ALTAIR INTERNATIONAL INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
_______________

ALTAIR INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)

Province of
Ontario,
Canada 1-12497 None
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)

1725 Sheridan Avenue, Suite 140
Cody, Wyoming 82414
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(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (307) 587-8245

|_| Securities registered pursuant to Section 12(b) of the Act: None

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

Common Shares, no par value Nasdaq National Market
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(Title of Class) (Name of each exchange on which registered)

Indicate by check mark whether the Registrant (1) has 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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|

The aggregate market value of the Common Shares held by non-affiliates
of the Registrant on March 15, 1999, based upon the closing sale price of the
Common Shares on the NASDAQ Stock Market of $7.125 per share on March 15, 1999,
was approximately $89,739,254. Common Shares held by each officer and director
and by each other person who may be deemed to be an affiliate of the Registrant
have been excluded. As of March 15, 1999 the Registrant had 15,174,915 Common
Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on June 10, 1999 are
incorporated by reference in Part III of this Report.
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INDEX TO FORM 10-K
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PART I .......................................................................................................1
Exchange Rate Information..............................................................................1

Item 1. Business...............................................................................................1
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General................................................................................................1
The Jig................................................................................................2
Target Markets for the Jig.............................................................................3
Heavy Minerals Recovery.........................................................................3
Coal Washing....................................................................................4
Environmental Remediation.......................................................................5
Other Testing...................................................................................5
Tennessee Mineral Property.............................................................................5
California Mineral Property............................................................................6
Technology and Proprietary Rights......................................................................7
Competition--the Jig...................................................................................7
Alternative Technologies........................................................................7
Spirals and Cones...............................................................................8
Froth Flotation Devices.........................................................................8
Heavy Media Separation..........................................................................8
Competing Products..............................................................................8
Competition--the Mineral Properties....................................................................8
Plan of Operation......................................................................................9
Business Development-the Jig....................................................................9
Business Development-the Mineral Properties............................................................9
Research, Testing and Development of the Jig...................................................10
Research, Testing and Development of the Mineral Properties....................................11
Subsidiaries..........................................................................................12
Government Regulation and Environmental Concerns......................................................12
Government Regulation..........................................................................12
Environmental Regulation and Liability.........................................................13
Employees.............................................................................................13
Glossary of Terms.....................................................................................13
Forward-looking Statements............................................................................14
Factors that May Affect Future Results................................................................14
Absence of Operating Revenues or Profits.......................................................15
Possibility of Continuing Operating Losses.....................................................15
Risks Associated With Sufficiency and Price of Capital.........................................15
Government Regulation..........................................................................15
Enforceability of Civil Liabilities Against Foreign Persons....................................16
Dependence on Key Personnel....................................................................16
Acquisition Risks..............................................................................16
Possible Issuance of Substantial Amounts of Additional Shares Without Stockholder Approval
.....................................................................................16
Volatility of Stock Price......................................................................16
Shares Eligible for Future Sales...............................................................17
Absence of Dividends...........................................................................17
Capacity Limitations of the Series 12 Jig......................................................17
Testing Status of the Series 30 Jig--Mineral Sands Processing..................................17
Testing Status of the Series 30 Jig--Coal Washing..............................................18
Risks Upon Completion of Testing...............................................................18
Competition From Alternative Technologies......................................................18
Competition From Other Jig-like Products.......................................................18
Dependence on Commodities Markets..............................................................19
Dependence on Third Party Manufacturers........................................................19
Patents for the Centrifugal Jig................................................................19
Exploratory Stage of Development--Tennessee Mineral Property...................................19
Uncertainty of Obtaining Environmental Permits for the Tennessee Mineral Property..............20
Exploratory Stage of Development--California Mineral Property..................................20
Absence of Detailed Plans for the California Mineral Property..................................21
Uncertainty of Obtaining Environmental Permits for the California Mineral Property.............21
Environmental Liability on Mineral Properties..................................................21

Item 2. Properties............................................................................................21
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Item 3. Legal Proceedings.....................................................................................22
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Item 4. Submission of Matters to a Vote of Security Holders...................................................22
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PART II ......................................................................................................23

Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters..............................23
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Market Price..........................................................................................23
Outstanding Shares and Number of Shareholders.........................................................24
Dividends.............................................................................................24
Transfer Agent and Registrar..........................................................................24
Canadian Taxation Considerations......................................................................24

Item 6. Selected Financial Data...............................................................................24
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................25
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Overview..............................................................................................25
Results of Operations.................................................................................26
Liquidity and Capital Resources.......................................................................27
Year 2000 Issues......................................................................................27

Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................................28
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Item 8. Financial Statements and Supplementary Data...........................................................28
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................28
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PART III ......................................................................................................28

Item 10. Directors and Executive Officers of the Registrant....................................................28
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Item 11. Executive Compensation................................................................................28
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Item 12. Security Ownership of Certain Beneficial Owners and Management........................................28
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Item 13. Certain Relationships and Related Transactions........................................................28
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PART IV ......................................................................................................29

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................................29
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Documents Filed.......................................................................................29
1. Financial Statements..................................................................29
2. Financial Statement Schedule..........................................................29
3. Exhibit List..........................................................................29
Reports on Form 8-K...................................................................................30
Exhibits..............................................................................................30
Financial Statement Schedule..........................................................................31

SIGNATURES ......................................................................................................32

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PART I

This Annual Report on Form 10-K for the year ended December 31, 1998 (this "Form
10-K") contains "forward- looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Exchange Act of 1934, as amended (the "Exchange Act"), that involve
risks and uncertainties. Purchasers of any of the common shares, no par value
(the "Common Stock") of Altair International Inc. ("Altair" or the "Company")
are cautioned that the Company's actual results will differ (and may differ
significantly) from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those factors
discussed herein under "Factors That May Affect Future Results" and elsewhere in
this Form 10-K generally. The reader is also encouraged to review other filings
made by the Company with the Securities and Exchange Commission (the
"Commission") describing other factors that may affect future results of the
Company.

Exchange Rate Information.

The following exchange rates represent the noon buying rate in New York
City for cable transfers in Canadian dollars, as certified for customs purposes
by the Federal Reserve Bank of New York. The following table sets forth, for
each of the years indicated, the period end exchange rate, the average exchange
rate (i.e., the average of the exchange rates on the last day of each month
during the period), and the high and low exchange rates of the U.S. dollar in
exchange for the Canadian dollar for the years indicated below, based on the
noon buying rates.

Year Ended December 31,
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1998 1997 1996 1995 1994
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(Canadian dollar per US dollar)

High............................... 1.5770 1.4398 1.3822 1.4238 1.4078

Low................................ 1.4075 1.3392 1.3310 1.3285 1.3103

Average............................ 1.4894 1.3849 1.3638 1.3725 1.3664

Year End........................... 1.5375 1.4288 1.3697 1.3655 1.4030

Item 1. Business.
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General.

A glossary of technical terms used in the following description of the
Company's business is set forth at the conclusion of this Item 1.

Altair International Inc. was incorporated under the laws of the
Province of Ontario, Canada in April 1973 for the purpose of acquiring and
developing mineral properties. Unless the context requires otherwise, all
references to "Altair," "Altair International Inc.," or the "Company" in this
Prospectus refer to Altair International Inc. and each of its subsidiaries.

Since 1994, the Company has increasingly shifted its emphasis from the
acquisition and development of mineral properties to the development and testing
of mineral processing equipment for use in the recovery of fine, heavy mineral
particles, including titanium, zircon, gold and environmental contaminants. The
Company has also leased, and seeks to lease or acquire, lease mineral deposits
suitable for the use of its mineral processing equipment.

During 1996, Altair acquired the rights to the Campbell Centrifugal
Jig, since modified and renamed the Altair Centrifugal Jig (the "Jig"), through
a merger involving the Company, Fine Gold Recovery Systems, Inc., a wholly owned
subsidiary of the Company ("Fine Gold"), and Trans Mar, Inc., a Washington
corporation ("TMI"). The Jig is a machine that uses a rotating circular screen

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and pulsating water to separate valueless mineral particles from more valuable
mineral particles based on the differences in their specific gravity. In tests,
the Jig has proven capable of segregating and recovering extremely fine mineral
particles which are not economically recoverable using existing conventional
techniques. Altair is presently testing and customizing the Jig for use in the
recovery of heavy minerals such as titanium and zircon and for use in the
washing of coal. Management believes that the Jig could also be used to recover
other minerals such as gold and for environmental remediation. See "--Technology
and Proprietary Rights."

Altair has also leased, and is exploring, an approximately 13,600 acre
parcel of land near Camden, Tennessee (the "Tennessee Mineral Property") to
determine whether it would be amenable to large-scale mining for titanium and
zircon using the Jig or other equipment. Preliminary reports suggest that the
Tennessee Mineral Property contains significant amounts of valuable heavy
minerals, including titanium and zircon, and is suitable for a large-scale sand
mining operation with a multi-decade life. See "--Tennessee Mineral Property."

In October 1998, Altair acquired an option to enter into a mineral
processing lease on a heavy mineral sand stockpile located near Ione, California
(the "California Mineral Property"; collectively with the Tennessee Mineral
Property, the "Mineral Properties"). Although the limited size of the California
Mineral Property suggests that any mineral processing operation conducted on the
property would be small scale and short-term, existing data suggests that the
stockpiled materials grade between 14% and 31% heavy minerals (compared to 2%
heavy minerals content in some primary mine locations). Of the heavy mineral
content, approximately 50-65% is ilmenite, which is used as a feed stock in the
manufacture of titanium dioxide pigment--a common ingredient in plastics,
paints, and paper. Altair has commenced initial drilling to verify the content
of the stockpile, and, if such tests reveal consistent, adequate mineral grade
of ilmenite, Altair plans to commence gravity separation tests and feasibility
analysis sometime in 1999.

From a financial and accounting standpoint, the Company is a
development stage firm and has been since its inception. To date, the Company
has derived no revenues from product sales or otherwise and has experienced an
operating loss in every year of operation. In the fiscal year ended December 31,
1998, the Company experienced operating losses of $1,762,088.

Throughout this Form 10-K, the Company is sometimes referred to or
defined as a "development stage" company or firm. Such references are for
financial and accounting purposes only and are intended to signify that the
Company is devoting substantially all of its efforts to establishing a new
business, and planned principal operations have commenced, but there has been no
significant revenue therefrom. References to the Company as a development stage
company are not intended to imply that exploration activities with respect to
the Tennessee Mineral Property, the California Mineral Property, or any other
mineral deposits have disclosed a commercially viable reserve. For purposes of
Regulation S-K, Item 802, Guide 7 promulgated under the Exchange Act of 1934,
the Company should be considered an "exploration stage" company.

The Jig.

The Jig segregates particles based on differences in their specific
gravity. Such technology may be categorized as a "gravity separation" process.
Gravity separators are widely used in minerals beneficiation because of their
relative simplicity, low cost of operation and ability to continuously treat
large tonnage throughput. Management believes the Jig will prove able to
economically recover smaller particles than can presently be economically
recovered by competing gravity technologies. While not yet confirmed through
actual operations, the cost to manufacture and operate the Jig is expected to be
similar to the cost to manufacture and operate competing gravity separators,
which can efficiently process only particles larger than 150 mesh. In contrast,
the Company's tests suggest that the Jig will be able to maintain relative
efficiency when processing feeds as small as 400 mesh. See "--Competition." In
tests conducted to date using the Jig to process relatively small particles, the
Jig has yielded product quality (grade and contaminates) equivalent to that
yielded by alternative technologies processing larger particles. See "--Target
Markets" and "--Competition."

Several prototype and demonstration Jigs have been built and tested by
the Company and TMI. Continued field testing of the Jig is being undertaken to
increase the volume capacity, identify any design problems that may reside in
the Jig technology, evaluate the Jig's ability to perform sustained operations,
determine the potential for downtime during such operations and estimate the
anticipated maintenance costs associated with continued operations.

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In addition, field testing is being carried out to improve operating design for
specific applications. There can be no assurance that the testing program will
be successful for all applications or that testing will demonstrate the Jig to
be economically attractive to end users. See "--Factors That May Affect Future
Results."

During 1998, the Company conducted preliminary testing of the Series 30
Jig at a mineral recovery plant operated by a large heavy mineral sand producer
located in northern Florida. Results of the testing indicate that the Series 30
Jig is capable of producing separation results comparable in efficiency to those
of the Series 12 Jig for zircon concentrates. The Series 30 Jig, however, is
designed to be capable of processing 500 tons of solids per day, or more than
four times the throughput capacity of the Series 12 Jig. The volumes of solids
per day that the Series 30 and Series 12 Jigs are actually capable of processing
have not been established through testing; however, the Company expects that
continued testing over the next six to twelve months will confirm that the two
models can process the volumes they have been designed to process. The Company
has also begun design work for a larger Jig that would have over twice the
processing capacity of the Series 30 Jig. See "--Research, Testing and
Development." Such increased capacity would enhance the Jig's commercial
potential for high volume applications such as coal washing and recovery of iron
ore fines. Also, multiple units might be used in series or parallel
configurations to process high volume operations.

Preliminary demonstration tests conducted by the Company and TMI
suggest that the Jig may be commercially viable in a number of applications,
including:

o Recovery of ultra fine gold from waste streams or former tailings;
o Recovery of zircon, rutile, ilmenite, leucoxene, and other
valuable fractions from heavy mineral sand operations,
especially from finely sized waste piles;
o Sulfur and ash removal from fine coal;
o Recovery of tin and iron ore fines from fine tailings;
o Concentration of heavy minerals, such as anatase, aparite,
barite, cassiterite, chromite, columbite, industrial diamonds,
fluorite, various garnets, monazite, tantalite and wolframite;
o Remediation of nuclear waste.

Target Markets for the Jig.

The Company's present focus is on developing markets for the Jig that
have the greatest near-term profit potential. Although management of the Company
believes that, in the long run, the Jig may potentially be useful for a number
of applications, management believes that the most promising markets for the Jig
in the short run are for use in (i) processing of heavy mineral sands in order
to recover heavy minerals, particularly zircon and titanium, (ii) washing of
coal fines in order to remove fine pyrite particles and ash, and (iii) to a
lesser extent, environmental remediation.

Heavy Minerals Recovery. In the minerals arena, the Company is seeking
to enter into royalty or limited licensing agreements under which the Jig can
add value to the beneficiation process, especially the processing of heavy
mineral sands. Verification testing with the Series 12 Jig suggests the Jig's
potential for recovering zircon from heavy minerals sand dry mill tails in
Florida. In Phase 1 and 2 trials conducted by the Company involving separation
of commercial grade zircon products from mineral sands, the Series 12 Jig
withdrew a larger portion of zircon from the feed ore than other mineral sands
processing equipment in use today. In tests on zircon/contaminate feeds
conducted by the Company, the Series 12 Jig has yielded greater than 90% zircon
concentrates and recovered up to 75% of the zircon fed to the unit. Initial
testing of the Series 30 Jig on zircon/contaminate feeds produced results which
were generally equivalent to the Series 12 Jig. The Company plans more extensive
testing of the Series 30 Jig during 1999.
See "--Plan of Operation."

The primary valuable minerals produced from heavy mineral sands are
titanium and zircon. Titanium is used primarily as a basic component of titanium
dioxide, a pigment used principally as a whitener and opacifier for paper,
plastics and paint. Zircon is used primarily for foundry molds and in the
manufacture of certain types of glass and ceramics. The Company believes the
domestic and international markets for both of these products are significant
and well established. Both are commodities traded in bulk, usually under long
term contracts, and are also sold in 50-100 lbs. bags, usually traded as a

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spot-priced product. The U.S. Geological Survey has reported that production of
titanium dioxide in the United States during 1998 was approximately 1,360,000
metric tons, representing a market value of approximately $3 billion. The U.S.
Geological Survey does not report zirconium production for the United States;
however, according to the 1993 Mineral Commodities Summaries prepared by the
U.S. Department of the Interior, Bureau of Mines, consumption of zirconium in
the United States during 1992 was approximately 75,000 metric tons, representing
a market value of approximately $16.1 million. There can be no assurance that
testing will demonstrate that the Jig can economically extract heavy minerals
from heavy minerals sands or that the Jig will prove attractive to end users.

Coal Washing. During 1997, the Company tested the Series 12 Jig to
evaluate its ability to remove fine pyrite particles and ash from coal fines, in
an attempt to create a saleable product from material currently discharged as
mine waste. The tests were carried out at Southern Illinois University in
conjunction with a major coal producer. Tests were conducted on a crushed coal
middlings material with difficult cleaning characteristics. The following
conclusions, have been provided to the Company by the Southern Illinois
University Department of Mining Engineering:

1. For the 28 x 325 mesh particle size fraction of a Pittsburgh
No. 8 seam coal, the Altair Centrifugal Jig was found to
provide a reduction in ash content from an average of 30% to
10% while recovering 86% of the combustible material. The
corresponding reduction in total sulfur content was from 2.50%
to 1.40%. This separation performance resulted in a 78%
rejection of ash-bearing material and 62.5% rejection of total
sulfur. Considering that the feed material contained a
significant amount of near-gravity material due to its
origination from the middlings stream of a jig, the high
separation efficiency value of around 55% is a remarkable
achievement for the Altair Jig.

2. Partition curves derived from Altair Jig washability data
indicate the ability to achieve a relatively low specific
gravity cut point (D50) of nearly 1.50 at a probable error
value (Ep) of 0.10. These performance values rank among the
best of those reported for other enhanced gravity
concentrators.

3. The separation performance achieved on the 28 x 325 mesh
particle size fraction by the Altair Jig was found to be
superior to the results obtained from advanced washability
(release) analysis, which represents the ultimate performance
achievable by any flotation technology.

