U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-12401

WITS BASIN PRECIOUS MINERALS INC.

(Exact Name of Registrant as specified in Its Charter)

Minnesota	84-1236619
(State or Other Jurisdiction ofIncorporation or Organization)	(I.R.S. Employer Identification No.)

80 South 8^th Street, Suite 900, Minneapolis, MN 55402-8773
 (Address of Principal Executive Offices)

612.349.5277

(Issuer’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

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

As of November 10, 2006, there were 91,387,739 shares of common stock, $.01 par value, outstanding.

Transitional Small Business Disclosure Format (check one): Yes o  No x

WITS BASIN PRECIOUS MINERALS INC.

FORM 10-QSB INDEX

SEPTEMBER 30, 2006

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets - As of September 30, 2006 and December 31, 2005	4
	Condensed Consolidated Statements of Operations - For the three months and nine months ended September 30, 2006 and September 30, 2005	5
	Condensed Consolidated Statements of Cash Flows - For the nine months ended September 30, 2006 and September 30, 2005	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Controls and Procedures	26
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	27
	Signatures	28

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-QSB contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of probable ore reserves, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-QSB, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-QSB with respect to future events, the outcome of which is subject to risks, which may have a significant impact on our business, operating results or financial condition. Readers are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. We undertake no obligation to update forward-looking statements. The risks identified in the section of Item 2 entitled “RISK FACTORS,” among others, may impact forward-looking statements contained in this Form 10-QSB.

3

WITS BASIN PRECIOUS MINERALS INC. and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

(unaudited)

	September 30, 2006			December 31, 2005
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	812,859		$	117,816
Interest receivable		9,453			—
Investment		20,178			11,260
Prepaid expenses		865,795			163,396
Total current assets		1,708,285			292,472
PROPERTY AND EQUIPMENT, net		83,755			89,559
PARTICIPATION MINING RIGHTS, net		39,828			120,803
DEBT ISSUANCE COSTS, net		—			4,662
	$	1,831,868		$	507,496
LIABILITIES and SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Notes payable, net of original issue discount	$	—		$	301,111
Accounts payable		37,430			136,223
Accrued expenses		112,737			65,972
Total current liabilities		150,167			503,306
COMMITMENTS and CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock, $.01 par value, 150,000,000 shares
authorized; 90,054,406 and 65,674,329 shares issued
and outstanding, respectively		900,544			656,743
Additional paid-in capital		42,444,312			34,487,774
Stock subscriptions receivable		(445,225	)		—
Warrants		7,097,568			6,418,685
Accumulated deficit		(22,932,460	)		(22,932,460	)
Deficit accumulated during exploration stage, subsequent
to April 30, 2003		(25,379,157	)		(18,618,908	)
Accumulated other comprehensive loss		(3,881	)		(7,644	)
Total shareholders’ equity		1,681,701			4,190
	$	1,831,868		$	507,496

The accompanying notes are an integral part of these consolidated financial statements.

4

WITS BASIN PRECIOUS MINERALS INC. and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Operations

(unaudited)

													May 1, 2003 (inception)
	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,						to Sept. 30,
	2006			2005			2006			2005			2006
Revenues	$	—		$	—		$	—		$	—		$	—
Operating Expenses:
General and administrative		1,589,776			724,163			3,653,488			3,193,196			10,570,420
Exploration expenses		597,152			379,068			1,254,927			1,007,055			8,886,145
Depreciation and amortization		3,569			—			17,545			105,650			456,595
Stock issued as penalty		—			—			—			—			2,152,128
Loss on impairment of Brazmin		—			—			—			(75,000	)		667,578
Loss on disposal of assets		—			—			—			—			1,633
Total operating expenses		2,190,497			1,103,231			4,925,960			4,230,901			22,734,499
Loss from Operations		(2,190,497	)		(1,103,231	)		(4,925,960	)		(4,230,901	)		(22,734,499	)
Other Income (Expense):
Other income (expense), net		19,892			(8,889	)		23,793			(10,613	)		26,018
Interest expense		(363,000	)		(193,211	)		(1,858,082	)		(434,661	)		(2,935,750	)
Total other expense		(343,108	)		(202,100	)		(1,834,289	)		(445,274	)		(2,909,732	)
Loss from Operations before Income Tax
Benefit and Discontinued Operations		(2,533,605	)		(1,305,331	)		(6,760,249	)		(4,676,175	)		(25,644,231	)
Benefit from Income Taxes		—			—			—			—			243,920
Loss from Continuing Operations	$	(2,533,605	)	$	(1,305,331	)	$	(6,760,249	)	$	(4,676,175	)	$	(25,400,311	)
Discontinued Operations
Gain from discontinued operations		—			—			—			—			21,154
Net Loss	$	(2,533,605	)	$	(1,305,331	)	$	(6,760,249	)	$	(4,676,175	)	$	(25,379,157	)
Basic and Diluted Net Loss
Per Common Share:
Continuing operations	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.08	)	$	(0.53	)
Discontinued operations		—			—			—			—			—
Net Loss	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.08	)	$	(0.53	)
Basic and diluted weighted average
outstanding shares		89,460,384			62,704,111			79,575,777			60,432,512			47,750,384

The accompanying notes are an integral part of these consolidated financial statements.

5

WITS BASIN PRECIOUS MINERALS INC. and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Cash Flows

(unaudited) 

	Nine Months Ended September 30,						May 1, 2003 (inception) to
	2006			2005			Sept. 30, 2006
OPERATING ACTIVITIES:
Net loss	$	(6,760,249	)	$	(4,676,175	)	$	(25,379,157	)
Adjustments to reconcile net loss to cash
flows from operating activities:
Depreciation and amortization		17,545			105,650			456,595
Loss on disposal of assets		—			—			1,633
Loss on impairment of Brazmin		—			—			742,578
Issuance of common stock for exploration rights & exp		169,646			94,000			5,104,936
Amortization of participation mining rights		80,975			581,481			2,060,172
Amortization of debt issuance costs		4,662			65,748			138,858
Amortization of original issue discount		798,889			324,999			1,701,281
Amortization of prepaid consulting fees related to issuance of warrants and common stock		1,933,937			846,064			3,753,699
Compensation expense related to stock options and warrants		531,679			265,497			1,281,677
Contributed services by an executive		70,000			75,000			274,500
Issuance of common stock as penalty related to October 2003 private placement		—			—			2,152,128
Interest expense related to issuance of common stock, warrants and options to purchase common stock		1,084,630			67,647			1,173,420
Unrealized loss on investment		—			10,613			—
Changes in operating assets and liabilities:
Accounts receivable, net		(9,453	)		50,817			33,564
Prepaid expenses		(330,864	)		132,511			(150,758	)
Accounts payable		(59,793	)		(84,378	)		23,288
Accrued expenses		46,765			(79,406	)		(107,850	)
Net cash used in operating activities		(2,421,631	)		(2,219,932	)		(6,739,436	)
INVESTING ACTIVITIES:
Purchases of property and equipment		(11,741	)		—			(106,353	)
Proceeds from sale of Brazmin		—			—			25,000
Investment in participation mining rights		—			—			(2,239,121	)
Net cash used in investing activities		(11,741	)		—			(2,320,474	)
FINANCING ACTIVITIES:
Payments on long-term debt		(1,100,000	)		(127,781	)		(1,434,645	)
Private placement advances held in escrow		—			(734,950	)		—
Cash proceeds from issuance of common stock		—			1,628,669			4,725,272
Cash proceeds from exercise of stock options		—			—			169,900
Cash proceeds from exercise of warrants		3,878,415			158,830			4,181,353
Cash proceeds from short-term debt		350,000			250,000			1,100,000
Cash proceeds from long-term debt		—			—			650,000
Debt issuance costs		—			—			(138,858	)
Net cash provided by financing activities		3,128,415			1,174,768			9,253,022
Change in Cash and Liabilities of Discontinued Ops		—			—			(77,293	)
Increase (Decrease) in Cash and Equivalents		695,043			(1,045,164	)		115,819
Cash and Equivalents, beginning of period		117,816			1,122,348			697,040
Cash and Equivalents, end of period	$	812,859		$	77,184		$	812,859

The accompanying notes are an integral part of these consolidated financial statements.

6

WITS BASIN PRECIOUS MINERALS INC.

(AN EXPLORATION STAGE COMPANY)

Notes to Condensed Consolidated Financial Statements

September 30, 2006

(unaudited)

NOTE 1 - NATURE OF BUSINESS

Wits Basin Precious Minerals Inc., and subsidiaries (“we,” “us,” “our,” “Wits Basin” or the “Company”) is a minerals exploration and development company based in Minneapolis, Minnesota. As of September 30, 2006, we hold interests in mineral exploration projects in South Africa (FSC), Colorado (Bates-Hunter), Mexico (Vianey) and Canada (Holdsworth and MacNugget).

