate office premises.

Net changes in non-cash working capital balances utilized $172,758 of cash for the three months ended June 30, 2006, increasing cash utilized in operating activities to $412,383. During the prior period, net changes in non-cash working capital balances utilized $12,951 of cash, increasing cash utilized in operating activities to $240,392.

During the period, the Company utilized $285,194 of its cash for resource property acquisition payments pursuant to agreements, utilized $935,106 of its cash for deferred exploration and $9,140 for an equipment purchase. During the same period in the previous year, the Company utilized $68,563 of its cash for resource property acquisition payments pursuant to agreements and $118,757 for deferred exploration expenses.

During the period, the Company generated an aggregate cash of $987,500 for the exercise of 945,000 warrants at $1.00 per share and 50,000 warrants at $0.85 per share.

The other sources of funds potentially available to the Company are through the exercise of outstanding 1,639,000 share purchase warrants at a price of $1.00 per share which expire October 13, 2007, 589,100 share purchase warrants at $0.85 per share which expire January 31, 2007 and 1,145,000 stock options at $0.92 per share which expire February 3, 2010, 220,000 options at $1.16 per share which expire November 22, 2010 and 60,000 options at $2.48 per share which expire February 2, 2011. There can be no assurance, whatsoever, that any of these outstanding exercisable securities will be exercised.

Fiscal 2006 Ended 3/31/2006     

The Company reported working capital of $625,226 at March 31, 2006 compared to working capital of $664,231 at March 31, 2005, representing an increase in working capital by $39,005. As at March 31, 2006, the Company had net cash on hand of $838,809 compared to $674,917 at March 31, 2005. Financing for the Company’s operations was funded primarily from non-brokered private placements carried out during the period of 3,000,000 units at $0.80 per unit for gross proceeds of $2,400,000 and $858,205 from the exercise of share purchase warrants and share purchase options.

Current assets excluding cash at March 31, 2006 increased by $8,699, from $38,227 at March 31, 2005 to $46,926 at March 31, 2006. The increase in current assets is attributable to an increase in prepaid expenses by $13,337.

Current liabilities as at March 31, 2006, which mainly consisted of accounts payable and accrued liabilities, increased by $211,596. This increase resulted from outstanding payables to various exploration vendors.

Changes in non-cash working capital balances were $202,897 of cash for the fiscal year ended March 31, 2006, decreasing cash utilized in operating activities to $1,020,466. During the prior period, net changes in non-cash working capital balances were only $694, decreasing cash utilized in operating activities to $428,007.

During the period, the Company utilized an aggregate of $180,471 of its cash to acquire various interests in resource properties, utilized $1,718,723 for deferred exploration and $1,816 to purchase equipment. These expenditures are disclosed in Item 4.D. Property, Plant and Equipment.

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During the period, the Company generated cash of $745,505 from the exercise of 785,300 warrants at a price of $0.85 and $1.00 per share. The Company also raised $2,400,000 from a non-brokered private placement of up to 3,000,000 units of the Company at a price of $0.80 per unit. Each unit consisted of one common share and one non-transferable share purchase warrant, entitling the holder to purchase within two years one additional common share of the Company at a price of $1 per share. The warrants will be subject to an acceleration clause whereby if the shares of the Company trade above $2 for a period of 10 consecutive trading days, the Company will have the option to require the earlier exercise of the warrants within 30 days of formal notice from the Company. The Company paid an aggregate of $160,000 to various finders and regulatory fees of $12,838 for this private placement. In addition, an aggregate of 104,000 brokers’ warrants were granted on the same terms as the private placement warrants. The Company also realized $112,700 from the exercise of 122,500 share purchase options.

The other sources of funds potentially available to the Company are through the exercise of outstanding 2,584,000 share purchase warrants at a price of $1.00 per share which expire October 13, 2007, 639,100 share purchase warrants at $0.85 per share which expire January 31, 2007, 1,145,000 options at $1.16 per share which expire November 22, 2010 and 60,000 options exercisable at $2.48 per share expiring on February 2, 2011. There can be no assurance, whatsoever, that any of these outstanding exercisable securities will be exercised.

Financing for the Company’s operations was funded primarily from various share issuances through private placements and exercise of warrants. The Company has and may continue to have capital requirements in excess of its currently available resources. In the event the Company’s plans change, its assumptions change or prove inaccurate, or its capital resources in addition to projected cash flow, if any, prove to be insufficient to fund its future operations, the Company may be required to seek additional financing. Although the Company has been successful in raising the above funds, there can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future. The Company has just recently acquired interests in resource properties and its overall success will be affected by its current or future business activities.

The Company is in the process of acquiring and exploring its interests in resource properties and has not yet determined whether these properties contain mineral deposits that are economically recoverable. The continued operations of the Company and the recoverability of expenditures incurred to earn an interest in these resource properties are dependent upon the existence of economically recoverable reserves, securing and maintaining title and beneficial interest in the properties, obtaining necessary financing to explore and develop the properties, and upon future profitable production or proceeds from disposition of the resource properties.

Fiscal 2005 ended 3/31/2005

As at 3/31/2005, Keegan had working capital of $664,231 as compared to working capital of $413,667 at 3/31/2004. The increase in working capital of $250,564 was due to the financing which occurred during Fiscal 2005 as described above in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS. Cash and cash equivalents of $674,917 represented the majority of the current asset position at 3/31/2005 and the current liabilities of $48,913 were simply debts incurred in the normal course of business such as monthly rent, current amounts owing for property investigation costs, regulatory and filing fees and travel. None of these liability accounts were past due and were paid as agreed.

Cash used for Operating Activities during the year ended 3/31/2005 was ($428,007) including the net loss for the fiscal year of ($629,372). The adjustments in the category of items not affecting cash for the fiscal year were amortization in the amount of $5,710 and stock based compensation in the amount of $194,961.

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The amortization was attributed to furniture and equipment, computers and leasehold improvements. The basis for the furniture and equipment and the computers was on the declining balance and the basis on the leasehold improvements was on a straight-line basis. The furniture and equipment is amortized at 20%, the computers are amortized at 30% and the leasehold improvements are amortized for the term of the lease.

The stock based compensation was related to the stock options, which were granted to directors and consultants of the Company.

Effective January 1, 2003 the Company adopted the new accounting recommendations of the Canadian Institute of Chartered Accountants (“CICA”) Handbook, Section 3870, Stock-based compensation and other stock-based payments, released in November 2003, whereby it will be expensing all stock-based compensation awards, made or altered on or after January 1, 2003, on a prospective basis. The standard requires that all new or altered stock based awards provided to employees and non-employees are measured and recognized using a fair value based method. Fair values are determined using the Black-Scholes option pricing model. Any consideration paid by employees on the exercise of the options is credited to share capital.

The Company granted 1,348,000 stock options to directors and employees during the year ended 3/31/2005. During the fiscal year ended 3/31/2004, Keegan cancelled 363,333 stock options, which had been granted to former directors and officers of the Company. These options were cancelled because these individuals were no longer associated with the Company.

Cash Used for Investing Activities during the year ended 3/31/2005 totaled ($285,410) which consisted of expenditures on Keegan ’s mineral properties, and the purchase of furniture, equipment and leasehold improvements. The expenditures associated with the mineral properties are described in ITEM 4.B BUSINESS OVERVIEW; ITEM 4.D, PROPERTY PLANT AND EQUIPMENT and ITEM 5, OPERATING AND FINANCIAL REVIEW AND PROSPECTS (Results of Operations, Fiscal 2004, Ended 3/31/2005 vs. Fiscal 2004, Ended 3/31/2004).

Cash Provided by Financing Activities during Fiscal 2005 was $964,675 and consisted of the cash received for the issuance of common shares as described in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.

US GAAP Reconciliation  

These consolidated financial statements prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) conform to those generally accepted in the United States (“U.S. GAAP”), in all material respects, except as noted below:

Reconciliation of losses reported to U.S. GAAP

	2006	2005	2004
Net loss as reported in accordance with Canadian Gaap	($2,989,019)	($629,372)	($55,857)
Adjustments:
Resource property costs expensed	($1,106,195)	($31,155)	N/A
Net loss under U.S. GAAP	($4,095,214)	($660,527)	($55,857)
Net loss per share under U.S. GAAP	($0.43)	($0.10)	($0.01)

Stock-based compensation – The Company records compensation expense for U.S. GAAP purposes following the fair value method of accounting for stock options issued to employees. The Company uses the Black-Scholes option-pricing model to value its stock options as described in Note 5 to the audited financial statements for the fiscal year ended March 31, 2006.

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Net earnings per share and escrow shares – Under U.S. GAAP, performance-based escrow shares are considered to be contingently issuable until the performance criteria has been satisfied and are excluded from the computation of the weighted average of shares outstanding. The Company's escrow shares are not performance-based and therefore no adjustments have been made to the calculation of earnings per share.

On August 4, 2004, the Company entered into an escrow agreement with certain of its shareholders in respect of their 150,000 shares. The shares are being released from escrow as to 10% on final Exchange approval and the balance on a pro-rata basis at 15% semi-annually, with the final release scheduled for February 12, 2007. As of March 31, 2006, there were 90,000 shares still held in escrow.

Resource properties –  Under Canadian GAAP, acquisition and exploration costs are capitalized. Under U.S. GAAP, costs are expensed as incurred unless commercial feasibility is established.

Under U.S. GAAP, resource properties are reviewed by management for impairment whenever circumstances change which could indicate that the carrying amount of these assets may not be recoverable. Such review has not been completed, as there are no capitalized properties for U.S. GAAP purposes.

Reconciliation of total assets, liabilities and shareholder equity to U.S. GAAP:

	2006	2005
Total assets under Canadian GAAP	$2,372,212	$1,288,330
Adjustment to U.S. GAAP	($1,106,195)	($31,155)
Total assets under U.S. GAAP	$1,266,016	$1,257,175
Total liabilities under Canadian GAAP	$260,509	$48,913
Total shareholders’ equity under Canadian GAAP	$2,111,703	$1,239,417
Adjustments:
Resource property costs expenses	($1,106,195)	($31,155)
Total equity (deficiency) under U.S. GAAP	1,005,508	$1,208,262
Total equity (deficiency) and liabilities under U.S. GAAP	$1,266,017	$1,257,175

Reconciliation of consolidated statements of cash flows to U.S. GAAP

	2006	2005	2004
Cash provided by (used in) operations under Canadian GAAP:
Net loss as reported in accordance with Canadian GAAP	($2,989,019)	($629,372)	($55,857)
Adjustments:
Resource property costs expenses	($1,106,195)	($31,155)	-
	($4,095,214)	$660,527)	($55,587)
Add (deduct) items not involving cash
Amortization	$10,336	%5,710	-
Stock-based compensation	$557,202	$194,961	-
Write-off interest in resource properties	$585,591	-	-
Acquisition of resource properties	($180,471)	($202,595)
Changes in non-cash working capital bal.	$202,897	$694	$22,491
Cash used in operations under U.S. GAAP	($2,919,659)	($661,757)	($33,366)
Cash provided by (used in) financing activities under Canadian & U.S. GAAP
Shares issued	$3,085,367	$964,675	Nil
Cash provided by (used in) investing activities under Canadian GAAP
Purchase of property & equipment	($1,816)	($51,660)	-
Increase in resource properties	($1,899,194)	($233,750)	-
Adjustment to U.S. GAAP	$1,899,194	$233,750	-
Cash used in investing activities under U.S. GAAP	($1,816)	($51,660)	-

Under U.S. GAAP, the Company must provide a reconciliation of the numerators and denominators of basic and diluted earnings per share:

Numerator
Net loss under U.S. GAAP	($4,095,214)	($660,527)	($55,857)
Denominator
Weighted average number of common shares outstanding	9,601,522	6,648,223	4,590,115
Basic & diluted net earnings (loss) per share	($0.43)	($0.10)	($0.01)

Diluted net loss per share reflects the potential dilution of securities that could result from the exercise of dilutive options and warrants. As of March 31, 2006, the Company had 1,425,000 (2005 – 1,348,000; 2004 – 100,000) stock options outstanding and 3,223,100 (2005 – 904,400; 2004 – nil) warrants outstanding which have not been included in the calculation of diluted net loss per share because their effect would have been anti-dilutive.

Recent pronouncements:

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted could have a material effect on the accompanying consolidated financial statements.

5.E.  Off-Balance Sheet Arrangements.

5.F.  Tabular disclosure of contractual obligations.

--- No Disclosure Necessary ---

Critical Accounting Policies

Management is required to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  On a regular basis, we evaluate our estimates and assumptions.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

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ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6.A.  Directors and Senior Management

Table No. 6

Directors and Senior Management

9/1/2006

Name	Position	Age	Date of First Election Or Appointment
Daniel T. McCoy	President & Director	45	11/25/2004
Tony M. Ricci (1)	Director and Chief Financial Officer	43	11/21/2005
Richard J. Haslinger	Director	41	05/11/2004
Robert J. McLeod (1)	Director	35	02/03/2005
Gordon J. Fretwell (1)	Director	53	02/24/2004
Michael Bebek	Corporate Secretary	30	12/01/2005

(1)

Member of Audit Committee

Daniel T. McCoy is the President and a Director of Keegan.

Mr. McCoy obtained a B.S. and Ph.D in Geology from the University of Alaska and has over 22 years of work experience in the mineral exploration sector. Before being named President of Keegan, he was Senior Geologist from Placer Dome where he coordinated acquisitions and field programs for Placer’s Nevada generative exploration office and coordinator of acquisition and exploration projects in Alaska and Canada. From 1992 to 1995, he was a teaching and research associate at the University of Alaska, Fairbanks, and also served as a contract geologist for other major metals companies throughout the United States

Tony M. Ricci is a Director and the Chief Financial Officer of Keegan.
Mr. Ricci is a chartered accountant with over 18 years of practice experience, mainly with public companies listed on Canadian and U.S. stock exchanges. His expertise involves auditing and corporate structure advice, including the structuring of subsidiaries in Latin America. Mr. Ricci currently is the principal of Pacifica-Tech Capital and has his own accounting practice, primarily servicing public companies. Previously, he had worked as a manager with Amec Inc. (formerly H.A. Simons Ltd.) and KPMG as a senior accountant.

Richard J. Haslinger is a Director of Keegan.

Mr. Haslinger received a Bachelor of Applied Science degree in Geological Engineering from the University of British Columbia in 1986 and is a registered professional geological engineer with over 20 years of experience in the mineral exploration industry. During the last 15 years Richard has managed numerous multi-disciplinary exploration and deposit delineation projects at sites ranging from Alaska to South Africa. In his role with Keegan he provides exploration guidance and drill program management.

Robert J. McLeod is a Director of Keegan.

Mr. McLeod is the VP of Exploration and a director of Full Metal Minerals Ltd. He has over 12 years of experience in mining and exploration, working for a variety of major and junior mining companies. Technical skills include advanced GIS and 3D geologic modeling, grade-block modeling and resource calculation, mine design and geostatistics, lithogeochemical and structural studies, as well as project generation and property evaluation. His exploration strategy is a multi-tier approach including: conceptual geologic and project generation, early-stage project advancement focusing on discovery, and advancing mid-stage projects towards feasibility. As an exploration geologist and project manager at Miramar’s Hope Bay project, he was part of the team that discovered the Naartok deposit, as well as expanding and delineating the Boston and Doris deposits. He was previously VP of Exploration for Atna Resources Ltd, where he helped assemble a premier portfolio of gold properti es in Nevada. Mr. McLeod obtained his Bachelor of Science Degree, majoring in Economic Geology from UBC in 1993 and graduated from Queen’s University’s, Master’s in Geology, Mineral Exploration Program in 1998. He is a Fellow of the Society of Economic Geologists, member of the Association of Professional Engineers and Geoscientists of BC, Prospectors and Developers Association of Canada, Alaska Miners Association and the BC & Yukon Chamber of Mines.

Gordon J. Fretwell is a Director of Keegan.

Mr. Fretwell holds a Bachelor of Commerce degree and graduated from the University of British Columbia in 1979 with a Bachelor of law degree. Mr. Fretwell has, since 1991, been a self-employed solicitor in Vancouver practicing primarily in the areas of corporate and securities law. He currently serves on the board or is an officer of several public companies engaged in mineral exploration including Bell Resources Corporation, Copper Ridge Exploration Inc., Continental Minerals Corporation, Rockwell Ventures Inc., Grandcru Resources Corp., Pine Valley Mining Corp., Quartz Mountain Resources Ltd., and Icon Industries Ltd.

The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.

The Senior Management serves at the pleasure of the Board of Directors.

No Director and/or Senior Management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Senior Management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no family relationships between any two or more Directors or Senior Management.

There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.

6.B.  Compensation

Cash Compensation

Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended 3/31/2005 was CDN$50,951 in consulting fees and CDN$71,159 in professional fees paid to directors and officers of the Company.

35

Table No. 7

Officer and Director Compensation

		Annual Compensation			Long Term Compensation
					Awards		Payouts
NEO Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compen- sation ($)	Securities Under Option/ SAR’s Granted (#)	Shares/ Units Subject to Resale Restrictions ($)	LTIP Pay- outs ($)	All Other Compen-sation ($)
Daniel T. McCoy	2006 2005 2004	95,180 33,335 Nil	Nil 20,000Nil	17,127 Nil Nil	Nil 350,000 Nil	Nil Nil	Nil Nil Nil	Nil 33,919 6,361
Tony M. Ricci	2006	N/A	N/A	N/A	75,000	N/A	N/A	35,895
Richard J. Haslinger	2006 2005 2004	Nil	Nil	Nil	40,000	Nil	Nil	11,625
Robert J. McLeod	2005 2004 2003	Nil	Nil	Nil	70,000	Nil	Nil	Nil
Gordon J. Fretwell	2006 2005 2004	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil	Nil 200,000 Nil	Nil Nil Nil	Nil Nil Nil	$39,443 71,159 5,394

Table No. 8

Stock Option Grants in Fiscal 2006 Ended 3/31/2006

Name	Number of Options Granted	% Of Total Options Granted on	Exercise Price per Share	Grant Date	Expiration Date	Mkt. Value of Securities Underlying Options on Date of Grant
Tony Ricci	75,000	34%	$1.16	11/21/05	11/21/10	$1.16
Michael Bebek	25,000	11%	$1.16	11/21/05	11/21/10	$1.16
Richard Haslinger	40,000	67%	$2.48	02/02/06	04/02/11	$2.48
Consultant	20,000	33%	$2.48	02/02/06	04/02/11	$2.48
Consultant	120,000		$1.16	11/21/05	11/21/10	$1.16

______________________________________________________________________________

______________________________________________________________________________

The following table gives certain information concerning stock option exercises during Fiscal 2006 by our Senior Management and Directors.  It also gives information concerning stock option values.

36

Table No. 9

Aggregated Stock Options Exercises in Fiscal 2006

Fiscal Yearend Unexercised Stock Options

Fiscal Yearend Stock Option Values

Senior Management/Directors

Name	Number of Shares Acquired on Exercise	Aggregate Value Realized	Number of Unexercised Options at Fiscal Year-End Exercisable/Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Unexercisable
Dan McCoy	60,000	$68,400	290,000	$255,200

___________________________________  ___________________________________________

Director Compensation.  Keegan had no formal plan for compensating its Directors for their service in their capacity as Directors.  Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors.  The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of Keegan  other than services ordinarily required of a Director.  Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.

Stock Options.  Keegan may grant stock options to Directors, Senior Management and employees. Stock options have been granted and 60,000 were exercised during Fiscal 2006 and thru 6/30/2006. Refer to ITEM #6.E., "Share Ownership" and Table No. 8 for information about stock options outstanding.

Change of Control Remuneration.  Keegan had no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of Keegan  in Fiscal 2004 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$60,000 per Senior Management.

Other Compensation.  No Senior Management/Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Senior Management/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation.  Except for the stock option program discussed in ITEM #6.E., Keegan  had no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to Keegan 's Directors or Senior Management.

Pension/Retirement Benefits.  No funds were set aside or accrued by Keegan  during Fiscal 2004 to provide pension, retirement or similar benefits for Directors or Senior Management.

6.C.  Board Practices

6.C.1.  Terms of Office.  Refer to ITEM 6.A.1.

6.C.2.  Directors’ Service Contracts.  

--- No Disclosure Necessary ---

6.C.3.  Board of Director Committees.

Keegan  has an Audit Committee, which recommends to the Board of Directors the engagement of the independent auditors of Keegan  and reviews with the independent auditors the scope and results of Keegan ’s audits, Keegan ’s internal accounting controls, and the professional services furnished by the independent auditors to Keegan .  The current members of the Audit Committee are: Tony Ricci, Rob Mcleod, and Gord Fretwell.  The Audit Committee met twice during the year ended 3/31/2006.

37

6.D.  Employees

As of 3/31/2006, Keegan had 4 employees and independent contractors, excluding the Senior Management.

6.E.  Share Ownership

Table No. 10 lists, as of 3/31/2006, Directors and Senior Management who beneficially own Keegan's voting securities, consisting solely of common shares, and the amount of Keegan's voting securities owned by the Directors and Senior Management as a group.

Table No. 10

Shareholdings of Directors and Senior Management

Shareholdings of 5% Shareholders

______________________________________________________________________________

______________________________________________________________________________

Title of Class	Name of Beneficial Owner		Amount and Nature of Beneficial Ownership	Percent of Class
Common	Daniel T. McCoy	(1)	326,000	2.42%
Common	Tony M. Ricci	(2)	75,000	0.06%
Common	Richard J. Haslinger	(3)	190,000	1.43%
Common	Robert J. McLeod	(4)	96,000	0.07%
Common	Gordon J. Fretwell	(5)	302,500	2.26%
Common	Michael Bebek	(6)	100,000	0.07%
	Total Directors/Management 5% Holders		1,089,500	6.31%

(1)

Of these shares, 290,000 are represented by currently exercisable share purchase options and 0 are represented by currently exercisable share purchase warrants.

(2)

Of these shares, 75,000; are represented by currently exercisable share purchase options and 0 are represented by currently exercisable share purchase warrants.

(3)

Of these shares, 110,000 are represented by currently exercisable share purchase options and 0 are represented by currently exercisable share purchase warrants.

(4)

Of these shares, 70,000 are represented by currently exercisable share purchase options; and 0 are represented by currently exercisable share purchase warrants.

(5)

Of these shares, 200,000 are represented by currently exercisable share purchase options and 0 are represented by currently exercisable share purchase warrants.

(6)

Of these shares, 100,000 are represented by currently exercisable share purchase options and 0 are represented by currently exercisable share purchase warrants.

# Based on 13,209,418 shares outstanding as of 6/30/2006

Stock Options.  The terms of incentive options grantable by Keegan  are done in accordance with the rules and policies of the TSX Exchange and the British Columbia Securities Commission, including the number of common shares under option, the exercise price and expiry date of such options, and any amendments thereto.  Keegan  adopted a formal written stock option plan (the "Plan") on 6/22/2004. At the Annual Meeting held on September 29, 2006, Shareholders approved revisions to the Company’s Stock Option Plan.

38

The principal purposes of Keegan ’s Plan is to give Eligible Persons, as additional compensation, the opportunity to participate in the success of the Company. Eligible Persons include Directors, Officers, Employees, Consultants, Consultant Companies, or Management Company Employees.

The Plan provides that the aggregate number of shares of Keegan, which may be issued and sold under the Plan, is 2,774,683. All optionees under the Plan in aggregate shall not exceed 20% of the currently issued and outstanding share capital. Options granted to Insiders as a group may not exceed 20% of the issued shares, and to any one one individual may not exceed 5% of the issued shares on a yearly basis, and 2% of the issued shares on a yearly basis if the optionee is engaged in investor relations activities or is a consultant, on a non-diluted basis.

Options granted under the Plan will be exercisable over periods of up to five years as determined by the board of directors of the Company. The price of each option shall be at a price not less than the Market Price prevailing on the date the option is granted less applicable discount, if any, permitted by the policies of the Exchanges and approved by the Board. The Directors, subject to the policies of the Exchange, may determine and impose terms upon which each option shall become vested. Current policies of the TSX Venture Exchange provide that minimum vesting requirements shall be 25% of the option upon TSX Venture Exchange approval and a further 12 ½% every quarter thereafter. The Directors have adopted this vesting schedule.

If an optionee ceases to be an Eligible Person under the Plan, his her vested options will be exercisable as follows:

a)

Death or Disability: the earlier of 365 days after the date of death or disability or the Expiry Date.

b)

Termination for Cause: Cancelled as of the date of termination.

c)

Early Retirement, Voluntary Resignation or Termination Other than for Cause: The earlier of the Expiry Date or 90 datys (30 days if the Optionee was engaged in Investor Relations Activities) after the Optionee ceases to be an Eligible Person.

In the event of a bonafide Take-Over Bid where the offeror becomes a control person of the Company, all Option Shares will become vested and the option may be exercised in whole or in part by the Optionee to permit the Optionee to tender the Option Shares received in such exercise pursuant to the offer. If the Take-Over offer is not completed within the time specified, or all of the Option Shares tendered by the Optionee pursuant to the offer are not taken up or paid for by the offeror, then the option shares received upon the exercise may be returned by the Optionee to the Company and reinstated as authorized but unissued shares. In respect to such returned shares, the Option shall be reinstated as if it had not been exercised and the terms upon which such Option Shares were to become vested shall be reinstated and the Company shall refund the exercise price to the Optionee.

The names and titles of the Directors/Executive Officers of Keegan  to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in Table No. 11 as of 6/30/2006, as well as the number of options granted to Directors and independent contractors.

39

Table No. 11

Stock Options Outstanding

Name	Number of Options Granted	Exercise Price per Share	Grant Date	Expiration Date
Officers/Directors
Dan McCoy*	290,000	0.92	Feb/03/05	Feb/03/2010
Gord Fretwell	200,000	0.92	Feb/03/05	Feb/03/2010
Rob McLeod	70,000	0.92	Feb/03/05	Feb/03/2010
Richard Haslinger	70,000	0.92	Feb/03/05	Feb/03/2010
Richard Haslinger	40,000	2.48	Feb/02/06	Feb/02/2011
Michael Bebek	75,000	0.92	Feb/03/05	Feb/03/2010
Tony Ricci	75,000	1.16	Nov/22/05	Nov/22/2010
Michael Bebek	25,000	1.16	Nov/22/05	Nov/22/2010
Consultants
Ivan Bebek Shawn Wallace	200,000 200,000	0.92 0.92	Feb/03/05 Feb/03/05	Feb/03/2010 Feb/03/2010
John Eren	120,000	1.16	Nov/22/05	Nov/22/2010
Jim Slayton	20,000	2.48	Feb/02/06	Feb/02/2011
Scott Price	40,000	0.92	Feb/03/05	Feb/03/2010
Total Officers/Directors	845,000
Total Consultants	580,000
Total Outstanding	1,425,000

______________________________________________________________________________

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A.  Major Shareholders.

7.A.1.a.  Holdings By Major Shareholders.

Refer to ITEM #6.E and Table No. 10.

7.A.1.b.  Significant Changes in Major Shareholders’ Holdings.

---No Disclosure Required---

7.A.1.c.  Different Voting Rights.  Keegan ’s major shareholders do not have different voting rights.

7.A.2.  Share Ownership.

On 9/26/2006, Keegan’s shareholders’ list showed 14,411,168 common shares outstanding and 17 registered shareholders.  Of these shareholders 9 are located in Canada; 5 are located in the United States and 3 are located elsewhere. The Canadian shareholders own 14,114,871 common shares; the U.S. shareholders own 249,000 common shares; and, the other shareholders own 47,297 common shares.

7.A.3.  Control of the Company  Keegan  is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents.  Keegan  is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., “History and Growth of the Company”, and ITEM #6.E., “Share Ownership”.

7.A.4.  Change of Control of Company Arrangements

---No Disclosure Necessary---

7.B.  Related Party Transactions

Included in professional fees is $39,443 (2005 – $71,159) paid or accrued for legal fees to a company controlled by Gordon Fretwell a director and officer of the Company and $35,895 (2005 – $nil) for accounting fees to a company controlled by Tony Ricci, a director and officer of the Company.

Included in consulting fees, wages and benefits is $17,005 (2005: $Nil) paid or accrued for consulting fees paid to Michael Bebek, an officer of the Company.

40

The Company has entered into a consulting agreement with Dan McCoy, a director and officer of the Company in the amount of US$6,667 per month plus benefits. During the year ended March 31, 2006, the Company paid consulting fees and benefits of $112,307 (2005 – $45,118) under this agreement.

The Company has entered into a consulting agreement with Stacey Bligh, a former officer of the Company in the amount of CAD$3,333 per month. During the year ended March 31, 2006, the Company paid consulting fees of $15,000 (2005 – $5,833) under this agreement.

During the year ended March 31, 2006, the Company paid or accrued $11,625 (2005 - $nil) for deferred exploration costs to Richard Haslinger, a director of the Company.

These charges were measure by the exchange amount, which is the amount agreed upon by the transacting parties.

Included in accounts payable and accrued liabilities is $32,424 (2005 - $23,183) owing to Richard Haslinger a director of the Company and a company controlled by Tony Ricci, a director and officer of the Company. The prior year balance was owed to Dan McCoy, an officer and director of the Company and to a company controlled by Gordon Fretwell, also an officer and director of the Company.

During the year ended March 31, 2006, the Company issued 60,000 common shares (2005 – nil) to Dan McCoy, a director and officer of the Company pursuant to the exercise of options at $0.92 per share for total proceeds of $55,200.

Accounting Fees

Keegan  paid accounting fees of $35,895 (2005 – nil, 2004 – nil) to Tony M. Ricci, Inc., a chartered accounting firm.   

As Tony Ricci did not become related party until Nov 21, 2005 there are no related party accounting fees for the yrs ended Mar 31, 2005, 2004 or 2003

Indirect Payments

See Item 7.B Related Party Transactions

Shareholder Loans

---No Disclosure Required---

Amounts Owing to Senior Management/Directors

There is no money owing to members of senior management of members of the Board of Directors.

There have been no transactions since 6/30/2006, or proposed transactions, which have materially affected or will materially affect Keegan in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest.  

7.C.  Interests of Experts and Counsel

---No Disclosure Necessary---

ITEM 8.  FINANCIAL INFORMATION

8.A.  Consolidated Statements and Other Financial Information

Keegan 's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of Keegan , conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.

41

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Registration Statement.  The audit reports of Amisano Hanson for fiscal 2006, 2005 and 2004 are included herein immediately preceding the financial statements.

8.A.7.  Legal/Arbitration Proceedings

The Directors and the management of Keegan do not know of any material, active or pending, legal proceedings against them; nor is Keegan involved as a plaintiff in any material proceeding or pending litigation.

The Directors and the management of Keegan know of no active or pending proceedings against anyone that might materially adversely affect an interest of Keegan.

ITEM 9.  THE OFFER AND LISTING

9.A.  Common Share Trading Information

The Company's common shares trade on the TSX Venture Exchange in Vancouver, British Columbia, Canada, under the symbol "KGN".  Keegan  applied for listing on the TSX Venture Exchange and began trading on the TSX Venture Exchange on June 25, 2001.

Table No. 12 lists the high, low and closing sales prices on the TSX Venture Exchange for the last six months, last ten fiscal quarters, and last five fiscal years.

______________________________________________________________________________

______________________________________________________________________________

Table No. 12

TSX Venture Exchange (formerly the Canadian Venture Exchange)

And Toronto Stock Exchange (TSE)

Common Shares Trading Activity

- Sales -

Canadian Dollars

Period	High	Low
Month Ended 09/30/06	$2.30	$1.83
Month Ended 08/31/06	1.90	1.46
Month Ended 07/31/06	1.55	1.32
Month Ended 06/30/06	1.79	1.37
Month Ended 05/31/06	2.38	1.30
Month Ended 04/30/06	2.26	1.74
Fiscal Year Ended 3/31/2006	$2.75	$1.51
Fiscal Year Ended 3/31/2005	1.85	0.55
Fiscal Year Ended 3/31/2004	0.60	0.08
Fiscal Year Ended 3/31/2003	0.34	0.15
Fiscal Year Ended 3/31/2002	0.28	0.12
Fiscal Quarter Ended 09/30/2006	$2.30	$1.32
Fiscal Quarter Ended 06/30/2006	2.38	1.30
Fiscal Quarter Ended 03/31/2006	2.75	1.51
Fiscal Quarter Ended 12/31/2005	1.85	0.95
Fiscal Quarter Ended 09/30/2005	1.15	0.76
Fiscal Quarter Ended 06/30/2005	1.50	0.83
Fiscal Quarter Ended 03/31/2005	1.85	1.44
Fiscal Quarter Ended 12/31/2004	No Trades	No Trades
Fiscal Quarter Ended 09/30/2004	1.05	0.80
Fiscal Quarter Ended 06/30/2004	1.10	0.55

______________________________________________________________________________

______________________________________________________________________________

42

9.A.5.  Common, First Preferred and Second Preferred Share Description

Registrar/Common Shares Outstanding/Shareholders

The authorized capital of Keegan consists of an unlimited number of common shares. with no par value and an unlimited number of preferred shares with no par value.

Pacific Corporate Trust Company of Canada (located at 510 Burrard Street 2nd Floor Vancouver, BC V6C 3B9) is the registrar and transfer agent for the common shares.

Stock Options and Warrants

Refer to ITEM 6.E. and Table No. 11 for additional information.

Table No. 13 lists, as of 9/26/2006, share purchase warrants outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants.  As of 9/26/2006, Keegan  was aware of 45 holders of its share purchase warrants, 38 of whom were resident in Canada, 2 offshore and 5 in the United States.  These warrants were issued in conjunction with three private placements and the purchase of a total of 3,904,400 common shares.

Table No. 13

Share Purchase Warrants Outstanding

______________________________________________________________________________

Effective Date of Issuance	Number of Share Purchase Warrants Originally Issued	Number of Share Purchase Warrants Still Outstanding	Year #1	Year #2	Expiration Date of Share Purchase Warrants
October 13, 2005	3,104,000	526,250	1.00	1.00	October 13, 2007
Nov. 29, 2004	904,400	460,100	0.85	0.85	January 31, 2007

______________________________________________________________________________

9.C.  Stock Exchanges Identified

The common shares trade on the TSX Venture Exchange in Vancouver, British Columbia.

ITEM 10.  ADDITIONAL INFORMATION

10.A.  Share Capital

10.A.1.  Authorized/Issued Capital.  As of 10/11/2006, there was an unlimited number of common shares authorized.   

As of 3/31/2006, there were 12,164,418 common share issued. As of 9/25/2006, there were 14,114,871 common shares issued.

10.A.2.  Shares Not Representing Capital.

10.A.3.  Shares Held By Company.

---No Disclosure Necessary---

10.A.4.  Stock Options/Share Purchase Warrants

10.A.5.  Stock Options/Share Purchase Warrants

---Refer to Table No. 8 and Table No. 10.---

43

10.A.6.  History of Share Capital

Keegan  has financed its operations through funds raised in public/private placements of common shares and Special Warrants; and shares issued upon conversion of Special Warrants.

Fiscal Year	Nature of Share Issuance	Number of Shares	Amount
Fiscal 2000	Nil
Fiscal 2001	Private Sale of Escrow Shares	1,333,334	$100,000
Fiscal 2002	Initial Public Offering	3,300,000	$495,000
	Exercise of Agent’s Options	70,000	$10,500
Fiscal 2003	Pursuant to the Exercise of Share Purchase Options	95,000	$14,250.00
Fiscal 2004	Nil
Fiscal 2005	Private Placement	3,200,000	$320,000
	Private Placement	870,500	$652,875
	Finders’ fees associated with the private placements	33,900	$33,900
	Exercise of stock options	100,000	$15,000
	Payment for resource properties	341,159	$295,486
Fiscal 2006	Issued for resource property payment	246,059	$218,736
	Private Placement	3,000,000	$2,400,000
	Exercise of share purchase warrants	785,300	$745,505
	Exercise of share purchase options	122,500	$112,700
Fiscal 2007 to date	Exercise of share purchase warrants	2,132,750	$2,105,900

______________________________________________________________________________

10.A.7.  Resolutions/Authorizations/Approvals

---No Disclosure Necessary---

10.B.  Memorandum and Articles of Association

Keegan Resources Inc. (“Keegan” or the “Company”) was incorporated as “Quicksilver Ventures Inc.” on September 23, 1999 under the British Columbia Company Act. Pursuant to a resolution passed at a meeting of the shareholders of the Company that was held on August 13, 2004, the Company changed its name from Quicksilver Ventures Inc. to Keegan Resources Inc.

At the Annual and Special General meeting of the Company held on September 17, 2004, shareholders passed appropriate resolutions to complete the transition procedures to revise the Company’s Articles under the new British Columbia Business Corporations Act (the “New Act”). At the Annual and Special Meeting held on September 29, 2006, shareholders approved an increase of the number of common shares which the Company is authorized to issue to an unlimited number of common shares and an unlimited number of preferred shares. The Notice of Alteration of the Company’s Articles was filed with the British Columbia Registrar of Companies on October 11, 2006.

There are no restrictions on the business the Company may carry on in the Articles of Incorporation.

44

Under Part 17 of the Company’s Articles and Division 3 of the New Act, a director or senior officer must declare its interest in any existing or proposed contract or transaction with the Company and such director is not allowed to vote on any transaction or contract with the Company in which has a disclosable interest, unless all directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution. A director may hold any office or place of profit with the Company in conjunction with the office of director, and no director shall be disqualified by his office from contracting with the Company. A director or his firm may act in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services. A director may become a director or other officer or employee of, or otherwise interested in, any corporation or firm in which the Company may be interest ed as a shareholder or otherwise. The director shall not be accountable to the Company for any remuneration or other benefits received by him, subject to the New Act.

Part 16 of the Company’s articles address the duties of the directors. Directors must manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers which are not required to be exercised by the shareholders, or as governed by the New Act. Part 19 addresses Committees of the Board of Directors. Directors may, by resolution, create and appoint an executive committee consisting of the director or directors that they deem appropriate. This executive committee has, during the intervals between meetings of the Board, all of the directors’ powers, except the power to fill vacancies in the Board, the power to remove a Director, the power to change the membership of, or fill vacancies in, any committee of the Board and any such other powers as may be set out in the resolution or any subsequent directors’ resolution. Directors may also by resolution appoint one or more committees other than the executi ve committee. These committees may be delegated any of the directors’ powers except the power to fill vacancies on the board of directors, the power to remove a director, the power to change the membership or fill vacancies on any committee of the directors, the power to appoint or remove officers appointed by the directors, and make any delegation subject to the conditions set out in the resolution or any subsequent directors’ resolution. Part 18 details the proceedings of directors. The quorum necessary for the transaction of the business of the directors may be fixed by the directors and if not so fixed shall be two directors.

Part 8 details the borrowing powers of the Directors. They may, on behalf of the Company:

•

Borrow money in a manner and amount, on any security, from thesources and on the terms and conditions that they consider appropriate;

•

Issue bonds, debentures, and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

•

Guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

•

Mortgage, charge, whether by way of specific or floating charge, grant a security interest in or give other security on, on the whole or any part of the present or future assets and undertaking of the Company.

45

A director need not be a shareholder of the Company, and there are no age limit requirements pertaining to the retirement or non-retirement of directors. The directors are entitled to the remuneration for acting as directors, if any as the directors may from time to time determine. If the directors so decide, the remuneration of directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such who is also a director. The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors , or, at the option of that director, fixed by ordinary resolution and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

Part 21 provides for the mandatory indemnification of directors, senior officers, former directors, and alternate, as well as their respective heirs and personal or other legal representatives, or any other person, to the greatest extent permitted by the New Act. The indemnification includes the mandatory payment of expenses. The failure of a director, alternate director, or officer of the Company to comply with the Business Corporations Act or the Company’s Articles does not invalidate any indemnity to which he or she is entitled under Part 21. The directors may cause the Company to purchase and maintain insurance for the benefit of eligible parties.

The rights, preferences and restrictions attaching to each class of the Company’s shares are as follows:

Common Shares

The authorized share structure consists of an unlimited number of common shares without nominal or par value, and an unlimited number of preferred shares without nominal or par value. All the shares of common stock of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets.  Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.  Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.

Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, if any, remaining after payments of all debts and liabilities and the satisfaction of preferred shareholders, if any.  No shares have been issued subject to call or assessment.  There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.

Under Part 9 and subject to the New Act, the Company may alter its authorized share structure by special resolution. These special resolutions may:

(1)

create one or more classes or series of shares or, if none of the shares of a series of a class or series of shares are allotted or issued, eliminate that class or series of shares;

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(2)

increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the company is authorized to issue out of any class or series of shares for which no maximum is established;

(3)

subdivide or consolidate all or any of its unissued, or fully paid issued, shares;

(4)

if the Company is authorized to issue shares of a class or shares with par value;

(a)

decrease the par value of those shares; or

(b)

if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

(5)

change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;

(6)

alter the identifying name of any of its shares; or

(7)

otherwise alter its share or authorized share structure when required or permitted to do so by the New Act.

Subject to Part 9.2 and the New Act, the Company may by special resolution:

(1)

create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

(2)

vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

An annual general meeting shall be held once every calendar year at such time (not being more than 15 months after holding the last preceding annual meeting) and place as may be determined by the Directors. The Directors may, as they see fit, to convene an extraordinary general meeting. An extraordinary general meeting, if requisitioned in accordance with the New Act, shall be convened by the Directors or, if not convened by the Directors, may be convened by the requisitionists as provided in the New Act.

There are no limitations upon the rights to own securities.

There are no provisions that would have the effect of delaying, deferring, or preventing a change in control of the Company.

There is no special ownership threshold above which an ownership position must be disclosed. However, any ownership level above 10% must be disclosed to the TSX Venture Exchange and the British Columbia Securities Commission.

A copy of the Company’s revised articles is filed as an exhibit to this Form 20-F Registration Statement.

10.C.  Material Contracts

The Company currently has 6 Material Contracts in Effect, and 2 that were previously in effect during the most recent 3 fiscal years.

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Currently in Effect

1.  Black Velvet Project

Under an agreement dated December 7, 2005 between the Company and Gerald Baughman and Fabiola Baughman, the Company could earn a 100% interest in the Black Velvet project located in Pershing County, Nevada. To earn a 100% interest, the Company must deliver cash payments totaling US$150,000 and 150,000 common shares over four years under the following schedule:

Cash Payment	Common Share Issuance	Date Due
US$2,500	-	Upon Execution of the Agreement
-	10,000	Upon Exchange Approval
-	20,000	May 31, 2006
US$27,500	-	December 1, 2006
US$30,000	30,000	May 31, 2007
US$40,000	40,000	May 31, 2008
US$50,000	50,000	May 31, 2009

2.  Regent Project

Under an agreement dated March 4, 2005 between the Company and Jerry Baughman and Fabiola Baughman, the Company can earn a 100% interest (subject to a 2.5% NSR) in the Regent Project located in Mineral County, Nevada by completing US$3,000,000 in exploration work (US$250,000 in year 1); deliver cash payments totaling US$270,000 ($US80,000 in year 1); and issuing a total of 500,000 common shares (150,000 in year 1), all over a period of six years. A 2.5% NSR will remain on the property, 60% of which may be purchased by the Company (leaving a 1% NSR) for the payment of US$3,000,000. The Company also issued 35,890 common shares to Hunter Dickinson Group as a finder’s fee.

3.  Asumura Project

Under an agreement dated February 18, 2005 between the Company and GTE Ventures Limited (“GTE”) the Company can earn a 100% interest (subject to a 3.5% NSR) in the Asumura property located in Ghana by completing US$1,000,000 in exploration work (US$80,000 required in year 1) by July 31, 2007; deliever cash payments totaling US$100,000 by October 8, 2007; and issue common shares equivalent to US$100,000 in value over a period of 3 years. Once the above conditions have been met, the Company will have a 100% interest in the project, subject to a 3.5% NSR. The Company may purchase 50% of the NSR (leaving a 1.75% NSR) for the payment of US$2,000,000. The Company also issued Hunter Dickinson Group 11,270 common shares as a finder’s fee.

4.   Esaase Project

Under an agreement dated May 9, 2006 between the Company and Sammetro Co. Ltd (“Sammetro”), the Company can earn a 100% interest (subject to the Ghanian Government retaining a 10% underlying interest and NSR) in the Esaase Project located in Ghana. To earn its interest, the Company must pay US$540,000, issue 780,000 common shares, and spend US$2,250,000 in exploration on the project, all over a 4 year period, to both Sammetro and to the Esaase Liquidating Committee (the “Committee”) under the following schedule:

a)

Payment of US$100,000 by May 17, 2006;

b)

Payment of US$100,000 by June 30, 2006;

c)

Payment of US$40,000 on the first anniversary;

d)

Payment of US$300,000 to the Committee over a four year period;

e)

Issuance of 780,000 common shares to Sammetro over a four year period;

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f)

expend US$2,250,000 on exploration over a four year period.

In addition, the Company is required to pay Sammetro US$50,000 on the fourth anniversary and every anniversary thereafter until production. Upon production, the Company is required to pay US$100,000 to Sammetro and US$200,000 to the Committee.

A finder’s fee equal to 10% of the consideration paid to Sammetro is also due.

5.   Dan McCoy Consulting Agreement

Under an agreement between the Company and Dan McCoy dated January 1, 2005, Dan McCoy agrees to serve as a consultant to the Company in the capacity of President and CEO. The consultant shall be paid US$6,667 per month, and the agreement may be terminated by either party of four weeks’ written notice.

6.   Tony Ricci Consulting Agreement

Under an agreement between the Company and Tony Ricci dated December 9, 2005, Tony Ricci agrees to serve as a consultant to the Company in the capacity of Chief Financial Officer. The consultant’s position is not full-time, and shall be paid on an hourly basis for services rendered. The agreement may be terminated by either party on two weeks’ notice.

Material Contracts Previously in Effect

1.   Horse Mountain Project

Under an agreement dated July 28, 2004 between the Company and Hunter Dickinson Group Inc. (“HDG”), the Company entered into an assignment agreement with HDG where HDG assigned its interest in a letter agreement between HDG, Anaconda Gold (“Anaconda”) on the Horse Mountain property in Elko County, Nevada. Under the agreement, the Company could earn a 55% interest in the Anaconda Horse Mountain claims by making exploration expenditures of US$1,500,000 over 6 years, with the first US$150,000 mandatory in Year 1, as well as making US$385,000 in cash option payments over 4 years, with US$80,000 payable in year one of which $15,000 was payable with 24,000 common shares of Keegan. The Company also reimbursed Anaconda US$68,376.50 through the issuance of 100,000 common shares for past Bureau of Land Management (“BLM”) fees and reimbursed HDG for out of pocket expenses of CAN$111,600 through the issuance of 131,294 common shares of Keegan. Keegan also reimbursed HDM US$23,376.50 for BLM payments due September 1, 2004 which HDG had already paid. Once the Company had earned a 55% interest in the property, it could earn an additional 15% (for a total interest of 70%) by funding a feasibility study. The Company could purchase a 100% interest in the Anaconda Horse Mountain claims for US$7,500,000. The Company also issued 25,000 common shares to Anaconda to opt-out of an Area of Influence clause contained in the original agreement.

Under a separate agreement between the Company and Barrick Gold (“Barrick”), the Company could earn a 70% interest in additional claims which made up the Horse Mountian Project. Under this agreement, the Company was required to make exploration expenditures of US$1,500,000 over four years, with the first US$200,000 in expenditures mandatory in Year 1. Once Keegan had earned its 70% interest, Barrick could, at its election, form a joint venture with Keegan at an initial 30% interest; earn back up to a 70% interest by making the next US$3,000,000 in exploration expenditures; or Keegan could purchase Barrick’s 30% interest for US$2,500,000 within one year, with Barrick retaining a 2% NSR.

During the year ended March 31, 2006, the Company decided not to further pursue the option agreement on the property and wrote down its entire capitalized acquisition and deferred exploration costs.

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2.  Fri Property

Under an agreement dated May 31, 2005 between the Company and Gerald Baughman and Fabiola Baughman, the Company could acquire a 100% interest (subject to a 2.5% NSR) in the Fri property located in Nye County, Nevada. Under the agreement, the Company could earn the 100% interest by making US$285,000 in cash payments over 5 years; issuing 500,000 common shares over 5 years; and expending US$3,000,000 in work expenditures on the property over 5 years. The property would be subject to a 2.5% NSR, which the Company could purchase 60% (leaving a 1% NSR) for the payment of US$3,000,000.

During the year ended March 31, 2006, the Company decided not to further pursue the option agreement on the property and wrote down its entire capitalized acquisition and deferred exploration costs.

Copies of all the material contracts discussed above have been filed as exhibits to this Registration Statement.