4. The separation performance results obtained as a function of
particle size indicates that the optimum separation was
achieved on the 100 x 200 mesh particle size fraction. This
fact was confirmed by both the metallurgical and process
efficiency results. For the coarsest particle size fractions,
the ash-forming material was found to have difficulty in
passing through the screen. Thus, ash recovery to the product
is sufficiently higher than the finer material. However, the
excellent separation performances achieved on the particle
size fractions below 100 mesh are superior to other
commercially available enhanced gravity technologies. This
finding is especially unique due to the use of a relatively
low centrifugal force of 45 g's.

5. A circuit utilizing the Altair Jig to clean the 28 x 325 mesh
particle size fraction and a flotation column to treat the
-325 mesh fraction was predicted to provide a 10% product ash
content while recovering 78% of the combustible material. In
comparison, the use of a flotation column to treat the entire
-28 mesh coal would only recover 60% of the combustible
material while achieving the same product ash content. Thus,
the use of the Altair Jig to treat the high middlings content
coal used in this study would result in an overall increase in
recovery of 18% weight units.

6. A complete parametric study was conducted based on a
statistically designed test program and response evaluation
software. Empirical equations describing the effects of
operating parameters value on important response variables,
i.e., combustible recovery, ash rejection, and sulfur
rejection, have been developed and utilized to identify the
optimum test conditions."

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Based on these test results, and others, the Company believes utilities
in the eastern United States may be able to use the Jig to remove pyrite from
high sulphur eastern coals, potentially reducing the need to incur the expense
of transporting low-sulphur western coals. For example, the cost of transporting
coal from Wyoming, a large coal mining area, to the midwestern United States
typically comprises 75% of the cost of the delivered coal product. In addition,
the Company believes the Jig may be used to remove ash from coal, which would
benefit utilities because ash reduces the thermal value of coal and causes
undesirable environmental impacts. The Company established a coal wash test
program with Kerr-McGee Coal Corp. and the University of Southern Illinois to
utilize a Series 12 Jig in processing coal feeds in an on-line coal wash plant
production environment. The test program was completed in late- 1998 and the
Company expects the results to be published by the University of Southern
Illinois in the second quarter of 1999. See "--Plan of Operation." There can be
no assurance that testing will demonstrate that the Jig can economically remove
pyrite, ash or other substances or that the Jig will be attractive to coal
purchasers.

Environmental Remediation. Testing of the Series 12 Jig conducted under
a grant from the U. S. Environmental Protection Agency at Montana College of
Mineral Science and Technology during 1994 indicated that the Jig may be
effective in removing heavy minerals from old mine and mill tailing sites. The
1994 tests indicated that the Jig removed approximately 64% of the fine pyrite
contained in mill tailings in a single pass through the machine. Nearly 80% of
the fine pyrite content of such tailings was removed in two passes through the
machine. In 1995, the U.S. Department of Energy (the "D.O.E.") sponsored tests
suggesting that the Jig may be capable of removing dense nuclear particles from
radioactive waste. The tests conducted by the D.O.E. reported that the Jig was
able to remove up to 54% of the contained nuclear contaminate in a single pass.
Company management is currently exploring these potential environmental
remediation applications.

Other Testing. The Company has licensed a Series 12 Jig to BHP Minerals
International Inc. ("BHP") for installation at BHP's worldwide testing
laboratory in Reno, Nevada. Under the terms of the license, in exchange for
nominal consideration, the Company has granted BHP a non-exclusive license for
use of the Series 12 Jig until September 1, 1999. BHP is not restricted in its
choice of ores or minerals for testing. The Series 12 Jig has been installed and
the Company has committed to train BHP personnel to operate and conduct routine
maintenance, and to provide limited consulting to BHP on an on-going basis. See
"---Plan of Operation."

Tennessee Mineral Property.

The Tennessee Mineral Property consists of approximately 13,600 acres of land
that the Company has leased (or has binding commitments to lease) in or near
Camden, Tennessee, containing fine, heavy minerals. From 1996, when the Company
began acquiring leases, through 1998, exploration activities on the Tennessee
Mineral Property have included geologic mapping, sample collection, drilling of
123 auger holes and preparation of geologic and deposit models. The deposit
model also incorporates 40 drill holes completed by an earlier exploration
company. Deposit model estimates are consistent with deposit estimates
previously determined by other resource companies. The mineralized deposit on
the Tennessee Mineral Property has not yet been proven to be a reserve (as
defined in Regulation S-K, Item 802, Guide 7 promulgated under the Exchange
Act), and the Company's limited operations and proposed plan with respect to it
are exploratory in nature.

The production of saleable heavy minerals from heavy mineral sand ore
is a two-stage process. At the mine site, heavy mineral ore is treated in a "wet
mill" where a 90% total heavy mineral concentrate is prepared typically
utilizing gravity separation equipment. This concentrate is then taken to a "dry
mill" where individual mineral constituents are extracted using magnetic and
high tension electrical separators.

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In order to assess the amenability of the Tennessee Mineral Property
ore to processing with the Jig, two bulk samples were collected by the Company
from the Tennessee Mineral Property. Test work completed by the Company on the
first sample during the spring of 1997 suggested the sands can be processed with
the Jig. Tests performed by the Company which emphasized recovery have yielded
up to 94% heavy mineral recovery with a six-to-one concentration ratio. (Stated
differently, after a single pass through the Jig, 94% of the ore's value was
concentrated in about one-sixth of its original volume, and five-sixths of the
sand rendered a non-valuable discard.) As is typical of gravity separation
processing, several passes through the Jig will be necessary to produce a 90%
total heavy mineral concentrate. Further, in the event the Tennessee Mineral
Property is proven to contain significant heavy mineral reserves the Jig would
likely be used in conjunction with traditional gravity separators, primarily
spirals, to most efficiently process the sand ore in the "wet mill". A second
bulk sample was collected during late 1997. Approximately 5,000 pounds of
representative mineralized material was collected from an exposed sand horizon.
This sample was processed by an independent Florida heavy sands producer and the
Company utilizing both "wet mill" and "dry mill" processes to produce
representative samples of saleable products. The sample results were reviewed by
an independent consultant hired by the Company to prepare a pre-feasibility
study of the Tennessee Mineral Property. See "--Plan of Operation."

In July 1998, an independent consulting group hired by the Company
completed a technical pre-feasibility study of approximately 4,700 acres of the
Tennessee Mineral Property known as the "Camden Deposit." The study states that
the Camden Deposit contains an indicated resource of 12 million tons of total
heavy minerals consisting of 65% titanium-bearing minerals, 5% zircon and 20%
non-valuable heavy minerals. It indicated that saleable ilmenite, rutile and
zircon products can be produced, and that established markets currently exist
for such products. The study then modeled mining and production costs and
concluded that the Camden Deposit has the potential to be economically mined via
a large-scale sand mining operation with an approximate 20-year life.

Based on the positive results of the consultant's report, the Company
initiated a final feasibility study in August 1998. The Company anticipates that
such study will involve additional drilling to further define resource
characteristics, detailed analysis of mineralogical characteristics and mine
processing methods, larger scale testing of the Series 30 Jig, analysis of
product markets, and evaluation of possible strategic alliances. The Company
expects that completion of a feasibility study will take 12-18 months. If the
feasibility study suggests that cost-effective mining of the Tennessee Mineral
Property is feasible, mining could begin within 24-36 months after completion of
the study, subject to, among other things, the price of, and demand for
extractable heavy minerals and the Company's ability to obtain necessary
financing, permits, and government approvals. See "--Plan of Operation" and
"--Government Regulation and Environmental Concerns."

Subsequent to the completion of the pre-feasibility study, further
exploration of the Tennessee Mineral Property by the Company suggested the
existence of an additional heavy mineral sands resource of approximately 10
million tons in an area northwest of the Camden Deposit known as the "Little
Benton Deposit." Preliminary results indicate that the Little Benton Deposit
contains a high-grade titanium mineralization similar to the Camden Deposit. The
Company has approximately 7,900 acres under lease in the Little Benton area and
intends to conduct further testing of the Little Benton Deposit. If such testing
affirms the existence of the indicated resource, and the feasibility study
suggests that cost-effective mining of the Tennessee Mineral Property is
feasible, the production capacity and/or life of the mining operation could be
significantly increased.

California Mineral Property.

In October 1998, the Company entered into an exploration license with
respect to a heavy mineral sand stockpile near Ione, California. The license,
which allows the Company to explore and test for heavy minerals, has a one-year
term and includes an option to enter into a production agreement with the
licensee to extract heavy minerals from the sand stockpile.

The stockpile was accumulated over a 40-year period as an impoundment
of material removed from sand ores used by a glass sand mining operation in the
area. The Company has drilled 23 auger holes in the property; preliminary
testing of the resulting samples indicates that the sands grade from 14% to 31%
total heavy minerals with approximately 250,000 tons of ilmenite present. The
very high concentration of heavy minerals in a small area suggests that a
small-scale, low-cost mining operation may be effective in mining the property.
During 1999, the Company intends to drill additional holes to define the heavy

6

mineral resource area, assess potential environmental implications of mining the
stockpile, and conduct gravity separation tests to determine product
marketability. If the exploratory work on the property indicates that it can be
economically developed, the Company intends to exercise its option with respect
to the production agreement and commence mining in late 1999 or early 2000,
subject to, among other things, the price of and demand for extractable heavy
minerals and the Company's ability to obtain necessary financing, permits and
governmental approvals. See "--Plan of Operation" and "--Government Regulation
and Environmental Concerns."

Technology and Proprietary Rights.

In operation, the Jig utilizes a combination of standard mechanical jig and
centrifugal technologies. Without having tested the Jig in sustained, commercial
operations, management believes production models of the Jig, if completed, will
be capable of sustaining high reliability and low maintenance costs in a
production environment. See "--Plan of Operation." Use of the Jig requires no
chemical additives. The Series 12 Jig stands about six feet tall, requires floor
space of about 25 square feet and weighs approximately 2,000 pounds, while the
Series 30 Jig stands about 10 feet tall, requires floor space of about 54 square
feet and weighs approximately 7,000 pounds. Recently constructed jigs have been
mounted on metal frames along with jig auxiliary equipment--pulse water pump and
tank and control panel--for transport by truck and rapid on-site installation.

A conventional jig separates a slurry of mineral particles as it flows
across the top of a screen. Water is periodically pulsed up through the screen
to eliminate interparticle friction and allow differential settling according to
the variations in the net specific gravities of the ore. Heavier minerals are
allowed to pass downward through the screen while lighter materials flow across
the screen to a discharge point. The Jig operates according to conventional jig
principles except that the screen surface is cylindrical and is rotated to
subject the particles to centrifugal forces. As currently designed, materials to
be processed by the Jig are introduced into the top of the Jig in a slurry mix
with water. The slurry is diffused across the top of the interior of a vertical
cylindrical screen which is rotating. Water is pulsed through the screen
allowing differential separation in the slurry material. Heavy particles pass
through the screen, are collected, and exit the machine in a "concentrate"
stream. Lighter particles flow down the screen interior, are collected and exit
out the bottom of the machine in a separate "tails" stream.

The Company does not intend to establish its own manufacturing
facility. Management is considering options for manufacture of the Jig,
including manufacturing under contract, exclusive licensing, or a joint venture.
The arrangement could eventually include an exclusive license for manufacture,
warehousing and distribution of spare parts, as well as maintenance and leasing
of the Jig. Currently, the Company has entered into an agreement with a machine
shop located in central Tennessee to manufacture three Series 30 Jigs.

Initial patents related to the concept of the Jig as a whole have been
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These patents expire on various dates between May 1999 and December 2000. A
series of second patents with respect to the process by which water is pulsed
through the cylindrical screen on the Jig, a critical component differentiating
the Jig from competing products, have been issued in the United States, South
Africa, Japan, Europe, Australia, Canada, United Kingdom, Germany and France.
These patents expire on various dates between January 2010 and January 2011. On
May 15, 1997, the Company filed an application in the United States seeking a
third patent for an efficiency enhancing component of the Jig. Patents on the
same component have been issued in Europe, Australia, Japan, South Africa,
Canada and Brazil with expiration dates between April and November 2018.

In separate transactions in 1996, 1997, and 1998, the Company purchased
an aggregate of approximately 99% of the capital stock of Intercontinental
Development Corporation ("Indeco") for total consideration of $424,605. Indeco
has as its sole assets a royalty agreement entitling it to 10% of profits from
use of the Jig worldwide.

Competition--the Jig.

Alternative Technologies. Various mineral processing technologies
perform many functions similar or identical to those for which the Jig is
designed. See "Factors That May Affect Future Results--Competing Products and
Alternative Technologies." Minerals processing technologies are generally
predicated on the physical and chemical characteristics of the materials being
processed. A minerals processor may exploit contrasts in size, specific gravity,
hardness, magnetic susceptibility, electrical conductivity, and similar

7

characteristics to selectively extract and concentrate mineral constituents.
Minerals processors also exploit variations in chemical reactivity and molecular
affinity to selectively separate minerals.

The Jig competes in an arena in which particle specific
gravity is the primary criteria for particle segregation and capture. Competing
technologies in this arena include the following:

Spirals and Cones. To separate out valuable particles with a spiral or
cone, a mineral processor runs a sand- size feed slurried in water
through a tilted trough (spiral) or over a convex surface (cone). In
this process, fine-sized particles tend to "float" and not settle as
quickly as larger particles. The difference in settling speed permits
the mineral processor to separate out and extract the more valuable
heavy particles. Spirals and cones are most effective in feed sizes
larger than 150 mesh.

Froth Flotation Devices. To separate minerals using a froth floatation
device, a processor introduces chemical agents into a pool of mixed
particles, which agents attach to certain sulfides. Once attached to
the chemical agents, the sulfides float to the surface. The froth
flotation method can be effective on particles 200 mesh or smaller in
size.

Heavy Media Separation. Heavy media separation is a process in which a
feed containing both dense and light particles is fed into a solution
whose specific gravity is midway between the particles to be separated.
The light particles float to the surface of the solution, while the
heavy particles sink. Heavy media separation is effective primarily in
the removal of ash from coal and in small scale analytic laboratory
applications.

The Company believes that, in certain applications, the Jig
may prove more efficient, cost effective, or adaptable than spirals and cones,
froth flotation devices, or heavy media separation devices. Nevertheless,
results from further tests or actual operations may reveal that these
alternative technologies are better adapted to any or all of the uses for which
the Jig is intended. Moreover, regardless of test results, consumers may view
any or all of such alternative technologies as technically superior to, or more
cost effective than, the Jig.

Competing Products. The Company believes that the Jig currently faces
several forms of competition in the commercial segregation of dense particles
contained in feeds between 150 and 400 mesh, including the Kelsey Jig, Falcon
concentrators and the Knelsen batch concentrator unit, which are currently being
used worldwide. See "Factors That May Affect Future Results--Competing Products
and Alternative Technologies." Another centrifugal jig device, the Kelsey jig,
has been developed in Australia subsequent to the invention of the Jig. The
Kelsey jig is more complicated in design than the Jig, which the Company
believes makes it more expensive to manufacture, operate and maintain in a
production environment. According to the Kelsey jig's manufacturer, Geo Logics
Pty. Ltd., Kelsey jigs are in service at 20 plants worldwide. In addition,
Falcon, a Canadian company, produces a concentrator which is used mainly for
pre-concentration and scavenging. Their principal applications to date have been
in the gold and tantalum industries. There also exists a batch concentrator
known as the Knelsen Bowl, which management believes is best suited to small
volumes. (A batch concentrator differs from the Jig in that it process a finite
"batch" of material, is completely emptied, and then processes a completely new
finite batch, while the Jig processes a continuous flow of materials). Knelsen
Bowls have been installed in various mining applications, primarily gold,
throughout the world. Both the Falcon and Knelsen concentrators utilize
different technologies than the technologies employer by the Jig.

The Company is a small player in an industry comprised of major mining
companies possessing tremendous capital resources. The Company is an
insignificant competitive factor in the industry. There is no assurance that
competitors, many of whom may have significant capital and resources, will not
develop or are not now in the process of developing competitive equipment that
may be functionally or economically superior to the Company's equipment.

Competition--the Mineral Properties.

Based on the exploratory work done to date, the Company anticipates
that the saleable products which may be produced from the Mineral Properties are
ilmenite, rutile and zircon. Ilmenite, which may contain 40% to 70% titanium
dioxide, is used in the production of titanium dioxide pigment, a specialty
chemical used principally as a whitener and opacifier for paper, plastics and
paint. Ilmenite is the most abundant naturally occurring, commercially produced
titanium mineral and supplies approximately 90% of the world demand for

8

titaniferous material. Such demand is projected to increase at an annual rate of
2%-3% for the foreseeable future. The United States imports approximately 60% of
total ilmenite consumed. There are presently three entities in the United States
which produce ilmenite concentrate from heavy mineral sands and virtually all
production is used by five titanium pigment producers whose plants are primarily
located in the southeastern U.S. Pigment producers use various methods to
process ilmenite concentrate into titanium dioxide pigment and require that the
concentrate feedstock meet certain chemical and size criteria applicable to the
process being used. The Company believes that, if it can economically mine the
Mineral Properties and produce satisfactory products for sale to pigment
producers, it may have a competitive advantage in being a domestic producer
operating in close proximity to its primary markets.

Rutile, which generally contains greater than 95% titanium dioxide, is
also used in the production of titanium dioxide pigment. Its processing costs
are significantly less than ilmenite due to the higher concentration of titanium
dioxide. Although this greatly enhances its market value, rutile is much less
abundant than ilmenite, representing approximately 5% of the total heavy
minerals contained in the Mineral Properties.

Zircon is used in ceramic, refractory and foundry applications. Zircon
sand is currently being produced at three mines in the southeastern U.S. and in
several countries around the world. The U.S. Geological Survey believes that
long-term supply shortages may occur unless new production sources of zircon
concentrates are developed.

Plan of Operation.