Our primary holding is a 35 percent interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”), which holds the rights and interests in the “FSC Project,” an exploration project adjacent to the historic Witwatersrand goldfields in South Africa. We own the exploration rights of the “Holdsworth Project,” a property located near the village of Hawk Junction, Ontario, Canada. We acquired rights to the FSC and Holdsworth Projects in June 2003. On January 21, 2005, we acquired purchase rights under a purchase agreement, which provides us with exploration rights of the Bates-Hunter Mine (this was a prior producing gold mine when operations ceased during the 1930’s) located in Central City, Colorado and the possible future purchase of the assets of the Hunter Gold Mining Corporation. In June 2006, we acquired rights on two additional projects. One in which we may earn up to an undivided 50 percent interest in certain mining claims comprising the Vianey Mine Concession (“Vianey”) located in Guerrero State, Mexico (a prior producing silver mine) and the other relating to a VMS (volcanogenic massive sulphide) base metals project exploration project located in northern Ontario, the Hawk-MacNugget Claims (“MacNugget”).

As of the date of this report, we do not claim to have any mineral reserves on our properties. Furthermore, we do not directly own any permits, we possess only a few pieces of equipment and we employ insufficient numbers of personnel necessary to actually explore and/or mine for minerals, therefore, we will be substantially dependent on the third party contractors we engage to perform such operations.

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-KSB filed March 31, 2006. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year as a whole.

NOTE 3 - NET LOSS PER COMMON SHARE

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the periods presented. Diluted net loss per common share is determined using the weighted average number of common shares outstanding during the periods presented, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of options, warrants and conversion of convertible debt. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

7

As of September 30, 2006, we have (i) 7,222,000 shares of common stock issuable upon the exercise of stock options issued under our stock option plans with a weighted average exercise price of $0.74 per share, (ii) 33,456,666 shares of common stock issuable upon the exercise of warrants with a weighted average exercise price of $0.52 per share, (iii) 3,620,000 shares issuable upon the closing of the transaction contemplated by the purchase agreement pertaining to the assets of the Bates-Hunter Mine, and (iv) reserved an aggregate of 5,000,000 shares of common stock pursuant to amendments of secured promissory notes and subsequent extensions of those purchase rights, with a per share price of $0.20 per share. These 49,298,666 shares were excluded from the basic and diluted weighted average outstanding shares amount for computing the net loss per common share, because the net effect would be antidilutive for each of the periods presented.

NOTE 4 - COMPANY’S CONTINUED EXISTENCE

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company during its exploration stage has sustained losses totaling $25,379,157. Furthermore, since we do not expect to generate any revenues for the foreseeable future, our ability to continue as a going concern depends, in large part, on our ability to raise additional capital through equity or debt financing transactions. Without additional capital, we will be unable to fund exploration of our current property interests or acquire interests in other mineral exploration projects that may become available. We have estimated our cash needs over the next twelve months to be approximately $4,000,000. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease operations altogether.

NOTE 5 - INTEREST RECEIVABLE

Under the terms of two stock subscription receivables, we hold two secured promissory notes, dated April 28, 2006, which are secured by the stock issued. The notes accrue interest at a rate of five percent per annum and are due December 29, 2006.

NOTE 6 - INVESTMENT

We hold 225,000 shares of MacDonald Mines Exploration Ltd., (“MacDonald”), a Toronto Stock Exchange listed company (TSX-V:BMK), that we received under joint ventures with MacDonald.

NOTE 7- PREPAID EXPENSES

Prepaid expenses consist of two components: prepaid consulting fees and other prepaid expenses. The prepaid consulting fees include cash remuneration and the calculated amounts from the issuance of common stock, warrants or options to consultants for various services that we do not have internal infrastructure to perform. The amortization periods coincide with terms of the agreements. The other prepaid expenses contain amounts we have prepaid for general and administrative purposes and are being expensed as utilized.

During the three months ended September 30, 2006, we entered into a consulting agreement with an unaffiliated third party consultant and issued a two-year warrant to purchase up to 150,000 shares of our common stock, with an exercise price of $0.50 per share (the fair value of the warrant, $30,548, was calculated using the Black-Scholes pricing model), which is being amortized over a six month period to coincide with the consulting agreement. The remaining prepaid consulting fees are being amortized over the expected life of the agreements, with some services extending into 2007.

Included in the other prepaid expenses are two bonds (held in the form of certificate of deposit, CD, $10,000 each) required by the State of Colorado for exploration activities. The CD’s will not be expensed unless an event requires us to release them to the State and accrues nominal interest.

8

Components of prepaid expenses are as follows:

	September 30,		December 31,
	2006		2005
Prepaid consulting fees	$	813,813	$	142,276
Other prepaid expenses		51,982		21,120
	$	865,795	$	163,396

NOTE 8 - PARTICIPATION MINING RIGHTS

The Participation Mining Rights are the capitalized investments we made in the mineral exploration projects of the FSC Project in South Africa and the Holdsworth Project in Canada. These investments are in the form of: (a) shares of our common stock and warrants issued to purchase the rights to explore or buy assets, (b) cash expenditures required by the agreements we entered into to obtain those rights, and (c) historical costs we recorded as part of certain acquisitions. We have amortized all of the projects costs except for the remaining cash balance held by Kwagga for the FSC Project. We do not have the right to a refund of that remaining balance, except in very specific events and therefore do not consider those funds to be a prepaid expense, but an investment in exploration.

We have adopted the policy to expense all further exploration project expenses as incurred (less any fixed assets or other normally capitalized costs) until we can establish a timeline for revenue recognition from either the mining of a mineral or the sale of a developed property.

FSC and Holdsworth Projects

In June 2003, we acquired two exploration projects in a transaction with Hawk Precious Minerals USA, Inc., (“Hawk USA”), a wholly owned subsidiary of Toronto-based Hawk Precious Minerals Inc., (“Hawk”). Hawk is an affiliate of ours. One of the projects is the FSC Project, in which we have acquired a 35 percent equity interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”) in exchange for a $2,100,000 investment. Kwagga is a subsidiary of AfriOre International (Barbados) Ltd., (“AfriOre”). Kwagga holds the exploration rights for the FSC Project located in the Republic of South Africa adjacent to the major goldfields discovered at the historic Witwatersrand Basin. AfriOre is a precious minerals exploration company with offices in Johannesburg, South Africa and the operator of the FSC Project.

To date, we have invested $2,100,000 in Kwagga, which is being used to fund a three drillhole exploration program on the FSC Project that commenced in October 2003. Once the current exploration funds have been expended completely, estimated to be the end of 2006, AfriOre and Kwagga will deliver to us a report describing the results of the drilling activities. Within 120 days of our receipt of that report, we have the option to increase our ownership position in Kwagga to 50 percent in exchange for a further investment of $1,400,000. We have had initial conversations with AfriOre regarding possible financing options for the next investment. If we choose not to make this additional investment, then we would continue to own the shares representing our 35 percent interest, but we would no longer have any rights to increase our participation and would be subject to rapid dilution resulting from any additional investment in Kwagga. Furthermore, should Kwagga fail to complete the entire drillhole program, we could realize a complete loss of any remaining funds advanced to Kwagga.

AfriOre consults with us regarding the work to be carried out on the FSC Project. AfriOre is responsible for ensuring that the property and the project are at all times in compliance with applicable laws. AfriOre is also required to provide us with quarterly written reports describing the work completed and the funds expended therewith. As consideration for its role as the project operator, AfriOre is entitled to a fee equal to 10 percent of all qualified expenditures made in connection with the FSC Project.

9

In accordance with South African legislation, Kwagga will offer to a black economic empowerment group an option to purchase up to a 28 percent equity stake in Kwagga at a price to be mutually agreed upon by us, Kwagga and AfriOre. If such empowerment groups exercises such right to be granted, our interest in Kwagga would be proportionately diluted. For example, if we own 50 percent of Kwagga’s outstanding capital stock prior to the time any black economic empowerment group purchases a 28 percent stake, we would own 36 percent of Kwagga’s outstanding capital after the sale.

After all of the funds contributed by us and any black empowerment group have been expended on the FSC Project, we, AfriOre and any such empowerment group will contribute on a pro rata basis all such further amounts necessary to continue funding the exploration work on the project on a pro rata basis. In the event any of the parties do not fully contribute in proportion to their respective equity interest in Kwagga, such party’s interest will be proportionately diluted.

