Operational Reviews

Nalunaq Gold Mine

Nalunaq Gold Mine is located in the Kirkespirdalen valley in Southern Greenland and is the first new mine in Greenland for over twenty years and the country’s first gold mine. After many years of development, the mine commenced commercial production in July 2004 and was officially opened on August 26, 2004.

Commencement of Mining

In the previous financial year, the Company’s efforts focused on ensuring the Mine complied fully with the requirements imposed by the Bureau of Minerals and Petroleum (“BMP”) for the granting of a Mining License. This was finally concluded by the end of April, 2004.

The first gold from the mine was produced in February 2004 from ore which had been stockpiled during prior years’ exploration programs. On August 12, 2004, the second shipment of ore left Greenland. Thereafter, ore production has progressed with, on average, a consignment of ore leaving Greenland on a quarterly basis and in total, four shipments being processed in the year.

Results from Mining

The Nalunaq resource is a narrow vein deposit consisting of several high grade “bands” typically holding grades of around 30 g/t or higher. Between the high grade bands, grades can vary between 10-12 g/t and 20 g/t. In practice this means that the grades achieved on an ongoing basis can vary considerably.

The average grade achieved for the year was 16.9 grams per tonne. In total 132,000 tonnes of ore were produced in the year, of which 119,000 tonnes were actually processed. Gross gold production was 62,900 contained ounces in the year, with 59,700 ounces recovered following tailings and efficiency fees. Average cash cost per ounce (see page 1) produced was $406.

With any business, its start up period will present many challenges. Careful planning, while vital, cannot cover every aspect of an operation and Nalunaq proved no exception. While the results for the year are not as originally anticipated, they incorporate the cost of knowledge, experience and development processes learned during the year under review, which will be of long term benefit to the ongoing production and profitability of Nalunaq.

Several major factors arose during the year which impaired both the production levels and grades achieved, and as a direct result, the cash cost per ounce (see page 1).

It had always been the Company’s intention to commence production of commercial ore and in tandem, continue ongoing development work. The level of development work undertaken in the year was extensive and was higher than originally anticipated. Typically, as development work produces waste and some low grade ore, both production levels and grades were impacted adversely.

The Company experimented with two mining methods during the year, again whilst this impacted production, the experimentation assisted in developing the most appropriate method of mining for the operation. During the last quarter of the financial year, average production was around 600 tonnes per day, 33% higher than the originally planned target of 450 tonnes per day.

The narrow vein of Nalunaq presents its own unique challenges. To maximize the return from the ore, the dilution with waste ore must be kept to a minimum. From the commencement of mining, it became apparent that the plant and equipment present at the Mine would require some additional enhancement in order to perform in line with expectations and deal with the changes in mining methods from the original plan. The time taken to identify these difficulties and resolve by sourcing, ordering and commissioning new equipment had a negative impact on production and grades.

The severity of the winter resulted in the then only accessible level on the Mine, the 450 level, being unreachable. To counteract this, access was developed at the 300 level and this should minimise further production downtime arising from the adverse weather conditions.

The independent consultants who undertook the resource estimate and review of operations also indicated that gold fines remain in the stopes from mining activities undertaken to date. Nalunaq has now secured the equipment to commence a cyclical sweeping programme and is currently assessing how this gold could be economically extracted from the mine. The Company anticipates this gold, if recovered in the forthcoming year could enhance ongoing earnings.

Management believes resolution of these issues will enhance the ongoing grades recovery levels from the Mine and thereafter, the costs will decrease and ongoing profitability be enhanced.

Exploration at Nalunaq

Nalunaq currently ships ore to Spain for processing at the Rio Narcea Gold Plant. While it had always been accepted that the returns from the Mine would be significantly improved by the installation of an on-site processing plant, more definitive work was required to expand the resource base in order to justify the significant further investment this would entail.

An aggressive exploration program commenced during Q3 2005. The objective of the programme was to significantly increase the resource base, ideally to a level where the identified resource base could justify the installation of an on-site processing plant.

The exploration program for the South Block (valley sector) on Nalunaq was developed with a time line of approximately 6 months. Thereafter initial expansion into a similar target known as the Upper Block (mountain sector between 600-900 levels) commenced.

The Company is pleased to report that this year’s exploration drilling in the South Block and the Upper Block of Nalunaq Gold Mine has been successful and that the first program has provided results, which allow independent consultant Snowden Mining Industry Consultants Inc (Snowden) to define an Inferred Resource of 2.1 million tonnes with a grade of 18 g/t (range: 16-21 g/t), using a conservative payability factor averaging 0.4 for the drill-indicated resources. This results in a total resource of 1.2 million ounces.