10.D.  Exchange Controls

Canada has no system of exchange controls.  There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors.  There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of Keegan ’s securities, except as discussed in ITEM 10, ”Taxation" below.

Restrictions on Share Ownership by Non-Canadians:  There are no limitations under the laws of Canada or in the organizing documents of Keegan  on the right of foreigners to hold or vote securities of Keegan , except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of Keegan  by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of Keegan . "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.

10.E.  Taxation

The following summary of the material Canadian federal income tax consequences generally applicable in respect of the common stock reflects the Company’s opinion.  The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder’s particular circumstances.  This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arm’s length with the Company, hold their common stock as capital property and who will not use or hold the common stock in carrying on business in Canada.  Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.

This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the "Tax Act" or “ITA”)and the Canada-United States Tax Convention (the “Tax Convention”) as at the date of the Annual Report and the current administrative practices of Canada Customs and Revenue Agency.  This summary does not take into account provincial income tax consequences.

Management urges each holder to consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.

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CANADIAN INCOME TAX CONSEQUENCES

Disposition of Common Stock.

The summary below is restricted to the case of a holder (a “Holder”) of one or more common shares (“Common Shares”) who for the purposes of the Tax Act is a non-resident of Canada, holds his Common Shares as capital property and deals at arm’s length with the Company.

Dividends

A Holder will be subject to Canadian withholding tax (“Part XIII Tax”) equal to 25%, or such lower rates as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on his Common Shares. Under the Tax Convention, the rate of Part XIII Tax applicable to a dividend on Common Shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and, in any other case, 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares

A Holder who disposes of Common Shares, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain thereby realized unless the common Share constituted “taxable Canadian property” as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder unless he held the common share as capital property used by him carrying on a business in Canada, or he or persons with whom he did not deal at arm’s length alone or together held or held options to acquire, at any time within the 60 months preceding the disposition, 25% or more of the issued shares of any class of the capital stock of the Company.

A Holder who is a resident of the United States and realizes a capital gain on disposition of Common Shares that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the Common Shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resources properties, (b) the Common Shares formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or (c) the Holder (i) was a resident of Canada at any time within the ten years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the Common Shares when he ceased to be resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on disposition of Common Shares must include one half of the capital gain (“taxable capital gain”) in computing his taxable income earned in Canada. The Holder may, subject to certain limitations, deduct one half of any capital loss (“allowable capital loss”) arising on disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains of any of the three preceding years or any subsequent year.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of material United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of common shares of the Company. This discussion does not cover any state, local or foreign tax consequences.

51

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury Regulations, published Internal Revenue Service (“IRS) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possible on a retroactive basis, at any time.  In addition, the discussion does not consider the potential effects, both adverse and beneficial, or recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company. Each holder and prospective holder of common shares of the Company is advised to consult their own tax advisors about the federal, state, local, and foreign t ax consequences of purchasing, owning and disposing of common shares of the Company applicable to their own particular circumstances.

U.S. Holders

As used herein, a (“U.S. Holder”) includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, an estate whose income is taxable in the United States irrespective of source or a trust subject to the primary supervision of a court within the United States and control of a United States fiduciary as described in Section 7701(a)(30) of the Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholde rs who hold common shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

Distribution on Common Shares of the Company

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal Income tax liability or, alternatively, individuals may be deducted in computing the U.S. Holder’s United States Federal taxable income by those individuals who itemize deductions.  (See more detailed discussion at “Foreign Tax Credit” below).  To the extent that distributions exceed current or a ccumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Dividend income will be taxed at marginal tax rates applicable to ordinary income while preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust.  There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

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In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale of other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.

Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.  The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

Under current Treasury Regulations, dividends paid on the Company’s common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends and the proceeds from a sale of the Company’s common shares paid in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

For individuals whose entire income from sources outside the United States consists of qualified passive income, the total amount of creditable foreign taxes paid or accrued during the taxable year does not exceed $300 ($600 in the case of a joint return) and an election is made under section 904(j), the limitation on credit does not apply.

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax.  This election is made on a year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year.  There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his/her or its worldwide taxable income in the determination of the application of this limitation. The various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process.  In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income. Dividends distributed by the Company will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes.  The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and management urges holders and prospective holders of common shares of the Company to consult their own tax advisors regarding their individual circumstances.

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Disposition of Common Shares of the Company

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (I) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company.  Preferential tax rates apply to long-term capital gains of U.S. Holders, which are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are capital assets in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders, which are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted, but individuals may not carry back capital losses. For U.S. Holders, which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company’s outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% (50% after the first tax year) or more of the Company’s gross income for such year was derived from certain passive sources (e.g. from interest income received from its subsidiaries), the Company would be treated as a “foreign personal holding company.”  In that event, U.S. Holders that hold common shares of the Company would be required to include in gross income for such year their allocable portions of such passive income to the extent the Company does not actually distribute such income.

The Company does not believe that it currently has the status of a “foreign personal holding company”. However, there can be no assurance that the Company will not be considered a foreign personal holding company for the current or any future taxable year.

Foreign Investment Company

If 50% or more of the combined voting power or total value of the Company’s outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Company might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.

Passive Foreign Investment Company

As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1297 of the Code, depending upon the percentage of the Company’s income which is passive, or the percentage of the Company’s assets which is held for the purpose of producing passive income.

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Certain United States income tax legislation contains rules governing PFICs, which can have significant tax effects on U.S. shareholders of foreign corporations.  These rules do not apply to non-U.S. shareholders.  Section 1297 (a) of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (I) 75% or more of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the company is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more.  The taxation of a US shareholder who owns stock in a PFIC is extremely complex and is therefore beyond the scope of this discussion.  Management urges US persons to consult with their own tax advisors with regards to the im pact of these rules.  

Controlled Foreign Corporation

A Controlled Foreign Corporation (CFC) is a foreign corporation more than 50% of whose stock by vote or value is, on any day in the corporation’s tax year, owned (directly or indirectly) by U.S. Shareholders. If more than 50% of the voting power of all classes of stock entitled to vote is owned, actually or constructively, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own actually or constructively 10% or more of the total combined voting power of all classes of stock of the Company could be treated as a “controlled foreign corporation” under Subpart F of the Code.  This classification would affect many complex results, one of which is the inclusion of certain income of a CFC, which is subject to current U.S. tax. The United States generally taxes United States Shareholders of a CFC currently on their pro rata shares of the Subpa rt F income of the CFC. Such United States Shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation which is or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company (accumulated in corporate tax years beginning after 1962, but only while the shares were held and while the Company was “controlled”) attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to the United States Shareholders of the CFC. This rule generally will be effective for taxable years of United States Shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States Shareholders. The PFIC provisions continue to apply in the case of PFIC that is also a CFC with respect to the U.S. Holders that are less than 10% shareholders. Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion.

The amount of any backup withholding will not constitute additional tax and will be allowed as a credit against the U.S. Holder’s federal income tax liability.

Filing of Information Returns.  Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply, and management urges United States Investors to consult their own tax advisors concerning these requirements.

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10.G.  Statement by Experts  

Keegan’s financial statements for the years ended March 31, 2006, 2005, and 2004 have been audited by Amisano Hanson, Independent Chartered Accountants.  Their audit report is included with the related financial statements in this Registration Statement with their consent.

10.H.  Document on Display

--- No Disclosure Necessary ---

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--- No Disclosure Necessary ---

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A.  Debt Securities            --- No Disclosure Necessary ---

12.B.  Warrants and Rights        --- No Disclosure Necessary ---

12.C.  Other Securities           --- No Disclosure Necessary ---

12.D.  American Depository Shares  -- No Disclosure Necessary ---

PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

--- No Disclosure Necessary ---

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

          HOLDERS AND USE OF PROCEEDS

--- No Disclosure Necessary ---

ITEM 15.  CONTROLS AND PROCEDURES

---Not Applicable---

ITEM 16.  RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

ITEM 16B. CODE OF ETHICS

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

ITEM 16E. PURCHASES OF EQUITY SECFURITIES BY KEEGAN/AFFILIATED PURCHASERS

---Not Applicable---

PART III

ITEM 17.  FINANCIAL STATEMENTS

Keegan 's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of Keegan, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Registration Statement.  The audit report of Amisano Hanson, Independent Chartered Accountants, is included herein immediately preceding the audited financial statements.

ITEM 18.  FINANCIAL STATEMENTS

Keegan  has elected to provide financial statements pursuant to ITEM #17.

56

ITEM 19.  EXHIBITS

1. Certificate of Incorporation, Certificate of Name Change, Articles of Incorporation and By-Laws and Notice of Alteration

2. Instruments defining the rights of holders of the securities being registered

***See Exhibit Number 1***

3. Voting Trust Agreements – N/A

4. Material Contracts

a) Black Velvet Project – Agreement dated December 7, 2005 between the Company and Gerald Baughman and Fabiola Baughman

b)  Regent Project – Agreement dated March 4, 2005 between the Company and Jerry Baughman and Fabiola Baughman

c)  Asumura Project – Agreement dated February 18, 2005 between the Company and GTE Ventures Limited

d)  Easaase Project – Agreement dated May 9, 2006 between the Company and Sammetro Co. Ltd.

e)  Dan McCoy Consulting Agreement – Agreement between the Company and Dan McCoy dated January 1, 2005.

f)  Tony Ricci Consulting Agreement – Agreement between the Company and Tony Ricci dated December 9, 2005.

g)  Horse Mountain Project – Agreement dated July 28, 2004 between the Company and Hunter Dickinson Group Inc.

h)  Fri Project – Agreement dated May 31, 2005 between the Company and Gerald Baughman and Fabiola Baughman

5. List of Foreign Patents – N/A

6. Calculation of earnings per share – N/A

7. Explanation of calculation of ratios – N/A

8. List of Subsidiaries

9. Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities – N/A

10.Other documents

Copy of Keegan’s Stock Option Plan

Information Circular

Form of Proxy for the Annual General Meeting held on September 29, 2006.

Auditor Consent dated October 4, 2006

Signature Page          

57

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Auditors’ Report and

Consolidated Financial Statements

Years ended March 31, 2006 and 2005

_______________________

58

A PARTNERSHIP OF INCORPORATED PROFESSIONALS	AMISANO HANSON
	CHARTERED ACCOUNTANTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of

Keegan Resources Inc.

(An Exploration Stage Company)

We have audited the consolidated balance sheets of Keegan Resources Inc. (An Exploration Stage Company) as at March 31, 2006 and 2005 and the consolidated statements of operations, cash flows and stockholders’ deficiency for the years ended March 31, 2006, 2005 and 2004.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America).  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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2006 and 2005 and the results of its operations and its cash flows for the years ended March 31, 2006, 2005 and 2004 in accordance with Canadian generally accepted accounting principles.

Comments by Auditor for US Readers on Canada-US Reporting Conflict

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is substantial doubt about a Company’s ability to continue as a going concern.  The accompanying financial statements hae been prepared on the basis of accounting principles applicable to a going concern, which assumes the realization of assets and discharge of liabilities in the normal course of business.  As discussed in Note 1 to the accompanying financial statements, the Company has accumulated substantial losses since its inception and expects to incur further losses in the development of its business.  Its ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

Our report to the shareholders dated July 20, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditor's report when these are adequately disclosed in the consolidated financial statements.

Vancouver, Canada	“AMISANO HANSON”
July 20, 2006	Chartered Accountants

750 WEST PENDER STREET, SUITE 604	TELEPHONE:  604-689-0188
VANCOUVER CANADA	FACSIMILE:  604-689-9773
V6C 2T7	E-MAIL:  amishan@telus.net

59

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Balance Sheets

March 31, 2006 and 2005

Expressed in Canadian Dollars

	2006	2005
Assets
Current assets:
Cash	$        838,809	$       674,917
Goods and services taxes recoverable	25,089	29,727
Prepaid expenses and deposits	21,837	8,500
	885,735	713,144
Furniture, equipment and leasehold improvements (note 3)	37,430	45,950
Mineral properties (notes 4, 6 and 9)	1,449,047	529,236
	$     2,372,212	$    1,288,330
Liabilities
Current liabilities:
Accounts payable and accrued liabilities (note 6)	$        260,509	$         48,913
Shareholders’ Equity
Capital stock (note 5)	4,981,915	1,674,328
Contributed surplus (note 5)	867,367	313,649
Deficit accumulated during the exploration stage	(3,737,579)	(748,560)
	2,111,703	1,239,417
	$     2,372,212	$    1,288,330

Nature and continuance of operations (note 1)

Commitments (notes 4 and 7)

Subsequent events (notes 4 and 9)

Approved by the Directors:

“Dan McCoy”       

_________________________  Director

“Tony Ricci”

_________________________  Director

60

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Operations

Years ended March 31, 2006, 2005 and 2004

Expressed in Canadian Dollars

	2006	2005	2004
Expenses:
Amortization	$          10,336	$            5,710	$                    -
Bank charges and interest	2,894	674	121
Consulting fees, wages and benefits (note 6)	372,304	111,060	-
Office, rent and administration	99,718	79,293	6,614
Professional fees (note 6)	119,794	104,601	39,908
Regulatory	34,001	19,389	5,335
Stock-based compensation (note 5)	557,202	194,961	-
Transfer agent and shareholder information	109,440	41,186	6,499
Travel, promotion and investor relations	492,366	44,263	2,161
	1,798,055	601,137	60,638
Other expenses (income):
Interest	(10,779)	(3,721)	(9,781)
Foreign exchange	3,625	31,956	-
Write-off of interest in mineral properties	1,198,118	-	5,000
	1,190,964	28,235	(4,781)
Net loss for the year	$     2,989,019	$        629,372	$           55,857
Loss per share – basic and diluted	$               0.31	$              0.09	$               0.01
Weighted average number of shares outstanding	9,601,522	6,648,223	4,590,115

61

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statement of Stockholders’ Equity

for the period from September 23, 1999 (Date of Inception) to March 31, 2006

Expressed in Canadian Dollars

				Deficit
				Accumulated
	Number of			During the
	Common		Contributed	Exploration
	Shares	Amount	Surplus	Stage	Total
Common shares issued for cash on incorporation	1	$                   1	$                   -	$                       -	$                     1
Net loss for the period	-		-	(11)	(11)
Balance, March 31, 2000	1	1	-	(11)	(10)
Common shares returned to treasury and cancelled	(1)	(1)	-	-	(1)
Common shares issued for cash pursuant to   an escrow agreement - at $0.08	1,333,334	100,000	-	-	100,000
Net loss for the year	-	-	-	(9,675)	(9,675)
Balance, March 31, 2001	1,333,334	100,000	-	(9,686)	90,314
Common shares issued for cash:
Pursuant to the initial public offering - at $0.15	3,300,000	495,000	-	-	495,000
Less: issue costs	-	(86,895)	-	-	(86,895)
Pursuant to the exercise of options - at $0.15	70,000	10,500	-	-	10,500
Net loss for the year	-	-	-	(22,082)	(22,082)
Balance, March 31, 2002	4,703,334	518,605	-	(31,768)	486,837
Common shares issued for cash pursuant  to the exercise of options - at $0.15	95,000	14,250	-	-	14,250
Net loss for the year	-	-	-	(31,563)	(31,563)
Balance, March 31, 2003	4,798,334	532,855	-	(63,331)	469,524
Escrow shares cancelled and returned to treasury	(1,333,334)	(100,000)	100,000	-	-
Net loss for the year	-	-	-	(55,857)	(55,857)
Balance, March 31, 2004	3,465,000	423,855	100,000	(119,188)	413,667
Common shares issued for cash
Pursuant to a private placement - at $0.10	3,200,000	320,000	-	-	320,000
- at $0.75	870,500	652,875	-	-	652,875
Finder’s fee	33,900	33,900	-	-	33,900
Less: finder’s fees	-	(57,100)	-	-	(57,100)
Pursuant to the exercise of options - at $0.15	100,000	15,000	-	-	15,000
Common shares issued on acquisition of  mineral properties - at $0.85	216,159	183,736	-	-	183,736
- at $0.90	100,000	90,000	-	-	90,000
- at $0.87	25,000	21,750	-	-	21,750
Stock based compensation	-	-	194,961	-	194,961
Brokers’ warrants issued	-	(18,688)	18,688	-	-
Net loss for the year	-	-	-	(629,372)	(629,372)
Balance, March 31, 2005	8,010,559	1,674,328	313,649	(748,560)	1,239,417

…/cont’d

62

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statement of Stockholders’ Equity

Continued

for the period from September 23, 1999 (Date of Inception) to March 31, 2006

Expressed in Canadian Dollars

				Deficit
				Accumulated
	Number of			During the
	Common		Contributed	Exploration
	Shares	Amount	Surplus	Stage	Total
Balance, March 31, 2005	8,010,559	1,674,328	313,649	(748,560)	1,239,417
Common sharres issued for cash
Pursuant to a private placement - at $0.80	3,000,000	2,400,000	-	-	2,400,000
Less: issue costs	-	(240,223)	-	-	(240,223)
Pursuant to the exercise of warrants - at $0.85	265,300	225,505	-	-	225,505
- at $1.00	520,000	520,000	-	-	520,000
Pursuant to the exercise of options - at $0.92	122,500	112,700	-	-	112,700
Transferred from contributed surplus for the  exercise of options	-	70,869	(70,869)	-	-
Common shares issued on acquisiton of  mineral properties - at $0.85	72,160	61,336	-	-	61,336
- at $0.88	150,000	132,000	-	-	132,000
- at $0.72	13,899	10,000	-	-	10,000
- at $1.54	10,000	15,400	-	-	15,400
Stock based compensation	-	-	557,202	-	557,202
Brokers’ warrants	-	-	67,385	-	67,385
Net loss for the year	-	-	-	(2,989,019)	(2,989,019)
Balance, March 31, 2006	12,164,418	$ 4,981,915	$  867,367	$(3,737,579)	$ 2,111,703

63

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

Years ended March 31, 2006, 2005 and 2004

Expressed in Canadian Dollars

	2006	2005	2004
Cash provided by (used in)
Operations:
Net loss for the year	$ (2,989,019)	$ (629,372)	$ (55,857)
Items not involving cash:
Amortization	10,336	5,710	-
Stock based compensation	557,202	194,961	-
Write-off of interst in mineral properties	1,198,118	-	-
Changes in non-cash working capital:
Goods and services taxes recoverable	4,638	(26,643)	(1,065)
Prepaid expense and deposits	(13,337)	19,180	(2,918)
Accounts payable and accrued liabilities	211,596	8,157	26,474
	(1,020,466)	(428,007)	(33,366)
Investing:
Purchase of furniture, equipment and leasehold  improvements	(1,816)	(51,660)	-
Acquisition of interest in mineral properties	(180,471)	(202,595)	-
Deferred exploration	(1,718,723)	(31,155)	-
	(1,901,010)	(285,410)	-
Financing:
Shares issued for cash, net of share issue costs	3,085,368	964,675	-
Increase (decrease) in cash and cash equivalents	163,892	251,258	(33,366)
Cash, beginning of year	674,917	423,659	457,025
Cash, end of year	$ 838,809	$ 674,917	$ 423,659
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$ -	$ -	$ -
Income txes	$ -	$ -	$ -
Non-cash transactions (note 10)

64

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Mineral Property Costs

Year ended March 31, 2006

Expressed in Canadian Dollars

	United States				Ghana
	Horse Mountain	Fri	Regent	Black Velvet	Asumura	Total
Balance, March 31, 2005	$ 430,066	$ -	$ 55,553	$ -	$ 43,617	$ 529,236
Acquisition costs
Cash	109,029	25,246	43,316	2,880	-	180,471
Shares	-	21,250	162,506	15,400	19,580	218,736
	109,029	46,496	205,822	18,280	19,580	399,207
Deferred exploration costs
Assays	3,925	9,184	2,818	-	129,441	145,368
Consulting	3,350	1,266	4,650	-	16,647	25,913
Drilling	374,160	59,818	198,867	-	176,340	809,185
Equipment rental	-	-	-	-	82,831	82,831
Field supplies	-	5,741	-	-	47,273	53,014
Geological fees and  expenses	47,715	24,852	49,786	-	54,644	176,997
Miscellaneous	-	-	-	-	7,583	7,583
Property maintenance	50,342	32,174	68,493	-	24,563	175,572
Telephone	-	-	-	-	5,068	5,068
Travel and accommodation	-	-	-	-	48,288	48,288
Wages and salaries	-	-	-	-	188,903	188,903
	479,492	133,035	324,614	-	781,581	1,718,722
Less: write-off of mineral  property costs	(1,018,587)	(179,531)	-	-	-	(1,198,118)
Balance, March 31, 2006	$ -	$ -	$ 585,989	$ 18,280	$ 844,778	$ 1,449,047

65

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Mineral Property Costs

Year ended March 31, 2005

Expressed in Canadian Dollars

	United States		Ghana
	Horse Mountain	Regent	Asumura	Total
Balance, March 31, 2004	$ -	$ -	$ -	$ -
Acquisition costs
Cash	142,430	55,553	12,462	210,445
Shares	287,636	-	-	287,636
	430,066	-	12,462	498,081
Deferred exploration costs
Assays	-	-	1,309	1,309
Consulting	-	-	512	512
Equipment rental	-	-	2,991	2,991
Exploration advance	-	-	6,037	6,037
Field supplies	-	-	2,856	2,856
Geological fees and expenses	-	-	597	597
Property maintenance	-	-	205	205
Telephone	-	-	402	402
Travel and accommodation	-	-	3,691	3,691
Wages and salaries	-	-	12,555	12,555
	-	-	31,155	31,155
Balance, March 31, 2005	$ 430,066	$ 55,553	$ 43,617	$ 529,236

66

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 1

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

1.

Nature and continuance of operations

The Company was incorporated on September 23, 1999 under the laws of British Columbia. The Company was a capital pool company as defined in the TSX Venture Exchange (the “Exchange”) Policy 2.4.  

During the year ended March 31, 2004, the common shares of the Company commenced trading on the NEX. NEX is a separate board of the Exchange for companies which were previously listed on the Exchange which have failed to maintain compliance with the ongoing financial listing standards of the Exchange. NEX was created so publicly listed shell companies may still continue to trade their securities while they seek and undertake transactions to complete their reactivation.

During the year ended March 31, 2006, the Company completed its Qualifying Transaction through the acquisition of interests in mineral properties (see note 4). As a result, the Company is no longer considered a capital pool company. The Company’s listing has been transferred from NEX to TSX Venture under a Tier 2 issuer classification. In conjunction with the completion of the Qualifying Transaction, the Company changed its name from Quicksilver Ventures Inc. to Keegan Resources Inc.  

The Company is in the exploration stage and its principal business activity is the sourcing and exploration of mineral properties. The Company has interest in mineral properties located in the United States and the Republic of Ghana.

The recoverability of amounts shown for mineral properties and related deferred exploration costs is dependent upon the discovery of economically recoverable reserves, continuation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete their development and upon future profitable production or proceeds from the disposition thereof.

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2006, the Company had working capital of $625,226 which may be insufficient to sustain operations over the next twelve months, had not yet achieved profitable operations and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  

67

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 2

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

2.

Significant accounting policies

The consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  The consolidated financial statements have, in management’s opinion, been properly prepared using careful judgment within the framework of the significant accounting policies summarized below.

(a)

Basis of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned inactive subsidiary, Quicksilver Ventures (Nevada), Inc.. All significant intercompany amounts and transactions have been eliminated on consolidation.

(b)

Financial instruments

The carrying amounts of cash and accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of these instruments.  Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

(c)

Furniture, equipment and leasehold improvements

Furniture, equipment and leasehold improvements are carried at cost less accumulated amortization. Amortization is determined at rates which will reduce original cost to estimated residual value over the useful life of each asset. The annual rates used to compute amortization are as follows:

Asset	Basis	Rate
Furniture and equipment	declining balance	20%
Computers	declining balance	30%
Leasehold improvements	Straight-line	term of lease

Amortization is recorded at half the annual rate in the year of acquisition.

68

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 3

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

2.

Significant accounting policies (continued)

(a)

Mineral properties and deferred exploration costs

The Company accounts for mineral property costs in accordance with the Canadian Institute of Chartered Accountants Handbook Section 3061, “Property, plant and equipment” (“CICA 3061”), and abstract EIC-126, “Accounting by Mining Enterprises for Exploration Costs” (“EIC-126”) of the Emerging Issues Committee. CICA 3061 provides for the capitalization of the acquisition and exploration costs of a mineral property where such costs are considered to have the characteristics of property, plant and equipment. EIC-126 provides that a mining enterprise is not precluded from considering exploration costs to have the characteristics of property, plant and equipment when it has not established mineral reserves objectively and therefore does not have a basis for preparing a projection of the estimated future net cash flow from the property.

Mineral property costs include initial acquisition costs and related option payments, which are recorded when paid. Exploration and development costs are capitalized until properties are brought into production, when costs are amortized on a unit-of-production basis over economically recoverable reserves. Option payments are credited against mineral property costs when received. No gain or loss on disposition of a partial interest is recorded until all carrying costs of the interest have been offset by proceeds of sale or option payments received.  No gain or loss on disposition of a partial interest is recorded until all carrying costs of the interest have been offset by proceeds of sale or option payments received.

CICA 3061 also provides that property, plant and equipment be written down when the long-term expectation is that the net carrying amount will not be recovered. EIC-126 states that a mining enterprise which has not objectively established mineral reserves and therefore does not have a basis for preparing a projection of the estimated future cash flow from a property is not obliged to conclude that the capitalized costs have been impaired. However, EIC-126 references certain conditions that should be considered in determining subsequent write-downs, such as changes or abandonment of a work program or poor exploration results, and management reviews such conditions to determine whether a write-down of capitalized costs is required. When the carrying value of a property exceeds its net recoverable amount, provision is made for the impairment in value.

Accounting standards subsequently issued by the CICA dealing with Intangible Assets (CICA 1581 and CICA 3062) include reference to “Use rights such as drilling, water, air, mineral, timber cutting, and route authorities” as examples of intangible assets. CICA 3062 also states, inter alia, that intangible assets should be amortized over their useful life and tested for impairment. Management has reviewed this potential reporting conflict with the previously issued standards and is of the opinion that it is appropriately accounting for its mineral properties as having the characteristics of property, plant and equipment.

69

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 4

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

2.

Significant accounting policies (continued)

(e)

Asset retirement obligations

Effective April 1, 2004, the Company adopted the CICA Handbook Section 3110, “Asset Retirement Obligations” (“HB 3110”). HB 3110 requires that the fair value of a liability for an asset retirement obligation, such as site reclamation costs, be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company is required to record the estimated present value of future cash flows associated with site reclamation as a liability when the liability is incurred and increase the carrying value of the related assets for that amount. The obligations recognized are statutory, contractual or legal obligations.  The liability is accreted over time for changes in the fair value of the liability through charges to accretion, which is included in depletion, amortization and accretion expense.  The costs capitalized to the related assets are amortized in a manner consistent with the depletion and amortization of the related asset.  

As of March 31, 2006, the Company has determined that it does not have material obligations for asset retirement obligations. Accordingly, adoption of HB 3110 had no impact on the consolidated financial statements.

(f)

Foreign currency translation

Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary items are translated at exchange rates prevailing when the assets were acquired or the obligations incurred. Foreign currency denominated revenue and expense items are translated at exchange rates prevailing at the transaction date. Exchange gains or losses arising on foreign currency translation are included in the determination of operating results for the year.

(g)

Earnings (loss) per share

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments.  Under this method the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.  It assumes that the proceeds would be used to purchase common shares at the average market price during the year.

Basic earnings (loss) per share is calculated using the weighted-average number of shares outstanding during the year.  For the years ended March 31, 2006, 2005 and 2004, the inclusion of the Company’s stock options and warrants in the computation of diluated loss per share would have an anti-dilutive effect on loss per share and therefore are excluded from the computation.

70

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 5

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

2.

Significant accounting policies (continued)

(h)

Stock-based compensation

The Company accounts for the granting of share purchase options to employees and non-employees using the fair value method whereby all awards to employees and non-employees will be recorded at fair value on the date of the grant.  The fair value of all share purchase options are expensed over their vesting period with a corresponding increase to contributed surplus.  Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital.

The Company uses the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of grant.  Option pricing models require the input of highly subjective assumptions, including the expected price volatility.  Changes in these assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s share purchase options.

(i)

Income taxes

The Company accounts for income taxes by the asset and liability method.  Under this method, current income taxes are recognized for the estimated income taxes payable for the current year.  Future income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are more likely than not to be realized.

3.

Furniture, equipment and leasehold improvements

		Accumulated	Net book
2006	Cost	amortization	value
Furniture and equipment	$  32,761	$    9,039	$   23,722
Computers	14,145	5,456	8,689
Leasehold improvements	6,570	1,551	5,019
	$  53,476	$  16,046	$  37,430

71

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 6

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

3.

Furniture, equipment and leasehold improvements (continued)

		Accumulated	Net book
2005	Cost	amortization	Value
Furniture and equipment	$         32,014	$          3,201	$         28,813
Computers	13,076	1,961	11,115
Leasehold improvements	6,570	548	6,022
	$         51,660	$          5,710	$         45,950

4.

Mineral properties

Title to mineral properties 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 frequent ambiguous conveyancing history characteristic of many mineral properties.  The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to all of its properties are in good standing.  However, this should not be construed as a guarantee to title.  The concessions may be subject to prior claims, agreements or transfer and rights of ownership may be affected by undetected defects.

(a)

Horse Mountain Claims

During the year ended March 31, 2005, the Company entered into agreements with Hunter Dickinson Group Inc. (“HDG”), Anaconda Gold (USA) Inc. (“Anaconda”) and Barrick Gold Exploration Inc. (“Barrick”), whereby it has acquired the right to earn an interest in the Horse Mountain Project in Nevada. The transactions with Anaconda and Barrick (collectively the “Acquisition”) served as the Company’s Qualifying Transaction for the purposes of the policies of the Exchange.

Pursuant to an assignment agreement entered into on August 5, 2004 between the Company and HDG (the “Anaconda Agreement”), the Company was assigned HDG’s interest in a letter agreement dated August 7, 2003 between HDG and Anaconda as amended by letter agreement dated July 28, 2004 among HDG, Anaconda and the underlying owners to acquire an interest in 223 mining claims situated in Elko County, Nevada (the “Anaconda Horse Mountain Claims) that form part of the Horse Mountain Project. Pursuant to the terms of an option agreement entered into on August 16, 2004 between the Company and Barrick (the “Barrick Agreement”), the Company may earn an interest in 35 mining claims and a mining lease situated in Elko County, Nevada (the “Barrick Horse Mountain Claims”) that form the balance of the Horse Mountain Project.

72

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 7

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

4.

Mineral properties (continued)

(a)

Horse Mountain Claims (continued)

Under the terms of the Anaconda Agreement, the Company was assigned the right and option to earn a 55% interest in the Anaconda Horse Mountain Claims as follows:

i)

by making cumulative exploration expenditures of US$1,500,000 by August 31, 2010 as follows:

Year 1 – US$150,000 (incurred)

Year 2 – US$225,000 (incurred)

Year 3 – US$300,000

Year 4 – US$300,000

Year 5 – US$300,000

Year 6 – US$225,000

ii)

by making US$385,000 in option payments to Anaconda:

Year 2004 – US$  80,000 (paid)

Year 2005 – US$  90,000 (paid)

Year 2006 – US$115,000 (of which $57,500 is payable in shares)

Year 2007 – US$100,000 (of which $50,000 is payable in shares)

iii)

by issuing to Anaconda 100,000 common shares (issued during the year ended March 31, 2005) of the Company as reimbursement for the payment by Anaconda of US$68,376 for past Bureau of Land Management (“BLM”) fees and past option payments to the underlying vendors; and

iv)

by providing HDG with consideration for assigning its rights to the Anaconda Horse Mountain Claims as follows:

a)

issuing to HDG 141,159 common shares of the Company for reimbursement of $119,986 of out of pocket costs incurred by HDG (issued during the year ended March 31, 2005);

b)

issuing to HDG a further 75,000 common shares (issued during the year ended March 31, 2005); and

c)

reimbursing HDG for US$23,376.50 for 2004 BLM payments made by HDG on the Anaconda Horse Mountain Claims and US$5,925 for holding costs on the Barrick Horse Mountain Claims (paid during the year ended March 31, 2005).

Pursuant to a letter agreement dated July 21, 2004 between the Company and Anaconda, the Company issued to Anaconda 25,000 common shares for the one time right to opt out of the area of influence (AOI) clause applicable pursuant to the terms of the Anaconda Agreement. The Company also agreed to issue an additional 100,000 common shares to Anaconda for the permanent right to opt out of the AOI clause if and when the Company earns its 70% interest in the Barrick Horse Mountain Claims.

73

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 8

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

4.

Mineral properties (continued)

(a)

Horse Mountain Claims (continued)

Under the terms of the Barrick Agreement, the Company can earn a 70% interest in the Barrick Horse Mountain Claims by making exploration expenditures of US$1,500,000 over four years as follows:

Year 1 – US$200,000

Year 2 – US$300,000

Year 3 – US$400,000

Year 4 – US$600,000

During the year ended March 31, 2006, the Company decided not to pursue its option agreement on the Horse Mountain claims and as a result, $1,018,587 in acquisition and deferred exploration expenditures were written-off.

(b)

Regent Gold Silver Project

Pursuant to an agreement dated March 4, 2005, between the Company and Jerry Baughman and Fabiola Baughman (“Optionors”), the Company may acquire 100% of the Regent Gold Silver Project (“Regent property”)  located in Mineral County, Nevada, on the following terms:

i)

pay US$305,000 as follows:

- US$45,000 upon signing the agreement (paid);

- US$35,000 on June 15, 2005 (paid);

- US$45,000 on June 15, 2006 (paid subsequent to March 31, 2006);

- US$50,000 on June 15, 2007;

- US$55,000 on June 15, 2008; and

- US$75,000 on June 15, 2009

ii)

issue a total of 500,000 common shares of the Company to the Optionors as follows:

- 100,000 common shares upon obtaining regulatory approval (issued);

- 50,000 common shares on June 15, 2005 (issued);

- 50,000 common shares on June 15, 2006 (issued subsequent to March 31, 2006);

- 50,000 common shares on June 15, 2007;

- 75,000 common shares on June 15, 2008; and

- 175,000 common shares on June 15, 2009.

iii)

complete US$3,000,000 of exploration work on the Regent property as follows:

- US$250,000 prior to March 4, 2006 (incurred);

- US$300,000 prior to March 4, 2007;

- US$400,000 prior to March 4, 2008;

- US$500,000 prior to March 4, 2009;

- US$500,000 prior to March 4, 2010; and

- US$1,050,000 prior to March 4, 2011.

74

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 9

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

4.

Mineral properties (continued)

(b)

Regent Gold Silver Project (continued)

After meeting the above commitments, the Company will have an undivided 100% interest in the property subject to a 2.5% NSR royalty, 60% of which may be purchased for US$3,000,000. 35,890 shares were issued to HDG as finder’s fees with respect to the Regent property.

(c)

Asumura Gold Project

The Company entered into an option agreement with GTE Ventures Limited (“GTE”) dated February 18, 2005 whereby the Company may acquire 100% of the Asumura Reconnaissance Concession (“Asumura property”) located in the Republic of Ghana, West Africa, under the following terms:

i)

pay US$100,000 to GTE as follows:

- US$10,000 upon signing the agreement (paid);

- US$30,000 on or before October 8, 2006; and

- US$60,000 on or before October 8, 2007.

ii)

issue common shares of the Company with a value of US$100,000 to GTE as follows:

- common shares with a value of US$10,000 upon regulatory approval (issued  13,899 shares);

- common shares with a value of US$30,000 based on the 10 day average closing price prior to issuance on or before October 8, 2006; and

- common shares with a value of US$60,000 based on the 10 day average closing price prior to issuance on or before October 8, 2007.

iii)

complete US$1,000,000 of exploration work on the Asumura property as follows:

- US$80,000 on or before July 31, 2005, (incurred);

- an additional US$400,000 on or before July 31, 2006 (incurred); and

- an additional US$520,000 on or before July 31, 2007.

After meeting the above commitments, the Company will have an undivided 100% interest in the Asumura property subject to a 3.5% net smelter return, 50% of which may be purchased for US$2,000,000. 11,270 shares were issued to HDG as finder’s fees with respect to the Asumura property.

75

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 10

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

4.

Mineral properties (continued)

(d)

Fri Property

The Company entered into an option agreement dated May 31, 2005 with Gerald Baughman and Fabiola Baughman (the “Optionors”) pursuant to which the Company has the option to acquire 100% interest in the Fri gold project located in Nye County, Nevada, under the following terms:

i)

pay US$285,000 as follows:

- US$20,000 upon signing the agreement (paid);

- US$40,000 on May 31, 2006;

- US$45,000 on May 31, 2007;

- US$50,000 on May 31, 2008;

- US$55,000 on May 31, 2009; and

- US$75,000 on May 31, 2010

ii)

issue a total of 500,000 common shares of the Company to the Optionors as follows:

- 25,000 common shares upon obtaining regulatory approval (issued);

- 100,000 common shares on May 31, 2006;

- 45,000 common shares on May 31, 2007;

- 75,000 common shares on May 31, 2008;

- 75,000 common shares on May 31, 2009; and

- 180,000 common shares on May 31, 2010.

iii) complete US$3,000,000 of exploration work on the Fri property as follows:

- US$70,000 prior to May 31, 2006;

- US$230,000 prior to May 31, 2007;

- US$300,000 prior to May 31, 2008;

- US$400,000 prior to May 31, 2009;

- US$1,000,000 prior to May 31, 2010; and

- US$1,000,000 prior to May 31, 2011.

After meeting these commitments, the Company will have an undivided 100% interest in the Fri property subject to a 2.5% net smelter return royalty payable to GTE, 60% of which (net purchase of 1.5%) may be purchased back by the Company for US$3,000,000.

During the year ended March 31, 2006, the Company decided not to pursue its option agreement on the Fri property and as a result, $179,531 in acquisition and deferred exploration expenditures were written-off.

76

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 11

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

4.

Mineral properties (continued)

(e)

Black Velvet Gold Project

The Company entered into an option agreement dated December 7, 2005 with Gerald Baughman and Fabiola Baughman (the “Optionors”) whereby the Company may acquire 100% interest in the Black Velvet Gold Project in Pershing County, Nevada.

Under the terms of the agreement, the Company will have the option to deliver cash payments of US$150,000 and 150,000 shares of the Company to the Optionors over a period of four years as follows:

i)

cash payment of US$2,500 upon execution of the agreement (paid);

US$27,500 on December 1, 2006;

US$30,000 on May 31, 2007;

US$40,000 on May 31, 2008; and

US$50,000 on May 31, 2009.

ii)

issuance of 10,000 common shares upon Exchange approval (issued);

20,000 common shares on July 31, 2006;

30,000 common shares on May 31, 2007;

40,000 common shares on May 1, 2008; and

50,000 common shares on May 31, 2009.

5.

Share capital

(a)

Authorized

100,000,000 common shares without par value; and

100,000,000 preferred shares without par value.

(b)

Shares held in escrow

As at March 31, 2006, 90,000 (2005 – 135,000) common shares of the Company were the subject of an escrow agreement under which the shares may not be transferred, assigned or otherwise dealt with without the consent of the relevant regulatory body having jurisdiction thereon.

(c)

Stock options

The Company maintains a fixed stock option plan that enables it to grant from time to time options to its directors, officers, employees and other service providers. During the year ended March 31, 2006, the Company amended its stock option plan increasing the number of shares reserved for issuance under the plan to 1,646,543. The options vest as to 25% on the date of the grant and 12 ½ % every three months thereafter for a total vesting period of 18 months.

77

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 12

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

5.

Share capital (continued)

(c)

Stock options (continued)

As summary of the status of the Company’s stock option plan for the years ended March 31, 2006 and 2005 is presented below:

	Number of shares	Weighted average Exercise price
Balance, March 31, 2004	100,000	$  0.15
Granted	1,348,000	$  0.92
Exercised	(100,000)	$  0.15
Balance, March 31, 2005	1,348,000	$  0.92
Granted	280,000	$  1.44
Exercised	(122,500)	$  0.92
Cancelled	(80,500)	$  0.92
Balance, March 31, 2006	1,425,000	$  1.02

The following table summarizes the stock options outstanding and exercisable at March 31, 2006:

Exercise price	Number outstanding at March 31, 2006	Expiry date	Number exercisable at March 31, 2006
$0.92	1,145,000	February 3, 2010	1,011,000
$1.16	220,000	November 22, 2010	82,500
$2.48	60,000	February 2, 2011	15,000
	1,425,000		1,108,500

During the year, under the fair-value-based method, $557,202 (2005 – $194,961; 2004 – $Nil) in stock-based compensation expense was recorded in the statements of operations and deficit for stock options granted to directors and consultants of the Company.

The fair value of share options used to calculate compensation expense has been estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

	2006	2005
Risk free interest rate	3.78-3.92%	3%
Expected dividend yield	0%	0%
Stock price volatility	107.20 – 108.85%	124%
Expected life of options	3 years	2 years

78

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 13

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

5.

Share capital (continued)

(c)

Stock options (continued)

The weighted average fair value of options granted during the year ended March 31, 2006 is $0.97 (2005 – $0.58) per share.

(d)

Warrants

The following warrants were outstanding at March 31, 2006. Each warrant entitles the holder to purchase one common share of the Company as follows:

Number of Shares	Exercise Price	Expiry Date
639,100	$0.85	January 31, 2007
2,584,000 (1)	$1.00	October 13, 2007

⁽¹⁾ These warrants are subject to an acceleration clause whereby if the shares of the Company trade above $2 for a period of 10 consecutive trading days, the Company will have the option to require the earlier exercise of the warrants within 30 days of formal notice from the Company.

6.

Related party transactions

Included in professional fees is $39,443 (2005 – $71,159; 2004 – $5,394) paid or accrued for legal fees to a company controlled by a director and officer of the Company and $35,895 (2005 – $nil; 2004 – $nil) for accounting fees to a company controlled by a director and officer of the Company.

Included in consulting fees, wages and benefits is $17,005 (2005: $nil; 2004 – $nil) paid or accrued for consulting fees paid to an officer of the Company.

The Company has entered into a consulting agreement with a director and officer of the Company in the amount of US$6,667 per month plus benefits. During the year ended March 31, 2006, the Company paid consulting fees and benefits of $112,307 (2005 – $45,118; 2004 – $nil) under this agreement.

The Company has entered into a consulting agreement with a former officer of the Company in the amount of CAD$3,333 per month. During the year ended March 31, 2006, the Company paid consulting fees of $15,000 (2005 – $5,833; 2004 –$nil) under this agreement.

During the year ended March 31, 2006, the Company paid or accrued $11,625 (2005 - $nil; 2004 – $nil) for deferred exploration costs to a director of the Company.

These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.

Included in accounts payable and accrued liabilities is $32,424 (2005 - $23,183) owing to a director of the Company and a company controlled by a director and officer of the Company.

79

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 14

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

6.

Related party transactions (continued)

During the year ended March 31, 2006, the Company issued 60,000 common shares (2005 – nil) to a director and officer of the Company pursuant to the exercise of options at $0.92 per share for total proceeds of $55,200.

7.

Commitments

The Company is committed to payments regarding agreements to lease its Vancouver office premises as follows:

2007

$

47,823

2008

51,250

2009

51,548

2010

12,887

$

163,508

The Company is also committed to carry out the expenditures described in note 4.

8.

Income taxes

The Company has accumulated foreign resource deductions totalling $913,272 and non-capital losses totalling $1,769,433 for income tax purposes, which may be carried forward to reduce taxable income of future years. Management has determined that sufficient likelihood of realization of the future potential benefits arising from the above losses has not been established. Accordingly, a 100% valuation allowance has been provided. The non-capital losses expire as follows:

2008

$

9,686

2009

21,552

2010

31,355

2014

54,776

2015

428,701

2016

1,223,363

$

1,769,433

The significant components of the Company’s future income tax assets are as follows:

	2006	2005
Non-capital losses	$ 610,454	$ 194,506
Foreign development and exploration expenditures	913,272	188,514
	1,523,726	383,020
Less: valuation allowance	(1,523,726)	(383,020)
	$ -	$ -

80

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 15

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

9.

Subsequent events

The following events occurred subsequent to March 31, 2006:

(a)

The Company entered into an option agreement dated May 3, 2006 with Sammetro Co. Ltd. (“Sammetro”) to purchase a 100% interest in the Esaase gold property in southwest Ghana, subject to the underlying 10% interest and NSR of the Ghanaian government in all mining projects in Ghana, subject to the following terms:

i)

payment of US$100,000 to the bank from which Sammetro borrowed funds by May 17, 2006 (paid subsequent to March 31, 2006);

ii)

payment of US$100,000 to Sammetro by June 30, 2006, which payment Sammetro will deliver to the Esaase Liquidation Committee (the “Committee”) (paid subsequent to March 31, 2006);

iii)

payment of US$40,000 to Sammetro on the first anniversary;

iv)

payment of US$300,000 to the Committee over a four year period;

v)

issuance of 780,000 shares of the Company to Sammetro over a four year period;

vi)

exploration expenditures of US$2,250,000 over a four year period;

vii)

payment to Sammetro of US$50,000 on the fourth anniversary and every anniversary thereafter until production; and

viii)

on production, payments of US$200,000 to the Committee and US$100,000 to Sammetro.

The Company entered into a finders’ fee agreement with respect to this acquisition whereby the Company will pay a finders’ fees equal to 10% of the consideration paid to Sammetro, including the amount in i).

(b)

50,000 warrants were exercised at a price of $0.85 per share and 1,445,000 warrants were exercised at $1.00 per share for an aggregate of 1,495,000 common shares issued for gross proceeds of $1,487,500.

81

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 16

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

10.

Non-cash transactions

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the year ended March 31, 2006, the following transactions were excluded from the statements of cash flows:

-

the Company issued 72,160 common shares at $0.85 per share, 150,000 common shares at $1.00 per share, 13,899 common shares at $0.72 per share and 10,000 common shares at $1.54 per share pursuant to mineral property option agreements;

-

the Company issued 104,000 brokers’ warrants pursuant to a private placement;

During the year ended March 31, 2005, the following transactions were excluded from the statements of cash flows:

-

the Company issued 100,000 common shares at $0.90 per share pursuant to an agreement to issue shares in lieu of required payments on a mineral property option agreement;

-

the Company issued 25,000 common shares at $0.87 per share pursuant to an agreement with a mineral property optionor;

-

the Company issued 141,159 common shares at $0.85 per share pursuant to an agreement to reimburse a mineral property optionor for expenses incurred;

-

the Company issued 75,000 common shares at $0.85 per share pursuant to a mineral property option agreement.

11.

Segmented information

Geographic Information

The Company operates in one reportable operating segment, being the exploration of mineral properties.

	Canada	USA	Ghana	Total
March 31, 2006
Current assets	$ 885,735	$ -	$ -	$ 885,735
Furniture, equipment and leasehold  improvements	37,430	-	-	37,430
Mineral properties	-	604,269	844,778	1,449,047
	$ 923,165	$ 604,269	$ 844,778	$ 2,372,212

82

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 17

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

11.

Segmented information (continued)

Geographic Information (continued)

	Canada	USA	Ghana	Total
March 31, 2005
Current assets	$ 713,144	$ -	$ -	$ 713,144
Furniture, equipment and leasehold  improvements	45,950	-	-	45,950
Mineral properties	-	485,619	43,617	529,236
	$ 759,094	$ 485,619	$ 43,617	$ 1,288,330

12.

United States generally accepted accounting principles

These consolidated financial statements prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) conform to those generally accepted in the United States (“U.S. GAAP”), in all material respects, except as noted below:

Reconciliation of losses reported to U.S. GAAP:

	2006	2005	2004
Net loss as reported in accordance         with Canadian GAAP	$(2,989,019)	$  (629,372)	$    (55,857)
Adjustments:
Mineral property costs expensed	(1,106,195)	(31,155)	-
Net loss under U.S. GAAP	$(4,095,214)	$  (660,527)	$    (55,857)
Net loss per share under U.S. GAAP	$          (0.43)	$        (0.10)	$        (0.01)

Stock-based compensation – The Company records compensation expense for U.S. GAAP purposes following the fair value method of accounting for stock options issued to employees. The Company uses the Black-Scholes option pricing model to value its stock options as described in Note 5.

83

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 18

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

12.

United States generally accepted accounting principles (coninued)

Net earnings per share and escrow shares – Under U.S. GAAP, performance-based escrow shares are considered to be contingently issuable until the performance criteria has been satisfied and are excluded from the computation of the weighted average of shares outstanding. The Company's escrow shares are not performance-based and therefore no adjustments have been made to the calculation of earnings per share.