Certain components of our Participation Mining Rights are based on the distributions made by us to Kwagga and further advanced to AfriOre to fund the drillhole program of the FSC Project. Of the $2,100,000 already invested in Kwagga, $39,828 remains in their cash reserves at September 30, 2006. The majority of all exploration expenses processed by AfriOre, is denominated in the South African Rand, whereas all of our funding has been in the US Dollar. Since June 30, 2003, the Rand has appreciated against the US Dollar by as much as approximately 25 percent. This reduction in the US Dollar plus the cost overruns associated with the additional depth drilled on each drillhole (BH47 and BH48) and sidewall repair on BH48 are the major factors that have contributed to decreasing the initial 5 to 7 drillhole program on the FSC to be revised to only a two drillhole program. Additionally, the availability of deep drilling operators has declined over the last two years, which in turn has allowed them to demand higher rates and fees for their services further impacting the estimated drill holes thought to be accomplished. The initial drillhole, BH47 was completed in June 2004 to a depth of 2,984 meters (approximately 9,800 feet) and the second drillhole, BH48 was completed in August 2005 to a depth of 2,559 meters (approximately 8,400 feet).

Subsequent to September 30, 2006, AfriOre received New Order Prospecting Rights under South Africa’s Mineral and Petroleum Resources Development Act thus allowing for further exploration to progress at the FSC project. The Prospecting Rights which have been granted cover an area of approximately 52,615 hectares (129,959 acres) of the estimated total of 102,612 hectares (253,451 acres) where rights are held and where rights are in the application process or subject to conversion. Preparations are now underway to mobilize a drill rig to the next drill site as additional drill targets are being identified.

The other exploration project we acquired from Hawk USA in June 2003, is the Holdsworth Project, located in the Wawa area near the village of Hawk Junction, Ontario, Canada. The Holdsworth Project consists of 19 contiguous patented mining claims covering approximately 304 hectares (approximately 750 acres). The mining claims allow us to conduct exploration and exploitation activities in the near surface oxide zone of the Holdsworth Project. Once we have secured the financing, which we estimate to be approximately $150,000, our plan would be to conduct pre-exploration activities on the Holdsworth Project. The primary objective of these pre-exploration activities will be to confirm the results of prior exploration activities conducted on or near this property. Until we have the results of the pre-exploration activities, we will not be in a position to determine the scope and cost of further exploration activities, if any, necessary for the Holdsworth Project. Hawk USA’s contributions of its rights in the FSC Project and its mining claims held in the Holdsworth Project were valued at their historical cost, an aggregate of $246,210.

Components of participation mining rights are as follows:

	September 30, 2006			December 31, 2005
Investment made in Kwagga	$	2,100,000		$	2,100,000
Historical value assigned to the FSC & Holdsworth Projects		246,210			246,210
Miscellaneous costs (1)		82,889			82,889
Gross participation mining rights		2,429,099			2,429,099
Less exploration expenditures report by AfriOre and Kwagga		(2,060,172	)		(1,979,197	)
Less amortization of historical and miscellaneous costs		(329,099	)		(329,099	)
	$	39,828		$	120,803

(1)   Includes the June 2003 Hawk agreement costs and the issuance of an option to a former director.

10

NOTE 9 - DEBT ISSUANCE COSTS

Related to two secured convertible promissory notes (See Note 10 - Notes Payable) issued in the fourth quarter of 2005, we paid $7,361 of debt issuance costs for legal fees. The following table summarizes the amortization of debt issuance costs:

	Sept. 30, 2006			Dec. 31, 2005
Gross debt issuance costs	$	7,361		$	7,361
Less: amortization of debt issuance costs		(7,361	)		(2,699	)
Debt issuance costs, net	$	—		$	4,662

NOTE 10 - NOTES PAYABLE

In May 2005, we entered into a short-term loan arrangement with a shareholder whereby we borrowed $250,000 through a purchase agreement with an unsecured promissory note. In November 2005, we renegotiated our financing agreement and entered into a new loan and security agreement whereby the original $250,000 unsecured note was combined to allow us to draw up to an aggregate of $600,000. By February 21, 2006, we had drawn the full $600,000.

In September 2005, we issued a six-month secured convertible promissory note in the principal amount of up to $600,000 to another shareholder. In November 2005, we amended the note to allow for similar terms with the note issued to the first shareholder as set forth above, thereby enabling both shareholders to have equal security interests in our Company and identical compensation for issuing their respective notes. With our last draw on January 11, 2006, we had drawn $400,000 on the second note.

Each of the note holders received the following compensation in order to make the loans: (i) 500,000 shares of our common stock and (ii) for each draw of $100,000 under each note, the holder received a five-year warrant to purchase up to 1,000,000 shares of our common stock, at an exercise price of $0.12 per share.

In order to effectuate the two loans, a personal guaranty was required. Stephen D. King, who served the Company only as a board member at that time, provided the guarantees. In exchange for agreeing to personally guaranty our obligations under the two notes discussed above, we issued Mr. King two-year warrants to purchase an aggregate of up to 2,000,000 shares of our common stock at a price of $0.15 per share.

In October 2005, we entered into a short-term loan arrangement with a shareholder whereby we borrowed $100,000 through a purchase agreement with an unsecured promissory note. The note holder received a five-year warrant to purchase up to 1,000,000 shares of our common stock, at an exercise price of $0.12 per share. The proceeds of the loan were allocated based on the relative fair value of the loan and the warrants granted in accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.”

In April 2006, we entered into amendments to the arrangements with each of the three note holders, extending the maturity of each of the notes for an additional 30 days. In consideration of these extensions, we issued an aggregate of 110,000 shares of our common stock to the note holders (with an aggregate fair value of $27,100, based on the closing sale price of our common stock on the date of issuance as listed on the OTCBB) and we gave each note holder an option, at any time on or prior to August 31, 2006, to purchase a number of shares of our common stock, at a price per share of $0.20, equal to, but not greater than, the final principal and interest balance of their respective note divided by the $0.20 per share price. We had reserved an aggregate of 5,516,767 shares of our common stock for issuance under the terms of the amendments of each promissory note until August 31, 2006. One of the note holders right to purchase expired on August 31, 2006 and therefore we removed from our reserved shares 516,767 shares. During the three months ended June 30, 2006, we recorded an expense relating to the right of the three note holders (to purchase shares of our common stock at a set price) of $628,643, with the fair value of the aggregate shares calculated using the Black-Scholes pricing model, resulting in a non-cash interest expense.

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In August 2006, we entered into standby joint venture financing agreements with two of our note holders, setting forth the terms of each note holders contemplations of potential participation in joint venture or financing arrangements with the Company for the purposes of financing future mineral exploration projects, including terms relating to the payment of proceeds from any exploration project for which a joint venture or financing arrangement has been entered, subject to written agreements between the Company and the note holder relating to specific projects. As partial consideration for such note holders entering into their respective standby joint venture financing agreements, we extended the term of each of their options to purchase shares of our common stock at $0.20 per share from August 31, 2006 to March 31, 2007. Since the purchase price of $0.20 was below the fair value of our underlying stock on the modification date, we calculated an additional fair value of $363,000 using the Black-Scholes pricing model. Since the note holders are not required to participate in any joint venture or financing during the period of the agreements, the entire $363,000 was expensed as interest expense for the three months ended September 30, 2006.

We paid off the obligations under the three promissory notes in May 2006, which required an aggregate of $1,100,000 in cash principal payments. The notes had accumulated an aggregate of $69,239 in interest payable. We paid $3,353 in cash to one note holder and paid the remaining $65,886 by the issuance of 329,432 shares (valued at $0.20 per share) of our common stock.

The application of the provisions of EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments” resulted in the proceeds of two of the loans being allocated based on the relative fair value of the loan, common stock and warrants. Lastly, due to the reduced relative fair value assigned to the convertible debt, the debt had a beneficial conversion feature that was “in-the-money” on the commitment date. Based on EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” the amount of the discount assigned to the beneficial conversion feature was limited to the amount of the proceeds allocated to the debt instrument.

The following table summarizes the note payable balances:

Original gross proceeds	$	750,000
Less: original issue discount at time of issuance of note for common stock and warrants		(521,304	)
Less: beneficial conversion feature		(179,977	)
		48,719
Less: principal payments		—
Add: amortization of original issue discount and beneficial conversion feature		252,392
Balance at December 31, 2005		301,111
Add: additional draws received in the 1st Quarter 2006		350,000
Less: original issue discount at time of issuance of note for warrants		(252,014	)
Less: beneficial conversion feature		(97,986	)
Add: amortization of original issue discount and beneficial conversion feature		798,889
Less: principal payments		(1,100,000	)
Balance at September 30, 2006	$	—

NOTE 11 - COMPREHENSIVE LOSS

Comprehensive loss includes our net loss and the change in unrealized gain (loss) on available for sale investments (the 225,000 shares of MacDonald common stock held). We report the unrealized gain (loss) on the investment in securities in our Condensed Consolidated Balance Sheet. The following table details the changes in our Accumulated Other Comprehensive Loss balance:

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Balance at December 31, 2005	$	(7,644	)
Unrealized gain		3,763
Balance at September 30, 2006	$	(3,881	)

NOTE 12- STOCK OPTIONS

On January 1, 2006, the Company adopted Financial Accounting Standards Board (“FASB”) Statement No. 123(R), “Share-Based Payment,” which requires the fair value of share-based payments, including grants of employee stock options and employee stock purchase plan shares, to be recognized in the income statement based on their fair values unless a fair value is not reasonable estimable. Prior to the Company’s adoption of SFAS No. 123(R), the Company followed the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related interpretations, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” The fair value of the Company’s stock options issued prior to the adoption of SFAS No. 123(R) was estimated using a Black-Scholes pricing model, which assumes no expected dividends and estimates the option expected life, volatility and risk-free interest rate at the time of grant.  Prior to the adoption of SFAS No. 123(R), the Company used historical and implied market volatility as a basis for calculating expected volatility.