Due to the nature of the high-grade, narrow-vein mineralization the new resources cannot be classified in economic terms before underground drifting into the structures has been completed. Management believes that the consistent drilling results are supportive of a significant mineralization and has adopted a conservative payability factor averaging 40% to adjust for the uncertainty. The results are sufficiently encouraging to recommend the construction of a processing plant on site. In addition, the first drilling program has only covered a limited area around the current operation and drilling will be continued in potential ground of the Valley Block and the interior of the Mountain Block in the near future.

Mine planning is being adjusted to these new results and is already scheduled to allow for ready access and the definition of mineable reserves. More than 6,000 meters of systematic core drilling from 37 holes in the South Block have now been completed. The results show that a consistent and regular mineralized sheet exists in an area of nearly 400,000 square metres, in direct continuation of the known structure already established by drifting on level 300. As expected, the narrow vein returns irregular assay results from the drill intercepts. Best results of 104 g-m/t gold and 36 g-m/t (gram-meter/ton) are in line with results of the previous drilling in the Target Block and support the presence of a regular and locally high-grade mineralization. However, the results cannot be taken as indicative of the contained grade as the high nugget effect makes intercept of high-grade intervals highly unlikely and irregular. In the Upper Block 8 holes totalling 572 meters have demonstrated a consistent mineralization here over an area of about 255,000 square meters.

Management is particularly encouraged by the intercept of a Main Vein structure with 115 g/t over 0.5 m and visible gold in an area, which appear in the projected extension of the high-grade panel of the Target Block, which is currently being mined, as this will allow immediate access from the existing mining infrastructure. In addition, the mine operator is preparing access to the 250-levels by a decline from the 300-level and to the 200-level from a surface portal to be used as the future feed conduit of ore to the planned processing facility in the valley floor. All these levels will be connected to the existing mine infrastructure to allow for underground ore transfer throughout the year. The results of the exploration programme can be summarized as follows:

The permitting process of a plant on site has been commenced and if approved could be operational by January 2007. The Company is evaluating how to optimize the resource exploitation until such time as a plant is commissioned.

Barberton Mines Limited

Effective June 15, 2003, the Company acquired a 20% interest in the ETC Division of Avgold Limited (renamed “Barberton Mines Limited”) for a total cash injection of $3.8 million comprising of a shareholder loan of $3.8 million (Rand 30 million) and a nominal equity investment of $3 (Rand 20).

The acquisition was made by a consortium consisting of Metorex Ltd, 54%, MCI Resources Ltd, 26%, and the Company, 20%. The total purchase price paid by the consortium of Rand 255 million was funded by a Rand 105 million term-loan facility and Rand 150 million of shareholder loans. The term loan facility was secured by a pledge of all Barberton Mines Limited (“Barberton”) shares held by the shareholders and by Barberton’s assets. In addition, certain financial and operational lending covenants had to be met by Barberton as failure to do so would result in restrictions on the payment of dividends, repayments of shareholder loans and the repayment of interest there under.

On October 29, 2003 it was agreed by Special Resolution to increase the authorised share capital of Barberton from Rand 12,000,000 to Rand 12,016,000 by the creation of 16,000 cumulative variable rate redeemable preference shares of Rand 1 each. These shares had no voting rights. On December 23, 2003 the shareholder loans of Rand 150,000,000 were converted to 15,000 cumulative variable rate redeemable preference shares of Rand 1. The issue price of each of these shares was Rand 10,000. Rand 9,999 being the surplus between issue price and par value, was credited to a surplus premium account in Barberton.

In exchange for converting Rand 30,000,000 of shareholder loans, Crew received 3,000 preference shares of par value Rand 1 each with a deemed aggregate issue price of Rand 30,000,000 ($ 4,311,000).

There is an equity loss from the company´s investment in Barberton of $ 0.2 million compared with equity earnings of $ 2.1 million for the year ended June 30, 2004. The reasons for this decrease are as follows:

• In the previous fiscal year, Barberton recorded significant gains resulting from the mark to market revaluation of its hedge book which under Canadian generally accepted accounting principles is recorded each period. In the year under review, under Canadian GAAP further write downs were required to book unrealized hedge losses from new hedges entered into by Barberton.
• For fiscal year 2005, Barberton’s production and grades achieved were slightly behind budget. In total, 316,000 tonnes of ore was produced at an average grade of 11.11 g/t. This compares to 334,000 tonnes at 11.27 g/t in the previous year. This resulted in a slight fall in ounces produced from 110,000 ounces in 2004 to 103,000 ounces for 2005.
• Local mining costs increased by 8% over 2004 levels. Barberton’s ongoing cost basis is currently the subject of independent review, the result of which could result greater efficiencies leading to a decrease in its ongoing cost base.