On August 4, 2004, the Company entered into an escrow agreement with certain of its shareholders in respect of their 150,000 shares. The shares are being released from escrow as to 10% on final Exchange approval and the balance on a pro-rata basis at 15% semi-annually, with the final release scheduled for February 12, 2007. As of March 31, 2006, there were 90,000 shares still held in escrow.

Mineral properties –  Under Canadian GAAP, exploration costs are capitalized as disclosed in Note 2.  Under U.S. GAAP, exploration costs are expensed as incurred until proven and probable reserves are established.  When proven and probable reserves are determined for a property, subsequent exploration and development costs of the property are capitalized.

Under U.S. GAAP, mineral properties are reviewed by management for impairment whenever circumstances change which could indicate that the carrying amount of these assets may not be recoverable. Such review has not been completed as there are no capitalized properties for U.S. GAAP purposes.

Reconciliation of total assets, liabilities and shareholder equity to U.S. GAAP:

	2006	2005
Total assets under Canadian GAAP	$   2,372,212	$  1,288,330
Adjustments to U.S. GAAP	(1,106,195)	(31,155)
Total assets under U.S. GAAP	$   1,266,017	$  1,257,175
Total liabilities under Canadian	$      260,509	$       48,913
Total shareholders’ equity under Canadian GAAP	2,111,703	1,239,417
Adjustments:
Mineral property costs expensed	(1,106,195)	(31,155)
Total equity (deficiency) under U.S. GAAP	1,005,508	1,208,262
Total equity (deficiency) and liabilities under U.S. GAAP	$   1,266,017	$  1,257,175

84

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 19

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

12.

United States generally accepted accounting principles (continued)

Reconciliation of consolidated statements of cash flows to U.S. GAAP:

	2006	2005	2004
Cash provided by (used in) operations under US GAAP:
Net loss as reported in accordance with         Canadian GAAP	$(2,989,019)	$   (629,372)	$    (55,857)
Adjustments:
Mineral property costs expensed	(1,106,195)	(31,155)	-
	(4,095,214)	(660,527)	(55,857)
Add (deduct) items not involving cash
Amortization	10,336	5,710	-
Stock-based compensation	557,202	194,961	-
Write-off of interest in mineral properties	585,591	-	-
Acquisition of mineral properties	(180,471)	(202,595)	-
Changes in non-cash working capital balances	202,897	694	22,491
Cash used in operations under U.S. GAAP	$(2,919,659)	$    (661,757)	$   (33,366)

	2006	2005	2004
Cash provided by (used in) financing activities under Canadian and U.S. GAAP:
Shares issued	$ 3,085,368	$      964,675	$               -
Cash provided by (used in) investing activities under U.S. GAAP:
Cash provided by (used in) investing activities         under Canadian GAAP	$(1,901,010)	$   (285,410)	$               -
Mineral properties costs	1,718,723	31,155	-
Acquisition of mineral properties	180,471	202,595	-
Cash used in investing activities under         U.S. GAAP	$      (1,816)	$     (51,660)	$               -

85

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 20

Years ended March 31, 2006 and 2005

Expressed in Canadian Dollars

12.

United States generally accepted accounting principles (continued)

Under U.S. GAAP, the Company must provide a reconciliation of the numerators and denominators of basic and diluted earnings per share:

Numerator
Net loss under U.S. GAAP	$(4,095,214)	$   (660,527)	$     (55,857)
Denominator
Weighted average number of common shares         Outstanding	9,601,522	6,648,223	4,590,115
Basic and diluted net earnings (loss) per share	$          (0.43)	$         (0.10)	$         (0.10)

Diluted net loss per share reflects the potential dilution of securities that could result from the exercise of dilutive options and warrants. As of March 31, 2006, the Company had 1,425,000 (2005 – 1,348,000; 2004 – 100,000) stock options outstanding and 3,223,100 (2005 – 904,400; 2004 – nil) warrants outstanding which have not been included in the calculation of diluted net loss per share because their effect would have been anti-dilutive.

Recent pronouncements:

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted could have a material effect on the accompanying consolidated financial statements.

86

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Financial Statements

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

_______________________

87

KEEGAN RESOURCES INC.

(the “Company”)

FINANCIAL STATEMENTS

Three months ended June 30, 2006 and 2005

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, the statements must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

__________________________________

__________________________________

Dan McCoy

Tony M. Ricci

President & CEO

CFO

August 22, 2006

88

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Balance Sheets

June 30, 2006 and March 31, 2006

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

	June 30, 2006	March 31, 2006
	Unaudited	Audited
Assets
Current assets:
Cash	$        184,486	$        838,809
Goods and services taxes recoverable	30,166	25,089
Prepaid expenses and deposits	17,104	21,837
	231,756	885,735
Furniture, equipment and leasehold improvements (note 3)	44,235	37,430
Resource properties (notes 4 and 6)	2,740,847	1,449,047
	$    3,016,838	$     2,372,212
Liabilities
Current liabilities:
Accounts payable and accrued liabilities (note 6)	$         88,095	$        260,509
Shareholders’ Equity
Share capital (note 5)	6,040,915	4,981,915
Contributed surplus (note 5)	994,379	867,367
Deficit	(4,106,551)	(3,737,579)
		2,111,703
	$     3,016,838	$     2,372,212

Nature and continuance of operations (note 1)

Commitments (notes 4 and 7)

Subsequent events (notes 4 and 8)

89

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Operations and Deficit

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

	2006	2005
Expenses:
Amortization	$            2,335	$           2,525
Bank charges and interest	2,140	715
Consulting fees, wages and benefits (note 6)	83,453	115,710
Office, rent and administration	54,054	29,127
Professional fees (note 6)	7,563	10,316
Regulatory	9,392	15,120
Stock based compensation (note 5)	127,012	158,106
Transfer agent and shareholder information	18,674	13,514
Travel, promotion and investor relations	57,460	43,952
	362,083	389,085
Other expenses (income):
Interest	(6,231)	(1,216)
Foreign exchange	12,684	203
Write-off of interest in resource properties	436	-
	6,889	(1,013)
Net loss for the period	368,972	388,072
Deficit, beginning of period	3,737,579	748,560
Deficit, end of period	$   4,106,551	$   1,136,632
Loss per share – basic and diluted	$            0.03	$            0.05
Weighted average number of shares outstanding	12,980,903	8,012,938

90

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

	2006	2005
Cash provided by (used in):
Operations:
Net loss for the period	$   (368,972)	$    (388,072)
Items not involving cash:
Amortization	2,335	2,525
Stock based compensation	127,012	158,106
Changes in non-cash working capital:
Good and services taxes recoverable	(5,077)	(3,345)
Prepaid expenses and deposits	4,733	-
Accounts payable and accrued liabilities	(172,414)	(9,606)
	(412,383)	(240,392)
Investing:
Purchase of furniture, equipment and leasehold         improvements	(9,140)	-
Acquisition of interest in resource properties	(285,194)	(68,563)
Deferred exploration	(935,106)	(118,757)
	(1,229,440)	(187,320)
Financing:
Shares issued for cash, net of share issue costs	987,500	-
Increase in cash and cash equivalents	(654,323)	(427,712)
Cash, beginning of period	838,809	674,917
Cash, end of period	$      184,486	$      247,205
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$                  -	$                  -
Income taxes	$                  -	$                  -

Non-cash transactions (note 10)

91

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Consolidated Statements of Resource Property Costs

Three months ended June 30, 2006

Expressed in Canadian Dollars

	United States					Ghana
		Horse Mountain	Fri	Regent	Black Velvet		Asumura	Esaase	Total
Balance, March 31, 2005		$ 430,066	$ –	$ 55,553	$ –		$ 43,617	$                –	$ 529,236
Acquisition costs
Cash		109,029	25,246	43,316	2,880		–	–	180,471
Shares		–	21,250	162,506	15,400		19,580	–	218,736
		109,029	46,496	205,822	18,280		19,580	–	399,207
Deferred exploration costs		479,492	133,035	324,614	–		781,581	–	1,718,722
Less: write-off of resource  property costs		(1,018,587)	(179,531)	–	–		–	–	(1,198,118)
Balance, March 31, 2006		–	–	585,989	18,280		844,778	–	1,449,047
Acquisition costs
Cash		–	–	50,296	–		–	234,898	285,194
Shares		–	–	71,500	–		–	–	71,500
				121,796				234,898	356,694
Deferred exploration costs		–	–	538	–		820,958	113,610	935,106
Balance, June 30, 2006		$ –	$ –	$ 708,323	$ 18,280		$ 1,665,736	$   348,508	$ 2,740,847

92

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 1

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

1.

Nature and continuance of operations

The Company was incorporated on September 23, 1999 under the laws of British Columbia. The Company was a capital pool company as defined in the TSX Venture Exchange (the “Exchange”) Policy 2.4.  

During the year ended March 31, 2004, the common shares of the Company commenced trading on the NEX. NEX is a separate board of the Exchange for companies which were previously listed on the Exchange which have failed to maintain compliance with the ongoing financial listing standards of the Exchange. NEX was created so publicly listed shell companies may still continue to trade their securities while they seek and undertake transactions to complete their reactivation.

During the year ended March 31, 2006, the Company completed its Qualifying Transaction through the acquisition of interests in resource properties (see note 4). As a result, the Company is no longer considered a capital pool company. The Company’s listing has been transferred from NEX to TSX Venture under a Tier 2 issuer classification. In conjunction with the completion of the Qualifying Transaction, the Company changed its name from Quicksilver Ventures Inc. to Keegan Resources Inc.  

The Company is in the exploration stage and its principal business activity is the sourcing and exploration of mineral properties. The Company has interest in mineral properties located in the United States and the Republic of Ghana.

The recoverability of amounts shown for resource properties and related deferred exploration costs is dependent upon the discovery of economically recoverable reserves, continuation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete their development and upon future profitable production or proceeds from the disposition thereof.

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At June 30, 2006, the Company had working capital of $143,661 which may be insufficient to sustain operations over the next twelve months, had not yet achieved profitable operations and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  

93

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 2

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

2.

Significant accounting policies

The consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  The consolidated financial statements have, in management’s opinion, been properly prepared using careful judgment within the framework of the significant accounting policies summarized below.

(a)

Basis of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned inactive subsidiary, Quicksilver Ventures (Nevada), Inc.. All significant intercompany amounts and transactions have been eliminated on consolidation.

(b)

Financial instruments

The carrying amounts of cash and accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of these instruments.  Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

(c)

Furniture, equipment and leasehold improvements

Furniture, equipment and leasehold improvements are carried at cost less accumulated amortization. Amortization is determined at rates which will reduce original cost to estimated residual value over the useful life of each asset. The annual rates used to compute amortization are as follows:

Asset	Basis	Rate
Furniture and equipment	declining balance	20%
Computers	declining balance	30%
Leasehold improvements	Straight-line	term of lease

Amortization is recorded at half the annual rate in the year of acquisition.

94

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 3

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

2.

Significant accounting policies (continued)

(d)

Resource properties and deferred exploration costs

The Company accounts for resource property costs in accordance with the Canadian Institute of Chartered Accountants Handbook Section 3061, “Property, plant and equipment” (“CICA 3061”), and abstract EIC-126, “Accounting by Mining Enterprises for Exploration Costs” (“EIC-126”) of the Emerging Issues Committee. CICA 3061 provides for the capitalization of the acquisition and exploration costs of a resource property where such costs are considered to have the characteristics of property, plant and equipment. EIC-126 provides that a mining enterprise is not precluded from considering exploration costs to have the characteristics of property, plant and equipment when it has not established resource reserves objectively and therefore does not have a basis for preparing a projection of the estimated future net cash flow from the property.

Resource property costs include initial acquisition costs and related option payments, which are recorded when paid. Exploration and development costs are capitalized until properties are brought into production, when costs are amortized on a unit-of-production basis over economically recoverable reserves. Option payments are credited against resource property costs when received. No gain or loss on disposition of a partial interest is recorded until all carrying costs of the interest have been offset by proceeds of sale or option payments received.  No gain or loss on disposition of a partial interest is recorded until all carrying costs of the interest have been offset by proceeds of sale or option payments received.

CICA 3061 also provides that property, plant and equipment be written down when the long-term expectation is that the net carrying amount will not be recovered. EIC-126 states that a mining enterprise which has not objectively established resource reserves and therefore does not have a basis for preparing a projection of the estimated future cash flow from a property is not obliged to conclude that the capitalized costs have been impaired. However, EIC-126 references certain conditions that should be considered in determining subsequent write-downs, such as changes or abandonment of a work program or poor exploration results, and management reviews such conditions to determine whether a write-down of capitalized costs is required. When the carrying value of a property exceeds its net recoverable amount, provision is made for the impairment in value.

Accounting standards subsequently issued by the CICA dealing with Intangible Assets (CICA 1581 and CICA 3062) include reference to “Use rights such as drilling, water, air, mineral, timber cutting, and route authorities” as examples of intangible assets. CICA 3062 also states, inter alia, that intangible assets should be amortized over their useful life and tested for impairment. Management has reviewed this potential reporting conflict with the previously issued standards and is of the opinion that it is appropriately accounting for its resource properties as having the characteristics of property, plant and equipment.

95

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 4

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

2.

Significant accounting policies (continued)

(e)

Asset retirement obligations

Effective April 1, 2004, the Company adopted the CICA Handbook Section 3110, “Asset Retirement Obligations” (“HB 3110”). HB 3110 requires that the fair value of a liability for an asset retirement obligation, such as site reclamation costs, be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company is required to record the estimated present value of future cash flows associated with site reclamation as a liability when the liability is incurred and increase the carrying value of the related assets for that amount. The obligations recognized are statutory, contractual or legal obligations.  .  The liability is accreted over time for changes in the fair value of the liability through charges to accretion, which is included in depletion, amortization and accretion expense.  The costs capitalized to the related assets are amortized in a manner co nsistent with the depletion and amortization of the related asset.  

As of June 30, 2006, the Company has determined that it does not have material obligations for asset retirement obligations. Accordingly, adoption of HB 3110 had no impact on the consolidated financial statements.

(f)

Foreign currency translation

Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary items are translated at exchange rates prevailing when the assets were acquired or the obligations incurred. Foreign currency denominated revenue and expense items are translated at exchange rates prevailing at the transaction date. Exchange gains or losses arising on foreign currency translation are included in the determination of operating results for the year.

(g)

Earnings (loss) per share

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments.  Under this method the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.  It assumes that the proceeds would be used to purchase common shares at the average market price during the period.

Basic earnings (loss) per share is calculated using the weighted-average number of shares outstanding during the period.  For the three months ended June 30, 2006 and 2005, the inclusion of the Company’s stock options and warrants in the computation of diluted loss per share would have an anti-dilutive effect on loss per share and therefore are excluded from the computation.

96

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 5

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

2.

Significant accounting policies (continued)

(h)

Stock-based compensation

The Company accounts for the granting of share purchase options to employees and non-employees using the fair value method whereby all awards to employees and non-employees will be recorded at fair value on the date of the grant.  The fair value of all share purchase options are expensed over their vesting period with a corresponding increase to contributed surplus.  Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital.

The Company uses the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of grant.  Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s share purchase options.

3.

Furniture, equipment and leasehold improvements

		Accumulated	Net book
June 30. 2006	Cost	amortization	value
Furniture and equipment	$  41,901	$    10,434	$   31,467
Computers	14,145	6,099	8,046
Leasehold improvements	6,570	1,848	4,722
	$  62,616	$  18,381	$  44,235

		Accumulated	Net book
March 31, 2006	Cost	amortization	value
Furniture and equipment	$  32,761	$    9,039	$   23,722
Computers	14,145	5,456	8,689
Leasehold improvements	6,570	1,551	5,019
	$  53,476	$  16,046	$  37,430

97

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 6

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties

Title to resource properties 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 frequent ambiguous conveyancing history characteristic of many resource properties.  The Company has investigated title to all of its resource properties and, to the best of its knowledge, title to all of its properties are in good standing.  However, this should not be construed as a guarantee to title.  The concessions may be subject to prior claims, agreements or transfer and rights of ownership may be affected by undetected defects.

(a)

Horse Mountain Claims

During the year ended March 31, 2005, the Company entered into agreements with Hunter Dickinson Group Inc. (“HDG”), Anaconda Gold (USA) Inc. (“Anaconda”) and Barrick Gold Exploration Inc. (“Barrick”), whereby it has acquired the right to earn an interest in the Horse Mountain Project in Nevada. The transactions with Anaconda and Barrick (collectively the “Acquisition”) served as the Company’s Qualifying Transaction for the purposes of the policies of the Exchange.

Pursuant to an assignment agreement entered into on August 5, 2004 between the Company and HDG (the “Anaconda Agreement”), the Company was assigned HDG’s interest in a letter agreement dated August 7, 2003 between HDG and Anaconda as amended by letter agreement dated July 28, 2004 among HDG, Anaconda and the underlying owners to acquire an interest in 223 mining claims situated in Elko County, Nevada (the “Anaconda Horse Mountain Claims) that form part of the Horse Mountain Project. Pursuant to the terms of an option agreement entered into on August 16, 2004 between the Company and Barrick (the “Barrick Agreement”), the Company may earn an interest in 35 mining claims and a mining lease situated in Elko County, Nevada (the “Barrick Horse Mountain Claims”) that form the balance of the Horse Mountain Project.

Under the terms of the Anaconda Agreement, the Company was assigned the right and option to earn a 55% interest in the Anaconda Horse Mountain Claims as follows:

i)

by making cumulative exploration expenditures of US$1,500,000 by August 31, 2010 as follows:

Year 1 – US$150,000 (incurred)

Year 2 – US$225,000 (incurred)

Year 3 – US$300,000

Year 4 – US$300,000

Year 5 – US$300,000

Year 6 – US$225,000

98

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 7

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties (continued)

(a)

Horse Mountain Claims (continued)

ii)

by making US$385,000 in option payments to Anaconda:

Year 2004 – US$  80,000 (paid)

Year 2005 – US$  90,000 (paid)

Year 2006 – US$115,000 (of which $57,500 is payable in shares)

Year 2007 – US$100,000 (of which $50,000 is payable in shares)

iii)

by issuing to Anaconda 100,000 common shares (issued) of the Company as reimbursement for the payment by Anaconda of US$68,376 for past Bureau of Land Management (“BLM”) fees and past option payments to the underlying vendors; and

iv)

by providing HDG with consideration for assigning its rights to the Anaconda Horse Mountain Claims as follows:

a)

issuing to HDG 141,159 common shares of the Company for reimbursement of $119,986 of out of pocket costs incurred by HDG (issued);

b)

issuing to HDG a further 75,000 common shares (issued); and

c)

reimbursing HDG for US$23,376.50 for 2004 BLM payments made by HDG on the Anaconda Horse Mountain Claims and US$5,925 for holding costs on the Barrick Horse Mountain Claims (paid).

Pursuant to a letter agreement dated July 21, 2004 between the Company and Anaconda, the Company issued to Anaconda 25,000 common shares for the one time right to opt out of the area of influence (AOI) clause applicable pursuant to the terms of the Anaconda Agreement. The Company also agreed to issue an additional 100,000 common shares to Anaconda for the permanent right to opt out of the AOI clause if and when the Company earns its 70% interest in the Barrick Horse Mountain Claims.

Under the terms of the Barrick Agreement, the Company can earn a 70% interest in the Barrick Horse Mountain Claims by making exploration expenditures of US$1,500,000 over four years as follows:

Year 1 – US$200,000

Year 2 – US$300,000

Year 3 – US$400,000

Year 4 – US$600,000

During the year ended March 31, 2006, the Company decided not to pursue its option agreement on the Horse Mountain claims and as a result, $1,018,587 in acquisition and deferred exploration expenditures were written-off.

99

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 8

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties (continued)

(b)

Regent Gold Silver Project

Pursuant to an agreement dated March 4, 2005, between the Company and Jerry Baughman and Fabiola Baughman (“Optionors”), the Company may acquire 100% of the Regent Gold Silver Project (“Regent property”)  located in Mineral County, Nevada, on the following terms:

i)

pay US$305,000 as follows:

- US$45,000 upon signing the agreement (paid);

- US$35,000 on June 15, 2005 (paid);

- US$45,000 on June 15, 2006 (paid);

- US$50,000 on June 15, 2007;

- US$55,000 on June 15, 2008; and

- US$75,000 on June 15, 2009

ii)

issue a total of 500,000 common shares of the Company to the Optionors as follows:

- 100,000 common shares upon obtaining regulatory approval (issued);

- 50,000 common shares on June 15, 2005 (issued);

- 50,000 common shares on June 15, 2006 (issued);

- 50,000 common shares on June 15, 2007;

- 75,000 common shares on June 15, 2008; and

- 175,000 common shares on June 15, 2009.

iii) complete US$3,000,000 of exploration work on the Regent property as follows:

- US$250,000 prior to March 4, 2006 (incurred);

- US$300,000 prior to March 4, 2007;

- US$400,000 prior to March 4, 2008;

- US$500,000 prior to March 4, 2009;

- US$500,000 prior to March 4, 2010; and

- US$1,050,000 prior to March 4, 2011.

After meeting the above commitments, the Company will have an undivided 100% interest in the property subject to a 2.5% NSR royalty, 60% of which may be purchased for US$3,000,000. 35,890 shares were issued to HDG as finder’s fees with respect to the Regent property.

100

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 9

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties (continued)

(c)

Asumura Gold Project

The Company entered into an option agreement with GTE Ventures Limited (“GTE”) dated February 18, 2005 whereby the Company may acquire 100% of the Asumura Reconnaissance Concession (“Asumura property”) located in the Republic of Ghana, West Africa, under the following terms:

i)

pay US$100,000 to GTE as follows:

- US$10,000 upon signing the agreement (paid);

- US$30,000 on or before October 8, 2006; and

- US$60,000 on or before October 8, 2007.

ii)

issue common shares of the Company with a value of US$100,000 to GTE as follows:

- common shares with a value of US$10,000 upon regulatory approval (issued  13,899 shares);

- common shares with a value of US$30,000 based on the 10 day average closing price prior to issuance on or before October 8, 2006; and

- common shares with a value of US$60,000 based on the 10 day average closing price prior to issuance on or before October 8, 2007.

iii)

complete US$1,000,000 of exploration work on the Asumura property as follows:

- US$80,000 on or before July 31, 2005, (incurred);

- an additional US$400,000 on or before July 31, 2006 (incurred); and

- an additional US$520,000 on or before July 31, 2007.

After meeting the above commitments, the Company will have an undivided 100% interest in the Asumura property subject to a 3.5% net smelter return, 50% of which may be purchased for US$2,000,000. 11,270 shares were issued to HDG as finder’s fees with respect to the Asumura property.

(d)

Fri Property

The Company entered into an option agreement dated May 31, 2005 with Gerald Baughman and Fabiola Baughman (the “Optionors”) pursuant to which the Company has the option to acquire 100% interest in the Fri gold project located in Nye County, Nevada, under the following terms:

101

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 10

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties (continued)

(d)

Fri Property (continued)

i)

pay US$285,000 as follows:

- US$20,000 upon signing the agreement (paid);

- US$40,000 on May 31, 2006;

- US$45,000 on May 31, 2007;

- US$50,000 on May 31, 2008;

- US$55,000 on May 31, 2009; and

- US$75,000 on May 31, 2010

ii)

issue a total of 500,000 common shares of the Company to the Optionors as follows:

- 25,000 common shares upon obtaining regulatory approval (issued);

- 100,000 common shares on May 31, 2006;

- 45,000 common shares on May 31, 2007;

- 75,000 common shares on May 31, 2008;

- 75,000 common shares on May 31, 2009; and

- 180,000 common shares on May 31, 2010.

iii) complete US$3,000,000 of exploration work on the Fri property as follows:

- US$70,000 prior to May 31, 2006;

- US$230,000 prior to May 31, 2007;

- US$300,000 prior to May 31, 2008;

- US$400,000 prior to May 31, 2009;

- US$1,000,000 prior to May 31, 2010; and

- US$1,000,000 prior to May 31, 2011.

After meeting these commitments, the Company will have an undivided 100% interest in the Fri property subject to a 2.5% net smelter return royalty payable to GTE, 60% of which (net purchase of 1.5%) may be purchased back by the Company for US$3,000,000.

During the year ended March 31, 2006, the Company decided not to pursue its option agreement on the Fri property and as a result, $179,531 in acquisition and deferred exploration expenditures were written-off.

102

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KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 11

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties (continued)

(e)

Black Velvet Gold Project

The Company entered into an option agreement dated December 7, 2005 with Gerald Baughman and Fabiola Baughman (the “Optionors”) whereby the Company may acquire 100% interest in the Black Velvet Gold Project in Pershing County, Nevada.

Under the terms of the agreement, the Company has the option to deliver cash payments of US$150,000 and 150,000 shares of the Company to the Optionors over a period of four years as follows:

i)

cash payment of US$2,500 upon execution of the agreement (paid);

US$27,500 on December 1, 2006;

US$30,000 on May 31, 2007;

US$40,000 on May 31, 2008; and

US$50,000 on May 31, 2009.

ii)

issuance of 10,000 common shares upon Exchange approval (issued);

20,000 common shares on July 31, 2006 (issued subsequent to June 30, 2006);

30,000 common shares on May 31, 2007;

40,000 common shares on May 1, 2008; and

50,000 common shares on May 31, 2009.

(f)

Esaase Gold Property

The Company entered into an option agreement dated May 3, 2006 with Sammetro Co. Ltd. (“Sammetro”) to purchase a 100% interest in the Esaase gold property in southwest Ghana, subject to the underlying 10% interest and NSR of the Ghanaian government in all mining projects in Ghana, subject to the following terms:

i)

payment of US$100,000 to the bank from which Sammetro borrowed funds by May 17, 2006 (paid);

ii)

payment of US$100,000 to Sammetro by June 30, 2006, which payment Sammetro will deliver to the Esaase Liquidation Committee (the “Committee”) (paid);

iii)

payment of US$40,000 to Sammetro on the first anniversary;

iv)

payment of US$300,000 to the Committee over a four year period;

v)

issuance of 780,000 shares of the Company to Sammetro over a four year period (40,000 shares issued subsequent to June 30, 2006);

vi)

exploration expenditures of US$2,250,000 over a four year period;

vii)

payment to Sammetro of US$50,000 on the fourth anniversary and every anniversary thereafter until production; and

viii)

on production, payments of US$200,000 to the Committee and US$100,000 to Sammetro.

103

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 12

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

4.

Resource properties (continued)

(f)

Esaase Gold Property (continued)

The Company entered into a finder’s fee agreement with respect to this acquisition whereby the Company will pay finders’ fees equal to 10% of the consideration paid to Sammetro, including the amount in i). US$10,000 has been paid during the period and 4,000 common shares were issued subsequent to June 30, 2006 pursuant to this agreement.

5.

Share capital

(a)

Authorized

100,000,000 common shares without par value; and

100,000,000 preferred shares without par value.

(b)

Issued and outstanding common shares

	Number of shares	Amount
Balance, March 31, 2005	8,010,559	1,674,328
Issued on acquisition of mineral properties
- at $0.85	72,160	61,336
- at $0.88	150,000	132,000
- at $0.72	13,899	10,000
- at $1.54	10,000	15,400
Issued for cash:
Pursuant to a private placement
- at $0.80	3,000,000	2,400,000
Pursuant to exercise of warrants
- at $0.85	265,300	225,505
- at $1.00	520,000	520,000
Pursuant to the exercise of options
- at $0.92	122,500	112,700
Share issuance costs	-	(240,223)
Transferred from contributed surplus for the exercise   of options	-	70,869
Balance, March 31, 2006	12,164,418	4,981,915
Issued for cash:
Pursuant to the exercise of warrants
- at $0.85	50,000	42,500
- at $1.00	945,000	945,000
Issued on acquisition of mineral properties
- at $1.43	50,000	71,500
Balance, June 30, 2006	13,209,418	$   6,040,915

104

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 13

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

5.

Share capital (continued)

(c)

Shares held in escrow

As at June 30, 2006, 90,000 common shares of the Company were the subject of an escrow agreement under which the shares may not be transferred, assigned or otherwise dealt with without the consent of the relevant regulatory body having jurisdiction thereon.

(d)

Stock options

The Company maintains a fixed stock option plan that enables it to grant from time to time options to its directors, officers, employees and other service providers. During the year ended March 31, 2006, the Company amended its stock option plan increasing the number of shares reserved for issuance under the plan to 1,646,543. The options vest as to 25% on the date of the grant and 12 ½ % every three months thereafter for a total vesting period of 18 months.

As summary of the status of the Company’s stock option plan for the three months ended June 30, 2006 is presented below:

	Number of shares	Weighted average Exercise price
Balance, March 31, 2005	1,348,000	$  0.92
Granted	280,000	$  1.44
Exercised	(122,500)	$  0.92
Cancelled	(80,500)	$  0.92
Balance, March 31, 2006 and June 30, 2006	1,425,000	$  1.02

The following table summarizes the stock options outstanding and exercisable at June 30, 2006:

Exercise price	Number outstanding at June 30, 2006	Expiry date	Number exercisable at June 30, 2006
$0.92	1,145,000	February 3, 2010	1,092,106
$1.16	220,000	November 22, 2010	121,658
$2.48	60,000	February 2, 2011	24,522
	1,425,000		1,238,286

105

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 14

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

5.

Share capital (continued)

(d)

Stock options (continued)

During the period, under the fair-value-based method, $127,013 (2005 – $158,106) in stock-based compensation expense was recorded in the statements of operations and deficit for stock options granted to directors and consultants of the Company.

The fair value of share options used to calculate compensation expense has been estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

	2006	2005
Risk free interest rate	3%	3%
Expected dividend yield	0%	0%
Stock price volatility	124%	124%
Expected life of options	2 years	2 years

The weighted average fair value of options granted during the three months ended June 30, 2006 is $0.65 (2005 – $0.58) per share.

(e)

Warrants

The following warrants were outstanding at June 30, 2006. Each warrant entitles the holder to purchase one common share of the Company as follows:

Number of Shares	Exercise Price	Expiry Date
589,100	$0.85	January 31, 2007
1,639,000 (1)	$1.00	October 13, 2007

⁽¹⁾ These warrants are subject to an acceleration clause whereby if the shares of the Company trade above $2 for a period of 10 consecutive trading days, the Company will have the option to require the earlier exercise of the warrants within 30 days of formal notice from the Company.

(f)

Contributed surplus

	June 30, 2006	March 31, 2006
Balance, beginning of year	$  867,367	$    313,649
Stock-based compensation	127,012	557,202
Brokers’ warrants issued	-	67,385
Transferred to share capital for the exercise of options	-	(70,869)
Balance, end of year	$  994,379	$    867,367

106

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 15

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

6.

Related party transactions

Included in professional fees is $2,826 (2005 – $7,975) paid or accrued for legal fees to a company controlled by a director and officer of the Company and $3,000 (2005 – $nil) for accounting fees to a company controlled by a director and officer of the Company.

The Company has entered into a consulting agreement with a director and officer of the Company in the amount of US$6,667 per month plus benefits. During the three months ended June 30, 2006, the Company paid consulting fees and benefits of $26,578 (2005 – $29,189) under this agreement.

The Company has entered into a consulting agreement with a former officer of the Company in the amount of CAD$3,333 per month. During the three months ended June 30, 2006, the Company paid consulting fees of $nil (2005 – $10,000) under this agreement.

During the three months ended June 30, 2006, the Company paid or accrued $37,094 (2005 – $nil) for deferred exploration costs to a director of the Company.

Included in accounts payable and accrued liabilities is $39,480 (2005 – $6,870) owing to directors of the Company and a company controlled by a director and officer of the Company.

7.

Commitments

The Company is committed to payments regarding agreements to lease its Vancouver office premises as follows:

2007	$              47,823
2008	51,250
2009	51,548
2010	12,887
	$            163,508

The Company is also committed to carry out the expenditures described in note 4.

8.

Subsequent events

Subsequent to June 30, 2006, 500,000 warrants were exercised at a price of $1.00 per share and 100,000 warrants were exercised at a price of $1.75 per share for gross proceeds of $675,000 and an aggregate of 600,000 common shares were issued.

107

#

KEEGAN RESOURCES INC.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements, page 16

Three months ended June 30, 2006 and 2005

(Unaudited – Prepared by Management)

Expressed in Canadian Dollars

9.

Non-cash transactions

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the three months ended June 30, 2006, the following transactions were excluded from the statements of cash flows:

–

the Company issued 50,000 common shares at $1.43 per share, pursuant to a mineral property option agreement.

During the three months ended June 30, 2005, the following transactions were excluded from the statements of cash flows:

–

the Company issued 72,160 common shares at $0.85 per share, pursuant to a mineral property option agreement.

10.

Segmented information

Geographic Information

The Company operates in one reportable operating segment, being the exploration of resource properties.

	Canada	USA	Ghana	Total
June 30, 2006
Current assets	$ 231,757	$ –	$ –	$ 231,757
Furniture, equipment and leasehold  improvements	44,235	–	–	44,235
Resource properties	–	726,603	2,014,244	2,740,847
	$ 275,992	$ 726,603	$ 2,014,244	$ 3,016,839

	Canada	USA	Ghana	Total
March 31, 2006
Current assets	$ 885,735	$ –	$ –	$ 885,735
Furniture, equipment and leasehold  improvements	37,430	–	–	37,430
Resource properties	–	604,269	844,778	1,449,047
	$ 923,165	$ 604,269	$ 844,778	$ 2,372,212

108

SIGNATURE PAGE

Pursuant to the requirements of Section 12g of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: October 13, 2006	By:  Daniel T. McCoy
	Daniel T. McCoy, President and CEO

109

#

EX-3.1

EX-3.2

KEEGAN RESOURCES INC.
(the “Company”)

The Company has as its articles the following articles.

Incorporation number:

BC0592958

KEEGAN RESOURCES INC.
(the “Company”)
ARTICLES

1.

Interpretation

 1

2.

Shares and Share Certificates

2

3.

Issue of Shares

3

4.

Share Registers

4

5.

Share Transfers

5

6.

Transmission of Shares

6

7.

Purchase of Shares

6

8.

Borrowing Powers

7

9.

Alterations

7

10.

Meetings of Shareholders

8

11.

Proceedings at Meetings of Shareholders

9

12.

Votes of Shareholders

13

13.

Directors

16

14.

Election and Removal of Directors

18

15.

Alternate Directors

20

16.

Powers and Duties of Directors

21

17.

Disclosure of Interest of Directors

22

18.

Proceedings of Directors

23

19.

Executive and Other Committees

25

20.

Officers

26

21.

Indemnification

27

22.

Dividends and Reserves

28

23.

Documents, Records and Reports

30

24.

Notices

30

25.

Seal

31

26.

Prohibitions

32

1.

INTERPRETATION

1.1

Definitions

In these Articles, unless the context otherwise requires:

(1)

“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being;

(2)

(2)

“Business Corporations Act” means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

(3)

“legal personal representative” means the personal or other legal representative of the shareholder;

(4)

“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register;

(5)

“seal” means the seal of the Company, if any.

1.2

Business Corporations Act and Interpretation Act Definitions Applicable

The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.

2.

SHARES AND SHARE CERTIFICATES

2.1

Authorized Share Structure

The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

2.2

Form of Share Certificate

Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.

2.3

Shareholder Entitled to Certificate or Acknowledgment

Each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder’s name or (b) a non-transferable written acknowledgment of the shareholder’s right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders’ duly authorized agents will be sufficient delivery to all.

2.4

Delivery by Mail

Any share certificate or non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate or acknowledgement is lost in the mail or stolen.

(3)

2.5

Replacement of Worn Out or Defaced Certificate or Acknowledgement

If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think fit:

(1)

order the share certificate or acknowledgment, as the case may be, to be cancelled; and

(2)

issue a replacement share certificate or acknowledgment, as the case may be.

2.6

Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment

If a share certificate or a non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, if the directors receive:

(1)

proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and

(2)

any indemnity the directors consider adequate.

2.7

Splitting Share Certificates

If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

2.8

Certificate Fee

There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations Act, determined by the directors.

2.9

Recognition of Trusts

Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

3.

ISSUE OF SHARES

3.1

Directors Authorized

Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by

(4)

the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

3.2

Commissions and Discounts

The Company may at any time pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.

3.3

Brokerage

The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

3.4

Conditions of Issue

Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:

(1)

consideration is provided to the Company for the issue of the share by one or more of the following:

(a)

past services performed for the Company;

(b)

property;

(c)

money; and

(2)

the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

3.5

Share Purchase Warrants and Rights

Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

4.

SHARE REGISTERS

4.1

Central Securities Register

As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

(5)

4.2

Closing Register

The Company must not at any time close its central securities register.

5.

SHARE TRANSFERS

5.1

Registering Transfers

A transfer of a share of the Company must not be registered unless:

(1)

a duly signed instrument of transfer in respect of the share has been received by the Company;

(2)

if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and

(3)

if a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment has been surrendered to the Company.

5.2

Form of Instrument of Transfer

The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form that may be approved by the directors from time to time.

5.3

Transferor Remains Shareholder

Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

5.4

Signing of Instrument of Transfer

If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgments deposited with the instrument of transfer:

(1)

in the name of the person named as transferee in that instrument of transfer; or

(2)

if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

5.5

Enquiry as to Title Not Required

Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate

(6)

representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares.

5.6

Transfer Fee

There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.

6.

TRANSMISSION OF SHARES

6.1

Legal Personal Representative Recognized on Death

In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

6.2

Rights of Legal Personal Representative

The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.

7.

PURCHASE OF SHARES

7.1

Company Authorized to Purchase Shares

Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

7.2

Purchase When Insolvent

The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:

(1)

the Company is insolvent; or

(2)

making the payment or providing the consideration would render the Company insolvent.

7.3

Sale and Voting of Purchased Shares

If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

(1)

is not entitled to vote the share at a meeting of its shareholders;

(2)

must not pay a dividend in respect of the share; and

(3)

must not make any other distribution in respect of the share.

(7)

8.

BORROWING POWERS

The Company, if authorized by the directors, may:

(1)

borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;

(2)

issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

(3)

guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

(4)

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

9.

ALTERATIONS

9.1

Alteration of Authorized Share Structure

Subject to Article 9.2 and the Business Corporations Act, the Company may by special resolution:

(1)

create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

(2)

increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

(3)

subdivide or consolidate all or any of its unissued, or fully paid issued, shares;

(4)

if the Company is authorized to issue shares of a class of shares with par value:

(a)

decrease the par value of those shares; or

(b)

if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

(5)

change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;

(6)

alter the identifying name of any of its shares; or

(7)

otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act.

9.2

Special Rights and Restrictions

Subject to the Business Corporations Act, the Company may by special resolution:

(8)

(1)

create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

(2)

vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

9.3

Change of Name

The Company may by special resolution authorize an alteration of its Notice of Articles in order to change its name.

9.4

Other Alterations

If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.

10.

MEETINGS OF SHAREHOLDERS

10.1

Annual General Meetings

Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.

10.2

Resolution Instead of Annual General Meeting

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

10.3

Calling of Meetings of Shareholders

The directors may, whenever they think fit, call a meeting of shareholders.

10.4

Notice for Meetings of Shareholders

The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

(1)

if and for so long as the Company is a public company, 21 days;

(2)

otherwise, 10 days.

(9)

10.5

Record Date for Notice

The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

(1)

if and for so long as the Company is a public company, 21 days;

(2)

otherwise, 10 days.

If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.6

Record Date for Voting

The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.7

Failure to Give Notice and Waiver of Notice

The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.

10.8

Notice of Special Business at Meetings of Shareholders

If a meeting of shareholders is to consider special business within the meaning of Article 11. 1, the notice of meeting must:

(1)

state the general nature of the special business; and

(2)

if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:

(a)

at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

(b)

during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

11.

PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

11.1

Special Business

At a meeting of shareholders, the following business is special business:

(10)

(1)

at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;

(2)

at an annual general meeting, all business is special business except for the following:

(a)

business relating to the conduct of or voting at the meeting;

(b)

consideration of any financial statements of the Company presented to the meeting;

(c)

consideration of any reports of the directors or auditor;

(d)

the setting or changing of the number of directors;

(e)

the election or appointment of directors;

(f)

the appointment of an auditor;

(g)

the setting of the remuneration of an auditor;

(h)

business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;

(i)

any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

11.2

Special Majority

The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3

Quorum

Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two shareholders, or one or more proxyholder(s) representing two shareholders, or one member and a proxyholder representing another shareholder. If there is only one shareholder, the quorum is one person present and being, or representing by proxy, such shareholder. The Directors, the Secretary or, in his absence, an Assistant Secretary, and the solicitor of the Company shall be entitled to attend at any general meeting but no such person shall be counted in the quorum or be entitled to vote at any general meeting unless he shall be a shareholder or proxyholder entitled to vote thereat.

11.4

One Shareholder May Constitute Quorum

If there is only one shareholder entitled to vote at a meeting of shareholders:

(1)

the quorum is one person who is, or who represents by proxy, that shareholder, and

(2)

that shareholder, present in person or by proxy, may constitute the meeting.

11.5

Other Persons May Attend

The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to

(11)

attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

11.6

Requirement of Quorum

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

11.7

Lack of Quorum

If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

(1)

in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and

(2)

in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

11.8

Lack of Quorum at Succeeding Meeting

If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

11.9

Chair

The following individual is entitled to preside as chair at a meeting of shareholders:

(1)

the chair of the board, if any; or

(2)

if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.

11.10

Selection of Alternate Chair

If, at any meeting of shareholders, there is no chair of the board or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

11.11

Adjournments

The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

(12)

11.12

Notice of Adjourned Meeting

It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

11.13

Decisions by Show of Hands or Poll

Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

11.14

Declaration of Result

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

11.15

Motion Need Not be Seconded

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

11.16

Casting Vote

In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

11.17

Manner of Taking Poll

Subject to Article 11. 18, if a poll is duly demanded at a meeting of shareholders:

(1)

the poll must be taken:

(a)

at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

(b)

in the manner, at the time and at the place that the chair of the meeting directs;

(2)

the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

(3)

the demand for the poll may be withdrawn by the person who demanded it.

11.18

Demand for Poll on Adjournment

A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

(13)

11.19

Chair Must Resolve Dispute

In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

11.20

Casting of Votes

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.21

Demand for Poll

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.22

Demand for Poll Not to Prevent Continuance of Meeting

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

11.23

Retention of Ballots and Proxies

The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxyholder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

12.

VOTES OF SHAREHOLDERS

12.1

Number of Votes by Shareholder or by Shares

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

(1)

on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

(2)

on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

12.2

Votes of Persons in Representative Capacity

A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

12.3

Votes by Joint Holders

If there are joint shareholders registered in respect of any share:

(14)

(1)

any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

(2)

if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

12.4

Legal Personal Representatives as Joint Shareholders

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.

12.5

Representative of a Corporate Shareholder

If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

(1)

for that purpose, the instrument appointing a representative must:

(a)

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

(b)

be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting;

(2)

if a representative is appointed under this Article 12.5:

(a)

the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

(b)

the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.6

Proxy Provisions Do Not Apply to All Companies

Articles 12.7 to 12.15 do not apply to the Company if and for so long as it is a public company or a pre­existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

12.7

Appointment of Proxy Holders

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.

(15)

12.8

Alternate Proxy Holders

A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

12.9

When Proxy Holder Need Not Be Shareholder

A person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:

(1)

the person appointing the proxy holder is a corporation or a representative of a corporation appointed under Article 12.5;

(2)

the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting; or

(3)

the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting.

12.10

Deposit of Proxy

A proxy for a meeting of shareholders must:

(1)

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

(2)

unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting.

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.11

Validity of Proxy Vote

A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:

(1)

at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

(2)

by the chair of the meeting, before the vote is taken.

12.12

Form of Proxy

A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

(16)

[name

of

company] (the “Company”)

The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.

Number of shares in respect of which this proxy is given (if no number is specified, then this proxy if given in respect of all shares registered in the name of the shareholder):

Signed [month, day, year]

[Signature of shareholder]

[Name of shareholder—printed]

12.13

Revocation of Proxy

Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:

(1)

received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

(2)

provided, at the meeting, to the chair of the meeting.

12.14

Revocation of Proxy Must Be Signed

An instrument referred to in Article 12.13 must be signed as follows:

(1)

if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;

(2)

if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

12.15

Production of Evidence of Authority to Vote

The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

13.

DIRECTORS

13.1

First Directors; Number of Directors

The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

(17)

(1)

subject to paragraphs (2) and (3), the number of directors that is equal to the number of the Company’s first directors;

(2)

if the Company is a public company, the greater of three and the most recently set of:

(a)

the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

(b)

the number of directors set under Article 14.4;

(3)

if the Company is not a public company, the most recently set of:

(a)

the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

(b)

the number of directors set under Article 14.4.

13.2

Change in Number of Directors

If the number of directors is set under Articles 13.1(2)(a) or 13.1(3)(a):

(1)

the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;

(2)

if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

13.3

Directors’ Acts Valid Despite Vacancy

An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

13.4

Qualifications of Directors

A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

13.5

Remuneration of Directors

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

13.6

Reimbursement of Expenses of Directors

The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company

(18)

13.7

Special Remuneration for Directors

If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

13.8

Gratuity, Pension or Allowance on Retirement of Director

Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

14.

ELECTION AND REMOVAL OF DIRECTORS

14.1

Election at Annual General Meeting

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

(1)

the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

(2)

all the directors cease to hold office immediately before the election or appointment of directors under paragraph (1), but are eligible for re-election or re-appointment.

14.2

Consent to be a Director

No election, appointment or designation of an individual as a director is valid unless:

(1)

that individual consents to be a director in the manner provided for in the Business Corporations Act;

(2)

that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or

(3)

with respect to first directors, the designation is otherwise valid under the Business Corporations Act.

14.3

Failure to Elect or Appoint Directors

If:

(1)

the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or

(2)

the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

(19)

then each director then in office continues to hold office until the earlier of:

(3)

the date on which his or her successor is elected or appointed; and

(4)

the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

14.4

Places of Retiring Directors Not Filled

If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

14.5

Directors May Fill Casual Vacancies

Any casual vacancy occurring in the board of directors may be filled by the directors.

14.6

Remaining Directors Power to Act

The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.

14.7

Shareholders May Fill Vacancies

If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

14.8

Additional Directors

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

(1)

one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

(2)

in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(1), but is eligible for re-election or re-appointment.

(20)

14.9

Ceasing to be a Director

A director ceases to be a director when:

(1)

the term of office of the director expires;

(2)

the director dies;

(3)

the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or

(4)

the director is removed from office pursuant to Articles 14.10 or 14.11.

14.10

Removal of Director by Shareholders

The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

14.11

Removal of Director by Directors

The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

15.

ALTERNATE DIRECTORS

15.1

Appointment of Alternate Director

Any director (an “appointor”) may by notice in writing received by the Company appoint any person (an “appointee”) who is qualified to act as a director to be his or her alternate to act in his or her place at meetings of the directors or committees of the directors at which the appointor is not present unless (in the case of an appointee who is not a director) the directors have reasonably disapproved the appointment of such person as an alternate director and have given notice to that effect to his or her appointor within a reasonable time after the notice of appointment is received by the Company.

15.2

Notice of Meetings

Every alternate director so appointed is entitled to notice of meetings of the directors and of committees of the directors of which his or her appointor is a member and to attend and vote as a director at any such meetings at which his or her appointor is not present.

15.3

Alternate for More Than One Director Attending Meetings

A person may be appointed as an alternate director by more than one director, and an alternate director:

(1)

will be counted in determining the quorum for a meeting of directors once for each of his or her appointors and, in the case of an appointee who is also a director, once more in that capacity;

(21)

(2)

has a separate vote at a meeting of directors for each of his or her appointors and, in the case of an appointee who is also a director, an additional vote in that capacity;

(3)

will be counted in determining the quorum for a meeting of a committee of directors once for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, once more in that capacity;

(4)

has a separate vote at a meeting of a committee of directors for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, an additional vote in that capacity.

15.4

Consent Resolutions

Every alternate director, if authorized by the notice appointing him or her, may sign in place of his or her appointor any resolutions to be consented to in writing.

15.5

Alternate Director Not an Agent

Every alternate director is deemed not to be the agent of his or her appointor.

15.6

Revocation of Appointment of Alternate Director

An appointor may at any time, by notice in writing received by the Company, revoke the appointment of an alternate director appointed by him or her.

15.7

Ceasing to be an Alternate Director

The appointment of an alternate director ceases when:

(1)

his or her appointor ceases to be a director and is not promptly re-elected or re-appointed;

(2)

the alternate director dies;

(3)

the alternate director resigns as an alternate director by notice in writing provided to the Company or a lawyer for the Company;

(4)

the alternate director ceases to be qualified to act as a director; or

(5)

his or her appointor revokes the appointment of the alternate director.