The Company elected to adopt the modified prospective transition method, under which prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). The valuation provisions of SFAS No. 123(R) apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. The Company had no remaining estimated compensation for grants that were outstanding as of the effective date that would need to be recognized over the remaining service period using the compensation cost estimated for the SFAS No. 123 pro forma disclosures. The Company's condensed consolidated financial statements as of and for the three and nine months ended September 30, 2006 reflect the impact of SFAS 123(R). As required by SFAS 123(R), the following pro forma table illustrates the effect on net loss as if the fair-value-based approach of SFAS No. 123 (R) had been applied during the three and nine months ended September 30, 2005.

	Three Months Ended September 30, 2005			Nine Months Ended September 30, 2005			May 1, 2003 (inception) to September 30, 2005
Net loss as reported:	$	(1,305,331	)	$	(4,676,175	)	$	(17,564,394	)
Stock based employee
compensation expense
determined under the fair
value based method (1)	$	—		$	(359,564	)	$	(4,967,144	)
Pro forma net loss	$	(1,305,331	)	$	(5,035,739	)	$	(22,531,538	)
Loss per share (basic and diluted)
As reported	$	(0.02	)	$	(0.08	)	$	(0.48	)
Pro forma	$	(0.02	)	$	(0.08	)	$	(0.62	)

(1) Reported net of related tax effect.

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statements of operations. During the three months ended September 30, 2006, we granted 2,000,000 options to purchase common stock at $0.31 per share (the closing sale price of our common stock as reported on the OTCBB on September 15, 2006) to our newly elected President, Dr. Clyde Smith. Dr. Smith was granted two stock options: one for 1,500,000 shares (the “Standard Options”) and one for 500,000 shares (the “Incentive Based Stock Options”). The Standard Options vest as follows: 300,000 vested immediately and 300,000 vest each anniversary thereafter (September 15, 2007, 2008, 2009 and 2010). The Incentive Based Stock Options vest at 100,000 shares on each anniversary (September 15, 2007, 2008, 2009, 2010 and 2011). The Company recorded $92,155 of related compensation expense for the three month period ended September 30, 2006, relating to the 1,500,000 option grant. This expense is included in selling, general and administrative expense. There was no tax benefit from recording this non-cash expense. The compensation expense had no impact on the loss per share for the three months ended September 30, 2006. As of September 30, 2006, $522,217 of total unrecognized compensation expense (related to non-vested portion of the 1,500,000 and the 500,000 option grants) is expected to be recognized over a period of approximately five years.

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The Company uses the Black-Scholes pricing model as a method for determining the estimated fair value for employee stock awards under SFAS 123(R), which is the same pricing model used in prior years to calculate pro forma compensation expense underSFAS 123 footnote disclosures. Compensation expense for employee stock awards is recognized on a straight-line basis over the vesting period of the award. The adoption of SFAS 123(R) also requires certain changes to the accounting for income taxes and the method used in determining diluted shares, as well as additional disclosure related to the cash flow effects resulting from share-based compensation.

In determining the compensation expense of the options granted during the three months ended September 30, 2006, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes pricing model and the weighted average assumptions used in these calculations are summarized below.

Risk free interest rate	4.875	%
Expected life of options granted	10 years
Expected volatility factor	168	%
Expected dividend yield	—

Stock Option Plans

The Company has six stock option plans: the 1994 Stock Option Plan, the 1998 Incentive Equity Plan, the 1999 Stock Option Plan, the 2000 and 2003 Director Stock Option Plans and the 2001 Employee Stock Option Plan. As of September 30, 2006, an aggregate of 14,750,000 shares of our common stock may be granted under these plans as determined by the board of directors. Stock options, stock appreciation rights, restricted stock and other stock and cash awards may be granted under the plans. In general, options vest over a period ranging from immediate vesting to four years and expire 10 years from the date of grant.

Effective January 13, 2006, the 2001 Employee Stock Option Plan was amended to increase the total shares of stock which may be issued under the Plan from 1,450,000 to 2,500,000. Effective September 13, 2006, the 1999 Employee Stock Option Plan was amended to increase the total shares of stock which may be issued under the Plan from 4,250,000 to 6,250,000. Under the Plans, an aggregate of approximately 2,100,000 shares of our Company’s common stock remain available for issuance at September 30, 2006. The 1994 Stock Option Plan expired in 2004, which means that we cannot grant new awards after that time. All outstanding incentives, granted under the 1994 Stock option Plan will remain in effect until satisfied or expired.

	Number of Options			Weighted Average Exercise Price
Options outstanding - December 31, 2005		6,132,000		$	0.88
Granted		3,000,000			0.27
Canceled or expired		(910,724	)		0.78
Exercised		(1,000,000	)		0.78
Options outstanding - September 30, 2006		7,222,000		$	0.74

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The following tables summarize information concerning outstanding and exercisable stock options at September 30, 2006:

	Options Outstanding
Range of Exercise Prices	Number Outstanding		Weighted Remaining Contractual Life		Weighted Average Exercise Price
$0.15 to $0.40		4,475,000		7.9 years	$	0.27
$0.56 to $1.00		2,006,000		4.4 years		0.66
$2.75 to $5.00		741,000		1.1 years		3.77
$0.15 to $5.00		7,222,000		3.9 years	$	0.74

	Options Exercisable
Range of Exercise Prices	Number Exercisable		Weighted Remaining Contractual Life		Weighted Average Exercise Price
$0.15 to $0.40		2,775,000		7.8 years	$	0.24
$0.56 to $1.00		2,006,000		4.4 years		0.66
$2.75 to $5.00		741,000		1.1 years		3.77
$0.15 to $5.00		5,522,000		3.7 years	$	0.87

The weighted average fair value of options granted during the three months ended September 30, 2006 was $0.31. The Company's approach to estimating expected volatility on its stock awards granted during the quarter considers both the historical volatility in the trading market for its common stock and a look back period equal to the expected life of the grants. Expected volatility is one of several assumptions in the Black-Scholes pricing model used by the Company to make an estimate of the fair value of options granted under the Company's stock plans. The Company believes this approach results in a better estimate of expected volatility.

In estimating the expected term, both exercise behavior and post-vesting termination behavior were included in the analysis, as well as consideration of outstanding options. The risk-free interest rate used in the Black-Scholes pricing model is the historical yield on U.S. Treasury Notes issued with equivalent remaining terms. The Company does not pay any cash dividends on the Company's common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero is used in the Black-Scholes pricing model.

NOTE 13 - SUBSEQUENT EVENT

The Company executed an amendment to the asset purchase agreement for the purchase of the Bates-Hunter Mine, with an effective date of October 31, 2006. The amendment extends the formal closing date from the originally stated November 30, 2006 date until January 31, 2007, allowing us additional time to complete our due diligence and title work relating to the real property assets. All other terms and conditions of the September 20, 2006 asset purchase agreement remain as stated

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WITS BASIN PRECIOUS MINERALS INC.

(AN EXPLORATION STAGE COMPANY)

Item 2. Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the fiscal year ended December 31, 2005.

OVERVIEW

We are a minerals exploration and development company based in Minneapolis, Minnesota. As of September 30, 2006, we hold interests in mineral exploration projects in South Africa (FSC), Canada (Holdsworth and MacNugget), Colorado (Bates-Hunter) and Mexico (Vianey).

·FSC Project. In June 2003, we acquired two exploration projects in a transaction with Hawk Precious Minerals USA, Inc., (“Hawk USA”), a wholly owned subsidiary of Toronto-based Hawk Precious Minerals Inc., (“Hawk”). Hawk is an affiliate of ours and H. Vance White (our Chairman of the Board) is also an officer and director of Hawk. In one of these projects, which we refer to as the “FSC Project,” we have acquired a 35 percent equity interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”) in exchange for a $2,100,000 investment. Kwagga is a subsidiary of AfriOre International (Barbados) Ltd., (“AfriOre”). Kwagga holds the exploration rights for the FSC Project located in the Republic of South Africa adjacent to the major goldfields discovered at the historic Witwatersrand Basin. AfriOre is a precious minerals exploration company with offices in Johannesburg, South Africa and the operator of the FSC Project.