Apex Mining Company Inc

The Company announced its intention to acquire 72.5% of the share capital of Apex Mining Company Inc (“Apex”) in February 2005. The due diligence processes were concluded satisfactorily and the Company concluded the definitive agreement relating to the acquisition in August 2005. The total consideration paid for the 72.8% shareholding was $6.6 million. In line with the requirements of the Philippine Stock Exchange (“PSE”), the Company, having acquired 72.5% of the share capital is obliged to make an offer to the minority shareholders to acquire their shares. This process is underway.

Apex is listed on the PSE (PSE:APX). Its principal asset is the Masara Gold ine, located in south-eastern Mindanao, where production was closed in 2000. The mine had previously been operated as a small underground operation with a mill and treatment plant on site. The treatment plant previously had the capacity to process 1,200 tonnes of ore per day. The property is located in Compostela Valley which is considered to be one of the most prolific gold belts in the Philippines and among others includes the famous Diwalwal gold-rush area, hosted in a similar geological setting.

According to the Bureau of Mines and Geosciences, a Philippines Government Agency, Masara has a gold reserve in the range of 500,000- 600,000 tonnes at 9-10 g/t (JORC) and an inferred resource of 1.7 to 1.9 million ounces at similar grades. However, the Company will commission an independent resource evaluation according to the Canadian standard NI 43-101 to confirm the MGB estimates.

Following the conclusion of the acquisition, Managements initial objectives are to rehabilitate the existing plant to an operational stage. Throughout the development process, the Company will work in tandem with the local population to ensure no social distress arises. By the end of 2005 the plant is planned to have a capacity of 500 tonnes per day (“tpd”) increasing to 2,000 tpd by the end of 2006. When the plant is operational, the refining of existing tailings will commence. These contain estimated grades of 3.5 g/t.

An extensive exploration drilling program has been designed and will be conducted in order to assess the resource potential and to get better information of the mineralized system. The initial program will concentrate on parts of the system where access is already available, but with emphasis on deeper parts and strike parallel extensions. The results from the exploration drilling will form the basis for the mine plan and the start of underground drilling.

A Technical Report on the historical resource evaluation is being compiled for an independent resource assessment by Snowden Mining Industry Consultants Limited (“Snowden”), where Dr Simon C Dominy will be the “Qualified Person” as defined by Canadian National Instrument 43-101. The technical report will satisfy requirements of Canadian Securities Commission on disclosure in relation to the Company’s acquisition of Apex and will be NI 43-101-compliant for reporting of historical data.

Recruitment of suitably qualified and trained staff has commenced and the organisation should be in place by the end of October.

Ghana Concession

The Hwini-Butre gold concession (the “HB Gold Concession”) is a gold exploration project in south western Ghana. Hwini-Butre Minerals Ltd. (“HBM”), a 100%-owned Ghanaian subsidiary of Crew Gold Corporation, owns 51% of the HB Gold Concession while the operator, St. Jude Resources Ltd (“St Jude”), owns 49% of the HB Gold Concession.

In August, 2005 the Company received notice from its 49% partner in the project, St Jude (“St Jude”), indicating the latter’s desire to increase its interest in Hwine Butre to 65% pursuant to a call option stipulated in the original agreement between both parties dated February 1995. The Company offered and St Jude agreed to acquire the Company’s interests with immediate effect.

The total consideration for the transaction was $5 million paid in an equivalent amount of St Jude shares. As a result, St. Jude issued 2,995,000 common shares to the Company. These shares are subject to a four month statutory holding period after which time one third of these shares will be subject to a hold period spanning an additional 12 months.

The Company anticipates a gain on disposal of $2.4 million, before tax, as a result of this transaction. This sale is in line with the Company’s strategy to focus human and financial resources on projects in, or close to production with a target of substantially increasing gold production in the next 1 to 3 years.

Mindoro Nickel Project

The Mindoro Nickel Project is located in Mindoro Island in the Philippines approximately 200 kilometres south of Manila. The nickelbearing laterite deposit is located in the foothills of the central part of the island around 30 kilometres from the Coast.