Business Development-the Jig. Testing conducted to date by the Company
indicates the Jig may have economic potential in a wide variety of industries,
and management believes the Jig can be used for finely sized heavy minerals
recovery, coal cleaning and environmental remediation. See "--Target Markets".
During 1999, the Company plans to continue developing these target markets,
which may have near-term profit potential, through implementation of the
following critical steps:

(1) Continued field testing and demonstration of the Series 12 Jig
and experimentation with design manipulations to improve
effectiveness for certain specific applications. In addition,
sustained operational testing is critical in determining if
any material design problems reside in the Jig technology, if
the Jig is capable of sustained operation with little
downtime, and if its maintenance costs are satisfactory. See
"--Research, Testing and Development."

(2) Continued field testing, including sustained operational
testing, of the larger volume, more marketable Series 30 Jig.
See "--Research, Testing and Development."

(3) Initial engineering and design work for a Jig that will be
larger than the Series 30 Jig. See "--Research, Testing and
Development."

(4) Separation testing on potential new ore applications such as
tin and iron ore fines.

(5) Development of royalty, rental, or limited licensing
agreements with prospective industrial users and introduction
of the Jigs into targeted markets.

Business Development-the Mineral Properties.
--------------------------------------------

The Company believes that, with the discovery of the Little Benton
Deposit, the value of the Tennessee Mineral Property has been significantly
enhanced. Accordingly, the Company is seeking to identify strategic options and
potential sources of capital for development of the property. The Company has
initiated a feasibility study with respect to developing the Tennessee Mineral
Property; completion is expected by mid-2000.

The Company intends to continue its exploration of the California
Mineral Property. If the results of this work are positive, the Company expects
to commence mining on the property as soon as it obtains the necessary
financing, permits and governmental approvals.

9

General. The Company's marketing efforts in the near future will
continue to be directed to opportunities within North America, with future
expansion into foreign markets developing over time. Because the Company does
not intend to engage in the actual manufacture of its own products, the Company
does not expect to purchase a manufacturing facility or any significant
manufacturing equipment. Management does not anticipate that the number of
Company employees will significantly increase until the Company has sufficient
sales and business activity to warrant additional employees. Management expects
to hire two to four additional employees during the next 12-month period;
however, the actual number of new employees hired will depend on the Company's
operating results. If hired, such new employees would be primarily engineering
and technical staff to support testing, development and commercialization
programs.

Research, Testing and Development of the Jig. Field testing to date
suggests that the Jig possesses the ability to process continuous tonnage
throughput in several applications. The Jig has multiple operating parameters --
primarily rotational speed, pulsing pressure, and screen characteristics --
which must be adjusted to fit the processing requirements of the particular feed
stream being treated. Management believes that more extensive testing is needed
to identify the most efficient operating parameters for specifically identified
applications. Further, demonstration of sustained operation is critical to
marketing efforts. To this end, the Company has installed or is in the process
of installing the Jig in several test sites. Specifically designed research,
testing and development efforts planned for the upcoming twelve months include
the following:

(1) The Company has installed and commenced testing of a Series 30
Jig at a mineral recovery plant located in Northern Florida.
Tests conducted by the Company indicate that the Jig is
capable of yielding greater than 90% zircon concentrates and
recovering up to 75% of the zircon fed to the unit. The Series
30 Jig is designed to process 500 tons per day and is
considered to be commercial- sized for this application.
Testing scheduled during the first half of 1999 is intended to
verify Jig processing capacity and improve other operating
design parameters. Also, sustained operational testing is
intended to determine the Jig's capability for sustained
operations with limited downtime. To this end, the high-volume
testing will be done on a stream in the normal plant operating
environment. Jig concentrate and tailings products will be
commingled with other plant outputs. Access to the Florida
test site is controlled by a large heavy minerals sand
producer that supplies test materials for processing. On-site
testing is being conducted by two Company employees.
Additional Company employees provide periodic testing analysis
and engineering services at the site. A Series 12 Jig unit has
also been installed at the sand processing facility in
Northern Florida. This unit is being used to test various
other plant titanium and zircon feedstreams and to test heavy
mineral sand feeds from other Florida locations. Testing
utilizing the Series 12 Jig is being performed by Company
personnel.

(2) A joint coal wash test program with Southern Illinois
University and Kerr-McGee Coal Corp. was established during
late 1997 at Kerr-McGee's Galatia Coal Preparation Plant near
Harrisburg, Illinois. During 1998, Kerr-McGee sold its Galatia
coal operations to American Coal Company, who assumed
Kerr-McGee's role in the test program. A Series 12 Jig was
installed in the Galatia Plant and testing was conducted with
the Jig treating feeds from the plant's coal processing
streams to remove fine particles of ash and pyrite. Testing
was performed by two Southern Illinois University test
facility employees with periodic reviews conducted by Company
employees. The testing has been completed and the Company
expects the results to be published by the University of
Southern Illinois in the second quarter of 1999. The Company
will evaluate these results, together with the results of
operational and field testing, to determine a course of action
for future coal wash programs.

(3) The Company has established a Jig testing facility near Reno,
Nevada to test samples supplied by mineral companies and other
potential users of the Jig. The facility is used for
demonstrations of the Jig technology, provides amenability

10

testing for a variety of mineral ores, and serves as a test
site for on-going equipment design. The test facility is
equipped with a Series 12 Jig, placed in a "closed loop"
circuit designed to take an initial charge of solids (0.5 to
2.0 tons) which can be continuously fed in slurry form to the
Jig. Concentrate and tails streams produced by the Jig may be
accessed for sampling prior to recombination and return to the
feed circuit. Amenability testing performed at the test
facility during 1998 included heavy mineral sand feeds from
the Mineral Properties and ores which may have near term
commercial potential for recovery using the Jig. Operation of
the Jig test facility is performed exclusively by Company
personnel.

(4) Engineering and design work will continue on a Jig having
approximately twice the processing capacity of the Series 30
Jig. The Company anticipates that it will be able to complete
construction of the first unit by the end of 1999.

Provided that the planned testing of the Jig over the next twelve
months as described above is successful, the Company believes the Series 30 Jig
would be ready at that time for commercial use in applications involving the
recovery of titanium, zircon and gold. While such capabilities of the Jig could
then be marketed, the Company expects that the Jig's multiple operating
parameters would need to be adjusted to fit the requirements of each particular
customer and application. In the event any of the foregoing tests are not
successful, the Company expects that it would conduct additional testing, the
nature of which would depend upon the results obtained in the above-described
tests.

Research, Testing and Development of the Mineral Properties. As
discussed in "--Tennessee Mineral Property" above, in July 1998, an independent
consulting group completed a technical pre-feasibility study of approximately
4,700 acres of the Tennessee Mineral Property known as the "Camden Deposit."
Based on the positive results of the consultant's report, the Company initiated
a final feasibility study in August 1998 which it anticipates will involve
additional drilling to further define resource characteristics, detailed
analysis of mineralogical characteristics and mine processing methods, larger
scale testing of the Series 30 Jig, analysis of product markets, and evaluation
of possible strategic alliances. The Company expects that a feasibility study
will be completed by mid-2000. If the feasibility study suggests that
cost-effective mining of the Tennessee Mineral Property is feasible, mining
could begin within 24-36 months after completion of the study, subject to, among
other things, the price of, and demand for extractable heavy minerals and the
Company's ability to obtain necessary financing, permits, and government
approvals

During 1998, the Company incurred $724,907 in deferred exploration
expenditures on the Tennessee Mineral Property. Expenditures were incurred on
leasehold minimum advance royalty payments, auger hole drilling, sampling,
sample analysis and assay, geological and mineralized deposit characterization
studies and other related exploration activities.

As discussed in "--California Mineral Propertys" above, in October
1998, the Company entered into an exploration license with respect to a heavy
mineral sand stockpile near Ione, California. The license, which allows the
Company to explore and test for heavy minerals, has a one-year term and includes
an option to enter into a production agreement with the licensee to extract
heavy minerals from the sand stockpile. See "Item 2 Properties." The Company has
drilled 23 auger holes in the property; preliminary testing of the resulting
samples indicates that the sands grade from 14% to 31% total heavy minerals with
approximately 250,000 tons of ilmenite present. During 1999, the Company intends
to drill additional holes to define the heavy mineral stockpile area, assess
potential environmental implications of processing the stockpile, and conduct
mineral processing tests to determine product marketability. If the exploratory
work on the property indicates that it can be economically developed, the
Company intends to exercise its option with respect to the production agreement
and commence processing in late 1999 or early 2000, subject to, among other
things, the price of and demand for extractable heavy minerals and the Company's
ability to obtain necessary financing, permits and governmental approvals.

During 1998, the Company incurred $68,344 in deferred exploration
expenditures on the California Mineral Property. Expenditures were incurred for
the exploration license, auger hole drilling, sampling, sample analysis and
assay, and related exploration activities.

11

Subsidiaries.

Altair International Inc.1 was incorporated under the laws of the
province of Ontario, Canada in April 1973. The Company currently has two
wholly-owned subsidiaries, Fine Gold Recovery Systems, Inc., a Nevada
corporation ("Fine Gold"), and Mineral Recovery Systems, Inc., a Nevada
corporation ("MRS"), and four indirect wholly owned subsidiaries, California
Recovery Systems, Inc., a Nevada corporation, Altair Technologies, Inc., a
Nevada corporation, Tennessee Valley Titanium, Inc., a Nevada corporation, and
660250 Ontario Limited, and Ontario Corporation. The Company also owns
approximately 99% of the capital stock of Intercontinental Development
Corporation. "-Technology and Proprietary Rights"

Fine Gold was acquired by the Company in April 1994. Fine Gold is, for
accounting purposes, a development stage company with no operating revenues
earned to date. The Company's acquisition of TMI in February 1996 was effected
by merging TMI with and into Fine Gold (the "TMI Merger"). Fine Gold also now
includes the operations of a wholly-owned subsidiary of the Company formerly
known as Mineral Recovery Systems, Inc., which was merged with and into Fine
Gold in June 1996. As discussed below, another wholly-owned subsidiary of the
Company, formerly known as Carlin Gold Company, is now operated under the name
Mineral Recovery Systems, Inc. The Company intends that Fine Gold will hold and
maintain Jig technology rights, including patents, and will enter into a royalty
arrangements to allow MRS to develop and commercially utilize the Jig.

MRS was incorporated by the Company in April, 19872. MRS previously has
been involved in the exploration for minerals and development of unpatented
mining claims in Nevada, Oregon and California. All mining claims have now been
abandoned. The Company currently intends that MRS will arrange for the
manufacture of the Jig for commercial sales, rental or royalty arrangements with
end users. In addition, MRS currently holds, directly or indirectly, all of the
Company's interest in the Mineral Properties, and the Company intends that MRS
will continue to lease or acquire and develop mineral properties in the future,
particularly properties that contain mineral resources that may be processed
with the Jig.

California Recovery Systems, Inc. holds the company's exploratory
rights with respect to the California Mineral Property. The remaining indirect
100% owned subsidiaries do not presently have any assets or operations.

Government Regulation and Environmental Concerns.

Government Regulation. The Company's exploration of the Mineral
Properties and testing of the Jig are, and any future testing, construction or
mining activities of the Company will be, subject to a number of federal, state,
and local laws and regulations concerning mine and machine safety and
environmental protection. Such laws include, without limitation, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response Compensation Liability Act. Such laws
require that the Company take steps to, among other things, maintain air and
water quality standards, protect threatened endangered and other species of
wildlife and vegetation, preserve certain cultural resources, and reclaim
exploration, mining and processing sites. These laws are continually changing
and, as a general matter, are becoming more restrictive.

Compliance with federal, state, or local laws or regulations represents
a small part of the Company's present budget; nevertheless, continued compliance
may be extremely costly, especially if the Company actually commences extraction
operations on the Tennessee Mineral Property or the California Mineral Property.
If the Company fails to comply with any such laws or regulations, a government
entity may levy a fine on the Company or require the Company to take costly
measures to ensure compliance. Any such fine or expenditure may adversely affect
the Company's development.

The Company is committed to complying with and, to its knowledge, is in
compliance with all governmental regulations. The Company's primary product, the
Jig, does not require the addition of chemicals in its processing of minerals.
The Company cannot, however, predict the extent to which future legislation and
regulation could cause

- --------------------------

1 The Company was incorporated in April 1973 under the name Diversified
Mines Limited, which was subsequently changed to Tex-U.S. Oil & Gas Inc. in
February 1981, then to Orex Resources Ltd. in November 1986, then to Carlin Gold
Company Inc. in July 1988, to Altair International Gold Inc. in March 1994, and
to Altair International Inc. in November 1996.

2 MRS was formerly known as Carlin Gold Company. The name change was
effective in June 1996.

12

the Company to incur additional operating expenses, capital expenditures, and/or
restrictions and delays in the development of the Company's products and
properties.

Environmental Regulation and Liability. Any proposed mining or
processing operation on the Mineral Properties or any other property acquired by
the Company will be subject to federal, state, and local environmental laws.
Under such laws, the Company may be jointly and severally liable with prior
property owners for the treatment, cleanup, remediation, and/or removal of
substances discovered on either of the Mineral Properties or any other property
used by the Company, which are deemed by the federal and/or state government to
be toxic or hazardous ("Hazardous Substances"). Courts or government agencies
may impose liability for, among other things, the improper release, discharge,
storage, use, disposal, or transportation of Hazardous Substances. The Company
might use Hazardous Substances and, although the Company intends to employ all
reasonably practicable safeguards to prevent any liability under applicable laws
relating to Hazardous Substances, Companies engaged in mineral exploration and
processing are inherently subject to substantial risk that environmental
remediation will be required.

Employees.

The business of the Company is currently managed by Dr. William P.
Long, President and Chief Executive Officer of the Company and Mr. C. Patrick
Costin, Vice President of the Company and President of MRS and Fine Gold. In
addition, Altair employs a Vice President of Marketing, and MRS employs a
Director of Finance, a senior process engineer, a process engineer, a
metallurgist, a geologist, a controller and a part-time employee in an office
management and administrative assistance capacity. There are no other employees
of the Company or its subsidiaries.

Other than the employment agreements of Dr. Long and Mr. Costin
described below, and the employment agreement with the Vice President of
Marketing and the Director of Finance, there are no written employment
agreements between the Company or its subsidiaries and their respective
personnel. See "Item 11. Executive Compensation -- Employment Agreements." The
future success of the Company will depend, in part, on its ability to attract
and retain highly qualified technical, marketing and management personnel. There
is no assurance the Company will be successful in retaining or attracting highly
qualified individuals in key positions. See "Factors That May Affect Future
Results--Dependence on Key Personnel."

Glossary of Terms.

Amenability means responsiveness of an ore deposit to processing.

Ash means inorganic residue remaining after coal combustion. Ash is an
undesirable component of coal because it reduces thermal value and produces a
waste product after combustion.

Assay means to analyze an ore or other substance to determine the
presence, absence, and quantity of one or more components.

Beneficiate means to improve the grade of ore by processing.

Centrifugal force means the component of force on a body in curvilinear
motion that is directed away from the axis of rotation.

Coal fines means finely pulverized coal particles which will pass
through a 28 mesh screen.

Coal washing means processing of pulverized coal to remove ash and
pyrite.

Environmental remediation means removal of harmful mineral particles
from a site previously altered by human activities.

Heavy minerals sands means beach or dune sands which contain a small
fraction of heavy particles. Heavy mineral sands are commercially mined to
produce titanium minerals and zircon.

13

Ilmenite means a titanium-bearing oxide mineral containing variable
percentages of iron and used as a raw material in the production of titanium
pigments.

Mesh means one of the openings or spaces in a screen. The value (size)
of the mesh is given as the number of openings per linear inch.

Mill means a building with machinery for processing ore. Dry mill
refers to heavy minerals sand processing of dry materials. Wet mill refers to
heavy minerals sand process of material that are mixed with water in slurry.

Mineralized Deposit or Mineral Deposit means a mineralized body which
has been delineated by appropriately spaced drilling and/or underground sampling
to support a sufficient tonnage and average grade of metals. Such a deposit does
not qualify as a reserve until a comprehensive evaluation based upon unit cost,
grade, recoveries and other material factors conclude legal and economic
feasibility.

Placer means deposits of sand, gravel and other detrital or residual
material containing a valuable mineral which has accumulated through weathering
and natural mechanical concentration processes. A placer mine is an operation
that recovers certain valuable minerals based on differences in specific
gravity.

Pyrite means a yellowish-brown mineral sulfide containing iron and
sulphur. Pyrite is an undesirable component of coal because sulphur dioxide gas
is released when it is burned with coal.

Specific gravity means the ratio of the mass of a solid or liquid to
the mass of an equal volume of water at a specified temperature.

Tails or tailings means those portions of washed ore that are regarded
as too poor to be treated further, as distinguished from material (concentrates)
that is to be smelted or otherwise utilized.

Thermal value means a measure of the ability of a fuel (coal) to
produce energy when ignited.

Forward-looking Statements.

This Form 10-K contains various forward-looking statements. Such
statements can be identified by the use of the forward-looking words
"anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or
similar words. These statements discuss future expectations, contain projections
regarding future developments, operations, or financial conditions, or state
other forward-looking information. When considering such forward-looking
statements, you should keep in mind the risk factors noted in this section and
other cautionary statements throughout this Form 10-K and the Company's other
filings with the Commission. You should also keep in mind that all
forward-looking statements are based on management's existing beliefs about
present and future events outside of management's control and on assumptions
that may prove to be incorrect. If one or more risks identified in this Form
10-K or any other applicable filings materializes, or any other underlying
assumptions prove incorrect, the Company's actual results may vary materially
from those anticipated, estimated, projected, or intended.

Among the key factors that may have a direct bearing on the Company's
operating results are risks and uncertainties described under "Factors That May
Affect Future Results," including those attributable to the absence of operating
revenues or profits, uncertainties regarding the development and
commercialization of the Jig, development risks associated with the Mineral
Properties, and uncertainties regarding the Company's ability to obtain capital
sufficient to continue its operations and pursue its proposed business strategy.