15.8

Remuneration and Expenses of Alternate Director

The Company may reimburse an alternate director for the reasonable expenses that would be properly reimbursed if he or she were a director, and the alternate director is entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the appointor as the appointor may from time to time direct.

16.

POWERS AND DUTIES OF DIRECTORS

16.1

Powers of Management

The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such

(22)

powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

16.2

Appointment of Attorney of Company

The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

17.

DISCLOSURE OF INTEREST OF DIRECTORS

17.1

Obligation to Account for Profits

A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.

17.2

Restrictions on Voting by Reason of Interest

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

17.3

Interested Director Counted in Quorum

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

17.4

Disclosure of Conflict of Interest or Property

A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.

17.5

Director Holding Other Office in the Company

A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

(23)

17.6

No Disqualification

No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

17.7

Professional Services by Director or Officer

Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

17.8

Director or Officer in Other Corporations

A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

18.

PROCEEDINGS OF DIRECTORS

18.1

Meetings of Directors

The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

18.2

Voting at Meetings

Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

18.3

Chair of Meetings

The following individual is entitled to preside as chair at a meeting of directors:

(1)

the chair of the board, if any;

(2)

in the absence of the chair of the board, the president, if any, if the president is a director; or

(3)

any other director chosen by the directors if:

(a)

neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting;

(b)

neither the chair of the board nor the president, if a director, is willing to chair the meeting; or

(c)

the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting.

(24)

18.4

Meetings by Telephone or Other Communications Medium

A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

18.5

Calling of Meetings

A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

18.6

Notice of Meetings

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18. 1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors and the alternate directors by any method set out in Article 24.1 or orally or by telephone.

18.7

When Notice Not Required

It is not necessary to give notice of a meeting of the directors to a director or an alternate director if:

(1)

the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

(2)

the director or alternate director, as the case may be, has waived notice of the meeting.

18.8

Meeting Valid Despite Failure to Give Notice

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.

18.9

Waiver of Notice of Meetings

Any director or alternate director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director and, unless the director otherwise requires by notice in writing to the Company, to his or her alternate director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director or alternate director.

18.10

Quorum

The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at two directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

(25)

18.11

Validity of Acts Where Appointment Defective

Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.

18.12

Consent Resolutions in Writing

A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, email or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 18.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

19.

EXECUTIVE AND OTHER COMMITTEES

19.1

Appointment and Powers of Executive Committee

The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:

(1)

the power to fill vacancies in the board of directors;

(2)

the power to remove a director;

(3)

the power to change the membership of, or fill vacancies in, any committee of the directors; and

(4)

such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution.

19.2

Appointment and Powers of Other Committees

The directors may, by resolution:

(1)

appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

(2)

delegate to a committee appointed under paragraph (1) any of the directors’ powers, except:

(a)

the power to fill vacancies in the board of directors;

(b)

the power to remove a director;

(c)

the power to change the membership of, or fill vacancies in, any committee of the directors; and

(d)

the power to appoint or remove officers appointed by the directors; and

(26)

(3)

make any delegation referred to in paragraph (2) subject to the conditions set out in the resolution or any subsequent directors’ resolution.

19.3

Obligations of Committees

Any committee appointed under Articles 19.1 or 19.2, in the exercise of the powers delegated to it, must:

(1)

conform to any rules that may from time to time be imposed on it by the directors; and

(2)

report every act or thing done in exercise of those powers at such times as the directors may require.

19.4

Powers of Board

The directors may, at any time, with respect to a committee appointed under Articles 19.1 or 19.2:

(1)

revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

(2)

terminate the appointment of, or change the membership of, the committee; and

(3)

fill vacancies in the committee.

19.5

Committee Meetings

Subject to Article 19.3(1) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 19.1 or 19.2:

(1)

the committee may meet and adjourn as it thinks proper;

(2)

the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

(3)

a majority of the members of the committee constitutes a quorum of the committee; and

(4)

questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.

20.

OFFICERS

20.1

Directors May Appoint Officers

The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

20.2

Functions, Duties and Powers of Officers

The directors may, for each officer:

(1)

determine the functions and duties of the officer;

(27)

(2)

entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

(3)

revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

20.3

Qualifications

No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as a managing director must be a director. Any other officer need not be a director.

20.4

Remuneration and Terms of Appointment

All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors thinks fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

21.

INDEMNIFICATION

21.1

Definitions

In this Article 21:

(1)

“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

(2)

“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director, former director or alternate director of the Company (an “eligible party”) or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate director of the Company:

(a)

is or may be joined as a party; or

(b)

is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;

(3)

“expenses” has the meaning set out in the Business Corporations Act.

21.2

Mandatory Indemnification of Directors and Former Directors

Subject to the Business Corporations Act, the Company must indemnify a director, former director or alternate director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director and alternate director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.

21.3

Indemnification of Other Persons

Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.

(28)

21.4

Non-Compliance with Business Corporations Act

The failure of a director, alternate director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Part.

21.5

Company May Purchase Insurance

The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

(1)

is or was a director, alternate director, officer, employee or agent of the Company;

(2)

is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

(3)

at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;

(4)

at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;

against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position.

22.

DIVIDENDS

22.1

Payment of Dividends Subject to Special Rights

The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

22.2

Declaration of Dividends

Subject to the Business Corporations Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

22.3

No Notice Required

The directors need not give notice to any shareholder of any declaration under Article 22.2.

22.4

Record Date

The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

22.5

Manner of Paying Dividend

A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.

(29)

22.6

Settlement of Difficulties

If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

(1)

set the value for distribution of specific assets;

(2)

determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

(3)

vest any such specific assets in trustees for the persons entitled to the dividend.

22.7

When Dividend Payable

Any dividend may be made payable on such date as is fixed by the directors.

22.8

Dividends to be Paid in Accordance with Number of Shares

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

22.9

Receipt by Joint Shareholders

If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

22.10

Dividend Bears No Interest

No dividend bears interest against the Company.

22.11

Fractional Dividends

If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

22.12

Payment of Dividends

Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

22.13

Capitalization of Surplus

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

(30)

23.

DOCUMENTS, RECORDS AND REPORTS

23.1

Recording of Financial Affairs

The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.

23.2

Inspection of Accounting Records

Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

24.

NOTICES

24.1

Method of Giving Notice

Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

(1)

mail addressed to the person at the applicable address for that person as follows:

(a)

for a record mailed to a shareholder, the shareholder’s registered address;

(b)

for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class;

(c)

in any other case, the mailing address of the intended recipient;

(2)

delivery at the applicable address for that person as follows, addressed to the person:

(a)

for a record delivered to a shareholder, the shareholder’s registered address;

(b)

for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class;

(c)

in any other case, the delivery address of the intended recipient;

(3)

sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

(4)

sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;

(5)

physical delivery to the intended recipient.

24.2

Deemed Receipt of Mailing

A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.

(31)

24.3

Certificate of Sending

A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 24. 1, prepaid and mailed or otherwise sent as permitted by Article 24.1 is conclusive evidence of that fact.

24.4

Notice to Joint Shareholders

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.

24.5

Notice to Trustees

A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

(1)

mailing the record, addressed to them:

(a)

by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

(b)

at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

(2)

if an address referred to in paragraph (1)(b) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

25.

SEAL

25.1

Who May Attest Seal

Except as provided in Articles 25.2 and 25.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

(1)

any two directors;

(2)

any officer, together with any director;

(3)

if the Company only has one director, that director; or

(4)

any one or more directors or officers or persons as may be determined by the directors.

25.2

Sealing Copies

For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 25.1, the impression of the seal may be attested by the signature of any director or officer.

(32)

25.3

Mechanical Reproduction of Seal

The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assis tant treasurer or an assistant secretary-treasurer may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

26.

PROHIBITIONS

26.1

Definitions

In this Article 26:

(1)

“designated security” means:

(a)

a voting security of the Company;

(b)

a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

(c)

a security of the Company convertible, directly or indirectly, into a security described in paragraph (a) or (b);

(2)

“security” has the meaning assigned in the Securities Act (British Columbia);

(3)

“voting security” means a security of the Company that:

(a)

is not a debt security, and

(b)

carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

26.2

Application

Article 26.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

26.3

Consent Required for Transfer of Shares or Designated Securities

No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

EX-3.3

EX-3.4

EX-10

EX-10

REGENT PROPERTY

OPTION AGREEMENT

THIS AGREEMENT is made effective as of the 4^th day of March, 2005.

BETWEEN:

QUICKSILVER VENTURES (NEVADA) INC. a

company incorporated under the laws of Nevada and

having a corporate address at Suite 1204-700 West

Pender Street, Vancouver, B.C., V6C 1G8

(hereinafter called "Optionee")

OF THE FIRST PART

AND:

GERALD W. BAUGHMAN AND FABIOLA

BAUGHMAN,  both of P.0 Box 18127, Reno, Nevada,

89511, U.S.A.

(hereinafter called the "Optionor")

OF THE SECOND PART

THIS AGREEMENT WITNESSES that in consideration of the sum of $10 now paid by the Optionee to the Optionor (the receipt and sufficiency of which is hereby acknowledged) and the covenants and agreements hereinafter set forth, the parties hereto agree as follows:

1.0

DEFINITIONS

1.1.

"Area of Interest" means the area contained within one mile of the boundaries of the Property as constituted on the date of signing the Agreement.

1.2.

"Effective Date" means the date of this Agreement.

1.3

"Expenditures" means all direct and indirect expenses incurred on or for the benefit of the Property or the Area of Interest, together with any and all costs, fees, and expenses that may be paid to obtain a Feasibility Study or other engineering or other studies or reports on or with respect to the Property. For greater certainty Expenditures shall include without limitation the costs, fees and expenses of (i) obtaining and maintaining title (including associated surface, access and water rights, expenses referred to in Section 3.3, (ii) conducting geological, geochemical, geophysical, and environmental diligence and obtaining necessary authorizations and permits; (iii) reasonable charges by the Optionee for services provided by geologists or others in the employment of the Optionee in evaluating the Property; and (iv) a management fee equal to 10% of all Expenditures

2

except the fee referred to in this clause (iv) provided that in the case of individual contracts or invoices greater than $100,000 such fee shall be 5% of such contract or invoice.

1.4

"First Anniversary", "Second Anniversary", "Third Anniversary", "Fourth Anniversary" "Fifth Anniversary" and "Sixth Anniversary" means respectively the first, second, third, fourth, fifth and sixth anniversary of the execution of this Agreement.

1.5

"First Year Commitments" means the 100,000 shares to be issued by the Optionee and the $45,000 in cash to be paid by the Optionee on execution of this Agreement and the $250,000 of Expenditures to be incurred by the Optionee prior to the first anniversary as provided for in Article 4 of this Agreement

1.6

"Force Majeure" means any cause beyond the Optionee's reasonable control, including law or regulation, action or inaction of civil or military authority, interference by Natives, Native rights groups, environmentalists or other activists, inability to obtain any licence, permit or other authorization that may be required, unusually severe weather, fire, explosion, flood, insurrection, riot, labour dispute, inability after diligent effort to obtain workmen or material, delay in transportation and acts of God, but not including lack of funds.

1.7

"NSR" means the net smelter return royalty defined in Schedule B of this Agreement.

1.8

"Operations" includes any and every kind of work which the Optionee in its sole discretion elects to do or to have done on or in respect of the Property or the Area of Interest or the products derived therefrom and all expenditures in respect of or incidental to such work. "Option" has the meaning assigned to it in Section 2.1.

1.9

"Property" means the unpatented lode mining claims described in Exhibit A to this Agreement, all of which are located in Mineral County, Nevada, subject to any deletions therefrom by operation of Section 3.4 and additions thereto by operation of Article 13 and any mining leases or other forms of mineral tenure which replace the same.

1.10

"Shares" means common shares of the Optionee or its assigns.

1.11

"5" means United States dollars unless otherwise stated.

1.12

Attached to and forming part of this Agreement are the following Exhibits:

Exhibit A

Property

Exhibit B

NSR definition

2.0

OPTION

2.1.

In consideration of the $10 paid by the Optionee to the Optionor and the commitment by the Optionee to complete the First Year Commitments, the Optionor hereby grants to the Optionee the sole and exclusive right and option (the "Option") exercisable in the manner described in Section 4, to acquire a 100% undivided interest in the Property and in all right, title and interest in and to the Property which the Optionor now has or may

3

hereafter acquire free and clear of all liens, charges, encumbrances, security interests and adverse claims, except the 2¹/2% NSR referred to in Article 4 of this Agreement.

2.2.

The Optionor hereby grants to the Optionee, its servants, agents and independent contractors, during the currency of the Option, the sole and exclusive right and option to:

2.2.1.

enter upon and have immediate possession of the Property;

2.2.2.

carry out Operations on the Property as the Optionee may in its sole discretion determine;

2.2.3.

bring and install on the Property and remove from time to time such buildings, plant, machinery, equipment, tools, appliances and supplies as the Optionee may deem necessary; and

2.2.4.

remove from the Property reasonable quantities of rocks, ores, minerals and metals and to transport same for the purpose of sampling, testing and assaying.

3.0

TITLE

3.1.

Title to the Property will remain in the name of the Optionor during the term of the Option but the Optionor will, at the request of the Optionee, provide duly executed transfer documents in a form sufficient to transfer the Property to the Optionee to be held in escrow pending exercise of the Option. Upon exercise of the Option by the Optionee the Optionor shall deliver to the Optionee duly executed transfers of the Property in recordable form in favour of the Optionee, free and clear of all liens, charges, encumbrances, security interests and adverse claims other than the NSR royalty in favour of the Optionor.

3.2

The Optionor will, at the request of the Optionee prior to exercising the Option and while this Agreement is in good standing, record the Optionee's interest by registering a memorandum or short form notice of this Agreement in the BLM.

3.3

If the title of the Optionor to the Property is now or at any time hereafter materially deficient, materially defective or materially encumbered in any way not expressly contemplated hereby then, without limiting the Optionee's rights and remedies provided hereunder or by law, such material deficiency, material defect or material encumbrance may be remedied or removed by the Optionee in which event the cost and related expenses thereof may at the Optionee's option be deducted from any amounts or payments which may be or become due or payable to the Optionor hereunder or may be credited against the Expenditures. Because the payments set forth herein are predicated upon the Optionor owning the interests in the Property shown on Exhibit A, if the Optionor's title to that part of the Property from which minerals are being produced or are to be produced is less than the interests shown on Exhibit A, the Optionee shall have the right, without waiving any other rights it may have hereunder, to reduce all payments to be made to the Optionor hereunder to the same proportion thereof as the rights and title actually owned' by the Optionor bear to the interests shown on Exhibit A. If the Opiiouor is determined to have a lesser interest, any overpayments made to the Optionor may be recovered by the

4

Optionee by offset against future payments due to the Optionor or by other means available to the Optionee at law.

3.4

The Optionee may at any time and from time to time abandon, surrender, allow to lapse, reduce the area of or otherwise deal with any part or parts of the Property as it may determine (collectively, "Property Termination"), by giving the Optionor notice no less than 30 days prior to the date of such Property Termination or by failing to provide the Optionor with the notice and payment referred to in paragraph 3.5 of this Agreement. Upon there being a Property Termination the Optionor will immediately provide the Optionee with a recordable release and reconveyance if the Optionee surrenders any of the unpatented mining claims which comprise the Property and if requested by the Optionor the Optionee will immediately deliver to the Optionor duly executed transfers of the part or parts of the Property so intended to be part of the Property Termination. Any part or parts of the Property so deal t with shall cease to be included in the Property and shall cease to be subject to this Agreement for all purposes, including without limitation Section 9.3.1.

3.5

The Optionee shall, in respect to each mining claim comprising the Property:

3.5.1

provide the Optionor, 60 days prior to the date BLM fees are due each year during the term of the Option, with a written notice confirming the Optionee's intention to hold such mining claims and undertaking to pay the BLM fees in respect to such mining claims that are due 60 days following; and

3.5.2

pay by the date which is 30 days prior to the date the BLM fees are due, the BLM fees due in respect to such mining claims.

4.0

NSR ROYALTY

4.1.

Subject to paragraph 4.2 the Optionor shall retain a 2V2% NSR in respect to the Property.

4.2.

At any time during the term of this Option Agreement or at any time after the Optionee has exercised the Option, the Optionee may purchase a l'A% NSR (ie 60% of the Optionor's 2¹/2% NSR) from the Optionor for $3,000,000.

5.0

REQUIREMENTS TO EXERCISE THE OPTION

5.1.

In addition to the requirements to exercise the Option referred to in paragraph 5.2 below, the Optionee shall, upon execution of this Agreement, provide the Optionor with $20,000 representing the amount required to repay past BLM fees paid by the Optionor.

5.2.

In order to exercise the Option the Optionee must:

5.2.1.

pay to the Optionor $305,000 in cash as follows:

Upon execution of this Agreement, $45,000

including the $20,000 referred to in 5.1

5

On June 15, 2005

$35,000

On June 15, 2006

$45,000

On June 15, 2007

$50,000

On June 15, 2008

$55,000

On June 15, 2009

$75,000

TOTAL

$305,000

5.2.2.

issue to the Optionor 500,000 Shares as follows:

Upon regulatory approval	100,000
On the June 15, 2005	50,000
On the June 15, 2006	50,000
On the June 15, 2007	50,000
On the June 15, 2008	75,000
On the June 15, 2009	175,000
TOTAL:	500,000

5.2.3.

incur Expenditures of no less than $3,000,000 by the Sixth Anniversary of this Agreement as follows:

Prior to the First Anniversary	$250,000
Prior to the Second Anniversary	$300,000
Prior to the Third Anniversary	$400,000
Prior to the Fourth Anniversary	$500,000
Prior to the Fifth Anniversary	$500,000
Prior to the Sixth Anniversary	$1,050,000
TOTAL:	$3,000,000

6.0

ACCELERATION , FORCE MAJEURE AND CHANGE OF SHARE STRUCTURE

6.1.

The Optionee may pre-pay any or all of the payments contemplated by Sections 5.2.1, issue at any time ahead of schedule any of the Shares required to be issued pursuant to Section 5.2.2 and may accelerate any or all of the Expenditures contemplated by Section 5.2.3. The Optionee may at any time from time to time pay to the Optionor money in lieu of incurring Expenditures under Sections 5.2.3, in which event the Optionee shall be deemed to have incurred additional Expenditures in the same amount as the amount of any such payment. Any excess payments or Expenditures incurred in any calendar year will be carried forward and applied as a credit against the payment or Expenditures, as the case may be, to be made in the next succeeding year or years.

6

6.2

If from time to time the Optionee is prevented by Force Majeure from incurring Expenditures in the amounts and times provided in Sections 5.2.3, then the Optionee shall have such additional time as is reasonable in the circumstances to incur Expenditures in such amounts and times, the amount of such additional time not to exceed the duration of the Force Majeure. The Optionee shall provide notice to the Optionor of the commencement of any Force Majeure together with the details of the circumstances constituting Force Majeure and shall provide the the Optionor with notice of termination of Force Majeure. The Optionee shall diligently and in good faith prosecute any application for license, permit or other authorization, the ability of which to obtain is the basis for the Force Majeure event.

6.3

Upon the occurrence of any one or more events involving the capital reorganization, consolidation, subdivision or reclassification of the common shares in the capital of the Optionee, or the merger, amalgamation or other corporate combination of the Optionee with one or more other entities, or of any other events in which new securities of any kind or nature are issued or delivered in exchange for the common shares in the capital stock of the Optionee as constituted on the date hereof ("Fundamental Changes") then, at the time of any issuance of any of the Optionee's shares pursuant to this agreement taking place after such Fundamental Change, and in lieu of issuing and delivering the Optionor shares which, but for such Fundamental Change and this provisions, would have been issued and delivered, the Optionee (or its successor) will issue and/or deliver instead such number of new securities as would have been issued and/or delivered to the Optionor as a result of the Fundamental Change in exchange for those the Optionee shares which the Optionor would have held if such issuance had occurred prior to the occurrence of the Fundamental Change.

7.0

PERFORMANCE OF WORK

7.1.

In exercising its rights under Section 2.2 the Optionee shall comply with all applicable laws, rules and regulations and shall carry out Operations in a good and miner-like manner in accordance with all applicable governmental regulations and restrictions.

7.2.

The Optionee shall defend, indemnify and save harmless the Optionor from and against any and all claims, debts, demands, suits, actions and causes of action whatsoever which may be brought or made against the Optionor by any person, firm or corporation and all loss, cost, damages, expenses and liabilities which may be suffered or incurred by the Optionor arising out of or in connection with or in any way referable to, whether directly or indirectly, the entry on, presence on, or activities on the Property or the approaches thereto by the Optionee or its servants or agents including without limitation bodily injuries or death at any time resulting therefrom or damage to property, unless and to the extent due to the acts or omissions of the Optionor or its servants or agents.

7.3.

The Optionor shall at all reasonable times during the currency of the Option have access to the Property on reasonable notice to the Optionee, provided that the Optionor shall not interfere with the Optionee's operations hereunder and that the Optionee shall be under

7

no liability to the Optionor for any personal injuries including death or for any damage to the property of the Optionor unless such injury or damage is due to the gross negligence or wilful default of the Optionee, its servants or agents.

 7.4.

The Optionee shall, at its sole cost, keep in force during this Agreement term a policy of commercial general liability insurance covering property damage and liability for personal injury occurring on or about the Property, with limits in the amount of at least Two Million Dollars ($2,000,000) per occurrence for injuries to or death of person, One Million Dollars ($1,000,000) per occurrence for property damage, and with a contractual liability endorsement insuring the Optionee's performance of the Optionee's indemnity obligations of this Agreement and naming the Optionor as an additional insured.

8.0

VESTING OF INTEREST

8.1.

Upon the Optionee complying with the provisions of Article 5 and the Optionee delivering to the Optionor not later than the Sixth Anniversary a notice in writing stating that the Optionee wishes to acquire a 100% undivided interest in the Property, subject to the 21/2% NSR in favour of the Optionor, the Optionee shall without any further payment or action be deemed to have exercised the Option and it will thereupon acquire and be deemed to have acquired and be vested with a 100% undivided right, title and interest in the Property free and clear of all liens, charges, encumbrances, security interests and adverse claims except for the 21/2% NSR in favour of the Optionor.

 8.2.

If the Optionee, having the right to give notice to the Optionor under Section 8.1, fails to do so within the time provided, the Optionor will give the Optionee notice of such failure and the date on or before which the Optionee must give notice to the Optionor under Section 8.1, to exercise the Option. The Option will be extended to the date which is 30 days after receipt by the Optionee of such notice from the Optionor.

9.0

TERMINATION

9.1.

The parties acknowledge and agree that, subject to the Optionee being obligated to complete the First Year Commitments the Optionee has the right and option but not the obligation to make each of the payments referred to in Section 5.2.1; to issue the Shares referred to in Section 5.2.2, and to incur the Expenditures referred to in Sections 5.2.3 and neither anything which the Optionee might do nor any payment which it makes, issuance of Shares that it completes or Expenditure which it incurs will obligate it to do anything more or to make any further payment, issue any further Shares, or incur any further Expenditures.

9.2.

At any time the Optionee may, subject to having fulfilled the First Year Commitments let the Option lapse by notice to the Optionor, by failing to provide the Optionor with the notice and the payment referred to in Section 3.5, by not making a payment referred to in Section 5.2.1, by failing to issue any of the Shares referred to in 5.2.2 or by not incurring the Expenditures referred to in Section 5.2.3 whereupon, subject to Section 9.5, this Agreement shall terminate, provided Section 7.2 shall continue in full force and effect and Section 4.1 shall continue if effect for a further 60 days in accordance with its terms.

8

9.3.

If this Agreement is terminated pursuant to Section 9.2 the Optionee shall:

9.3.1.

deliver to the Optionor duly executed transfers of the Property in favour of the Optionor, free and clear of all liens, charges, encumbrances, security interests or adverse claims arising from the activities of the Optionee on the Property, each mineral claim then comprised in the Property to be in good standing for at least 12 months;

9.3.2.

within 180 days deliver to the Optionor copies of all of the non-interpretative reports, maps, plans, photographs and drill logs of the Optionee relating to the Property, provided that the Optionee does not make any representation or warranty concerning the accuracy or completeness thereof;

9.3.3.

within the said 180 days remove from the Property any machinery, buildings, structures, facilities, equipment and all other property of every nature and description erected, placed or situated thereon by the Optionee; any property not so removed at the end of the 180 day period shall at the option of the Optionor become the property of the Optionor; and

9.3.4. within the said 180 days leave the working and camp site in a clean and environmentally acceptable condition.

 9.4.

If the Optionee is prevented from or delayed in performing its obligations in Sections 9.3.3 or 9.3.4 by Force Majeure, the relevant period of 180 days referred to therein shall be extended by the period of Force Majeure.

 9.5.

Neither party will be in default of any of its obligations under this Agreement or deprived of any of its rights hereunder until notice of the alleged default has been given to the other party and such default has not been remedied or such other party has not in good faith commenced to take action to remedy such default within 30 days after the receipt of such notice and has not diligently proceeded with such remedying.

10.0

ASSIGNMENT BY OPTIONEE

10.1.

The Optionee may not assign the Option and its rights under this Agreement without the written consent of the Optionor, such consent not to be unreasonably withheld.

11.0

RESTRICTION ON ASSIGNMENT BY OPTIONOR

11.1.

Prior to exercise of the option, the Optionor shall not sell, assign, transfer, convey or otherwise dispose of or deal with any or all of its rights and interests in whole or in part in or with respect to the Property or under or by virtue of this Agreement except in accordance with the provisions of this Article 11.

11.2.

If the Optionor should desire to sell all or any portion of its interest in the Property they shall first offer same to the Optionee. Any such offer shall provide for a closing date at least 60 days from the date of notice of the offer being made. The Optionee shall have a 30 day period to elect whether to purchase the offered interest. Upon the expiry of the 30 day period the Optionor shall be free to dispose of the offered interest to the extent

9

not committed to be purchased by the Optionee to any third party for a period of 180 days and on terms no less favourable to the Optionor than was offered to the Optionee. If no sale of the offered interest is consummated within the aforesaid 180 day period, it shall thereafter again become subject to the right of the first refusal contemplated hereby.

12.0

NOTICES

12.1.

All notices and other required communications ("Notices") to one of the Optionee or the Optionor by the other shall be in writing and shall be addressed respectively as follows:

If to the Optionor:

Gerald W. Baughman

P.0 Box 18127

Reno, Nevada

89511, U.S.A.

If to the Optionee:

Quicksilver Ventures (Nevada) Inc.

Suite 1204-700 West Pender Street

Vancouver, B.C.

V6C 1G8

Telecopier: (604) 683-8194

Attention: President and CEO

All Notices shall be given (1) by personal delivery to the addressee, or (2) by electronic communication, with a confirmation sent by registered or certified mail return receipt requested, or by commercial carrier or (3) by registered or certified mail return receipt requested, or commercial carrier. All Notices shall be effective and shall be deemed delivered (1) if by personal delivery on the date of delivery if delivered during normal business hours and, if not delivered during normal business hours, on the next business day following delivery, (2) if by electronic communication on the next business day following receipt of the electronic communication, and (3) if solely by mail or commercial carrier on the next business day after actual receipt. A party may change its address by Notice to the other party.

12.2.

All payments by the Optionee to the Optionor under this Agreement shall be well and sufficiently made if a cheque payable to the Optionor in Canadian funds is sent by mail, postage prepaid, or deposited with a commercial carrier, and addressed to the Optionor at its address for notices on or before the date on which such payment is to be made for the amount of the payment. If from time to time the Optionee mails a cheque to the Optionor, or deposits a cheque with a commercial carrier, in payment of an amount under this Agreement but not within the time specified by such payment, the Optionee will be deemed to have made the payment within the specified time and this Agreement including the Option will continue in full force and effect provided that, if the Optionor gives written notice to the Optionee that such payment has not been made, such cheque is mailed by the Optionee within 30 days of receipt of such notice.

10

13.0

REPRESENTATIONS AND WARRANTIES

13.1

The Optionor covenants, represents and warrants, which covenants, representations and warranties shall survive termination of this Agreement, that:

(a)

the mining claims comprising the Property were properly located in accordance with applicable Federal and state laws and regulations;

(b)

all assessment work requirements for the mining claims have been performed and all filings and recordings of proof of performance have been made properly and all Federal annaual unpatented mining claim maintenance and rental fees have been paid properly and timely;

(c)

the mining claims are in good standing and the Optionor has good title to and owns the entire undivided legal and equitable interest in the claims, subject to the paramount title of the United States and other matters of title disclosed in this Agreement;

(d)

The Optionor has good right and full power to lease and to convey the interests described in this Agreement;

(e)

the claims are free and clear of all liens, claims, encumbrances, production royalties and security interests, except as otherwise provided in this Agreement;

(f)

The Optionor shall not commit any act or acts which will encumber or cause a lien to be placed on the claims;

(g)

The Optionor will defend title to the claims consistent with these representations and warranties.

(h)

there are not any suits, actions, prosecutions, investigations or proceedings, actual, pending or threatened, against or affecting the Optionor that relates to or has an adverse effect on the Property;

(i)

the execution and delivery of this Agreement and the exercise by the Optionee of the rights granted to it under this Agreement will not conflict with or be in contravention of any law, regulation or order of any government, government department or other competent authority including Ministerial orders and Orders-in-Council or conflict with rights of third parties or result in a breach of or default under any agreement or other instrument of obligation to which either of the Optionor is a party or by which the Optionor or the Property may be bound;

(j)

this Agreement constitutes a legal, valid and binding obligation of the Optionor;

13.2

The Optionor makes no representation or warranty concerning the discovery or presence of valuable minerals on the unpatented mining claims which comprise all or a portion of the Property.

11

13.3

The Optionee represents and warrants to the Optionor that:

(a)

the execution and delivery of this Agreement and the exercise by the Optionee of the rights granted to it under this Agreement will not conflict with or result in a breach of or default under any agreement or other instrument of obligation to which the Optionee is a party or by which it may be bound; and

(b)

this Agreement constitutes a legal, valid and binding obligation of the Optionee.

13.4

The representations and warranties contained in Section 13.1 are provided for the exclusive benefit of the Optionee and a breach of any one or more of them may be waived by the Optionee in writing in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty.

13.5

The representations and warranties contained in Section 13.2 and 13.3 are provided for the exclusive benefit of the Optionor and a breach of any one or more of them may be waived by the Optionor in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty.

14.0

AREA OF INTEREST

14.1.

If at any time during the subsistence of the Option the Optionor or the Optionee ( herein referred to as the "Acquiring Party") stakes or otherwise acquires, directly or indirectly, any right to or interest in any mineral claim, licence, lease, grant, concession, permit, patent, or other mineral property or surface rights or water rights (collectively, "Acquired Rights") located wholly or partly within the Area of Interest the Acquiring Party shall forthwith give notice to the other party(the "Other Party") of that staking or acquisition; the cost thereof and all details in possession of the Acquiring Party with respect to the nature of the Acquired Rights and the known mineralization.

14.2.

The Other Party may, within 30 days of receipt of the Acquiring Party's notice, elect, by notice to the Other Party to require that the Acquired Rights and the right or interest acquired be included in and thereafter form part of the Property for all purposes of this Agreement.

14.3.

If the Other Party does not make the election aforesaid within that period of 30 days, the Acquired Rights shall not form part of the Property and the Acquiring Party shall be solely entitled thereto.

14.4

Any unpatented mining claims that are surrendered by the Optionee that would otherwise have been included in the Area of Interest but for such surrender, will no longer be included in the Area of Interest if such unpatented mining claims are subsequently amended or relocated by the Optionor.

12

15.-1

MISCELLANEOUS

15.1. Applicable Law. The terms and provisions of this Agreement shall be interpreted in accordance with the laws of Nevada.

15.2.

Entire Agreement. This Agreement terminates and replaces all prior agreements, either written, oral or implied, between the Optionee and the Optionor with respect to the Property and constitutes the entire agreement between the parties with respect to the Property.

15.3.

Recording. This Agreement shall not be recorded. However, the parties agree to execute and record where appropriate in offices of public record in the State of Nevada a notice of this Agreement in the applicable form hereto to provide notice to third parties of the Option and of the respective rights and interests of the parties in and to the Property.

15.4.

Void or Invalid Provision. If any term, provision, covenant or condition of this Agreement, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of this Agreement, and all applications thereof not held invalid, void or unenforceable shall continue in full force and effect and in no way be affected, impaired or invalidated thereby.

15.5.

Additional Documents. The parties shall do and perform all such acts and things, and execute all such deeds, documents and writings, and give all such assurances, as may be necessary to give effect to this Agreement.

15.6.

Binding Effect. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

SCHEDULE "B"

To the Regent Property Option Agreement dated March , 2005
NET SMELTER RETURNS ROYALTY

1.

Definitions – For the purpose of this Schedule, "Agreement" shall mean the Regent Property Option Agreement to which this Schedule is attached, "Owner" shall mean the party or parties paying a percentage of Net Smelter Returns pursuant to the Agreement. "Holder" shall mean the party or parties receiving a percentage of Net Smelter Returns pursuant to the Agreement and other capitalized terms shall have the meanings assigned to them in the Agreement.

2.

Net Smelter Returns – For the purpose hereof, the term "Net Smelter Returns" shall, subject to paragraphs 3, 4, 5, and 6 below, mean gross revenues received from the sale by the Owner of all ore mined from the Property and from the sale by the Owner of concentrate, dore, metal and products derived from ore mined from the Property, after deduction of the following:

(a)

all smelting and refining costs, sampling, assaying and treatment charges and penalties including but not limited to metal losses, penalties for impurities and charges for refining, selling and handling by the smelter, refinery or other purchaser (including price participation charges by smelters and/or refiners); and

(b)

costs of handling, transporting, securing and insuring dore, metal and concentrates from the Property or from a concentrator, whether situated on or off the Property, to a smelter, refinery or other place of treatment, and in the case of gold or silver concentrates, security costs; and

(c)

ad valorem taxes and taxes based upon sales or production, but not income taxes; and

(d)

marketing costs, including sales commissions, incurred in selling ore mined from the Property and from concentrate, dore, metal and products derived from ore mined from the Property.

3.

Non-Arm's Length Revenue – Where revenue otherwise to be included under this Schedule is received by the Owner in a transaction with a party with whom it is not dealing at arm's length, the revenue to be included shall be based on the fair market value under the circumstances and at the time of the transaction.

4.

Non-Arm's Length Costs – Where a cost otherwise deductible under this Schedule is incurred by the Owner in a transaction with a party with whom it is not dealing at arm's

2

length, the cost to be deducted shall be the fair market cost under the circumstances and at the time of the transaction.

5.

Currency – The currency of the United States shall be used for the purposes of calculating Net Smelter Returns.

6.

Hedging – The Owner may, but shall not be under any duty to, engage in price protection (hedging) or speculative transactions such as futures contracts and commodity options in its sole discretion covering all or part of production from the Property and, except in the case where products are actually delivered and a sale is actually consummated under such price protection or speculative transactions, none of the revenues, costs, profits or losses from such transactions shall be taken into account in calculating Net Smelter Returns or any interest therein.

7.

Commingling – If the Property is brought into commercial production, it may be operated as a single operation with other mining properties owned by third parties or in which the Owner has an interest, in which event, the parties agree that (notwithstanding separate ownership thereof) ores mined from the mining properties (including the Property) may be blended at the time of mining or at any time thereafter, provided, however, that the respective mining properties shall bear and have allocated to them their proportionate part of costs described in paragraphs 2(a) to 2(d) above incurred relating to the single operation, and shall have allocated to each of them the proportionate part of the revenues earned relating to such single operation. In making any such allocation, effect shall be given to the tonnages and location of ore and other material mined and beneficiated and the characteristics of such material i ncluding the metal content of ore removed from, and to any special charges relating particularly to ore, concentrates or other products or the treatment thereof derived from, any of such mining properties. The Owner shall, at least 60 days prior to the commencement of commingling of ore mined from another property, deliver to the Holder a detailed description of the proposed commingling plan and the procedures by which the Owner intends to determine the respective outturn of minerals from ores mined from the Property and the other property or properties.

8.

Sampling – The Owner shall ensure that highest and best practises and procedures utilized in the precious metals mining industry in Nevada are adopted and employed for weighing, determining moisture content, sampling and assaying and determining recovery factors.

9.

NSR Interest – The Net Smelter Return interest is two and one-half percent (2.5%) of Net Smelter Returns.

10.

Payments – Payments of a percentage of Net Smelter Returns shall be made to the Holder within thirty (30) days after the end of each calendar quarter in which Net Smelter Returns, as determined on the basis of final adjusted invoices, are received by the Owner. All such payments shall be made in U.S. dollars.

11.

Calculations – After the year in which commercial production is commenced on the Property, the Holder receiving a percentage of Net Smelter Returns from the Owner shall be provided annually on or before April 1 with a copy of the calculation of Net Smelter

3

Returns, determined in accordance with this Schedule, for the preceding calendar year, certified correct by the Owner.

12.

Audits – The Owner shall cause the Net Smelter Returns and the records relating thereto to be audited within the first quarter of each calendar year by a national firm of chartered accountants designated and paid by the Owner (which may be the auditor of the Owner) and:

(a)

copies of the audited reports shall be delivered to the Holder and the Owner by the chartered accounting firm;

(b)

either party shall have six (6) months after receipt of any audited report to object thereto in writing to the other party, and failing such objection, such report shall be deemed correct; and

(c)

in the event of a reaudit, all costs relating to such reaudit shall be paid by the Owner (if the original audit is found in error by a margin of 10% or more) or the Holder (if the original audit is found to be correct) and the Holder requested the reaudit.

13.

Rights of Parties – The right to receive a percentage of Net Smelter Returns from the Owner as and when due is and shall be deemed to be a covenant which runs with the title to the unpatented mining claims. Furthermore, the right to receive a percentage of Net Smelter Returns by the Holder from the Owner as and when due shall not be deemed to constitute the Owner the partner, agent or legal representative of the Holder or to create any fiduciary relationship between them for any purpose whatsoever.

14.

Operations – The Owner shall be entitled to:

(a)

Make all operational decisions with respect to the methods and extent of mining and processing of ore, concentrate, dore, metal and products produced from the Property (for example, without limitation, the decision to process by heap leaching rather than conventional milling);

(b)

Make all decisions relating to sales of such ore, concentrate, dore, metal and products produced provided, however, that subject to paragraph 10 herein royalty payments are owing to the Holder upon the outturn of minerals at the smelter, refinery or other place of treatment; and

(c)

Make all decisions concerning temporary or long-term cessation of operations.

15.

Reacquisitions – Notwithstanding the provisions of paragraph 14 of this Schedule, if the Owner relinquishes, drops, abandons or allows any portion of the Property to lapse and subsequently reacquires a direct or indirect beneficial interest with respect to such portion of the Property, then such portion of the Property will once again be subject to the obligation to pay Net Smelter Returns.

Annual Reports – Within one hundred and twenty (120) days following the end of each calendar year, the Owner shall provide the Holder with an annual report of all activities and operations conducted upon or with respect to the Property during the preceding calendar year, together with a description of activities and operations anticipated during the current year (including, estimates).

EX-10

 

EX-10

 

EX-10

CONFIDENTIAL

Quicksilver Ventures Inc.

CONSULTING AGREEMENT

EFFECTIVE JANUARY 1, 2005  

This CONSULTING AGREEMENT dated as of January 1, 2005 (Effective Date") is between Dan McCoy “Consultant” and Quicksilver Ventures Inc. (QSV).

.

QSV agrees to engage Consultant, and Consultant agrees to accept exclusive engagement, to provide QSV services including , overseeing all Exploration initiatives,  Property Acquisitions, obtaining Project Exploration permits, Mine Development Certificates and Construction permits in a technical and cost effective manner, strategic planning and environmental/government affairs, organization, coordination and completion of project prefeasibility and feasibility studies and operation/financial business administration as required. In so doing,, Consultant will act in the capacity of President and CEO and is responsible for the following Services:  

*

Strategize with, develop, direct, and/or coordinate internal staff, consultants, government agency personnel, the various environmental, community, government, and aboriginal programs to achieve the optimum outcome for QSV on it’s various Projects.

*

Develop, manage, direct, and coordinate all stages (including pre and post exploration and mine project certificates) of the environmental and socioeconomic processes required under various permitting jurisdictions, (work permits, Forestry Practices Code, BCEAA, CEAA, MDC, En Forma Premanente, USA equivalent, and other permits and jurisdictions  as required);

*

Develop, direct and maintain strong skilled internal staff, including providing mentorship training to all geological staff who handle environmental monitoring;

*

Develop, direct, maintain and coordinate acceptance awareness programs for community, native groups, and governments that inter-link environmental and engineering programs;

*

Develop, initiate, direct, coordinate and manage all exploration works and other data collection with consultants, internal staff or others;

*

Develop, initiate, direct and coordinate all work activities for internal staff and external consultants with the goal to (a) identify and establish all geological/environmental/socioeconomic programs necessary to meet and comply with federal, provincial, state and/or local/regional requirements concerning environmental, and social economic standards, and (b) coordinate, integrate, and achieve common objectives with all project exploration, engineering, environmental, and social economic programs.

•

Develop, initiate, and maintain a professional corporate liaison with various government agencies, elected and or appointed officials, associates, affiliates and relevant industry corporations;

•

Develop, initiate, and maintain strategic alliances and planning between corporation, the financial community, agencies and governments;

•

Manage operation/business administration including set-up, contracting and monitoring all projects;

•

Assist in financings, contracting and negotiation where required.

2.

The QSV Contact Person authorized to assign work to Consultant and coordinate Consultant's performance of Services is Gordon J, Fretwell, Director and Richard J, Haslinger, P. .Eng Director.   The Consultant will also report to the board of directors.  

3.

The Contract Agreement engagement shall begin upon the Effective Date (defined as Nov 1, 2004) and continue until terminated by either party by a minimum of four weeks written notice of termination. Both QSV and Consultant, as they are cognizant of planned future levels of business activity, shall both on a reasonable efforts basis provide termination notice to the other party equal to or in excess of four weeks.

4.

QSV shall pay Consultant at the rate of USD $6,667 per month.

5.

There are no hours billable at overtime or premium rates.  Office hours are generally considered to be consistent from 9:00a.m. (or earlier) to (5:00p.m.) or later from Monday to Friday; flexibility as to schedule is recognized as required by the nature of the job.  Working at either the corporate or field office is preferred over working from home during the aforementioned business hours.   Consultant will work a minimum of 20 days each month (at a minimum 8 hours per day) for which he shall record his activities.  Days worked in excess of 20 days during any month can be banked for use as vacation time by consultant to be used during subsequent months of employment as approved by QSV contact persons and the board of Directors.

6.

Options, repricing of options shall be offered by QSV to the Consultant at the highest possible level allowable by the Board of Directors and the TSX Venture Exchange.

7.

Based on advance approval for travel related to Services, and after presentation of customary receipts QSV shall reimburse (at cost) Consultant for approved expenses related to Services.

8.

Reasonable expenses incurred when travelling to and from the field and while in the field will be paid when a supported (back-up receipts, adequate notations, excluding alcohol, etc.) expense report is filed and approved by your Contact Person and delivered to the payables administrator at month end.  

9.

QSV shall pay Consultant for Services, and reimburse Consultant for Health Care Expenses incurred and invoiced each month for :1,155.00 or higher as required to provide the same level of coverage until April 2006 at which point Consultant shall be responsible for obtaining coverage at the same or lower rate as the rate currently in place at that time The coverage will extend to Elleanor B. McCoy, consultants spouse, and Caghain M. McCoy, consultants son, and to future children.

10.

While working in the office, camp or during work related travel, it is the responsibility of the Consultant to notify the receptionist or Contact Person of his whereabouts (phone number, travel plans etc.) to ensure contact with the Consultant.

11.

If attendance by the Consultant at a promotional or professional trade/technical conventions(s)/show(s) is required as part of Services then QSV will pay for travel and accommodation and related expenses.

12.

Consultant shall keep and make available to QSV, records showing all Services performed and time spent in such performance.

13.

Consultant shall make such written reports of Consultant's activities to Contact person as they may reasonably request from time to time.

14.

Immediately upon request or upon termination of this Agreement, Consultant expressly agrees to deliver possession and assign any right, title and interest of the Consultant to QSV, including all managed company documents, manuals, lists, data, records, field notes, field maps, drawings, models, maps, computer programs, codes, materials, prototypes, products, samples, analysis reports, equipment, tools and devices including any copies or reproductions relating to services in Consultant's possession or under Consultant's control.  Any and all designs, ideas, works, creations, developments, programs, codes, drawings, sketches including copies of reproductions of same made or created by the Consultant's during the course of the engagement in connection with services provided by the Consultant shall be and remain the exclusive property of QSV and the Consultant shall have no right, title or interest therein even though the Consultant ma y have created or contributed to the creation of any of the items specified.  The Consultant shall not directly or indirectly acquire mineral claims or an interest in mineral claims or provide exploration and/or mine development information to other clients during Consultants engagement with QSV managed companies except with prior approval from board of directors.

15.

Consultant agrees to use QSV software and hardware only for QSV business and upon termination of Agreement, all software (and any copies made) and hardware is to be promptly returned.

16.

Consultant shall not divulge, without the express written authorization by a company Director, to any person or Companies any proprietary or confidential information relating to QSV, its Subsidiaries, Affiliates or relating to any business or property. This clause does not apply to information that is already in the public domain.

17.

Consultant represents and warrants to QSV that its performance of Services will not constitute a breach of any obligation Consultant may have to any third party.  

18.

Consultant shall not delegate, subcontract, assign, or employ any person to perform any Services directly or indirectly related to Services without QSV’s prior written consent.

19.

In the performance of Services, Consultant shall be an independent Consultant.  

20.

Consultant assumes full responsibility and liability for the payment of any taxes and other governmental or agency deductions due on any amount received hereunder.

21.

Consultant assumes full responsibility and liability for Workers' Compensation Board registration, coverage, and premiums thereto as required by law.

22.

Except to the extent required by law, QSV shall not make any deduction for taxes, insurance, benefits, workers’ compensation premium to the Consultant.  Consultant will indemnify and save harmless QSV  from any and all liabilities, penalties, interest or other obligations which QSV may incur or become subject to in consequence of the payment of any monies to the Consultant which QSV may be called upon to pay in the future for or by reason of any liability which it may have or which in the appropriate government authority may claim QSV, including any claims or under any of the Regulations made pursuant to any of those statutes.  Consultant will indemnify and save harmless QSV from any and all liabilities, claims and other obligations that may occur as a consequence of an incident/accident happening to the Consultant on or off the work site.

23.

All notices provided for in this Agreement shall be delivered personally or by facsimile or by first class mail, postage prepaid, and shall be deemed received when personally delivered or, if by facsimile, on the next business day after receipt or, if mailed five business days after date of mailing.

24.

Any notice of default shall only be effective if delivered personally, or sent by registered or certified mail.

25.

Any notice from Consultant to QSV shall be delivered or addressed to the QSV Contact Person.

26.

All notices to be delivered by mail or facsimile shall be sent to the addresses and facsimile numbers shown below (or as changed by notice given as provided herein).

27.

Consultant is required, as an ambassador for QSV and the mining industry to maintain at all times a positive professional relationship with representatives of government, industry, and suppliers, the publics and first nation peoples both during and after working hours.

28.

The Consultant will not:

(a)

directly or indirectly, induce any individual who to his knowledge is then employed on a full time or substantially full time basis by QSV, to leave the employ of QSV.,

and

(b)

hereafter, directly or indirectly, use or divulge to any person, other than to QSV, its directors, officers, employees, agents or representatives or as required in the conduct of the Business, any information, whether oral, written or otherwise recorded, which is non-public, proprietary or confidential information of or relating to the Business, including, without limitation, information as to the customers, processes or products and services or intended processes or intended products and services of the Business, including those relating to research, development, manufacturing, purchasing, accounting, engineering, marketing, merchandising or selling of products and services of the Business.

29.

Severability

If any provision of this Agreement is at any time unenforceable or invalid for any reason it will be severable from the remainder of this Agreement and, in its application at that time, this Agreement will be construed as though such provision was not contained herein and the remainder will continue in full force and effect and be construed as if this Agreement had been executed without the invalid or unenforceable provision.

30.

Indemnification

QSV hereby agrees to indemnify and save harmless the Consultant from any and all claims, costs, charges, expenses, actions and liabilities incurred by the Consultant in furtherance of the Consultant's obligation under this Agreement.  This indemnity is in force so long as (a) the Consultant acted honestly and in good faith with a view to the best interests of QSV and (b) in the case of a criminal or administrative action or proceeding, the Consultant had reasonable grounds in believing that the Consultant's actions were lawful.  This indemnity clause shall survive the Termination of this Agreement.  Consultant shall be reimbursed for professional liability insurance premiums for the duration of this contract.