The project has a number of advantages, which more than outweigh its lower grade compared to some of the richest projects currently under development. The project has almost identical grade as several operating Australian deposits but a more attractive wet-limonite composition with better leach kinetics and higher recovery. The Company’s sulfur source in the Philippines (Pamplona) secures the project a fixed low cost of sulfuric acid, the largest cost component in processing of nickel laterite, for the life-of-mine.

In 1997, an Exploration Permit (“EP”) for the Mindoro concession was granted to Aglubang Mining Corp, a fully owned subsidiary of Crew. The EP was renewed in 1999 for a period of two years. In 2001 the key section of the concession was granted a Mineral Production-Sharing greement (“MPSA”), which secured for the Group the exclusive right to develop the property into a mine for a period of 25 years. The MPSA covered the area where the Group had defined a measured and indicated resource.

In July 2001 the MPSA was cancelled unexpectedly by the Secretary of the Department of Environment and Natural Resources (“DNER”) in the Philippines. The Company immediately appealed the Cancellation to the Office of the President and suspended further work on the project. As a consequence of the cancellation the Company recorded impairment provisions in the financial statements for the year ended 30 June 2001 against the full carrying value of its investment in the project totalling $26.5 million.

On March 24, 2004 the Company’s Philippine subsidiary Aglubang Mining Corp received notification that a resolution issued by the Office of the President revoked and set aside the cancellation of its MPSA (Mineral Production-Sharing Agreement) docketed as No. 167-2000-IV. The resolution effectively reinstated fully the MPSA and title to the property. Management believes the response of the Office of the President was a clear and strong signal of the change in attitude of the Government of the Philippines towards mining, from that of tolerance to active promotion and acknowledges the MPSA as a tool for investment protection.

Management believes that the costs incurred to date on the project are of significant value to the Company and will be of ongoing benefit as work recommences on the project. The Company has re-initiated both its resource and test work on the project. It has recommenced test drilling and has conducted a radar survey which clearly confirmed the lateral continuity of the resource and also proved to be an efficient method for defining the lower contacts of the resource.

The Company’s stated strategy for non-gold assets is to develop these with an industrial partner. Management believes this mitigates the Company’s overall risk. In line with the Company’s strategy to develop its non-gold assets with an industrial partner in July 1, 2005, the Company signed a Memorandum of Understanding with Jilin JIEN Nickel Industry Corporation (“Jilin”) relating to the cooperative development of MNP. The Memorandum of Understanding (“MOU”) represents an agreement between Crew and Jilin on a joint contribution to further studies and test work. The MOUdescribes the framework for reaching a Definitive Agreement with the objective of concluding this at the earliest possible date.

Seqi Olivine Deposit

During the year ended June 30, 2003, the Company acquired 100% of the mineral rights to the Seqi Olivine project after this had been released by the previous owner and was granted an exclusive Exploration Permit for the project by the Bureau of Mines and Petroleum of the Greenland Home Rule Government. The property measures fourteen square kilometres and is located in Greenland 90 kilometres north of Greenland’s capital city, Nuuk. On July 7, 2004 the Company announced the expansion of its holdings in the Fiskefjord area, West Greenland from 16 square kilometers to 83 square kilometres, partly as an expansion of the original Seqi license (License No 2003/02) and partly as 4 independent sub-areas (License No. 2004/06).

Olivine is a magnesium-iron silicate, which is used extensively in iron pellet production and its properties make its products suitable for a number of industrial applications. The high grade and favourable textural and chemical properties contribute to the commercial potential of the project. The deposit is located only 600 meters from the tidewater in a protected fjord, which provides year round access. The location and relatively simple nature of the operation allows for a short leadtime to production. The project has been designed for an annual capacity of 1.5-2 million tonnes per annum.

During the previous year, the Company entered into an agreement with Minelco AB, a subsidiary of iron ore producer LKAB of Sweden, to develop a Bankable Feasibility Study (“BFS”) for the Olivine project. The Company was responsible for the management of drilling and for the preparation of the BFS. Minelco agreed to cover the costs of producing the BFS. Drilling on site commenced on August 16, 2003 and most work was completed on schedule by the end of March 2004.

On April 30, 2004 the Company announced that Minelco AB (“Minelco”) had, based on the preliminary evaluations of the feasibility study, requested Crew to advance the Seqi Olivine project under the terms of the existing agreement between Crew Minerals AS and Minelco AB.

The agreement granted Minelco an option to buy 51% of the Seqi project through carrying all capital expenditures related to the development of a mining operation as defined by the feasibility study. The conclusion of the feasibility was positive. On June 21, 2004 Minelco confirmed that the LKAB board, as defined by the feasibility study for the project, had approved the investment capital. Under the terms of the existing agreement between Crew and Minelco AB this investment would grant Minelco a 51% shareholding of the project.