Factors that May Affect Future Results.

- ---------------------------------------------
Risk Factors Related to the Company Generally
- ---------------------------------------------

14

Absence of Operating Revenues or Profits. The Company is a development
stage company. To date, the Company has not generated revenues from operations
or realized a profit. The Company is presently investing substantial resources
in the testing and development of the Jig and the exploration of the Mineral
Properties. There can be no assurance that the Jig, the Mineral Properties, or
any other project undertaken by the Company will ever enable the Company to
generate revenues or that the Company will at any time realize a profit from
operations.

Possibility of Continuing Operating Losses. The Company has experienced
a loss from operations in every fiscal year since its inception. The Company's
losses from operations in 1997 were $1,831,471 and its losses from operations in
1998 were $1,762,088. Consistent with its history, the Company expects to
experience a net loss from operations during 1999. The Company will continue to
experience a net operating loss until, and if, the Jig and/or the Mineral
Properties begin generating revenues for the Company. Even if the Jig or the
Mineral Properties begin generating revenues, such revenues may not exceed the
costs of production. Accordingly, the Company cannot provide assurance that it
will ever realize a profit from operations.

Risks Associated With Sufficiency and Price of Capital. The Company's
existing capital may prove insufficient to complete testing and development of
the Jig or exploration of the Mineral Properties. This insufficiency may be
caused by numerous factors, including without limitation, unanticipated expenses
associated with developing the Jig or exploring the Mineral Properties, the
Company's inability to locate and reach an agreement with a company willing to
manufacture the Jig at a reasonable price, or the need for a radical change in
the design of the Jig.

If the Company determines to construct and operate a mine on
the Tennessee Mineral Property or the California Mineral Property, the Company's
existing capital will be inadequate to complete construction of the mine and
commencement of operations. In addition, the Company may need additional capital
for necessary or discretionary acquisitions of equipment, properties,
intellectual property rights or companies. General and industry market factors
or other unforeseen events may also affect the Company's use of and need for
capital.

If the Company needs additional capital, it may not to be able
obtain the amount of additional capital needed or may be forced to pay an
extremely high price for capital. Factors affecting the availability and price
of capital may include, without limitation, the following:

o market factors affecting the availability and cost of capital
generally;
o the performance of the Company;
o the size of the Company's capital needs;
o the market's perception of mining, technology, and or minerals stocks;
o the economics of projects being pursued; and
o industry perception of the Company's ability to recover minerals with
the Jig or otherwise.

If the Company is unable to obtain sufficient capital or is forced to pay a high
price for capital, the Company may be unable to complete testing and production
of the Jig, exploration and development of the Mineral Properties, or otherwise
pursue and fully exploit existing or future development opportunities. In
addition, because of their size, resources, history and other factors, certain
competitors of the Company may have better access to capital than the Company
and, as a result, may be able to exploit opportunities more easily or thoroughly
than the Company.

Government Regulation. The Company's exploration of the Mineral
Properties and testing of the Jig are, and any future testing, construction or
mining activities of the Company will be, subject to a number of federal, state,
and local laws and regulations concerning mine and machine safety and
environmental protection. Such laws include, without limitation, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response Compensation Liability Act. Such laws
require that the Company take steps to, among other things, maintain air and
water quality standards, protect threatened, endangered and other species of
wildlife and vegetation, preserve certain cultural resources, and reclaim
exploration, mining and processing sites. These laws are continually changing
and, as a general matter, are becoming more restrictive.

Compliance with federal, state, or local laws or regulations
represents a small part of the Company's present budget; nevertheless, continued
compliance may be extremely costly, especially if the Company actually commences
mining operations on the Tennessee Mineral Property or the California Mineral
Property. If the Company fails to comply with any such laws or regulations, a

15

government entity may levy a fine on the Company or require the Company to take
costly measures to ensure compliance. Any such fine or expenditure may adversely
affect the Company's development.

Enforceability of Civil Liabilities Against Foreign Persons. The
Company is an Ontario corporation, and a majority of its directors are residents
of Canada. In addition, certain of the Company's experts (including its
principal accountants and Canadian legal counsel) are located in Canada. As a
result, investors may be unable to effect service of process upon such persons
within the United States and may be unable to enforce court judgments against
such persons predicated upon civil liability provisions of the United States
securities laws. It is uncertain whether Canadian courts would (i) enforce
judgments of United States courts obtained against the Company or such
directors, officers or experts predicated upon the civil liability provisions of
United States securities laws or (ii) impose liability in original actions
against the Company or its directors, officers, or experts predicated upon
United States securities laws.

Dependence on Key Personnel. The continued success of the Company will
depend to a significant extent on the services of Dr. William P. Long, President
and Chief Executive Officer of the Company, and Mr. C. Patrick Costin, Vice
President of the Company and President of Fine Gold and MRS. The loss or
unavailability of Mr. Long or Mr. Costin could have a material adverse effect on
the Company. The Company does not carry key man insurance on the lives of such
key officers.

In addition to the individuals identified above, the Company
employs a Vice President of Marketing, Director of Finance, controller, senior
process engineer, process engineer, metallurgist, geologist, and administrative
assistant. The Company has no other employees. Aside from Dr. Long, Mr. Costin,
the Vice President of Marketing, and the Director of Finance, the Company has no
employment agreements with any of its personnel. Competition for such personnel
is intense, and the Company can provide no assurance that it will be able to
attract and maintain all personnel necessary for the development and operation
of its business.

Acquisition Risks. The Company is currently evaluating, and plans to
continue to evaluate, licensing or acquiring additional mining products or
properties. The Company also plans to remain open to acquiring, or developing
strategic relations with, other companies that have products, manufacturing
capabilities, or other qualities that are compatible with the Company's business
objectives. The Company must compete for attractive acquisition or strategic
alliance candidates with numerous other companies, many of whom have
significantly greater financial and technological resources than the Company. In
addition, to the extent the Company is in a competitive position, it may fail to
identify or consummate acquisition or strategic alliance opportunities.

Even if the Company identifies and completes such alliances,
consummation thereof may require the Company to incur additional debt, amortize
expenses related to goodwill and intangible assets, or issue dilutive equity
securities, all of which could adversely affect the Company's operating results
or financial condition. In addition, a failure by the Company to integrate its
operations with that of an ally or acquisition target may adversely affect
operating results. Disruptions in operations are likely to be especially severe
during the fiscal quarters immediately following any acquisition or alliance
transaction, while the operations of the acquired or combined business are being
integrated into the Company's operations.

Possible Issuance of Substantial Amounts of Additional Shares Without
Stockholder Approval. The Company's Articles of Incorporation authorize the
issuance of an unlimited number of shares of Common Stock. All such shares may
be issued without any action or approval by the Company's stockholders. In
addition, the Company has two stock option plans which have potential for
diluting of the ownership interests of the Company's stockholders. The issuance
of any additional shares of Common Stock would further dilute the percentage
ownership of the Company held by existing stockholders.

Volatility of Stock Price. The Common Stock was listed on the Alberta
Stock Exchange through April 23, 1998 and has been listed on the Nasdaq National
Market since January 26, 1998. Between March 24, 1997 and January 23, 1998, the
Common Stock was listed on the Nasdaq SmallCap Market. Trading in the Common
Stock has been characterized by a high degree of volatility. See "Price Range of
Common Stock." Trading in the Common Stock may continue to be characterized by
extreme volatility for numerous reasons, including the following:

16

o The continued absence of any revenues from the Jig;

o Uncertainty regarding the viability of mining the Tennessee Mineral
Property or the California Mineral Property;

o Continued dominance of trading in the Common Stock by a small
number of firms;

o Positive or negative announcements by the Company or its
competitors;

o Industry trends, general economic conditions in the United States
or elsewhere, or the general markets for equity securities,
minerals, and commodities;

o The announcement of financial or research and development results
that differ from analyst and investor expectations, regardless of
the health of the Company;

o Significant changes in future prospects of the Company; and

o Speculation by short sellers of shares of Common Stock or other
persons who stand to profit from a rapid increase or decrease in
the price of the Common Stock.

Shares Eligible for Future Sales. The resale of "restricted securities"
as well as securities held by "affiliates" of the Company, is generally subject
to the provisions of Rule 144 ("Rule 144") promulgated under the Securities Act
of 1993, as amended (the "Securities Act"). In general, under Rule 144 as
currently in effect, a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities for at least one year (including the
holding period of any prior owner except an affiliate), including persons who
may be deemed "affiliates" of the Company, would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the number of shares of common shares then outstanding or the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years (including the holding period of any prior owners except
an affiliate), would be entitled to sell such shares under Rule 144(k) without
regard to the requirements described above. The Company is unable to predict the
effect that future sales under Rule 144 may have on the then prevailing market
price of the Common Stock.

In addition, shares issued upon exercise of options granted
pursuant to the Company's employee stock option plans are presently registered
under the Securities Act. Subject to certain restrictions on resale by
affiliates, such shares may be sold without restriction. The sale of any
substantial number of shares of Common Stock will have a depressive effect on
the market price of the Common Stock.

Absence of Dividends The Company has never declared or paid dividends
on the Common Stock. Moreover, the Company currently intends to retain any
future earnings for use in its business and, therefore, does not anticipate
paying dividends on the in the Common Stock in the foreseeable future.

- --------------------------------------------------------
Risk Factors Primarily Related to Development of the Jig
- --------------------------------------------------------

Capacity Limitations of the Series 12 Jig. To date, the Company has
developed and tested a lower-capacity Series 12 Jig and a higher-capacity Series
30 Jig. Test results on the Series 12 Jig, designed to be capable of processing
approximately 120 tons of solids per day, suggest that commercial use of the
Series 12 Jig is technically feasible. Nevertheless, the designed capacity of
the Series 12 Jig is too small for coal washing, heavy minerals extraction, and
most other intended applications of the Jig, except use in small placer gold
mines or similar operations. Even if the Series 12 Jig performs to design
specifications in subsequent tests or at a commercial facility, the Company
believes that, because of its small capacity, the potential market for the
Series 12 Jig is limited.

Testing Status of the Series 30 Jig--Mineral Sands Processing. The
Series 30 Jig is designed to process approximately 500 tons of solids per day.

17

The Company believes that this designed capacity is sufficient for heavy mineral
sands processing and many other intended commercial applications. Having
completed an initial set of tests on the Series 30 Jig at a heavy minerals sand
processing facility in Northern Florida, the Company hopes that it can begin
marketing the Series 30 Jig for heavy mineral sands recovery during 1999.
Nevertheless, the Company can provide no assurance that the Series 30 Jig will
prove attractive to potential end users. Even if the Company is successful in
leasing the Series 30 Jig to end users, the Company can provide no assurance
that, once installed in uncontrolled operational environments, the Series 30 Jig
will prove efficient, durable, or cost-effective enough to satisfy the
expectations of end users. In addition, the introduction of new technologies by
competitors could render the Series 30 Jig or larger Jig obsolete or
unmarketable or require costly alterations to make it marketable.

Testing Status of the Series 30 Jig--Coal Washing. With respect to coal
washing, the larger volume series 30 Jig has not yet been tested to evaluate its
ability to operate at a commercial production facility. The Company expects to
have installed a Series 30 Jig at an independent coal production facility during
1999, and expects that testing will take a minimum of six months. Depending upon
the results of such testing, the Company hopes to begin marketing the Series 30
Jig for coal washing within three months of the date such testing is complete.
Nevertheless, the test results may indicate that the Series 30 Jig is not
capable of processing the volume of coal it is designed to process or capable of
removing fine pyrite particles and ash from coal fines with acceptable
efficiency or with reasonable maintenance costs. If not, the Company expects
that marketing of the Series 30 Jig for coal washing will be delayed. Moreover,
even if the Series 30 Jig or larger Jig performs to design specifications in a
controlled test in a production facility, the Series 30 Jig may not wash coal
fines in a cost-effective manner outside the test environment, prove
sufficiently durable, or otherwise prove attractive to end users. In addition,
the introduction of new technologies by competitors could render the Series 30
Jig or larger Jig obsolete or unmarketable or require costly alterations to make
it marketable.

Risks Upon Completion of Testing. Although test results from controlled
tests on the Series 30 Jig suggest that it is capable of separating valuable
heavy minerals from mineral sands and removing fine pyrite particles and ash
from coal fines, the Series 30 Jig has not been operated as part of an actual
commercial mineral processing or coal production facility. When integrated into
an actual commercial operations, the Series 30 Jig:

o may not be able to process sand or coal at its design capacity;

o may not recover a commercially valuable end product at a commercial
viable rate when processing mineral sands or coal;

o may break down frequently or otherwise be too costly to operate and
maintain;

o may be displaced or rendered obsolete by the introduction of
competing technologies or jigs and may be incompatible with
developing mining or extraction processes; and

o may be rendered obsolete by the absence of demand for heavy
minerals, coal, or other end product of processing.

Competition From Alternative Technologies. The centrifugal jig process
may not prove superior, either technically or commercially, to alternative
technologies. As explained in "Competition--Alternative Technologies" on page 7,
various mineral processing technologies perform many functions similar or
identical to those for which the Jig is designed. The Company believes that, in
certain applications, the Jig may prove more efficient, cost effective, or
adaptable than spirals and cones, froth flotation devices, or heavy media
separation devices. Nevertheless, results from further tests or actual
operations may reveal that these alternative technologies are better adapted to
any or all of the uses for which the Jig is intended. Moreover, regardless of
test results, consumers may view any or all of such alternative technologies as
technically superior to, or more cost effective than, the Jig.

Competition From Other Jig-like Products. The Company believes that the
Jig currently faces several forms of competition in the commercial segregation
of dense particles contained in feeds between 150 and 400 mesh, including the
Kelsey Jig, Falcon concentrators and the Knelsen batch concentrator unit, which
are currently being used worldwide. See "Factors That May Affect Future
Results--Competing Products and Alternative Technologies." Another centrifugal
jig device, the Kelsey jig, has been developed in Australia subsequent to the
invention of the Jig. According to the Kelsey jig's manufacturer, Geo Logics

18

Pty. Ltd., Kelsey jigs are in service at 20 plants worldwide. In addition,
Falcon, a Canadian company, produces a small batch concentrator as well as a
machine which is used mainly for pre-concentration and scavenging. Their
principal applications to date have been in the gold and tantalum industries.
There also exists a batch concentrator known as the Knelsen Bowl. Knelsen units
have been installed in various mining applications, primarily gold, throughout
the world. Competitors, many of whom may have significant capital and resources,
may develop, or be in the process of developing, superior or less expensive
alternatives to the Jig.

Dependence on Commodities Markets. If the Jig is successfully developed
and manufactured, the Company intends to use the Jig, or lease the Jig for use,
to separate and recover valuable, heavy mineral particles. Active international
markets exist for gold, titanium, zircon, and many other minerals potentially
recoverable with the Jig. Prices of such minerals fluctuate widely and are
beyond the control of the Company. A significant decline in the price of
minerals capable of being extracted by the Jig could have significant negative
effect on the value of the Jig. Similarly, a significant decline in the price of
minerals being produced or expected to be produced on the Tennessee Mineral
Property or California Mineral Property could have a significant negative effect
on the viability of a mine or processing facility on either such property. In
addition, because the Company intends to market the Jig primarily to mining
companies, a general economic downturn in the mining or mineral industries may
have a material adverse effect on the Company.

Dependence on Third Party Manufacturers. The Company currently
contracts on a per-unit basis with a machine shop located in central Tennessee
for assembly of the Jig but has no long-term contract with such entity. If the
Company completes testing of the Jig and develops a final production model, the
Company does not currently have the know-how or resources to establish its own
manufacturing facility. Management is considering options for manufacture of the
Jig, including manufacturing under a long-term contract or through an exclusive
licensing arrangement or joint venture. The Company may not be able to obtain
adequate manufacturing capacity. Moreover, even if a manufacturer is found, it
may not be able to cost-effectively produce affordable, high-quality units
capable of sustaining continuous operations with low maintenance costs in a
production environment.

Patents for the Centrifugal Jig. Initial patents on the Jig have been
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These patents expire on various dates between May 1999 and December 2000. A
series of second patents have been issued with respect to a critical component
of the Jig in the United States, South Africa, Japan, Europe, Australia, Canada,
United Kingdom, Germany and France. These patents expire on various dates
between January 2010 and January 2011. The Company filed an application in the
United States seeking a third patent for a recently developed component of the
Jig on May 15, 1997. Patents on the same component have been issued in Europe,
Australia, Japan, South Africa, Canada and Brazil with expiration dates between
April and November 2018.

The Company can provide no assurance that pending patent
applications will be granted. In addition, persons in countries in which the
Company has not patented the Jig or certain critical components may develop and
market an infringing product. The cost of enforcing patents outside of North
America, and similar obstacles, may limit the Company's ability to enforce its
patents and keep infringing products out of the market for the Jig.

- ------------------------------------------------------------------------
Risk Factors Primarily Related to Development of the Minerals Properties
- ------------------------------------------------------------------------

Exploratory Stage of Development--Tennessee Mineral Property.
The Tennessee Mineral Property is currently in the exploratory stage. An
independent consultant hired by the Company has completed a pre-feasibility
study on the Tennessee Mineral Property, which study concludes sands on the
Tennessee Mineral property contain commercial quantities of heavy minerals. The
preliminary study further concludes that the sands can be economically mined to
produce commercial grade products and that established markets exist for such
products. Based on these results, the Company has determined to commence a
feasibility study of the Tennessee Mineral Property.