31.

Arbitration

All disputed under this Agreement will be decided and binding by arbitration in accordance with the Commercial Arbitration Act SBC. 1986 C.3.  Parties to this Agreement shall select a single arbitrator.  If the parties cannot agree on a single arbitrator than each party (Consultant and HDI/HDI managed companies) shall each select an arbitrator, to which these two arbitrators shall select a third arbitrator.

32.

The interpretation and performance of this Agreement shall be governed by the domestic law of the Province of British Columbia.  

33.

This Agreement constitutes the entire Agreement between the parties related to its subject matter and it supersedes all prior proposals, agreements, understandings, representations and conditions.  It may not be changed or amended except in writing.

Consultant

Daniel T. (Dan) McCoy

.

By:

Date:

                             8746 Damselfly Drive

Reno, Nevada 89523

Phone No.

775-240-5598

Quicksilver Ventures Inc.

Gordon J. Fretwell

By:

Date:

1020-800 West Pender Street

Vancouver, BC V6C 2V6

Phone No:

(604) 684-6365  

Fax No:

(604) 684-8092

EX-10

Consulting Agreement

THIS CONSULTING AGREEMENT dated this 9th day of December, 2005

BETWEEN:

Keegan Resources Inc.. of Suite 1204 - 700 West Pender Street, Vancouver, British Columbia V6C 1G8
(the "Company")

OF THE FIRST PART

- AND -

Tony Ricci of ___________, Vancouver, British Columbia _____
(the "Consultant")

OF THE SECOND PART

BACKGROUND:

1.

The Company is duly incorporated, organized and existing under the laws of the Province of British Columbia.

2.

The Company is of the opinion that the Consultant has the necessary qualifications, experience and abilities to assist and benefit the Company in its business.

3.

The Company desires to engage the services of the Consultant and Consultant’s Assistant and the Consultant has agreed to accept the terms and conditions set out in this Agreement.

IN CONSIDERATION OF the matters described above and of the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged, the parties to this Agreement agree as follows:

Commencement Date and Term

1.

The Consultant will commence providing full-time services to the Company on December 9, 2005 (the 'Commencement Date').

2.

Subject to termination as provided in this Agreement, the Consultant will provide services for an indefinite term. The parties acknowledge that various provisions of this Agreement survive past termination of services.

Position and Duties

3.

The Company agrees to engage the services of the Consultant as a Chief Financial Officer to perform any and all Chief Financial Officer duties, and the Consultant agrees to the terms and conditions set out in this Agreement.

4.

The Consultant will perform any and all duties assigned to the Consultant by the Company. The Consultant agrees to be subject to the general supervision of and act pursuant to the orders, advice and direction of the Company and that all work shall be authorized by the President and CEO.

5.

The Consultant agrees to abide by the Company's and on any Exchange for which the Company is listed rules, regulations, and practices, as they may from time to time be adopted or modified.

Consultant Compensation

6.

For the services rendered by the Consultant as required by this Agreement, the Company will pay to the Consultant hourly fees at $175/hour or hourly fees of $100/hour for work that will be accomplished by Consultants Assistant. This compensation will be payable once a month upon invoice while this Agreement is in force. Invoices will be detailed as to the amount of time spent by Consultant and Assistant and work provided.  

7.

The Consultant understands that the Consultant's compensation as provided in this Agreement will constitute the full and exclusive monetary consideration and compensation for all services performed by the Consultant and for the performance of all the Consultant's promises and obligations in this Agreement.

8.

Stock Options

Contractor shall, on the Effective Date, be eligible for incentive stock options which the Company at its discretion will cause to be granted.

Initial Grant

75,000 options

The above and any future Options will be granted to Contractor by the Company pursuant to a separate agreement between Contractor and the Company in the standard form used by that company (the “Option Agreement”) pursuant to its option plan or otherwise as appropriate, and will be subject to TSX Venture Exchange or TSX Inc. acceptance as applicable. The Options will be granted at an exercise price based on prevailing quoted prices of the Company’s shares on the relevant stock exchange.  The Options shall only vest and thereupon be exercisable dependent upon Contractor’s continued engagement by the Company hereunder. If this Agreement is terminated or Contractor dies during the term of the Options, all then vested share option rights, if any, may be exercised for 30 days subject to applicable rules of the regulatory authorities having jurisdiction, by the lawful representative of the estate of Con tractor as contemplated by the separate Option Agreements.  The Option Agreements shall not in any way affect the interpretation of this Agreement.

9.

The Consultant understands and agrees that any additional compensation to the Consultant (whether a bonus or other form of additional compensation) will rest in the sole discretion of the Company and that the Consultant will not earn or accrue any right to additional compensation by reason of the Consultant's services.

Non Full Time Position

10.

The Consultant and Company agree that the job is not currently a full-time position and that Consultant may hold positions and contracts with other companies.

Avoiding Conflict of Opportunities

11.

It is understood and agreed that any business opportunity relating to or similar to the Company's current or anticipated business opportunities in Ghana or Nevada coming to the attention of the Consultant during the Consultant's term of service is an opportunity belonging to the Company. Therefore, the Consultant will advise the Company of the opportunity and cannot pursue the opportunity, directly or indirectly, without the written consent of the Company.

12.

Without the written consent of the Company, the Consultant further agrees not to:

1.

solely or jointly with others undertake or join any planning for or organization of any business activity competitive with the current or anticipated business activities of the Company; and

2.

directly or indirectly, engage or participate in any other business activities that the Company, in its reasonable discretion, determines to be in conflict with the best interests of the Company.

Inability to Contract for Company

13.

In spite of anything contained in this Agreement to the contrary, the Consultant will not have the right to make any contracts or commitments for or on the behalf of the Company without first obtaining the express written consent of the Company.

Confidential Information and Assignment of Inventions

14.

The Consultant acknowledges in any position the Consultant may hold, in and as a result of the Consultant's engagement of services by the Company, the Consultant will, or may, be making use of, acquiring or adding to information about certain matters and things which are confidential to the Company and which information is the exclusive property of the Company, including, without limitation:

1.

'Confidential Information' means all data and information relating to the business and management of Company, including proprietary and trade secret technology and accounting records to which access is obtained by the Consultant, including Work Product, Computer Software, Other Proprietary Data, Business Operations, and Marketing and Development Operations. Confidential Information will also include any information that has been disclosed by a third party to the Company and governed by a non-disclosure agreement entered into between the third party and the Company. Confidential Information will not include information that:

1.

is generally known in the industry of the Company;

2.

is now or subsequently becomes generally available to the public through no wrongful act of the Consultant;

3.

the Consultant rightfully had in its possession prior to the disclosure to Consultant by the Company;

4.

is independently created by the Consultant without direct or indirect use of the Confidential Information; or

5.

the Consultant rightfully obtains from a third party who has the right to transfer or disclose it.

2.

'Work Product' means work product resulting from or related to work or projects performed or to be performed for the Company or for clients of the Company, of any type or form in any stage of actual or anticipated research and development;

3.

'Computer Software' which means computer software resulting from or related to work or projects performed or to be performed for the Company or for clients of the Company, of any type or form in any stage of actual or anticipated research and development, including but not limited to programs and program modules, routines and subroutines, processes, algorithms, design concepts, design specifications (design notes, annotations, documentation, flowcharts, coding sheets, and the like), source code, object code and load modules, programming, program patches and system designs;

4.

'Other Proprietary Data' means information relating to the Company's proprietary rights prior to any public disclosure of such information, including but not limited to the nature of the proprietary rights, production data, technical and engineering data, test data and test results, the status and details of research and development of products and services, and information regarding acquiring, protecting, enforcing and licensing proprietary rights (including patents, copyrights and trade secrets);

5.

'Business Operations' means internal personnel and financial information, vendor names and other vendor information (including vendor characteristics, services and agreements), purchasing and internal cost information, internal services and operational manuals, and the manner and methods of conducting the Company's business;

6.

'Marketing and Development Operations' means marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, quoting procedures, marketing techniques and methods of obtaining business, forecasts and forecast assumptions and volumes, and future plans and potential strategies of the Company which have been or are being discussed.

Confidential Obligations

15.

The Consultant agrees that a material term of the Consultant's contract with the Company is to keep all Confidential Information absolutely confidential and protect its release from the public. The Consultant agrees not to divulge, reveal, report or use, for any purpose, any of the Confidential Information which the Consultant has obtained or which was disclosed to the Consultant by the Company as a result of the Consultant's engagement of services by the Company. The Consultant agrees that if there is any question as to such disclosure then the Consultant will seek out senior management of the Company prior to making any disclosure of the Company's information that may be covered by this Agreement.

16.

The Consultant may disclose any of the Confidential Information:

1.

to a third party where Company has consented in writing to such disclosure; and

2.

to the extent required by law or by the request or requirement of any judicial, legislative, administrative or other governmental body, however, the Consultant will first have given prompt notice to the Company of any possible or prospective order (or proceeding pursuant to which any order may result), and the Company will have been afforded a reasonable opportunity to prevent or limit any disclosure.

Ownership and Title

17.

The Consultant acknowledges and agrees that all rights, title and interest in any Confidential Information will remain the exclusive property of the Company. Accordingly, the Consultant specifically agrees and acknowledges that she will have no interest in the Confidential Information, including, without limitation, no interest in know-how, copyright, trade-marks or trade names, notwithstanding the fact that she may have created or contributed to the creation of the same.

18.

The Consultant does hereby waive any moral rights that she may have with respect to the Confidential Information.

Return of Confidential Information

19.

The Consultant agrees that, upon request of the Company or upon termination or expiration, as the case may be, of services, the Consultant will turn over to the Company all documents, disks or other computer media, or other material in the possession or control of the Consultant that:

1.

may contain or be derived from ideas, concepts, creations, or trade secrets and other proprietary and Confidential Information as defined in this Agreement; or

2.

connected with or derived from the Consultant's services to the Company.

Non-Solicitation

20.

Any attempt on the part of the Consultant to induce others to leave the Company's employ, or any effort by the Consultant to interfere with the Company's relationship with its other Consultants and contractors would be harmful and damaging to the Company. The Consultant agrees that during the term of his services with the Company and for a period of three (3) years after the end of that term, the Consultant will not in any way, directly or indirectly:

1.

induce or attempt to induce any Consultant or contractor of the Company to quit employment or retainer with the Company;

2.

otherwise interfere with or disrupt the Company's relationship with its Consultants and contractors;

3.

discuss employment opportunities or provide information about competitive employment to any of the Company's Consultants or contractors; or

4.

solicit, entice, or hire away any Consultant or contractor of the Company.

This obligation will be limited to those that were Consultants or contractors of the Company when the Consultant was employed by the Company.

Non-Competition

21.

Other than through employment with a bona-fide independent party, or with the express written consent of the Company, which will not be unreasonably withheld, the Consultant will not, during the continuance of this Agreement or within two (2) years after the termination or expiration, as the case may be, of this Agreement, be directly or indirectly involved with a business which is in direct competition for the properties or other proposed acquisitions that the Consultant was working on during any time in the last year while providing services to the Company.

22.

For a period of two (2) years from the date of termination or expiration, as the case may be, of the Consultant’s engagement of services with the Company, the Consultant will not divert or attempt to divert from the Company any business the Company had enjoyed, solicited, or attempted to solicit, from its customers, or partners prior to termination or expiration, as the case may be, of the Consultant's services with the Company.

Termination Due to Discontinuance of Business

23.

In spite of anything contained in this Agreement to the contrary, in the event that the Company will discontinue operating its business at the location where the Consultant is employed, then, at the Company's sole option, this Agreement will terminate as of the last day of the month in which the Company ceases operations at such location with the same force and effect as if such last day of the month were originally set as the termination date of this Agreement.

Termination of Services

24.

Where the Consultant has breached any of the terms of this Agreement or where there is just cause for termination, the Company may terminate the Consultant's services without notice.

25.

The Consultant and the Company agree that reasonable and sufficient notice of termination of services by the Company is the greater of two weeks.

26.

If the Consultant wishes to terminate his own services with the Company, the Consultant will provide the Company with two weeks' notice.

27.

Should the Consultant terminate his services pursuant to this Agreement, and there is no constructive dismissal, the Consultant agrees to be reasonably available as a consultant for the purposes of maintaining any projects or developments created while still providing services by the Company. The Consultant agrees to negotiate the terms of the consulting work in good faith. In his capacity as a consultant for the Company pursuant to this paragraph, the Consultant agrees to provide his present residential address and telephone number as well as his business address and telephone number.

28.

The time specified in the notice by either the Consultant or the Company may expire on any day of the month and upon the date of termination the Company will forthwith pay to the Consultant any outstanding portion of the consulting fees. Notwithstanding the date of termination, the Consultant acknowledges and agrees to diligently execute and complete his service responsibilities to the Company at the reasonable direction of the Company. Failure of the Consultant to responsibly execute his obligations to the Company during the notice period will be considered to be an abandonment of his obligations and will be sufficient cause for immediate termination of the Consultant without compensation or notice.

Remedies

29.

The Consultant agrees and acknowledges that the Confidential Information is of a proprietary and confidential nature and that any disclosure of the Confidential Information to a third party in breach of this Agreement cannot be reasonably or adequately compensated for in money damages, would cause irreparable injury to Company, would gravely affect the effective and successful conduct of the Company's business and goodwill, and would be a material breach of this Agreement.

30.

In the event of a breach or threatened breach by the Consultant of any of the provisions of this Agreement, the Consultant agrees that the Company is entitled to, in addition to and not in limitation of any other rights and remedies available to the Company at law or in equity, to a permanent injunction in order to prevent or restrain any such breach by the Consultant or by the Consultant's partners, agents, representatives, servants, Consultants, and/or any and all persons directly or indirectly acting for or with the Consultant.

31.

The Consultant agrees to co-operate with the Company following termination by providing documentation and other information to permit the Company to evaluate whether the Consultant is honoring his post-services obligations set out in this Agreement.

Severability

32.

Company and Consultant acknowledge that this Agreement is reasonable, valid and enforceable. However, if a court of competent jurisdiction finds any of the provisions of this Agreement to be too broad to be enforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable, bearing in mind that it is the Consultant's intention to give the Company the broadest possible protection against disclosure of the Confidential Information, against the Consultant soliciting the Company's Consultants and contractors and against the Consultant using such Confidential Information in competing with the Company.

33.

In the event that any of the provisions of this Agreement will be held to be invalid or unenforceable in whole or in part, those provisions to the extent enforceable and all other provisions will nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Agreement and the remaining provisions had been executed by both parties subsequent to the expungement of the invalid provision.

 Modification of Agreement

34.

Any amendment or modification of this Agreement or additional obligation assumed by either party in connection with this Agreement will only be binding if evidenced in writing signed by each party or an authorized representative of each party.

Governing Law

35.

It is the intention of the parties to this Agreement that this Agreement and the performance under this Agreement, and all suits and special proceedings under this Agreement, be construed in accordance with and governed, to the exclusion of the law of any other forum, by the laws of the Province of British Columbia, without regard to the jurisdiction in which any action or special proceeding may be instituted.

General Provisions

36.

The Consultant is liable for all costs, expenses and expenditures including, and without limitation, the complete legal costs incurred by the Company in enforcing this Agreement as a result of any default of this Agreement by the Consultant.

37.

No failure or delay by the Company in exercising any power, right or privilege provided in this Agreement will operate as a waiver, nor will any single or partial exercise of such rights, powers or privileges preclude any further exercise of them or the exercise of any other right, power or privilege provided in this Agreement.

38.

This Agreement will inure to the benefit of and be binding upon the respective heirs, executors, administrators, successors and assigns, as the case may be, of the Company and the Consultant.

39.

This Agreement may be executed in counterparts.

40.

Time is of the essence in this Agreement.

41.

This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or written. As of the effective date of this Agreement, this Agreement supersedes all other agreements between the parties. The parties to this Agreement stipulate that neither of them has made any representations with respect to the subject matter of this Agreement except such representations as are specifically set forth in this Agreement. Each of the parties acknowledges that it has relied on its own judgment in entering into this Agreement.

IN WITNESS WHEREOF Keegan Resources Inc.. has duly affixed its signature by a duly authorized officer and Tony Ricci has duly signed under hand on this _th day of December, 2005.

	KEEGAN RESOURCES INC.. Per: Daniel T. McCoy
WITNESS	TONY RICCI

Page # of 9

EX-10

 

EX-10

FRI PROPERTY
OPTION AGREEMENT

THIS AGREEMENT is made effective as of the day of May 31, 2005.

BETWEEN:

QUICKSILVER VENTURES (NEVADA) INC. a company incorporated under the laws of Nevada and having a corporate address at Suite 1204-700 West Pender Street, Vancouver, B.C.,

V6C 1G8

(hereinafter called "Optionee")

OF THE FIRST PART

AND:

GERALD W. BAUGHMAN AND FABIOLA BAUGHMAN,  both of P.0 Box 18127, Reno, Nevada, 89511, U.S.A.

(hereinafter called the "Optionor")

OF THE SECOND PART

THIS AGREEMENT WITNESSES that in consideration of the sum of US $20,000 now paid by the Optionee to the Optionor and the covenants and agreements hereinafter set forth, the parties hereto agree as follows:

1.0

DEFINITIONS

1.1.

"Area of Interest" means the area contained within one mile of the boundaries of the Property as constituted on the date of signing the Agreement.

1.2.

"Effective Date" means the date of this Agreement.

1.3

"Expenditures" means all direct and indirect expenses incurred on or for the benefit of the Property or the Area of Interest, together with any and all costs, fees, and expenses that may be paid to obtain a Feasibility Study or other engineering or other studies or reports on or with respect to the Property. For greater certainty Expenditures shall include without limitation the costs, fees and expenses of (i) obtaining and maintaining title (including associated surface, access and water rights, expenses _,referred to in Section 3.3, (ii) conducting geological, geochemical, geophysical, and environmental diligence and obtaining necessary authorizations and permits; (iii) reasonable char^ges by the Optionee for services provided by geologists or others in the employment of the Optionee in evaluating the Property; and (iv) a management fee equal to 10% of all Expenditures except the fee referred to in this clause (iv) prov ided that in the case of individual contracts or invoice's greater than $100,000 such fee shall be 5% of such contract or invoice.

2

1.4

"First Anniversary", "Second Anniversary", "Third Anniversary", "Fourth Anniversary" "Fifth Anniversary" and "Sixth Anniversary" means respectively the first, second, third, fourth, fifth and sixth anniversary of the execution of this Agreement.

1.5

"First Year Commitments" means the 25,000 shares to be issued by the Optionee upon regulatory approval and $20,000 in cash to be paid by the Optionee on execution of this Agreement.

1.6

"Force Majeure" means any cause beyond the Optionee's reasonable control, including law or regulation, action or inaction of civil or military authority, interference by Natives, Native rights groups, environmentalists or other activists, inability to obtain any licence, permit or other authorization that may be required, unusually severe weather, fire, explosion, flood, insurrection, riot, labour dispute, inability after diligent effort to obtain workmen or material, delay in transportation and acts of God, but not including lack of funds.

1.7

"NSR" means the net smelter return royalty defined in Exhibit B of this Agreement.

1.8

"Operations" includes any and every kind of work which the Optionee in its sole discretion elects to do or to have done on or in respect of the Property or the Area of Interest or the products derived therefrom and all expenditures in respect of or incidental to such work. "Option" has the meaning assigned to it in Section 2.1.

1.9

"Property" means the unpatented lode mining claims described in Exhibit A to this Agreement, all of which are located in Nye County, Nevada, subject to any deletions therefrom by operation of Section 3.4 and additions thereto by operation of Article 14 and any mining leases or other forms of mineral tenure, which replace the same.

1.10

"Shares" means common shares of the Optionee or its assigns.

1.11

"5" means United States dollars unless otherwise stated.

1.12

Attached to and forming part of this Agreement are the following Exhibits:

Exhibit A

Property

Exhibit B

NSR definition

2.0

OPTION

2.1.

In consideration of the $20,000 paid by the Optionee to the Optionor, the Optionor hereby grants to the Optionee the sole and exclusive right and option (the "Option") exercisable in the manner described in Section 5, to acquire a 100% undivided interest in the Property and in all right, title and interest in and to the Property which the Optionor now has or may hereafter acquire free and clear of all liens, charges, encumbrances, security interests and adverse claims, except the 2V-2% NSR referred to in Article 4 of this Agreement.

The Optionor hereby grants to the Optionee, its servants, agents and independent contractors, during the currency of the Option, the sole and exclusive right and option to:

3

2.2.1.

enter upon and have immediate possession of the Property;

2.2.2.

carry out Operations on the Property as the Optionee may in its sole discretion determine;

2.2.3.

bring and install on the Property and remove from time to time such buildings, plant, machinery, equipment, tools, appliances and supplies as the Optionee may deem necessary; and

2.2.4.

remove from the Property reasonable quantities of rocks, ores, minerals and metals and to transport same for the purpose of sampling, testing and assaying.

3.0

TITLE

3.1.

Title to the Property will remain in the name of the Optionor during the term of the Option but the Optionor will, at the request of the Optionee, provide duly executed transfer documents in a form sufficient to transfer the Property to the Optionee to be held in escrow pending exercise of the Option. Upon exercise of the Option by the Optionee the Optionor shall deliver to the Optionee duly executed transfers of the Property in recordable form in favour of the Optionee, free and clear of all liens, charges, encumbrances, security interests and adverse claims other than the NSR royalty in favour of the Optionor.

3.2

The Optionor will, at the request of the Optionee prior to exercising the Option and while this Agreement is in good standing, record the Optionee's interest by registering a memorandum or short form notice of this Agreement in the BLM.

3.3

If the title of the Optionor to the Property is now or at any time hereafter materially deficient, materially defective or materially encumbered in any way not expressly contemplated hereby then, without limiting the Optionee's rights and remedies provided hereunder or by law, such material deficiency, material defect or material encumbrance may be remedied or removed by the Optionee in which event the cost and related expenses thereof may at the Optionee's option be deducted from any amounts or payments which may be or become due or payable to the Optionor hereunder or may be credited against the Expenditures. Because the payments set forth herein are predicated upon the Optionor owning the interests in the Property shown on Exhibit A, if the Optionor's title to that part of the Property from which minerals are being produced or are to be produced is less than the interests shown on Exhibit A, the O ptionee shall have the right, without waiving any other rights it may have hereunder, to reduce all payments to be made to the Optionor hereunder to the same proportion thereof as the rights and title actually owned by the Optionor bear to the interests shown on Exhibit A. If the Optionor is determined to have a lesser interest, any overpayments made to the Optionor may be recovered by the Optionee by offset against future payments due to the Optionor or by other means available to the Optionee at law.

3.4

The Optionee may at any time and from time to time abandon, surrender, allow to lapse, reduce the area of _or otherwise deal with any part or parts of the Property as it may determine (collectively, "Property Termination"), by giving the Optionor notice no less than 30 days prior to the date of such Property Termination or by failing to provide the Optionor with the notice and payment referred to in paragraph 3.5 of this Agreement.

4

Upon there being a Property Termination the Optionor will immediately provide the Optionee with a recordable release and reconveyance if the Optionee surrenders any of the unpatented mining claims which comprise the Property and if requested by the Optionor the Optionee will immediately deliver to the Optionor duly executed transfers of the part or parts of the Property so intended to be part of the Property Termination. Any part or parts of the Property so dealt with shall cease to be included in the Property and shall cease to be subject to this Agreement for all purposes, including without limitation Section 9.3.1.

3.5

The Optionee shall, in respect to each mining claim comprising the Property:

 3.5.1

provide the Optionor, 60 days prior to the date BLM fees are due each year during the term of the Option, with a written notice confirming the Optionee's intention to hold such mining claims and undertaking to pay the BLM fees in respect to such mining claims that are due 60 days following; and

3.5.2

pay by the date which is 30 days prior to the date the BLM fees are due, the BLM fees due in respect to such mining claims.

4.0

NSR ROYALTY

4.1.

Subject to paragraph 4.2 the Optionor shall retain a 2¹/2% NSR in respect to the Property.

4.2.

At any time during the term of this Option Agreement or at any time after the Optionee has exercised the Option, the Optionee may purchase a 11/2% NSR (ie 60% of the Optionor's 21/2% NSR) from the Optionor for $3,000,000.

5.0

REQUIREMENTS TO EXERCISE THE OPTION

5.1

In order to exercise the Option the Optionee must:

5.1.1.

pay to the Optionor $285,000 in cash as follows:

Upon execution of this Agreement	$20,000
On May 31, 2006	$40,000
On May 31, 2007	$45,000
On May 31, 2008	$50,000
On May 31, 2009	$55,000
On May 31, 2010	$75,000
TOTAL	$285,000

5.1.2.

cause Keegan Resources Ltd. to issue to the Optionor-500,000 Shares as follows:

5

Upon regulatory approval	25,000
On May 31, 2006	100,000
On May 31, 2007	45,000
On May 31, 2008	75,000
On May 31, 2009	75,000
On May 31, 2010	180,000
TOTAL:	500,000

5.1.3.

incur Expenditures of no less than $3,000,000 by the Sixth Anniversary of this Agreement as follows:

Prior to the First Anniversary	$70,000
Prior to the Second Anniversary	$230,000
Prior to the Third Anniversary	$300,000
Prior to the Fourth Anniversary	$400,000
Prior to the Fifth Anniversary	$1,000,000
Prior to the Sixth Anniversary	$1,000,000
TOTAL:	$3,000,000

6.0

ACCELERATION , FORCE MAJEURE AND CHANGE OF SHARE STRUCTURE

6.1.

The Optionee may pre-pay any or all of the payments contemplated by Sections 5.2.1, issue at any time ahead of schedule any of the Shares required to be issued pursuant to Section 5.2.2 and may accelerate any or all of the Expenditures contemplated by Section 5.2.3. The Optionee may at any time from time to time pay to the Optionor money in lieu of incurring Expenditures under Sections 5.2.3, in which event the Optionee shall be deemed to have incurred additional Expenditures in the same amount as the amount of any such payment. Any excess payments or Expenditures incurred in any calendar year will be carried forward and applied as a credit against the payment or Expenditures, as the case may be, to be made in the next succeeding year or years.

6.2

If from time to time the Optionee is prevented by Force Majeure from incurring Expenditures in the amounts and times provided in Sections 5.2.3, then the Optionee shall have such additional time as is reasonable in the circumstances to incur Expenditures in such amounts and times, the amount of such additional time not to exceed the duration of the Force Majeure. The Optionee shall provide notice to the Optionor of the commencement of any Force Majeure together with the details of the circumstances constituting Force Majeure and shall provide the the Optionor with notice of termination of Force Majeure. The Optionee shall diligently and in good faith prosecute any application for license, permit or other authorization, the ability of which to obtain is the basis for the Force Majeure event.

6.3

Upon the occurrence of any one or more events involving the capital reorganization, consolidation, subdivision or reclassification of the common shares in the capital of the Optionee, or the merger, amalgamation or other corporate combination of the Optionee with one or more other entities, or of any other events in which new securities of any kind or nature are issued or delivered in exchange for the common shares in the capital stock of the Optionee as constituted on the date hereof ("Fundamental Changes") then, at the time of any issuance of any of the Optionee's shares pursuant . to this agreement taking place after such Fundamental Change, and in lieu of issuing and delivering the Optionor shares which, but for such Fundamental Change and this provisions, would have been

6

issued and delivered, the Optionee (or its successor) will issue and/or deliver instead such number of new securities as would have been issued and/or delivered to the Optionor as a result of the Fundamental Change in exchange for those the Optionee shares which the Optionor would have held if such issuance had occurred prior to the occurrence of the Fundamental Change.

7.0

PERFORMANCE OF WORK

7.1.

In exercising its rights under Section 2.2 the Optionee shall comply with all applicable laws, rules and regulations and shall carry out Operations in a good and miner-like manner in accordance with all applicable governmental regulations and restrictions.

7.2.

The Optionee shall defend, indemnify and save harmless the Optionor from and against any and all claims, debts, demands, suits, actions and causes of action whatsoever which may be brought or made against the Optionor by any person, firm or corporation and all loss, cost, damages, expenses and liabilities which may be suffered or incurred by the Optionor arising out of or in connection with or in any way referable to, whether directly or indirectly, the entry on, presence on, or activities on the Property or the approaches thereto by the Optionee or its servants or agents including without limitation bodily injuries or death at any time resulting therefrom or damage to property, unless and to the extent due to the acts or omissions of the Optionor or its servants or agents.

7.3.

The Optionor shall at all reasonable times during the currency of the Option have access to the Property on reasonable notice to the Optionee, provided that the Optionor shall not interfere with the Optionee's operations hereunder and that the Optionee shall be under no liability to the Optionor for any personal injuries including death or for any damage to the property of the Optionor unless such injury or damage is due to the gross negligence or wilful default of the Optionee, its servants or agents.

7.4.

The Optionee shall, at its sole cost, keep in force during this Agreement term a policy of commercial general liability insurance covering property damage and liability for personal injury occurring on or about the Property, with limits in the amount of at least Two Million Dollars ($2,000,000) per occurrence for injuries to or death of person, One Million Dollars ($1,000,000) per occurrence for property damage, and with a contractual liability endorsement insuring the Optionee's performance of the Optionee's indemnity obligations of this Agreement and naming the Optionor as an additional insured.

8.0

VESTING OF INTEREST

8.1.

Upon the Optionee complying with the provisions of Article 5 and the Optionee delivering to the Optionor not later than the Sixth Anniversary a notice in writing stating that the Optionee wishes to acquire a 100% undivided interest in the Property, subject to the 21/2% NSR in favour of the Optionor, the Optionee shall without any further payment or action be deemed to have exercised the Option and it will thereupon acquire and be deemed to have acquired and be vested with a 100% undivided right, title and interest in the Property free and clear of all liens, charges, encumbrances, security interests and adverse claims except for the 2'/2% NSR in favour of the Optionor.

8.2.

if the Optionee, having the right to give notice to the Optionor under Section 8.1, fails to do so within the time provided, the Optionor \vill give the Optionee notice of such failure and the date on or before which the Optionee must give notice to the Optionor under Section 8.1, to exercise the

7

Option. The Option will be extended to the date which is 30 days after receipt by the Optionee of such notice from the Optionor.

9.0

TERMINATION

9.1.

The parties acknowledge and agree that, subject to the Optionee being obligated to complete the First Year Commitments the Optionee has the right and option but not the obligation to make each of the payments referred to in Section 5.1.1; to issue the Shares referred to in Section 5.1.2, and to incur the Expenditures referred to in Sections 5.1.3 and neither anything which the Optionee might do nor any payment which it makes, issuance of Shares that it completes or Expenditure which it incurs will obligate it to do anything more or to make any further payment, issue any further Shares, or incur any further Expenditures.

9.2.

At any time the Optionee may, subject to having fulfilled the First Year Commitments let the Option lapse by notice to the Optionor, by failing to provide the Optionor with the notice and the payment referred to in Section 3.5, by not making a payment referred to in Section 5.1.1, by failing to issue any of the Shares referred to in 5.1.2 or by not incurring the Expenditures referred to in Section 5.1.3 whereupon, subject to Section 9.5, this Agreement shall terminate, provided Section 7.2 shall continue in full force and effect.

9.3.

If this Agreement is terminated pursuant to Section 9.2 the Optionee shall:

9.3.1. deliver to the Optionor duly executed transfers of the Property in favour of the Optionor, free and clear of all liens, charges, encumbrances, security interests or adverse claims arising from the activities of the Optionee on the Property, each mineral claim then comprised in the Property to be in good standing for at least 12 months;

9.3.2.

within 180 days deliver to the Optionor copies of all of the non-interpretative reports, maps, plans, photographs and drill logs of the Optionee relating to the Property, provided that the Optionee does not make any representation or warranty concerning the accuracy or completeness thereof;

9.3.3. within the said 180 days remove from the Property any machinery, buildings, structures, facilities, equipment and all other property of every nature and description erected, placed or situated thereon by the Optionee; any property not so removed at the end of the 180 day period shall at the option of the Optionor become the property of the Optionor; and

9.3.4. within the said 180 days leave the working and camp site in a clean and environmentally acceptable condition.

9.4.

If the Optionee is prevented from or delayed in performing its obligations in Sections 9.3.3 or 9.3.4 by Force Majeure, the relevant period of 180 days referred to therein shall be extended by the period of Force Majeure.

9.5.

Neither party will be in default of any of its obligations under this Agreement or deprived of any of its rights hereunder until notice of the alleged default has been given to the other party and such default has not been remedied or such other party has not in good faith commenced to take action

8

to remedy such default within 30 days after the receipt of such notice and has not diligently proceeded with such remedying.

10.0

ASSIGNMENT BY OPTIONEE

10.1.

The Optionee may not assign the Option and its rights under this Agreement without the written consent of the Optionor, such consent not to be unreasonably withheld.

11.0

RESTRICTION ON ASSIGNMENT BY OPTIONOR

11.1.

Prior to exercise of the Option, the Optionor shall not sell, assign, transfer, convey or otherwise dispose of or deal with any or all of its rights and interests in whole or in part in or with respect to the Property or under or by virtue of this Agreement except in accordance with the provisions of this Article 11.

11.2.

If the Optionor should desire to sell all or any portion of its interest in the Property they shall first offer same to the Optionee. Any such offer shall provide for a closing date at least 60 days from the date of notice of the offer being made. The Optionee shall have a 30 day period to elect whether to purchase the offered interest. Upon the expiry of the 30 day period the Optionor shall be free to dispose of the offered interest to the extent not committed to be purchased by the Optionee to any third party for a period of 180 days and on terms no less favourable to the Optionor than was offered to the Optionee. If no sale of the offered interest is consummated within the aforesaid 180 day period, it shall thereafter again become subject to the right of the first refusal contemplated hereby.

12.0

NOTICES

12.1.

All notices and other required communications ("Notices") to one of the Optionee or the Optionor by the other shall be in writing and shall be addressed respectively as follows:

If to the Optionor:

Gerald W. Baughman

P.0 Box 18127

Reno, Nevada

89511, U.S.A.

If to the Optionee:

Quicksilver Ventures (Nevada) Inc.

Suite 1204-700 West Pender Street

Vancouver, B.C.

V6C 1G8

Telecopier: (604) 683-8194

Attention: President and CEO

All Notices shall be given (1) by personal delivery to the addressee, or (2) by electronic communication, with a confirmation sent by registered or certified mail return receipt requested, or by commercial carrier or (3) by registered or certified mail return receipt requested, or commercial carrier. All Notices shall be effective and shall be deemed delivered (1) if by personal delivery on

9

the date of delivery if delivered during normal business hours and, if not delivered during normal business hours, on the next business day following delivery, (2) if by electronic communication on the next business day following receipt of the electronic communication, and (3) if solely by mail or commercial carrier on the next business day after actual receipt. A party may change its address by Notice to the other party.

12.2.

All payments by the Optionee to the Optionor under this Agreement shall be well and sufficiently made if a cheque payable to the Optionor in Canadian funds is sent by mail, postage prepaid, or deposited with a commercial carrier, and addressed to the Optionor at its address for notices on or before the date on which such payment is to be made for the amount of the payment. If from time to time the Optionee mails a cheque to the Optionor, or deposits a cheque with a commercial carrier, in payment of an amount under this Agreement but not within the time specified by such payment, the Optionee will be deemed to have made the payment within the specified time and this Agreement including the Option will continue in full force and effect provided that, if the Optionor gives written notice to the Optionee that such payment has not been made, such cheque is mailed by the Optionee within 30 days of receip t of such notice.

13.0

REPRESENTATIONS AND WARRANTIES

13.1

The Optionor covenants, represents and warrants, which covenants, representations and warranties shall survive termination of this Agreement, that:

(a)

the mining claims comprising the Property were properly located in accordance with applicable Federal and state laws and regulations;

(b)

all assessment work requirements for the mining claims have been performed and all filings and recordings of proof of performance have been made properly and all Federal annual unpatented mining claim maintenance and rental fees have been paid properly and timely;

(c)

the mining claims are in good standing and the Optionor has good title to and owns the entire undivided legal and equitable interest in the claims, subject to the paramount title of the United States and other matters of title disclosed in this Agreement;

(d)

The Optionor has good right and full power to lease and to convey the interests described in this Agreement;

(e)

the claims are free and clear of all liens, claims, encumbrances, production royalties and security interests, except as otherwise provided in this Agreement;

(f)

The Optionor shall not commit any act or acts which will encumber or cause a lien to be placed on the claims;

(g)

The Optionor will defend title to the claims consistent with these representations and warranties.

(h)

there are not any suits, actions, prosecutions, investigations or proceedings, actual, pending or threatened, against or affecting the Optionor that relates to or has an adverse effect on the Property;

(i)

the execution and delivery of this Agreement and the exercise by the Optionee of the rights granted to it under this Agreement will not conflict with or be in contravention of any law, regulation or order of any government, government department or other competent authority including Ministerial orders and Orders-in-Council or conflict with rights of third parties or result in

10

a breach of or default under any agreement or other instrument of obligation to which either of the Optionor is a party or by which the Optionor or the Property may be bound;

(j)

this Agreement constitutes a legal, valid and binding obligation of the Optionor;

13.2

The Optionor makes no representation or warranty concerning the discovery or presence of valuable minerals on the unpatented mining claims which comprise all or a portion of the Property.

13.3

The Optionee represents and warrants to the Optionor that:

(a)

the execution and delivery of this Agreement and the exercise by the Optionee of the rights granted to it under this Agreement will not conflict with or result in a breach of or default under any agreement or other instrument of obligation to which the Optionee is a party or by which it may be bound; and

(b)

this Agreement constitutes a legal, valid and binding obligation of the Optionee.

 13.4

The representations and warranties contained in Section 13.1 are provided for the exclusive benefit of the Optionee and a breach of any one or more of them may be waived by the Optionee in writing in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty.

 13.5

The representations and warranties contained in Section 13.2 and 13.3 are provided for the exclusive benefit of the Optionor and a breach of any one or more of them may be waived by the Optionor in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty.

14.0

AREA OF INTEREST

14.1.

If at any time during the subsistence of the Option the Optionor or the Optionee ( herein referred to as the "Acquiring Party") stakes any mineral claim located wholly or partly within the Area of Interest the Acquiring Party shall forthwith give notice to the other party(the "Other Party") of that staking, the cost thereof and all details in possession of the Acquiring Party with respect to the nature of the Acquired Rights and the known mineralization.

14.2.

The Other Party may, within 30 days of receipt of the Acquiring Party's notice, elect, by notice to the Other Party to require that the Acquired Rights and the right or interest acquired be included in and thereafter form part of the Property for all purposes of this Agreement.

14.3.

If the Other Party does not make the election aforesaid within that period of 30 days, the Acquired Rights shall not form part of the Property and the Acquiring Party shall be solely entitled thereto.

14.4

Any unpatented mining claims that are surrendered by the Optionee that would otherwise have been included in the Area of Interest but for such surrender, will no longer be included in the Area of Interest if such unpatented mining claims are subsequently amended or relocated by the Optionor.

15.0

MISCELLANEOUS

15.1

Applicable Law. The terms and provisions of this Agreement shall be interpreted in accordance with the laws of Nevada.

15.2.

Entire Agreement. This Agreement terminates and replaces all prior agreements, either written, oral or implied, between the Optionee and the Optionor with respect to the Property and constitutes the entire agreement between the parties with respect to the Property.

15.3.

Recording. This Agreement shall not be recorded. However, the parties agree to execute and record where appropriate in offices of public record in the State of Nevada a notice of this Agreement in the applicable form hereto to provide notice to third parties of the Option and of the respective rights and interests of the parties in and to the Property.

15.4. Void or Invalid Provision. If any term, provision, covenant or condition of this Agreement, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of this Agreement, and all applications thereof not held invalid, void or unenforceable shall continue in full force and effect and in no way be affected, impaired or invalidated thereby.

15.5.

Additional Documents. The parties shall do and perform all such acts and things, and execute all such deeds, documents and writings, and give all such assurances, as may be necessary to give effect to this Agreement.

15.6.

Binding Effect. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

EXHIBIT "A"

To the FRI Property Option Agreement dated May 31, 2005

The Property referred to in the Agreement that this exhibit is attached to, consists of 30 full-size unpatented claims named Wind 1-22 and Wind 37-44 located in Nye County in the Mt. Diablo Meridian, Township 7N, Range 39E, Sections 22, 23, 26, and 27. It is depicted in the map below.

2

EXHIBIT "B"

To the FRI Property Option Agreement dated May 31, 2005
NET SMELTER RETURNS ROYALTY

1.

Definitions - For the purpose of this EXHIBIT, "Agreement" shall mean the FRI Property Option Agreement to which this Exhibit is attached, "Owner" shall mean the party or parties paying a percentage of Net Smelter Returns pursuant to the Agreement. "Holder" shall mean the party or parties receiving a percentage of Net Smelter Returns pursuant to the Agreement and other capitalized terms shall have the meanings assigned to them in the Agreement.

2.

Net Smelter Returns – For the purpose hereof, the term "Net Smelter Returns" shall, subject to paragraphs 3, 4, 5, and 6 below, mean gross revenues received from the sale by the Owner of all ore mined from the Property and from the sale by the Owner of concentrate, dore, metal and products derived from ore mined from the Property, after deduction of the following:

(a)

all smelting and refining costs, sampling, assaying and treatment charges and penalties including but not limited to metal losses, penalties for impurities and charges for refining, selling and handling by the smelter, refinery or other purchaser (including price participation charges by smelters and/or refiners); and

(b)

costs of handling, transporting, securing and insuring dore, metal and concentrates from the Property or from a concentrator, whether situated on or off the Property, to a smelter, refinery or other place of treatment, and in the case of gold or silver concentrates, security costs; and

(c)

ad valorem taxes and taxes based upon sales or production, but not income taxes; and

(d)

marketing costs, including sales commissions, incurred in selling ore mined from the Property and from concentrate, dore, metal and products derived from ore mined from the Property.

3.

Non-Arm's Length Revenue – Where revenue otherwise to be included under this Exhibit is received by the Owner in a transaction with a party with whom it is not dealing at arm's length, the revenue to be included shall be based on the fair market value under the circumstances and at the time of the transaction.

4.

Non-Arm's Length Costs – Where a cost otherwise deductible under this Exhibit is incurred by the Owner in a transaction with a party with whom it is not dealing at arm's length, the cost to be deducted shall be the fair market cost under the circumstances and at the time of the transaction.

3

5.

Currency – The currency of the United States shall be used for the purposes of calculating Net Smelter Returns.

6.

Hedging – The Owner may, but shall not be under any duty to, engage in price protection (hedging) or speculative transactions such as futures contracts and commodity options in its sole discretion covering all or part of production from the Property and, except in the case where products are actually delivered and a sale is actually consummated under such price protection or speculative transactions, none of the revenues, costs, profits or losses from such transactions shall be taken into account in calculating Net Smelter Returns or any interest therein.

7.

Commingling – If the Property is brought into commercial production, it may be operated as a single operation with other mining properties owned by third parties or in which the Owner has an interest, in which event, the parties agree that (notwithstanding separate ownership thereof) ores mined from the mining properties (including the Property) may be blended at the time of mining or at any time thereafter, provided, however, that the respective mining properties shall bear and have allocated to them their proportionate part of costs described in paragraphs 2(a) to 2(d) above incurred relating to the single operation, and shall have allocated to each of them the proportionate part of the revenues earned relating to such single operation. In making any such allocation, effect shall be given to the tonnages and location of ore and other material mined and beneficiated and the characteristics of such material including the metal content of ore removed from, and to any special charges relating particularly to ore, concentrates or other products or the treatment thereof derived from, any of such mining properties. The Owner shall, at least 60 days prior to the commencement of commingling of ore mined from another property, deliver to the Holder a detailed description of the proposed commingling plan and the procedures by which the Owner intends to determine the respective outturn of minerals from ores mined from the Property and the other property or properties.

8.

Sampling – The Owner shall ensure that highest and best practises and procedures utilized in the precious metals mining industry in Nevada are adopted and employed for weighing, determining moisture content, sampling and assaying and determining recovery factors.

9.

NSR Interest – The Net Smelter Return interest is two and one-half percent (2.5%) of Net Smelter Returns.

10.

Payments – Payments of a percentage of Net Smelter Returns shall be made to the Holder within thirty (30) days-after the end of each calendar quarter in which Net Smelter Returns, as determined on the basis of final adjusted invoices, are received by the Owner. All such payments shall be made in U.S. dollars.

11.

Calculations – After the year in which commercial production is commenced on the Property, the Holder receiving a percentage of Net Smelter Returns from the Owner shall be provided annually on or before April 1 with a copy of the calculation of Net Smelter Returns, determined in accordance with this Exhibit, for the preceding calendar year, certified correct by the Owner.

12.

Audits – The Owner shall cause the Net Smelter Returns and^, the records relating thereto to be audited within the first quarter of each calendar year by a national firm of chartered

4

accountants designated and paid by the Owner (which may be the auditor of the Owner) and:

(a)

copies of the audited reports shall be delivered to the Holder and the Owner by the chartered accounting firm;

(b)

either party shall have six (6) months after receipt of any audited report to object thereto in writing to the other party, and failing such objection, such report shall be deemed correct; and

(c)

in the event of a reaudit, all costs relating to such reaudit shall be paid by the Owner (if the original audit is found in error by a margin of 10% or more) or the Holder (if the original audit is found to be correct) and the Holder requested the reaudit.

13.

Rights of Parties – The right to receive a percentage of Net Smelter Returns from the Owner as and when due is and shall be deemed to be a covenant which runs with the title to the unpatented mining claims. Furthermore, the right to receive a percentage of Net Smelter Returns by the Holder from the Owner as and when due shall not be deemed to constitute the Owner the partner, agent or legal representative of the Holder or to create any fiduciary relationship between them for any purpose whatsoever.

14.

Operations – The Owner shall be entitled to:

(a)

Make all operational decisions with respect to the methods and extent of mining and processing of ore, concentrate, (lore, metal and products produced from the Property (for example, without limitation, the decision to process by heap leaching rather than conventional milling);

(b)

Make all decisions relating to sales of such ore, concentrate, dore, metal and products produced provided, however, that subject to paragraph 10 herein royalty payments are owing to the Holder upon the outturn of minerals at the smelter, refinery or other place of treatment; and

(c)

Make all decisions concerning temporary or long-term cessation of operations.

15.

Reacquisitions – Notwithstanding the provisions of paragraph 14 of this Exhibit, if the Owner relinquishes, drops, abandons or allows any portion of the Property to lapse and subsequently reacquires a direct or indirect beneficial interest with respect to such portion of the Property, then such portion of the Property will once again be subject to the obligation to pay Net Smelter Returns.

Annual Reports – Within one hundred and twenty (120) days following the end of each calendar year, the Owner shall provide the Holder with an annual report of all activities and operations conducted upon or with respect to the Property during the preceding calendar year, together with description of activities and operations anticipated during the current year (including estimates).

EX-20

KEEGAN RESOURCES INC.

AMENDED STOCK OPTION PLAN

1.

PURPOSE OF THE PLAN

The Company hereby establishes a stock option plan for directors, senior officers Employees, Management Company Employees and Consultants (as such terms are defined below) of the Company and its subsidiaries (collectively "Eligible Persons"), to be known as the "Stock Option Plan" (the "Plan").  The purpose of the Plan is to give to Eligible Persons, as additional compensation, the opportunity to participate in the success of the Company by granting to such individuals options, exercisable over periods of up to five years as determined by the board of directors of the Company, to buy shares of the Company at a price not less than the Market Price prevailing on the date the option is granted less applicable discount, if any, permitted by the policies of the Exchanges and approved by the Board.

2.

DEFINITIONS

In this Plan, the following terms shall have the following meanings:

2.1

"Associate" means an "Associate" as defined in the Exchange Policies.

2.2

"Board" means the Board of Directors of the Company.

2.3

"Change of Control" means the acquisition by any person or by any person and all Joint Actors, whether directly or indirectly, of voting securities (as defined in the Securities Act) of the Company, which, when added to all other voting securities of the Company at the time held by such person or by such person and a Joint Actor, totals for the first time not less than fifty percent (50%) of the outstanding voting securities of the Company or the votes attached to those securities are sufficient, if exercised, to elect a majority of the Board of Directors of the Company.

2.4

"Company" means Keegan Resources Inc. and its successors.

2.5

"Consultant" means a "Consultant" as defined in the TSX Policies.

2.6

"Consultant Company" means a "Consultant Company" as defined in the TSX Policies.

2.7

"Disability" means any disability with respect to an Optionee which the Board, in its sole and unfettered discretion, considers likely to prevent permanently the Optionee from:

(a)

being employed or engaged by the Company, its subsidiaries or another employer, in a position the same as or similar to that in which he was last employed or engaged by the Company or its subsidiaries; or

(b)

acting as a director or officer of the Company or its subsidiaries.