·Holdsworth Project. The other gold exploration project we acquired from Hawk USA, located in the Wawa area near the village of Hawk Junction, Ontario, Canada, we refer to as the “Holdsworth Project.” The Holdsworth Project consists of 19 contiguous patented mining claims, which allows us to conduct exploration and exploitation activities in the near surface oxide zone of the property. We estimate pre-exploration activities to be approximately $150,000, which are necessary to confirm the data of prior exploration activities conducted on or near this property. As of the date of this prospectus, we have no estimate as to the timeframe that we believe that pre-exploration activities would commence, if ever, and until we have the results of the pre-exploration activities, we will not be in a position to determine the scope and cost of further exploration activities, if any, necessary for the Holdsworth Project.

·Bates-Hunter Mine. On January 21, 2005, we completed the acquisition of an option to purchase all of the outstanding capital stock of the Hunter Gold Mining Corporation (a corporation incorporated under the laws of British Columbia, Canada) including its wholly owned subsidiary Hunter Gold Mining, Inc., (a corporation incorporated under the laws of Colorado). On July 21, 2006, we executed a stock purchase agreement intended to supersede the option agreement. On September 20, 2006, we executed a formal asset purchase agreement (the “Bates Asset Purchase Agreement”) to purchase the Bates-Hunter Mine on different economic terms than previously agreed upon. The Bates Asset Purchase Agreement is by and among Wits Basin and Hunter Gold Mining Corporation, Hunter Gold Mining Inc., Central City Consolidated Mining Corp., a Colorado corporation and George Otten, a resident of Colorado (collectively the “Sellers”) for the purchase of the following assets: the Bates-Hunter Mine (this was a prior producing gold mine when operations ceased during the 1930’s), Golden Gilpin Mill, a water treatment plant, mining properties, claims, permits and all ancillary equipment. The closing of the transaction contemplated by the Bates Asset Purchase Agreement (originally stated to occur on or before November 30, 2006) has been extended until January 31, 2007. At the formal closing, we shall deliver to the Sellers(i) the sum of Two Hundred Fifty Thousand Canadian Dollars ($250,000.00 CDN), (ii) a note payable to Sellers in the original principal amount of Six Million Five Hundred Thousand Canadian Dollars ($6,500,000.00 CDN), (iii) a deed of trust with George Otten as trustee for the Sellers securing the note payable, and (iv) Three Million Six Hundred Twenty Thousand (3,620,000) shares of our unregistered and restricted $.01 par value common capital stock. The Bates Asset Purchase Agreement would still require us to provide the following additional compensation to non-affiliate third parties: (i) a warrant to purchase up to 1,000,000 shares of our common stock, at an exercise price equal to the average prior 30-day sale price of our common stock; (ii) a two percent net smelter return royalty on all future production, with no limit; (iii) a one percent net smelter return royalty (up to a maximum payment of $1,500,000); and (iv) a fee of $300,000, payable in cash or common stock at our election.

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·Vianey Mine. On June 28, 2006, we closed on an option agreement with Journey Resources Corporation, (“Journey”) (TSX-V:JNY), whereby we may earn up to an undivided 50 percent interest in certain mining claims comprising the Vianey Mine (“Vianey”) located in Guerrero State, Mexico (a prior producing silver mine). In order to earn our first 25 percent interest in Vianey, we issued 500,000 shares of our common stock and must further provide, on or before December 31, 2006, an aggregate of $500,000 for an exploration work program, which will be directed by Journey. Journey is the recorded and beneficial owner of 100 percent of Vianey.

·Hawk-MacNugget Claims. On June 29, 2006, we executed two agreements relating to a VMS (volcanogenic massive sulphide) base metals project exploration project located in northern Ontario, Canada. The first agreement was pursuant to a Memorandum of Agreement between the Company and Hawk (the “Hawk Memorandum”) whereby we acquired a 50 percent interest in five mining claims (the “MacNugget Claims”) held entirely by Hawk by issuing to Hawk 40,000 shares of our common stock. Under the terms of the second agreement, we sold a portion of our MacNugget Claims to MacDonald Mines Exploration Ltd., (“MacDonald”) (TSX-V:BMK), under a further Memorandum of Agreement between the Company, Hawk and MacDonald (the “Hawk/MacDonald Memorandum”). With the execution of the Hawk/MacDonald Memorandum, we beneficially received 50,000 shares of MacDonald’s publicly-traded common stock and whereby MacDonald became a 51 percent owner in the MacNugget Claims and the operator of the exploration efforts at MacNugget. A formal joint venture agreement is to be drafted and will include a dilution formula requiring further monetary participation of the Company in order to maintain its 24.5 percent interest in the MacNugget Claims.

In the future, we will continue to seek new areas for exploration and the rights that would allow us to be either owners or participants. These rights may take the form of direct ownership of mineral exploration or, like our interest in the FSC Project, these rights may take the form of ownership interests in entities holding exploration rights. Furthermore, although our main focus has been in gold exploration projects, future projects will involve other minerals.

Our principal office is located at 80 South 8^th Street, Suite 900, Minneapolis, Minnesota 55402. Our telephone number is (612) 349-5277 and our Internet address is www.witsbasin.com. Our securities trade on the Over-the-Counter Bulletin Board under the symbol “WITM.”

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005.

Revenues

We had no revenues from continuing operations for the three and nine months ended September 30, 2006 and 2005. Furthermore, we do not anticipate having any future revenues until an economic mineral deposit is discovered or unless we make further acquisitions or complete other mergers or joint ventures with business models that produce such results.

Operating Expenses

General and administrative expenses were $1,589,776 for the three months ended September 30, 2006 as compared to $724,163 for the same period in 2005. General and administrative expenses were $3,653,488 for the nine months ended September 30, 2006 as compared to $3,193,196 for the same period in 2005. Of the expenses reported in 2006 and 2005, the majority related primarily to our marketing programs and consulting fees, which included direct mailing and emailing campaigns, minerals trade publications, research analysts, public relations, luncheons and special invite events and improvements to our website, all of which were increased during 2006. We anticipate the future marketing dollar expenditures will decrease for the remainder of fiscal 2006.

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Exploration expenses were $597,152 for the three months ended September 30, 2006 as compared to $379,068 for the same period in 2005. Exploration expenses were $1,254,927 for the nine months ended September 30, 2006 as compared to $1,007,055 for the same period in 2005. Exploration expenses for 2006 relate to the expenditures being reported on the work-in-process from the project operator, AfriOre, at the FSC Project site, the Bates-Hunter project and the Vianey silver project. We anticipate the rate of spending for the remaining fiscal 2006 exploration expenses will increase due to the additional drill rigs at the FSC project, both underground and surface drilling programs to commence at the Bates-Hunter and Vianey. Exploration expenses for 2005 related to (i) expenditures being reported on the work-in-process from the project operator, AfriOre, at the FSC Project site, (ii) McFaulds Lake (which our rights expired on December 31, 2005) and (iii) the Bates-Hunter project, which was still in its early stages.

Depreciation and amortization expenses were $3,569 for the three months ended September 30, 2006 as compared to $0 for the same period in 2005. Relating to our due diligence processes at the Bates-Hunter Mine in Colorado, we have made certain purchases of equipment ($106,353) necessary to operate and de-water the property. Depreciation of these purchases is calculated on a straight-line method. Depreciation and amortization expenses were $17,545 for the nine months ended September 30, 2006 as compared to $105,650 for the same period in 2005. Amortization expenses for 2005 include the FSC and McFaulds Lake, both of which will be fully amortized by June 30, 2005.

Other Income and Expense

Our other income and expense consists of interest income, interest expense and other expense. Interest income for the three and nine months ended September 30, 2006, was $19,892 and $23,793, respectively. This interest is being earned on excess warrant exercise funds held in a savings account. No interest income for any 2005 periods was recorded. Interest expense for the three months ended September 30, 2006 was $363,000 compared to $193,211 for the same period in 2005. The 2006 interest expense relates to the three promissory notes payable, including the amendments with the note holders in April 2006, and a further extension with two of the note holders, whereby we entitled them the option, at any time on or prior to March 31, 2007, to provide us (in cash or other immediately available funds) an amount equal to, but not greater than, the final principal balance of their respective note and receive the number of shares of our common stock computed by dividing that amount by $0.20 per share. We’ve reserved an aggregate of 5,000,000 shares of our common stock for issuance under the terms of the extensions and recorded a non-cash interest expense of $363,000, included in the three and nine month periods ended September 30, 2006, to reflect their immediate right to purchase shares of our common stock at a set price. The fair value of the aggregate shares was calculated using the Black-Scholes pricing model. It is anticipated that interest expense will decrease for the remainder of fiscal 2006, since all three notes were repaid in May 2006. For the nine months ended September 30, 2006, we’ve recorded $1,858,082 of interest expense verses $434,661 for the same period in 2005.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements primarily through the sale of our business assets and the sale of securities. We do not anticipate generating sufficient net positive cash flows from our operations to fund the next twelve months. For the nine months ended September 30, 2006 and 2005, we had net cash used in operating activities of $2,421,631 and $2,219,932, respectively.