19

The feasibility study, commenced during August 1998, will involve the
actual design, pricing, and analysis of equipment and facilities that would be
used to mine the Tennessee Mineral Property. The Company expects that
completion of a feasibility study will take 12-18 months and that, if the
feasibility study suggests that cost-effective mining of the Tennessee Mineral
Property is feasible, a mine would not be operational for 24-36 months after
completion of the study. The pre-feasibility testing or the feasibility study
may indicate that the Tennessee Mineral Property does not contain minable
quantities of heavy minerals or that such deposits are not amenable to
large-scale, low-cost mining, as contemplated by the Company. Even if the
testing and studies suggest that mining is economically feasible on the
Tennessee Mineral Property, the Company can provide no assurance that it will be
able to obtain the capital, resources, and permits necessary to mine the
Tennessee Mineral Property. Moreover, market factors, such as a decline in the
price of, or demand for, minerals recoverable at the Tennessee Mineral Property,
may adversely affect the development of mining operations on such property.

Uncertainty of Obtaining Environmental Permits for the Tennessee
Mineral Property. In order to begin construction and mining on the Tennessee
Mineral Property, the Company may have to obtain a number of federal, state, and
local permits, none of which the Company has obtained. Because the Company has
not yet commenced design of a mining facility in the Tennessee Mineral Property,
the Company is not in a position to definitively ascertain which federal, state
and local mining and environmental laws or regulations would apply to a mine on
the Tennessee Mineral Property. Nevertheless, the Company anticipates that
compliance with the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, and the Comprehensive Environmental Response
Compensation Liability Act would be necessary if the Company determined to
commence construction and operation of a mine on the Tennessee Mineral Property.
See "--Government Regulation."

In addition to these federal laws and regulations, the Company
anticipates that, if the Tennessee Property is developed, the Company will be
required to obtain a surface mining permit from the State of Tennessee under the
Tennessee Mineral Surface Mining Law of 1972. The application for such a permit
must be preceded by public notice and must include, among other things, a filing
fee, a reclamation and revegetation plan, and a bond to cover the costs of
reclamation. Moreover, absent definitive plans for a mining operation on the
Tennessee Mineral Property, the Company cannot determine what such operation's
water needs or discharge levels would be. Nevertheless, the Company anticipates
that it will be required to obtain a water discharge permit under the Tennessee
Water Quality Control Act. The Company can provide no assurance that it will be
able to obtain the federal and state permits necessary to construct and operate
a mine on the Tennessee Mineral Property.

The Company is not aware of any existing local land use restrictions
that would prevent or affect mining operations on the Tennessee Mineral
Property. Nevertheless, in the absence of a detailed plan for a mining operation
on the Tennessee Mineral Property, the Company has not held discussions with
State and local officials regarding land use issues and can provide no assurance
as to their response any proposed mining operation.

Exploratory Stage of Development--California Mineral Property. Altair
acquired leasehold rights to the California Mineral Property during October 1998
and immediately commenced initial testing of the stockpiles located on such
property. Such initial testing involves drilling holes to collect samples for
use in defining the stockpile base and, assuming the analysis of such samples
yields favorable results, experiments regarding the ease with which constituent
heavy minerals--particularly ilmenite--can be separated out and extracted. If
such initial tests suggest that valuable heavy minerals can be cost effectively
extracted, Altair plans to begin designing and pricing the equipment necessary
to process minerals on the California Mineral Property. Assuming Altair is able
to design and obtain all necessary equipment at a reasonable price and in a
timely manner, Altair anticipates that mineral processing operations on the
California Mineral Property would commence as early as the end of 1999 or the
first quarter of 2000. Nevertheless, the initial testing may reveal that the
stockpiles on the California Mineral Property do not contain a sufficient volume
or density heavy minerals or that constituent valuable heavy minerals can not be
cost effectively extracted. Even if the testing suggests that mineral processing
is economically feasible, Altair may be unable to obtain necessary equipment at
the projected price, and the revenues generated by such mineral processing may
be insubstantial. Moreover, the Company may be unable to obtain the capital,
resources, and permits necessary to process minerals on the California Mineral
Property, and market factors, such as a decline in the price of, or demand for,
minerals recoverable at the California Mineral Property, may adversely affect
the development of mineral processing operations on such property.

20

Absence of Detailed Plans for the California Mineral Property. The
Company is not aware of specific circumstances which would significantly delay,
or increase the cost of, developing the California Mineral Property; however,
the Company has not obtained sufficient mineral and economic feasibility

information to develop definitive

plans with respect to the precise design and nature of mineral processing
operations, if any, on the California Mineral Property. The specific details of
such plans will largely determine the cost and difficulty of complying with
governing environmental and land use laws. Significant factors the Company has
not explored include the following:

o The Company has not commenced any of the environmental,
cultural, and other studies required by governing
environmental and regulatory laws. Such studies are designed
to reveal the existence of factors that may increase the cost
and difficulty of obtaining necessary permits and approvals.

o The Company has not reviewed State of California or local
environmental or land use laws to determines what permits
would be necessary to conduct mineral processing operations on
the California Mineral Property or what restrictions may
increase the cost of, or prevent, planned mineral processing
activities. In general, land use and environmental
restrictions in California are strict and may be cost
prohibitive.

o Absent definitive plans for a mineral processing operation on
the California Mineral Property, the Company cannot determine
what such operation's water needs or discharge levels would
be. Depending on the nature of water use at the proposed
mineral processing site, the Company may be required to obtain
a water discharge permit under California's water control
laws.

Uncertainty of Obtaining Environmental Permits for the California
Mineral Property. In order to begin processing the stockpiles on the California
Mineral Property, the Company may have to obtain a number of federal, state, and
local permits, none of which the Company has obtained. Because the Company has
not yet commenced design of a mineral processing facility, the Company is not in
a position to definitively ascertain which federal, state and local mining and
environmental laws or regulations would apply to a mineral processing facility
on the California Mineral Property. Nevertheless, the Company anticipates that
compliance with the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation Liability Act, and applicable state and local laws would be
necessary if the Company determined to commence construction and operation of a
mineral processing facility on the California Mineral Property. See
"--Government Regulation."

Environmental Liability on Mineral Properties. Any proposed mining or
processing operation on the Tennessee Mineral Property, the California Mineral
Property, or any other property acquired by the Company will be subject to
federal, state, and local environmental laws. Under such laws, the Company may
be jointly and severally liable with prior property owners for the treatment,
cleanup, remediation, and/or removal of substances discovered on either of the
Mineral Properties or any other property used by the Company, which are deemed
by the federal and/or state government to be toxic or hazardous ("Hazardous
Substances"). Courts or government agencies may impose liability for, among
other things, the improper release, discharge, storage, use, disposal, or
transportation of Hazardous Substances. The Company might use Hazardous
Substances and, although the Company intends to employ all reasonably
practicable safeguards to prevent any liability under applicable laws relating
to Hazardous Substances, Companies engaged in mineral exploration and processing
are inherently subject to substantial risk that environmental remediation will
be required.

Item 2. Properties
----------

The Company maintains a registered office at 67 Richmond Street West,
Suite 500, Toronto, Ontario M5H 1Z5. The Company does not lease any space for,
or conduct any operations out of, the Toronto, Ontario registered office. In
addition, the Company leases 900 square feet of office space at 1725 Sheridan
Avenue, Suite 140, Cody, Wyoming 82414, which serves as the corporate
headquarters for the Company and its subsidiaries. The Company's lease to the
Cody, Wyoming office space may be terminated by either party on 30 days' prior
written notice.

21

Fine Gold and MRS lease 5,700 square feet of office space at 230 South
Rock Boulevard, Suite 21, Reno, Nevada 89502. The lease for the Reno, Nevada
offices expires on January 31, 2000. MRS leases approximately 1,550 square feet
of laboratory space at 7950 Security Circle, Reno, Nevada 89506, for its Jig
testing operations. The test facility lease may be terminated by either party
upon eight weeks prior written notice. Management believes that the existing
offices and test facilities of the Company and its subsidiaries are adequate for
their current needs. In the event that alternative or additional office space is
required, the Company believes it could obtain additional space on commercial
acceptable terms.

The Tennessee Mineral Property consists of approximately 13,600 acres
of real property located near Camden, Tennessee, which MRS leases (or has
binding commitments to lease) from multiple owners of the real property. Such
leases grant MRS certain exclusive rights, including the right to explore, test,
mine, extract, process, and sell any minerals or other materials found on the
land, in exchange for the payment of minimum annual advanced royalty payments
prior to commencement of production on the properties (or after commencement of
production, to the extent production royalty payments do not equal nominal
royalty payments) and, thereafter, production royalty payments in an amount
equal to a percentage of the value of minerals mined and sold from the property.
See Note 6 to the Consolidated Financial Statements for information regarding
present and future minimum advanced royalty payments. The leases typically are
for a minimum term of ten years, and may be extended indefinitely at MRS'
option, provided the Company is actively conducting exploration, development, or
mining operations. The leases are cancelable by MRS at any time, and are
cancelable by the lessor in the event MRS breaches the terms of the lease. The
mineralized deposit on the Tennessee Mineral Property has not yet proven to be a
reserve, and the Company's operations and proposed plan with respect to it are
exploratory in nature. See "Item 1. Business--Tennessee Mineral Property." The
Tennessee Mineral Property is accessed by public roads and, to the Company's
knowledge, has not been used in prior mining operations.

The California Property consists of a heavy mineral sand stockpile
located near Ione, California. A subsidiary of MRS, California Recovery Systems,
Inc. ("CRS"), has an exploration license effective as of October 1, 1998 with
the property owner which gives CRS the right to prospect and explore for heavy
minerals and evaluate the property as a situs of an operation for extracting,
processing and shipping of heavy minerals. The license has a term of one year
and also grants CRS the option to enter into a production agreement with the
property owner, pursuant to which CRS is granted a right to process the
stockpile in exchange for a fixed mineral royalty payment plus an additional
production based royalty. The production agreement has been executed by both
parties and placed in escrow. CRS may exercise its option with respect to the
production agreement at any time during the term of the license. The production
agreement has a term of ten years with options to extend if CRS is not in
default and minerals are being extracted in commercial quantities. The
mineralized deposit on the California Mineral Property has not yet proven to be
a reserve and the Company's operations and proposed plan with respect to it are
exploratory in nature. See "Item 1. Business--California Mineral Property." The
California Mineral Property is accessed by public roads and is a stockpile of
material removed from sand ores used by a glass sand mining operation in the
area.

During 1997 and 1998, the Company incurred $480,244 and $793,251
respectively in deferred exploration expenditures on the Mineral Property.
Expenditures were incurred on leasehold minimum advance royalty payments, auger
hole drilling, sampling, sample analysis and assay, geological and mineralized
deposit characterization studies, and other related exploration activities.

Item 3. Legal Proceedings
-----------------

The Company is from time to time involved in routine litigation
incidental to the conduct of its business. The Company is currently not involved
in any suit, action or other legal proceedings, nor is it aware of any
threatened suit, action or other legal proceedings which management believes
will materially and adversely affect the business or operations of the Company
or its subsidiaries.

Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------

The Company did not submit any matters to a vote of security holders
during the fourth quarter of the 1998 fiscal year.

22

PART II

Item 5. Market for the Registrant's Common Stock and Related Shareholder
-----------------------------------------------------------------------
Matters
-------

Market Price

In the United States, prior to March 23, 1997, the Common Stock was
listed under the symbol "AIGDF" on the over-the-counter bulletin board maintain
by the National Association of Securities Dealers the ("OTCBB"). The prices
listed below represent the closing high and low bid prices for the Common Stock
on OTCBB during the period from January 1, 1997 through March 23, 1997. The bid
prices set forth below are market quotations based on interdealer bid prices,
without markup, markdown or commission, and may not represent actual
transactions.

Fiscal Year Ended December 31, 1997: Low High
----------------- --------------

1st Quarter (through March 23, 1997)... $6.50 $11.375

From March 24, 1997 until January 23, 1998, the Common Stock was quoted
on the Nasdaq SmallCap Market under the symbol "ALTIF." The following table sets
forth, for the periods indicated, the high and low sales prices for the Common
Stock, as reported by the Nasdaq SmallCap Market:

Fiscal Year Ended December 31, 1997: Low High
--------------- ---------------
1st Quarter (beginning March 24,
1997).............................. $8.5625 $12.25
2nd Quarter........................ 4.75 9.625
3rd Quarter........................ 5.125 9.875
4th Quarter........................ 7.75 16.625

Fiscal Year Ended December 31, 1998

1st Quarter (through January 23,
1998).............................. $13.75 $15.625

Beginning on January 26, 1998, the Common Stock began trading on the
Nasdaq National Market under the symbol "ALTIF." The following table sets forth,
for the periods indicated, the high and low sales prices for the Common Stock,
as reported on the Nasdaq National Market.

Fiscal Year Ended December 31, 1998 Low High
--------------- --------------
1st Quarter (beginning January 26,
1998).............................. $8.125 $15.625
2nd Quarter........................ 7.00 9.625
3rd Quarter........................ 3.00 10.25
4th Quarter........................ 5.875 8.625

The last sale price of the Common Shares, as reported on the Nasdaq National
Market, on March 15, 1999 was $7.125 per share.

23

Outstanding Shares and Number of Shareholders.

As of March 15, 1999, the number of shares of Common Stock outstanding
was 15,174,915 held by 479 holders of record. In addition, as of the same date,
the Company has reserved 3,418,000 shares of Common Stock for issuance upon
exercise of options that have been, or may be, granted under its employee stock
option plans.

Dividends

The Company has never declared or paid dividends on the Common Stock.
Moreover, the Company currently intends to retain any future earnings for use in
its business and, therefore, does not anticipate paying any dividends on the
Common Stock in the foreseeable future.

Transfer Agent and Registrar

The Transfer Agent and Registrar for the Common Stock is Equity
Transfer Services, Inc., Suite 420, 120 Adelaide Street West, Toronto, Ontario,
M5H 4C3.

Canadian Taxation Considerations

Dividends paid on shares of Common Stock owned by non-residents of
Canada are subject to Canadian withholding tax. The rate of withholding tax on
dividends under the Income Tax Act (Canada) (the "Act") is 25%. However, Article
X of the reciprocal tax treaty between Canada and the United States of America
(the "Treaty") generally limits the rate of withholding tax on dividends paid to
United States residents to 15%. The Treaty further generally limits the rate of
withholding tax to 5% if the beneficial owner of the dividends is a U.S.
corporation which owns at least 10% of the voting shares of the Company.

If the beneficial owner of the dividend carries on business in Canada
through a permanent establishment in Canada, or performs in Canada independent
personal services from a fixed base in Canada, and the shares of stock with
respect to which the dividends are paid is effectively connected with such
permanent establishment or fixed base, the dividends are taxable in Canada as
business profits at rates which may exceed the 5% or 15% rates applicable to
dividends that are not so connected with a Canadian permanent establishment or
fixed base. Under the provisions of the Treaty, Canada is permitted to apply its
domestic law rules for differentiating dividends from interest and other
disbursements.

A capital gain realized on the disposition of shares of Common Stock by
a person resident in the United States ("a non-resident") will be subject to tax
under the Act if the shares held by the non-resident are "taxable Canadian
property." In general, shares of Common Stock will be taxable Canadian property
if the particular non-resident used (or in the case of a non-resident insurer,
used or held) the shares of Common Stock in carrying on business in Canada or,
pursuant to proposed amendments to the Act, where at any time during the
five-year period immediately preceding the realization of the gain, not less
than 25% of the issued and outstanding shares of any class or series of shares
of the Company were owned by the particular non-resident, by persons with whom
the particular non-resident did not deal at arms' length, or by any combination
thereof. If the shares of Common Stock constitute taxable Canadian property,
relief nevertheless may be available under the Treaty. Under the Treaty, gains
from the alienation of shares of Common Stock owned by a non-resident who has
never been resident in Canada generally will be exempt from Canadian capital
gains tax if the shares do not relate to a permanent establishment or fixed base
which the non-resident has or had in Canada, and if not more than 50% of the
value of the shares was derived from real property (which includes rights to
explore for or to exploit mineral deposits) situated in Canada.

Item 6. Selected Financial Data
-----------------------

The following table sets forth selected consolidated financial
information with respect to the Company and its subsidiaries for the periods
indicated. The data is derived from financial statements prepared in accordance
with accounting principles generally accepted in Canada ("Canadian GAAP"), which
differ in certain respects from those in the United States. See Note 15 of Notes
to Consolidated Financial Statements included herein for certain reconciliations
to accounting principles generally accepted in the United States ("U.S. GAAP").

24

The selected financial data should be read in conjunction with the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and
accompanying notes included herein. All amounts are stated in U.S. dollars.

Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ---------- ----------- ------------

Statements of Operations:
Revenues from Operations................... $ -0- $ -0- $ -0- $ -0- $ -0-
Operating Expenses.......................... 2,064,960 1,858,033 1,335,725 438,103 573,049
Interest Expense............................ 32,165 43,497 19,373 -0- -0-
Interest Income............................. (335,037) (70,059) (27,872) (1,000) (979)
------------ ----------- ---------- ----------- ------------
Net Loss....................................$ 1,762,088 $ 1,831,471 $1,327,226 $ 437,103 $ 572,070
============ =========== ========== =========== ============
Loss per Common Share.......................$ (0.13) $ (0.13) $ (0.12) $ (0.07) $ (0.12)
============ =========== ========== =========== ============
Cash Dividends declared per Common Share....$ -0- $ -0- $ -0- $ -0- $ -0-
============ =========== ========== =========== ============
Deficit, Beginning of Year..................$ 6,303,879 $ 3,956,564 $3,332,064 $ 2,894,961 $ 2,322,891
Net Loss.................................... 1,929,539 1,831,471 624,500 437,103 572,070
Other Expense (Income) ..................... 411,603 515,844 -0- -0- -0-
------------ ----------- ---------- ----------- ------------
Deficit, End of Year........................$ 8,645,021 $ 6,303,879 $3,956,564 $3,332,064 $ 2,894,961
============ =========== ========== =========== ============
Balance Sheet Data:
Working Capital ............................$ 2,991,707 $ 7,480,153 $ 2,974,955 $ 313,502 $ (113,116)

Total Assets................................ 8,712,052 13,125,804 8,042,888 975,259 384,923
Long-term Obligations....................... -0- 602,451 269,685 -0- -0-
Current Liabilities......................... 239,512 712,810 308,762 90,910 164,011
Net Stockholders' Equity.................... 8,472,540 11,810,543 7,464,441 884,349 220,219

Item 7. Management's Discussion and Analysis of Financial Condition and Results
----------------------------------------------------------------------
of Operations.
--------------

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

Overview

From inception through the end of 1993, the Company's business
consisted principally of the exploration of mineral properties for acquisition
and development. During 1994, the Company's focus changed as it became engaged
in the acquisition, development and testing of mineral processing equipment for
use in the recovery of fine, heavy mineral particles including gold, titanium,
zircon and environmental contaminants. Nevertheless, the Company continues
exploring mineral properties suitable for development using the Company's
patented mineral processing equipment.