In order to maximize its focus on gold projects, the Company decided to accept an offer from Minelco AB to dispose of its interest in the share capital of the Seqi project. The Company concluded this deal on June 30, 2005 when the sale proceeds of $10 million were received.

In addition to the purchase price there is an annual fee to be paid by Minelco AB over 17 years based on produced tonnage. For years 3 through to 14 of production there is a guaranteed minimum royalty of USD $1 million per year based on production and subject to certain conditions. This royalty income will be recognised in the financial statements as it is earned.

Negros Sulphur Project (Pamplona)

In Quarter 1, 2004 the Company announced that the Department of Environment and Natural Resources (“DENR”) of the Philippines approved an application for a $0.5 million exploration program including the delivery of a 2,000 tonne bulk sample from the Pamplona Sulfur deposit. The purpose of the bulk sampling was to examine the commercial and technical viability of the Pamplona deposit as a supplier of sulfur to a major agricultural fertilizer company in the region.

During the period the Company completed a new detailed topographical survey for the Pamplona open pit-area. This enabled the identification of a suitable sampling site for the 2,000 tonne bulk sample. The access road was surveyed in detail, all repair and upgrade sections identified and the required work quantified.

Three contractors reviewed the logistics of bringing 2,000 tonnes from the bulk sample trench to the shipping site at Amlan about 24 kilometres away. Management believes the proposed work will allow the sampling and transfer of materials under environmentally proper and safe conditions and that will be socially acceptable to the local population.

The current plan is to extract the bulk sulfur sample and ship this for testing. If testing is successful, work will commence on detailed mine planning and the required infrastructure of the proposed facility.

In tandem Management believes negotiations with the identified industrial partner regarding the financing of the project will be concluded. This is in line with Crew’s strategy to develop selected minerals projects through securing market access and entering into strategic alliances with major industrial partners, who are also end users of the mineral in question.

The Pamplona project, first developed in 1974, has an indicated resource of 40 million tonnes of ore that may be accessed by open pit mining, and a further 80 million tonnes of inferred resource according to earlier studies. The average sulfur content of the Pamplona ore is 30% S at cut-off of 18% S combined as native sulfur and sulphide. The potential production volume is considered to be in the range of 2-4 million tonnes of ore per year, starting at around 1 million tonnes per year.

A stand-alone sulfur operation at Pamplona will not compromise the potential future supply of sulfur to the Mindoro nickel project.

Nordli Molybdenum - Porphyry Deposit, (Hurdal, Norway)

On January 12, 2005 the Company was granted the exclusive title for two porphyry-molybdenite properties located in the Oslo region, Norway, the “Hurdal” and “Skrukkelia” Molybdenum (“Mo”) projects.

The Hurdal project is potentially the largest molybdenite deposit in Europe. Over recent years the Molybdenum prices have increased from about $2.5/lb to approximately $25lb today with steadily increasing consumption. The demand for the metal is also strongly associated with the consumption in the stainless and specialty steel sectors. 1% Mo is equivalent to 3% Chrome (Cr) in steel alloys and stainless construction- steel types may contain 2-3% Mo. An increasing range of other metal alloys and non-metallurgical compounds are also making use of Mo, because of its characteristics and the fact that, unlike most other heavy metals, it has low toxicity.

The recognition of stock-work-type molybdenite mineralization led to the discovery of several significant porphyry-type Mo deposits in the Permian Igneous Province of the Oslo region, Norway, in the 1970’s. Several targets were drill tested along with the recognition of numerous prospects for Mo mineralization.

In Hurdal, some 9,000 meters of drilling from 24 holes outlined a deposit, which potentially holds 200 million tonnes with an average grade of 0.2% MoS2. This data is derived from previous work and should be considered as preliminary estimates only. The target is well defined by a pronounced magnetic low in the core of a composite granite stock.

During the year, the Company has held meetings with the municipal representatives of Hurdal, with the participation of the Norwegian Mining Director. Local support for the project has been strong and the proposed exploration activities well received. A public meeting is to be held in October for the Company to present its proposals.

The current work program incorporates 3,000 meters of core drilling from 6 holes. The cost of this program is expected to cost NOK 3 million and is expected to be completed before end of 2005. A local drill contractor has been contacted but the details of the program have not yet been fully completed. Drilling will not commence until after the public meeting is held. A suitably experienced and qualified Technical Manager has been identified to lead the proposed work program.