We had working capital of $1,558,118 at September 30, 2006, compared to a working capital deficit of $210,834 at December 31, 2005. This increase was largely the result of cash proceeds received from warrant exercises in April 2006. Cash and equivalents were $812,859 at September 30, 2006, representing an increase of $695,043 from the cash and equivalents of $117,816 at December 31, 2005.

On June 1, 2004 we received gross proceeds of $650,000 in consideration for issuing an 18-month secured convertible promissory note (the “Note”) to Pandora Select Partners LP (“Pandora”), a Virgin Islands limited partnership. The Note was secured by substantially all of our assets and bore interest of 10 percent per annum. The principal and interest monthly payment was $46,278. In lieu of cash, we could satisfy our repayment obligations by issuing shares of our common stock. On any payments we elected to pay in shares of common stock, the per-share value would be equal to 85 percent of the average of the high closing bid price of our common stock during the 20 trading days immediately preceding the payment date. From inception and through March 31, 2005, all payments were made in cash. From April through October 2005, all payments were paid by the issuance of common stock. The final November payment was a combination of cash and common stock. We paid $334,645 in principal payments during 2005 and issued an aggregate of 2,400,000 shares of our common stock. The Note was repaid in full as of December 9, 2005.

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As of September 30, 2004, we have invested $2,100,000 in Kwagga (with a balance of $39,828 remaining at September 30, 2006), which is being used to fund a three drillhole exploration program on the FSC Project that commenced in October 2003. In order for AfriOre to begin preparation, an additional $500,000 is required and would be applied to our right to increase our equity position in Kwagga, as the next 15 percent requires an additional $1,400,000 cash investment.

On January 7, 2005, we completed a private placement of units of our securities, each unit consisting of one share of our common stock and a warrant to purchase one-half share of common stock at an exercise price of $0.25 per share. We sold an aggregate of 25,050,000 units at a price per unit of $0.10, resulting in gross proceeds of $2,505,000. In connection with the private placement, we engaged a placement agent, Galileo Asset Management SA, Switzerland. As compensation for their services, we paid a commission of $22,750.

On January 21, 2005, we completed the acquisition of an option to purchase all of the outstanding capital stock of the Hunter Gold Mining Corporation (a corporation incorporated under the laws of British Columbia, Canada) including its wholly owned subsidiary Hunter Gold Mining, Inc., (a corporation incorporated under the laws of Colorado). On July 21, 2006, we executed a stock purchase agreement intended to supersede the option agreement. On September 20, 2006, we executed a formal asset purchase agreement (the “Bates Asset Purchase Agreement”) to purchase the Bates-Hunter Mine on different economic terms than previously agreed upon. The Bates Asset Purchase Agreement is by and among Wits Basin and Hunter Gold Mining Corporation, Hunter Gold Mining Inc., Central City Consolidated Mining Corp., a Colorado corporation and George Otten, a resident of Colorado (collectively the “Sellers”) for the purchase of the following assets: the Bates-Hunter Mine (this was a prior producing gold mine when operations ceased during the 1930’s), Golden Gilpin Mill, a water treatment plant, mining properties, claims, permits and all ancillary equipment. The closing of the transaction contemplated by the Bates Asset Purchase Agreement (originally stated to occur on or before November 30, 2006) has been extended until January 31, 2007. At the formal closing, we shall deliver to the Sellers(i) the sum of Two Hundred Fifty Thousand Canadian Dollars ($250,000.00 CDN), (ii) a note payable to Sellers in the original principal amount of Six Million Five Hundred Thousand Canadian Dollars ($6,500,000.00 CDN), (iii) a deed of trust with George Otten as trustee for the Sellers securing the note payable, and (iv) Three Million Six Hundred Twenty Thousand (3,620,000) shares of our unregistered and restricted $.01 par value common capital stock. The Bates Asset Purchase Agreement would still require us to provide the following additional compensation to non-affiliate third parties: (i) a warrant to purchase up to 1,000,000 shares of our common stock, at an exercise price equal to the average prior 30-day sale price of our common stock; (ii) a two percent net smelter return royalty on all future production, with no limit; (iii) a one percent net smelter return royalty (up to a maximum payment of $1,500,000); and (iv) a fee of $300,000, payable in cash or common stock at our election.

In May 2005, we entered into warrant exercise agreements with two consultants, allowing them a reduced exercise price on previously issued and outstanding warrants, which both expired on March 31, 2006. They held an aggregate of 3,063,834 warrants exercisable with a range of original pricing was from $0.40 to $5.50 per share. Each warrant exercise agreement allowed for monthly exercises with an exercise price of $0.20 per share. With the expiration of the agreements on March 31, 2006, an aggregate of 695,450 warrants had been exercised into common stock and we received net proceeds of $139,090.

As of April 1, 2006, we had promissory notes in the aggregate principal amount of $1,100,000 payable to three lenders. We entered into amendments to the arrangements with each of the note holders, extending the maturity of each of the notes for an additional 30 days. In consideration of these extensions, we (i) issued an aggregate of 110,000 shares of our common stock to the note holders and (ii) entitled each note holder, at any time on or prior to August 31, 2006, to provide us (in cash or other immediately available funds) an amount equal to, but not greater than, the final principal and interest balance of their respective note and receive the number of shares of our common stock computed by dividing that amount by $0.20 per share. With the warrant exercises as described below, we paid off the obligations under the three promissory notes in May 2006, which required an aggregate of $1,100,000 in cash principal payments. The notes had accumulated an aggregate of $69,239 in interest payable. We paid $3,353 in cash to one note holder and paid the remaining $65,886 by the issuance of 329,432 shares (valued at $0.20 per share) of our common stock.

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On April 28, 2006, we completed a round of financing through the exercise of issued and outstanding warrants (the “Exercise Offer”) to certain warrant holders who qualified as accredited investors. One of the terms under the Exercise Offer was, for each two warrants exercised by the warrant holder, the warrant holder received two shares of common stock and a new three-year warrant (Class C Redeemable Warrant) with an exercise price of $0.50 per share. Certain of the warrant holders were offered a limited time reduction of the exercise price (in which their warrants were originally priced from $5.50 to $0.75 per share) of $0.25 per share.  We accepted subscription agreements to exercise 15,577,401 common stock purchase warrants and received approximately $3.84 million in cash (which includes $445,225 due under two stock subscription receivables, which accrue interest of five percent per annum, are due December 29, 2006 and are secured by the stock issued). No placement agents or broker/dealers were utilized.

On June 28, 2006, we closed on an option agreement with Journey whereby we may earn up to an undivided 50 percent interest in certain mining claims of the Vianey and we must provide, on or before December 31, 2006, an aggregate of $500,000 for an exploration work and must further provide an additional $500,000 (on or before September 30, 2007 as directed by Journey).

On June 29, 2006, we executed two agreements relating to the Hawk-MacNugget Claims, a VMS (volcanogenic massive sulphide) base metals project exploration project located in northern Ontario, Canada. A formal joint venture agreement is to be drafted and will include a dilution formula requiring further monetary participation of the Company in order to maintain its interest in the MacNugget Claims.

During the months of February, May and August 2006, an investor exercised on an aggregate of 1,375,000 stock purchase warrants with an exercise price of $0.25 per share and received 1,375,000 shares of common stock. We received $343,750 in proceeds.

On October 27, 2006, a shareholder exercised warrants to purchase 1,333,333 shares of our common stock, at $0.12 per share. The warrants were issued to a certain shareholder as additional consideration in connection with a secured convertible promissory note from September 2005. We received cash proceeds of $160,000.

Our existing sources of liquidity will not provide enough cash to fund operations for the next twelve months. We have estimated our cash needs over the next twelve months to be approximately $4,000,000 (to include $1,000,000 for the Bates-Hunter project; $150,000 for the Holdsworth project; we are required to have an additional $500,000 advance available to continue with exploration at the FSC Project; $725,000 required for the Vianey silver project; and approximately $120,000 for the MacNugget Claims). We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. However, such additional capital may not be available to us at acceptable terms or at all. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease some or all operations altogether.

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RISK FACTORS

RISKS RELATING TO OUR COMMON STOCK

TRADING OF OUR COMMON STOCK IS LIMITED.

Trading of our common stock is conducted on the National Association of Securities Dealers’ Over-the-Counter Bulletin Board, or “OTCBB.” This has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.

BECAUSE IT IS A “PENNY STOCK” IT CAN BE DIFFICULT TO SELL SHARES OF OUR COMMON STOCK.