2.8

"Discounted Market Price" of Shares means, if the Shares are listed only on the TSX Venture Exchange, the Market Price less the maximum discount permitted under the TSX Policy applicable to Options;

2.9

"Distribution" means a "Distribution" as defined in the TSX Policies.

2.10

"Eligible Persons" has the meaning given to that term in paragraph 1 hereof.

2.11

"Employee" means an "Employee" as defined in the TSX Policies.

2.12

"Exchanges" means the TSX Venture Exchange and, if applicable, any other stock exchange on which the Shares are listed.

2.13

"Expiry Date" means the date set by the Board under section 3.1 of the Plan, as the last date on which an Option may be exercised.

2.14

"Grant Date" means the date specified in an Option Agreement as the date on which an Option is granted.

2.15

"Insider" means an "Insider" as defined in the TSX Policies, other than a person who is an insider solely by virtue of being a director or senior officer of a subsidiary of the Company.

2.16

"Investor Relations Activities" means "Investor Relations Activities" as defined in the TSX Policies.

2.17

"Joint Actor" means a person acting "jointly or in concert with" another person as that phrase is interpreted in section 96 of the Securities Act.

2.18

"Management Company Employee" means a "Management Company Employee" as defined in the TSX Policies.

2.19

"Market Price" of Shares at any Grant Date means the last closing price per Share on the trading day immediately preceding the day on which the Company announces the grant of the option or, if the grant is not announced, on the Grant Date, or if the Shares are not listed on any stock exchange, "Market Price" of Shares means the price per Share on the over-the-counter market determined by dividing the aggregate sale price of the Shares sold by the total number of such Shares so sold on the applicable market for the last day prior to the Grant Date.

2.20

"Option" means an option to purchase Shares granted pursuant to this Plan.

2.21

"Option Agreement" means an agreement, in the form attached hereto as Schedule "A", whereby the Company grants to an Optionee an Option.

2.22

"Optionee" means each of the Eligible Persons granted an Option pursuant to this Plan and their heirs, executors and administrators.

2.23

"Option Price" means the price per Share specified in an Option Agreement, adjusted from time to time in accordance with the provisions of section 5.

2.24

"Option Shares" means the aggregate number of Shares which an Optionee may purchase under an Option.

2.25

"Plan" means this Stock Option Plan.

2.26

"Shares" means the common shares in the capital of the Company as constituted on the Grant Date provided that, in the event of any adjustment pursuant to section 5, "Shares" shall thereafter mean the shares or other property resulting from the events giving rise to the adjustment.

2.27

"Securities Act" means the Securities Act, R.S.B.C. 1996, c.418, as amended, as at the date hereof.

2.28

"TSX Policies" means the policies included in the TSX Venture Exchange Corporate Finance Manual and "TSX Policy" means any one of them.

2.29

"Unissued Option Shares" means the number of Shares, at a particular time, which have been reserved for issuance upon the exercise of an Option but which have not been issued, as adjusted from time to time in accordance with the provisions of section 5, such adjustments to be cumulative.

2.30

"Vested" means that an Option has become exercisable in respect of a number of Option Shares by the Optionee pursuant to the terms of the Option Agreement.

3.

GRANT OF OPTIONS

3.1

Option Terms

The Board may from time to time authorize the issue of Options to Eligible Persons.  The Option Price under each Option shall be not less than the Discounted Market Price on the Grant Date.  The Expiry Date for each Option shall be set by the Board at the time of issue of the Option and shall not be more than five years after the Grant Date.  Options shall not be assignable (or transferable) by the Optionee.

3.2

Limits on Shares Issuable on Exercise of Options

The maximum number of Shares which may be issuable pursuant to options granted under the Plan shall be 2,774,683 Shares or such additional amount as may be approved from time to time by the shareholders of the Company.  The number of Shares reserved for issuance under the Plan and all of the Company's other previously established or proposed share compensation arrangements:

(a)

in aggregate shall not exceed 20% of the total number of issued and outstanding Shares on the Grant Date on a non-diluted basis; and

(b)

to any one Optionee within a 12 month period shall not exceed 5% of the total number of issued and outstanding shares on the Grant Date on a non-diluted basis.

The number of Shares which may be issuable under the Plan and all of the Company's other previously established or proposed share compensation arrangements, within a one-year period:

(a)

to any one Optionee, shall not exceed 5% of the total number of issued and outstanding Shares on the Grant Date on a non-diluted basis;

(b)

to Insiders as a group shall not exceed 20% of the total number of issued and outstanding Shares on the Grant Date on a non-diluted basis;

(c)

to any one Consultant shall not exceed 2% in the aggregate of the total number of issued and outstanding Shares on the Grant Date on a non-diluted basis; and

(d)

to all Eligible Persons who undertake Investor Relations Activities shall not exceed 2% in the aggregate of the total number of issued and outstanding Shares on the Grant Date on a non-diluted basis.

3.3

Option Agreements

Each Option shall be confirmed by the execution of an Option Agreement.  Each Optionee shall have the option to purchase from the Company the Option Shares at the time and in the manner set out in the Plan and in the Option Agreement applicable to that Optionee.  For stock options to Employees, Consultants, Consultant Companies or Management Company Employees, the Company is representing herein and in the applicable Stock Option Agreement that the Optionee is a bona fide Employee, Consultant, Consultant Company or Management Company Employee, as the case may be, of the Company or its subsidiary.  The execution of an Option Agreement shall constitute conclusive evidence that it has been completed in compliance with this Plan.

4.

EXERCISE OF OPTION

4.1

When Options May be Exercised

Subject to sections 4.3 and 4.4, an Option may be exercised to purchase any number of Shares up to the number of Vested Unissued Option Shares at any time after the Grant Date up to 4:00 p.m. local time on the Expiry Date and shall not be exercisable thereafter.  

4.2

Manner of Exercise

The Option shall be exercisable by delivering to the Company a notice specifying the number of Shares in respect of which the Option is exercised together with payment in full of the Option Price for each such Share.  Upon notice and payment there will be a binding contract for the issue of the Shares in respect of which the Option is exercised, upon and subject to the provisions of the Plan.  Delivery of the Optionee's cheque payable to the Company in the amount of the Option Price shall constitute payment of the Option Price unless the cheque is not honoured upon presentation in which case the Option shall not have been validly exercised.

4.3

Vesting of Option Shares

The Directors, subject to the policies of the Exchanges, may determine and impose terms upon which each Option shall become Vested in respect of Option Shares.  Current policies of the TSX Venture Exchange provide that minimum vesting requirements shall be 25% of the Option upon TSX Venture Exchange approval and 12 1/2% every quarter thereafter which is the vesting period hereby adopted by the directors of the Company.

4.4

Termination of Employment

If an Optionee ceases to be an Eligible Person, his or her Option shall be exercisable as follows:

(a)

Death or Disability

If the Optionee ceases to be an Eligible Person, due to his or her death or Disability or, in the case of an Optionee that is a company, the death or Disability of the person who provides management or consulting services to the Company or to any entity controlled by the Company, the Option then held by the Optionee shall be exercisable to acquire Vested Unissued Option Shares at any time up to but not after the earlier of:

(i)

365 days after the date of death or Disability; and

(ii)

the Expiry Date;

(b)

Termination For Cause

If the Optionee, or in the case of a Management Company Employee or a Consultant Company, the Optionee's employer, ceases to be an Eligible Person as a result of termination for cause, as that term is interpreted by the courts of the jurisdiction in which the Optionee, or, in the case of a Management Company Employee or a Consultant Company, of the Optionee's employer, is employed or engaged; any outstanding Option held by such Optionee on the date of such termination, whether in respect of Option Shares that are Vested or not, shall be cancelled as of that date.

(c)

Early Retirement, Voluntary Resignation or Termination Other than For Cause

If the Optionee or, in the case of a Management Company Employee or a Consultant Company, the Optionee's employer, ceases to be an Eligible Person due to his or her retirement at the request of his or her employer earlier than the normal retirement date under the Company's retirement policy then in force, or due to his or her termination by the Company other than for cause, or due to his or her voluntary resignation, the Option then held by the Optionee shall be exercisable to acquire Vested Unissued Option Shares at any time up to but not after the earlier of the Expiry Date and the date which is 90 days (30 days if the Optionee was engaged in Investor Relations Activities) after the Optionee or, in the case of a Management Company Employee or a Consultant Company, the Optionee's employer, ceases to be an Eligible Person.

For greater certainty, an Option that had not become Vested in respect of certain Unissued Option Shares at the time that the relevant event referred to in this paragraph 4.4 occurred, shall not be or become vested or exercisable in respect of such Unissued Option Shares and shall be cancelled.

4.5

Effect of a Take-Over Bid

If a bona fide offer ( an "Offer") for Shares is made to the Optionee or to shareholders of the Company generally or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in part, would result in the offeror becoming a control person of the Company, within the meaning of subsection 1(1) of the Securities Act, the Company shall, immediately upon receipt of notice of the Offer, notify each Optionee of full particulars of the Offer, whereupon (subject to the approval of the Exchanges) all Option Shares subject to such Option will become Vested and the Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to tender the Option Shares received upon such exercise, pursuant to the Offer.  However, if:

(a)

the Offer is not completed within the time specified therein; or

(b)

all of the Option Shares tendered by the Optionee pursuant to the Offer are not taken up or paid for by the offeror in respect thereof,

then the Option Shares received upon such exercise, or in the case of clause (b) above, the Option Shares that are not taken up and paid for, may be returned by the Optionee to the Company and reinstated as authorized but unissued Shares and with respect to such returned Option Shares, the Option shall be reinstated as if it had not been exercised and the terms upon which such Option Shares were to become Vested pursuant to paragraph 4.3 shall be reinstated.  If any Option Shares are returned to the Company under this paragraph 4.5, the Company shall immediately refund the exercise price to the Optionee for such Option Shares.

4.6

Acceleration of Expiry Date

If at any time when an Option granted under the Plan remains unexercised with respect to any Unissued Option Shares, an Offer is made by an offeror, the Directors may, upon notifying each Optionee of full particulars of the Offer, declare all Option Shares issuable upon the exercise of Options granted under the Plan, Vested, and declare that the Expiry Date for the exercise of all unexercised Options granted under the Plan is accelerated so that all Options will either be exercised or will expire prior to the date upon which Shares must be tendered pursuant to the Offer.  The Directors shall give each Optionee as much notice as possible of the acceleration of the Options under this section, except that not less than 5 business days and not more than 35 days notice is required.

4.7

Effect of a Change of Control

If a Change of Control occurs, all Option Shares subject to each outstanding Option will become Vested, whereupon such Option may be exercised in whole or in part by the Optionee, subject to the approval of the Exchanges, if necessary.

4.8

Exclusion From Severance Allowance, Retirement Allowance or Termination Settlement

If the Optionee, or, in the case of a Management Company Employee or a Consultant Company, the Optionee's employer, retires, resigns or is terminated from employment or engagement with the Company or any subsidiary of the Company, the loss or limitation, if any, pursuant to the Option Agreement with respect to the right to purchase Option Shares which were not Vested at that time or which, if Vested, were cancelled, shall not give rise to any right to damages and shall not be included in the calculation of nor form any part of any severance allowance, retiring allowance or termination settlement of any kind whatsoever in respect of such Optionee.

4.9

Shares Not Acquired

Any Unissued Option Shares not acquired by an Optionee under an Option which has expired may be made the subject of a further Option pursuant to the provisions of the Plan.

5.

ADJUSTMENT OF OPTION PRICE AND NUMBER OF OPTION SHARES

5.1

Share Reorganization

Whenever the Company issues Shares to all or substantially all holders of Shares by way of a stock dividend or other distribution, or subdivides all outstanding Shares into a greater number of Shares, or combines or consolidates all outstanding Shares into a lesser number of Shares (each of such events being herein called a "Share Reorganization") then effective immediately after the record date for such dividend or other distribution or the effective date of such subdivision, combination or consolidation, for each Option:

(a)

the Option Price will be adjusted to a price per Share which is the product of:

(i)

the Option Price in effect immediately before that effective date or record date; and

(ii)

a fraction, the numerator of which is the total number of Shares outstanding on that effective date or record date before giving effect to the Share Reorganization, and the denominator of which is the total number of Shares that are or would be outstanding immediately after such effective date or record date after giving effect to the Share Reorganization; and

(b)

the number of Unissued Option Shares will be adjusted by multiplying (i) the number of Unissued Option Shares immediately before such effective date or record date by (ii) a fraction which is the reciprocal of the fraction described in subsection (a)(ii).

5.2

Special Distribution

Subject to the prior approval of the Exchanges, whenever the Company issues by way of a dividend or otherwise distributes to all or substantially all holders of Shares;

(a)

shares of the Company, other than the Shares;

(b)

evidences of indebtedness;

(c)

any cash or other assets, excluding cash dividends (other than cash dividends which the Board of Directors of the Company has determined to be outside the normal course); or

(d)

rights, options or warrants;

then to the extent that such dividend or distribution does not constitute a Share Reorganization (any of such non-excluded events being herein called a "Special Distribution"), and effective immediately after the record date at which holders of Shares are determined for purposes of the Special Distribution, for each Option the Option Price will be reduced, and the number of Unissued Option Shares will be correspondingly increased, by such amount, if any, as is determined by the Board in its sole and unfettered discretion to be appropriate in order to properly reflect any diminution in value of the Option Shares as a result of such Special Distribution.

5.3

Corporate Organization

Whenever there is:

(a)

a reclassification of outstanding Shares, a change of Shares into other shares or securities, or any other capital reorganization of the Company, other than as described in sections 5.1 or 5.2;

(b)

a consolidation, merger or amalgamation of the Company with or into another corporation resulting in a reclassification of outstanding Shares into other shares or securities or a change of Shares into other shares or securities; or

(c)

a transaction whereby all or substantially all of the Company's undertaking and assets become the property of another corporation;

(any such event being herein called a "Corporate Reorganization") the Optionee will have an option to purchase (at the times, for the consideration, and subject to the terms and conditions set out in the Plan) and will accept on the exercise of such option, in lieu of the Unissued Option Shares which he would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that he would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, he had been the holder of all Unissued Option Shares or if appropriate, as otherwise determined by the Directors.

5.4

Determination of Option Price and Number of Unissued Option Shares

If any questions arise at any time with respect to the Option Price or number of Unissued Option Shares deliverable upon exercise of an Option following a Share Reorganization, Special Distribution or Corporate Reorganization, such questions shall be conclusively determined by the Company's auditor, or, if they decline to so act, any other firm of Chartered Accountants in Vancouver, British Columbia, that the Directors may designate and who will have access to all appropriate records and such determination will be binding upon the Company and all Optionees.

5.5

Regulatory Approval

Any adjustment to the Option Price or the number of Unissued Option Shares purchasable under the Plan pursuant to the operation of any one of paragraphs 5.1, 5.2 or 5.3 is subject to the approval of the Exchanges and any other governmental authority having jurisdiction.

6.

MISCELLANEOUS

6.1

Right to Employment

Neither this Plan nor any of the provisions hereof shall confer upon any Optionee any right with respect to employment or continued employment with the Company or any subsidiary of the Company or interfere in any way with the right of the Company or any subsidiary of the Company to terminate such employment.

6.2

Necessary Approvals

The Plan shall be effective only upon the approval of the shareholders of the Company given by way of an ordinary resolution.  Any Options granted under this Plan prior to such approval shall only be exercised upon the receipt of such approval.  Disinterested shareholder approval (as required by the Exchanges) will be obtained for any reduction in the exercise price of any Option granted under this Plan if the Optionee is an Insider of the Company at the time of the proposed amendment.  The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to the approval of the Exchanges and any governmental authority having jurisdiction.  If any Shares cannot be issued to any Optionee for any reason, including, without limitation, the failure to obtain such approval, then the obligation of the Company to issue such Shares shall terminate and any Opt ion Price paid by an Optionee to the Company shall be immediately refunded to the Optionee by the Company.

6.3

Administration of the Plan

The Directors shall, without limitation, have full and final authority in their discretion, but subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and to make all other determinations deemed necessary or advisable in respect of the Plan.  Except as set forth in section 5.4, the interpretation and construction of any provision of the Plan by the Directors shall be final and conclusive.  Administration of the Plan shall be the responsibility of the appropriate officers of the Company and all costs in respect thereof shall be paid by the Company.

6.4

Income Taxes

As a condition of and prior to participation in the Plan any Optionee shall on request authorize the Company in writing to withhold from any remuneration otherwise payable to him or her any amounts required by any taxing authority to be withheld for taxes of any kind as a consequence of his or her participation in the Plan.

6.5

Amendments to the Plan

The Directors may from time to time, subject to applicable law and to the prior approval, if required, of the Exchanges or any other regulatory body having authority over the Company or the Plan, suspend, terminate or discontinue the Plan at any time, or amend or revise the terms of the Plan or of any Option granted under the Plan and the Option Agreement relating thereto, provided that no such amendment, revision, suspension, termination or discontinuance shall in any manner adversely affect any Option previously granted to an Optionee under the Plan without the consent of that Optionee.  Any amendments to the Plan or options granted thereunder will be subject to the approval of the shareholders.

6.6

Form of Notice

A notice given to the Company shall be in writing, signed by the Optionee and delivered to the head business office of the Company.

6.7

No Representation or Warranty

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

6.8

Compliance with Applicable Law

If any provision of the Plan or any Option Agreement contravenes any law or any order, policy, by-law or regulation of any regulatory body or Exchange having authority over the Company or the Plan, then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

6.9

No Assignment

No Optionee may assign any of his or her rights under the Plan or any option granted thereunder.

6.10

Rights of Optionees

An Optionee shall have no rights whatsoever as a shareholder of the Company in respect of any of the Unissued Option Shares (including, without limitation, voting rights or any right to receive dividends, warrants or rights under any rights offering).

6.11

Conflict

In the event of any conflict between the provisions of this Plan and an Option Agreement, the provisions of this Plan shall govern.

6.12

Governing Law

The Plan and each Option Agreement issued pursuant to the Plan shall be governed by the laws of the province of British Columbia.

6.13

Time of Essence

Time is of the essence of this Plan and of each Option Agreement.  No extension of time will be deemed to be or to operate as a waiver of the essentiality of time.

6.14

Entire Agreement

This Plan and the Option Agreement sets out the entire agreement between the Company and the Optionees relative to the subject matter hereof and supersedes all prior agreements, undertakings and understandings, whether oral or written.

Approved by the Board of Directors on August 13, 2004 and amended on September 26, 2006.

SCHEDULE "A"

KEEGAN RESOURCES INC.

STOCK OPTION PLAN

OPTION AGREEMENT

Without prior written approval of the Exchange and compliance with all applicable securities legislation, the securities represented by this agreement and any securities issued upon exercise thereof may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until______________, 200__.

This Option Agreement is entered into between Keegan Resources Inc. ("the Company") and the Optionee named below pursuant to the Company Stock Option Plan (the "Plan"), a copy of which is attached hereto, and confirms that:

1.

on _______________________, 200__ (the "Grant Date");

2.

__________________________ (the "Optionee") of _______________________________;

3.

was granted the option (the "Option") to purchase _____________ Common Shares (the "Option Shares") of the Company;

4.

for the price (the "Option Price") of $__________ per share;

5.

which shall be exercisable ("Vested") as to 25% of the Option upon the Grant Date and 12 ½% every quarter thereafter;

6.

terminating on the ___________________________, 200__ (the "Expiry Date");

all on the terms and subject to the conditions set out in the Plan.  For greater certainty, once Option Shares have become Vested, they continue to be exercisable until the termination or cancellation thereof as provided in this Option Agreement and the Plan.

By signing this Option Agreement, the Optionee acknowledges that the Optionee has read and understands the Plan and agrees to the terms and conditions of the Plan and this Option Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Option Agreement as of the ______ day of __________________________, 200__.

KEEGAN RESOURCES INC.

Per:

Authorized Signatory

EX-22

KEEGAN RESOURCES INC.

1204 – 700 West Pender Street
Vancouver, BC V6C 1G8
Telephone: (604) 683-8193 / Facsimile: (604) 683-8194

INFORMATION CIRCULAR

(as at Friday, August 25, 2006, except as indicated)

SOLICITATION OF PROXIES

The Company is providing this information circular and a form of proxy in connection with management’s solicitation of proxies for use at the annual and special meeting (the "Meeting") of Keegan Resources Inc. (the “Company”) to be held on Friday, September 29, 2006 and at any adjournments. The Company will conduct its solicitation by mail and officers and employees of the Company may, without receiving special compensation, also telephone or make other personal contact. The Company will pay the cost of solicitation.

APPOINTMENT OF PROXYHOLDER

The purpose of a proxy is to designate persons who will vote the proxy on a shareholder’s behalf in accordance with the instructions given by the shareholder in the proxy. The persons whose names are printed in the enclosed form of proxy are officers or Directors of the Company (the “Management Proxyholders”).

A shareholder has the right to appoint a person other than a Management Proxyholder, to represent the shareholder at the Meeting by striking out the names of the Management Proxyholders and by inserting the desired person’s name in the blank space provided or by executing a proxy in a form similar to the enclosed form. A proxyholder need not be a shareholder.

VOTING BY PROXY

Only registered shareholders or duly appointed proxyholders are permitted to vote at the Meeting. Shares represented by a properly executed proxy will be voted or be withheld from voting on each matter referred to in the Notice of Meeting in accordance with the instructions of the shareholder on any ballot that may be called for and if the shareholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly.

If a shareholder does not specify a choice and the shareholder has appointed one of the Management Proxyholders as proxyholder, the Management Proxyholder will vote in favour of the matters specified in the Notice of Meeting and in favour of all other matters proposed by management at the Meeting.

The enclosed form of proxy also gives discretionary authority to the person named therein as proxyholder with respect to amendments or variations to matters identified in the Notice of the Meeting and with respect to other matters which may properly come before the Meeting. At the date of this Information Circular, management of the Company knows of no such amendments, variations or other matters to come before the Meeting.

COMPLETION AND RETURN OF PROXY

Completed forms of proxy must be deposited at the office of the Company’s registrar and transfer agent, Pacific Corporate Trust Company, 510 Burrard Street, 2^nd Floor, Vancouver, British Columbia V6C 3B9, not later than forty-eight (48) hours, excluding Saturdays, Sundays and holidays, prior to the time of the

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Meeting, unless the chairman of the Meeting elects to exercise his discretion to accept proxies received subsequently.

NON-REGISTERED HOLDERS

Only shareholders whose names appear on the records of the Company as the registered holders of shares or duly appointed proxyholders are permitted to vote at the Meeting. Most shareholders of the Company are "non-registered" shareholders because the Shares they own are not registered in their names but instead registered in the name of a nominee such as a brokerage firm through which they purchased the Shares; bank, trust company, trustee or administrator of self-administered RRSP's, RRIF's, RESP's and similar plans; or clearing agency such as The Canadian Depository for Securities Limited (a "Nominee"). If you purchased your shares through a broker, you are likely an unregistered holder.

In accordance with securities regulatory policy, the Company has distributed copies of the Meeting materials, being the Notice of Meeting, this Information Circular and the Proxy, to the Nominees for distribution to non-registered holders.

Nominees are required to forward the Meeting materials to non-registered holders to seek their voting instructions in advance of the Meeting. Shares held by Nominees can only be voted in accordance with the instructions of the non-registered holder. The Nominees often have their own form of proxy, mailing procedures and provide their own return instructions. If you wish to vote by proxy, you should carefully follow the instructions from the Nominee in order that your Shares are voted at the Meeting.

If you, as a non-registered holder, wish to vote at the Meeting in person, you should appoint yourself as proxyholder by writing your name in the space provided on the request for voting instructions or proxy provided by the Nominee and return the form to the Nominee in the envelope provided. Do not complete the voting section of the form as your vote will be taken at the Meeting.

REVOCABILITY OF PROXY

Any registered shareholder who has returned a proxy may revoke it at any time before it has been exercised. In addition to revocation in any other manner permitted by law, a registered shareholder, his attorney authorized in writing or, if the registered shareholder is a corporation, a corporation under its corporate seal or by an officer or attorney thereof duly authorized, may revoke a proxy by instrument in writing, including a proxy bearing a later date. The instrument revoking the proxy must be deposited at the registered office of the Company, at any time up to and including the last business day preceding the date of the Meeting, or any adjournment thereof, or with the chairman of the Meeting on the day of the Meeting. Only registered shareholders have the right to revoke a proxy. Non-Registered Holders who wish to change their vote must, at least 7 days before the Meeting, arrange for their Nominees to r evoke the proxy on their behalf.

VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

The Company is authorized to issue 200,000,000 shares divided into 100,000,000 common shares without par value of which 13,873,418 are issued and outstanding, and 100,000,000 preferred shares without par value, of which none are issued and outstanding. The common shares in the capital of the Company carry the right to one vote.

To the knowledge of the Directors and executive officers of the Company, no person beneficially owns, directly or indirectly, or controls or directs shares carrying 10% or more of the voting rights attached to all shares of the Company.

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ELECTION OF DIRECTORS

The Directors of the Company are elected at each annual general meeting and hold office until the next annual general meeting or until their successors are appointed. In the absence of instructions to the contrary, the enclosed proxy will be voted for the nominees herein listed.

Shareholder approval will be sought to fix the number of directors of the Company at four.

The Company is required to have an audit committee. Members of this committee are as set out below.

Management of the Company proposes to nominate each of the following persons for election as a Director. Information concerning such persons, as furnished by the individual nominees, is as follows:

Name, Jurisdiction of Residence and Position	Principal Occupation or employment and, if not a previously elected Director, occupation during the past 5 years	Previous Service as a Director	Number of Common Shares beneficially owned, directly or indirectly, or Controlled or directed
Daniel T. McCoy British Columbia, Canada President, Chief Executive Officer and Director	Geologist	Since November 25, 2004	45,000
Gordon J. Fretwell   British Columbia, Canada Director and Secretary	Lawyer	Since February 24, 2004	102,500
Tony Ricci   British Columbia, Canada Director	Chartered Accountant	CFO since November 21, 2005 and Director since December 8, 2005	Nil
Richard J. Haslinger British Columbia, Canada Director	Geological Engineer & Project Manager	Since May 11, 2004	80,000
Robert McLeod   British Columbia, Canada Director	Geologist	Since February 23, 2005	26,000

1 Member of the audit committee.

No proposed director:

(a)

is, as at the date of the information circular, or has been, within 10 years before the date of the information circular, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity:

(i)

was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;

(ii)

was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or

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(iii)

within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

(b)

has, within the 10 years before the date of the information circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.

EXECUTIVE COMPENSATION

The following table (presented in accordance with the rules (the "Rules”) made under the Securities Act (British Columbia) sets forth all annual and long term compensation for services in all capacities to the Company and its subsidiaries for the three most recently completed financial years (to the extent required by the Rules) in respect of each of the individuals comprised of the Chief Executive Officer and the Chief Financial Officer as at March 31, 2006 and the other three most highly compensated executive officers of the Company as at March 31, 2006 whose individual total compensation for the most recently completed financial year exceeded $150,000 and any individual who would have satisfied these criteria but for the fact that individual was not serving as such an officer at the end of the most recently completed financial year (collectively the “Named Executive Officers& #148; or “NEOs”).

Summary Compensation Table

		Annual Compensation			Long Term Compensation
					Awards		Payouts
					Securities
				Other	Under	Shares/Units
NEO				Annual	Option/	Subject to		All Other
Name				Compen-	SAR 's	Resale	LTIP	Compen-
and		Salary	Bonus	sation	Granted1	Restrictions	Payouts	sation
Principal Position	Year	($)2	($)3	($)5	(#)	($)	)	($)4
Daniel McCoy	2006	95,180	NIL	17,127	NIL	NIL	NIL	NIL
President and CEO	2005	33,335	20,000	NIL	350,000	NIL	NIL	33,919
	2004	NIL	NIL	NIL	NIL	NIL	NIL	6,361
Gordon J. Fretwell	2006	N/A	N/A	N/A	NIL	N/A	N/A	58,138.52
CFO (until	2005	NIL	NIL	NIL	200,000	NIL	NIL	NIL
December 8, 2005)	2004	NIL	NIL	NIL	NIL	NIL	NIL	NIL
Tony Ricci	2006	N/A	N/A	N/A	75,000	N/A	N/A	32,925.00
CFO	2005	N/A	N/A	N/A	N/A	N/A	N/A	N/A
(from December 8,	2004	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2005)

1

On February 3, 2005 the Issuer granted to Daniel McCoy 350,000 incentⁱve stock options and to Gordon J. Fretwell a total of 200,000 incentive stock options, all ofwhich are exercisable at $0.92 per share expiring on February 3, 2010. On November 22, 2005 the Issuer granted to Tony Ricci 75,000 incentive stock options exercisable at $1.16 per share expiring on November 21, 2010.

2

Salary is stated in U.S. dollars at a rate of USD $6,667 per month.

3

Daniel T. McCoy received a one time Signing Bonus of USD $20,000 paid on January 31, 2005.

4

During the fiscal year ended March 31, 2006 Mr. Fretwell, through his wholly owned law corporation, invoiced the Company $58,138.52 for legal services rendered. During the fiscal year ended March 31, 2006 Mr. Ricci, through his wholly owned accounting corporation, invoiced the Company $32,925.00 for accounitng services rendered.

5

Medical plan expenses.

Pursuant to the terms of a Consulting Agreement entered into on March 31, 2005 between the Company and Daniel T. McCoy, the Company paid cash compensation to Mr. McCoy of USD $112,307. Under the terms of the Consulting Agreement, Mr. McCoy recieves a monthly fee of USD $6,667 plus medical expenses. Under the terms of the Consulting Agreement, the Company or Mr. McCoy may terminate the Agreement by providing termination notice equal to or in excess of four weeks.

- 5 -

The Company has no pension plan and no standard or other arrangement for compensation to the Directors and Officers of the Company except the granting of stock options. The following table sets forth particulars of stock options granted by the Company to the other Directors and Officers (other than the Named Executive Officers).

Names of Other		Number of	Exercise
Directors & Officers	Date of Grant	Common Shares	Price	Expiry Date
Michael Bebek	Nov 21/05	25,000	$1.16	Nov 21/10
Richard Haslinger	Feb 2/06	40,000	$2.48	Feb 2/11

Long Term Incentive Plan (LTIP) Awards

The Company does not have a LTIP, pursuant to which cash or non-cash compensation intended to serve as an incentive for performance over a period greater than one financial year (whereby performance is measured by reference to financial performance or the price of the Company’s securities) was paid to the Named Executive Officer(s) during the most recently completed financial year.

Option/Stock Appreciation Rights (“SAR”) Grants During the Most Recently Completed Financial Year

NEO Name	Securities, Under	Percentage of Total Options/SARs	Exercise or Base Price ($/Security)	Market Value of Securities	Expiration Date
and	Options/SARs	Granted to Employees		Underlying
Principal Position	Granted	in Financial Year		Options/SARs on the Date of Grant
Tony Ricci, CFO	75,000	26%	$1.16 per share	$1.16	Nov. 21, 2010

Pursuant to the Company’s Stock Option Plan, the Board authorized and issued 285,000 stock options, 1,633,000 of the 1,646,543 maximum amount allowable under the Company’s Stock Option Plan, to Eligible Persons on November 21, 2005 and February 2, 2006. The Expiry Date for the Options granted are November 21, 2010 and February 2, 2011.

The Options are subject to a Vesting schedule. Current policies of the TSX Venture Exchange provide that minimum vesting requirements shall be 25% of the Option upon TSX Venture Exchange approval and 12 1/2% every quarter thereafter which is the vesting period that was adopted by the directors of the Company.

Aggregated Option/SAR Exercises During The Most Recently Completed

Financial Year and Financial Year-End Option/SAR Values

The Named Executive Officers did not exercise any options in respect of the Company's shares during the most recently completed financial year.

Termination of Employment, Changes in Responsibility and Employment Contracts

The Company entered into a Consulting Agreement with Daniel T. McCoy, in the capacity of President and CEO. Under the terms of the Consulting Agreement, Mr. McCoy receives a monthly fee of US $6,667 plus all out of pocket expenses incurred. Mr. McCoy oversees all exploration initiatives, property acquisitions, obtaining exploration permits, mine development certificates, strategic planning and environmental/government affairs, organization, coordination and completion of project prefeasability studies and operation/financial business administration as required. Mr. McCoy may terminate the agreement without penalty by giving the Company four weeks written notice.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

At the end of the company’s most recently completed fiscal year, the company does not have any compensation plans under which equity securities of the company are authorized for issuance.

CORPORATE GOVERNANCE PRACTICES

Corporate governance refers to the policies and structure of the board of directors of the Company (the “Board”), whose members are elected by and are accountable to the shareholders of the Company. Good corporate governance requires establishing a reasonable degree of independence of the Board from executive management and the adoption of policies to ensure the Board recognizes the principles of good management and values of the Company. The Board is committed to sound corporate governance practices as such practices are both in the interests of shareholders and help to contribute to effective and efficient decision-making. Regulatory Guidelines (the “Guidelines”) require annual disclosure of the Company’s approach to corporate governance, and where it differs from the Regulatory Guidelines, the differences and the reasons for the differences should be explained. The following outlines the Company’s current corporate governance practices with respect to various matters.

Constitution and Functioning of the Board of Directors

The proposed Board will be currently comprised of 5 directors. The size and composition of the Board reflects a breadth of backgrounds and experience that is important for effective governance of a corporation in the mining industry, which has both exploration and production operations.

Under the Guidelines, an “unrelated director” is a director who is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with that director’s ability to act with a view to the best interests of the corporation. Under the Guidelines, a director who is also a member of day-to-day management is a related director.

The Board of Directors has considered the relationship to the Company of each of its nominees for election and has determined that one of the proposed directors is independent and an unrelated director, namely Mr. Robert McLeod. The other four directors of the Company are considered to be non-independent. Given the nature of the Company’s exploration business, which is carried out significantly by third party contractors, none of the officers of the Company can be considered to be employed by the Company on a full-time basis. The Board is satisfied as to the extent of independence of its members.

The Board is satisfied that it is not constrained in its access to information, in its deliberations or in its ability to satisfy the mandate established by law to supervise the business and affairs of the Company and that there are sufficient systems and procedures in place to allow the Board to have a reasonable degree of independence from day-to-day management.

Directorships

Daniel T. McCoy	No other directorships held
Gordon J. Fretwell	Director of Benton Resources Corp.
	Director of Bell Resources Corporation
	Director of Continental Minerals Corporation
	Director of Grandcru Resources Corporation
	Director and Officer of Icon Industries Ltd.
	Director of International Royalty Corporation
	Director of Pine Valley Mining Corporation
	Director of Quartz Mountain Resources Ltd.
	Director of Rockwell Ventures Inc.
	Director and Officer of Keegan Resources Inc.

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	Director of Northern Dynasty Minerals Ltd.
Tony Ricci	No other directorships held
Richard J. Haslinger	No other directorships held
Robert McLeod	Director of Full Metal Minerals Ltd.

Mandate of the Board of Directors, its Committees and Management

The Board of Directors is responsible for overseeing the overall management of the Company and for the conduct of the Company’s affairs generally. The Board actively participates in the strategic planning process and is responsible for overseeing management’s day-to-day operation of the Company. The Board is responsible for identifying the principal risks of the Company’s business and ensuring the implementation of appropriate of systems to manage these risks. The Board looks to senior management to keep it apprised of all significant developments affecting the Company and its operations. All major acquisitions, dispositions and investments, as well as financings and other significant matters outside the ordinary course of the Company’s business, are subject to approval by the Board. The Board is also responsible for succession planning of management, although this is not c urrently considered to be of singular importance given the relative age of the Company’s current principal operating officers and directors. Finally, the Board is responsible for the implementation of a communications policy for the Company, and for the integrity of the Company’s internal control, management information and public disclosure systems.

The Board and the Chief Executive Officer have not, to date, adopted a formal mandate for the Chief Executive Officer, as the responsibilities of such office are well understood by both the Board and management. There are no specific mandates for the Board, although the Board of Directors has ultimate responsibility for all aspects of the Company.

The Board generally requires that all material transactions receive prior Board approval. In this regard, virtually all financing transactions are considered to be material to the Company. Any property acquisitions and significant exploration programs receive the approval of the plenary Board of Directors.

Corporate Governance Policies and Procedures

The Board of Directors has developed a set of Corporate Governance Policies and Procedures to promote the effective functioning of the Board and its Committees and to set forth a common set of expectation as to how the Board should manage its affairs and perform its responsibilities with a view to compliance with the Guidelines. The Corporate Governance Policies and Procedures have been tabled before the Board of Directors and are being reviewed prior to their finalization and formal adoption. Among other things, the Corporate Governance Policies and Procedures establish procedures for evaluation of members of the Board, corporate information and trading policies, a code of ethics, a business conduct policy for Board and executive members, corporate whistleblower protection for employees who voice concerns over ethical matters, and mandates for the various Committees of the Board.

These policies are designed to ensure that corporate disclosures are accurate, timely, double-checked and duly authorized. The corporate ethics policy establish high standards for the conduct of management and all employees to ensure that the integrity and reputation of the Company remains paramount in the minds of all Company personnel. The Company will not tolerate any dishonest or unethical conduct and expects dedication and accountability from every staff member.

INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND

EXECUTIVE OFFICERS

There is no indebtedness of any director, executive officer, proposed nominee for election as a Director or associate of them, to or guaranteed or supported by the Company or any of its subsidiaries either

- 8 –

pursuant to an employee stock purchase program of the Company or otherwise, during the most recently completed financial year.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

No informed person or proposed director of the Company and no associate or affiliate of the foregoing persons has or has had any material interest, direct or indirect, in any transaction since the commencement of the Company's most recently completed financial year or in any proposed transaction which in either such case has materially affected or would materially affect the Company.

APPOINTMENT OF AUDITOR

Amisano Hanson, Chartered Accountant, of Suite 604, 750 West Pender Street, Vancouver, B.C., V6C 2T7 is the auditor of the Company. Unless otherwise instructed, the proxies given pursuant to this solicitation will be voted for the re-appointment of Amisano Hanson as the auditor of the Company to hold office for the ensuing year at a remuneration to be fixed by the Directors.

Amisano Hanson, Chartered Accountant, was first appointed as auditor on November 23, 2005.

 AUDIT COMMITTEE

The Audit Committee reviews the annual and quarterly financial statements of the Company, oversees the annual audit process, the Company’s internal accounting controls, the resolution of issues identified by the Company’s auditors and recommends to the Board the firm of independent auditors to be nominated for appointment by the shareholders at the next annual general meeting. In addition, the Audit Committee meets annually with the external auditors of the Company.

Composition of Audit Committee

The Company is required to have an Audit Committee comprised of not less than three directors, a majority of whom are not officers, control persons or employees of the Company or of an affiliate of the Company. The Company’s current Audit Committee consists of Gordon J. Fretwell, Tony Ricci and Robert McLeod of which (Mr. McLeod) is independent. Multilateral Instrument 52-110 Audit Committees, (“MI 52-110”) provides that a member of an audit committee is “independent” if the member has no direct or indirect material relationship with the Company, which could, in the view of the Company’s board of directors, reasonably interfere with the exercise of the member’s independent judgment.

Financial Literacy

MI 52-110 provides that an individual is “financially literate” if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.

All of the directors of the Company are financially literate as that term is defined.

Audit Committee Charter

The Company has not yet adopted an audit committee charter.

Audit Committee Oversight

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Since the commencement of the Company’s most recently completed financial year, the Audit Committee has not made any recommendations to nominate or compensate an external auditor which were not adopted by the board of directors of the Company.

Reliance on Certain Exemptions

Since the commencement of the Company’s most recently completed financial year, the Company has not relied on:

(a)

the exemption in section 2.4 (De Minimis Non-audit Services) of MI 52-110; or

(b)

an exemption from MI 52-110, in whole or in part, granted under Part 8 (Exemptions).

Pre-Approval Policies and Procedures

The Board of Directors has adopted a pre-approval policy requiring that the Audit Committee pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.

Audit Fees

The following table sets forth the fees paid by the Company to Amisano Hanson, Chartered Accountants, for services rendered in the last two fiscal years:

	Fiscal 2006 $	Fiscal 2005 $
Audit Fees	$17,700.00	$8,000.00
Audit Related Fees	$20,000.00	$16,825.00
Tax Fees	Nil	$600.00
All Other Fees	Nil	Nil
Totals	$37,700.00	$25,425.00

Exemption

The Company is a “venture issuer” as defined in MI 52-110 and is relying on the exemption in section 6.1 of MI 52-110 relating to Parts 3 (Composition of Audit Committee) and 5 (Reporting Obligations).

MANAGEMENT CONTRACTS

No management functions of the Company are performed to any substantial degree by a person other than the Directors or executive officers of the Company.

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

Except as set out herein, no person who has been a Director or executive officer of the Company at any time since the beginning of the Company’s last financial year, no proposed nominee of management of the Company for election as a Director of the Company and no associate or affiliate of the foregoing persons, has any material interest, direct or indirect, by way of beneficial ownership or otherwise, in matters to be acted upon at the Meeting other than the election of Directors or the appointment of auditors.

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PARTICULARS OF OTHER MATTERS TO BE ACTED UPON

A.

Adoption of New Charter Documents

Proposed Alterations of Authorized Capital

As now permitted by the British Columbia Business Corporations Act (the “Act’), the Company proposes an amendment to its Notice of Articles to increase the Company's authorized capital from 100,000,000 common shares without nominal or par value and 100,000,000 preferred shares without nominal or par value to an unlimited number of common shares without nominal or par value and an unlimited number of preferred shares without nominal or par value. Management believes that having unlimited authorized capital provides the Company with greater flexibility for future corporate activities. This resolution must be passed by not less than three-quarters of the votes cast by the shareholders present in person or by proxy at the Meeting. Shareholders will be asked to consider and, if thought fit, to pass the following special resolution:

“UPON MOTION IT WAS RESOLVED, as a special resolution, that:

(a)

the number of common shares authorized to be issued be increased to an unlimited number of common shares without nominal or par value and an unlimited number of preferred shares without nominal or par value;

(b)

the Company's Notice of Articles be altered accordingly;

(c)

any director or officer of the Company is authorized to execute and file a Notice of Alteration of the Notice of Articles with the Registrar of Companies along with all other documents and take such further actions that may be necessary to effect the amendment; and

(d)

the board of directors is hereby authorized, at any time in its absolute discretion, to determine whether or not to proceed with the above resolutions without further approval, ratification or confirmation by the shareholders.”

This amendment to the Notice of Articles shall take effect immediately on the date and time the Notice of Alteration of the Articles is filed with the Registrar of Companies.

B.

Stock Option Plan

The Company's Stock Option Plan (the "Plan") provides that a total of 1,646,543 shares are reserved for issuance upon exercise of stock options granted under the Plan. The Company currently has options outstanding under its Plan to purchase 1,633,000 shares.

It is proposed that the Plan be amended to increase the number of shares reserved for issuance under the Plan from 1,646,543 to 2,774,683. If the amendment is approved, there will be 1,633,000 options outstanding to purchase shares issued under the Plan and 1,141,683 shares reserved and available for issue under options to be granted under the Plan. The increased number of available options will facilitate the Company's search for and retention of senior management and to provide incentive to the Company's employees, officers and directors;

Under the amended Plan, the number of shares which may be reserved for issuance will be as follows:

(a)

to all optionees under the Plan in aggregate shall not exceed 20% of the current issued and outstanding share capital;

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(b)

to all insiders as a group may not exceed 20% of the issued shares; and

(c)

to any one individual may not exceed:

(i)

5% of the issued shares on a yearly basis; and

(ii)

2% of the issued shares on a yearly basis if the optionee is engaged in investor relations activities or is a consultant.

The full text of the amended Plan will be available for review at Meeting.

Accordingly, at the Meeting, shareholders will be asked to pass a resolution in the following form:

"BE IT RESOLVED THAT the Company amends its Stock Option Plan to increase the number of shares reserved for issuance under the Plan from 1,646,543 to 2,774,683".

Since the amended Plan also permits the directors to reserve up to 20% of the issued shares of the Company under options granted to insiders as a group, the Company must obtain approval of a majority of the shareholders at the Meeting, excluding insiders and their associates, (the “disinterested shareholders”) to such specific term of the amended Plan.

For the purposes hereof, an "insider" is a director or senior officer of the Company, a director or senior officer of a company that is itself an insider or subsidiary of the Company, or a person whose control, or direct or indirect beneficial ownership, or a combination thereof, over securities of the Company extends to securities carrying more than 10% of the voting rights attached to all the Company's outstanding voting securities.

Accordingly, at the Meeting, disinterested shareholders will be asked to pass a resolution in the following form:

"BE IT RESOLVED THAT by the disinterested shareholders that the directors have the discretion under the amended Plan to reserve common shares for issue upon exercise of stock options to all optionees who are insiders in aggregate of a maximum of 20% of the issued shares of the Company".

During the next year, the Company may grant additional stock options under its Stock Option Plan, subject to all necessary regulatory approvals. Under the current policy of the TSX Venture Exchange (the “Exchange”), member approval is not required for the grant of stock options if granted in accordance with the policy. However, such policy requires that any decrease in the exercise price of stock options held by insiders be approved by a majority of the members at the Meeting, excluding insiders and their associates (the “disinterested members”). Therefore, the disinterested members at the Meeting will be asked to authorize the directors in their discretion to amend stock options granted to insiders, subject to all necessary regulatory approvals.

For the purposes hereof, an “insider” is a director or senior officer of the Company, a director or senior officer of a company that is itself an insider or subsidiary of the Company, or a person whose control, or direct or indirect beneficial ownership, or a combination thereof, over securities of the Company extends to securities carrying more than 10% of the voting rights attached to all the Company’s outstanding voting securities.

Subject to the approval of the members of the Company’s proposed new Stock Option Plan, the number of shares under option from time to time and the exercise prices of such options, and any amendments thereto, will be and have been determined by the Directors in accordance with the policies of the TSX Venture Exchange.

- 12 -

C.

Adoption of Shareholder Rights Plan

Shareholders will be asked to consider and, if thought advisable, to pass at the Meeting, with or without modification, an ordinary resolution (the “Shareholder Rights Plan Resolution”) approving, ratifying and confirming the adoption of a shareholder rights plan agreement (the “Shareholder Rights Plan”) as follows:

BE IT RESOLVED, as an Ordinary Resolution, THAT:

(a)

the Shareholder Rights Plan to be dated as of September 1, 2006 (or such other date as the Company and Pacific Corporate Trust Company agree to) between the Company and Pacific Corporate Trust Company, be and the same is hereby approved, ratified and confirmed; and

(b)

any one director or officer of the Company be and is hereby authorized and directed, for and on behalf of the Company, to execute, under the corporate seal of the Company or otherwise, deliver and file all documents and instruments and take such other actions as such director or officer may determine to be necessary or desirable to implement this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such documents or instruments and the taking of any such actions.

The Shareholder Rights Plan, which was unanimously adopted by the board of directors on September 1, 2006, is contained in an agreement to be entered into with Pacific Corporate Trust Company as of September 1, 2006, or such other date as the parties agree, the form of which is attached hereto as Schedule “A”. The Shareholder Rights Plan will, subject to acceptance by Pacific Corporate Trust Company, become effective September 1, 2006 or such other date as the Company and Pacific Corporate Trust Company agree and will continue in effect unless the Shareholder Rights Plan Resolution is not approved by a majority of the shareholders at the Meeting. The purpose of the Shareholder Rights Plan is to ensure equal treatment of all shareholders in the event of a bid for the Company and to provide the board of directors with an adequate amount of time to evaluate a bid for the Company.

Existing Legislative Framework

In considering whether to adopt the Shareholder Rights Plan, the board of directors considered the current legislative framework in Canada governing take-over bids. Under provincial securities legislation, a take­over bid generally means an offer to acquire outstanding voting or equity shares of a person or persons, where the shares subject to the offer to acquire, together with shares already owned by the bidder and certain related parties thereto, constitute in aggregate 20% or more of the outstanding shares at the date of the offer to acquire.

The existing legislative framework for take-over bids in Canada raises the following concerns for shareholders:

(a)

Time. Current legislation permits a take-over bid to expire 35 days after it is initiated. The board of directors is of the view that this is not sufficient time to permit shareholders to consider a take-over bid and make a reasoned and unhurried decision. In addition, the board of directors believes that this time limitation seriously diminishes the opportunity to maximize the value for shareholders by other means, including the solicitation of competitive bids or other transactions.