On November 15, 1994, the Company executed an option agreement to
acquire TMI, a development stage enterprise which owned all patent rights to the
Campbell Centrifugal Jig, since modified and renamed the Altair Centrifugal Jig.
The Company funded $373,955 of option-related costs during 1994 and 1995.
Subsequently, during early 1996, the Company renegotiated the acquisition
agreement and acquired all of the outstanding common stock of TMI. The
acquisition was accounted for as a purchase by the Company, which agreed to
issue to TMI's shareholders 1,919,957 shares of the Common Stock over a
five-year period and 580,000 warrants entitling the holder to purchase one share
of Common Stock for $2.00 (Canadian) until March 1, 1997. The effective purchase
price of TMI was $3,732,450. This consisted of the issuance to the former TMI
shareholders of Common Stock valued at $2,521,469 (1,919,957 shares of Common
Stock with a deemed value of $1.31 per share) and the assumption of TMI's assets
and liabilities, with liabilities exceeding assets by $1,210,981 at February 29,
1996. The purchase price was allocated to Jig patents and development costs.

Of the 580,000 Series E Warrants issued, 561,585 were exercised prior
to January 31, 1997; the remaining 18,415 warrants have been canceled. Of the

25

1,919,957 shares of Common Stock initially deposited into escrow, in connection
with the TMI Merger, 749,957 shares have been released pursuant to the terms of
the governing agreements, 180,765 were released pursuant to a settlement
agreement dated March 19, 1998 (the "Settlement"), and 723,065 shares were
canceled pursuant to the Settlement. The remaining 266,170 shares remain in
escrow subject to a Performance Escrow Agreement dated February 29, 1996
("Performance Escrow Agreement"), which provides for release of one share of
Common Stock for each $1.80 in cash flow received by Altair, provided that no
more than one-third of the original number of shares of Common Stock escrowed
may be released in any one year over the first three years of the escrow. Shares
of Common Stock still in escrow at the end of five years may be canceled by the
Alberta Stock Exchange.

Prior to 1994, the Company operated its minerals business with the
intent of receiving income from property sales, joint ventures, or other
business arrangements with larger companies, rather than developing and placing
its properties into production on its own. The Company has received no royalty
income in the past, and at present, there are no business arrangements or joint
venture prospects involving the Company's properties or potential property sales
from which the Company expects to receive income. The Company continues to
explore mineral properties, such as the Tennessee Mineral Property, but its
exploration efforts are primarily focused on locating property suitable for
development using the Jig.

Results of Operations.

Fiscal Years 1998, 1997 and 1996

The Company has earned no revenues to date. Operating losses before
extraordinary items totaled $1,762,088 ($0.13 per share) for the 1998 fiscal
year, $1,831,471 ($0.13 per share) for the 1997 fiscal year, and $1,327,226
($0.12 per share) for the 1996 fiscal year. Principal factors contributing to
the losses during these periods were the absence of revenues coupled with the
incurrence of operating expenses.

Operating expenses increased from $1,335,725 during 1996 to $1,858,033
during 1997 and to $2,064,960 during 1998. Of these amounts, amortization of the
Company's assets (including Jig patents) represented $385,633, $590,831 and
$556,626 during 1996, 1997 and 1998, respectively. During 1998, the Company
increased the amount of test and development work on the Series 30/16 Jig, began
testing of potential new applications for it, initiated the preliminary design
work for a larger capacity Jig, commenced exploration in California, and
increased its exploration efforts in Tennessee. This higher level of activity
caused a direct increase in testing, research, and development costs from
$159,679 and $78,034 in 1996 and 1997, respectively, to $259,630 in 1998. In
addition, in order to support this higher level of activity, the Company
increased the number of employees in its Reno, Nevada office from four to eight
personnel and expanded into new leased office space. The costs associated with
this additional staffing and office space are reflected in increased testing,
research and development expenses, general and office expenses, travel, and
occupancy costs. Operating expenses, exclusive of amortization, increased in
1997 from 1996 due primarily to increased activity in acquiring, testing and
developing the Jig.

In January 1998, the Common Stock began trading on the Nasdaq National
Market System. As a result of the expanded market for the Common Stock, the
expenses associated with stock exchange fees, shareholders' meetings and
reports, and shareholder relations combined increased to $ 345,880 in 1998,
compared to $ 209,739 in 1997 and $ 77,330 in 1996.

Interest income increased in 1998 over 1997 and 1996 principally due to
interest earned on temporary cash investments following the issuance of
$5,000,000 of 5% convertible subordinated debentures (the "Convertible
Debentures") in December 1997.

As a result of the TMI Merger, Fine Gold assumed all of TMI's
liabilities. During 1996 and 1998, Fine Gold entered into agreements
extinguishing certain of the TMI accounts payable and notes payable at less than
the book amounts of such debt. The net of such forgiveness of debt in 1996 was
$702,726, resulting in an extraordinary gain of $.06 per share. In 1998, the
forgiveness of debt was $25,805 and had no material effect on earnings per
share. During 1998, the Company redeemed $2,250,000 of the Convertible
Debentures, incurring a redemption premium of $193,256. See "--Liquidity and
Capital Resources." This represents a net loss per share of $.01. There were no
extraordinary items during 1997.

26

Liquidity and Capital Resources.

The Company has financed its operations since inception primarily by
the issuance of equity securities (Common Stock, Convertible Debentures, and
options and warrants to purchase Common Stock) with aggregate net proceeds of
$19,056,117 as of December 31, 1998. The Company received cash proceeds from the
sale of Common Stock and the exercise of options and warrants to acquire Common
Stock of $7,156,846 in 1996 (including $2,521,469 deemed value of the Common
Stock issued in the TMI Merger - $4,635,377 without such deemed value),
$2,569,194 in 1997 and $113,664 in 1998. In addition, during 1997, the Company
received net proceeds of $4,484,156 ($5,000,000 less $515,844 costs of issuance)
from the issuance of the Convertible Debentures and related warrants.

The Company has earned no revenues from operations and has incurred
recurring losses. At December 31, 1998, the Company's accumulated deficit was
$8,645,021, or an increase of $2,341,142 over the accumulated deficit at
December 31, 1997. This increase was due to the net loss for the year of
$1,929,539 and $411,603 in costs associated with the issuance and conversion of
the Convertible Debentures.

During 1998, the Company's cash and short-term investments decreased
from $8,161,770 to $3,100,577. Of this $5,061,193 decrease in working capital,
$1,546,590 was expended on operating activities (compared with $1,186,833 in
1997 and $795,410 in 1996) and $1,105,034 was expended on the purchase or
exploration of the Mineral Properties, the purchase of capital assets, and the
purchase of rights related to the Jig (compared with $764,232 in 1997 and
$714,407 in 1996). Most of the remaining decrease was the result of the
Company's redemption of the Convertible Debentures. Between May and July 1998,
holders of the Convertible Debentures elected to convert $2,750,000 principal
amount of the Convertible Debentures and accrued interest. On August 28, 1998,
the Company used $2,550,938 of the proceeds from the initial issuance of the
Convertible Debentures to redeem the remaining $2,250,000 principal amount (plus
interest) of the Convertible Debentures. Although this redemption resulted in a
substantial decrease in the Company's working capital, the Company believes
that, because of the apparent downward pressure the existence of the Convertible
Debentures was placing on the price of the Common Stock, the Company's long-term
ability to raise money for working and expansion capital was enhanced by the
redemption of the Convertible Debentures.

The Company currently maintains working capital which management
believes will be sufficient for the Company's needs through the end of the 1999
fiscal year at the current level of operations. However, the Company's
exploration and development program may result in business opportunities that
require additional capital resources for the development of the Mineral
Properties and construction of Jigs. When and if such capital resources are
required, the Company intends to assess equity and/or debt financing sources.
Nevertheless, there can be no assurance that the Company will be able to
continue to raise capital to fund its long-term capital requirements. At
December 31, 1998, the Company had $3,100,577 in cash and short-term investments
available to meet its near-term development and operating needs.

The Company continues to use its working capital to invest in the
testing and development of the Jig and to invest in mineral properties suitable
for development and processing with the Jig. During 1998, the Company invested
$225,058 in development of the Jig, $123,147 to construct additional Jigs,
$724,907 in the exploration of the Tennessee Mineral Property, and $68,344 in
deferred exploration expenditures on the California Mineral Property.

Year 2000 Issues.

The Company has conducted a preliminary examination of the potential
impact of Year 2000 issues on its operations. Based on this preliminary
examination, the Company does not believe the Year 2000 issue will have a
significant impact on the Company's internal operations. The Company is in an
early stage of development and does not presently have any customer or supplier
relationships that management believes are material to its operations.
Accordingly, the Company has not taken steps to verify the Year 2000 readiness
of any third parties with which it conducts or may conduct business. The Company
intends, however, to investigate the Year 2000 readiness of third parties as its
relationship with any such party becomes material to the operations of the
Company. Despite the Company's examination of its own operations and intent to
investigate the Year 2000 readiness of essential suppliers, customers, and
service providers, there can be no assurance that the Company will not
experience interruptions of operations or become involved in disputes with third

27

parties because of direct or indirect Year 2000 problems. Such Year 2000
problems could require the Company to incur unanticipated expenses, and such
expenses could have a material adverse effect upon the Company's business,
financial condition and results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------

None.

Item 8. Financial Statements and Supplementary Data.
--------------------------------------------

The financial statements required by this Item appear on pages F-1
through F-17 of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
-------------------------------------------------------------------
Financial Disclosure.
---------------------

None.

PART III

Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------

The information required by this Item is incorporated by reference to
the section entitled "Election of Directors" in the Company's definitive proxy
statement to be filed with the Commission.

Item 11. Executive Compensation
----------------------

The information required by this Item is incorporated by reference to
the section entitled "Executive Compensation" in the Company's definitive proxy
statement to be filed with the Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------

The information required by this Item is incorporated by reference to
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's definitive proxy statement to be filed with the
Commission.

Item 13. Certain Relationships and Related Transactions
----------------------------------------------

The information required by this Item is incorporated by
reference to the section entitled "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement to be filed with the
Commission.

28

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------

(a) Documents Filed
---------------

1. Financial Statements. The following Consolidated Financial
Statements of the Company and Auditor's Report are filed as
part of this Annual Report on Form 10-K:

o Report of McGovern, Hurley, Cunningham, for the years
ended December 31, 1998, 1997, and 1996

o Consolidated Balance Sheets at December 31, 1998 and
1997

o Consolidated Statements of Operations and Deficit for
the years ended December 31, 1998, 1997 and 1996

o Consolidated Statements of Changes of Cash Flows for
the years ended December 31, 1998, 1997 and 1996

o Notes to Consolidated Financial Statements

2. Financial Statement Schedule. Not applicable.

3. Exhibit List

Exhibit Incorporated Filed
No. Exhibit by Reference Herewith
- ------- --------------------------------------------------------- ------------ --------

3.1.1 Articles of Incorporation of the Registrant (1)

3.1.2 Amendment to Articles of Incorporation of the Registrant
dated November 6, 1996 (2)

3.2 Bylaws of the Registrant (1)

4.1 Form of Common Stock Certificate (1)

4.3 Form of Warrant (related to Convertible Debentures) (3)

4.3 Shareholders Rights Plan Agreement dated November 27,
1998, between Altair International Inc. and Equity
Transfer Services Inc. (4)

10.1 Performance Escrow Agreement dated February 27,
1996; Performance Escrow Release Schedule (1)

10.2 Employment Agreement between Altair International Inc.
and William P. Long dated January 1, 1998 (5)

10.3 Employment Agreement between Fine Gold Recovery
Systems Inc. and C. Patrick Costin dated August 15,
1994 (1)

10.4 Employment Agreement between Altair International Inc.
and John W. Parsons dated July 6, 1998 (6)

29

Exhibit Incorporated Filed
No. Exhibit by Reference Herewith
--- ------------------------------------------------------ ------------ --------

10.5 Altair International Inc. Stock Option Plan adopted by
shareholders on May 10, 1996 (7)
10.6 1998 Altair International Inc. Stock Option Plan adopted
by Shareholders on June 11, 1998. (8)
10.7 Escrow Agreement among Altair International Inc.,
Equity Transfer Services Inc., Thomas P. Campbell and
C. Patrick Costin dated June 1, 1994 (1)
10.8 Form of Mineral Lease (5)
10.9 Exploration License with Option dated October 1, 1998 (9)
23.1 Consent of McGovern, Hurley, Cunningham (9)
27 Financial Data Schedule (9)
- -----------------------

(1) Incorporated by reference to Registration Statement on Form 10-SB filed
with the Commission on November 25, 1996.

(2) Incorporated by reference to Amendment No. 1 to Registration Statement on
Form 10 filed with the Commission on December 23, 1996.

(3) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on January 13, 1998, as amended by Amendment No. 1 to
Current Report on Form 8-K/A, filed on January 21, 1998.

(4) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on December 29, 1998.

(5) Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Commission on March 31, 1998, as amended by Amendment No. 1 to
Annual Report on Form 10-K/A filed on May 15, 1998.

(6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, filed with the Commission on
November 13, 1998.

(7) Incorporated by reference to the Company's Registration Statement on Form
S-8 filed with the Commission on July 11, 1997.

(8) Incorporated by reference to the Company's Definitive Proxy Statement on
Form 14A filed with the Commission on May 12, 1998.

(9) Filed herewith and attached to this Annual Report on Form 10-K following
page F-17 hereof.

(b) Reports on Form 8-K
-------------------

The Company filed a Current Report on Form 8-K on December 29,
1998, in which the Company reported the adoption of a
Shareholder Rights Plan dated November 27, 1998 and the
authorization of certain rights related thereto.

(c) Exhibits
--------

Exhibits to this Report are attached following page F-17
hereof.

30

(d) Financial Statement Schedule

Not applicable.

31

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 17, 1999.

ALTAIR INTERNATIONAL INC.

By: /s/ William P. Long
---------------------------------------
William P. Long,
President, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ William P. Long
- -----------------------
William P. Long President and Chief Executive March 17, 1999
Officer and Director (Principal
Executive Officer)

/s/ C. Patrick Costin Vice President (Principal March 17, 1999
- -----------------------
C. Patrick Costin Financial and Accounting
Officer)

/s/ James I. Golla Secretary and Director March 17, 1999
- -----------------------
James I. Golla

/s/ George Hartman Director March 17, 1999
- -----------------------
George Hartman

/s/ Robert Sheldon Director March 17, 1999
- -----------------------
Robert Sheldon

32

ALTAIR INTERNATIONAL INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998

(Express in United States Dollars)

INDEX PAGE

Auditors' Report F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Deficits F-4

Consolidated Statements of Cash Flows F-5

Notes to Financial Statements F-6- F17

F-1

[Letterhead of McGovern, Hurley, Cunningham]

AUDITORS' REPORT

To the Shareholders of
Altair International Inc.

We have audited the consolidated statements of Altair International Inc. as at
December 31, 1998 and 1997 and the consolidated statements of operations and
deficit, and consolidated statements of cash flows of Altair International Inc.
for the years ended December 31, 1998, 1997 and 1996. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1998
and 1997 and the results of its operations and changes in its financial position
for the years ended December 31, 1998, 1997 and 1996 in accordance with
generally accepted accounting principles in Canada.

McGOVERN, HURLEY, CUNNINGHAM

/s/ McGovern, Hurley, Cunningham

Chartered Accountants

NORTH YORK, Canada
February 26, 1999

F-2

ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)

December 31,
----------------------------
1998 1997
------------ ------------

ASSETS
Current
Cash and short-term investments $ 3,100,577 $ 8,161,770
Other current assets 130,642 31,193
------------ ------------
3,231,219 8,192,963

Capital
Office equipment, vehicles, testing and mining
equipment (Cost, net of amortization) (Note 4) 462,417 397,723

Centrifugal jig patents and related expenditures
(Cost, net of amortization) (Note 5) 3,609,024 3,918,378

Mineral properties and related deferred exploration
expenditures (Note 6) 1,399,802 606,551

Goodwill, net 9,590 10,189
------------ ------------

Total Assets $ 8,712,052 $ 13,125,804
============ ============

LIABILITIES
Current
Accounts payable and accrued liabilities $ 165,979 $ 227,439
Current portion of notes payable (Note 7) 73,533 253,890
Current portion of convertible debentures - liability
element -- 231,481
------------ ------------
239,512 712,810

Notes payable (Note 7) -- 5,901

Convertible debentures - liability element -- 596,550
------------ ------------
Total Liabilities 239,512 1,315,261
------------ ------------

SHAREHOLDERS' EQUITY
Capital stock issued (Note 8)
15,174,915 and 15,492,745 common shares at
December 31, 1998 and 1997, respectively 16,462,463 13,942,453

Convertible debentures - equity element -- 4,171,969

Contributed surplus (Note 3(b)) 655,098 --

Deficit (8,645,021) (6,303,879)
------------ ------------

Total Shareholders' Equity 8,472,540 11,810,543
------------ ------------

Total Liabilities and Shareholders' Equity $ 8,712,052 $ 13,125,804
============ ============

See accompanying Notes to the Consolidated Financial Statements.