Our common stock is a “penny stock.” Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for you to sell your shares of our stock. Because of the rules, there is less trading in penny stocks. Also, many brokers choose not to participate in penny stock transactions. Accordingly, you may not always be able to sell our shares of common stock publicly at times and prices that you feel are appropriate.

RISKS RELATING TO OUR FINANCIAL CONDITION

WE CURRENTLY DO NOT HAVE ENOUGH CASH TO FUND OPERATIONS DURING 2006.

As of September 30, 2006, we had only approximately $813,000 of cash and cash equivalents. Since we do not expect to generate any revenue from operations in 2006, we will be required to raise additional capital in financing transactions in order to satisfy our expected cash expenditures. We expect to raise such additional capital by selling shares of our capital stock or by borrowing money. However, such additional capital may not be available to us at acceptable terms or at all. Further, if we sell additional shares of our capital stock, your ownership position in our Company will be subject to dilution. In the event that we are unable to obtain additional capital, we may be forced to reduce our operating expenditures or to cease operations altogether.

WE HAVE MINIMAL OPERATING ASSETS.

After we completed the sales of our Hosted Solutions Business and our Accounting Software Business in 2003, we became an exploration stage company and do not anticipate having any revenues from operations until an economic mineral deposit is discovered or unless we complete other acquisitions or joint ventures with business models that produce such revenues. As of September 30, 2006 we hold certain rights in five projects: the FSC Project in South Africa, the Bates-Hunter Mine in Colorado, the Vianey Mine Concession in Mexico and the Holdsworth and MacNugget project’s in Canada. None of these projects may ever produce any significant mineral deposits.

WE ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE.

Since becoming an exploration stage company in May 2003 through September 30, 2006, we have incurred an aggregate net loss of $25,379,157. We expect operating losses to continue for the foreseeable future and may never be able to operate profitably.

OUR INDEPENDENT AUDITORS HAVE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have had net losses for each of the years ended December 31, 2005 and 2004, and we have an accumulated deficit as of September 30, 2006. Since the financial statements for each of these periods were prepared assuming that we would continue as a going concern, in the view of our independent auditors, these conditions raise substantial doubt about our ability to continue as a going concern. Furthermore, since we do not expect to generate any revenues for the foreseeable future, our ability to continue as a going concern depends, in large part, on our ability to raise additional capital through equity or debt financing transactions. If we are unable to raise additional capital, we may be forced to discontinue our business.

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FOREIGN CURRENCY EXCHANGE RATES.

Since our entrance into the precious minerals arena, we have had very limited dealings with foreign currency transactions, even though most of our transactions have been with foreign entities. Most of the funds requests have required US Dollar denominations. Exchange rates are influenced by global economic trends beyond our control. Even though we may not record direct losses due to our dealings with exchanges into foreign currencies, we have an associated reduction in the productivity of assets.

We’ve invested $2,100,000 in US funds in Kwagga, whereby they in turn transfer funds to AfriOre. The majority of all exploration expenditures that AfriOre deals in are denominated in the South African Rand and the exchange from the US Dollar to the South African Rand has sustained a reduction. On June 30, 2003, the exchange rate was approximately R7.51 = $1.00. Since June 30, 2003, the Rand has appreciated against the US Dollar by as much as approximately 25 percent. This reduction in the US Dollar plus the cost overruns associated with the additional depth drilled on each drillhole (BH47 and BH48) and sidewall repair on BH48 are the major factors that have contributed to decreasing the initial 5 to 7 drillhole program on the FSC to be revised to only a two drillhole program. Additionally, the availability of deep drilling operators has declined over the last two years, which in turn has allowed them to demand higher rates and fees for their services further impacting the estimated drill holes thought to be accomplished.

On September 20, 2006, we executed a formal asset purchase agreement (the “Bates Asset Purchase Agreement”) to purchase the Bates-Hunter Mine on different economic terms than previously agreed upon. The Bates Asset Purchase Agreement is by and among Wits Basin and Hunter Gold Mining Corporation, Hunter Gold Mining Inc., Central City Consolidated Mining Corp., a Colorado corporation and George Otten, a resident of Colorado (collectively the “Sellers”) for the purchase of the following assets: the Bates-Hunter Mine, Golden Gilpin Mill, a water treatment plant, mining properties, claims, permits and all ancillary equipment. The closing of the transaction contemplated by the Bates Asset Purchase Agreement (originally stated to occur on or before November 30, 2006) has been extended until January 31, 2007. At the formal closing, we shall deliver to the Sellers(i) the sum of Two Hundred Fifty Thousand Canadian Dollars ($250,000.00 CDN), (ii) a note payable to Sellers in the original principal amount of Six Million Five Hundred Thousand Canadian Dollars ($6,500,000.00 CDN), (iii) a deed of trust with George Otten as trustee for the Sellers securing the note payable, and (iv) Three Million Six Hundred Twenty Thousand (3,620,000) shares of our unregistered and restricted $.01 par value common capital stock. The Bates Asset Purchase Agreement would still require us to provide the following additional compensation to non-affiliate third parties: (i) a warrant to purchase up to 1,000,000 shares of our common stock, at an exercise price equal to the average prior 30-day sale price of our common stock; (ii) a two percent net smelter return royalty on all future production, with no limit; (iii) a one percent net smelter return royalty (up to a maximum payment of $1,500,000); and (iv) a fee of $300,000, payable in cash or common stock at our election.

RISKS RELATING TO OUR BUSINESS

SINCE BECOMING ENGAGED IN THE MINERAL EXPLORATION BUSINESS IN JUNE 2003, WE HAVE RELIED ON AN EXCLUSION FROM THE DEFINITION OF “INVESTMENT COMPANY” IN ORDER TO AVOID BEING SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940. TO THE EXTENT THE NATURE OF OUR BUSINESS CHANGES IN THE FUTURE, WE MAY BECOME SUBJECT TO THE REQUIREMENTS OF THE INVESTMENT COMPANY ACT, WHICH WOULD LIMIT OUR BUSINESS OPERATIONS AND REQUIRE US TO SPEND SIGNIFICANT RESOURCES IN ORDER TO COMPLY WITH SUCH ACT.

The Investment Company Act defines an “investment company,” among other things, as an issuer that is engaged in the business of investing, reinvesting, owning, holding or trading in securities and owns investment securities having a value exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items and securities issued by the federal government. Because the value of our interest in the FSC Project has exceeded 40 percent of our unconsolidated assets, excluding cash and government securities, since June 2003, we may meet this threshold definition of “investment company.” However, the Investment Company Act also excludes from this definition any person substantially all of whose business consists of owning or holding oil, gas or other mineral royalties or leases or fractional interests therein, or certificates of interest or participation relating to such mineral royalties or leases. Based on an opinion of counsel, we believe that we satisfy this mineral company exception to the definition of “investment company” for the period from June 26, 2003 through August 29, 2004. If our reliance on the mineral company exclusion from the definition of investment company during this period is misplaced, we may have been in violation of the Investment Company Act, the consequences of which can be significant. For example, investment companies that fail to register under the Investment Company Act are prohibited from conducting business in interstate commerce, which includes selling securities or entering into other contracts in interstate commerce. Section 47(b) of the Investment Company Act provides that a contract made, or whose performance involves, a violation of the act is unenforceable by either party unless a court finds that enforcement would produce a more equitable result than non-enforcement. Similarly, a court may not deny rescission to any party seeking to rescind a contract that violates the Investment Company Act, unless the court finds that denial of rescission would produce more equitable result than granting rescission. Accordingly, for example, certain investors who purchase our securities during any period in which we were required to register as investment company may seek to rescind their subscriptions.

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We further believe that we have continued to qualify for the mineral company exclusion from August 30, 2004 through the date of this report and are not therefore subject to the requirements of the Investment Company Act of 1940. If in the future the nature of our business changes such that the mineral company exception to the threshold definition of investment company is not available to us, we will be required to register as an investment company with the SEC. The ramifications of becoming an investment company, both in terms of the restrictions it would have on our Company and the cost of compliance, would be significant. For example, in addition to expenses related to initially registering as an investment company, the Investment Company Act also imposes various restrictions with regard to our ability to enter into affiliated transactions, the diversification of our assets and our ability to borrow money. If we became subject to the Investment Company Act at some point in the future, our ability to continue pursuing our business plan would be severely limited as it would be significantly more difficult for us to raise additional capital in a manner that would comply with the requirements of the Investment Company Act. To the extent we are unable to raise additional capital, we may be forced to discontinue our operations or sell or otherwise dispose of our mineral assets.

LAWS GOVERNING MINERAL RIGHTS OWNERSHIP HAVE CHANGED IN SOUTH AFRICA.