- 13 -

(b)

Pressure to Tender. A shareholder may feel compelled to tender to a take-over bid which the shareholder considers to be inadequate out of a concern that, in failing to do so, the shareholder may be left with illiquid or minority discounted Common shares. This possibility is particularly so in the case of a partial take-over bid for less than all of the Common shares, where the bidder wishes to obtain a control position but does not wish to acquire all of the Common shares. The Shareholder Rights Plan provides a shareholder approval mechanism which is intended to ensure that a shareholder can separate the decision to tender from the approval or disapproval of a particular take-over bid.

(c)

Unequal Treatment: Full Value. The board of directors is concerned that a person seeking control might attempt, among other things, a gradual accumulation of Common shares in the open market; the accumulation of a large block of Common shares in a highly compressed period of time from institutional shareholders and professional speculators or arbitrageurs; a partial offer that unfairly pressures shareholders; or an offer for any or all of the Common shares at what the board of directors considers to be less than full and fair value. The Shareholder Rights Plan effectively prohibits the acquisition of more than 20% of the outstanding Common Shares in such a manner. The Shareholder Rights Plan is designed to encourage any bidder to provide shareholders with equal treatment in a take-over situation and full value for their investment.

Summary of the Plan

A summary of the principal terms of the Shareholder Rights Plan is set forth below.

(a)

Effective Date. The effective date of the Shareholder Rights Plan is September 1, 2006 (the “Effective Date”).

(b)

Term. The Shareholder Rights Plan will terminate on the sixth anniversary of the Effective Date, subject to ratification by the shareholders at the Meeting and to reconfirmation by shareholders at the third annual general meeting thereafter.

(c)

Shareholder Approval. For the Shareholder Rights Plan to continue in effect following the Meeting, the Shareholder Rights Plan Resolution must be approved by a majority of the votes cast at the Meeting by shareholders voting in person and by proxy.

(d)

Issue of Rights. On the Effective Date, one right (a “Right”) is issued and attached to each Common share outstanding and will attach to each Common share subsequently issued.

(e)

Rights Exercise Privilege. The Rights will separate from the Common shares and will be exercisable eight business days (or such later business day as may be determined by the board of directors) (the “Separation Time”) after a person has acquired, or commences or publicly announces or discloses its intention to commence a take-over bid to acquire, 20% or more of the Common shares, other than by an acquisition pursuant to a take-over bid permitted by the Shareholder Rights Plan (a “Permitted Bid”). The acquisition by any person (an “Acquiring Person”) of 20% or more of the Common shares, other than by way of a Permitted Bid, is referred to as a “Flip-in Event”. Any Rights held by an Acquiring Person will become void upon the occurrence of a Flip-in Event. From and after the Separation Time, each Right (other than those held by the Acquiring Person), will permit the purchase of CDN$100 worth of Common shares (at the market price on the date of the Flip-in Event) for CDN$50 (i.e., at a 50% discount). The issue of the Rights is not initially dilutive; however, upon a Flip-in Event occurring and the Rights separating from the Common shares, reported earnings per Common share on a fully diluted or non-diluted basis may be affected. Holders of Rights not exercising their Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.

- 14 –

(f)

Certificates and Transferability. Prior to the Separation Time, the Rights will be evidenced by a legend imprinted on certificates for Common shares issued from and after the Effective Date and will not be transferable separately from the Common shares. From and after the Separation Time, the Rights will be evidenced by Rights certificates which will be transferable and traded separately from the Common shares.

(g)

Permitted Bid Requirements. The requirements for a Permitted Bid include the following:

(i)

the take-over bid must be made by way of a take-over bid circular;

(ii)

the take-over bid must be made to all holders of Common shares;

(iii)

the take-over bid must be outstanding for a minimum period of 60 days and Common shares tendered pursuant to the take-over bid may not be taken up and paid for prior to the expiry of such 60-day period and only if at such time more than 50% of the Common shares held by shareholders other than the bidder, its affiliates and persons acting jointly or in concert with the bidder (collectively, the “Independent Shareholders”) have been tendered to the take-over bid and not withdrawn;

(iv)

the Common shares deposited pursuant to the take-over bid may be withdrawn until taken up and paid for; and

(v)

if more than 50% of the Common shares held by Independent Shareholders are tendered to the take-over bid within such 60-day period, then the bidder must make a public announcement of that fact and the take-over bid must remain open for deposits of Common shares for an additional 10 business days from the date of such public announcement.

The Shareholder Rights Plan allows for a competing Permitted Bid (a “Competing Permitted Bid”) to be made while a Permitted Bid is in existence. A Competing Permitted Bid must satisfy all of the requirements of a Permitted Bid except that it may expire on the same date as the Permitted Bid.

(h)

Waiver and Redemption. The board of directors may, prior to the Flip-in Event, waive the dilutive effects of the Shareholder Rights Plan in respect of a particular Flip-in Event resulting from a take-over bid made by way of a take-over bid circular to all holders of Common shares, or to waive one or more of the requirements of a Permitted Bid, or a Competing Permitted Bid, in which event such waiver would be deemed also to be a waiver in respect of any other Flip-in Event, and any such requirement, occurring under a take-over bid made by way of a take-over bid circular to all holders of Common shares. The board of directors may also waive the Shareholder Rights Plan in respect of a particular Flip-in Event that has occurred through inadvertence, provided that the Acquiring Person that inadvertently triggered such Flip-in Event reduces its beneficial holdings to less than 20% of the outstandi ng voting shares of the Company within 14 days or such later date as may be specified by the board of directors. With the majority consent of shareholders or Rights holders at any time prior to the later of a Flip-in Event and the Separation time, the board of directors may at its option redeem all, but not less than all, of the outstanding Rights at a price of CDN$0.00001 each.

(i)

Exemptions for Investment Advisors. Investment advisors (for client accounts), trust companies (acting in their capacities as trustees and administrators), statutory bodies managing investment funds (for employee benefit plans, pension plans, insurance plans

- 15 -

or various public bodies) and administrators or trustees of registered pension funds or plans acquiring greater than 20% of the Common shares are exempted from triggering a Flip-in Event, provided that they are not making, or are not part of a group making, or proposing to make or participate in, or has not announced a current intention to make, a take-over bid.

(j)

Exemptions for Lock-up Agreements. A person is deemed not to be the beneficial owner of Common shares if the holder of such Common shares has agreed to deposit or tender its Common shares pursuant to a “Permitted Lock-up Agreement” to a take-over bid (the “Lock-up Bid”) made by such person. In order for an agreement to constitute a Permitted Lock-up Agreement, certain conditions must be met including, among other things, (i) any “break-up” fees payable by the tendering shareholder, cannot exceed in the aggregate the greater of the cash equivalent of 2.5% of the price or value of the consideration payable under the Lock-up Bid and 50% of the amount by which the price or value of the consideration payable under another take-over bid or transaction exceeds the price or value of the consideration that would have been received under the Lock-up Bid and (ii) the terms of such agreement are publicly disclosed and a copy of which is made available to the public (including to the Company) and the Permitted Lock-up Agreement permits the tendering shareholder to withdraw its Common shares in order to deposit or tender the Common shares to another take-over bid or support another transaction where the price or value offered under such other bid is at least 7% higher than the price or value offered under the Lock-up Bid or the number of Common shares to be purchased under another take-over bid or transaction is at least 7% more than the number proposed to be purchased under the Lock-up Bid.

(k)

Supplements and Amendments. The Company is authorized to make amendments to the Shareholder Rights Plan to correct any clerical or typographical error or to maintain the validity of the Shareholder Rights Plan as a result of changes in law, regulation or rules. Prior to the Meeting, the Company is authorized to amend or supplement the Shareholder Rights Plan as the board of directors may in good faith deem necessary or desirable. No such amendments have been made to date. The Company will issue a press release relating to any significant amendment made to the Shareholder Rights Plan prior to the Meeting and will advise the shareholders of any such amendment at the Meeting. Other amendments or supplements to the Shareholder Rights Plan may be made with the prior approval of shareholders or Rights holders.

Canadian Federal Income Tax Consequences of the Shareholder Rights Plan

Under the Income Tax Act (Canada) (the “Tax Act”), the issue of the Rights under the Shareholder Rights Plan should not be a taxable benefit because the Rights are provided to all shareholders and the Rights are identical. The Company considers that the Rights, when issued, will have negligible monetary value, there being only a remote possibility that the Rights will ever be exercised.

The Rights should be considered to be issued at no cost and, as a result, the holder of Rights may have income tax or be subject to withholding tax under the Tax Act if the holder of the Rights disposes of the Rights or disposes of the Common shares granted upon exercise of the Rights.

This statement is of a general nature only and is not intended to constitute nor should it be construed as legal or tax advice to any particular holder of Common shares. Such holders are advised to consult their own tax advisors regarding the consequences of acquiring, holding, exercising or otherwise disposing of their Rights, taking into account their own particular circumstances and applicable federal, provincial, territorial, state or foreign legislation.

- 16 -

The board of directors has determined that the Shareholder Rights Plan is in the best interests of the Company and the shareholders. The board of directors unanimously recommends that the shareholders vote in favour of the Shareholder Rights Plan Resolution in the form set out in this section.

ADDITIONAL INFORMATION

Additional information relating to the Company is on SEDAR at www.sedar.com. Shareholders may contact the Company at (604) 683-8193 to request copies of the Company’s financial statements and MD&A.

Financial information is provided in the Company’s comparative financial statements and MD&A for its most recently completed financial year which are filed on SEDAR.

OTHER MATTERS

Management of the Company is not aware of any other matter to come before the Meeting other than as set forth in the notice of Meeting. If any other matter properly comes before the Meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares represented thereby in accordance with their best judgment on such matter.

The foregoing contains no untrue statement of material fact (as defined in the Securities Act (British Columbia)) and does not omit to state a material fact that is required to be stated or that is necessary to make a statement contained herein not misleading in the light of the circumstances in which it was made.

DATED this 25^th day of August, 2006.

BY ORDER OF THE BOARD OF DIRECTORS
OF KEEGAN RESOURCES INC.

“Daniel T. McCoy”

Daniel T. McCoy
President and Chief Executive Officer

SCHEDULE “A”

SHAREHOLDER RIGHTS PLAN AGREEMENT

BETWEEN

KEEGAN RESOURCES INC.

AND

PACIFIC CORPORATE TRUST COMPANY

Made as of September 1, 2006

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION

1

1.1 Certain Definitions

1

1.2 Currency

11

1.3 Number and Gender

11

1.4 Sections and Headings

11

1.5 Statutory References

12

1.6 Determination of Percentage Ownership

12

1.7 Acting Jointly or in Concert

12

1.8 Generally Accepted Accounting Principles

12

ARTICLE 2 THE RIGHTS

12

2.1 Legend on Common Share Certificates

12

2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights

13

2.3 Adjustments to Exercise Price; Number of Rights

15

2.4 Date on Which Exercise is Effective

20

2.5 Execution, Authentication, Delivery and Dating of Rights Certificates

20

2.6 Registration, Transfer and Exchange

20

2.7 Mutilated, Lost, Stolen and Destroyed Rights Certificates

21

2.8 Persons Deemed Owners

21

2.9 Delivery and Cancellation of Certificates

21

2.10 Agreement of Rights Holders

22

ARTICLE 3 ADJUSTMENTS TO THE RIGHTS

22

3.1 Flip-in Event

22

3.2 Fiduciary Duties of the Board of Directors

23

ARTICLE 4 THE RIGHTS AGENT

23

4.1 General

23

4.2 Merger, Amalgamation, Consolidation or Change of Name of Rights Agent

24

4.3 Duties of Rights Agent

24

4.4 Change of Rights Agent

26

ARTICLE 5 MISCELLANEOUS

26

5.1 Redemption, Waiver, Extension and Termination

26

5.2 Expiration

29

5.3 Issuance of New Rights Certificates

28

5.4 Supplements and Amendments

28

5.5 Fractional Rights and Fractional Shares

29

5.6 Rights of Action

29

5.7 Holder of Rights Not Deemed a Shareholder

29

5.8 Notice of Proposed Actions

30

5.9 Notices

30

5.10 Costs of Enforcement

30

5.11 Regulatory Approvals

30

5.12 Declaration as to Non-Canadian and Non-United States Holders

31

5.13 Successors

31

5.14 Benefits of this Agreement

31

5.15 Shareholder Review

31

5.16 Determinations and Actions by the Board of Directors

31

5.17 Governing Law

31

5.18 Language

32

5.19 Counterparts

32

5.20 Severability

32

5.21 Effective Date

32

5.22 Time of the Essence

32
SCHEDULE A

Form of Rights Certificate

Form of Election to Exercise

Form of Assignment

SHAREHOLDER RIGHTS PLAN AGREEMENT

THIS AGREEMENT is made as of the 1^st day of September, 2006.

BETWEEN:

KEEGAN RESOURCES INC., a company incorporated pursuant to the laws of British Columbia

(the “Company”)

AND:

PACIFIC CORPORATE TRUST COMPANY, a company incorporated under the federal laws of Canada

(the “Rights Agent”)

WHEREAS:

A.

The Board of Directors has determined that it is advisable to adopt a shareholder rights plan (the “Rights Plan”) to ensure, to the extent possible, that all shareholders of the Company are treated fairly in connection with any take-over offer for the Company or other acquisition of control of the Company.

B.

In order to implement the Rights Plan, the Board of Directors has:

(i)

authorized and declared a distribution of one right (a “Right”) effective at the Record Time in respect of each Common Share outstanding at the Record Time;

(ii)

authorized the issuance of one Right in respect of each Common Share issued after the Record Time and prior to the earlier of the Separation Time and the Expiration Time; and

(iii)

authorized the issuance of Rights Certificates to holders of Rights pursuant to the terms and subject to the conditions set forth herein.

C.

Each Right entitles the holder thereof, after the Separation Time, to purchase securities of the Company pursuant to the terms and subject to the conditions set forth herein.

D.

The Company desires to appoint the Rights Agent to act on behalf of the Company, and the Rights Agent is willing to so act, in connection with the issuance, transfer, exchange and replacement of Rights Certificates, the exercise of Rights and other matters referred to herein.

NOW THEREFORE, in consideration of the premises and respective agreements set forth herein, the parties hereby agree as set forth below.

ARTICLE 1

INTERPRETATION

1.1

Certain Definitions

For the purposes of this agreement, including the recitals hereto, the terms set forth below have the meanings indicated.

(a)

“Acquiring Person” means any Person who is the Beneficial Owner of 20% or more of the outstanding Voting Shares, but does not include:

(i)

the Company or any Subsidiary of the Company;

(ii)

any Person who becomes the Beneficial Owner of 20% or more of the outstanding Voting Shares as a result of one or any combination of:

(A)

a Voting Share Reduction;

(B)

a Permitted Bid Acquisition;

(C)

an Exempt Acquisition;

(D)

a Pro Rata Acquisition; and

(E)

a Convertible Security Acquisition, provided, however, that if a Person shall become the Beneficial Owner of 20% or more of the outstanding Voting Shares by reason of one or any combination of a Voting Share Reduction, a Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata Acquisition and a Convertible Security Acquisition, and thereafter becomes the Beneficial Owner of more than 1.0% of the number of Voting Shares then outstanding in addition to those Voting Shares such Person already holds (otherwise than pursuant to a Voting Share Reduction, a Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata Acquisition or a Convertible Security Acquisition or any combination thereof), then, as of the date that such Person becomes a Beneficial Owner of such additional Voting Shares, such Person shall become an “Acquiring Person”;

(iii)

for the period of 10 days after the Disqualification Date (as hereinafter defined), any Person who becomes the Beneficial Owner of 20% or more of the outstanding Voting Shares as a result of such Person becoming disqualified from relying on Section 1.1(e)(ii)(B) where such disqualification results solely because such Person is making or has announced a current intention to make a Take-over Bid, either alone or by acting jointly or in concert with any other Person, unless such disqualified Person during such 10-day period acquires more than 1.0% of the number of Voting Shares then outstanding in addition to those Voting Shares such disqualified Person already holds. For the purposes of this definition, “Disqualification Date” means the first date of public announcement that such Person is making a Take-over Bid, either alone or by acting jointly or in concert with another Person;

(iv)

an underwriter or a member of a banking or selling group that becomes the Beneficial Owner of 20% or more of the Voting Shares in connection with a distribution of securities pursuant to an underwriting agreement with the Company; or

(v)

any Person (a “Grandfathered Person”) who is the Beneficial Owner of more than 20% of the Voting Shares determined as at the Record Time, provided, however, that this exception shall not, and shall cease to, apply if, after the Record Time, the Grandfathered Person: (1) ceases to own more than 20% of the outstanding Voting Shares; or (2) becomes the Beneficial Owner of more than 1% of the number of outstanding Voting Shares then outstanding in addition to those Voting Shares such Person already holds (otherwise than pursuant to a Voting Share Reduction, a Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata Acquisition or a Convertible Security Acquisition or any combination thereof).

(b)

“Affiliate”, when used to indicate a relationship with a specified corporation, means a Person that directly, or indirectly, controls, or is controlled by, or is under common control with, such specified corporation.

(c)

“Associate”, when used to indicate a relationship with a specified Person, means any relative of such specified Person who has the same home as such specified Person, or any person to whom such specified Person is married, or any person with whom such specified Person is living in a conjugal relationship outside marriage, or any relative of such spouse or other Person who has the same home as such specified Person.

(d)

“BCA” means the Business Corporations Act (British Columbia), and the regulations thereunder, and any comparable or successor laws or regulations thereto.

(e)

(i)

A Person shall be deemed the “Beneficial Owner” of, and to have “Beneficial Ownership” of, and to “Beneficially Own”:

(A) any securities of which such Person or any of such Person’s Affiliates or Associates is the owner at law or in equity;

(B) any securities of which such Person or any of such Person’s Affiliates or Associates has the right to become the owner at law or in equity within 60 days (where such right is exercisable within a period of 60 days, whether or not upon the condition or occurrence of a contingency or the making of one or more payments) upon the exercise of any conversion right, exchange right, share purchase right (other than the Rights) or pursuant to any agreement, arrangement, pledge or understanding, whether or not in writing, other than:

(1)

customary agreements with and between underwriters and banking group or selling group members with respect to a distribution of securities; and

(2)

pledges of securities in the ordinary course of the pledgee’s business; and

(C) any securities that are Beneficially Owned within the meaning of Section 1.1(e)(i)(A) or 1.1(e)(i)(B) by any other Person with which such Person is acting jointly or in concert.

(ii)

Notwithstanding the provisions of Section 1.1(e)(i), a Person shall not be deemed the “Beneficial Owner” of, or to have “Beneficial Ownership” of, or to “Beneficially Own”, any security because:

(A)

(1)

the holder of such security has agreed to deposit or tender such security to a Take-over Bid made by such Person or any of such Person’s Affiliates or Associates or any other Person referred to in Section 1.1(e)(i)(C) pursuant to a Permitted Lock-up Agreement; or

(2) such security has been deposited or tendered pursuant to a Take-over Bid made by such Person or any of such Person’s Affiliates or Associates or made by any other Person acting jointly or in concert with such Person until such deposited or tendered security has been taken up;

(B)

such Person, any Affiliate or Associate of such Person or any other Person acting jointly or in concert with such Person holds such security; provided that:

(1)

the ordinary business of such Person (the “Portfolio Manager”) includes the management or administration of investment funds or mutual funds for other Persons and such security is held by the Portfolio Manager in the ordinary course of such business in the performance of the Portfolio Manager’s duties for the account of any other Person (a “Client”) including non-discretionary accounts held on behalf of a Client by a broker or dealer registered under applicable law;

(2)

such Person (the “Trust Company”) is licensed to carry on the business of a trust company under applicable laws and, as such, acts as trustee or administrator or in a similar capacity in relation to the estates of deceased or incompetent Persons (each, an “Estate Account”) or in relation to other accounts (each, an “Other Account”) and holds such security in the ordinary course of such duties for such Estate Accounts or for such Other Accounts;

(3)

such Person (the “Crown Agent”) is established by statute for purposes that include, and the ordinary business or activity of such Person includes, the management of investment funds for employee benefit plans, pension plans, insurance plans, or various public bodies; or

(4)

such Person (the “Plan Administrator”) is the administrator or the trustee of one or more pension funds or plans registered under the laws of Canada or the United States of America or any province or state thereof (each, a “Plan”), or is a Plan; provided; however, that in any of the foregoing cases, the Portfolio Manager, the Trust Company,

the Crown Agent, the Plan Administrator or the Plan, as the case may be, is not then making or has not then announced an intention to make, a Take-over Bid, other than an Offer to Acquire Voting Shares or other securities pursuant to a distribution by the Company, a Permitted Bid or by means of ordinary market transactions (including pre­arranged trades entered into in the ordinary course of business of such Person) executed through the facilities of a stock exchange or organized over-the-counter market in respect of securities of the Company, alone or by acting jointly or in concert with any other Person;

(C)

such Person is a Client of the same Portfolio Manager as another Person on whose account the Portfolio Manager holds such security, or because such Person is an Estate Account or an Other Account of the same Trust Company as another Person on whose account the Trust Company holds such security or because such Person is a Plan with the same Plan Administrator as another Plan on whose account the Plan Administrator holds such security;

(D)

such Person is a Client of a Portfolio Manager and such security is owned at law or in equity by the Portfolio Manager or because such Person is an Estate Account or an Other Account of a Trust Company and such security is owned at law or in equity by the Trust Company or such Person is a Plan and such security is owned at law or in equity by the Plan Administrator of such Plan; or

(E)

such Person is the registered holder of securities as a result of carrying on the business, or acting as a nominee, of a securities depositary.

For the purposes of this Agreement, in determining the percentage of the outstanding Voting Shares with respect to which a Person is or is deemed to be the Beneficial Owner, any unissued Voting Shares as to which such Person is deemed the Beneficial Owner pursuant to this Section 1.1(e) shall be deemed outstanding.

(f)

“Board of Directors” means the board of directors of the Company or any duly constituted and empowered committee thereof.

(g)

“Business Day” means any day, other than a Saturday or Sunday or a day on which banking institutions in Vancouver, British Columbia are authorized or obligated by law to close.

(h)

“Canadian Dollar Equivalent” of any amount which is expressed in United States dollars means on any day the Canadian dollar equivalent of such amount determined by reference to the U.S. - Canadian Exchange Rate in effect on such date.

(i)

“Close of Business” on any given date means the time on such date (or, if such date is not a Business Day, the time on the next Business Day) at which the principal office of the transfer agent for the Common Shares in Vancouver, British Columbia (or after the Separation Time, the principal office of the Rights Agent in Vancouver, British Columbia) is closed to the public.

(j)

“Closing Price” per security of any securities on any date of determination means:

(i)

the closing board lot sale price or, if such price is not available, the average of the closing bid and asked prices, for each of such securities as reported by the principal stock exchange or national securities quotation system on which such securities are listed or admitted to trading (provided that, if at the date of determination such securities are listed or admitted to trading on more than one stock exchange or national securities quotation system, then such price or prices shall be determined based upon the stock exchange or quotation system on which such securities are then listed or admitted to trading on which the largest number of such securities were traded during the most recently completed calendar year);

(ii)

if for any reason none of such prices is available on such day or the securities are not listed or admitted to trading on a stock exchange or a national securities quotation system, then the last sale price, or in case no sale takes place on such date, the average of the high bid and low asked prices for each of such securities in the over-the-counter market, as quoted by any reporting system then in use; or

(iii)

if for any reason none of such prices is available on such day or the securities are not listed or admitted to trading on a stock exchange or a national securities quotation system or quoted by any such reporting system, then the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities selected in good faith by the Board of Directors, provided, however, that:

(A)

if for any reason none of such prices are available on such date, then the “Closing Price” per security of such securities on such date shall mean the fair value per security of the securities on such date as determined by a nationally or internationally recognized investment dealer or investment banker with respect to the fair value per security of such securities; and

(B)

if the Closing Price so determined is expressed in United States dollars, then such amount shall be converted to the Canadian Dollar Equivalent.

(k)

“Common Shares” means the common shares in the share capital of the Company as presently constituted, as such shares may be subdivided, consolidated, reclassified or otherwise changed from time to time, and “common shares” when used with reference to any Person other than the Company means the class or classes of shares (or similar equity interest) with the greatest per share voting power entitled to vote generally in the election of all directors of such other Person or the equity securities or other equity interest having power (whether or not exercised) to control or direct the management of such other Person or, if such other Person is a Subsidiary of another Person, of the Person or Persons (other than an individual) which ultimately control such first mentioned other Person.

(l)

”Competing Permitted Bid” means a Take-over Bid that:

(i)

is made after another Permitted Bid has been made and prior to the expiry of such Permitted Bid;

(ii)

satisfies all components of the definition of a Permitted Bid other than the requirement set forth in Section 1.1(hh)(ii)(A)(1); and

(iii)

contains, and the take-up and payment for securities tendered or deposited thereunder is subject to, irrevocable and unqualified conditions that no Voting Shares shall be taken up or paid for pursuant to such Take-over Bid prior to the Close of Business on a date that is no earlier than the later of:

(A)

35 days after the date of such Take-over Bid; and

(B)

the earliest date on which Voting Shares may be taken up or paid for under any other Permitted Bid that preceded the Competing Permitted Bid that is then in existence for the Voting Shares.

(m)

“Controlled”, a body corporate is “controlled” by another Person if:

(i)

securities entitled to vote in the election of directors carrying more than 50% of the votes for the election of directors are held, directly or indirectly, by or for the benefit of the other Person; and

(ii)

the votes carried by such securities are entitled, if exercised, to elect a majority of the board of directors of such body corporate, and “controls”, “controlling” and “under common control with” shall be interpreted accordingly.

(n)

“Convertible Security” means a security convertible or exchangeable into a Voting Share and a “Convertible Security Acquisition” means an acquisition by a Person of Voting Shares upon the exercise, conversion or exchange of Convertible Securities received by a Person pursuant to a Permitted Bid Acquisition, an Exempt Acquisition or a Pro Rata Acquisition.

(o)

“Co-Rights Agents” has the meaning ascribed thereto in Section 4.1.1.

(p)

“Disposition Date” has the meaning ascribed thereto in Section 5.1.1.

(q)

“Effective Date” means September 1, 2006.

(r)

“Election to Exercise” has the meaning ascribed thereto in Section 2.2.4(b).

(s)

“Exchange” means the TSX Venture Exchange Inc. and any other exchange on which the Common Shares may, from time to time, be listed for trading.

(t)

“Exempt Acquisition” means a share acquisition in respect of which the Board of Directors has waived the application of Section 3.1 pursuant to Sections 5.1.2, 5.1.4 or 5.1.5 or which was made on or prior to the Record Time.

(u)

“Exercise Price” means, as of any date, the price at which a holder of a Right may purchase the securities issuable upon exercise of one whole Right and, until adjustment thereof in accordance with the terms hereof, the Exercise Price shall be $1.15.

(v)

“Expansion Factor” has the meaning ascribed thereto in Section 2.3.2(i)(A).

(w)

“Expiration Time” means the earlier of:

(i)

the Termination Time; and

(ii)

the Close of Business on the date on which the first annual meeting of shareholders of the Company following the third anniversary of the Effective Date is held, provided, however, that if the resolution referred to in Section 5.15 is approved by the Independent Shareholders in accordance with Section 5.15 at or prior to such annual meeting, “Expiration Time” means the earlier of:

(iii)

the Termination Time; and

(iv)

the Close of Business on the sixth anniversary of the Effective Date.

(x)

“Fiduciary” means a trust company registered under the trust company legislation of Canada or any province thereof, a trust company organized under the laws of any state of the United States, a portfolio manager registered under the securities legislation of one or more provinces of Canada or an investment adviser registered under the United States Investment Advisers Act of 1940, as amended, or any other securities legislation of the United States or any state of the United States.

(y)

“Flip-in Event” means a transaction or event in or pursuant to which any Person becomes an Acquiring Person.

(z)

“Holder” has the meaning ascribed thereto in Section 2.8.

(aa)

“Independent Shareholders” means holders of outstanding Voting Shares, other than any:

(i)

Acquiring Person;

(ii)

Offeror other than a Person who at the relevant time is deemed not to Beneficially Own such Voting Shares by reason of Section 1. 1 (e)(ii)(B);

(iii)

Affiliate or Associate of such Acquiring Person or Offeror;

(iv)

Person acting jointly or in concert with such Acquiring Person or Offeror; or

(v)

employee benefit plan, stock purchase plan, deferred profit sharing plan and any similar plan or trust for the benefit of employees of the Company or a Subsidiary of the Company, unless the beneficiaries of such plan or trust direct the manner in which the Voting Shares are to be voted or withheld from voting or direct whether or not the Voting Shares are to be tendered to a Take-over Bid.

(bb)

“Market Price” per security of any securities on any date of determination means the average of the daily Closing Prices per security of such securities on each of the 20 consecutive Trading Days through and

including the Trading Day immediately preceding such date of determination; provided, however, that if an event of a type analogous to any of the events described in Section 2.3 shall have caused any Closing Price used to determine the Market Price on any Trading Day not to be fully comparable with the Closing Price on the Trading Day immediately preceding such date of determination, each such Closing Price so used shall be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 in order to make it fully comparable with the Closing Price on the Trading Day immediately preceding such date of determination.

(cc)

“1933 Act” means the United States Securities Act of 1933, as amended, and the rules and regulations thereunder, and any comparable or successor laws, rules or regulations thereto.

(dd)

“Nominee” has the meaning ascribed thereto in Section 2.2.3.

(ee)

“Offer to Acquire” shall include:

(i)

an offer to purchase or a solicitation of an offer to sell Voting Shares, or a public announcement of an intention to make such an offer or solicitation; and

(ii)

an acceptance of an offer to sell Voting Shares, whether or not such offer to sell has been solicited, or any combination thereof, and the Person accepting an offer to sell shall be deemed to be making an Offer to Acquire to the Person that made the offer to sell.

(ff)

“Offeror” means a Person who has announced a current intention to make, or who is making, a Take-over Bid.

(gg)

“Offeror’s Securities” means the aggregate of the Voting Shares Beneficially Owned on the date of a Take-over Bid by an Offeror.

(hh)

“Permitted Bid” means a Take-over Bid made by way of a Take-over Bid circular and which also complies with the following additional provisions:

(i)

the Take-over Bid is made to all holders of record of Voting Shares of the Company, other than the Offeror; and

(ii)

the Take-over Bid contains, and the take-up and payment for securities tendered or deposited thereunder is subject to, irrevocable and unqualified conditions that:

(A)

no Voting Shares shall be taken up or paid for pursuant to the Take-over Bid:

(1)

prior to the Close of Business on a date which is not less than 60 days following the date of the Take-over Bid; and

(2)

unless, at the Close of Business on such date, more than 50% of the then outstanding Voting Shares held by Independent Shareholders have been deposited or tendered pursuant to the Take-over Bid and have not been withdrawn;

(B)

unless the Take-over Bid is withdrawn, Voting Shares may be deposited pursuant to such Take-over Bid at any time prior to the Close of Business on the date of the first take-up of or payment for Voting Shares;

(C)

any Voting Shares deposited pursuant to the Take-over Bid may be withdrawn until taken up and paid for; and

(D)

in the event that the requirement set forth in Section 1. 1 (hh)(ii)(A)(2) is satisfied, the Offeror will make a public announcement of that fact and the Take-over Bid will remain open for deposits and tenders of Voting Shares for not less than 10 Business Days from the date of such public announcement, provided that, should a Permitted Bid cease to be a Permitted Bid because it ceases to meet any or all of the requirements mentioned above prior to the time it expires (after giving effect to any extension) or is withdrawn, then any acquisition of Voting Shares made pursuant to such Permitted Bid, including any acquisition of Voting Shares

made prior to such time, shall not be a Permitted Bid Acquisition. The term Permitted Bid shall include a Competing Permitted Bid.

(ii)

“Permitted Bid Acquisition” means an acquisition of Voting Shares made pursuant to a Permitted Bid or a Competing Permitted Bid.

(jj)

“Permitted Lock-up Agreement” means an agreement between a Person and one or more holders of Voting Shares (each, a “Locked-up Person”) (the terms of which are publicly disclosed and a copy of which is made available to the public, including the Company, not later than the date of the Lock-up Bid (as defined below) or, if the Lock-up Bid has been made prior to the date on which such agreement is entered into, not later than the date of such agreement and if such date is not a Business Day, the next Business Day) pursuant to which each such Locked-up Person agrees to deposit or tender Voting Shares to a Take-over Bid (the “Lock-up Bid”) made or to be made by the Person, any of such Person’s Affiliates or Associates or any other Person acting jointly or in concert with such Person, provided that:

(i)

the agreement permits any Locked-up Person to terminate its obligation to deposit or tender to or not to withdraw Voting Shares from the Lock-up Bid in order to tender or deposit the Voting Shares to another Take-over Bid or support another transaction:

(A)

where the price or value per Common Share offered under such other Take-over Bid or transaction is higher than the price or value per Common Share offered under the Lock-up Bid; or

(B)

if:

(1)

the price or value per Common Share offered under the other Take-over Bid or transaction exceeds by as much as or more than a specified amount (the “Specified Amount”) the price or value per Common Share offered under the Lock-up Bid, provided that such Specified Amount is not greater than 7% of the price or value per Common Share offered under the Lock-up Bid; or

(2)

the number of Voting Shares to be purchased under the other Take-over Bid or transaction exceeds by as much as or more than a specified number (the “Specified Number”) the number of Voting Shares that the Offeror has offered to purchase under the Lock-up Bid at a price or value per Common Share that is not less than the price or value per Common Share offered under the Lock-up Bid, provided that the Specified Number is not greater than 7% of the number of Voting Shares offered to be purchased under the Lock-up Bid, and, for greater clarity, the agreement may contain a right of first refusal or require a period of delay to give such Person an opportunity to match a higher price in another Take-over Bid or transaction or other similar limitation on a Locked-up Person’s right to withdraw Voting Shares from the agreement, so long as the limitation does not preclude the exercise by the Locked-up Person of the right to with draw Voting Shares during the period of the other Take-over Bid or transaction; and

(ii)

no “break-up” fees, “top-up” fees, penalties, expenses or other amounts that exceed in the aggregate the greater of:

(A)

the cash equivalent of 2.5% of the price or value of the consideration payable under the Lock­up Bid to a Locked-up Person; and

(B)

50% of the amount by which the price or value of the consideration payable under another Take-over Bid or transaction to a Locked-up Person exceeds the price or value of the consideration that such Locked-up Person would have received under the Lock-up Bid, shall be payable by a Locked-up Person pursuant to the agreement in the event a Locked-up Person fails to deposit or tender Voting Shares to the Lock-up Bid or withdraws Voting Shares in order to accept the other Take-over Bid or support another transaction.

(kk)

“Person” includes any individual, firm, partnership, association, trust, trustee, executor, administrator, legal personal representative, government, governmental body or authority, corporation or other incorporated or unincorporated organization, syndicate or other entity.

(ll)

“Pro Rata Acquisition” means an acquisition by a Person of Voting Shares pursuant to:

(i)

any dividend reinvestment plan or share purchase plan of the Company made available to all holders of Voting Shares (other than holders resident in any jurisdiction where participation in any such plan is restricted or impractical as a result of applicable law);

(ii)

a stock dividend, a stock split or other event pursuant to which such Person becomes the Beneficial Owner of Voting Shares on the same pro rata basis as all other holders of Voting Shares of the same class or series;

(iii)

the acquisition or exercise of rights to purchase Voting Shares distributed to all holders of Voting Shares (other than holders resident in any jurisdiction where such distribution is restricted or impractical as a result of applicable law) by the Company pursuant to a rights offering (but only if such rights are acquired directly from the Company); or

(iv)

a distribution of Voting Shares or Convertible Securities made pursuant to a prospectus or by way of a private placement or a conversion or exchange of any Convertible Security, provided, however, that such Person does not thereby acquire a greater percentage of Voting Shares or of Convertible Securities so offered than such Person’s percentage of Voting Shares Beneficially Owned immediately prior to such acquisition.

(mm)

“Record Time” means the Close of Business on the Effective Date.

(nn)

“Redemption Price” has the meaning attributed thereto in Section 5.1.1.

(oo)

“Regular Periodic Cash Dividend” means cash dividends paid on the Common Shares at regular intervals in any fiscal year of the Company to the extent that such cash dividends do not exceed in the aggregate in any fiscal year, on a per share basis, the greatest of:

(i)

200% of the aggregate amount of cash dividends declared payable by the Company on its Common Shares in its immediately preceding fiscal year divided by the number of Common Shares outstanding as at the end of such fiscal year;

(ii)

300% of the arithmetic mean of the aggregate amounts of cash dividends declared payable by the Company on its Common Shares in its three immediately preceding fiscal years divided by the arithmetic mean of the number of Common Shares outstanding as at the end of each of such fiscal years; and

(iii)

100% of the aggregate consolidated net income of the Company, before extraordinary items, for its immediately preceding fiscal year divided by the number of Common Shares outstanding as at the end of such fiscal year.

(pp)

“Rights” means the herein described rights to purchase securities pursuant to the terms and subject to the conditions set forth herein.

(qq)

“Rights Certificate” means a certificate representing the Rights after the Separation Time which shall be substantially in the form attached hereto as Schedule A.

(rr)

“Rights Register” and “Rights Registrar” have the respective meanings ascribed thereto in Section 2.6.1.

(ss)

“Securities Act (British Columbia)” means the Securities Act (British Columbia), as amended, and the rules and regulations made thereunder, as now in effect or as the same may from time to time be amended, re-enacted or replaced.

(tt)

“Securities Act (Ontario)” means the Securities Act (Ontario), as amended, and the regulations made thereunder, as now in effect or as the same may from time to time be amended, re-enacted or replaced.

(uu)

“Separation Time” means the Close of Business on the eighth Business Day (or such later Business Day
as may be determined at any time or from time to time by the Board of Directors) after the earlier of:

(i)

the Stock Acquisition Date; and

(ii)

the date of the commencement of, or first public announcement or disclosure of the intent of any Person (other than the Company or any Subsidiary of the Company) to commence, a Take-over Bid (other than a Permitted Bid, so long as such Take-over Bid continues to satisfy the requirements of a Permitted Bid), provided; however, that if any such Take-over Bid expires, is cancelled, is terminated or is otherwise withdrawn prior to the Separation Time, then such Take­over Bid shall be deemed, for purposes of this Section 1.1(uu) never to have been made, and, provided further, that if the Board of Directors determines, pursuant to Section 5.1, to waive the application of Section 3.1 to a Flip-In Event, then the Separation Time in respect of such Flip-In Event shall be deemed never to have occurred.

(vv)

“Stock Acquisition Date” means the first date of public announcement or disclosure by the Company or an Acquiring Person of facts indicating that a Person has become an Acquiring Person, which, for the purposes of this definition, shall include, without limitation, a report filed pursuant to Section 111 of the Securities Act (British Columbia), Section 101 of the Securities Act (Ontario) or Section 13(d) of the U.S. Exchange Act announcing or disclosing such information.

(ww)

“Subsidiary” means a body corporate that is controlled by another Person.

(xx)

“Take-over Bid” means an Offer to Acquire Voting Shares, or securities convertible into Voting Shares of that class, where the Voting Shares subject to the Offer to Acquire, together with the Voting Shares into or for which the securities subject to the Offer to Acquire are convertible or exchangeable and the Offeror’s Securities constitute in the aggregate 20% or more of the outstanding Voting Shares at the date of the Offer to Acquire.

(yy)

“Termination Time” means the time at which the right to exercise Rights shall terminate pursuant to Section 5.1.

(zz)

“Trading Day”, when used with respect to any securities, means the day on which the principal Canadian or United States securities exchange (as determined by the Board of Directors) on which such securities are listed or admitted to trading is open for the transaction of business or, if the securities are not listed or admitted to trading on any Canadian or United States securities exchange, a Business Day.

(aaa)

“U.S. - Canadian Exchange Rate” on any date means:

(i)

if on such date the Bank of Canada sets an average noon spot rate of exchange for the conversion of one United States dollar into Canadian dollars, such rate; and

(ii)

in any other case, the rate for such date for the conversion of one United States dollar into Canadian dollars which is calculated in the manner which shall be determined by the Board of Directors from time to time acting in good faith.

(bbb)

“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder as from time to time in effect, and any comparable or successor laws, rules or regulations thereto.

(ccc)

“Voting Share Reduction” means an acquisition or redemption by the Company of Voting Shares which, by reducing the number of Voting Shares outstanding, increases the percentage of Voting Shares Beneficially Owned by any Person to 20% or more of the Voting Shares then outstanding.

(ddd)

“Voting Shares” means the Common Shares and any other securities the holders of which are entitled to vote generally on the election of directors of the Company and “voting shares”, when used with reference to any Person other than the Company, means common shares of such other Person and any other securities the holders of which are entitled to vote generally in the election of the directors or to otherwise affect control of such other Person.

1.2

Currency

All sums of money which are referred to in this Agreement are expressed in lawful money of Canada, unless otherwise specified.

1.3

Number and Gender

Wherever the context will require, terms (including defined terms) used herein importing the singular number only shall include the plural and vice versa and words importing any one gender shall include all others.

1.4

Sections and Headings

The division of this Agreement into Articles, Sections and Schedules and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms this “Agreement”, “hereunder”, “hereof”, and similar expressions refer to this Agreement as amended or supplemented from time to time and not to any particular Article, Section or Schedule or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles, Sections and Schedules are to Articles, Sections and Schedules of or to this Agreement.

1.5

Statutory References

Unless the context otherwise requires, any reference to a specific section, subsection, clause or rule of any act or regulation shall be deemed to refer to the same as it may be amended, reenacted or replaced or, if repealed and there shall be no replacement therefor, to the same as it is in effect on the date of this Agreement.

1.6

Determination of Percentage Ownership

The percentage of Voting Shares Beneficially Owned by any Person, shall, for the purposes of this Agreement, be and be deemed to be the product determined by the formula:

100 X A

B

where:

A =

the aggregate number of votes for the election of all directors generally attaching to the Voting Shares Beneficially Owned by such Person; and

B =

the aggregate number of votes for the election of all directors generally attaching to all outstanding Voting Shares.

Where any Person is deemed to Beneficially Own unissued Voting Shares pursuant to Section 1.1(e), such Voting Shares shall be deemed to be outstanding for the purpose of both A and B in the formula above.

1.7

Acting Jointly or in Concert

For the purposes of this Agreement, a Person is acting jointly or in concert with every Person who is a party to an agreement, commitment or understanding, whether formal or informal or written or unwritten, with the first Person to acquire or Offer to Acquire Voting Shares or Convertible Securities (other than customary agreements with and between underwriters and banking or selling group members with respect to a distribution of securities and pledges of securities in the ordinary course of business to secure indebtedness).

1.8

Generally Accepted Accounting Principles

Wherever in this Agreement reference is made to generally accepted accounting principles, such reference shall be deemed to be the recommendations at the relevant time of the Canadian Institute of Chartered Accountants, or any successor institute, applicable on a consolidated basis (unless otherwise specifically provided herein to be applicable on an unconsolidated basis) as at the date on which a calculation is made or required to be made in accordance with generally accepted accounting principles. Where the character or amount of any asset or liability or item of revenue or expense is required to be determined, or any consolidation or other accounting computation is required to be made for the purpose of this Agreement or any document, such determination or calculation shall, to the extent applicable and except as otherwise specified herein or as otherwise agreed in writing by the parties, be made in accordance with generally a ccepted accounting principles applied on a consistent basis.

ARTICLE 2

THE RIGHTS

2.1

Legend on Common Share Certificates

2.1.1

Certificates representing the Common Shares, including without limitation Common Shares issued upon the conversion of Convertible Securities, issued after the later of:

(a)

the Record Time; and

(b)

the date on which all required regulatory approvals required in respect of this Agreement have been received,

but prior to the Close of Business on the earlier of-

(c)

the Separation Time; and

(d)

the Expiration Time,

shall also evidence one Right for each Common Share represented thereby and shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

“Until the Separation Time (as defined in the Rights Agreement referred to below), this certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Shareholder Rights Plan Agreement, made as of September 1, 2006 (the “Rights Agreement”), between the Company and Pacific Corporate Trust Company, as Rights Agent, the terms of which are hereby incorporated herein by reference and a copy of which is on file at the registered office of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be amended or redeemed, may expire, may become void (if, in certain cases, they are “Beneficially Owned” by an “Acquiring Person”, as such terms are defined in the Rights Agreement, or a transferee thereof) or may be evidenced by separate certificates and may no longer be evidenced by this certifi cate. The Company will mail or arrange for the mailing of a copy of the Rights Agreement to the holder of this

certificate without charge as soon as practicable after the receipt of a written request therefor.”

2.1.2

Certificates representing Common Shares that are issued and outstanding at the later of:

(a)

the Record Time; and

(b)

the date on which all required regulatory approvals required in respect of this Agreement have been received,

shall evidence one Right for each Common Share evidenced thereby, notwithstanding the absence of the foregoing legend, until the earlier of:

(a)

the Separation Time; and

(b)

the Expiration Time.

2.2

Initial Exercise Price; Exercise of Rights; Detachment of Rights

2.2.1

Subject to adjustment as herein set forth, including without limitation as set forth in Article 3, each Right will entitle the holder thereof, from and after the Separation Time and prior to the Expiration Time, to purchase one Common Share for the Exercise Price as at the Business Day immediately preceding the Separation Time (which Exercise Price and number of Common Shares are subject to adjustment as set forth below). Notwithstanding any other provision of this Agreement, any Rights held by the Company or any of its Subsidiaries shall be void.

2.2.2

Until the Separation Time:

(a)

the Rights shall not be exercisable and no Right may be exercised; and

(b)

for administrative purposes, each Right will be evidenced by the certificate for the associated Common Share registered in the name of the holder thereof (which certificate shall be deemed to represent a Rights Certificate) and will be transferable only together with, and will be transferred by a transfer of, such associated Common Share.

2.2.3

From and after the Separation Time and prior to the Expiration Time, the Rights may be exercised, and the registration and transfer of the Rights shall be separate from and independent of Common Shares. Promptly following the Separation Time, the Company will prepare or cause to be prepared and the Rights Agent will mail to each holder of record of Common Shares as of the Separation Time and, in respect of each Convertible Security converted into Common Shares after the Separation Time and prior to the Expiration Time, promptly after such conversion, the Company will prepare or cause to be prepared and the Rights Agent will mail to the holder so converting (other than an Acquiring Person and, in respect of any Rights Beneficially Owned by such Acquiring Person which are not held of record by such Acquiring Person, the holder of record of such rights (a “Nominee”)) at such holder’s address as shown by the records of the Company (the Company hereby agreeing to furnish copies of such records to the Rights Agent for this purpose):

(a)

a Rights Certificate in substantially the form of Schedule A appropriately completed, representing the number of Rights held by such holder at the Separation Time and having such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law, rule or regulation or judicial or administrative order, or with any article or regulation of any stock exchange or quotation system on which the Rights may from time to time be listed or traded, or to conform to usage; and

(b)

a disclosure statement prepared by the Company describing the Rights,

provided that a Nominee shall be sent the materials provided for in Sections 2.2.3(a) and 2.2.3(b) only in respect of all Common Shares held of record by it which are not Beneficially Owned by an Acquiring Person and the Company may require any Nominee or suspected Nominee to provide such information and documentation as the Company may reasonably require for such purpose.

2.2.4

Rights may be exercised in whole or in part on any Business Day after the Separation Time and prior to the Expiration Time by submitting to the Rights Agent, at its principal office in Vancouver, British Columbia or Toronto, Ontario:

(a)

the Rights Certificate evidencing such Rights;

(b)

an election to exercise (an “Election to Exercise”) substantially in the form attached to the Rights Certificate duly completed, and executed in a manner acceptable to the Rights Agent; and

(c)

payment in cash, or by certified cheque, banker’s draft or money order payable to the order of the Company, of a sum equal to the Exercise Price multiplied by the number of Rights being exercised and a sum sufficient to cover any transfer tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for Common Shares in a name other than that of the holder of the Rights being exercised.

2.2.5

Upon receipt of a Rights Certificate, which is accompanied by an appropriately completed and duly executed Election to Exercise (which does not indicate that such Right is null and void as provided by Section 3.1.2 and payment as set forth in Section 2.2.4, the Rights Agent (unless otherwise instructed by the Company) will thereupon promptly:

(a)

requisition from the transfer agent of the Common Shares certificates representing the number of Common Shares to be purchased (the Company hereby irrevocably authorizing its transfer agent to comply with all such requisitions);

(b)

after receipt of such Common Share certificates, deliver such certificates to, or to the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder;

(c)

when appropriate, requisition from the Company the amount of cash, if any, to be paid in lieu of issuing fractional Common Shares;

(d)

when appropriate, after receipt of such cash, deliver such cash to, or to the order of, the registered holder of the Rights Certificate; and

(e)

tender to the Company all payments received on exercise of the Rights.

