## Notes to the Consolidated Financial Statements 

(All tabular amounts stated in thousands of United States dollars unless otherwise indicated) 

1. Nature of Operations and Basis of Presentation 

AXMIN Inc. (the “Company”, formerly Asquith Resources Inc.) is an international mineral exploration company with a substantial exploration portfolio in the mineral belts of the Central African Republic (“CAR”), Mali, Ghana, Senegal and Tanzania. The Company is in the process of exploring its mineral properties and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of the amounts shown for exploration and development costs is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development and future profitable production or proceeds from the disposition of such properties. In addition the Company will be influenced by a number of factors including environmental risks, and legal and political risks. 

A significant portion of the Company’s exploration and development costs relate to its Bambari property in the CAR. The Company holds its interest in this property through a CAR registered company, Aurafrique S.A.R.L. (“Aurafrique”), which holds prospecting and exploration permits for the property. Previously and immediately prior to the completion of the reverse take-over of AXMIN Limited (“AXMIN”) by the Company on November 21, 2001 the Bambari property was subject to a Heads of Agreement between the Company and AXMIN wherein as at December 31, 2000 and immediately prior to completion of the reverse take-over the Company had a 49% and AXMIN had a 51% beneficial interest in Aurafrique. See notes 3 and 4(b). 

As at December 31, 2001 Aurafrique is a wholly owned subsidiary of the AXMIN Inc. group. 

On November 21, 2001 the Company successfully completed the reverse take-over of AXMIN by the acquisition of all of the outstanding shares of AXMIN in exchange for the issuance to the AXMIN shareholders of 34,506,532 common shares of the Company (the “RTO Transaction”). Concurrent with the completion of the RTO Transaction the Company closed the issue and sale of 14,627,000 common shares of the Company at a price of Cdn$0.25 per common share for total gross proceeds of Cdn$3,656,750 (the “Offering”). 

The RTO Transaction has been accounted for using the purchase method based upon the following: 

(a) immediately prior to completion of the RTO Transaction the issued share capital of the acquired company, Asquith Resources Inc., was 12,281,986 common shares; 

(b) the RTO Transaction was completed on November 21, 2001 and accordingly the results of Asquith Resources Inc. from that date are included in the determination of results of operations for the period; 

(c) the net assets of Asquith Resources Inc. acquired at the time of the RTO Transaction were Cdn$3,075,031 (see note 8); 

(d) the value of the consideration given for the net assets of Asquith Resources Inc. acquired at the time of the RTO Transaction was Cdn$8,626,633 (being the issuance to the AXMIN shareholders of 34,506,532 common shares of the Company at a deemed value of Cdn$0.25 each). 

The RTO Transaction resulted in the former shareholders of AXMIN owning the majority of the issued and outstanding common shares of the Company. Under the purchase method of accounting AXMIN has been identified as the acquirer and, accordingly, the entity is considered to be a continuation of AXMIN with the net assets of Asquith Resources Inc. at the date of the RTO Transaction deemed to have been acquired by AXMIN. Since the RTO Transaction is accounted for as a reverse take-over the comparative figures are those of AXMIN. 

2. Significant Accounting Policies 

Principles of consolidation 

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada and include the accounts of the Company and all of its subsidiaries (the “Company”) which are listed below: 

– AXMIN Limited (incorporated in the British Virgin Islands) 

– Golden Eagle Mining Limited (incorporated in the Isle of Man) 

– Aurafrique S.A.R.L. (incorporated in the CAR) 

Translation of foreign currencies 

With effect from the date of completion of the RTO Transaction the functional currency of the Company was changed from Canadian dollars (Cdn$) to United States dollars (US$). Foreign denominated monetary assets and liabilities are translated into United States dollars at the rate of exchange prevailing at the period end. Foreign denominated non- monetary assets and liabilities are translated at historical rates of exchange. Exchange gains and losses are included in the determination of results of operations for the period. 