The South African mining industry has undergone a series of significant changes culminating in the enactment of the Mineral and Petroleum Resources Development Act No. 28 of 2002 (“the Act”) on May 1, 2004. The Act legislates the abolition of private mineral rights in South Africa and replaces them with a system of state licensing based on the patrimony over minerals, as is the case with the bulk of minerals in other established mining jurisdictions such as Canada and Australia. On May 3, 2004 the Department of Minerals and Energy (the “DME”) announced that it was seeking legal advice on the implications of the Act in light of South Africa’s international agreements.

Holders of old-order mining rights, of the type held by Kwagga, are required within five years of the May 1, 2004 commencement date, to apply for conversion of their old order rights into new order mining rights in terms of the Act. Old order mining rights will continue to be in force during the conversion period, subject to the terms and conditions under which they were granted. Once a new order right is granted, security of tenure is guaranteed for a period of up to 30 years, subject to ongoing compliance with the conditions under which the right has been granted. A mining right may be renewed for further periods of up to 30 years at a time, subject to fulfillment of certain conditions.

In order to be able to convert old order mining rights to new order mining rights, a holder must primarily: apply in the correct form for conversion at the relevant office of the DME before May 1, 2009; submit a prescribed social and labor plan; and undertake to “give effect to” the black economic empowerment and socio-economic objectives of the Act (the “Objectives”) and set out the manner in which it will give effect to the Objectives.

In general, the Objectives are embodied in the broad-based socio-economic empowerment charter which was signed by the DME, the South African Chamber of Mines and others on October 11, 2002 (the “Charter”), and which was followed on February 18, 2003 by the release of the appendix to the Charter known as the Scorecard. The Charter and Scorecard has since been published for information during August 2004. The Charter is based on seven key principles, two of which are focused on ownership targets for historically disadvantaged South Africans (“HDSAs”) and beneficiation, and five of which are operationally oriented and cover areas focused on improving conditions for HDSAs.

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Regarding ownership targets, the Charter (as read with the Scorecard) requires each mining company to achieve the following HDSA ownership targets for the purpose of qualifying for the grant of new order rights: (i) 15% ownership by HDSAs in that company or its attributable units of production by May 1, 2009, and (ii) 26% ownership by HDSAs in that company or its attributable units of production by May 1, 2014. The Charter states that such transfers must take place in a transparent manner and for fair market value. It also states that the South African mining industry will assist HDSA companies in securing financing to fund HDSA participation, in the amount of ZAR100 billion within the first five years. The Charter does not specify the nature of the assistance to be provided.

Kwagga and AfriOre are actively engaged in discussions with DME officials and others to ensure that Kwagga fulfills the ownership requirements for conversion under the Act; however, the finalization of the means of achieving that end will require greater certainty regarding the operation and interpretation of the Act and pending related legislation.

At present, the financial implications and market-related risks brought about by the various pieces of the new legislation (including the Mineral and Petroleum Royalty Bill) cannot be assessed. It is not clear when the next draft of the Mineral and Petroleum Royalty Bill will be released. The Government has, however, indicated that no royalties will be payable until 2009. Material impacts on both the ownership structure and operational costs at the FSC Project are possible. Kwagga and AfriOre continue to explore their options and monitor the implementation and interpretation of the Act and the progress of other ancillary regulations and legislation closely.

DUE TO LEGISLATION ENACTED IN SOUTH AFRICA, KWAGGA WILL BE REQUIRED TO SELL A SUBSTANTIAL AMOUNT OF ITS STOCK, WHICH WOULD DILUTE OUR EQUITY POSITION IN KWAGGA.

In accordance with the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry, Kwagga will offer up to 28 percent of its capital stock at fair market value to a HDSA investor group. Any investment by such a group will dilute our ownership of Kwagga and, accordingly, the right to receive profits generated from the FSC Project, if any.

OUR SUCCESS IN CONNECTION WITH THE FSC PROJECT IS SUBSTANTIALLY DEPENDENT ON THE PROJECT’S OPERATOR.

We are relying heavily on the ability of AfriOre, the FSC Project operator, to make prudent use of all funds in connection with the exploration of the FSC Project. If AfriOre does not use these funds wisely, we may not realize any return on our investment. Further, we are dependent on the financial health and condition of AfriOre. In the event AfriOre became insolvent or otherwise unable to carry out its obligations of exploration, we could lose the entire amount we have invested in exploration of the FSC Project. We also depend on AfriOre to obtain and maintain various governmental licenses and permits necessary to explore and develop the properties. The failure to obtain and maintain such licenses and permits may cause significant delays in exploring and developing the properties, or even may prevent the completion of any of these activities altogether.

THE OPERATORS OF OUR EXPLORATION PROJECTS MAY NOT HAVE ALL NECESSARY TITLE TO THE MINING EXPLORATION RIGHTS.

We expect that Kwagga and AfriOre will have good and proper right, title and interest in and to the respective mining exploration rights they currently own, have optioned or intend to acquire and that they will explore and develop. Such rights may be subject to prior unregistered agreements or interests or undetected claims or interests, which could materially impair our ability to participate in the development of the FSC Project. The failure to comply with all applicable laws and regulations, including failure to pay taxes and to carry out and file assessment work, may invalidate title to portions of the properties where the exploration rights are held.

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WE WILL REQUIRE ADDITIONAL FINANCING TO CONTINUE TO FUND OUR CURRENT EXPLORATION PROJECT INTERESTS OR TO ACQUIRE INTERESTS IN OTHER EXPLORATION PROJECTS.

Additional financing will be needed in order to fund beyond the drillhole exploration program currently underway at the FSC Project, to fund exploration of the Bates-Hunter, Vianey, Holdsworth and MacNugget projects, or to potentially complete further acquisitions or complete other acquisitions or joint ventures with other business models. Our means of acquiring investment capital is limited to private equity and debt transactions. We have no significant sources of currently available funds to engage in additional exploration and development. Without additional capital, we will be unable to fund exploration of our current property interests or acquire interests in other mineral exploration projects that may become available. See “—Risks Relating to Our Financial Condition - We Currently Do Not Have Enough Cash to Fund Operations During 2006.”

OUR PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS IN GOLD PRICES.

The profitability of a gold exploration project could be significantly affected by changes in the market price of gold. Mine production and the willingness of third parties such as central banks to sell or lease gold affects the supply of gold. Demand for gold can be influenced by economic conditions, attractiveness as an investment vehicle and the relative strength of the US Dollar and local investment currencies. Other factors include the level of interest rates, exchange rates, inflation and political stability. The aggregate effect of these factors is impossible to predict with accuracy. Worldwide production levels also affect gold prices. In addition, the price of gold has on occasion been subject to very rapid short-term changes due to speculative activities. Fluctuations in gold prices may adversely affect the value of any discoveries made at the sites with which we are involved.

THE NATURE OF MINERAL EXPLORATION IS INHERENTLY RISKY.

The exploration for and development of mineral deposits involves significant financial risks, which even experience and knowledge may not eliminate, regardless of the amount of careful evaluation applied to the process. Very few properties are ultimately developed into producing mines. Whether a gold deposit will be commercially viable depends on a number of factors, including:

·   financing costs;

·   proximity to infrastructure;

·   the particular attributes of the deposit, such as its size and grade; and

·   governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land use, importing and exporting of gold and environmental protection.

The outcome of any of these factors may prevent us from receiving an adequate return on invested capital.

MINERAL EXPLORATION IS EXTREMELY COMPETITIVE.

There is a limited supply of desirable mineral properties available for claim staking, lease or other acquisition in the areas where we contemplate participating in exploration activities. We compete with numerous other companies and individuals, including competitors with greater financial, technical and other resources than we possess, in the search for and the acquisition of attractive mineral properties. Our ability to acquire properties in the future will depend not only on our ability to develop our present properties, but also on our ability to select and acquire suitable producing properties or prospects for future mineral exploration. We may not be able to compete successfully with our competitors in acquiring such properties or prospects.

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Item 3. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-QSB Quarterly Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were adequate and effective (as of the date of their evaluation) for the purposes of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed by the Company under Exchange Act of 1934.

Since the Company does not have a formal audit committee, its Board of Directors oversees the responsibilities of the audit committee. The Board is fully aware that there is lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, the Board has determined that considering the employees involved and the control procedures in place, risks associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties does not justify the expenses associated with such increases at this time.

During the period covered by this report, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting subsequent to such evaluation.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

None.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2006, we entered into a consulting agreement with an unaffiliated third party consultant and issued a two-year warrant to purchase up to 150,000 shares of our common stock, with an exercise price of $0.50 per share, with some services extending into 2007. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company reasonably believes that each consultant is “sophisticated,” no general solicitation was involved, and the transaction did not otherwise involve a public offering.

Item 6.Exhibits

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	WITS BASIN PRECIOUS MINERALS INC.
Date:November 10, 2006	By:	/s/ Stephen D. King
		Stephen D. King
		Chief Executive Officer

By:	/s/ Mark D. Dacko
	Mark D. Dacko
	Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.		Description
	31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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