F-3

ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in United States Dollars)

Year Ended December 31,
--------------------------------------------
1998 1997 1996
------------- ------------- -------------

Operating Expenses
Testing, research and development $ 259,630 $ 78,034 $ 159,679
Wages and administration 251,798 256,033 223,987
Professional fees 236,549 293,883 321,363
Shareholder relations 165,063 105,993 22,480
Shareholders' meetings and reports 119,497 96,308 51,348
General and office 108,785 74,266 87,647
Travel 106,661 87,777 23,416
Occupancy costs 69,286 43,146 27,140
Stock exchange fees 61,320 7,438 3,502
Insurance 58,951 48,120 11,769
Government fees and taxes 23,123 25,447 4,208
Loss (Gain) on foreign exchange 17,109 123,612 (7,888)
Transfer agent's fees 14,247 17,390 13,978
Accounting and corporate services 10,625 8,166 6,700
Bank charges 2,272 1,589 763
Loss on disposal of fixed assets 4,418 -- --
Amortization 555,626 590,831 385,633
----------- ----------- -------------
2,064,960 1,858,033 1,335,725

Interest on long-term debt 32,165 43,497 19,373
Interest income (335,037) (70,059) (27,872)
----------- ----------- -------------

Loss from operations 1,762,088 1,831,471 1,327,226
Premium on redemption of convertible debentures 193,256 -- --
(Gain) on forgiveness of debt (25,805) -- (702,726)
----------- ----------- -------------
Net loss for the year 1,929,539 1,831,471 624,500
Deficit, beginning of the year 6,303,879 3,956,564 3,332,064
Premium on conversion of convertible debentures 244,915 -- --
Accretion of equity element of convertible debentures 144,801 -- --
Convertible debenture issuance costs 21,887 515,844 --
----------- ----------- -------------
Deficit, end of the year $ 8,645,021 $ 6,303,879 $ 3,956,564
=========== =========== =============

Basic net loss per share from operations (Note 11) $ (0.13) $ (0.13) $ (0.12)
=========== =========== =============
Net loss per share from premium on redemption of
convertible debentures $ (0.01) $ -- $ --
=========== =========== =============
Net income per share from gain on forgiveness of debt $ -- $ -- $ 0.06
=========== =========== =============

See accompanying Notes to the Consolidated Financial Statements.

F-4

ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)

Year Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------

Cash flows from operating activities
Net loss for the year $(1,929,539) $(1,831,471) $ (624,500)
Adjustments to reconcile net loss for the period
to net cash (used):
Amortization 555,626 590,831 385,633
Gain on forgiveness of debt (25,805) -- (702,726)
Loss on disposal of fixed assets 4,418 -- --
Interest on long-term debt 9,619 -- --
----------- ----------- -----------
(1,385,681) (1,240,640) (941,593)

Changes in assets and liabilities:

Other current assets (99,450) (17,637) 81,367
Accounts payable and accrued liabilities (61,459) 71,444 64,816
----------- ----------- -----------

Net cash used in operating activities (1,546,590) (1,186,833) (795,410)
----------- ----------- -----------

Cash flows from investing activities
Purchase of mineral properties and related
deferred exploration expenditures (793,251) (480,248) (275,790)
Purchase of capital assets (146,211) (237,283) (87,114)
Purchase of centrifugal jig patents and related
expenditures (168,572) (46,701) (351,503)
----------- ----------- -----------

Net cash used in investing activities (1,108,034) (764,232) (714,407)
----------- ----------- -----------

Cash flows from financing activities
Issuance of common shares for cash -- -- 222,530
Proceeds from exercise of stock options 113,664 1,530,406 526,850
Proceeds from exercise of warrants -- 991,042 2,411,219
Payment of notes payable (160,454) (162,930) (152,634)
Issuance of common shares pursuant to private
placement -- -- 1,414,778
Common shares to be issued -- -- 47,746
Issuance of convertible debentures -- 5,000,000 --
Convertible debenture issuance costs (21,887) (515,844) --
Redemption of convertible debentures (2,337,892) -- --
----------- ----------- -----------

Net cash provided by (used in) financing activities (2,406,569) 6,842,674 4,470,489
----------- ----------- -----------

Net increase (decrease) in cash and short-term investments (5,061,193) 4,891,609 2,960,672

Cash and short-term investments, beginning of year 8,161,770 3,270,161 309,489
----------- ----------- -----------

Cash and short-term investments, end of year $ 3,100,577 $ 8,161,770 $ 3,270,161
=========== =========== ===========

See accompanying Notes to the Consolidated Financial Statements.

F-5

Notes to the Consolidated Financial Statements

Note 1. Basis of Presentation
- ------------------------------
The United States dollar is the principal currency in which the Company conducts
business; accordingly, these consolidated financial statements are expressed in
United States dollars.

Note 2. Summary of Significant Accounting Policies
- ---------------------------------------------------
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada. As described in Note 15,
these principles differ in certain respects from principles and practices
generally accepted in the United States. Summarized below are those policies
considered particularly significant for the Company.

Consolidation
The financial statements include the accounts of the Company and its
subsidiaries, Mineral Recovery Systems, Inc. (100% owned), Intercontinental
Development Corporation (99% owned), Fine Gold Recovery Systems, Inc. (100%
owned), Altair Technologies, Inc (100% owned), California Recovery Systems, Inc.
(100% owned), Tennessee Valley Titanium, Inc. (100% owned) and 660250 Ontario
Limited (100% owned).

Nature of Operations
The Company and its subsidiaries are engaged in the business of developing and
testing mineral processing equipment in the United States for use in the
recovery of fine and heavy mineral particles, including gold, titanium, zircon
and environmental contaminants. The Company and its subsidiaries are also in the
process of exploring mineral properties in the United States.

Mineral Properties and Related Deferred Exploration Expenditures
Mineral properties are carried at cost until they are brought into production,
at which time they are depleted on a unit-of-production method based on proven
and probable reserves. If a property is subsequently determined not to be
economic, the property and related deferred costs are written down to net
realizable value.

Exploration expenses, as well as advance royalty payments relating to mineral
properties in which the Company has an interest, are deferred until the
properties are brought into production, at which time they are amortized on a
unit-of-production basis. Other general exploration expenses are charged to
operations as incurred. The cost of mineral properties abandoned or sold and
their related deferred exploration costs are charged to operations in the
current year.

The Company reviews its mineral properties on an annual basis to determine if
events or changes in circumstances have transpired which indicate that the
carrying value of its assets may not be recoverable. The recoverability of costs
incurred on the mineral properties is dependent upon numerous factors including
exploration results, environmental risks, commodity risks, political risks, and
the Company's ability to attain profitable production. In reviewing its mineral
properties, the Company estimates the future cash flows expected to result from
each asset and its eventual disposition. If the sum of the undiscounted,
expected future cash flow is less than the carrying value of the asset, an
impairment loss is recognized. It is reasonably possible, based on existing
knowledge, that changes in future conditions in the near-term could require a
change in the determination of the need for and amount of any writedown.

Administrative Expenditures
Administrative expenditures are charged to operations as incurred.

Short-term Investments
Surplus cash of the Company is invested in a diversified portfolio of United
States dollar-denominated money market instruments. These investments are liquid
and can be converted to cash at any time through the public money market. The
carrying amount of the short-term investments approximates their market value.

F-6

Capital Assets and Amortization
Capital assets are stated at acquisition cost. Amortization is provided based on
the estimated useful life of the assets as follows:

Furniture and office equipment - 3, 5 and 7 year straight-line
Mining equipment - 7 year straight-line
Vehicles - 5 year straight-line
Centrifugal jig equipment - 7 year straight-line
Test facility - 7 year straight-line

Effective January 1, 1998, the Company changed certain methods of amortization
from the declining balance method to the straight-line method. This change has
been applied prospectively. The effect of the change on the reported net loss
for the year ended December 31, 1998 is not significant.

Centrifugal Jig Patents and Related Expenditures
The Centrifugal Jig patents are carried at acquisition cost and are being
amortized on a straight-line basis over their remaining lives.

The related expenditures are also being carried at acquisition cost and the
amortization policies are as follows:

Royalty agreement (Note 3(c)) - 15 year straight-line
License agreement - Straight-line over the remaining life of
the related patent
Mineral recovery technology rights - Straight-line over the remaining life of
the related patent

The Company reviews its Centrifugal Jig patents and related expenditures on an
annual basis to determine if events or changes in circumstances have transpired
which indicate that the carrying value of its assets may not be recoverable. In
performing its review, the Company estimates the future cash flows expected to
result from each asset and its eventual disposition. If the sum of the
undiscounted expected future cash flow is less than the carrying value of the
asset, an impairment loss is recognized. It is reasonably possible, based on
existing knowledge, that changes in future conditions in the near-term affecting
the operating capability and/or marketability of the Centrifugal Jig could
require a change in the determination of the need for and amount of any
writedown.

Research and Development Expenditures
Research and development expenditures are charged to operations as incurred.

Goodwill
Goodwill is the excess of the cost of the investment in subsidiaries over the
estimated fair value of the net assets acquired and is amortized on a
straight-line basis over 20 years. Goodwill is written down (to fair value) when
declines in value are considered other than temporary based on expected future
cash flows of the respective subsidiary.

Foreign Currency Translation
The Company's consolidated operations are integrated and amounts denominated in
currencies other than U.S. dollars are translated into U.S. dollars using the
temporal method. This method translates monetary balances at the rate of
exchange at the balance sheet date, non-monetary balances at historical exchange
rates and revenue and expense items at average exchange rates. The resulting
gains and losses are included in income (loss) in the reporting period.

Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated

F-7

financial statements and the related reported amounts of revenue and expense
during the report period. Actual results could differ from those estimates.
Management believes that the estimates are reasonable.

Financial Instruments
The carrying amounts for other current assets, accounts payable and accrued
liabilities, and notes payable on the balance sheets approximate fair value
because of the limited term of these instruments. Fair value estimates are made
at the balance sheet date based on relevant market information and information
about the financial instrument. These estimates are subjective in nature and
involve uncertainties in significant matters of judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
these estimates.

Note 3. Acquisitions
- ---------------------
(a) Fine Gold Recovery Systems, Inc.
Pursuant to an agreement dated April 21, 1994, the Company issued 750,000 Common
Shares with a deemed value of $0.34 per share ($255,000) for all of the
outstanding common shares of Fine Gold Recovery Systems, Inc. ("Fine Gold"), a
corporation incorporated in the State of Nevada and involved in the development
of a "Centrifugal Jig," an apparatus designed to recover fine gold from mineral
properties. Pursuant to an agreement dated January 1, 1994 between Thomas P.
Campbell, the inventor of the Centrifugal Jig, and Fine Gold, Fine Gold acquired
the rights to develop and market applications for the Centrifugal Jig at
specified target sites and utilize the Centrifugal Jig in the exploitation of
such sites, and further obtained the agreement of Mr. Campbell to provide
certain services and assistance to Fine Gold during the term of the agreement.
The agreement is valid throughout the world except (i) areas subject to patents
held by Trans Mar, Inc. (Note 3(b)), and (ii) the Republic of Costa Rica and
certain areas in Mexico and Guyana, South America.

A total of 650,000 Common Shares issued pursuant to the acquisition were subject
to a Performance Escrow Agreement. As of December 31, 1998, 216,666 Common
Shares remain in escrow and are scheduled to be released on June 1, 1999.

As of December 31, 1998, Fine Gold was still in the development stage in that no
operating revenues have been earned and no operating expenses have been
incurred.

(b) Trans Mar, Inc.
In March 1996, the Company acquired 100% of the issued and outstanding common
stock of Trans Mar, Inc. ("TMI") for total consideration of 1,919,957 Common
Shares at $1.31 each ($2,521,469), 580,000 warrants entitling the holder to
purchase one share of Common Stock for $2.00 (Canadian), and the assumption of
$1,210,981 of net liabilities.

TMI was involved in the development of the patented Campbell Centrifugal Jig and
held patent rights to the Centrifugal Jig technology (subject to a 10% royalty -
see Note 3(c)) in the United States, South Africa, United Kingdom, Australia and
Canada. The transaction was accounted for using the purchase method. The excess
paid over the net book value (which approximates fair value) of the assets
acquired was allocated to the Centrifugal Jig patents. TMI was merged with Fine
Gold immediately after the acquisition. Of the 1,919,957 Common Shares initially
deposited into escrow, 266,170 Common Shares remain subject to a Performance
Escrow Agreement which provides for release based on the cash flow of the
Company, and 749,957 Common Shares have been released pursuant to the terms of
the governing agreements. The remaining 903,830 Common Shares initially
deposited into escrow were subject to the terms of the Performance Escrow
Agreement. However, on March 19, 1998, the Alberta Stock Exchange approved (and
thereby made effective) a settlement agreement with respect to such 903,830
Common Shares. Pursuant to the settlement agreement, 180,765 of the affected
903,830 Common Shares were released to the beneficial owners effective March
19,1998 (subject to certain resale restrictions) and the remaining 723,065
Common Shares subject to the settlement agreement were canceled. The canceled
Common Shares had an average stated capital value of $655,098. Upon
cancellation, this amount was transferred from capital stock issued to
contributed surplus.

F-8

(c) Intercontinental Development Corporation
In 1996, the Company purchased 66% of the issued and outstanding shares of
Intercontinental Development Corporation ("INDECO") for total consideration of
$319,298. The acquisition was accounted for using the purchase method. INDECO is
a dormant company whose sole asset is a royalty agreement entitling the
corporation to 10% of the cost of manufacturing any Centrifugal Jigs which are
placed in production, sold or exploited for profit worldwide. The entire amount
of the purchase price has been allocated to the Centrifugal Jig Royalty
Agreement. During 1997, the Company acquired an additional 17% interest in
INDECO for total consideration of $36,537, and during 1998, the Company acquired
an additional 16% interest for total consideration of $68,770. The additional
cost of the investment has been allocated to the Centrifugal Jig Royalty
Agreement.

Note 4. Capital Assets
- -----------------------

December 31, 1998 December 31, 1997
---------------------------------- ----------------------------------
Accumulated Accumulated
Cost Amortization Net Cost Amortization Net
---------------------------------- ----------------------------------

Furniture and office
equipment $ 65,538 $ 28,325 $ 37,213 $ 42,473 $ 16,935 $ 25,538
Vehicles 92,629 44,499 48,130 92,629 26,555 66,074
Mining equipment -- -- -- 9,501 4,917 4,584
Centrifugal jig
equipment 333,028 111,674 221,354 333,028 70,182 262,846
Testing facility 45,128 12,555 32,573 45,128 6,447 38,681
Centrifugal jigs under
construction 123,147 -- 123,147 -- -- --
---------------------------------- ----------------------------------
$659,470 $197,053 $462,417 $522,759 $125,036 $397,723
================================== ==================================

Note 5. Centrifugal Jig Patents and Related Expenditures
- ---------------------------------------------------------

1998 1997
----------- -----------
Patents $ 4,182,262 $ 4,182,262
Less: accumulated amortization (1,332,821) (904,437)
----------- -----------
$ 2,849,441 $ 3,277,825
Royalty agreement 424,604 355,835
Less: accumulated amortization (59,265) (34,449)
----------- -----------
365,339 321,386
Mineral recovery technology rights 243,000 243,000
Less: accumulated amortization (18,692) --
----------- -----------
224,308 243,000
License agreement 136,004 66,003
Less: accumulated amortization (6,036) --
----------- -----------
129,968 66,003
Patent application 39,968 10,164
----------- -----------
$ 3,609,024 $ 3,918,378
=========== ===========

License Agreements
On June 10, 1996, the Company entered into an agreement to acquire the entire
right, title and interest in a license agreement related to the Centrifugal Jig.
The Company agreed to purchase the right for $75,000 with an initial deposit of

F-9

$5,000 and monthly payments of $2,000 commencing July 1, 1996 over a 35-month
period. On November 23, 1998, the Company acquired another license agreement
related to the Jig for a cash payment of $70,000.

Note 6. Mineral Properties and Related Deferred Exploration Expenditures
- -------------------------------------------------------------------------
The Company's subsidiary, Mineral Recovery Systems, Inc. ("MRS"), has entered
into various mineral leases for a 100% interest in approximately 13,600 acres of
land in the state of Tennessee, United States with minimum annual advance
royalty payments as follows:

Year Amount
---- ------
1999 $ 83,306
2000 89,101
2001 150,664
2002 190,929
2003 208,705
2004 and every year thereafter 421,172

The mineral leases are subject to a production royalty; however, MRS will
receive a credit against production royalties for all advance royalties paid.
The lessors can only terminate the leases upon failure of MRS to make the
minimum payments as required by the leases. During the years ended December 31,
1998 and 1997, approximately $793,000 and $480,000, respectively, was incurred
on exploration.

Note 7. Notes Payable
- ----------------------
Notes payable to former shareholders of TMI are subject to a repayment agreement
dated March 3, 1996. Although the original notes payable are due December 31,
1999, the Company agreed to retire $50,000 per month of the TMI debt assumed by
the Company.