2.2.6

If the holder of any Rights shall exercise less than all the Rights evidenced by such holder’s Rights Certificate, a new Rights Certificate evidencing the Rights remaining unexercised will be issued by the Rights Agent to such holder or to such holder’s duly authorized assigns.

2.2.7

The Company covenants and agrees that it will:

(a)

take all such action as may be necessary and within its power to ensure that all Common Shares delivered upon the exercise of Rights shall, at the time of delivery of the certificates for such Common Shares (subject to payment of the Exercise Price), be duly and validly authorized, executed, issued and delivered as fully paid and non-assessable;

(b)

take all such action as may reasonably be considered to be necessary and within its power to comply with any applicable requirements of the BCA, the Securities Act (British Columbia), the U.S. Exchange Act, the 1933 Act and comparable legislation of each of the other provinces and

territories of Canada and states of the United States of America, or the rules and regulations thereunder or any other applicable law, rule or regulation, in connection with the issuance and delivery of the Rights, the Rights Certificates and the issuance of any Common Shares upon exercise of the Rights;

(c)

use reasonable efforts to cause all Common Shares issued upon exercise of the Rights to be listed on the stock exchanges on which the Common Shares are listed at that time;

(d)

cause to be reserved and kept available out of its authorized and unissued Common Shares, the number of Common Shares that, as provided in this Agreement, will from time to time be sufficient to permit the exercise in full of all outstanding Rights;

(e)

pay when due and payable, if applicable, any and all federal, provincial and municipal taxes (not in the nature of income, capital gains or withholding taxes) and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or certificates for Common Shares issued upon the exercise of Rights, provided that the Company shall not be required to pay any transfer tax or charge which may be payable in respect of any transfer of Rights or the issuance or delivery of certificates for Common Shares issued upon the exercise of Rights, in a name other than that of the holder of the Rights being transferred or exercised; and

(f)

after the Separation Time, except as permitted by Section 5.1 or Section 5.4, not take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

2.3

Adjustments to Exercise Price; Number of Rights

2.3.1

The Exercise Price, the number and kind of securities subject to purchase upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 2.3 and in Article 3.

2.3.2

In the event that the Company shall at any time after the Record Time and prior to the Expiration Time:

(a)

declare or pay a dividend on the Common Shares payable in Voting Shares or Convertible Securities in respect thereof other than pursuant to any dividend reinvestment plan;

(b)

subdivide or change the then outstanding Common Shares into a greater number of Common Shares;

(c)

consolidate or change the then outstanding Common Shares into a smaller number of Common Shares; or

(d)

issue any Voting Shares (or Convertible Securities in respect thereof) in respect of, in lieu of or in exchange for existing Common Shares, whether in a reclassification, amalgamation, statutory arrangement, consolidation or otherwise,

then the Exercise Price and the number of Rights outstanding (or, if the payment or effective date therefor shall occur after the Separation Time, the securities purchasable upon the exercise of Rights) shall be adjusted as follows:

(i)

if the Exercise Price and number of Rights outstanding are to be adjusted:

(A)

the Exercise Price in effect after such adjustment will be equal to the Exercise Price in effect immediately prior to such adjustment divided by the number of Common Shares (or other securities of the Company) (the “Expansion Factor”) that a holder of one Common Share immediately prior to such dividend, subdivision, change, combination or issuance would hold thereafter as a result thereof; and

(B)

each Right held prior to such adjustment will become that number of Rights equal to the Expansion Factor, and the adjusted number of Rights will be deemed to be allocated among the Common Shares with respect to which the original Rights were associated (if

they remain outstanding) and the securities of the Company issued in respect of such dividend, subdivision, change, consolidation or issuance, so that each such Common Share (or other security of the Company) will have exactly one Right associated with it; and (ii) if the securities purchasable upon exercise of Rights are to be adjusted, the securities purchasable upon exercise of each Right after such adjustment will be the securities that a holder of the securities purchasable upon exercise of one Right immediately prior to such dividend, subdivision, change, consolidation or issuance would hold thereafter as a result thereof. Adjustments made pursuant to this Section 2.3.2 shall be made successively, whenever an event referred to in this Section 2.3.2 occurs.

2.3.3

If, after the Record Time and prior to the Expiration Time, the Company shall issue any of its securities other than Common Shares in a transaction of a type described in Sections 2.3.2(a) or 2.3.2(d), such securities shall be treated herein as nearly equivalent to Common Shares as may be practicable and appropriate under the circumstances and the Company and the Rights Agent agree to amend this Agreement in order to effect such treatment.

2.3.4

If an event occurs which would require an adjustment under both this Section 2.3 and Section 3. 1, the adjustment provided for in this Section 2.3 shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 3.1.

2.3.5

In the event the Company shall at any time after the Record Time and prior to the Separation Time issue any Common Shares otherwise than in a transaction referred to in Section 2.3.2, each such Common Share so issued shall automatically have one new Right associated with it, which Right shall be evidenced by the certificate representing such Common Share.

2.3.6

(a)

In the event the Company shall, at any time after the Record Time and prior to the Expiration Time, fix a record date for the making of a distribution to all holders of Common Shares of rights or warrants entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Shares (or Convertible Securities in respect of Common Shares) at a price per Common Share (or, in the case of such a Convertible Security, having a conversion, exchange or exercise price per share (including the price required to be paid to purchase such Convertible Security)) less than 90% of the Market Price per Common Share on such record date, the Exercise Price in effect after such record date will equal the Exercise Price in effect immediately prior to such record date multiplied by a fraction:

(i)

of which the numerator shall be the number of Common Shares outstanding on such record date plus the number of Common Shares which the aggregate offering price of the total number of Common Shares so to be offered (and/or the aggregate initial conversion, exchange or exercise price of the Convertible Securities so to be offered (including the price required to be paid to purchase such Convertible Securities)) would purchase at such Market Price per Common Share; and

(ii)

of which the denominator shall be the number of Common Shares outstanding on such record date plus the number of additional Common Shares to be offered for subscription or purchase (or into which the Convertible Securities so to be offered are initially convertible, exchangeable or exercisable).

(b)

In case such subscription price is satisfied, in whole or in part, by consideration other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such rights or warrants are not exercised prior to the expiration thereof, the Exercise Price shall be readjusted in the manner contemplated above based on the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights or warrants.

(c)

For purposes of this Agreement, the granting of the right to purchase Common Shares (whether from treasury or otherwise) pursuant to any dividend or interest reinvestment plan or any share purchase plan providing for the reinvestment of dividends or interest payable on securities of the Company or the investment of periodic optional payments or employee benefit or similar plans (so long as such right to purchase is in no case evidenced by the delivery of rights or warrants by the Company) shall not be deemed to constitute an issue of rights or warrants by the Company; provided, however, that in the case of any dividend or interest reinvestment or share purchase plan, the right to purchase Common Shares is at a price per share of not less than 90% of the current market price per share (determined as provided in such plans) of the Common Shares.

2.3.7

In the event the Company shall at any time after the Record Time and prior to the Expiration Time fix a record date for the making of a distribution to all holders of Common Shares of:

(a)

evidences of indebtedness or assets (other than a Regular Periodic Cash Dividend or a dividend paid in Common Shares, but including any dividend payable in securities other than Common Shares); or

(b)

rights or warrants entitling them to subscribe for or purchase Voting Shares (or Convertible Securities in respect of Voting Shares),

at a price per Voting Share (or, in the case of a Convertible Security in respect of Voting Shares, having a conversion, exchange or exercise price per share (including the price required to be paid to purchase such Convertible Security)) less than 90% of the Market Price per Common Share on such record date (excluding rights or warrants referred to in Section 2.3.6), the Exercise Price in effect after such record date shall be equal to the Exercise Price in effect immediately prior to such record date less the fair market value (as determined in good faith by the Board of Directors) of the portion of the assets, evidences of indebtedness, rights, warrants or other securities so to be distributed applicable to each of the securities purchasable upon exercise of one Right. Such adjustment shall be made successively whenever such a record date is fixed.

2.3.8

Each adjustment made pursuant to this Section 2.3 shall be made as of:

(a)

the payment or effective date for the applicable dividend, subdivision, change, combination or issuance, in the case of an adjustment made pursuant to Section 2.3.2; and

(b)

the record date for the applicable dividend or distribution, in the case of an adjustment made pursuant to Section 2.3.6 or 2.3.7, subject to readjustment to reverse the same if such distribution shall not be made.

2.3.9

In the event the Company shall at any time after the Record Time and prior to the Expiration Time issue any shares (other than Common Shares), or rights or warrants to subscribe for or purchase any such shares, or Convertible Securities in respect of any such shares, in a transaction referred to in any of Sections 2.3.2(a) to 2.3.2(d), inclusive, if the Board of Directors acting in good faith determines that the adjustments contemplated by Sections 2.3.2, 2.3.6 and 2.3.7 in connection with such transaction will not appropriately protect the interests of the holders of Rights, then the Board of Directors may from time to time, but subject to obtaining the prior approval of the holders of the Rights obtained as set forth in Section 5.4.2, determine what other adjustments to the Exercise Price, number of Rights or securities purchasable upon exercise of Rights would be appropriate and, notwithstanding Sections 2.3.2, 2.3.6 and 2.3.7, suc h adjustments, rather than the adjustments contemplated by Sections 2.3.2, 2.3.6 and 2.3.7, shall be made upon the Board of Directors providing written certification thereof to the Rights Agent as set forth in Section 2.3.17. The Company and the Rights Agent shall amend this Agreement as appropriate to provide for such adjustments.

2.3.10

Notwithstanding anything herein to the contrary, no adjustment of the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such Exercise Price; provided, however, that any adjustments which by reason of this Section 2.3. 10 are not required to

be made shall be carried forward and taken into account in any subsequent adjustment. All adjustments to the Exercise Price made pursuant to this Section 2.3 shall be calculated to the nearest cent.

2.3.11

All Rights originally issued by the Company subsequent to any adjustment made to an Exercise Price hereunder shall evidence the right to purchase, at the adjusted Exercise Price, the number of Common Shares purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

2.3.12

Unless the Company shall have exercised its election, as provided in Section 2.3.13, upon each adjustment of an Exercise Price as a result of the calculations made in Sections 2.3.6 and 2.3.7, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of Common Shares obtained by:

(a)

multiplying:

(i)

the number of Common Shares covered by a Right immediately prior to such adjustment; by

(ii)

the Exercise Price in effect immediately prior to such adjustment; and

(b)

dividing the product so obtained by the Exercise Price in effect immediately after such adjustment.

2.3.13

The Company may elect on or after the date of any adjustment of an Exercise Price to adjust the number of Rights, in lieu of any adjustment in the number of Common Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of Common Shares for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become the number of Rights obtained by dividing the relevant Exercise Price in effect immediately prior to adjustment of the relevant Exercise Price by the relevant Exercise Price in effect immediately after adjustment of the relevant Exercise Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the relevant Exercise Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 calendar days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 2.3.13, the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date, Rights Certificates evidencing, subject to Section 5.5, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and may bear, at the option of the Company, the relevant adjusted Exercise Price and shall be registered in the names of holders of record of Rights Certificates on the record date specified in the public announcement.

2.3.14

In any case in which this Section 2.3 shall require that an adjustment in an Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of the number of Common Shares and other securities of the Company, if any, issuable upon such exercise over and above the number of Common Shares and other securities of the Company, if any, issuable upon such exercise on the basis of the relevant Exercise Price in

effect prior to such adjustment; provided, however, that the Company shall deliver to such holder an appropriate instrument evidencing such holder’s right to receive such additional Common Shares (fractional or otherwise) or other securities upon the occurrence of the event requiring such adjustment.

2.3.15

Notwithstanding anything in this Section 2.3 to the contrary, the Company shall be entitled to make such adjustments in the Exercise Price, in addition to those adjustments expressly required by this Section 2.3, as and to the extent that in its good faith judgment the Board of Directors shall determine to be advisable in order that any:

(a)

subdivision or consolidation of the Common Shares;

(b)

issuance wholly for cash of any Common Shares at less than the applicable Market Price;

(c)

issuance wholly for cash of any Common Shares or securities that by their terms are exchangeable for or convertible into or give a right to acquire Common Shares;

(d)

stock dividends; or

(e)

issuance of rights, options or warrants referred to in this Section 2.3, hereafter made by the Company to holders of its Common Shares,

shall not be taxable to such shareholders.

2.3.16

Irrespective of any adjustment or change in the securities purchasable upon exercise of the Rights, the Rights Certificates theretofor and thereafter issued may continue to represent the securities so purchasable which were represented in the initial Rights Certificates issued hereunder.

2.3.17

Whenever an adjustment to the Exercise Price is made pursuant to this Section 2.3, the Company shall:

(a)

promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment; and

(b)

promptly file with the Rights Agent and with each transfer agent for the Common Shares a copy of such certificate and mail a brief summary thereof to each holder of Rights who requests a copy.

Failure to file such certificate or to cause such notice to be given as aforesaid, or any defect therein, shall not affect the validity of any such adjustment or change.

2.4

Date on Which Exercise is Effective

Each Person in whose name any certificate for Common Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Common Shares represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered (together with a duly completed Election to Exercise) and payment of the Exercise Price for such Rights (and any applicable transfer taxes and other governmental charges payable by the exercising Person hereunder) was made; provided, however, that if the date of such surrender and payment is a date upon which the Common Share transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next Business Day on which the Common Share transfer books of the Company are open.

2.5

Execution, Authentication, Delivery and Dating of Rights Certificates

2.5.1

The Rights Certificates shall be executed on behalf of the Company by its Chief Executive Officer, its Chief Financial Officer or its Secretary. The signature of any of these officers on the Rights Certificates may be manual or facsimile. Rights Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company,

notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature and delivery of such Rights Certificates.

2.5.2

Promptly following the Separation Time, the Company will notify the Rights Agent of such Separation Time and will deliver Rights Certificates executed by the Company to the Rights Agent for countersignature, and the Rights Agent shall countersign (manually or by facsimile signature in a manner satisfactory to the Company) and deliver such Rights Certificates to the holders of the Rights pursuant to Section 2.2. No Rights Certificate shall be valid for any purpose until countersigned by the Rights Agent as aforesaid.

2.5.3

Each Rights Certificate shall be dated the date of countersignature thereof.

2.6

Registration, Transfer and Exchange

2.6.1

After the Separation Time, the Company will cause to be kept a register (the “Rights Register”) in which, subject to such reasonable regulations as it may prescribe, the Company will provide for the registration and transfer of Rights. The Rights Agent is hereby appointed “Rights Registrar” for the purpose of maintaining the Rights Register for the Company and registering Rights and transfers of Rights as herein provided and the Rights Agent hereby accepts such appointment. In the event that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent will have the right to examine the Rights Register at all reasonable times.

2.6.2

After the Separation Time and prior to the Expiration Time, upon surrender for registration of transfer or exchange of any Rights Certificate, and subject to the provisions of Sections 2.6.4 and 3.1.2, the Company will execute, and the Rights Agent will countersign, deliver and register, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Rights Certificates evidencing the same aggregate number of Rights as did the Rights Certificates so surrendered.

2.6.3

All Rights issued upon any registration of transfer or exchange of Rights Certificates shall be valid obligations of the Company, and such Rights shall be entitled to the same benefits under this Agreement as the Rights surrendered upon such registration of transfer or exchange.

2.6.4

Every Rights Certificate surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company or the Rights Agent, as the case may be, duly executed by the holder thereof or such holder’s attorney duly authorized, in writing. As a condition to the issuance of any new Rights Certificate under this Section 2.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Rights Agent) in connection therewith.

2.7

Mutilated, Lost, Stolen and Destroyed Rights Certificates

2.7.1

If any mutilated Rights Certificate is surrendered to the Rights Agent prior to the Expiration Time, the Company shall execute and the Rights Agent shall countersign and deliver in exchange therefor a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so surrendered.

2.7.2

If there shall be delivered to the Company and the Rights Agent prior to the Expiration Time:

(a)

evidence to their reasonable satisfaction of the destruction, loss or theft of any Rights Certificate; and

(b)

such security or indemnity as may be reasonably required by them to save each of them and any of their agents harmless, then, in the absence of notice to the Company or the Rights Agent that such Rights Certificate has been acquired by a bona fide purchaser, the Company shall execute and, upon the Company’s request the Rights Agent shall countersign and deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so destroyed, lost or stolen.

2.7.3

As a condition to the issuance of any new Rights Certificate under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Rights Agent) connected therewith.

2.7.4

Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence a contractual obligation of the Company, whether or not the destroyed, lost or stolen Rights Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Rights duly issued hereunder.

2.8

Persons Deemed Owners

The Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever. As used in this Agreement, unless the context otherwise requires, the term “holder” of any Rights shall mean the registered holder of such Rights (or, prior to the Separation Time, the associated Common Shares).

2.9

Delivery and Cancellation of Certificates

All Rights Certificates surrendered upon exercise or for redemption, for registration of transfer or exchange shall, if surrendered to any Person other than the Rights Agent, be delivered to the Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent. The Company may at any time deliver to the Rights Agent for cancellation any Rights Certificates previously countersigned and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Rights Certificates so delivered shall be promptly cancelled by the Rights Agent. No Rights Certificate shall be countersigned in lieu of or in exchange for any Rights Certificates cancelled as provided in this Section 2.9 except as expressly permitted by this Agreement. The Rights Agent shall, subject to applicable law, destroy all cancelled Rights Certificates and deliver a certificate of destruction to the Company.

2.10

Agreement of Rights Holders

Every holder of Rights, by accepting such Rights, consents and agrees with the Company and the Rights Agent and with every other holder of Rights:

(a)

to be bound by and subject to the provisions of this Agreement, as amended from time to time in accordance with the terms hereof, in respect of all Rights held;

(b)

that, prior to the Separation Time, each Right will be transferable only together with, and will be transferred by a transfer of, the associated Common Share;

(c)

that, after the Separation Time, the Rights will be transferable only on the Rights Register as provided herein;

(d)

that, prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) for registration of transfer, the Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the Person in whose name the Rights Certificate (or, prior to the Separation Time, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on such Rights Certificate or the associated Common Share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary;

(e)

that such holder of Rights has waived its right to receive any fractional Rights or any fractional Common Shares or other securities upon exercise of a Right (except as provided herein); and

(f)

that, without the approval of any holder of Rights or Voting Shares and upon the sole authority of the Board of Directors acting in good faith, this Agreement may be supplemented or amended from time to time as provided herein.

ARTICLE 3

DJUSTMENTS TO THE RIGHTS

3.1

Flip-in Event

3.1.1

Subject to Section 3.1.2 and Section 5.1, in the event that prior to the Expiration Time a Flip-in Event occurs, each Right shall thereafter constitute the right to purchase from the Company, upon exercise thereof in accordance with the terms hereof, that number of Common Shares as have an aggregate Market Price on the date of the consummation or occurrence of such Flip-in Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 if, after such date of consummation or occurrence, an event of a type analogous to any of the events described in Section 2.3 shall have occurred with respect to such Common Shares).

3.1.2

Notwithstanding anything in this Agreement to the contrary, upon the occurrence of any Flip-in Event, any Rights that are or were Beneficially Owned on or after the earlier of the Separation Time and the Stock Acquisition Date, or which may thereafter be Beneficially Owned, by:

(a)

an Acquiring Person, any Affiliate or Associate of an Acquiring Person, any other Person acting jointly or in concert with an Acquiring Person or any Associate or Affiliate of such other Person; or

(b)

a transferee, direct or indirect, of an Acquiring Person, any Affiliate or Associate of an Acquiring Person, any other Person acting jointly or in concert with an Acquiring Person or any Associate or Affiliate of such other Person, in a transfer of Rights occurring subsequent to the Acquiring Person becoming such,

shall become null and void without any further action and any holder of such Rights (including any transferee of, or other successor entitled to, such Rights, whether directly or indirectly) shall thereafter have no right to exercise such Rights under any provisions of this Agreement and, further, shall thereafter not have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The holder of any Rights represented by a Rights Certificate which is submitted to the Rights Agent upon exercise or for registration of transfer or exchange which does not contain the necessary certifications set forth in the Rights Certificate establishing that such Rights are not void under this Section 3.1.2 shall be deemed to be an Acquiring Person for the purposes of this Section 3.1.2 and such Rights shall become null and void.

3.1.3

Any Rights Certificate that represents Rights Beneficially Owned by a Person described in either of Section 3.1.2(a) or 3.1.2(b) or transferred to any Nominee of any such Person, and any Rights Certificate issued upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain or will be deemed to contain the following legend:

“The Rights represented by this Rights Certificate were issued to a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such terms are defined in the Rights Agreement) or acting jointly or in concert with any of them. This Rights Certificate and the Rights represented hereby shall be void in the circumstances specified in Section 3.1.2 of the Rights Agreement.”

The Rights Agent shall not be under any responsibility to ascertain the existence of facts that would require the imposition of such legend but shall be required to impose such legend only if instructed to do so by the Company or if a holder fails to certify upon transfer or exchange in the space provided to do so.

3.1.4

After the Separation Time, the Company shall do all such acts and things necessary and within its power to ensure compliance with the provisions of this Section 3.1 including, without limitation, all such acts and things as may be required to satisfy the requirements of the BCA, the Securities Act (British Columbia) and the securities laws or comparable legislation in each of the provinces of Canada and in any other jurisdiction where the Company is subject to such laws and the rules of the stock exchanges where the Common Shares are listed at such time in respect of the issue of Common Shares upon the exercise of Rights in accordance with this Agreement.

3.2

Fiduciary Duties of the Board of Directors

For clarification it is understood that nothing contained in this Article 3 shall be considered to affect the obligations of the Board of Directors to exercise its fiduciary duties. Without limiting the generality of the foregoing, nothing contained herein shall be construed to suggest or imply that the Board of Directors shall not be entitled to recommend that holders of the Voting Shares reject or accept any Take-over Bid or take any other action including, without limitation, the commencement, prosecution, defence or settlement of any litigation and the submission of additional or alternative Take-over Bids or other proposals to the shareholders of the Company with respect to any Take-over Bid or otherwise that the Board of Directors believes is necessary or appropriate in the exercise of its fiduciary duties.

ARTICLE 4

THE RIGHTS AGENT

4.1

General

4.1.1

The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents (“Co-Rights Agents”) as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and Co-Rights Agents shall be as the Company may determine. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and other disbursements reasonably incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder, including the reasonable fees and disbursements of counsel and other experts consulted b y the Rights Agent pursuant to Section 4.3(a). The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability, which right to indemnification will survive the termination of this Agreement.

4.1.2

The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any certificate for Common Shares, Rights Certificate, certificate for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

4.1.3

The Company shall inform the Rights Agent in a reasonably timely manner of events which may materially affect the administration of this Agreement by the Rights Agent and, at any time upon request, shall provide to the Rights Agent an incumbency certificate certifying the then current officers of the Company.

4.2

Merger, Amalgamation, Consolidation or Change of Name of Rights Agent

4.2.1

Any corporation into which the Rights Agent or any successor Rights Agent may be merged or amalgamated or with which it may be consolidated, or any corporation resulting from any merger, amalgamation or consolidation to which the Rights Agent or any successor Rights Agent is a party, or any corporation succeeding to the shareholder services business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any document or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 4.4. In case at the time such successor Rights Agent succeeds to the agency created by this Agreement any of the Rights Certificates have been countersigned but not delivered any such successor Rights Agent may adopt the countersignature of the pre decessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates will have the full force provided in the Rights Certificates and in this Agreement.

4.2.2

In case at any time the name of the Rights Agent is changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

4.3

Duties of Rights Agent

The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

(a)

The Rights Agent may consult with legal counsel (who may be legal counsel for the Company) and the opinion of such counsel will be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion; the Rights Agent may also, with the approval of the Company (such approval not to be unreasonably withheld), consult with such other experts as the Rights Agent shall consider necessary or appropriate to properly carry out the duties and obligations imposed under this Agreement and the Rights Agent shall be entitled to rely in good faith on the advice of any such expert.

(b)

Whenever in the performance of its duties under this Agreement the Rights Agent deems it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a person believed by the Rights Agent to be the Chief Executive Officer, Chief Financial Officer, Secretary or Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate will be full authorization to the Rights Agent

for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

(c)

The Rights Agent will be liable hereunder only for its own negligence, bad faith or wilful misconduct.

(d)

The Rights Agent will not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the certificates for Common Shares, or the Rights Certificates (except its countersignature thereof) or be required to verify the same, and all such statements and recitals are and will be deemed to have been made by the Company only.

(e)

The Rights Agent will not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Common Share certificate, or Rights Certificate (except its countersignature thereof); nor will it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor will it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 3.1.2 or any adjustment required under the provisions of Section 2.3 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights after receipt of the certificate contemplated by Section 2.3 de scribing any such adjustment or any written notice from the Company or any holder that a Person has become an Acquiring Person); nor will it by any act hereunder be deemed to make any representation or warranty as to the authorization of any Common Shares to be issued pursuant to this Agreement or any Rights or as to any Common Shares, when issued, being duly and validly authorized, issued and delivered as fully paid and non-assessable.

(f)

The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this agreement

(g)

The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance

of its duties hereunder from any individual believed by the Rights Agent to be the Chief Executive Officer, Chief Financial Officer, Secretary or Assistant Secretary of the Company, and to apply to such individuals for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such individual. It is understood that instructions to the Rights Agent shall, except where circumstances make it impractical or the Rights Agent otherwise agrees, be given in writing and, where not in writing, such instructions shall be confirmed in writing as soon as reasonably practicable after the giving of such instructions.

(h)

The Rights Agent and any shareholder or director, officer or employee of the Rights Agent may buy, sell or deal in Common Shares, Rights or other securities of the Company or become pecuniary interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

(i)

The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent will not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default,

neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

4.4

Change of Rights Agent

The Rights Agent may resign and be discharged from its duties under this Agreement by giving 60 days prior written notice (or such lesser notice as is acceptable to the Company) to the Company, to each transfer agent of Common Shares and to the holders of the Rights, all in accordance with Section 5.9 and at the expense of the Company. The Company may remove the Rights Agent by giving 30 days prior written notice to the Rights Agent, to each transfer agent of the Common Shares and to the holders of the Rights in accordance with Section 5.9. If the Rights Agent should resign or be removed or otherwise become incapable of acting, the Company will appoint a successor to the Rights Agent. If the Company fails to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of any Rights ( which holder shall, with such notice, submit such holder’s Rights Certificate for inspection of the Company), then the holder of any Rights may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, must be a corporation incorporated under the laws of Canada or a province thereof and authorized to carry on the business of a company in the Province of British Columbia. After appointment, the successor Rights Agent will be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company will file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and mail a notice thereof in writing to the holders of the Rights in accordance with Section 5.9. Failure to give any notice provided for in this Section 4.4, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

ARTICLE 5

MISCELLANEOUS

5.1

Redemption, Waiver, Extension and Termination

5.1.1

Subject to the prior consent of the holders of Voting Shares or Rights obtained as set forth in Section 5.4.1 or 5.4.2, as applicable, the Board of Directors acting in good faith may, at any time prior to the later of the Stock Acquisition Date and the Separation Time, elect to redeem all but not less than all of the then outstanding Rights at a redemption price of $0.00001 per Right, appropriately adjusted in a manner analogous to the applicable adjustment provided for in Section 2.3 if an event of the type analogous to any of the events described in Section 2.3 shall have occurred (such redemption price being herein referred to as the “Redemption Price”).

5.1.2

The Board of Directors shall waive the application of Section 3.1 in respect of the occurrence of any Flip-in Event if the Board of Directors has determined in good faith, following the Stock Acquisition Date and prior to the Separation Time, that a Person became an Acquiring Person by inadvertence and without any intention to become, or knowledge that it would become, an Acquiring Person under this Agreement and, in the event that such a waiver is granted by the Board of Directors, such Stock Acquisition Date shall be deemed not to have occurred. Any such waiver pursuant to this Section 5.1.2 may only be given on the condition that such Person, within 14 days after the foregoing determination by the Board of Directors or such later date as the Board of Directors may determine (the “Disposition

Date”), has reduced its Beneficial Ownership of Voting Shares such that the Person is no longer an Acquiring Person. If the Person remains an Acquiring Person at the Close of Business on the Disposition Date, then the Disposition Date shall be deemed to be the date of occurrence of a further Stock Acquisition Date and Section 3.1 shall apply thereto.

5.1.3

In the event that a Person acquires Voting Shares pursuant to a Permitted Bid or an Exempt Acquisition referred to in Section 5.1.4, then the Board of Directors shall, immediately upon the consummation of such acquisition and without further formality, be deemed to have elected to redeem the

Rights at the Redemption Price.

5.1.4

The Board of Directors acting in good faith may, prior to the occurrence of the relevant Flip-in Event, upon prior written notice delivered to the Rights Agent, determine to waive the application of Section 3.1 to a Flip-in Event that may occur by reason of a Take-over Bid made by means of a Take-over Bid circular to all holders of record of Voting Shares; provided that, if the Board of Directors waives the application of Section 3.1 to a particular Take-over Bid pursuant to this Section 5.1.4, then the Board of Directors shall be deemed to have waived the application of Section 3.1 to any other Take-over Bid made by means of a Take-over Bid circular to all holders of record of Voting Shares prior to the expiry of any Take-over Bid in respect of which a waiver is, or is deemed to have been, granted under this Section

5.1.4.

5.1.5

The Board of Directors may, prior to the Close of Business on the eighth Business Day following a Stock Acquisition Date or such later Business Day as it may from time to time determine, upon prior written notice delivered to the Rights Agent, waive the application of Section 3.1 to the related Flip-in Event; provided that the Acquiring Person has reduced its Beneficial Ownership of Voting Shares (or has entered into a contractual arrangement with the Company, acceptable to the Board of Directors, to do so within 10 days of the date on which such contractual arrangement is entered into or such later date as the Board of Directors may determine) such that, at the time the waiver becomes effective pursuant to this Section 5.1.5, such Person is no longer an Acquiring Person. In the event of such a waiver becoming effective prior to the Separation Time, for the purposes of this Agreement, such Flip-in Event shall be deemed not to have occ urred.

5.1.6

Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or otherwise terminated after the Separation Time has occurred and prior to the occurrence of a Flip-in Event, or if the Board of Directors grants a waiver under Section 5.1.5 after the Separation Time, then the Board of Directors may elect to redeem all the outstanding Rights at the Redemption Price. Upon the Rights being redeemed pursuant to this Section 5.1.6, all of the provisions of this Agreement shall continue to apply as if the Separation Time had not occurred and Rights Certificates representing the number of Rights held by each holder of record of Common Shares at the Separation Time had not been mailed to each such holder and for all purposes of this Agreement the Separation Time shall be deemed not to have occurred and the Company shall be deemed to have issued replacement Rights to the holders of its then outstanding Common Shares.

5.1.7

If the Board of Directors is deemed under Section 5.1.3 to have elected or elects under Section 5.1.1 or 5.1.6 to redeem the Rights, then the right to exercise the Rights will thereupon, without further action and without notice, terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price.

5.1.8

Within 10 days after the Board of Directors is deemed under Section 5.1.3 to have elected or elects under Section 5. 1.1 or 5.1.6 to redeem the Rights, the Company shall give notice of redemption to the holders of the then outstanding Rights by mailing such notice to each such holder at his last address as

it appears upon the Rights Register or, prior to the Separation Time, on the registry books of the transfer agent for the Voting Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made, and will state that no payment will be made to holders entitled to less than $10, in accordance with Section 5.1.9.

5.1.9

The Company shall not be obligated to make a payment of the Redemption Price to any holder of Rights unless such holder is entitled to receive at least $10 in respect of all of the Rights held by such holder.

5.2

Expiration

No Person will have any rights pursuant to this Agreement or in respect of any Right after the Expiration Time, except in respect of any right to receive cash, securities or other property which has accrued at the Expiration Time and except as specified in Sections 4.1.1 and 4.1.2.

5.3

Issuance of New Rights Certificates

Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the number or kind or class of shares purchasable upon exercise of Rights made in accordance with the provisions of this Agreement.

5.4

Supplements and Amendments

5.4.1 Subject to Sections 5.4.2 and 5.4.3, the Company may from time to time amend, vary or delete any of the provisions of this Agreement and the Rights provided that no amendment, variation or deletion made on or after the first shareholders meeting after the date hereof, shall be made without the prior consent of the shareholders of the Company or holders of the Rights, given as provided in Section 5.4.2, except that amendments, variations or deletions made for any of the following purposes shall not require such prior approval but shall be subject to subsequent ratification in accordance with Section 5.4.2:

(a)

in order to make such changes as are necessary in order to maintain the validity of this Agreement and the Rights as a result of any change in any applicable legislation, regulations or rules; or

(b)

in order to make such changes as are necessary in order to cure any clerical or typographical error.

5.4.2

Any amendment, variation or deletion made by the Board of Directors pursuant to Section 5.4.1 shall if made:

(a)

prior to the Separation Time, be submitted to the shareholders of the Company at the next meeting of shareholders and the shareholders may, by resolution passed by a majority of the votes cast by Independent Shareholders who vote in respect of such amendment, variation or deletion, confirm or reject such amendment or supplement; or

(b)

after the Separation Time, be submitted to the holders of Rights at a meeting to be held on a date not later than the date of the next meeting of shareholders of the Company and the holders of Rights may, by resolution passed by a majority of the votes cast by the holders of Rights which have not become void pursuant to Section 3.1.2 who vote in respect of such amendment, variation or deletion, confirm or reject such amendment or supplement.

Any amendment, variation or deletion pursuant to Section 5.4.1 shall be effective from the later of the date of the consent of the holders of Voting Shares or Rights, as applicable, adopting such amendment, variation or deletion and the date of approval thereof by the Exchange (except in the case of another amendment, variation or deletion referred to in Section 5.4.1(a) or (b), which shall be effective from the later of the date of the resolution of the Board of Directors adopting such amendment, variation or deletion and the date or approval thereof by the Exchange and shall continue in effect until it ceases to be effective (as in this Section 5.4.2 described) and, where such amendment, variation or deletion is confirmed, it shall continue in effect in the form so confirmed). If an amendment, variation or deletion pursuant to Section 5.4.1(a) or (b) is rejected by the shareholders or the holders of Rights or is not submitted to the shareholders or h olders of Rights as required, then such amendment, variation or deletion shall cease to be effective from and after the termination of the meeting at which it was rejected or to which it should have been but was not submitted or from and after the date of the meeting of holders of Rights that should have been but was not held, and no subsequent resolution of the Board of Directors to amend, vary or delete any provision of this Agreement to substantially the same effect shall be effective until confirmed by the shareholders or holders of Rights, as the case may be. 5.4.3 For greater certainty, neither the exercise by the Board of Directors of any power or discretion conferred on it hereunder nor the making by the Board of Directors of any determination or the granting of any waiver it is permitted to make or give hereunder shall constitute an amendment, variation or deletion of the provisions of this Agreement or the Rights, for purposes of this Section 5.4 or otherwise.

5.4.4

The approval, confirmation or consent of the holders of Rights with respect to any matter arising hereunder shall be deemed to have been given if the action requiring such approval, confirmation or consent is authorized by the affirmative votes of the holders of Rights present or represented at and entitled to be voted at a meeting of the holders of Rights and representing a majority of the votes cast in respect thereof. For the purposes hereof, each outstanding Right (other than Rights which are void pursuant to the provisions hereof or which, prior to the Separation Time, are held otherwise than by Independent Shareholders) shall be entitled to one vote, and the procedures for the calling, holding and conduct of the meeting shall be those, as nearly as may be, which are provided in the Company’s bylaws and the BCA with respect to meetings of shareholders of the Company.

5.5

Fractional Rights and Fractional Shares

5.5.1

The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. After the Separation Time there shall be paid, in lieu of such fractional Rights, to the registered holders of the Rights Certificates with regard to which fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the Market Price of a whole Right.

5.5.2

The Company shall not be required to issue fractional Common Shares upon exercise of the Rights or to distribute certificates that evidence fractional Common Shares. In lieu of issuing fractional Common Shares, the Company shall pay to the registered holder of Rights Certificates at the time such Rights are exercised as herein provided, an amount in cash equal to the same fraction of the Market Price of one Common Share at the date of such exercise.

5.6

Rights of Action

Subject to the terms of this Agreement, rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, are vested in the respective holders of the Rights; and any holder of any Rights, without the consent of the Rights Agent or of the holder of any other Rights may, on such holder’s own behalf and for such holder’s own benefit and the benefit of other holders of Rights, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise such holder’s Rights in the manner provided in this Agreement and in such holder’s Rights Certificate. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not

have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement.

5.7

Holder of Rights Not Deemed a Shareholder

No holder, as such, of any Rights shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Common Shares or any other securities which may at any time be issuable on the exercise of Rights, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 5.8) or to receive dividends or subscription rights or otherwise, until such Rights, shall have been exercised in accordance with the provisions hereof.

5.8

Notice of Proposed Actions

In case the Company proposes after the Separation Time and prior to the Expiration Time to effect the liquidation, dissolution or winding up of the Company or the sale of all or substantially all of the Company’s assets, then, in each such case, the Company shall give to each holder of a Right, in accordance with Section 5.9, a notice of such proposed action, which shall specify the date on which such liquidation, dissolution, or winding up is to take place, and such notice shall be so given at least 20 Business Days prior to the date of the taking of such proposed action by the Company.

5.9

Notices

Notices or demands authorized or required by this Agreement to be given or made to or by the Rights Agent, the holder of any Rights or the Company will be sufficiently given or made and shall be deemed to be received if delivered or sent by first-class mail, postage prepaid, or by facsimile machine or other means of printed telecommunication, charges prepaid and confirmed in writing by mail or delivery, addressed (until another address is filed in writing with the Rights Agent or the Company, as applicable), as follows:

(a)

if to the Company:

Keegan Resources Inc.

Suite 1204 – 700 West Pender Street

Vancouver, British Columbia V6C 1G8

Attention: Chief Financial Officer

Facsimile: (604) 683-8194

(b)

if to the Rights Agent:

Pacific Corporate Trust Company

4th Floor - 510 Burrard Street

Vancouver, British Columbia V6C 3B9

Attention: Manager, Client Services

Facsimile: (604) 661-9549

(c)

if to the holder of any Rights, to the address of such holder as it appears on the Rights Register or, prior to the Separation Time, on the registry books of the Company for the Common Shares.

Any notice which is mailed or sent or delivered in the manner herein provided for shall be deemed given and received whether or not the holder receives the notice.

5.10

Costs of Enforcement

The Company agrees that if the Company or any other Person (the securities of which are purchasable upon exercise of Rights) fails to fulfill any of its obligations pursuant to this Agreement, then the Company or such Person will reimburse the holder of any Rights for the costs and expenses (including legal fees) incurred by such holder in actions to enforce his rights pursuant to any Rights or this Agreement.

5.11

Regulatory Approvals

Any obligation of the Company or action or event contemplated by this Agreement, shall be subject to applicable law and to the receipt of any requisite approval or consent from any governmental or regulatory authority. Without limiting the generality of the foregoing, any issuance or delivery of debt or equity securities (other than non-convertible debt security) of the Company upon the exercise of Rights and any amendment to this Agreement shall be subject to the applicable prior consent of the stock exchanges on which the Company is from time to time listed.

5.12

Declaration as to Non-Canadian and Non-United States Holders

If, upon the advice of outside counsel, any action or event contemplated by this Agreement would require compliance with the securities laws or comparable legislation of a jurisdiction outside of Canada and the United States of America, the Board of Directors acting in good faith may take such actions as it may deem appropriate to ensure that such compliance is not required, including without limitation establishing procedures for the issuance to a Canadian resident Fiduciary of Rights or securities issuable on exercise of Rights, the holding thereof in trust for the Persons entitled thereto (but reserving to the Fiduciary or to the Fiduciary and the Company, as the Company may determine, absolute discretion with respect thereto) and the sale thereof and remittance of the proceeds of such sale, if any, to the Persons entitled thereto. In no event shall the Company or the Rights Agent be required to issue or deliver Rights or secu rities issuable on exercise of Rights to Persons who are citizens, residents or nationals of any jurisdiction other than Canada and any province or territory thereof and the United States of America and any state thereof in which such issue or delivery would be unlawful without registration of the relevant Persons or securities for such purposes.

5.13

Successors

All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and enure to the benefit of their respective successors and assigns hereunder.

5.14

Benefits of this Agreement

Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the holders of the Rights any legal or equitable right, remedy or claim under this Agreement; this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the holders of the Rights.

5.15

Shareholder Review

At or prior to the first annual meeting of shareholders of the Company following the third anniversary of the date of this Agreement, provided that a Flip-in Event has not occurred prior to such time, the Board of Directors shall submit a resolution ratifying the continued existence of this Agreement to the Independent Shareholders for their consideration and, if thought advisable, approval. If a majority of the votes cast by Independent Shareholders who vote in respect of such resolution are not voted in favour of the continued existence of this Agreement, then immediately upon the confirmation by the chairman of such shareholders’ meeting of the result of the vote on such resolution and without further formality, this Agreement and any outstanding Rights shall be of no further force and effect.

5.16

Determinations and Actions by the Board of Directors

All actions, calculations, interpretations and determinations (including all omissions with respect to the foregoing) which are done or made by the Board of Directors for the purposes hereof, in good faith:

(a)

may be relied upon by the Rights Agent; and

(b)

shall not subject the Board of Directors to any liability to the holders of the Rights or to any other parties.

5.17

Governing Law

This Agreement and the Rights issued hereunder shall be deemed to be a contract made under the laws of the Province of British Columbia and for all purposes will be governed by and construed in accordance with the laws of such province applicable to contracts to be made and performed entirely within such province.

5.18

Language

Les parties aux présentes ont exig é que la présente convention ainsi que tous les documents et avis qui s’y rattachent ou qui en coulent soient redigés en langue anglaise. The parties hereto have required that this Agreement and all documents and notices related thereto or resulting therefrom be drawn up in English.

5.19

Counterparts

This Agreement may be executed in any number of counterparts and each of such counterparts will for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

5.20

Severability

If any term or provision hereof or the application thereof to any circumstance is, in any jurisdiction and to any extent, invalid or unenforceable, such term or provision will be ineffective only to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining terms and provisions hereof or the application of such term or provision to circumstances other than those as to which it is held invalid or unenforceable.

5.21

Effective Date

This Agreement is effective as of and from September 1, 2006. If the Rights Plan is not confirmed by resolution passed by a majority of the votes cast by Independent Shareholders who vote in respect of such

Rights Plan at a meeting to be held not later than December 31, 2006, then this Agreement and any outstanding Rights shall be of no further force and effect.

5.22

Time of the Essence

Time shall be of the essence hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed effective as of the date first above written.

KEEGAN RESOURCES INC.

By:

Authorized Signatory

By:

Authorized Signatory

PACIFIC CORPORATE TRUST COMPANY

By:

Authorized Signatory

By:

Authorized Signatory

SCHEDULE A

to a Shareholder Rights Plan Agreement made as of September 1, 2006 between Keegan Resources Inc. and Pacific Corporate Trust Company

Certificate No.

Rights

THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS PLAN AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 3.1.2 OF SUCH AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, CERTAIN RELATED PARTIES OF AN ACQUIRING PERSON OR A TRANSFEREE OF AN ACQUIRING PERSON OR ANY SUCH RELATED PARTIES WILL BECOME VOID WITHOUT FURTHER ACTION.

RIGHTS CERTIFICATE

This certifies that

 is the registered holder of the number of Rights set forth above, each of which entitles the registered holder thereof, subject to the terms, provisions and conditions of the Shareholder Rights Plan Agreement made as of September 1, 2006 (the “Rights Agreement”) between Keegan Resources Inc., a British Columbia corporation, (the “Company”) and Pacific Corporate Trust Company, a trust company incorporated under the laws of Canada, as Rights Agent (the “Rights Agent”), which term shall include any successor Rights Agent under the Rights Agreement), to purchase from the Company, at any time after the Separation Time and prior to the Expiration Time (as such terms are defined in the Rights Agreement), one fully paid common share of the Company (a “Common Share”) at the Exercise Price referred to below, upon presentation and surrender of this Rights Certificate, together with the Form of El ection to Exercise appropriately completed and duly executed, to the Rights Agent at its principal office in Vancouver, British Columbia or Toronto, Ontario. Until adjustment thereof in certain events as provided in the Rights Agreement, the Exercise Price shall be $1.15 per Right (payable in cash, certified cheque or money order payable to the order of the Company).

The number of Common Shares which may be purchased for the Exercise Price is subject to adjustment as set forth in the Rights Agreement.

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the registered office of the Company and are available upon written request.

This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office of the Rights Agent in Vancouver, British Columbia or Toronto, Ontario may be exchanged for another Rights Certificate or Rights Certificates of like tenor evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

In certain circumstances described in the Rights Agreement, each Right evidenced hereby may be adjusted so as to entitle the registered holder thereof to purchase or receive securities or shares in the capital of the Company other than Common Shares or more or less than one Common Share (or a combination thereof), all as provided in the Rights Agreement. The number of Common Shares which may be purchased for the Exercise Price is subject to adjustment as set forth in the Rights Agreement.

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at a redemption price of $0.00001 per Right subject to adjustment in certain events.

No fractional Common Shares will be issued upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Common Shares or any other securities which may at any time be issuable upon the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or

to give or withhold consent to any corporate action, or to receive notice of any meeting or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights or otherwise, until the Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.

This Rights Certificate shall not be valid for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper officers of the Company. Date:

KEEGAN RESOURCES INC.

By:

Authorized Signatory

By:

Authorized Signatory

PACIFIC CORPORATE TRUST COMPANY

By:

Authorized Signatory

By:

Authorized Signatory

FORM OF ELECTION TO EXERCISE
KEEGAN RESOURCES INC.

The undersigned hereby irrevocably elects to exercise

 whole Rights represented by this Rights Certificate to purchase the Common Shares issuable upon the exercise of such Rights and requests that certificates for such Common Shares be issued in the name of and delivered to:

Rights Certificate No.

Name

Address

City and Province

Social Insurance No. or other taxpayer identification numbers

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:

Name

Address

City and Province

Social Insurance No. or other

taxpayer identification numbers

Date:

Written Signature Guaranteed

Signature

(Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever)

Signature must be guaranteed by a Canadian chartered bank or trust company, a member of a recognized stock exchange in Canada or a member of the Securities Transfer Association Medallion (STAMP) Program.

(To be completed by the holder if true)

The undersigned hereby represents, for the benefit of the Company and all holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or by an Affiliate or Associate of an Acquiring Person, any other Person acting jointly or in concert with an Acquiring Person or any Affiliate or Associate of any such other Person (as such terms are defined in the Rights Agreement).

Signature

NOTICE

In the event that the certification set forth above in the Form of Election to Exercise is not completed, the Company shall deem the Beneficial Owner of the Rights represented by this Rights Certificate to be an Acquiring Person (as defined in the Rights Agreement) and, accordingly, such Rights shall be null and void.

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

(Please print name and address of transferee)

the Rights represented by this Rights Certificate, together with all right, title and interest therein.

Date:

Signature

	(Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever)
Written Signature Guaranteed

Signature must be guaranteed by a Canadian chartered bank or trust company, a member of a recognized stock exchange in Canada or a member of the Securities Transfer Association Medallion (STAMP) Program.

(To be completed by the assignor if true)

The undersigned hereby represents, for the benefit of the Company and all holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not and, to the knowledge of the undersigned have never been, Beneficially Owned by an Acquiring Person or by an Affiliate or Associate of an Acquiring Person, any other Person acting jointly or in concert with an Acquiring Person or any Affiliate or Associate of any such other Person (as such terms are defined in the Rights Agreement).

Signature

(Please print name below signature)

NOTICE

In the event that the certification set forth above in the Form of Assignment is not completed, the Company shall deem the Beneficial Owner of the Rights represented by this Rights Certificate to be an Acquiring Person (as defined in the Rights Agreement) and, accordingly, such Rights shall be null and void.

EX-22

EX-23

A PARTNERSHIP OF INCORPORATED PROFESSIONALS		AMISANO HANSON
	CHARTERED ACCOUNTANTS

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in the Form 20-F Registration Statement of Keegan Resources Inc. of our report on the consolidated balance sheets of Keegan Resources Inc. (An Exploration Stage Company) as at March 31, 2006 and 2005, and the consolidated statements of operations, cash flows and stockholders’ deficiency for the years ended March 31, 2006, 2005 and 2004.  Our report dated July 20, 2006 contains additional comments that state that conditions and events exist that cast substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Vancouver, Canada	“AMISANO HANSON”
October 4, 2006	CHARTERED  ACCOUNTANTS

750 WEST PENDER STREET, SUITE 604	TELEPHONE:  604-689-0188
VANCOUVER CANADA	FACSIMILE:  604-689-9773
V6C 2T7	E-MAIL:  amishan@telus.net