1998 1997
-------- --------
Notespayable assumed from Trans Mar, Inc.,
interest payable at various rates,
unsecured, principal and interest due
December 31, 1999 $ 67,442 $190,559
Notes payable to former shareholders of
Trans Mar, Inc., non-interest bearing,
unsecured, principal due December 31, 1999 -- 41,141
Note payable, interest payable at 10% per
annum, unsecured, blended payments
of $2,000 per month, due April 1, 1999 6,091 28,091
-------- --------
73,533 259,791
Less: Current portion 73,533 253,890
-------- --------

Long-term portion of notes payable $ -- $ 5,901
======== ========

F-10

Note 8. Capital Stock
- ----------------------
Authorized capital stock of the Company is comprised of an unlimited number of
Common Shares. Details of issued and outstanding shares are as follows:

Shares Amount
---------------- ---------------

Balance, December 31, 1995 8,497,849 $ 4,216,413
Private placements 554,027 1,414,778
Exercise of stock options 702,000 526,850
Exercise of warrants 2,912,463 2,471,219
Common shares issued for cash 100,000 222,530
Common shares issued for the acquisition of TMI (Note 3(b)) 1,919,957 2,521,469
---------------- ---------------
Balance, December 31, 1996 14,686,296 11,373,259
Exercise of stock options 362,500 1,530,406
Exercise of warrants 411,229 991,042
Common shares issued on warrants exercised in December 1996 32,720 47,746
---------------- ---------------
Balance, December 31, 1997 15,492,745 13,942,453
Exercise of stock options 17,500 113,664
Common shares issued on conversion of convertible debentures 387,735 3,061,444
Common shares canceled pursuant to settlement agreement
with former TMI shareholders (Note 3(b)) (723,065) (655,098)
---------------- ---------------
Balance, December 31, 1998 15,174,915 $ 16,462,463
================ ===============

Stock Options
As of December 31, 1998, 1,965,000 Common Shares are reserved for issuance to
directors, officers and employees under the Company's stock option plans. The
exercise price and expiry dates of options outstanding as of December 31, 1998
are as follows:

Number of Shares Price Expiry Date
---------------- ---------------- ----------------
15,000 $ 7.38 June 29, 2000
125,000 2.39 March 7, 2001
250,000 2.58 May 27, 2001
75,000 2.71 July 29, 2001
15,000 5.42 November 6, 2001
25,000 7.97 March 10, 2002
200,000 6.62 May 14, 2002
25,000 6.00 June 3, 2002
150,000 6.98 August 26, 2002
80,000 8.38 December 22, 2002
120,000 8.38 March 2, 2003
350,000 8.38 May 6, 2003
100,000 7.75 June 15, 2003
200,000 9.00 July 6, 2003
30,000 7.70 August 5, 2003
150,000 7.15 August 13, 2003
30,000 8.00 November 25, 2003
25,000 7.25 December 22, 2003
----------------
1,965,000
================

Warrants
As of December 31, 1998, there were 105,000 Convertible Debenture Placement
Warrants and 75,000 Convertible Debenture Transaction Warrants issued and
outstanding. See Note 9.

F-11

Note 9. Convertible Debentures
- -------------------------------
On December 29, 1997, the Company issued $5,000,000 in convertible subordinated
debentures due December 29, 2001 (the "Debentures") bearing interest at 5% per
annum payable in cash or Common Shares of the Company annually or upon
conversion or maturity, at the discretion of the Company. Subject to certain
restrictions during the first 180 days after closing, the Debentures were
convertible by holders into Common Shares at a conversion rate equal to the
lesser of (i) 92% of the average price of the Common Shares for the five trading
days prior to submission of a notice of conversion by the holder, or (ii)
$14.36875 per share. The purchasers of the Debentures also received transaction
warrants entitling the holders to purchase 75,000 Common Shares on or before
December 29, 1999 at a price of $16.7188 per share. In addition, the placement
agent received 105,000 placement warrants entitling the agent to purchase
105,000 Common Shares at $16.7188 per share on or before December 29, 1999.

During the period May 20, 1998 through July 31, 1998, the holders of the
Debentures elected to convert $2,750,000 of the principal amount of the
Debentures and $66,528 of accrued interest. The conversions were made at a
conversion price rate equal to 92% of the average price of the Common Shares for
the five trading days prior to submission of the notice of conversion by the
holders. These conversions resulted in the issuance of 387,735 Common Shares.

On August 28, 1998, the Company elected to redeem the remaining $2,250,000 of
Debentures using cash previously invested in short-term instruments. The total
cash required to redeem the Debentures, including the 10% redemption premium and
accrued interest, was $2,550,938.

Note 10. Commitments
- ---------------------
Under the current employment agreement between the Company and its president,
Dr. William P. Long, Dr. Long is entitled to receive payment of 200,000 Common
Shares in the event (i) voting control of over 35% of the issued stock is
acquired by a person or group of persons in a merger, takeover or similar
transaction (a "change of control") and Dr. Long's employment agreement is
terminated within 180 days before or at any time after such change of control,
or (ii) absent a change of control, if Dr. Long's employment agreement is
terminated for any reason except by Dr. Long, by mutual consent, by the Company
for cause, or at the end of the term.

Note 11. Net Loss per Share
- ----------------------------
The calculation of basic net loss per share from operations is based on the
weighted average number of Common Shares outstanding for the year. Net loss used
in the calculation is loss from operations increased by the accretion of the
equity element of convertible subordinated debentures.

1998 1997 1996
----------- ----------- -----------

Loss from operations $ 1,762,088 $ 1,831,471 $ 1,327,226
Accretion of equity element of
convertible debentures 144,801 -- --
----------- ----------- -----------
$ 1,906,889 $ 1,831,471 $ 1,327,226
=========== =========== ===========
Weighted average number of
common shares 15,143,020 14,366,457 11,592,073
=========== =========== ===========
Basic net loss per share from operations $ 0.13 $ 0.13 $ 0.12
=========== =========== ===========

The existence of stock options, warrants and convertible debentures affects the
calculation of loss per share on a fully diluted basis. As the effect of this
dilution is to reduce the reported loss per share, the fully diluted loss per
share has not been presented.

F-12

Note 12. Income Taxes
- ----------------------
As of December 31, 1998, the Company has approximately $5,900,000 of non-capital
losses carried forward for income tax purposes which, under certain
circumstances, are available to reduce future years' income for tax purposes.
Approximately $5,700,000 of these losses are subject to expiration beginning in
2003.

Note 13. Concentration of Credit Risk
- --------------------------------------
As of December 31, 1998, the Company had $3,028,216 invested in a diversified
portfolio of United States dollar-denominated money market instruments in the
United States. This portfolio is neither insured nor guaranteed by the United
States Government.

Note 14. Statements of Cash Flows
- ----------------------------------
Non-Cash Investing and Financing Activities
Year ended December 31, 1998: Convertible debentures having a principal amount
of $2,750,000 and accrued interest of $66,528 were converted into 387,735 Common
Shares with a fair market value of $3,061,444.

Year ended December 31, 1997: There were no non-cash investing or financing
activities.

Year ended December 31, 1996: The Company acquired 100% of the issued and
outstanding common stock of TMI for total consideration of 1,919,957 Common
Shares at $1.31 each ($2,521,469), the assumption of $1,210,981 of net
liabilities, and the issuance of 580,000 warrants entitling the holder to
purchase one Common Share per warrant.

Cash and Cash Equivalents
The cash and short-term investments on hand as of December 31, 1998 represent
cash, short-term investments with original maturity dates of less than 30 days
and a diversified portfolio of United States dollar-denominated money market
instruments which are considered cash equivalents.

Note 15. Differences Between Canadian and United States Generally Accepted
- --------------------------------------------------------------------------------
Accounting Principles
- ---------------------
The Company prepares its accounts in accordance with accounting principles
generally accepted in Canada ("Canadian GAAP") which conform, in all material
respects, with accounting principles generally accepted in the United States
("U.S. GAAP"), except as described below.

Development Stage Company
As of December 31, 1998 the Company would be characterized as a "development
stage enterprise" under U.S. GAAP in accordance with Statement of Financial
Accounting Standards No. 7 ("SFAS 7"). Under Canadian GAAP, there are no
requirements for the indication or reporting of development stage entities. The
following is a summary of the deficit accumulated during the development stage
prepared in accordance with SFAS 7:
Accumulated deficit
during the
development stage
-----------------
Professional fees $ 1,352,212
Salaries and wages 1,872,230
Shareholders' expenses 971,910
Office and general 1,658,431
Loss on sale of mining claims 101,047
Amortization 1,537,552
Interest on long-term debt 95,035
Write off of mineral properties and related
deferred exploration expenditures 1,292,354

F-13

Write off of organization costs
8,563
-----------
8,889,334
Less:
Interest income (446,609)
Gain on sale of marketable securities (35,773)
Lease payments (143,754)
Gain on forgiveness of debt (728,531)
Option payments (70,906)
-----------
Total accumulated loss 7,463,761
Convertible debenture costs 537,731
Share issue costs 60,557
Accretion of equity element of convertible debentures 144,801
Premium on conversion of convertible debentures 244,915
Premium on redemption of convertible debentures 193,256
-----------
Accumulated deficit, December 31, 1998 $ 8,645,021
===========

Foreign Currency Translation
In Canada and the United States, a distinction is made between the measurement
and accounting for an enterprise's own transactions in a foreign currency. The
Company remeasures its books and records into the functional currency prior to
translation into the reporting currency. The Company maintains its books and
records in Canadian dollars and the U.S. subsidiaries maintain their books and
records in United States dollars. The remeasurement of the Company's financial
statements according to U.S. GAAP would not change the results of the
consolidated financial statements prepared in accordance with Canadian GAAP.

Income Taxes
Under Canadian GAAP, the future tax benefits related to the non-capital loss
carryforwards have not been recorded in the accounts. Under U.S. GAAP, companies
must follow the requirements of Statement of Financial Accounting Standards No.
109 ("SFAS 109") which requires the use of the asset/liability method for
measurement of tax liabilities wherein deferred tax assets are recognized as
well as deferred tax liabilities.

The Company has significant non-capital loss carryforwards (Note 12). SFAS 109
would require the recognition of a deferred tax asset for the future benefit
expected from the application of these carryforwards to future profitable years.
If it is more likely than not that some portion or all of the deferred tax asset
will not be realized, then a valuation allowance is applied to the asset to
reasonably state it at its expected value. Under SFAS 109, disclosure of the
amount of the valuation allowance is required. As of December 31, 1998, the
valuation allowance is equal to 100% of the deferred tax asset. Changes in the
value of the deferred tax asset are recognized each year as income tax expense.

Stock Options
The number of Common Shares available for the granting of options at December
31, 1998 and 1997 was 1,453,000 and 443,000, respectively. The following table
summarizes stock option activity for the years ended December 31, 1998 and 1997:

1998 1997
---------- ----------
Outstanding at beginning of year 962,500 745,000
Granted during the year 1,020,000 580,000
Exercised at an average price of
$9.26 (1997 - $4.22) (17,500) (362,500)
---------- ----------
Outstanding at end of year 1,965,000 962,500
========== ==========
Currently exercisable 1,540,000 882,500
========== ==========

F-14

Under Canadian GAAP, there is no requirement to record compensation on the
issuance of stock options to employees or directors. Under U.S. GAAP,
compensation would be accrued on the date of granting of the options, calculated
as the difference between the market price and exercise price on the date of the
grant. For the fiscal years ended December 31, 1998 and 1997, the exercise price
of all stock options granted has been equal to or greater than the market price
on the date of the grant and therefore the compensation cost under U.S. GAAP
would be nil.

Reconciliation to Accounting Principles Generally Accepted in the United States
Convertible debenture issuance costs are added to the deficit under Canadian
GAAP, but would be recorded as deferred financing costs (an asset), and
amortized to expense, under U.S. GAAP. The Company incurred issuance costs of
$21,887 in 1998 and $515,844 in 1997 that have been charged to deficit under
Canadian GAAP. Under U.S. GAAP, the balance sheet at December 31, 1997 would
include a deferred financing cost asset of $515,844 but this amount and the 1998
charges of $21,887 would be charged to expense in 1998 due to the redemption and
conversion of the Debentures during the year (see Note 9). Also, under U.S.
GAAP, the premium on conversion of convertible debentures ($144,801) and the
accretion of equity element of convertible debentures ($244,915) would be
expensed in the Statements of Operations. The following reflects amounts that
would have been reported had the Company's consolidated financial statements
been prepared on the basis of U.S. GAAP:

Consolidated Balance Sheets
- ---------------------------
1998 1997
------------- -------------
Deferred convertible debenture
financing costs $ -- $ 515,844
Total assets 8,712,052 13,641,648
Deficit 8,645,021 5,788,035
Total shareholders' equity 8,472,540 12,326,387

Consolidated Statements of Operations and Deficit
- -------------------------------------------------

1998 1997 1996
----------- ----------- -----------

Convertible debenture issuance costs $ 537,731 $ -- $ --
Premium on conversion of convertible
debentures 244,915 -- --
Accretion of equity element of
convertible debentures 144,801 -- --
Net loss for the year 2,856,986 1,831,471 624,500
Deficit, beginning of year 5,788,035 3,956,564 3,332,064
Deficit, end of year 8,645,021 5,788,035 3,956,564
Basic net loss per share from operations $ (0.19) $ (0.13) $ (0.12)

Under U.S. GAAP, interest expense would be imputed with respect to a
non-interest bearing note payable as in Note 7. The effect on net income of not
recording imputed interest is negligible.

There are no other material differences between Canadian GAAP and U.S. GAAP.

Note 16. Uncertainty Due to the Year 2000 Issue
- -----------------------------------------------
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
third parties, will be fully resolved in a timely manner.

F-15

Additional Information

Common Stock
- ------------
United States
The Company's Common Shares began trading through the Nasdaq National Market on
January 23, 1998 under the symbol "ALTIF". From March 24, 1997 until January 23,
1998, the Common Shares traded under the same symbol on the Nasdaq SmallCap
Market. Prior to March 24, 1997, the Common Shares traded on the OTC Bulletin
Board under the symbol "AIDGF". On December 31, 1998, the number of record
holders was 479 and the Company estimates that on that date there were 9,321
beneficial owners.

The Company has never declared or paid dividends on its Common Shares. Moreover,
the Company currently intends to retain any future earnings for use in the
business and, therefore, does not anticipate paying dividends on its Common
Shares in the foreseeable future.

The following table sets forth, on a quarterly basis, the high and low sales
prices during the last two fiscal years for the Common Shares as reported. The
prices reported do not include retail mark-up, mark-down or commissions and may
not reflect actual transactions.

For the Fiscal Year Ended: December 31, 1998 December 31, 1997
(In U.S. Dollars) ------------------- -------------------
High Low High Low
First Quarter $ 15.63 $ 8.13 $ 12.25 $ 6.00
Second Quarter $ 9.63 $ 7.00 $ 9.63 $ 4.75
Third Quarter $ 10.25 $ 3.00 $ 9.88 $ 5.19
Fourth Quarter $ 8.63 $ 5.88 $ 16.63 $ 7.75

Canada
In Canada, the Common Shares were traded under the symbol "AIL" on the Alberta
Stock Exchange (the "ASE") through April 23, 1998. The Company voluntarily
removed the Common Shares from the ASE on that date due to increased focus on
operations in the United States and diminishing trading volume on the ASE.

Exchange Rate Information
- -------------------------
The following exchange rates represent the noon buying rate in New York City for
cable transfers in Canadian dollars, as certified for Customs purposes, by the
Federal Reserve Bank of New York. The table sets forth, for each of the years
indicated, the period-end exchange rate, the average exchange rate (i.e., the
average of the exchange rates on the last day of each month during the period),
and the high and low exchange rates of the U.S. dollar in exchange for the
Canadian dollar for the years indicated, based on the noon buying rates:

For the Year Ended December 31, 1998 1997 1996 1995 1994
(Canadian Dollar per U.S. Dollar) ---- ---- ---- ---- ----

High 1.5770 1.4398 1.3822 1.4238 1.4078
Low 1.4075 1.3392 1.3310 1.3285 1.3103
Average 1.4894 1.3849 1.3638 1.3725 1.3664
Year-End 1.5375 1.4288 1.3697 1.3655 1.4030

Canadian Taxation Considerations
Dividends paid on Common Shares of the Company owned by non-residents of Canada
are subject to Canadian withholding tax. The rate of withholding tax on
dividends under the Income Tax Act (Canada) (the "Act") is 25%. However, Article

F-16

X of the reciprocal treaty between Canada and the United States of America (the
"Treaty") generally limits the rate of withholding tax on dividends paid to
United States residents to 15%. The Treaty further generally limits the rate of
withholding tax to 5% if the beneficial owner of the dividends is a U.S.
corporation that owns at least 10% of the voting shares of the subject company.

If the beneficial owner of the dividend carries on business in Canada through a
permanent establishment in Canada, or performs in Canada independent personal
services from a fixed base in Canada, and the shares of stock with respect to
which the dividends are paid are effectively connected with such permanent
establishment or fixed base, the dividends are taxable in Canada as business
profits at rates which may exceed the 5% or 15% rate applicable to dividends
that are not so connected with a Canadian permanent establishment or fixed base.
Under the provisions of the treaty, Canada is permitted to apply its domestic
law rules for differentiating dividends from interest and other disbursements.

A capital gain realized on the disposition of Common Shares of the Company by a
person resident in the United States (a "non-resident") will be subject to tax
under the Act if the shares held by the non-resident are "taxable Canadian
property". In general, Common Shares will be taxable Canadian property if the
particular non-resident used (or in the case of a non-resident insurer, used or
held) the Common Shares in carrying on business in Canada or, pursuant to
proposed amendments to the Act, where at any time during the five-year period
immediately preceding the realization of the gain, not less than 25% of the
issued and outstanding shares of any class or series of shares of the Company
were owned by the particular non-resident, by persons with whom the particular
non-resident did not deal at arm's length, or by any combination thereof. If the
Company's Common Shares constitute taxable Canadian property, relief
nevertheless may be available under the Treaty. Under the Treaty, gains from the
alienation of Common Shares owned by a non-resident who has never been resident
in Canada generally will be exempt from Canadian capital gains tax if the shares
do not relate to a permanent establishment or fixed base which the non-resident
has or had in Canada, and if not more than 50% of the value of the shares was
derived from real property (which includes rights to explore for or to exploit
mineral deposits) situated in Canada.

F-17